Authors: Luke Leasure & Nick Carpinito

Translated by: Deep Tide TechFlow

Deep Tide Guide: The Logos upgrade of Nockchain embeds AI reasoning directly into proof of work, attempting to allow the same computing power to earn money for customers while also drawing blockchain rewards. This is a bold experiment for miner income and public chain security budgets. However, the first paying customer comes from the founder's self-established company, raising doubts about audit independence. Whether the flywheel can truly start turning remains to be seen. The actual reasoning demand and token performance post-upgrade tomorrow will be worth close attention from crypto investors.

Good morning, happy Thursday! Following a 0.1% month-over-month increase in CPI on Wednesday, the stock market continues to outperform cryptocurrencies, a trend that is still ongoing, while ETF fund flows show a moderate optimistic sentiment. Below, we will delve into tomorrow's launch of Nockchain's Logos upgrade as well as the next evolution of useful proof of work.

On Wednesday, the CPI increased by 0.1% month-over-month, aligning with the expected median, bouncing back from a 0.4% decline the previous month. The 0.1% change in housing prices contributed approximately two-thirds to the monthly increase, while energy prices fell by 1.5%, mainly dragged down by a 2.9% drop in gasoline prices. Overall, this data may not alter the Fed's interest rate path. On that day, the stock market performed better than cryptocurrencies, with the Nasdaq up 0.56%, and the S&P 500 up 0.23%, while crypto-related stocks outperformed, rising 2.19%.

BTC lagged behind, dropping 0.25%, and most of the crypto indices we track underperformed. The stock market's outperformance over tokens remains a persistent theme. The perpetual contracts sector was the biggest winner, rising 3% driven by a HYPE rally, while the decentralized exchange sector was the biggest loser, falling 4.7% due to the weakness of UNI, providing almost no signals on sector rotation direction.

BTC ETF fund flows show slight trajectory changes. A phase of gentle accumulation can be interrupted by outflows in a single day, echoing the weakness in the BTC daily price trend. Since early July, net inflows have remained positive, indicating that market optimism toward these products is gently returning, and there has been a significant shift compared to the substantial outflows seen in May and June. If this trend continues, the reaccumulation of chips in these products should provide a bottom support for BTC.

Earning Two Sets of Money with Computing Power

Making proof of work do something useful is not a new idea. Bitcoin miners burn hash power without any output besides that. Reasoning service providers sell GPU time to customers. Tomorrow, at block height 126000, the Logos upgrade of Nockchain will go live, and this division will cease to exist.

Logos adds a second mining puzzle to the existing ZK proof of work: integer matrix multiplication, which is a core operation of AI reasoning, with an independent difficulty target. Upon activation, the network will allocate 30% of block output to the AI puzzle and 70% to ZK-PoW. Miners execute matrix multiplication, and if the result meets the target, that miner wins the block. When this calculation runs simultaneously for paying reasoning customers, the same computing power becomes a lottery ticket to win block rewards.

The founder of Nockchain described this as a security budget that expands with the growth of the AI economy: as reasoning demand rises, more GPUs pointing to this chain will increase the cost of attacking it. However, this claim relies on a demand that has not yet emerged on a large scale. Nockchain needs paying reasoning customers to turn the flywheel, and its founder has established a separate company, National Compute, to provide the first batch of customers. This company drafted the Logos proposal and conducted internal audits, making this major upgrade of the protocol linked to its first anchor customer come from the same individual.

This launch occurs just weeks after Zorp's shutdown. Zorp is the research company that developed Nockchain, which has transferred the trademark and code repository to Nock Community Co., a non-stock entity managing 20% of the protocol fund. Logos is the first upgrade to operate under the new structure's promised process: a public testnet, third-party cryptographic audit, a bug bounty of up to 1 million NOCK, and advance notice of the activation height. The dual puzzle code has run on the public testnet for 20 days before merging into the mainnet.

Two things are worth examining with skepticism. The activation height has changed more than once: from 114,300 blocks at the end of July to 122,000 after the testnet, then to 126,000 on Friday, so this date carries the uncertainty inherent in each reset target launch. The security justification is built on a puzzle that has no prior track record. Nockchain had fixed a mining vulnerability that reused traces at height 119,400 with the Zoe upgrade in early August, reminding people that the proof mechanism is still in its early stages, although the fix did not change the ZK scheme and did not touch anything outside of block reward capture. The AI puzzle itself also carries reliability issues, which is precisely why audits and setting bounties are necessary.

NOCK's trading price is close to $0.009, with a market cap of approximately $22 million, and a fully diluted valuation close to $41 million, which is just a fraction of the attention it attracted during the fair launch last spring. For holders, the mechanisms on Friday are less significant than whether National Compute can channel enough paying reasoning through its computing power cluster to transform the narrative of "security equals income" into cash flow. Nockchain has delivered the more challenging engineering part, but the market it needs has yet to be established.