This article is compiled and organized by BlockWeeks
Quantum Cats: Using Ordinals to "campaign" for OP_CAT
Taproot Wizards this month launched a new Ordinals collection called Quantum Cats, aiming to promote a submitted but not yet implemented Bitcoin Improvement Proposal (BIP) — reintroducing the OP_CAT opcode. OP_CAT is one of Bitcoin's earliest script functions, written by Satoshi Nakamoto, but removed in 2010. The developers' concern at the time was that this opcode allowed the construction of data-intensive scripts, which could burden the computational resources of Bitcoin nodes and thus affect the stable operation of the entire network.
In October 2023, Bitcoin researcher Ethan Heilman submitted a BIP proposing to reintroduce this feature. Adding OP_CAT back to the Bitcoin script language means lifting the previously imposed restrictions, enhancing Bitcoin's programmability, and opening up space for more diverse use cases. It allows developers to construct and verify Merkle trees and other hash data structures in tapscript (the native script language introduced by the Taproot upgrade), thereby enhancing the ability to build Layer 2 and cross-chain bridges on Bitcoin.
The Technical Combination Behind "Evolving Inscriptions"
Taproot Wizards CTO Rijndael published a long tweet detailing the Bitcoin and Ordinals technologies used in this collection. Quantum Cats leverages multiple Ordinals innovations to launch the "Evolving Inscription" feature, mainly relying on Ordinal Recursions, pre-signed transactions, symmetric cryptography, and client-side payload management. With these mechanisms combined, as the OP_CAT proposal advances through Bitcoin's governance process, these cats and their artwork can change over time in a deterministic manner.
This launch coincides with an overall heating up of Ordinals activity: in 2023, total Ordinals trading volume reached $1.8 billion, second only to Ethereum NFTs. Taproot Wizards completed a $7.5 million seed round last year.
The BIP Process Itself Became the Focus of Controversy
Quantum Cats combines innovative inscription technology with an initiative: raising awareness and education about this key Bitcoin upgrade and the Bitcoin Improvement Proposal (BIP) mechanism itself. Currently, OP_CAT does not have an officially numbered BIP, only a proposal. BIP discussions are highly technical, and BIPs that need to go through the standard track of soft forks require sufficient popular science and consensus building—public dialogue, education, and expressing support for major upgrades are themselves an important part of Bitcoin consensus formation.
Selling collectibles or merchandise with social signaling meaning is not new; Quantum Cats is formally very similar to the UASF hats worn by SegWit supporters in 2017; but using Ordinals (essentially NFTs), and technically quite advanced Ordinals, to express a stance is a completely new approach.
The project also sparked discussion about the BIP process itself. Released alongside the collection is a board game called BIP Land, which satirizes the complexity and pitfalls of the BIP process. Blockstream CEO Adam Back said it "impressed" him. Strictly speaking, no Bitcoin upgrade must go through the BIP format; it is just a convention; but the BIP process—format, number assignment, inclusion in the BIP repository—is today effectively dominated by one developer: Luke Dashjr (who happens to be one of Taproot Wizards' main opponents). Taproot Wizards co-founder Udi Wertheimer and others have long criticized the BIP process, and some Bitcoin developers are beginning to agree that reform is needed. Although there are nominally two developers maintaining the BIP repository, only Luke Dashjr has actually merged BIP proposals.
Bitcoin core developer and Bitcoin Inquisition (a testnet for new upgrades) maintainer Anthony Towns said on the bitcoin-dev mailing list on Wednesday that the current BIP process is "extremely friction-heavy." Luke Dashjr replied, suggesting that it might be necessary to introduce BIP 3 (BIP 1 and 2 describe the process, the first substantive proposal is BIP 8, and 3–7 are reserved for process-related proposals), but he did not agree with Towns' overall complaint about the BIP process. Rob Hamilton, CEO of Bitcoin custody and insurance company AnchorWatch, said that the recent shift of discussions about BIPs and how to propose consensus changes on Bitcoin to the mailing list is "healthy progress" for the developer ecosystem.
