Also: OKX and AI agents, Future AI users of blockchain and Bitcoin’s latest governance clash
Welcome to The Protocol, CoinDesk's weekly wrap of the most important stories in cryptocurrency tech development. I’m Margaux Nijkerk, a reporter at CoinDesk.OKX jumps into AI agent race with new OnchainOS toolkiton X outlining his latest vision for scaling the blockchain, arguing the network can boost capacity in the near term while laying the groundwork for a longer-term shift to advanced cryptography and data-heavy “blobs” that would change how Ethereum is validated.
The post reflects Buterin’s renewed focus on scaling Ethereum’s base layer after several yearsaimed at making the network more efficient in the long term. In the short term, Buterin says Ethereum can safely increase throughput by making blocks easier and faster to check. Upcoming upgrades will allow the computers that run Ethereum to review different parts of a block simultaneously, rather than processing everything step by step. At the same time, changes to how blocks are built will let the network use more of each 12-second processing window, rather than finishing early out of caution . The result: Ethereum should be able to fit more transactions into each block without increasing the risk of errors or instability. Another major piece of the plan involves rethinking how transaction fees — known as “gas” — are calculated. Buterin argues that not all activity on Ethereum puts the same strain on the network. There’s a big difference between using computing power temporarily and permanently adding new data that every Ethereum computer, or node, must store forever. —: OKX rolled out an AI-focused upgrade to OnchainOS, its developer platform, pitching it as infrastructure for autonomous crypto trading agents. The AI layer builds on familiar components such as wallet infrastructure, liquidity routing and onchain data feeds, combining them into a unified execution framework aimed at AI agents operating across chains. Rather than wiring price feeds, token approvals, gas estimation and swap routing manually, developers can connect an agent and issue a high-level instruction, such as swapping ETH for USDC below a certain price. OnchainOS handles the workflow behind the scenes, from monitoring markets to sourcing liquidity and confirming settlement. The intersection between crypto and AI has grown exponentially in the past 12 months — the blockchain AI market projected tooccurred when a group of retail traders used AI to find "glitches" on platforms like Polymarket before instructing AI to trade on its behalf. —: For years, the crypto industry has searched for its next breakout moment — something on the scale of DeFi summer or the NFT boom. Meanwhile, artificial intelligence has quietly become embedded in daily life. Developers use ChatGPT as a co-pilot. Consumers rely on AI assistants to draft emails, plan travel and, increasingly, manage workflows. Crypto, by comparison, still feels infrastructural. Illia Polosukhin, a co-founder of NEAR, believes the divide is about to collapse, but not in the way many expect. “The users of blockchain will be AI agents,” Polosukhin said in an interview. “AI is going to be on the front end, and blockchain is going to be the back end.” His framing cuts against much of crypto’s recent experimentation with AI, which has centered on speculative tokens, memecoins and agent-themed trading bots. Instead, Polosukhin argues that AI will become the primary interface layer for everything online, including crypto, abstracting away wallets, explorers and transaction hashes. “The goal is to make your AI hide all the blockchain,” he said. “The fact that we have explorers is effectively a failure, because we don’t abstract the technology.” In this view, blockchain doesn’t disappear, it recedes. AIBitcoin’s latest governance clash escalated as the first block signaling support for a temporary soft fork designed to restrict arbitrary, non-monetary data in the blockchain's transactions. The proposal, formally assigned BIP-110 after evolving from earlier drafts, aims to reinstate strict limits on transaction output sizes and arbitrary data fields for about a year. The idea is to curb what proponents see as “spam” uses of block space for non-financial data. They argue that unchecked data, including large inscriptions and so-called OP_RETURN payloads, threaten the original blockchain's role as sound monetary infrastructure and burden node operators. The community remains deeply divided. Prominent critics, including, have warned that consensus-level intervention could harm Bitcoin’s credibility and lead to preferential treatment of some transactions in violation of the principle of neutral transaction capacity. He also questioned the level of support for the proposal, which, he said, increased the risk of the blockchain being split. —Kraken secured a Federal Reserve “master account,” giving its banking arm direct access to the Fed’s core payment systems and making it the first crypto firm to operate on the same rails as traditional financial institutions. The company said its Kraken Financial unit received approval for a Federal Reserve “master account.” The