The Protocol: Meme Coins (and Pepe’s Best Friend) Swarm Coinbase Layer 2 Chain

What’s a blue toad got to do with blockchain, if it even is a blue toad? The short answer is meme coin trading on Coinbase’s layer-2 blockchain, Base. Read on.

Also in this week’s The Protocol:

Hacker behind Munchables $62.5M exploit on layer-2 Blast returns private keys.
Ethereum developers tee up increase of the longstanding staking maximum of 32 ETH per validator.
Top picks from the past week’s

Protocol Village

column: Babylon and B², Ankr, Cosmos, Celestia, Spectral Labs, Dfinity Foundation, Internet Computer, Worldcoin Foundation.
$50M+ of blockchain project fundraisings.
Yields are rising for liquidity providers to blockchain bridges.

This article is featured in the latest issue of The Protocol, our weekly newsletter exploring the tech behind crypto, one block at a time. Sign up here to get it in your inbox every Wednesday. Also please check out our weekly The Protocol podcast.

Network news

BASE INSTINCTS: Last week’s The Protocol newsletter was all about meme coin trading driving up activity on Solana, an episode that brought lots of attention to the fast-and-cheap blockchain but also caused transactions to fail en masse. Solana co-founder Anatoly Yakavenko wondered aloud on The Protocol podcast if these crypto degens have “nothing better to do.” The answer, apparently, is yes: The swarm has moved on to another blockchain – Base, the U.S. crypto exchange Coinbase’s six-month-old layer-2 network atop Ethereum.

As reported by our Shaurya Malwa, Base is suddenly averaging 1.5 million transactions a day, versus under 500,000 a day a few months ago; unique addresses have doubled to 65,000 wallets. Just in the past few weeks, total value locked – a paramount decentralized-finance metric that’s akin to deposits – has doubled to about $2.7 billion.

Total value locked on the Base chain has soared since the launch in August. (L2Beat)

But guess what else is up? Fees.

Last week, Coinbase had to update its official status page to warn that “Base mainnet is experiencing high traffic and increasing fees.” It was quite a letdown, with Jesse Pollak, Coinbase’s head of protocols, who leads the Base project, telling CoinDesk recently that Ethereum’s landmark Dencun upgrade would bring “sub-cent” transactions closer to reality.

On Monday, Pollak tweeted that “lower fees induced >5x more demand,” so “fees are rising,” and he outlined a plan to increase capacity by roughly 400 times. “We know high fees suck – and getting them lower is our top priority.”

What doesn’t seem to be going away anytime soon is meme coin trading. “It’s evident now that meme coins have evolved from just a cultural movement into a key tool for driving the adoption of new chains,” the website Coingecko wrote in a newsletter.

Where Solana was jammed up by dog- and sloth-themed tokens, one of the hottest meme coins on Base appears to be BRETT – inspired by a cartoon character drawn by the artist Matt Furie, who bequeathed Pepe the Frog to the world before it quickly became adopted as a mascot for the alt-right and repurposed into all sorts of ridiculous incarnations. According to the website Fantagraphics, Brett is one of Pepe’s “slacker roommates” from the Boy’s Club cartoon series, featuring a “series of comical vignettes combining laconic psychedelia, childlike enchantment, drug-fueled hedonism and impish mischief.” Sometimes he’s referred to as “blue Pepe” or “Blepe.”

Screenshot of the @BasedBrett profile on the social media platform X. (@BasedBrett/X)

The smart contract underlying the BRETT token is available for anyone to read on the Base blockchain explorer, and according to an “info” section on the page, Brett is a toad, but The Protocol was unable to easily corroborate this taxonomic classification.

The coin has its own account on X, @BasedBrett, and a feed filled with, well, lots of memes. In one video, a character with the face of Brett sports a baseball hat that reads, “MAKE MEMECOINS BASED AGAIN.” In another, Brett is touching the hand of God, Michelangelo-style. There is a yet another video purporting to show an actual airplane flying above Amsterdam, dragging a banner that reads “BRETT – #1 MEME ON COINBASE.”