The rise of the OP_CAT movement may prompt Bitcoin developers to seriously examine other BIPs and even the entire BIP process. If using Ordinals for education and advocacy proves to be an effective means of accelerating or restructuring the BIP process, then it is reasonable to expect that more proposals nearing implementation will take a similar path.
Ethereum Dencun: Prysm Failure on Goerli and the Debate Over Testing Pace
On the Ethereum side, the testing process for the Dencun upgrade exposed alarming issues: after Dencun was activated on the Goerli testnet, the Prysm client had problems, and validators could not finalize the network until the bug was fixed; at the same time, all major client teams lacked a mainnet-ready Dencun version, and L2s were not yet ready to support the upgrade on any testnet (let alone mainnet).
Some developers at the ACD call that week gave the reason that the Prysm issue found on Goerli was fairly simple to fix and did not require further analysis. But this bug left important lessons that will affect future Ethereum upgrade testing methods—its nature is not trivial; if the same failure occurred on mainnet, it would disrupt applications and end users on Ethereum.
A key reason why this issue was not discovered in earlier Dencun testing is that developers advanced testnet activations too quickly, without leaving enough time for key milestones and events to be triggered on these networks. Since the Merge and Shanghai upgrades, the complexity of the Ethereum protocol has increased significantly, and finding bugs in complex code is increasingly like "finding a needle in a haystack." Therefore, even if failures like Prysm are still discovered after more than two years of testing, it should be expected that the harder it is for major client versions to become mainnet-ready, the longer the testing time required for upgrades.
Furthermore, although some developers believe that Ethereum should adopt ready code changes more quickly without waiting for L2s to be ready, given the value of more adequate testing time for mainnet stability, the motivation for this approach is not sufficient.
SEC v. Coinbase: Clarity Comes from Courts, Not Regulators
On the crypto regulatory front, real regulatory clarity comes more from courts than from regulators who could have worked with the industry to develop a reasonable framework. The SEC chose a path of interpretive guidance combined with old rules, yet has never provided substantive guidance on how broker-dealers, exchanges, transfer agents, and other entities should actually custody, list, trade, or use digital assets. To date, the SEC has only approved one broker-dealer, Promethean, to deal with digital assets, and the company admits it has not actually begun trading or touching any digital assets, including Bitcoin.
It is regrettable that the industry is forced to obtain more clarity from courts than from regulators—regulators could have taken a cooperative path instead of a costly litigation strategy that may be disastrous for both defendants and the SEC. The ruling on Coinbase's motion to dismiss (MTD) is expected to be announced by Judge Failla within three months.
On-Chain U.S. Treasury Tokenization Continues to Expand
Even though the Federal Reserve has signaled that interest rates are high enough, the on-chain market value of tokenized U.S. Treasuries is still growing strongly: up $66 million (+8%) in the past 30 days. Franklin Templeton is the largest on-chain T-Bill issuer, holding a dominant 40% share.
The growth is set against intensifying competition for on-chain yield. Since late November 2023, stablecoin lending (supply) rates have been higher than U.S. Treasury yields. Since both are denominated in U.S. dollars and require no additional crypto asset exposure other than stablecoins, stablecoin rates are the most comparable to off-chain T-Bill rates. The relevant data tracks supply rates for USDT, USDC, DAI, and FRAX on the Ethereum mainnet.
Other Important Developments This Week
- Bitcoin surpasses silver to become the second-largest ETF commodity in the United States
- BlackRock's Bitcoin ETF surpasses $1 billion in assets under management within a week
- PGN, a Layer 2 network supported by Gitcoin, is shutting down
- Donald Trump says he will "never allow" the issuance of a CBDC if elected
- Texas power restrictions during winter storms lead to an estimated ~25% drop in Bitcoin hash rate
- IRS says businesses need not report certain crypto transactions until new rules are issued
- Chainlink integrates Circle's CCTP protocol to enable cross-chain USDC transfers
- NFT wash trading volume across Ethereum marketplaces hits a more than one-year low
- Solana releases the Saga "Chapter 2" phone
