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Inside a house of Silicon Valley hackers programming the new Bitcoin tokens
- The bitcoin halving coincided with some other major launches on the blockchain, including cutting-edge programming innovations that should attract more developers to the network.
- For years, rival chains like ethereum and solana have competed with bitcoin on functionality because both have smart contracts natively integrated into the underlying chain.
- Recent features added after the halving make large-scale bitcoin DeFi a reality, and programmers are capitalizing on the opportunities as bitcoin’s market value surpasses $1.3 trillion.
Magic Eden programmers gathered at an Airbnb in San Jose, California, to hack in preparation for the so-called bitcoin halving.
Amyl Husayn
In the eastern hills of San Jose, California, 17 programmers working for the popular ordinal market maker, Magic Eden, crammed into a 4-bedroom, 3,875-square-foot house rented on Airbnb. Their goal was to spend a week hacking to prepare for the so-called bitcoin halving – an event that is baked into the chain’s code and helps ward off inflation through programmatic monetary policy.
Much of the debate over the halving, which occurs roughly every four years, has been over whether new issuance of the world’s largest virtual currency would be halved. But the halving lockdown also coincided with a couple of other major launches on the blockchain, including cutting-edge programming innovations that should attract many more programmers and many more venture capital dollars into the bitcoin ecosystem.
Additionally, unlike past halving events, the largest cryptocurrency in the world hit a new all-time high above $73,000 in March as record flows entered the bitcoin ecosystem via newly launched bitcoin spot exchange-traded funds in the U.S.
“Bitcoin has never been healthier – what was previously missing was a vibrant developer ecosystem,” said Zedd Yin, co-founder and COO of Magic Eden.
Some Magic Eden programmers have taken breaks from hacking to play arcade games.
Amyl Husayn
The Magic Eden hacker pop-up house was modest but had a few bells and whistles that carried the small crew along throughout the week.
These perks included Teenage Mutant Ninja Turtles and Street Fighter-themed arcade-style machine games in the living room, plus a DIY open bar on a folding plastic table in the dining room.
Engineers also participated in the hackathon with the distinct advantage of knowing what they wanted to build. In the days leading up to the halving, Yin, 33, brought her team together under one roof in Northern California with a clear goal in mind: to code and launch the ultimate marketplace for a new wave of digital products coming to the blockchain of Bitcoin. On Monday morning, Magic Eden’s Runes platform went live, helping solidify its place as the go-to forum for dealing with these new bitcoin offerings.
I’ve liked rival chains for years ethereum AND solana they competed with Bitcoin in terms of functionality, because they both have smart contracts – that is, programmable pieces of code – natively integrated into the underlying chain. This has been one of the main reasons why developers around the world have flocked to these blockchains to build applications.
Magic Eden’s pop-up hacker house included arcade games and a ping pong table with a full bar.
Amyl Husayn
Enter Casey Rodarmor.
The popular bitcoin developer completely disrupted this dynamic last year when it introduced bitcoin’s version of non-fungible tokens known as ordinals, which developers ended up using as the basis for bitcoin-issued coins called BRC-20 tokens. The launch was uneventful at first, but it ended up being a huge success.
Late Friday night, at the exact moment the bitcoin halving was initialized, Rodarmor unveiled its latest creation, Runes, which is basically just a better, more efficient version of the BRC-20 tokens.
“People really respect Casey and think he captured lightning in a bottle,” said Nic Carter of Castle Island Ventures. “And so there are very high expectations for runes too.”
Technically speaking, runes simply enable the issuance of fungible token assets on the bitcoin base chain. They could be stablecoins, memecoins, or any variety of fungible token.
The reason this is important for developers is its efficiency compared to existing BRC-20 tokens, Bitcoin’s widely used fungible token standard that has already received a lot of popularity. Having a universally accepted token standard like this is seen as key to helping unlock the scope of decentralized finance on bitcoin. Decentralized finance, or DeFi, is a parallel banking system that eliminates intermediaries like lawyers and banks and relies on code for enforcement.
“Fungible tokens are a significant part of every significant ecosystem like solana and ethereum, so runes represent an important step in the evolution of bitcoin,” said Yin, who previously helped lead the product for all trading products institutional at CoinBase.
Bill Barhydt, who runs Abra, a company that supports miners with a mix of services, including automatic settlements, and has access to macro data across the industry, said bitcoin simply cannot scale 100% on-chain via the own level one. The problem has to do with the fact that the bitcoin blockchain does not have the built-in smart contract capabilities needed to replicate the banking stack of a chain like ethereum or solana.
