A weekly recap of the most insightful news, analysis, and capital flows in the wild west we call crypto.

Hello and welcome back to the Web3 Rewind! Per usual in this industry, lots has happened this past week. Here's what we have in store for you:

• Crypto in a “Goldilocks” moment

• Matter Labs ZK trademark

• Roaring Kitty’s GME position

• Pudgy Penguin mobile game

• Uniswap Foundation postpones the fee switch vote

• Linea halts their sequencer

The Latest

Crypto in a ‘Goldilocks’ moment

Mmm mmm trademark dept.

MatterLabs ZK trademark application

Polyhedra, a protocol that empowers interoperability and computation via zero-knowledge (ZK) technology, released its token through an airdrop a few months ago. However, another protocol, zkSync, also wants the ticker ZK. The protocol’s decision to also use the ticker ZK has led to a series of actions against Polyhedra, including a delisting of its token from Kucoin and a ticker symbol change on Bybit.

No one ever said it should be first come first serve, and anyone can always create a token with an identical ticker to an existing token, but Polyhedra feels like what happened to them was deeply unjust. Tickers are immutable onchain when a token is created, but CEXs and dApp frontends have the liberty of displaying different tickers should they choose to do so. Should zkSync be “entitled” to the ticker ZK just cause they are a “larger” protocol than Polyhedra? I’m not sure, to be honest. I also don’t know how to choose who is “entitled” to a ticker if there are multiple protocols that all want the same ticker.

Here’s the kicker. Matter Labs, the company behind zkSync, filed trademark applications in nine countries for the term “ZK.” Considering our industry is deeply rooted in the values of equal opportunity, permissionless systems, and all that stuff, you could imagine this caused quite an uproar. It would be akin to someone trying to trademark the term “blockchain” so that no one could ever use it. Such an action is so deeply antithetical to crypto that it’s shocking they would even consider it to be honest.

As a result of the uproar, Matter Labs decided to make a pledge, stating that they would set up an ownerless legal entity with the sole purpose of holding trademarks for “ZK” and similar, critical names, with this effort being led by a trusted, credibly neutral organization or community members. This entity would also grant free licenses of the trademark to everyone. At this point, it still seems like pure insanity. Imagine all of the big tech CEOs and AI accelerationists coming together, sitting on the board for an entity, and the sole purpose of this entity is to own the trademark for the term “AI.” No one owns the term AI. It just doesn’t work like that.

After Matter Labs also realized that, they decided to drop all trademark applications for the term “ZK,” stating that it would be impossible to agree on a group of people perceived as credibly neutral. Systems can be designed such that they are credibly neutral. Humans? Very much less so. — JC

Quick Bits

Roaring Kitty’s GME position

• On June 2nd, through a Reddit post, Roaring Kitty, better known as DeepFuckingValue, also the messiah of retail, revealed a $210M GME position. Yes, million. His position included 5M shares of GME, and an incredible amount of Jun 21st, 2024 calls.
  

• No one knows where the money comes from, and people have been trying to figure out if he could have made that much money in the GME fiasco of 2021. One thing is for sure. It has reignited retail interest in the financial markets.

Pudgy Penguins mobile game

• Pudgy Penguin recently announced a mobile game for its Pudgy Penguins NFT line. This will be achieved through a new partnership with Mythical Games.

• Since its debut, Pudgy Penguins have taken over the NFT space, with the Pudgy Penguins NFTs being one of the best-performing NFTs of 2024, along with the fact that Pudgy Penguins are bleeding into every retail store across multiple countries. 

Uniswap postpones fee switch vote

• A few days ago, the Uniswap Foundation announced that it would be delaying the fee switch vote due to a stakeholder raising a new issue that requires additional diligence. I wonder what it could be. Cough cough, the SEC.

• Dan Robison, a researcher at Paradigm and someone who has worked on many of Uniswap’s largest upgrades, tweeted “It’s disappointing to see a large VC try to bully the token governance process and delay community proposals at the last minute in order to advance their own pet projects.” I wonder who.

And last but not least

Linea halting their sequencer

Last week, Linea, a zkEVM layer 2 built by Consensys had one of its dApps hacked. The attacker exploited nearly $7M in assets before moving 700 ETH off the network using a third-party bridge. To prevent any further withdrawal of exploited assets, the Linea team halted the sequencer. In addition, Linea decided to censor the attacker’s addresses to “protect the users and builders in our ecosystem.” If you recall a few months ago, Blast suffered a similar hack in which Munchables, an NFT game, was exploited for more than $60M in user funds. Luckily for them, the hacker returned the funds.

Linea wasn’t as lucky as the attacker had already transferred a large amount of the assets through TornadoCash. This brings us to the grave moral decision that Linea had to make. Halt the sequencer and censor the attacker’s addresses and show that its L2 is centralized and any single user could have their wallet censored or not be able to withdraw off the chain, or let users suffer from the exploit and allow the attacker to continue to withdraw funds off chain. They chose option one.

This is a very slippery slope. Once done, the gloves are off and users realize they could be censored forever with their assets stuck indefinitely. This is because, unlike L1s, an L2 relies on a sequencer, which has the role of including transactions within blocks and submitting those blocks and their data to the L1. Today, the majority of L2s have a single sequencer run by their respective Foundations. Technically, the sequencer decides the next blocks in the blockchain and the transactions that make up those blocks. It gets to play god. In some cases, there are mechanics such as forced inclusion or an escape hatch that would allow a user to process transactions on or withdraw from the L2, but in Linea’s case, it doesn’t have an escape hatch live yet.

Everyone likes decentralized networks with censorship resistance until they have their money stolen. When that happens, everyone wishes the chain could be reverted or the stolen assets frozen. Well, decentralized networks with censorship resistance and censorable centralized chains are polar opposites. You can’t have both. I don’t think Linea should be condemned for it, they obviously value their users’ assets more than being decentralized today, and that’s ok. Every new L2 takes a gradual path to decentralization, some faster than others. But as long as there is a roadmap to decentralization that is being executed at an acceptable pace of technical innovation, I think that’s fair.

This event simply marks the importance of a decentralized sequencer for an L2, which most L2s are thinking about, even if the actual implementation is years away. The promise of blockchains is horrifying yet enlightening simultaneously. If there’s anything I’ve learned in my time in the space, it’s that humans are stupid. We get scammed all the time, we wire money to scammers for the most obvious scams, our logins get phished constantly, and we sign the most ridiculous transactions through our crypto wallets. To think that human behavior will change in any way is hopeful at best, ridiculous at worse. Blockchains will have to grapple with the fact that humans are stupid and will make mistakes and that smart contracts will never be perfect. How we design resilient systems that minimize malicious activity while still ensuring sufficient decentralization is up to us to figure out. But one thing is for sure, we won’t be onboarding the masses if confirming one wrong transaction wipes your entire net worth with zero chance of recourse. — JC

Have you read the definitive history of Ethereum? No? Well then get your copy of Out of the Ether while you can.