This Week in Blockchain: Key Events Impacting the Industry

This Week in Blockchain: Major Developments and Controversies

In this week’s edition of CoinDesk’s blockchain technology newsletter, we dive into significant events shaking the industry: fresh SEC charges against OpenSea, the arrest of Telegram CEO Pavel Durov and its implications for the TON blockchain, and a heated debate on Twitter regarding Ethereum co-founder Vitalik Buterin’s stance on decentralized finance (DeFi).

OpenSea Faces SEC Scrutiny

Just in: OpenSea has received a ‘Wells Notice’ from the SEC, which asserts that some NFTs traded on the platform may be classified as securities. This move by the SEC could have far-reaching consequences for the NFT market and its participants.

TON Blockchain in Turmoil

The recent arrest of Pavel Durov, the CEO of Telegram, has raised alarms within the cryptocurrency community, particularly concerning the TON blockchain, officially known as The Open Network. Durov is facing legal proceedings in a French court on Wednesday, and analysts are evaluating how this situation might affect TON’s future.

• Alex Thorn, head of research at Galaxy Digital, warned that the value of the TON blockchain and its native token, toncoin (TON), is “substantially dependent” on its integration with Telegram.
• The price of TON plummeted after Durov’s arrest on Saturday, which was part of an investigation into alleged criminal activities communicated via Telegram.
• Currently, there are over 350 validators supporting the TON blockchain, but it remains unclear how many are directly operated by Telegram.
• A source indicated that Telegram does not control any of these validators, a statement that the TON Foundation did not confirm.
• Thorn expressed concerns about the resilience of TON in the face of potential government actions following Durov’s arrest.

The TON Society, a community group linked to the blockchain, circulated an open letter denouncing Durov’s arrest and urging his immediate release. Adding to the drama, the TON blockchain experienced a nearly six-hour outage on Wednesday, attributed to increased network traffic, possibly influenced by a recent airdrop of a TON-based memecoin called DOGS. The team behind the TON blockchain clarified on X that “several validators faced challenges in clearing the database of old transactions, which disrupted consensus,” but assured that “no cryptocurrency assets would be lost due to this issue.”

Vitalik Buterin and the DeFi Debate

A lively discussion erupted on X regarding Ethereum co-founder Vitalik Buterin and his views on decentralized finance (DeFi). As over $50 billion in DeFi collateral is locked in Ethereum protocols—more than five times that of its closest competitor, Tron—questions about Buterin’s stance have gained traction.

• Notably, Kain Warwick, founder of DeFi projects Infinex and Synthetix, sparked the conversation by suggesting that if a blockchain’s longevity relies solely on DeFi and its founder merely tolerates it, that founder is anti-DeFi.
• Warwick later clarified on the Steady Lads podcast that he does not consider himself a “Vitalik maxi,” asserting that Buterin has underestimated the significance of DeFi over the past five years.
• Buterin responded to the discourse, emphasizing his appreciation for various DeFi use cases, including decentralized exchanges and stablecoins, while expressing skepticism about the 2021-era liquidity farming trend.
• He noted the abundance of centralization points in current technologies, asserting that simply decentralizing finance “isn’t enough” to address broader issues.

User @DeFiSurfer808 chimed in, asserting, “DeFi is the whole point of ETH, lmao.” Meanwhile, Stani Kulechov, founder of Aave, the leading DeFi lending protocol, emphasized that establishing resilient financial systems could tackle numerous challenges and empower individuals in various ways.

Elsewhere in Blockchain

In a significant upgrade, Cardano is advancing towards the ‘Chang Hard Fork,’ its largest upgrade in two years. Spearheaded by founder Charles Hoskinson, this upgrade will introduce fundamental changes to the main network, enabling users to engage in on-chain governance. Initially scheduled for this week, the update has been postponed to September 1 to allow exchanges like Binance to adequately prepare.

• This upgrade aims to empower ADA holders to elect representatives (known as Delegate Representatives or dReps) and vote on improvement proposals, thereby enhancing community involvement in future technical decisions.

Babylon’s Impact on Bitcoin

The Bitcoin-centric staking initiative, Babylon, launched last week, causing a significant spike in transaction fees, reaching levels not seen since June. The platform’s first phase featured a cap of 1,000 BTC, which was filled in just 74 minutes, leading to congestion on the blockchain.

• Fees for a single block surged as high as 15.5 BTC (nearly $1 million), a stark contrast to the usual fee levels of 0.1 BTC or less.
• One participant, Lombard Finance, scaled back its initial plan to stake 250 BTC, citing the exorbitant fees as unjustifiable.
• Babylon operates similarly to the Ethereum restaking protocol EigenLayer, allowing users to stake deposits that secure additional networks.
• This model presents Bitcoin holders an opportunity to earn returns on a $1.3 trillion asset that lacks native yield, with plans for a shared security marketplace to be rolled out in future phases.

As Babylon progresses, it has the potential to unlock substantial value in Bitcoin, as noted by Presto Research in their recent analysis.

Stay tuned for more updates in the ever-evolving world of blockchain technology!