The Protocol: OKX Slashes Native Token Supply In Half

Welcome to The Protocol, CoinDesk's weekly wrap-up of the most important stories in cryptocurrency tech development. I'm Margaux Nijkerk, CoinDesk’s Tech & Protocols reporter.

In this issue:

OKX Slashes OKB Token Supply by 50% With $7.6B Burn, Price SurgesETH Transaction Volume Climbs on Price Rally, Cheaper DeFi CostsWeaponized Trading Bots Drain $1M From Crypto Users via AI-Generated YouTube ScamBabylon Introduces Trustless Bitcoin Vaults for BTC Staking ProtocolUnknown block type "divider", specify a component for it in the `components.types` option

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OKX SLASHES TOKEN SUPPLY IN HALF: OKB, the token of cryptocurrency exchange OKX, more than tripled to a record high after the company executed a one-time burn of 65.26 million OKB, cutting the supply by more than 50%. Burning the roughly $7.6 billion worth of tokens permanently reduces the maximum supply to 21 million, in line with the hard cap coded into Bitcoin. The burn, or sending the tokens to a wallet address that can't be accessed, was carried out from OKX’s reserves and represents one of the largest deflationary events in exchange token history. The effect of the burn was instant. OKB jumped to $142 from $46 before retrenching to about $102. Trading volume skyrocketed 13,000% to $723 million as traders attempted to capitalize on the supply shock. The strategy mirrors that of BNB, the token of BNB Chain, which is associated with rival exchange Binance. That undergoes quarterly burns that often precede short-term rallies. — Oliver Knight Read more.

ETH TRANSACTION VOLUME CLIMBS : Ethereum’s transaction volume has been overall on an upward trajectory, closing in its all-time high of 1.9 million transactions in a single day in January 2024. The latest surge is drawing attention from both retail traders and institutional observers, as it reflects a confluence of technical improvements, favorable market sentiment, and a renewed appetite for on-chain activity. According to data from Etherscan, daily transaction counts have been consistently trending higher over the past several weeks. Other data shows seven-day averages of daily transactions have already surpassed their previous records. Analysts suggest that this momentum is being fueled by a combination of factors: a recent increase in network capacity, rising ether prices, and a reduction in transaction costs, particularly for decentralized finance (DeFi) protocols and stablecoin transfers. One of the biggest enablers of the current spike has been a substantial capacity boost on Ethereum’s mainnet. The Fidelity Digital Assets Research Team told CoinDesk that “Ethereum’s Layer 1 is seeing a surge in transactions largely due to a 50% increase in the gas limit since March, which allows more transactions to fit into each block.” This upgrade has significantly increased throughput, enabling more efficient settlement and reducing congestion. As a result, stablecoin transfer costs have fallen consistently below a dollar, making DeFi activity and peer-to-peer payments far more affordable. Fidelity Digital Assets notes that DeFi currently tops the charts for ETH burns, underlining its central role in driving network activity. — Margaux Nijkerk Read more.

WEAPONIZED TRADING BOTS STEAL $1M FROM CRYPTO USERS : Over $1 million has been siphoned from unsuspecting crypto users through malicious smart contracts posing as MEV trading bots, according to a new report by SentinelLABS. The campaign leveraged AI-generated YouTube videos, aged accounts, and obfuscated Solidity code to bypass basic user scrutiny and gain access to crypto wallets. Scammers appeared to be using AI-generated avatars and voices to reduce production costs and scale up video content. These tutorials are published on aged YouTube accounts populated with unrelated content and manipulated comment sections to give the illusion of credibility. In some cases, the videos are unlisted and likely distributed via Telegram or DMs. At the center of the scam was a smart contract promoted as a profitable arbitrage bot. Victims were instructed via YouTube tutorials to deploy the contract using Remix, fund it with ETH, and call a “Start()” function. In reality, however, the contract routed funds to a concealed, attacker-controlled wallet, using techniques such as XOR obfuscation (which hides data by scrambling it with another value) and large decimal-to-hex conversions (which convert large numbers into wallet-readable address formats) to mask the destination address (which makes fund recovery trickier). — Shaurya Malwa Read more.

