The Protocol: Ethereum Foundation starts experimenting with ‘DVT-lite’ technology

Also: Nvidia’s rare blog, Aave liquidations, and Pudgy Penguins new game.

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What to know:

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.

In this issue:

• Vitalik Buterin pushes ‘DVT-Lite’ to make Ethereum validator setup easier
• Nvidia's Huang argues AI creates jobs, not destroys them, in rare official blog post
• DeFi lending platform Aave sees a rare $27 million in liquidations after a price glitch
• Pudgy Penguins launches its 'Club Penguin' moment, and the game doesn't feel like crypto at all

Network News

ETHEREUM FOUNDATION STARTS EXPERIMENTING WITH DVT-LITE TECH: The Ethereum Foundation is testing a method for running validators that could make it significantly easier for institutions holding large amounts of ether to set up staking infrastructure, widening the pool of participants and creating a more decentralized network. In a post on X, blockchain co-founder Vitalik Buterin said the foundation is using a simplified version of distributed validator technology, or “DVT-lite,” to stake 72,000 ETH. The experiment aims to make running validators across multiple machines less complicated. Buterin said the goal is to reduce the process to something close to a one-click setup, where operators choose which computers will run validator nodes, launch the software and enter the same key on each machine. The system would then automatically connect the nodes and begin staking. “My hope for this project is that we can make it maximally easy and one-click to do distributed staking for institutions,” Buterin wrote. Running Ethereum validators today typically means operating a single node that holds the key used to sign blocks and participate in the network. If that machine fails or goes offline, the validator can stop working and may be penalized. Distributed validator technology (DVT) changes that by allowing multiple independent machines to collectively act as a single validator. Instead of relying on one key and one computer, several nodes work together, and only a handful of them sign for the validator to function. That means the validator can keep operating even if some machines go down. But existing DVT systems can be complicated to deploy because operators must coordinate networking, keys and communication between nodes. Buterin has previously argued that complexity is one reason large staking providers have come to dominate the ecosystem. The “DVT-lite” setup aims to automate much of that process, making it easier for institutions to run distributed validators with minimal infrastructure expertise.— Margaux Nijkerk Read more.

NVIDIA SHARES AI CREATES JOBS IN RARE BLOG: The AI jobs debate got its sharpest rebuttal yet, from the person selling the hardware. Nvidia CEO Jensen Huang published a rare standalone essay laying out what he calls the "five-layer cake" of AI infrastructure: energy at the base, then chips, then physical infrastructure, then models, then applications. It positioned AI not as a software product or a chatbot but as an industrial buildout on the scale of electrification, one that requires trillions of dollars in physical construction and a massive workforce of electricians, plumbers, pipefitters, steelworkers, and network technicians. "These are skilled, well-paid jobs, and they are in short supply. You do not need a PhD in computer science to participate in this transformation," he said. Huang's argument for why the buildout needs to be so large starts with a fundamental shift in how computing works. Traditional software retrieves stored instructions, while AI generates new outputs in real time, with every response created fresh based on the context provided. It isn't looking up an answer, but instead, reasoning through one on demand. Because intelligence is produced in real time, the entire computing stack beneath it has to be reinvented, which is why AI requires purpose-built infrastructure from the energy layer up rather than running on existing data centers. The timing is pointed. The essay arrives after weeks of mounting anxiety about AI's impact on employment, from Block Inc.'s mass layoffs to Anthropic CEO Dario Amodei's comments about job displacement. Tech stocks had been selling off on the combination of those fears since early this year. — Shaurya Malwa Read more.

