The Protocol: Blockchains Keep Launching, From Sei to Shibarium

Past eras of crypto development were marked by a rapid proliferation in protocols for decentralized finance (DeFi) or other purposes, built atop big blockchains like Ethereum. Recently, however, there’s been a mini-explosion in new blockchains, including so-called layer-2 networks built atop Ethereum. The trend is encapsulated in this week’s launch of the Sei network – optimized for speed, and trading applications – as well as the meme-obsessed Shiba Inu crypto community’s new Shibarium blockchain. As documented in The Protocol this week, these launches aren’t always so smooth.

Our feature story by Sage D. Young and yours truly takes a deep dive into “restaking” and a pioneering protocol called EigenLayer – tipped by crypto experts as a potentially explosive technological trend; restaking represents a new way of securing blockchain projects, where it’s easy to piggyback off Ethereum’s own security apparatus. There are worries, though, that the practice may take on a life of its own, and Ethereum co-founder Vitalik Buterin has warned of the potential for systemic risk. The full story is here.

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SEI HELLO! Sei, a new layer-1 blockchain built using Cosmos technology, launched to the public, and its native SEI token garnered more than $1 billion in trading volume after being listed on crypto exchanges including Gate.io and Binance. The project is notable because it was designed as an application-specific blockchain meant for trading, in contrast to more general-purpose networks like Ethereum that could theoretically support a wider range of use cases. Jay Jog, co-founder of Sei Labs, which led the new blockchain’s development, said that the “solution” to providing faster performance of decentralized trading applications was a “fundamental rewrite of the underlying infrastructure.” (Sei Labs raised $30 million in funding in April from big-name backers including Jump Crypto and Multicoin Capital.) After some wild first-day fluctuations, the SEI token had a market capitalization of about $343 million, a touch below the nearly $500 million mark predicted by some traders. The much-anticipated debut was blemished by questions and complaints from early adopters who were expecting an immediate airdrop of rewards tokens; the Sei Foundation, which was coordinating the details, declined Wednesday to provide extra info on the likely timing. After the airdrop actually began, later in the day, the SEI price tumbled 31% as recipients dumped the tokens on the market, while complaints flooded X (fka Twitter) about the scantiness of the allocations.

DOG HOUSE – The Shiba Inu blockchain community, centered around the doggy-themed meme coin SHIB, which in turn was a play on Dogecoin’s DOGE, went live with its new layer-2 blockchain, Shibarium, built atop Ethereum. The goal is to reduce transaction fees for users involved in Shiba Inu ecosystem, but there is also a mechanism to boost the price of the SHIB token. The new blockchain will use BONE tokens as the primary gas token – used to pay fees; and some 70% of base fees will be converted into SHIB tokens and then burned, effectively reducing the supply. But the blockchain’s first day was a bit of a dog’s breakfast, with the SHIB token tumbling 9% as users widely reported troubles bridging assets over to the new blockchain, with transactions on the network stalled for at least five hours. Users were also muzzled from sending messages on a community forum on Discord shortly after the initial reports started coming in.

DIS-CONNECT: Binance, the world’s largest crypto exchange, shut down Binance Connect, formerly known as Bifinity, just one year after its launch. The service allowed merchants to accept payments in crypto, supporting 50 digital assets and major credit-card networks including Visa and Mastercard. In a statement, Binance said the decision came “in response to changing market and user needs.”

OUTED AS ALTCOINER? Fresh election-finance disclosures revealed that former U.S. President Donald Trump, who is running for the Republican nomination in the 2024 race, held $2.8 million in a cryptocurrency wallet as of early August; the blockchain-analysis firm Arkham Intelligence said it found what appears to be the wallet address, and it contains ether (ETH) along with wrapped ETH (wETH), Polygon’s MATIC tokens and the USDC stablecoin. The revelations are notable partly because other Republican candidates, including Ron DeSantis and Vivek Ramaswamy, have touted policy positions favorable specifically to bitcoin (BTC), and many bitcoiners tend to frown on usage of anything besides the largest and original cryptocurrency.

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Injective Protocol, blockchain built for finance that claims to be the fastest among layer 1s, announced a new “2.0” tokenomics upgrade. The plan will “dramatically increase the amount of INJ burned weekly,” according to a blog post. According to Messari, the INJ token price has quintupled year-to-date, making it the top performer among cryptocurrencies with a market capitalization of at least $500 million.