CAPTION: OK, this kind of actually looks like it might be real if you watch the actual video. (@BasedBrett/X)

At one point BRETT had a market capitalization of nearly $500 million, according to CoinMarketCap. Even price-charting analysts got in on the action, with one of them posting a technical analysis comparing the relative value of BRETT vs. a popular Solana-based token dogwifhat, ticker WIF, literally just representing an image of a dog wearing a hat.

The Protocol emailed Pollak for comment on whether the meme coin frenzy was welcome or unwelcome on Base, and whether the situation might cause any regulatory concerns for Coinbase.

He looped in a spokesperson for the crypto exchange, who responded with an emailed statement: “Base’s mission is to bring the next billion users onchain, and we are encouraged by the recent influx of activity on Base. While we do not endorse specific assets, we are supportive of builders entering the Base ecosystem, and we are continuing to focus on making onchain technology more accessible with faster and cheaper transactions.”

Munchables, a Web3 project on the much-hyped Blast blockchain, suffered a hack that resulted in a loss of $62.5 million worth of ether (ETH). The attacker manipulated a contract and transferred stored user funds before upgrading the platform’s smart contracts. Blockchain sleuth ZachXBT said the attacker was likely North Korean – with a profile listed on the open-source software development platform GitHub as “Werewolves0493,” allegedly working for the Munchables team. Later, the Munchables account said on X that a developer had “shared all private keys involved, to assist in recovering the user funds.” The project set up a “compensatory treasury pool” where users could claim refunds. Blast suffered its first exploit in February, when a project team supposedly building atop the network disappeared after raising 420 ETH worth about $1.3 million at the time.

The security council serving as overseer of emergency upgrades on the layer-2 network Polygon zkEVM reportedly sprung into action to help address technical issues after a 10-hour outage.

Ethereum in the headlines:

The Ethereum Foundation, which supports and helps to coordinate development on the Ethereum blockchain, wrote on GitHub that “we have received a

voluntary enquiry from a state authority

.” The disclosure dovetailed with

speculation

that the U.S. Securities and Exchange Commission, under Chair Gary Gensler, is mounting a fresh push to classify Ethereum’s native cryptocurrency, ether (ETH), as a security.
Ethereum founder Vitalik Buterin

said

onstage at BUIDL Asia conference in Seoul that the “metaverse is poorly defined and often seen more as a brand name than a product.”

Protocol Village

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

Schematic from the blog post showing the Babylon staking integration into B2 Hub (B2 Network)

1. Babylon and B² Network announced that B² will integrate Babylon’s BTC Staking protocol “to enhance the security of B² Network’s Data Availability Layer and the B² Hub.” According to the team: “The partnership will utilize Babylon’s BTC timestamping protocol to guard against long-range attacks on the B² Hub helping safeguard the PoS mechanism.”

2. Ankr, a blockchain node provider, introduced “Neura” protocol – a blockchain blending AI, cloud and Web3 on Cosmos SDK architecture, “for better scalability and interoperability,” according to the team: “Features include a decentralized GPU marketplace, ANKR token economy, novel token standards, and off-chain storage with Celestia and IPFS, aiming for improved AI model deployment and data security.”

3. Spectral Labs, a crypto development firm focused on artificial intelligence, wants to make it easier for non-programmers to build on blockchains. The company this week launched Syntax, an AI app that can help anyone – coders and non-coders alike – spin up smart contracts for Ethereum and dozens of other blockchains.

4. Dominic Williams, chief scientist at Dfinity Foundation, posted a video on X of what he claimed was the world’s first “demonstration of AI running *on* blockchain as a smart contract.” According to Williams: “Code will follow shortly. This is running on Dfinity’s Internet Computer testnet, but you’ll be able to take the code and run it on the public network as the NNS is expected to up the per-transaction instruction limit in the coming days.”

