The Protocol: Bitcoin Gets Political as U.S. Government Ponders Airdrops

Last week's Bitcoin Nashville conference dominated crypto news headlines – largely due to former U.S. President Donald Trump's campaign speech (and lots of promises) as well as Senator Cynthia Lummis's call for a national "Bitcoin Strategic Reserve." (We've got the draft legislation.)

We wandered around the event for four days while scrambling to cover all the news, and took lots of photos. Bitcoin LARP, anyone?

In this issue:

U.S. Senator Cynthia Lummis, a Wyoming Republican, with a copy of her bitcoin reserve bill at the Bitcoin Nashville conference on Saturday, July 27. (Danny Nelson/CoinDesk)

RESERVING JUDGMENT: Details are scarce on last weekend's Republican calls for a "strategic national bitcoin stockpile." Trump, the party's presidential nominee, suggested using the government's existing holdings of just over 200,000 BTC as the "core" of a new reserve. Senator Cynthia Lummis of Wyoming proposed to go even further, possibly building it up to 1 million BTC, or about 5% of the cryptocurrency's maximum supply.

Lummis said onstage at Bitcoin Nashville that the plan might eventually "eliminate" the national debt – $27 trillion, at last check! – but didn't really explain how that would work, "apart from the basic math that swelling U.S. government wealth would generally equate with reduced indebtedness," as CoinDesk's Jesse Hamilton put it. Questions arose on social media over whether the government even had rights to keep the existing hoard, mostly obtained through seizures and forfeitures associated with criminal activity; in other words, any stolen assets might at some point need to be returned to the rightful owners.

There was also considerable speculation over what exactly Lummis meant when she said, "We will convert excess reserves at our 12 Federal Reserve banks into bitcoin over five years," or if the economics or legality of anything remotely close to that were even feasible. George Selgin, an economist with the conservative Cato Institute, wrote on X that he had "heard from someone in Senator Lummis's office" who clarified that the plan was actually just to buy about $64 billion worth of bitcoin using balances created from simply revaluing the gold in Fort Knox. CoinDesk obtained a draft bill that does indeed outline a plan to revalue Federal Reserve gold certificates, while setting aside $6 billion from any net earnings the U.S. central bank might generate over the next five fiscal years – with the giant caveat that, lately, the Fed has been losing money at a record pace.

Fun fact: The draft bill offers a provision for how the U.S. government would handle any airdropped tokens.

Taking things from a high level, the Wall Street Journal Editorial Board concluded that "if cryptocurrencies really are a libertarian vehicle to invest free from political vagaries, then they should trade on their own without government help."

The entire debate took a sharp turn once reports emerged that U.S. authorities had just moved about $2 billion worth of the government's bitcoin associated with the Silk Road website seizures. U.S. officials wouldn't really explain the move, and cautioned against reading too much into it, but theories quickly emerged on social media that the Biden administration and its allies were rushing to "dump" the government's stash before the Trump administration ever gets control.

ALSO:

Lightning protocol engineer Lisa Neigut leading an instructional game called "Bitcoin LARP" at last week's Bitcoin Nashville conference (Bradley Keoun)

Check out our photo-blog from last week's Bitcoin Nashville Conference: "Surreal doesn't begin to describe the combination of visuals collected from last week's festival-style gathering in homage to the oldest and largest cryptocurrency, punctuated by former U.S. President Donald Trump's pro-crypto campaign speech to an adoring crowd."

Featuring, in order of appearance: David Tse, Lisa Neigut (above), Adrián Eidelman, Fred Thiel, Justin Sun (not really but sort of), Robin Linus, Jeremy Rubin, Liam Eagen, Weikeng Chen, Andrew Poelstra, Casey Rodarmor, Erin Redwing, Cathie Wood, Michael Saylor, Ron Paul, Donald Trump.

Click here for the full story by Bradley Keoun

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

The Irys project will feature both permanent data storage as well as "term data ledgers" (Irys)

1. Irys, describing itself as a provenance layer for data storage, announced it will transition to a new layer-1 network with the launch of a "programmatic datachain that combines data storage and execution." According to the team: "Through IrysVM, which is fully EVM-compatible, developers can leverage efficient and cost-effective real-time data manipulation. This approach simplifies development processes, enhances scalability and ensures stable and predictable pricing for transactions and data storage. Ecosystem partners building on Irys’ Layer 1 include Berachain, Eclipse, Injective Labs, Livepeer, Linea, IoTeX, Gateway.fm, Lit Protocol, NodeKit, Olas, Snapchain, BeraLand and YEET." Founded in 2021, Irys began its journey as Bundlr, a scaling solution for permanent data storage on Arweave.

2. Router Protocol, a project built using Cosmos blockchain technology, said Tuesday that it launched the main network of a new blockchain designed for "chain abstraction" – a concept embraced by many protocols with the aim of making the user experience of blockchains more seamless. To make the new Router Chain more seamless in cross-chain interactions, it will focus on reducing “the development barriers and streamlining the development of dApps that can seamlessly interact with multiple blockchains and aggregate liquidity from any chain,” according to a press release shared with CoinDesk.

3. Blackbird Labs, the restaurant loyalty platform founded by Resy and Eater co-founder Ben Leventhal, announced the launch of Blackbird Pay, a system that will allow participating restaurants to accept payment in cryptocurrency. The new payments platform expands on Blackbird's mission by allowing consumers to pay for their meals using the $FLY cryptocurrency. The tokens can be earned as loyalty points for dining at participating restaurants or purchased in the Blackbird app using Coinbase's popular USDC stablecoin.

4. The developers of Theoriq, described as an "AI agent base layer," published its official project whitepaper, introducing the key aspects of its network and outlining its benefits for the development of advanced AI agent collectives. According to the team: "Using a decentralized model, Theoriq will leverage smart contracts to ensure transparency and accountability while also maintaining flexibility to ensure its network will continue to adapt as AI continues to advance in complexity."

5. Dash, a payments-focused cryptocurrency project, is launching the Evolution upgrade on July 29, described as "its most major upgrade" to date, with a new sidechain. According to the team, the project aims "to enable indexed decentralized storage and decentralized applications." According to a blog post, the sidechain "is run by EvoNodes, which also secures the legacy Dash chain. It uses the account-based model (single addresses have balances), as opposed to the UTXO model (multiple addresses hold coins, or UTXOs) of the Core chain. It uses a heavily-modified derivative of Tendermint (Cosmos) consensus called Tenderdash. The main differences between Tenderdash and Tendermint are that Dash’s version has same-block execution, meaning you don’t have to wait for the next block after writing new data in order to query it."

Fundraisings

Hyperbolic CEO Jasper Zhang and co-founder Yuchen Jin (Hyperbolic)

Data and Tokens

Regulatory and Policy

The benchmark CoinDesk 20 index of blue-chip digital assets returned 3.3% during the month, through July 30, roughly matching July returns for gold, but slightly outperforming the Standard & Poor's 500 Index of U.S. stocks.

MTD returns through July 30. (Tracy Stephens/CoinDesk Indices)

XRP, the token used in the Ripple Labs-developed XRP Ledger, dominated among the month's big gainers, soaring 32%, followed by Solana's SOL at 20%. Bitcoin was the only other cryptocurrency in the green, with a 3.8% month-to-date rise.

MTD returns through July 30. (Tracy Stephens/CoinDesk Indices)