The Protocol: Upcoming Ethereum scaling initiatives

Also: OKX and AI agents, Future AI users of blockchain and Bitcoin’s latest governance clash.

(CoinDesk)

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 unveils his ambitious new strategy to address Ethereum’s scaling challenges
• OKX enters the AI agent competition with its new OnchainOS toolkit
• AI agents are set to become the main users of blockchain, according to NEAR co-founder
• The struggle for Bitcoin’s essence commences as the first block endorsing a ‘clean-up’ proposal is mined

Network News

NEW SCALING INITIATIVES FOR ETHEREUM: Ethereum co-founder Vitalik Buterin shared a blog post on X detailing his latest approach to scaling the blockchain, claiming the network can enhance capacity in the short term while establishing a foundation for a future transition to sophisticated cryptography and data-intensive “blobs” that would transform Ethereum’s validation process. The post signifies Buterin’s renewed emphasis on scaling Ethereum’s base layer following several years where much of the ecosystem’s scaling strategy focused on layer-2 rollups. This plan follows the Ethereum Foundation’s release of a ‘strawmap’ aimed at enhancing the network’s efficiency over time. In the near term, Buterin asserts that Ethereum can safely improve throughput by simplifying and expediting block verification. Upcoming enhancements will enable the computers operating Ethereum to assess different sections of a block simultaneously instead of processing everything sequentially. Concurrently, modifications regarding block construction will allow the network to utilize more of each 12-second processing period instead of concluding early out of caution (termed ePBS, which will be integrated into the Glamsterdam upgrade). Consequently, Ethereum should be able to accommodate more transactions per block without escalating the risk of errors or instability. A significant aspect of the plan involves re-evaluating how transaction fees — referred to as “gas” — are determined. Buterin contends that not all activities on Ethereum exert the same pressure on the network. There’s a marked distinction between temporarily utilizing computing resources and permanently incorporating new data that each Ethereum computer, or node, must retain indefinitely. — Margaux Nijkerk Read more.

OKX EXPLORES AI AGENTS: OKX introduced an AI-centric upgrade to OnchainOS, its developer platform, promoting it as a foundation for autonomous cryptocurrency trading agents. The AI component enhances existing features such as wallet infrastructure, liquidity routing, and on-chain data feeds, merging them into a cohesive execution framework tailored for AI agents operating across multiple chains. Instead of manually configuring price feeds, token approvals, gas estimations, and swap routing, developers can connect an agent and issue a high-level directive, such as swapping ETH for USDC below a specified price. OnchainOS manages the underlying processes, from market monitoring to liquidity sourcing and settlement confirmation. The intersection of crypto and AI has surged dramatically in the past year — with the blockchain AI market expected to grow from $6 billion in 2024 to $50 billion by 2030 — and traders are leveraging this technology. A recent example featured a group of retail traders utilizing AI to identify “glitches” on platforms like Polymarket before instructing AI to trade on their behalf. — Sam Reynolds Read more.

NEAR CO-FOUNDER ON FUTURE BLOCKCHAIN USERS: For years, the cryptocurrency sector has sought its next major breakthrough — something akin to the DeFi summer or the NFT surge. Meanwhile, artificial intelligence (AI) has gradually become a part of everyday existence. Developers employ ChatGPT as a co-pilot. Consumers depend on AI assistants for tasks like composing emails, organizing travel, and increasingly, managing workflows. In contrast, crypto still feels largely infrastructural. Illia Polosukhin, a NEAR co-founder, believes this gap is about to narrow, but not in the expected manner. “The users of blockchain will be AI agents,” Polosukhin mentioned in an interview. “AI is going to be on the front end, and blockchain is going to be the back end.” His perspective challenges much of the recent experimentation within crypto concerning AI, which has focused on speculative tokens, memecoins, and agent-oriented trading bots. Instead, Polosukhin suggests that AI will evolve into the primary interface layer for all online activities, including crypto, abstracting away wallets, explorers, and transaction hashes. “The aim is to have your AI obscure all the blockchain,” he stated. “The existence of [blockchain] explorers indicates a failure, as we do not abstract the technology.” In this framework, blockchain does not vanish; it recedes. AI agents engage directly with protocols, executing payments, managing assets, coordinating services, and even participating in governance systems. Humans, in turn, interact with the AI. — Margaux Nijkerk Read more.

BITCOIN’S LATEST GOVERNANCE DISPUTE: Bitcoin’s recent governance dispute intensified as the first block indicating support for a temporary soft fork aimed at limiting arbitrary, non-monetary data in the blockchain’s transactions was created by mining pool Ocean. The proposal, formally designated BIP-110 after evolving from earlier drafts, seeks to restore strict limitations on transaction output sizes and arbitrary data fields for approximately one year. The objective is to mitigate what supporters view as “spam” uses of block space for non-financial data. They argue that uncontrolled data, including large inscriptions and so-called OP_RETURN payloads, jeopardize the original blockchain’s function as reliable monetary infrastructure and burden node operators. The community remains significantly divided. Prominent detractors, including Blockstream CEO Adam Back, have cautioned that consensus-level intervention could undermine Bitcoin’s credibility and lead to preferential treatment of certain transactions, violating the principle of neutral transaction capacity. He also expressed concerns regarding the level of support for the proposal, which he claimed heightened the risk of the blockchain being fractured. — Jamie Crawley Read more.

