Welcome to The Protocol, CoinDesk’s weekly roundup of the most important stories in cryptocurrency technological development. I’m Margaux Nijkerk, CoinDesk reporter.
In this number:
- Ethereum developers prepare for Fusaka, second update of 2025
- Anthropic Research Shows AI Agents Are Getting Closer to DeFi’s Real Attack Capability
- Ethereum Developers Push ZK ‘Secret Santa’ System Toward Implementation
- Bitnomial Prepares to Debut First CFTC-Regulated Crypto Spot Market
Network News
FUSAKA WILL GO LIVE ON ETHEREUM: Ethereum developers are preparing for the second network upgrade of 2025 launching later today. Fusaka, a combination of the names Fulu + Osaka, consists of two updates that occur on Ethereum’s consensus and execution layers at the same time. The goal of the upgrade is to allow Ethereum to handle the high transaction throughput of Layer 2 chains that use the blockchain as a base layer. Fusaka consists of 12 code changes, also known as “Ethereum Improvement Proposals” (EIP) that will make the Layer 2 experience faster and cheaper. The biggest change in Fusaka is known as PeerDAS, which allows validators to verify only segments of data instead of entire “blobs”, alleviating bandwidth demands and reducing expenses for both validators and Layer 2 networks. Currently, Layer 2s send thousands of transactions to Ethereum via “blobs”, where validators currently on the Ethereum blockchain have to download all transaction data from the blob to verify it is accurate, which creates bottlenecks. With this improvement, those validators will only need to verify a fraction of a blob, which will speed up the process and reduce the transaction fees involved. — Margaux Nijkerk Read more.
ANTHROPIC STUDY ON DEFI AI AGENTS: AI agents are getting good enough at finding attack vectors in smart contracts that bad actors can already weaponize them, according to new research published by the Anthropic Fellows program. A study conducted by the ML Alignment & Theory Scholars Program (MATS) and the Anthropic Fellows program tested frontier models against SCONE-bench, a data set of 405 exploited contracts. GPT-5, Claude Opus 4.5, and Sonnet 4.5 collectively produced $4.6 million in simulated exploits on hacked contracts after their knowledge outages, offering a lower bound on what this generation of AI could have stolen in the wild. The team discovered that frontier models did more than just identify errors. They were able to synthesize entire exploit scripts, sequence transactions, and drain simulated liquidity in ways that closely mirror real attacks on the Ethereum and BNB blockchains. The paper also tested whether current models could find vulnerabilities that had not yet been exploited. GPT-5 and Sonnet 4.5 scanned 2,849 newly deployed BNB chain contracts that showed no signs of pre-commitment. Both models discovered two zero-day failures worth $3,694 in simulated profits. One arose from a missing view modifier in a public function that allowed the agent to inflate its token balance. Another allowed a caller to redirect fee withdrawals by providing an arbitrary payee address. In both cases, the agents generated executable scripts that turned failure into profit. Although the dollar amounts were small, the discovery is important because it demonstrates that profitable autonomous exploitation is technically feasible. — Samuel Reynolds Read more.
ETHEREUM DEVELOPERS BOOST ZK PROTOCOL FOR PRIVACY: Ethereum developers are refining a zero-knowledge protocol designed to bring stronger privacy guarantees to on-chain interactions, starting with a “Secret Santa”-style matchmaking system that could evolve into a broader toolset for private coordination. Solidity engineer Artem Chystiakov resurfaced the research Monday in a post on the Ethereum community forum, pointing to work he first published in January on arXiv. The idea aims to recreate the anonymous gift exchange game on Ethereum, where participants are randomly paired without anyone knowing who is sending whom. However, doing that on a transparent blockchain requires solving several long-standing issues related to randomness, privacy, and Sybil resilience. Chystiakov said the core problems are simple: “Everything on Ethereum is visible to everyone,” blockchains do not provide true randomness, and the system must prevent users from signing up multiple times or assigning gifts to themselves. The proposed protocol uses zero-knowledge proofs to verify sender-recipient relationships without revealing identities, and a transaction relay to send movements so that individual wallets cannot be linked to actions. In the proof of concept, participants register their Ethereum addresses in a smart contract and commit to a unique digital signature, which blocks duplicate entries. Each participant then sends a random number to a shared list through the repeater. Because the relay transmits the transactions, no one can know which address contributed which number. Recipients encrypt their delivery details using these shared numbers, ensuring that only their assigned counterparty can decrypt them. — Shaurya Malwa Read more.
