The Ethereum Foundation begins trials of ‘DVT-lite’ technology.

Also: Nvidia’s rare blog, Aave liquidations, and Pudgy Penguins new game.

What to know:

Welcome to The Protocol, CoinDesk’s weekly summary of the most significant developments in cryptocurrency technology. I’m Margaux Nijkerk, a reporter at CoinDesk.

In this edition:

• Vitalik Buterin advocates for ‘DVT-Lite’ to simplify Ethereum validator setup
• Nvidia’s Huang asserts AI generates jobs, not eliminates them, in a rare official blog
• DeFi lending platform Aave experiences a rare $27 million in liquidations due to a price anomaly
• Pudgy Penguins unveils its ‘Club Penguin’ moment, and the game does not seem crypto-centric at all

Network News

ETHEREUM FOUNDATION INITIATES DVT-LITE TECH EXPERIMENTATION: The Ethereum Foundation is exploring a method for managing validators that could greatly simplify the process for institutions holding large quantities of ether to establish staking infrastructure, thereby broadening the pool of participants and fostering a more decentralized network. In a post on X, blockchain co-founder Vitalik Buterin indicated that the foundation is employing a streamlined version of distributed validator technology, or “DVT-lite,” to stake 72,000 ETH. The experiment’s aim is to simplify the operation of validators across multiple machines. Buterin articulated the aspiration to reduce the setup process to something akin to a one-click installation, where operators select which computers will operate validator nodes, initiate the software, and input the same key on each machine. The system would then automatically interconnect the nodes and commence staking. “My hope for this project is that we can make it maximally easy and one-click to do distributed staking for institutions,” Buterin noted. Currently, running Ethereum validators typically involves managing a single node that holds the key used to sign blocks and engage in the network. If that machine fails or goes offline, the validator may cease to function and could face penalties. Distributed validator technology (DVT) addresses this by enabling multiple independent machines to collectively function as a single validator. Instead of depending on one key and one computer, several nodes cooperate, with only a few of them signing for the validator to operate. This ensures that the validator can continue functioning even if some machines fail. However, existing DVT frameworks can be intricate to set up because operators must coordinate networking, keys, and communication among nodes. Buterin has previously contended that this complexity is a factor contributing to the dominance of large staking providers in the ecosystem. The “DVT-lite” configuration seeks to automate a significant portion of that process, facilitating institutions’ ability to manage distributed validators with limited infrastructure knowledge.— Margaux Nijkerk Read more.

NVIDIA ARGUES AI CREATES JOBS IN UNUSUAL BLOG: The AI employment debate received a significant rebuttal from the individual selling the hardware. Nvidia CEO Jensen Huang released a rare independent essay outlining what he refers to as the “five-layer cake” of AI infrastructure: energy at the base, followed by chips, physical infrastructure, models, and applications. This positions AI not merely as a software product or chatbot, but as an industrial development comparable to electrification, necessitating trillions of dollars in physical construction and a substantial workforce of electricians, plumbers, pipefitters, steelworkers, and network technicians. “These are skilled, well-compensated jobs, and they are in limited supply. You do not need a PhD in computer science to engage in this transformation,” he stated. Huang’s justification for the extensive buildout begins with a fundamental alteration in computing operations. Traditional software retrieves stored instructions, while AI produces new outputs in real time, with each response generated uniquely based on the provided context. It doesn’t simply look up an answer; rather, it reasons through one on demand. Since intelligence is generated in real time, the entire computing stack beneath it must be reimagined, which is why AI requires purpose-built infrastructure from the energy layer upward instead of relying on existing data centers. The timing is significant. The essay comes after weeks of escalating concerns regarding AI’s effect on jobs, including Block Inc.’s mass layoffs and Anthropic CEO Dario Amodei’s remarks about job displacement. Tech stocks have faced declines due to these fears since early this year. — Shaurya Malwa Read more.