AAVE SEES RARE $27M IN LIQUIDATIONS DUE TO PRICE GLITCH: About $27 million was liquidated on the decentralized lending platform Aave over the last 24 hours, in what some market participants say may have been caused by a temporary pricing issue involving the token wstETH. Blockchain data flagged by risk-management firm Chaos Labs shows a spike in liquidations in the past 24 hours. Some observers believe the event may have been linked to a price update in a risk-oracle system that Aave uses to determine the value of collateral. Oracles are services that feed price data from the outside world into blockchain applications. Lending protocols like Aave rely on them to decide when a borrower’s collateral is no longer sufficient to back their loan — at which point the position can be liquidated. While such scenarios are rare, most recently, a price-oracle setup misconfigured by DeFi lender Moonwell briefly valued Coinbase Wrapped ETH (cbETH) at about $1 instead of roughly $2,200, leaving the protocol with nearly $1.8 million in bad debt. In Aave's case, some say the issue may have involved wstETH, a token issued by Lido that represents staked ether. Because it accrues staking rewards over time, one wstETH is typically worth slightly more than one ETH. According to a post from LTV Protocol on X, at the time of the liquidations, Aave’s risk-oracle appeared to value wstETH at roughly 1.19 ETH, while the broader market valued it closer to 1.23 ETH. Volume remained relatively low for wstETH trading pairs, with just $10 million being traded over the past 24 hours, so it is unlikely any astute traders capitalized on the pricing mismatch before it snapped back. Stani Kulechov, the founder and CEO of Aave Labs, said in a post on X that there "was no impact to the Aave Protocol." According to Chaos Labs, the incident was caused by a mismatch between stale parameters stored in a smart contract, including a reference exchange rate and its associated timestamp. Because those values were not updated in sync, the CAPO system temporarily calculated a maximum allowed exchange rate that was lower than the real market value of wstETH. — Margaux Nijkerk Read more.

PUDGY PENGUINS LAUNCHES ITS WEB3 GAME: Pudgy Penguins shipped its flagship game to the general public, and the most notable thing about it is that you wouldn't know it had anything to do with crypto unless someone told you. Pudgy World, the browser-based game first announced at Art Basel in late 2023, went live with 12 unique towns across a world called The Berg, narrative quests where players help a penguin named Pengu find someone named Polly, and a set of mini-games. CoinDesk played a 10-minute session and came away with a simple takeaway. It's smooth, responsive, intuitive, and clearly not built with a crypto-first user in mind. "We created custom world-building tools using open-source web technology, giving us a lightweight editor built for speed and rapid iteration," co-founder @chefgoyardi said in an X post. "Our asset pipeline lets artists work in Maya, Cinema4D, or Blender while custom Houdini scripts automatically convert everything into a web-optimized format. Creative freedom without compromise." "We engineered physics specifically for the browser. Snappy movement, parkour, fluid navigation, and high frame rates even on lower-end devices," they added.The game could be pure Club Penguin nostalgia for some users. The game was Disney's browser-based virtual world that ran from 2005 to 2017 and peaked at over 200 million registered users, mostly kids who customized penguin avatars and played mini-games. It remains the template for what a mass-market Penguin game looks like, and the comparison Pudgy World could be measured against in the broader audience. The NFT gaming space has spent years producing products that feel like wallets with gameplay bolted on. Pudgy World goes the other direction, building something that works as a game first and connects to the token economy second. — Shaurya Malwa Read more.