BABYLON INTRODUCES TRUSTLESS BITCOIN VAULTS: Bitcoin project Babylon took another step toward offering a decentralized finance (DeFi) experience on its $5 billion staking protocol akin to that seen elsewhere in the crypto world. The latest development is the introduction of trustless vaults, designed to allow BTC holders to deposit their tokens without relying on a centralized entity, as outlined in a new white paper shared with CoinDesk. In DeFi ecosystems, trustless vaults are a form of digital asset storage or management that removes the need for users to trust a central authority or intermediary. Instead, the systems use smart contracts to ensure security and enforce the rules of the vault. Babylon says its vaults will allow bitcoin to be used as collateral in DeFi applications such as lending and stablecoin issuance, as well as the staking that its protocol provides. Users can also earn yield on their BTC holdings by staking it to support the operation of proof-of-stake networks. They then receive rewards paid in BABY, Babylon's native token. The development forms part of the broader movement to utilize the enormous value held in bitcoin to power DeFi activity across other blockchains. — Jamie Crawley Read more.

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In Other News

Sentient, a New York-based artificial intelligence company, has introduced The GRID, an open-source network designed for building and monetizing artificial general intelligence (AGI) systems. The company says the platform is aimed at providing a decentralized alternative to closed AI marketplaces from firms such as OpenAI. Developers can plug in their AI agents, models, or tools and earn token-based rewards, with usage fees and subscriptions available as optional monetization routes. At the time of its debut, The GRID hosts over 40 AI agents, 50 data sources, and more than 10 models, spanning both Web2 and Web3. These include tools like Napkin, a generative graphics engine, and Exa, a search startup, as well as blockchain-connected agents deployed across Base, Polygon, Arbitrum, and others. Users can access these through Sentient Chat, an interface for discovering and combining agents into workflows capable of handling tasks such as calendar coordination, code generation, and data visualization. — Oliver Knight Read more.Stripe has appointed Matt Huang, co-founder and managing partner of crypto venture capital firm Paradigm, as the chief executive officer of its upcoming blockchain Tempo. Huang, who already sits on Stripe’s board, will retain his position at Paradigm. That’s according to Fortune, citing sources familiar with the project. The move aligns with a growing trend of developing stablecoin-focused blockchains. These include Plasma, which recently attracted over $373 million in an oversubscribed token sale, and Tether-focused blockchain Stable.— Francisco Rodrigues Read more.Unknown block type "divider", specify a component for it in the `components.types` option

Regulatory and Policy

Terraform Labs founder Do Kwon pleaded guilty to conspiracy to commit fraud and wire fraud in Manhattan on Tuesday morning, three years after the dramatic $60 billion collapse of the Terra/Luna stablecoin ecosystem. The 33-year old South Korean national arrived in court in handcuffs and a canary yellow prison jumpsuit, a metal chain around his waist. He admitted that he "knowingly engaged in a scheme to defraud and did in fact defraud" purchasers of the TerraUSD stablecoin. Under the charges in the original indictment, which included seven other charges such as securities and commodities fraud, Kwon faced a maximum sentence of 135 years in prison if convicted on all counts. Kwon’s plea agreement with the government slashes his maximum sentence to 25 years — 20 for the wire fraud charge, and five for the fraud conspiracy charge, which the judge can either order to be served consecutively or concurrently — but prosecutors will ask for a maximum of 12 years. After serving half his sentence in the U.S., Kwon will be eligible to apply to serve the rest of his sentence in his native South Korea. — Nikhilesh De & Cheyenne Ligon Read more.President Donald Trump's crypto adviser, Bo Hines, has departed after only months on the job, and the next in line — his deputy, Patrick Witt — will apparently be shepherding the industry's political priorities in Washington as it still seeks industry-wide regulations and the institution of a federal crypto stockpile. Witt shares a remarkably similar history with Hines – both ex-football stars who played at Yale before seeking law degrees and falling short in bids for Congressional seats. Witt had a brief stint as a free-agent quarterback for the New Orleans Saints after leading the Yale Bulldogs team that Hines later played on as wide receiver. Both ex-athletes tied their political careers closely to Trump in recent years, and Witt will now be the chief industry liaison for Trump's White House, according to his social-media profile on X that references the title Hines left behind.— Jesse Hamilton Read more.Unknown block type "divider", specify a component for it in the `components.types` option

Calendar

Sept. 22-28: Korea Blockchain Week, SeoulOct. 1-2: Token2049, SingaporeOct. 13-15: Digital Asset Summit, LondonOct. 16-17: European Blockchain Convention, BarcelonaNov. 17-22: Devconnect, Buenos AiresDec. 11-13: Solana Breakpoint, Abu DhabiFeb. 10-12, 2026: Consensus, Hong KongMay 5-7, 2026: Consensus, Miami