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Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.

Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

Last weekend was exciting for crypto speculators, with the prices of bitcoin (BTC), ether (ETH) and other coins shooting up by double-digit percentages. Zoom out on that price chart and the picture becomes clearer: Things aren’t looking so hot.

A year ago, every crypto reporter’s inbox was filled with fundraising announcements from upstart decentralized finance (DeFi) firms and non-fungible (NFT) projects. From algorithmic stablecoins to yield-farming platforms to land sales in the metaverse, each new narrative seemed to draw out hundreds of millions of dollars from venture capitalists.

This article originally appeared in Valid Points, CoinDesk’s weekly newsletter breaking down Ethereum’s evolution and its impact on crypto markets. Subscribe to get it in your inbox every Wednesday.

Today, inboxes are emptier and buzzwords are apparently no longer enough to rake in a $10 million seed round. But things haven’t quieted down entirely. Some teams have continued to woo investors and Crypto Twitter amid the market downturn.They generally seem to have more technical, infrastructure-focused pitches relative to the speculative lending platforms and colorful Web3 projects of the past.

In Ethereum-land, here are a few of the biggest areas for tech investment. .

Zero-knowledge and scaling

Zero-knowledge (ZK) technology continues to be among the frothiest sectors for investors. The technology is complicated, but the concept isn’t: ZK proofs use fancy cryptography to allow users to “prove” something is true without showing how.

ZK proofs are used widely in blockchain privacy, security and scaling but they also have applications beyond just crypto. Some of the teams building ZK tech for Ethereum include Scroll, Matter Labs and Polygon – each of which is building a rollup to scale Ethereum using ZK proofs. It is expected that ZK rollups will eventually become the main way people access Ethereum.

Staking

Ethereum’s shift to proof-of-stake ditched crypto miners for crypto validators, also called “stakers” – people who lock up, or “stake,” crypto with the network and earn rewards for helping keep it secure.

EigenLayer is one of the buzzier staking-focused companies that’s continued to earn attention as the wider crypto market has soured. Pitching itself as a “general-purpose marketplace for decentralized trust,” EigenLayer allows people to “restake” tokens that they’ve locked up to validate Ethereum – re-using those tokens to help secure other Ethereum middleware.

On another end of Ethereum staking land is Obol Labs, which announced this week that it just raised $12.5 million in series A funding to build out its approach to distributed validator technology (DVT). Obol Labs says the tech will help validators operate more securely and in closer alignment with crypto’s decentralized ethos.

MEV: Maximal Extractable Value

Maximal extractable value (MEV) is a kind of profit that one can earn by analyzing Ethereum’s pending transaction pool (the “mempool”) to find profitable trades. Initially viewed as a scourge for the entire ecosystem, since MEV-optimizers frequently use strategies that eat into the profits of other traders, firms like Flashbots have long been at work spreading out the riches of MEV across more stakeholders.

As MEV extraction has grown more equitable, it’s continued to grow into a lucrative cottage industry, with MEV-focused firms still earning attention and funding despite wider market conditions.

Flashbots, for its part, has grown in prominence since Ethereum switched to proof-of-stake in September. Today, 94% of the blocks (bundles of transactions) written to the Ethereum ledger come from MEV-Boost, a piece of Flashbots middleware that delivers pre-made, maximum extractable value-optimized blocks to the validators that add them to the blockchain. Flashbots also made waves two months ago with the announcement that it was building SUAVE – a new blockchain that will run in parallel with other networks to provide a kind of decentralized MEV market.

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Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.


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CoinDesk - Unknown

Sam is a reporter at CoinDesk focused on decentralized technology, DeFi and DAOs. He owns ETH, BTC and MATIC.