In Other News

• Kraken obtained a Federal Reserve “master account,” granting its banking division direct access to the Fed’s core payment systems and making it the first crypto company to operate on the same framework as traditional financial institutions. The firm announced that its Kraken Financial unit received approval for a Federal Reserve “master account.” This account provides direct access to Fedwire, a key interbank payment network that processes trillions in transactions daily. Until now, Kraken had to depend on partner banks to send or receive U.S. dollars. This direct access alters that dynamic, allowing the firm to settle payments independently, which may accelerate deposits and withdrawals for large traders and institutional clients. Kraken Financial operates under a Wyoming charter tailored for crypto-focused banks. The application was overseen by the Federal Reserve Bank of Kansas City. However, the approval is limited. Kraken will not have access to the full range of services available to traditional banks, as it will not earn interest on reserves or utilize the Fed’s emergency lending. — Francisco Rodrigues Read more.
• Tether, the company behind the most widely used stablecoin, USDT, invested $50 million in sleep technology startup Eight Sleep at a $1.5 billion valuation, based on a Wednesday press release and data from Crunchbase. With this funding, Eight Sleep intends to create new AI health features utilizing Tether’s QVAC architecture, a computing framework designed to process data at the device level rather than entirely depending on cloud systems. Eight Sleep develops sensor-integrated sleep systems that monitor biometrics like heart rate and temperature throughout the night. Its flagship product, the “Pod,” adjusts mattress temperature and generates sleep insights based on real-time physiological data. “We believe that advanced personalized AI is the ideal pathway to comprehend and expand human potential,” stated Paolo Ardoino, CEO of Tether. This investment exemplifies Tether’s move beyond stablecoins and crypto infrastructure. The company is most recognized for its $183 billion USDT stablecoin, which is favored as a savings and payment tool in emerging markets with limited access to U.S. dollars. Tether reported over $10 billion in net income in 2025 and has increasingly directed those earnings into venture investments across energy, payments, artificial intelligence, and health technology. — Kristzian Sandor Read more.

Regulatory and Policy

• U.S. President Donald Trump claimed that bankers are attempting to undermine the Genius Act — the flagship stablecoin legislation he enacted last year — in a Truth Social post on Tuesday, urging the passage of Congress’ crypto market structure legislation without interference. “The U.S. needs to finalize Market Structure, ASAP. Americans should earn more on their investments,” he stated in the post. “The Banks are recording significant profits, and we will not permit them to undermine our strong Crypto Agenda that could end up benefiting China and other nations if we do not resolve the Clarity Act.” He cautioned banks against holding the Clarity Act “hostage,” emphasizing that the bill is crucial for retaining the crypto industry in the U.S. “They need to strike a favorable deal with the Crypto Industry because it’s in the best interest of the American People,” he asserted. The market structure bill has been stalled since the Senate Banking Committee indefinitely postponed a markup hearing, during which lawmakers were set to discuss and vote on amendments to the bill, in January. Several issues continue to impede the bill’s passage, but the most notable conflict has been between the banking and crypto sectors regarding whether third parties can offer yield on stablecoin deposits to customers. — Nikhilesh De Read more.
• A federal judge has dismissed a proposed class action lawsuit against Uniswap Labs, CEO Hayden Adams, and several venture capital backers, ruling they cannot be held accountable for alleged “rug pull” tokens traded on the decentralized exchange’s protocol. In a ruling from the U.S. District Court for the Southern District of New York, Judge Katherine Polk Failla dismissed the remaining state law claims in Risley v. Universal Navigation Inc., the Brooklyn-based company that operates Uniswap, after previously rejecting the plaintiffs’ federal securities claims. This decision effectively concludes the case at the district court level. The ruling is among the first to specifically consider whether developers and investors behind a decentralized protocol can be held liable under existing securities and state laws for tokens created and traded by third parties. “Due to the Protocol’s decentralized nature, the identities of the Scam Token issuers are essentially unknown and unknowable, leaving Plaintiffs with an identifiable injury but no identifiable defendant,” Failla noted. “Undeterred, they now sue the Uniswap Defendants and the VC Defendants, hoping that this Court might overlook the fact that the current state of cryptocurrency regulation leaves them without recourse, at least concerning the specific claims alleged in this lawsuit,” she added. — Olivier Acuna Read more.

Calendar

• Mar. 24-26, 2026: Digital Asset Summit, New York City
• Mar. 30-Apr. 2, 2026: EthCC, Cannes
• Apr.15-16, 2026: Paris Blockchain Week, Paris
• Apr. 29-30, 2026: Token2049, Dubai
• May 5-7, 2026: Consensus, Miami
• Sept. 29-Oct.1, 2026: Korea Blockchain Week, Seoul
• Oct. 7-8, 2026: Token2049, Singapore
• Nov. 3-6, 2026: Devcon, Mumbai
• Nov. 15-17, 2026: Solana Breakpoint, London