AAVE EXPERIENCES UNUSUAL $27M IN LIQUIDATIONS DUE TO PRICE ANOMALY: Approximately $27 million was liquidated on the decentralized lending platform Aave within the last 24 hours, in what some market participants suggest may have resulted from a temporary pricing glitch involving the token wstETH. Blockchain data highlighted by risk-management firm Chaos Labs indicates a surge in liquidations over the past day. Some observers believe this incident may have been related to a price update in a risk-oracle system that Aave utilizes to assess collateral value. Oracles are services that relay price data from the external environment into blockchain applications. Lending protocols such as Aave depend on them to determine when a borrower’s collateral is insufficient to support their loan, at which point the position may be liquidated. Although such situations are infrequent, a recent misconfiguration in a price-oracle setup by DeFi lender Moonwell briefly valued Coinbase Wrapped ETH (cbETH) at around $1 instead of about $2,200, resulting in nearly $1.8 million in bad debt for the protocol. In Aave’s situation, some believe the issue might have involved wstETH, a token issued by Lido representing staked ether. Given that it accumulates staking rewards over time, one wstETH is generally worth slightly more than one ETH. According to a post from LTV Protocol on X, at the time of the liquidations, Aave’s risk-oracle seemed to value wstETH at roughly 1.19 ETH, while the broader market estimated it closer to 1.23 ETH. Trading volume for wstETH pairs remained relatively low, with only $10 million transacted in the past 24 hours, making it unlikely that any astute traders took advantage of the price discrepancy before it corrected. Stani Kulechov, founder and CEO of Aave Labs, mentioned in a post on X that there “was no impact to the Aave Protocol.” According to Chaos Labs, the incident was triggered by a mismatch between outdated parameters stored in a smart contract, including a reference exchange rate and its corresponding timestamp. Due to these values not being updated synchronously, the CAPO system temporarily calculated a maximum permissible exchange rate that was lower than the actual market value of wstETH. — Margaux Nijkerk Read more.

PUDGY PENGUINS RELEASES ITS WEB3 GAME: Pudgy Penguins has launched its flagship game to the public, with the most notable aspect being that players would not recognize its connection to crypto unless informed. Pudgy World, the browser-based game first revealed at Art Basel in late 2023, has gone live with 12 distinct towns within a world called The Berg, narrative quests where players assist a penguin named Pengu in locating someone named Polly, and a collection of mini-games. CoinDesk participated in a 10-minute session and noted a straightforward observation. It is smooth, responsive, intuitive, and evidently not designed with a crypto-first audience in mind. “We developed custom world-building tools utilizing open-source web technology, providing us with a lightweight editor optimized for speed and rapid iteration,” co-founder @chefgoyardi stated in an X post. “Our asset pipeline allows artists to work in Maya, Cinema4D, or Blender while custom Houdini scripts automatically convert everything into a web-optimized format. Creative freedom without compromise.” “We tailored physics specifically for the browser. Quick movement, parkour, fluid navigation, and high frame rates even on lower-end devices,” they added. The game may evoke nostalgia for some users akin to Club Penguin. That game was Disney’s browser-based virtual world that operated from 2005 to 2017 and peaked at over 200 million registered users, primarily children who personalized penguin avatars and engaged in mini-games. It serves as a template for what a mainstream Penguin game could resemble, and Pudgy World may be compared against a broader audience. The NFT gaming sector has spent years creating products that feel like wallets with gameplay attached. Pudgy World takes the reverse approach, crafting something that functions effectively as a game first and connects to the token economy second. — Shaurya Malwa Read more.

