Welcome to Protocol, a weekly rap of Coindesk's most important story in cryptocurrency technology development. I am Margaux Nickelk, a reporter for Coindsk.
In this issue:
- Bitcoin Mining Face “Incredibly Difficult” Markets become real currency
- Bitcoin liquid staking gains momentum as Lombard launches bird tokens and foundation
- Optimism taps flashbot to supercharge OP stack sequences
- Hemi Labs raises $15 million to expand Bitcoin programmerity
Network News
Bitcoin mining players face a challenging market: Bitcoin miners have long been defined by the boom and bust rhythm of a half-cycle of four years. But the game has changed, some of the industry's most prominent executives said at the Salt Conference held at Jackson Hole earlier this week. With an increase in funds traded on exchanges, a surge in demand for electricity, and a restructuring of AI outlook (AI) infrastructure needs, miners must find ways to risk diversifying or being left behind. “We used to come here and talk about hashrates,” said Matt Schultz, CEO of CleanSpark. “Now we're talking about how to monetize megawatts.” For years, mining companies have lived and died by half cycles, mainly revenues from Bitcoin production. Every four years, the rewards were cut in half, with miners scrambling to reduce costs or reduce them to survive. According to these executives, that rhythm no longer defines business. “The four-year cycle will effectively be destroyed, along with the ETF and now the Strategic Treasury, due to Bitcoin's maturation as a strategic asset,” Schultz says. “The adoption is driving demand. If you read anything about the latest ETFs, they consumed much more Bitcoin than they've been generated this year.” Currently operating an 800 megawatt energy infrastructure and an additional 1.2 gigawatts under development, CleanSpark is beginning to draw attention beyond the proof of work. “The speed of selling on electricity has created an opportunity to allow us to consider ways to monetize electricity beyond Bitcoin mining,” he said. “With 33 locations, it's now much more flexible than ever,” Schultz doesn't just invoke changes in the industry's business model. Terawulf's CFO, Patrick Fleury, repeated his emotions, narrowed down the benefits the miners felt and didn't sugar. “Bitcoin mining is a very difficult business,” he said. He easily cut off the economy of Bitcoin mining. The electricity costs 5 cents per kilowatt hour, and it currently costs around $60,000 to mine one Bitcoin. At a Bitcoin price of $115,000, it means that half of the revenue is consumed through electricity alone. When corporate and other operating expenses are taken into consideration, the margins will be tightened quickly. In his view, mining profitability is almost completely hinged to ensure very low cost power. – Helen Brown read more.
Bitcoin Liquid Staking Rise: For much of its history, Bitcoin has been touted as digital gold by supporters. It is an asset you hold rather than use. Its passivity has trillions of dollars worth of BTC sitting idle in the wallet, separating it from yield strategies and complexity that define distributed finance (DEFI). The rise of liquid staking tokens promises to change it, placing Bitcoin not only as a valuable store, but also as a productive asset integrated into the capital market on the chain. Liquid Staking allows users to provide cryptographic services to protect their networks and receive a liquid-tradable token that represents an existing pile. Lombard Finance has emerged as one of the most prominent projects in Bitcoin Liquid Staking. Its flagship product, LBTC, is a token that contains yields backed by BTC 1:1. When BTC is deposited on the Lombard protocol, the underlying coins are staked, mainly through Babylon. Users will receive LBTC in return. This can be deployed across Defi Ecosystems while the original Bitcoin is earning staking rewards. This dual function is important. Holders can continue to be exposed to Bitcoin while using LBTC across protocols such as Aave, Morpho, Pendle, and Ether.fi, while using LBTC through lending, borrowing, and liquidity offerings. Designed for interoperability, LBTC moves across Ethereum, base, BNB chains, and other networks, preventing liquidity fragmentation and enabling Bitcoin to participate in multi-chain disruption environments. – Jamie Crowley read more.