5. The Worldcoin Foundation open-sourced core components of the orb’s software, now publicly available on GitHub under an MIT/Apache 2.0 dual license, according to a blog post dated March 22: “These new open components complement the previously-released hardware and iris recognition repositories, and their public availability marks significant progress in making the Orb’s image processing transparent and its privacy claims verifiable.”

Screengrab from the online video, “Worldcoin Orb codebase walkthrough” (Worldcoin)

Money Center

Fundraisings

BOB, a hybrid layer-2 network – sitting atop the Bitcoin blockchain, but with Ethereum compatibility – has raised $10 million in seed funding. The round was led by Castle Island Ventures and included participation from Mechanism Ventures, Bankless Ventures, CMS Ventures, UTXO Management, along with angel investors Dan Held and Domo, creator of the BRC-20 token standard.

Layer-1 blockchain Peaq said it raised $15 million in funding to expand its ecosystem of decentralized physical infrastructure (DePIN) networks. The funding round, led by Generative Ventures and Borderless Capital and featuring participation from Spartan Group, CMCC Global and Animoca Brands, comes ahead of the blockchain’s mainnet launch and listing of the PEAQ token.

MyPrize, founded by Zach Bruch and describing itself as an “online crypto casino enabling immersive multiplayer experiences,” emerged from stealth and disclosed having raised $13 million over two rounds of financing, backed by Dragonfly and Boxcar Ventures.

Illuvium, describing itself as “a decentralized studio building the world’s first interoperable blockchain game universe,” has raised $12 million in a Series A round, from investors including King River Capital, Arrington and Animoca.

Moondance Labs, the creators behind Tanssi Network, an appchain infrastructure protocol, has successfully raised $6 million in a strategic funding round to bolster Tanssi’s ongoing development and enable team expansion.

Deals and grants

Fetch.ai, SingularityNET and Ocean Protocol agreed to merge tokens and create an alliance for decentralized artificial intelligence (AI). The three are seeking to create an AI collective, providing a decentralized alternative to existing projects that are controlled by large technology companies, according to an emailed announcement on Wednesday. The new token will trade under the symbol ASI and would theoretically have a fully diluted market capitalization of about $7.5 billion.

Allen Day, head of Web3 developer relations at Google Cloud, is joining Dovey Wan’s Primitive Ventures as a venture partner. According to a message from Wan: “He will focus on key areas such as the intersection of AI and crypto, decentralized data and compute stacks, and next-generation cryptographic schemes and validation mechanisms.”

A16z, the venture capital firm, publicized that its “Crypto Startup Accelerator (CSX) Spring 2024 program kicks off this week, with the founders of 25 early-stage startups gathered in London.”

SKALE, the gasless blockchain, just announced $2 million in grants for GDC attendees. GDC stands for “Game Developer Conference,” in San Francisco.

Data and Tokens

Regulatory and Policy

Bridging Yields on the Rise as Blockchains Proliferate

It’s not something we have historically written a lot about – bridging yields. But a new report from the crypto investment firm Exponentia.fi included a chart on these yields, and it caught our eye because they’ve been rising fast recently, pushing above 15%. Co-founder Mehdi Lebbar attributes the rising yields to higher demand from users, in part a reflection of the trend toward greater interoperability between blockchains, along with the proliferation of layer-2 and layer-3 networks. “As the DeFi ecosystem extends across networks, third-party bridging protocols like Across and Synapse are reaping higher fees,” the report reads. These yields are paid out to liquidity providers who supply the bridges with cryptocurrencies, according to Lebbar: “The bridge allows transfers of bitcoins across chains, and people pay commissions on that. Commissions are reversed by the bridge/protocol to liquidity providers.” Asked if the higher yields might reflect increased risk, Lebbar said: “The increased yield would reflect ‘protocol risk’ if we were in a mature, highly efficient market, but that’s not the case for bridging.”