The Protocol: Another Episode in the Layer-2 Teams Drama

Ethereum’s layer-2 teams are butting heads once again. This time, major figures in the space are condemning Matter Labs, the creator of zkSync, over its decision to trademark the acronym “ZK,” which is shorthand for “zero-knowledge” cryptography, the core technology underlying zkSync and a plethora of other blockchain projects. Matter Labs claimed it made the move to protect users. Leaders from Polygon and Starkware–competitors in the layer-2 space–disagreed, arguing that trademarking public goods does not serve the interests of the Ethereum ecosystem.

In this week’s newsletter, we’ll recap this latest episode in the layer-2 saga and a slate of other industry updates that you won’t want to miss.

Consensus 2024 wrap up.
Starkware, the Ethereum layer-2 team, unveils its plan to start scaling the Bitcoin blockchain, too.
Avail, the data availability spinoff from Polygon, shares it has raised $43 million in a Series A fuding round.
The team behind Bitcoin layer-2 network Ark has created a new company that will focus on faster and cheaper Bitcoin transactions, putting it head-to-head with the Lightning Network.

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ZK Trademark Filing Rile Layer 2 Teams: Matter Labs, the main development firm behind the zkSync Era blockchain, received major blowback from fellow Ethereum layer-2 teams after it unveiled plans to trademark the term “ZK.” The week-long clash resulted in Matter Labs withdrawing its trademark application, which it initially said was necessary to protect the Ethereum community against similarly-named projects and token tickers. ZK, or zero-knowledge, is a type of cryptography used by certain layer-2 rollups and other blockchain projects to quickly prove that transaction details are true while keeping other details private. The tech is closely associated with attempts to scale the Ethereum blockchain. Layer-2 networks like Polygon, StarkNet and zkSync all use ZK proofs to help provide users with quicker and cheaper transactions. Matter Labs’ move to trademark ZK came after a tiff with Polyhedra, a blockchain project that used “ZK” as the ticker for its token. Matter Labs has been preparing for its own highly-anticipated token airdrop and planned to take the “ZK” ticker for itself. (Polyhedra ultimately decided to rebrand its token to “ZKJ,” according to reporting from The Block.) When Matter Labs initially revealed its plan to trademark ZK, it ignited an ecosystem-wide outcry. Given that ZK technology—and the term itself—are used by many teams across the industry, the trademark filing was seen as an attempt by a single company to seize ownership over a “public good.” More broadly, this was viewed as an attack on crypto’s open-source and collaborative ethos. In a statement shared with CoinDesk, StarkWare CEO Eli Ben-Sasson called the move “an absurd IP-grab.” Polygon Chief Legal Officer Rebecca Rettig wrote on X that trademarking a term is to “protect a company’s brand” rather than the wider crypto community.

This isn’t the first time that Matter Labs has found itself in hot water with its competitors. In August 2023, the Polygon team went on a media blitz with the claim that Matter Labs had copied its Plonky-2 software system without proper attribution. Leaders from other teams, like Starkware, also weighed in at the time, expressing their disappointment with Matter Labs. (Gluchowski denied the claims of copying but said his team “could have done better” by providing clearer attribution to other teams’ open-source code.) Polygon co-founder Sandeep Nailwal seemed to reference the debacle when he weighed in on the earlier dispute, saying in a statement last week that “zkSync has repeatedly acted contrary to the Web3 ethos, despite consistently signaling those same values. We believe that if we do not publicly address this behavior, it will persist and potentially worsen.” Alex Gluchowski, the CEO of Matter Labs, initially dismissed the complaints, sharing that his intention with the trademark application was to protect users and adding that Matter Labs would eventually move to share the trademark with a yet-to-exist consortium of ecosystem stakeholders. Three days later, however, Matter Labs opted to walk back on its trademark efforts entirely.