Optimism and Flashbot team up: Optimism is working with Flashbots to revamp how transactions are processed across the OP stack ecosystem, aiming to make some of Ethereum's most popular Layer-2 networks faster and more customizable. Partnerships focus on the behind-the-scenes process of determining sequences, quick confirmation of transactions, which transactions are prioritized, and how much users will ultimately pay. According to optimism, Flashbots' infrastructure is responsible for building more than 90% of Ethereum's blocks, but now brings proximity checks and user-friendly transaction orders to any chain of so-called super chains. Chain, ink, sonium. Previously, advanced sequencing features such as ultra-fast payments, front-running protection, and custom compliance rules were available only to the largest chain with the resources to build them in-house. With Flashbots installed, these features are available through tools for building projects in Optimism's OP stack. – Margaux nijkerk read more.
Hemi Labs raises $15 million: Hemi Labs, a Bitcoin programmers network founded by Jeff Garzik, raised $15 million in funding to accelerate development and expand its ecosystem. The round included YZi Labs (formerly Binance Labs), Republic Digital, HyperChain Capital, Breyer Capital, Big Brain Holdings, Crypto.com and others, according to an emailed announcement.The company said the funds will support applications for borrowing, lending and trading on Bitcoin while further developing its Hemi Virtual Machine (hVM), a layer that embeds a Bitcoin node inside an Ethereum VM — the term for a Distributed system that can run smart contracts and process transactions in Ethereum. – Jamie Crowley read more.
In other news
- Aave Labs has introduced Horizon. Horizon is a new platform dedicated to facility borrowers accessing stubcoin, using tokenized versions (RWAs), like the US Treasury Department, as collateral. At launch, agencies can borrow Circle USDC, Ripple's RLUSD, and Aave's GHO against tokenized assets, including Superstate's short-term US Treasury and Crypto-Transport Fund, Circle's Invey Fund, and Centrifuge's tokenized Janus Henderson products. The platform aims to provide eligible investors with short-term funding for RWA holdings and enable them to deploy yield strategies. – Kim Jiang Sandor read more.
- Google Cloud is moving forward with plans to launch its own Layer-1 blockchain at a time when FinTech competitors are developing their own distributed ledgers, deploying the network as a neutral infrastructure for global finance. In a LinkedIn post published Tuesday, Rich Widmann, head of Google's Web3 Strategy, provided fresh details about the project known as the Google Cloud Universal Ledger (GCUL). He described the platform as a reliable, neutral, high-performance blockchain designed for institutions, supporting Python-based smart contracts making it more accessible to developers and financial engineers. “Financial institutions can be built with GCUL,” Widmann argued that while it may be unlikely that companies like Tether will employ Circle's blockchain or payment companies like Adyen, they may hesitate to use Stripe. – Sister Masnavi read more.
Regulation and policy
- Washington's lobbyists in the crypto industry are trying to attract lines to the sand above the market structure bill that is steaming the US Senate. The industry has sent “in one voice” the Senate Banking and Agriculture Committee with letters signed by Coinbase, Kraken, Ripple, A16Z, Uniswap Labs and more than 100 other crypto companies and organizations. This unified effort could happen the week before the Senate returned to work, rekindling full negotiations on the language of law, representing the industry's highest goals. – Jesse Hamilton read more.
- When Democrat Christine Johnson leaves the agency next week, the US Commodity Futures Trade Commission is about to drop it on a single director, with the only other person waiting to join the regulator is President Donald Trump's nominee, Brian Quintens. As of September 3rd, the five-member committee would be reduced to one. This is because Johnson is scheduled to be sent off. “It is important not to dismantle the fundamental resilience that supports financial stability and protects the broader economy as we advance the agenda in the name of growth,” she said in a farewell statement encouraging new technology to stick to the basics when it boards. – Jesse Hamilton read more.
calendar
- September 22nd to 28th: Korea Blockchain Week, Seoul
- October 1st-2: Token2049, Singapore
- October 13th-15th: Digital Assets Summit, London
- October 16th-17th: European Blockchain Convention, Barcelona
- November 17th-22nd: DevConnect, Buenos Aires
- December 11th-13th: Solana Breakpoint, Abu Dhabi
- February 10-12, 2026: Consensus, Hong Kong
- May 5-7, 2026: Miami, Consensus