In Other News

• Mastercard has introduced a new Crypto Partner Program that unites more than 85 companies from various sectors of the digital asset and payments industries, aiming to more directly connect blockchain technology with the infrastructure that supports global commerce. The initiative includes crypto exchanges, blockchain developers, fintech firms, and banks such as Binance, Circle, Ripple, Gemini, PayPal, and Paxos, the company informed CoinDesk in a statement. Participants will collaborate with Mastercard to investigate how blockchain-based systems can integrate with conventional payment networks utilized by banks, merchants, and consumers globally. Mastercard noted that the initiative emphasizes practical applications where digital assets are already gaining momentum, including cross-border transfers, business-to-business payments, and global payouts. For payment firms like Mastercard, the challenge revolves less around replacing existing systems and more about linking new ones to the networks that currently handle global commerce. Mastercard’s network connects banks, merchants, and consumers in over 200 countries and territories. The company contends that blockchain-based payments will only achieve widespread adoption if they can integrate into such a global framework. The Crypto Partner Program is intended to establish that connection. Companies involved in the program will collaborate with Mastercard teams to help develop products that merge on-chain tools — such as programmable payments or tokenized assets — with traditional payment infrastructures. — Helene Braun Read more.
• Foundry Digital, one of the leading Bitcoin mining pools by hashrate, announced plans to launch a zcash (ZEC) mining pool by next month, expanding its operations beyond BTC and bringing a significant institutional player into the privacy-centered network. With the new pool, Foundry aims to provide zcash miners with a U.S.-based platform designed around compliance checks, reporting standards, and operational controls often required by public corporations and large enterprises. This move addresses what Foundry describes as a gap in Zcash infrastructure. Although the cryptocurrency has been around for nearly a decade, much of its mining ecosystem still consists of smaller global pools that typically operate outside formal compliance frameworks. “Zcash has matured into an institutional-grade asset, but the mining infrastructure supporting it hasn’t kept pace,” stated Foundry CEO Mike Colyer in a statement shared with CoinDesk. The expansion comes as privacy-oriented cryptocurrencies are regaining attention across the market, particularly as new crypto tax reporting regulations, along with the risk of asset seizure, took effect across the European Union at the beginning of the year, and as onchain analysis continues to advance, leading to a growing demand for financial anonymity. — Francisco Rodrigues Read more.

Regulatory and Policy

• Binance has initiated a defamation lawsuit against Dow Jones, the publisher of The Wall Street Journal, on the same day the newspaper released a report alleging that the U.S. Justice Department is investigating whether Iran utilized the world’s largest crypto exchange to transfer funds in violation of American sanctions. In the complaint lodged in the U.S. District Court for the Southern District of New York, the company asserted that the newspaper disseminated “false and defamatory statements” regarding its compliance procedures and handling of Iran-linked transactions in an article published on Feb. 23. The Journal claimed that Binance terminated employees who flagged funds being transferred through the exchange to sanctioned entities, allegations which Binance denied. The lawsuit asserts that Binance did not dismiss employees for expressing compliance concerns. Staff departures were due to alleged violations of internal data protection policies rather than retaliation, it stated. “Binance categorically did not dismantle any compliance investigation,” a spokesperson for the exchange told CoinDesk. “The WSJ continues to report the same inaccuracies. Consequently, we have filed a lawsuit against the Wall Street Journal for defamation.” — Francisco Rodrigues Read more.
• Sen. Adam Schiff (D-CA) has proposed legislation that would prohibit prediction market contracts linked to terrorism, warfare, assassination, and death, directly opposing the market regulator CFTC’s movement toward looser regulation of event trading. The bill, named the DEATH BETS Act, would remove the agency’s discretion over permitting such contracts and explicitly write prohibitions into law, positioning Schiff in direct conflict with CFTC Chair Mike Selig’s deregulatory agenda. Schiff, who serves on the Senate Agriculture Committee that oversees the CFTC, is poised to advance the issue legislatively as the agency’s new rule-making unfolds. Under the Commodity Exchange Act, the CFTC already possesses the authority to prohibit contracts associated with war, terrorism, or assassination if it determines they are against the public interest. However, enforcement relies on the regulator’s judgment, which means the scope of protection can fluctuate with agency leadership. Schiff’s bill would eliminate that variability. — Sam Reynolds Read more.

Calendar

• Mar. 24-26, 2026: Digital Asset Summit, New York City