Consensus 2024 Debrief: Last week, CoinDesk’s 10th annual Consensus festival took place in Austin, Texas, and what a whirlwind it was! This year, the conference had a pronounced focus on policy and regulation. Last month’s surprise ether (ETH) ETF approval, the bipartisan vote to repeal the U.S. Securities and Exchange Commission’s (SEC) crypto accounting policy (SAB121), and the wider Democratic softening towards crypto in the past few weeks were on everyone’s minds. Independent U.S. presidential candidate Robert F. Kennedy Jr. stopped by to share his thoughts on crypto policy, and he also gave his opinion on former President Donald J. Trump’s guilty verdict in his hush-money trial. Another trend at the center of Consensus was AI and its intersection with Blockchain. Consensus even dedicated an entire day (May 31) to AI discussions on the Gen C Stage. And finally, vibe checks were all around, with many still figuring out if crypto is on the cusp of another bear or bull run. The takeaway: it isn’t exactly clear.

Protocol Village

Top picks of the past week from our Protocol Village column, highlighting key blockchain tech upgrades and news.

Starkware, the main developer firm behind the Ethereum layer-2 StarkNet, announced

its plans to start scaling

on the Bitcoin blockchain too, dedicating $1 million towards Bitcoin research and funding.
Polygon Labs, the main development firm behind the Polygon blockchain,

shared that co-founder and Executive chairman

Sandeep Nailwal will also be taking on the role as chief business officer. The team said that Naiwal “has been actively engaged in collaborating with developers and enterprises since Polygon’s inception,” and that the new role is a formalization of the work he already does with the team.
Linea, the layer-2 blockchain from ConsenSys, stopped

producing blocks for an hour

after an exploit on the decentralized exchange Velocore. After the issue was patched, the Linea team

pledged that it would focus

its efforts on decentralizing its network and sequencer as the blockchain matures.
Ether.fi, the largest liquid restaking protocol on EigenLayer, will let its

users install a mobile wallet

, called Etherfi Cash and use a Visa credit card that borrows USDC against their DeFi investments that can be paid off with crypto. The Cash visa card is expected to start rolling out in December.

Bitcoin Gets More Scaling

Bitcoin scaling continues to be a major focus for the oldest blockchain ecosystem, and now the team behind Bitcoin layer-2 protocol Ark has created a new company that will focus on cheap and fast payments.

Ark Labs, the new company, will compete with Bitcoin’s Lightning Network with its own solution for scaling the blockchain’s transaction capacity.

The company shared that it will pursue scalability by developing “an open implementation of the Ark Protocol” and “building services for users,” CoinDesk’s Jamie Crawley writes.

The open implementation of Ark is expected to happen in 2024.

Money Center

Avail, which spun out of Polygon and is known for its data availability solution,

shared that they

have raised $43 million in a seed round. The fresh round of capital will go towards building out its core products.
Stablecoin protocol El Dorado

completed a

$3 million seed round to build a crypto payments “superapp” for users in Latin America.
Connext has rebranded to

Everclear

to build a Clearing Layer for Web3, solving liquidity fragmentation for modular blockchains. Everclear secured $5 million from Pantera Capital and launched its testnet to reduce liquidity management costs across chains. According to Everclear, their system “can reduce the cost and complexity of solving and liquidity management across chains by as much as 90%.”
API3

has completed a strategic funding round led by DWF Labs, raising $4 million. The funding will enhance liquidity and support API3’s growth strategy, according to the company. API3’s Total Value Secured (TVS) has increased significantly to over $1 billion, the team says, as it has integrated with new chains like Optimism Superchain and Worldcoin.
SCRYPT, a provider of crypto asset financial services, has closed a $5 million strategic funding round led by Braza Bank. This funding will support SCRYPT’s expansion in LATAM and enhance its product offerings.

Polygon Labs, the development firm behind Polygon,

announced that it has

acquired Toposware, a blockchain engineering firm focused on zero-knowledge technology. Sources close to the deal told CoinDesk that the acquisition was in the range of $30 million to $50.
Mantle EcoFund, with a capital pool of $200M,

deployed $5M

in its second capital call. “Seven Mantle Ecosystem SocialFi and gaming projects have received fresh funding: MetaCene, Blade Games, Co-Museum, Fingerlabs, L3E7, and DreamOS,” said Mantle. “The newly inducted projects within Mantle EcoFund portfolio underscore Mantle’s belief in the transformative power of SocialFi and gaming applications to onboard the next billion users to web3.”