account allows direct access to Fedwire, a major interbank payment network that processes trillions in transfers every day. Until now, Kraken had to rely on partner banks to send or receive U.S. dollars. Direct access changes that flow as the firm can now settle payments itself, which may speed up deposits and withdrawals for large traders and institutional clients. Kraken Financial operates under a Wyomingfor crypto-focused banks. The Federal Reserve Bank of Kansas City oversaw the application. The approval is limited, however. Kraken will not receive the full set of services available to traditional banks as it won’t earn interest on reserves or be able to tap into the Fed’s emergency lending. — Tether, the firm behind the most popular stablecoin, USDT, invested $50 million in sleep technology startup Eight Sleep at a $1.5 billion valuation, according to a. With the funding, Eight Sleep plans to develop new AI health features using Tether’s QVAC architecture, a computing framework designed to process data at the device level rather than relying fully on cloud systems. Eight Sleep builds sensor-equipped sleep systems that track biometrics such as heart rate and temperature during the night. Its flagship "Pod" product adjusts mattress temperature and generates sleep insights based on real-time physiological data. "We believe advanced personalized AI is the perfect pathway to understand and expand human potential," Paolo Ardoino, CEO of Tether, said in a statement. The investment is the latest example of Tether pushing beyond stablecoins and crypto infrastructure. The firm is best known for its $183 billion USDT stablecoin, which is popular as a savings and payments tool across emerging markets with limited access to U.S. dollars. Tethermore than $10 billion in net income in 2025 and has increasingly channeled those earnings into venture investments across energy, payments, artificial intelligence and health technology. —U.S. President Donald Trump said bankers are trying to undermine the Genius Act — the signature stablecoin legislation he signed into law last year — inTuesday, and he urged passage of Congress' crypto market structure legislation without interference. "The U.S. needs to get Market Structure done, ASAP. Americans should earn more money on their money," he said in the post. "The Banks are hitting record profits, and we are not going to allow them to undermine our powerful Crypto Agenda that will end up going to China, and other Countries if we don’t get The Clarity Act taken care of." He warned banks against holding the Clarity Act "hostage," saying the bill was necessary to keep the crypto industry in the U.S. "They need to make a good deal with the Crypto Industry because that’s what’s in best interest of the American People," he said. The market structure bill has been in limbo since the Senate Banking Committee indefinitely postponed a markup hearing, in which lawmakers were set to debate and vote on amendments to the bill, in January. There are a number of issues still holding up passage of the bill, but the most public fight has been between the banking and crypto sectors over whether third parties can offer yield on stablecoin deposits to customers.— 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 liable for alleged “rug pull” tokens traded on the decentralized exchange’s protocol. In aby the U.S. District Court for the Southern District of New York, Judge Katherine Polk Failla threw out the remaining state law claims in Risley v. Universal Navigation Inc., the Brooklyn-based firm that operates Uniswap. after previously dismissing the plaintiffs’ federal securities claims. The decision effectively ends the case at the district court level. The ruling is one of the first to specifically address 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 basically unknown and unknowable, leaving Plaintiffs with an identifiable injury but no identifiable defendant,” Failla wrote. “Undaunted, 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 as to the specific claims alleged in this suit,” she added. —CoinDesk Research looks into how Pudgy Penguins disrupts traditional toys market via a phygital model. With 2M+ units sold, they scale via global partnerships and events.: Pudgy Penguins is utilizing a "Negative CAC" model to challenge the traditional $31.7B licensed toy industry by treating physical merchandise as a profitable user acquisition tool rather than just a final product. Polosukhin argues that AI will become the primary interface layer for everything online, including crypto, abstracting away wallets, explorers and transaction hashes.For years, the crypto industry has searched for its next breakout moment — something on the scale of DeFi summer or the NFT boom. Artificial intelligence, meanwhile, has quietly embedded itself into daily life. Developers use ChatGPT as a co-pilot. Consumers rely on AI assistants to draft emails, plan travel and increasingly manage workflows. Crypto, by comparison, still feels infrastructural.Billions in crypto are moving in Iran. Analysts can't agree if it's war-time panic or business as usual.
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