BITNOMIAL LAUNCHES SPOTLIGHT TRADING IN US: Bitnomial, a Chicago-based derivatives exchange, is preparing to launch the first cryptocurrency spot trading platform overseen by the US Commodity Futures Trading Commission (CFTC). The Chicago-based derivatives exchange’s self-certified rules went into effect last week, authorizing it to list both leveraged and unleveraged spot crypto products. The approval opens the door for customers to buy, sell and fund digital assets directly on a federally regulated commodity exchange, a first for the US market. Caroline Pham, acting director of the CFTC, said in November that she was in talks with regulated exchanges about potentially launching crypto spot products. Bitnomial’s approval comes as the CFTC accelerates its effort to place retail crypto markets under federal commodity supervision. Pham has argued that the agency already has sufficient authority to supervise spot cryptocurrencies. The CFTC and Securities and Exchange Commission recently revealed that nothing in current law prevents exchanges registered with either regulator from listing certain crypto products, including those with leverage, as long as they coordinate with agency staff. The approval could pave the way for other exchanges that have designated contract market (DCM) status, including Coinbase and prediction market venues like Kalshi and Polymarket. – Oliver Caballero Read more.
In other news
- Kalshi, a US-based prediction market, has closed its $1 billion funding round, raising its valuation to around $11 billion, according to a press release. The latest round was led by Paradigm, with participation from veteran venture capital firms including Sequoia Capital and CapitalG, Alphabet’s growth capital arm. News of the increase broke last month, when TechCrunch reported the $1 billion increase. Kalshi, which offers binary event contracts that allow users to trade the outcomes of real-world future events like political races and legislation, outperformed rival Polymarket in the third quarter, racking up $4.47 billion in trading volume compared to Polymarket’s $3.5 billion total, according to data from TokenTerminal. — Oliver Caballero Read more.
- Antithesis, a Northern Virginia startup that bills itself as infrastructure for software that never fails, raised a $105 million Series A led by Jane Street, a bet that stress testing distributed systems is as important for blockchains as it is for high-speed commerce. The company’s platform uses deterministic simulation testing, running large-scale, production-like simulations, to reveal the types of edge cases that can exploit in live networks, Antithesis said in a press release. When a failure occurs, Antithesis said it can reproduce the error exactly, helping engineers isolate problems without the usual limbo of being unable to reproduce, a familiar weakness for cryptographic protocols where small glitches can cause instability in the chain. — cunning will Read more.
Regulation and policy
- The United Kingdom now formally recognizes cryptocurrencies as property following the passing of a new law this week. The Property (Digital Assets, etc.) Bill has received royal assent, the final step for a bill to become law after being passed by Parliament. The law, signed into law by King Charles on Tuesday, was designed to modernize property law to take digital assets into account. Previously, property was classified into one of two categories: things in possession, such as physical objects, and things in action, such as a debt. The law establishes a third category that includes digital assets such as cryptocurrencies and non-fungible tokens (NFTs). Crypto industry associations welcomed the law, calling it an important step in legal recognition of digital assets and thus instilling greater confidence in users. Jamie Crawley Read more.
- President Karol Nawrocki of Poland refused to sign a bill that he believed would have imposed overly strict regulations on the cryptocurrency market. The president vetoed provisions of the bill on the basis that they “represent a real threat to the freedom of Poles, their property and the stability of the state,” according to an update on his website. The Cryptoasset Market Act was Poland’s legislation to align with the European Union’s (EU) Cryptoasset Markets (MiCA) regulation, which is the bloc’s framework for establishing a single rulebook for the supervision of the cryptocurrency industry. President Narwocki was concerned that the law allowed the government to take down crypto companies’ websites “with a single click” and that regulation on domain blocking lacked transparency and was open to abuse. — Jamie Crawley Read more.
Calendar
- December 11-13: Solana Breakpoint, Abu Dhabi
- February 10-12, 2026: Consensus, Hong Kong
- February 17-21, 2026: EthDenver, Denver
- From March 30 to April 30. 2, 2026: EthCC, Cannes
- April 15-16, 2026: Paris Blockchain Week, Paris
- May 5-7, 2026: Consensus, Miami