“BRC-20 tokens and ordinals, its successor runes, sidechains like stacks, and DeFi on bitcoin are all showing strong promise in user adoption, which is set to dramatically increase demand for the space of bitcoin lockdown and adoption, which I believe will create a positive feedback loop will further drive bitcoin price increases over the next few years,” Barhydt said. “It’s truly remarkable the level of new development work happening around bitcoin,” she added.
Venture capital investors agree.
“I’ve never seen the pace of deals move so aggressively in the bitcoin space in my entire career,” Carter tells CNBC.
For a week, the Magic Eden team gathered at an Airbnb in San Jose to work on code for a new digital asset marketplace that would go live at the Bitcoin halving block.
Amyl Husayn
Indeed, VC appetite for these layer two bitcoin projects has increased in recent months.
PitchBook says that the fourth quarter of 2023 was the first time in nearly two years that the value of cryptocurrency trades increased, reaching $1.9 billion, up 2.5% from the previous quarter. While still far from the 2021 high of $31 billionfunds are rebuilding interest and confidence in the space.
“There has definitely been a revival of capital interest in the bitcoin layer two space,” said Muneeb Ali, who co-founded Stacks, an open-source blockchain network that brings smart contracts to bitcoin.
Stacks is a separate chain from Bitcoin but the two are able to work together. The project also launched its update at the time of the halving block, which reduced the transaction time to five seconds, compared to the 10 to 30 minute block times tied to Bitcoin’s base chain.
“Having so much interest in venture capital just confirms that the bitcoin ecosystem is poised to grow,” said Ali, who noted that the pace of projects launching on bitcoin has also picked up momentum over the past six months, from half a dozen projects started at more than 50.
A new report released by Austin-based venture capital fund Trammell Venture Partners found that the bitcoin startup sector had a successful year in the pre-seed stage, noting a 360% year-over-year increase in transaction counts.
“The founders really want to build specifically on bitcoin,” Christopher Calicott, the fund’s managing director and founding partner, said of the study’s findings.
The report also notes that early-stage native Bitcoin startups raised just under $1 billion from 2021 to 2023.
Take Alpen Labs. The second-level project, which is bringing cutting-edge scaling technology known as zero-knowledge proof to Bitcoin, has just emerged from stealth mode with Ribbit Capital leading a $10.6 million round. Another popular layer two solution called “Build on Bitcoin” or BOB, has raised $10 million in seed funding.
“Ordinals, BRC-20 and other innovations introduced in 2023 really helped build momentum ahead of the halving,” Ali said. “They made bitcoin fun for developers again and showed that users will prefer NFTs, assets and apps over bitcoin if provided the opportunity.”
In the eastern hills of San Jose, California, 17 programmers working for the popular Ordinals marketplace maker, Magic Eden, crammed into a 3,875-square-foot, 4-bedroom house rented on Airbnb.
Amyl Husayn
For years, developers have tried to insert additional functionality into the basic bitcoin chain. Barhydt told CNBC that demand for DeFi, particularly yield and lending, is a key driver of cryptocurrency adoption.
Sidechains like stacks, for example, have worked to bring the speed and competitive transaction costs of solana-style binaries into the bitcoin ecosystem, in order to decongest the main chain and allow the overall bitcoin economy to grow.
With Runes, these existing projects have a new tool they can use to grow, as it allows them to potentially connect to a native, lightweight token system on the bitcoin main chain instead of having to generate their own independent token environment.
“Runes presents an efficient system for creating and managing fungible tokens directly on bitcoin in a way that reduces blockchain footprint and improves scalability compared to other token standards,” said Hong Fang, president of cryptocurrency exchange OKX. “This has important implications for second-layer solutions and sidechains that are working to scale Bitcoin,” added Fang, who previously spent nearly a decade working at Goldman Sachs.
Stacks’ Ali dubbed the post-halving environment “Bitcoin’s second season.”
“Season two is all about the builders’ return to bitcoin. Users are finally separating bitcoin as an asset from bitcoin, like binary,” he said.
As for Yin and his team, another important aspect of the rune hackathon was the need for a little more due diligence on Airbnb properties.
The team had an outdoor gas fireplace that didn’t work so there was a constant gas leak smell throughout the week, the rental apartment’s WiFi was down the entire first day, and a handful of people sick with Covid.