A Play for ZK™️
Plus: The limits of centralized sequencers
In this week’s edition of The Context, Matter Labs stops pursuing a trademark™️, Linea stops its blockchain, and Coinbase pops a few million in the collection basket.
[What’s the Matter With ZK? 🤷♀️]
After backlash from other scaling solutions, Matter Labs, the maker of the zkSync protocol, said it will stop trying to trademark the initials ZK, which refer to “zero knowledge” proofs.
What Journalists Said 🧑💻:
Matter Labs wanted to trademark ZK, “a form of cryptographic proof used to demonstrate that something is known without directly revealing the known information,” wrote Stephen Graves (Decrypt). It argued that applying this legal protection would ensure the term could be used openly by crypto projects.
But many of those projects—including Polygon and Starkware—cried foul, “argu[ing] that leveraging the legal system to claim the popular and longstanding acronym violated the ethos of web3,” said Mehab Qureshi (The Defiant). In an open letter, they said that “ZK should remain a public good.”
“The controversy around ZkSync's trademark application came just as the protocol is planning for an airdrop that's expected to occur in mid-June,” wrote Zack Abrams (The Block). Matter Labs and fellow zk developer Polyhedra Network both wanted to use ZK as a ticker symbol.
PR Perspective 🔎:
X was filled this week with testy conversations between Matter Labs execs and members of other ZK teams. While all of that made it into trade publications, such arguments are too inside baseball to get much play in mainstream publications. Though Matter Labs didn’t make any new friends inside the industry, this may be a case of “no such thing as bad publicity.” If Matter Labs wasn't synonymous with "ZK" before the trademark application, it certainly is now.
[Coinbase PACks in the Donations 💰]
Crypto exchange Coinbase announced it donated another $25 million (on top of an earlier $24M) to pro-crypto super PAC Fairshake. As an “independent expenditure-only political committee,” Fairshake can run advertisements but can’t give directly to a candidate or political party. Fairshake has now raised $160M to be deployed in this year’s elections.
What Journalists Said 🧑💻:
The donation comes days after President Joe Biden vetoed SAB 121, wrote Niamh Rowe (Fortune). That bill “would have overturned the Securities and Exchange Commission’s policy that prevents traditional financial companies from holding on to their customers’ crypto on their behalf.”
Speaking of which, Coinbase just filed a brief with the US Court of Appeals arguing that “the SEC demands that digital asset firms come into compliance with securities laws, but has refused to clarify the rules for the compliance it demands,” reported Mike Millard (DL News).
While the SEC is still playing hardball, lawmakers may be “shifting toward wider acceptance of crypto,” said Jesse Hamilton (CoinDesk). The next Congress could be the one “that establishes tailored rules of the road for digital assets.” Crypto advocates sense an opportunity. The “industry’s stockpile of campaign cash now rivals the scale of the massive war chests assembled by the political parties themselves [for] House and Senate races.”
PR Perspective 🔎:
Crypto firms are gearing up for election season by paying to push for clearer (and, yes, crypto-friendly) legislation. While PACs are all about buying media, the industry’s lobbying efforts are also garnering earned media from trade publications and mainstream outlets alike.
[Stop, in the Name of Linea ⏯️]
Layer-2 blockchain Linea paused the network to prevent a hacker from making off with $7M in tokens stolen from Velocore, a decentralized exchange atop it.
What Journalists Said 🧑💻:
Linea said it had to pause the blockchain to protect users, as “the hacker had begun to sell large amounts of stolen tokens for ETH,” said Mehab Qureshi (The Defiant). But then the ConsenSys-backed project took heat from critics, who argued that turning off a blockchain is inconsistent with crypto’s always-on, decentralized ethos.
But it’s like this all over L2 land, explained Vishal Chawla (The Block): “While rollups offer a promising solution for scaling Ethereum dApps, they inherently introduce centralization risks due to reliance on sequencers controlled by project teams. This setup presents single points of failure and potential censorship issues.” 🙊
Linea noted as much when delivering its mea culpa, wrote Vince Dioquino (Crypto Briefing). It nonetheless “reaffirmed its commitment to decentralizing its network and sequencer to prevent similar incidents in the future.”
PR Perspective 🔎:
Your #1 commitment in a crisis is to your users. Everyone else can wait. Linea took the hit, communicated the challenge it faces, and now must demonstrate public progress in overcoming it.
[Tweet Of The Week]
Credit: @0xmads
[DeFi Definitions]
A segment exploring one particular aspect of DeFi. View previous entries here.
This week: ‘’Crypto Mixers” by Sophie-Joy Latinwo.
A crypto mixer (or tumbler) enhances the privacy and anonymity of cryptocurrency transactions by obscuring the link between the sender and receiver, making it difficult to trace specific coin histories. This process, similar to money laundering, raises significant legal concerns, especially regarding money laundering and regulatory compliance. Mixers charge a transaction fee of 1-3% to turn a profit.
The process involves three steps: placement, layering, and integration. Users place their coins into the mixer along with others; the mixer algorithmically disguises the origins and ownership; and then it redistributes the coins randomly, to obscure their origin.
There are two types of mixers: centralised and decentralised. Centralised mixers are third-party services that mix coins in one pot and return different coins of the same value. However, they require high trust as they retain records of coin origins and recipients, which could be exposed or hacked. Decentralised mixers use zero-knowledge proofs and smart contracts, which allow transaction verification without revealing details. These protocols obscure transactions effectively, ensuring no records of coin origins exist, making them more secure than centralised mixers.
The usual disclaimer: This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/Web3/NFT land and tries to provide unbiased context. It's aimed at anyone who wants to keep an eye on the space. It's put together by a team at YAP and doesn't contain any promotion of our clients (if one is mentioned, we'll flag that).
The team: Founder Samantha Yap and consulting editor Jeff Benson, Ewan Brewster, Andrew Wickerson, and Emma Murphy. Your feedback is, as always, welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and brands through impactful storytelling. Find out more about us here.