In Other News

• Mastercard has launched a new Crypto Partner Program that brings together more than 85 companies from across the digital asset and payments industries, an effort to more directly link blockchain technology with the infrastructure that underpins global commerce. The program includes crypto exchanges, blockchain developers, fintech firms and banks such as Binance, Circle, Ripple, Gemini, PayPal and Paxos, the company told CoinDesk in a statement. Participants will work with Mastercard to explore how blockchain-based systems can connect with traditional payment rails used by banks, merchants and consumers around the world. Mastercard said the initiative focuses on practical use cases where digital assets are already gaining traction, including cross-border transfers, business-to-business payments and global payouts. For payment companies like Mastercard, the challenge is less about replacing existing systems and more about connecting new ones to the networks that already handle global commerce. Mastercard’s network links banks, merchants and consumers in more than 200 countries and territories. The company argues that blockchain-based payments will only scale widely if they can plug into that kind of global infrastructure.The Crypto Partner Program is designed to create that bridge. Companies in the program will work with Mastercard teams to help shape products that combine on-chain tools — such as programmable payments or tokenized assets — with established payment rails. — Helene Braun Read more.
• Foundry Digital, one of the largest Bitcoin mining pools by hashrate, said it plans to introduce a zcash (ZEC) mining pool by next month, expanding beyond BTC and bringing a large institutional operator into the privacy-focused network. With the new pool, Foundry aims to offer zcash miners a U.S.-based platform designed around compliance checks, reporting standards and operational controls often required by public companies and large firms. The move addresses what Foundry describes as a gap in Zcash infrastructure. While the cryptocurrency has existed for nearly a decade, much of its mining ecosystem still consists of smaller global pools that often operate outside formal compliance frameworks. “Zcash has matured into an institutional-grade asset, but the mining infrastructure supporting it hasn’t kept pace,” Foundry CEO Mike Colyer said in a statement shared with CoinDesk. The expansion comes as privacy-focused cryptocurrencies regain attention across the market as new crypto tax reporting rules, with the threat of asset seizure, kicked in across the European Union at the turn of the year and as onchain analysis keeps developing, leading to growing demand for financial anonymity. — Francisco Rodrigues Read more.

Regulatory and Policy

• Binance filed a defamation lawsuit against Dow Jones, the publisher of The Wall Street Journal, on the same day the newspaper published a report claiming the U.S. Justice Department is investigating whether Iran used the world's largest crypto exchange to move funds in violation of American sanctions. In the complaint filed in the U.S. District Court for the Southern District of New York, the company said the newspaper published “false and defamatory statements” about its compliance practices and handling of Iran-linked transactions in an article published on Feb. 23. In that article, the Journal said Binance fired staff who flagged funds moving through the exchange to sanctioned entities, allegations Binance rejected. The lawsuit says Binance did not fire employees for raising compliance concerns. Staff departures stemmed from alleged breaches of internal data protection policies rather than retaliation, it said."Binance categorically did not dismantle any compliance investigation," a spokesperson for the exchange told CoinDesk. "The WSJ continues to report the same falsities. As a result, we have filed a lawsuit against the Wall Street Journal for defamation." — Francisco Rodrigues Read more.
• Sen. Adam Schiff (D-CA) has introduced proposed legislation that would ban prediction market contracts tied to terrorism, war, assassination, and death, directly challenging market regulator CFTC's shift toward looser regulation of event trading. The bill, dubbed the DEATH BETS Act, would strip the agency of discretion over whether to permit such contracts and write explicit prohibitions into law, putting Schiff on a collision course with CFTC Chair Mike Selig's deregulatory agenda. Schiff, a member of the Senate Agriculture Committee that oversees the CFTC, is positioned to press the issue legislatively as the agency's new rule-making takes shape. Under the Commodity Exchange Act, the CFTC already has authority to block contracts tied to war, terrorism, or assassination if it determines they are contrary to the public interest. But enforcement hinges on the regulator's judgment, meaning the scope of protection shifts with agency leadership. Schiff's bill would eliminate that flexibility. — Sam Reynolds 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

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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.

What to know:

• Disrupting a Stagnant Market: 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.

More For You

Vitalik Buterin pushes ‘DVT-Lite’ to make Ethereum validator setup easier

In a post on X, the blockchain's co-founder said the Ethereum Foundation is testing a new method for running validators that could make staking infrastructure significantly easier for institutions holding large amounts of ether.

What to know:

• The Ethereum Foundation is testing a new method for running validators that could make staking infrastructure significantly easier for institutions holding large amounts of ether.
• In a post on X, Ethereum co-founder Vitalik Buterin said the foundation is using a simplified version of distributed validator technology, or “DVT-lite,” to stake 72,000 ETH. The experiment aims to make running validators across multiple machines far easier to set up.

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