Let me preface from the get-go that I'm about to start my vacation, so this will be a shorter update than usual.
Today and throughout the long weekend, crypto markets are at best shaky. At the time of writing, BTC is trading for about $38k and continuing the decline we’ve been seeing over the past few weeks. Meanwhile ETH has dropped below its $3K support floor, trading at just approximately $2.8k.
Last week, a key regulatory battle emerged that may carry enormous implications on the industry depending on which way it swings. While across the pond, Biden’s recent EO set an overall optimistic tone, the European Parliament has taken a notably colder approach with its recent advancement of legislation that would all but outlaw transactions to anonymous (i.e noncustodial) crypto wallets.
Time will tell how this will play out, and if other jurisdictions will follow suit. However, between the possibility of heavy-handed regulation in Europe, the looming threat of recession, global supply chain disruptions, rising prices, and an all-out war in Ukraine that could still easily get a lot worse – it’s easy to get nervous. Hang tight frens!
Beanstalk is quietly exploited for $182m.
Another day, another DeFi hack. Beanstalk, a stablecoin-based project on Ethereum, suffered an exploit of $182m on Sunday morning. The attacker, according to calculations from The Block’s Igor Igamberdiev, was able to get away with about $76m in assets.
The exploit was carried out via a flash loan attack. This where someone takes out a loan on a blockchain and repays it in the same transaction.
Here’s the TL;DR. The hacker was able to borrow $1bn over the course of a single transaction, which was then used to purchase BEAN tokens. Then, the hacker was able to transform their BEANS tokens into 'Seeds'. This is asset that powers the governance system of Beanstalk. The attackerwas able to gain 70% of all voting power of Beanstalk, which, with a 66% minimum required threshold for emergency governance proposals to pass, means the attacker effectively took control of Beanstalk.
Once the attacker took control of Beanstalk, they were able to drain the treasury and then pay back the original loan. As I'm writing this, the Beanstalk team is investigating the attack and has taken measures to stop the attacker from cashing out.
On Discord, the team reported they had turned governance off, which will prevent the attacker from being able to do anything else, and has paused the dApp. In addition, on Twitter, the team wrote: “We’re engaging all efforts to try to move forward. As a decentralized project, we are asking the DeFi community and experts in chain analytics to help us limit the exploiter's ability to withdraw funds via CEXes. If the exploiter is open to a discussion, we are as well.”
2022 so far has felt like an endless stream of DeFi hacks. I guess as capital is increasingly flowing into the ecosystem, it’s virtually a given that hacks will continue to occur and even increase in magnitude. I've written time and time again about the importance of DeFi risk management tools and insurance solutions, so I won't bore you with that today. Additionally, what I think the industry really needs (and I'm not volunteering here) is someone to collate a list of the exploits and categorise them by type. I imagine this would be helpful to a lot of new developers.
ETH network hits a setback.
Ethereum’s switch from Pow to PoS will not happen in June, as expected. In a tweet, Ethereum core developer, Tim Beiko confirmed that the long-awaited ‘Ethereum Merge’ will come later than expected. “It won’t be June, but likely in the few months after. No firm date yet, but we’re definitely in the final chapter of PoW on Ethereum.”
The setback is hardly a surprise given that ‘The Merge’ has constantly been delayed ever since it was first proposed...
Ethereum famously has major plans to reduce energy consumption in crypto mining. The protocol aims to reduce the enormous energy consumed in Ether mining by over 99%. And this is possible only after transitioning from PoW to PoS consensus mechanism. This is what developers call 'The Merge.'
The Merge, unlike previous Ethereum upgrades, will not be triggered by a block time – the time required to authenticate or verify a block, by crypto miners, which in the case of Ethereum, is usually between 10 - 20 secs.
Ethereum’s switch will instead be promoted by something called ‘difficulty bomb’. Ethereum developers will enforce a mechanism to force the PoW network to stop producing blocks, so that the network can be switched to PoS. And this cannot be done immediately, doing this instantly could cause the blockchain network to completely jam and miners would lose on incentives as well. So, this needs to be done in a process.
The developer plans to implement difficulty bomb by May, the effects of which will make blocks unbearably slow by August. “If client developers do not think they can deploy The Merge to mainnet (blockchain) before block times are slowed too much, it will need to be delayed again,” Beiko added.
For instance, if the difficulty bomb is delayed by six months, the Ethereum developers will implement the Merge before that. However, in case a major issue is found, the bomb will be terminated and another bomb delay would be considered.
Even though it's delayed, with merge incoming, my conviction for Ethereum as the leading L1 is stronger than ever.
Copper hires BofA team to build prime brokerage crypto product.
BlackRock joins stablecoin issuer Circle's $400m funding round.
LEGAL + REGULATORY + GOV + CBDCs
Middle East's largest alternative asset manager starts raising blockchain fund.
Brazilian Senate announces incoming approval of the ‘Bitcoin law’.
Binance announces €100m investment in France.
US government connects North Korean hacking group with last month's $600m Ronin exploit.
Biden nominates former Ripple adviser Barr as top US Fed regulator.
Central Bank of Portugal grants country’s first crypto license to a bank.
Russian crypto bill amendment targets mining, trading.
Iran to stiffen penalties for illegal use of subsidised energy in crypto mining.
COMPANY + CeFi
Fabric Ventures looks to close two web3 funds worth $245m.
Luna Foundation treasury holds almost 40k BTC after weekend purchase.
Luna Foundation Guard adds $100m in BTC to UST reserves.
Celsius to stop paying interest on new deposits from US starting on Friday.
Tether announces launch of USDT on Kusama.
Pantera says it's raised $1.3bn for blockchain fund, plans to raise more in 2023.
Ava Labs reportedly raising $350m at $5.25bn valuation.
Gemini launches credit card in United States.
Circle to apply for crypto bank charter soon: CEO Jeremy Allaire.
New Virginia law allows state-chartered banks to custody crypto.
DeFi + WEB3 + NFTs + METAVERSE
Uniswap Labs launches venture unit to invest in web3 projects.
SoftBank leads $70m round for DeFi infrastructure firm BloXroute.
Class action lawsuit accuses Uniswap Labs, its investors of allowing fraudulent activity on the DEX protocol.
DEX aggregator 1inch expands to Fantom Network.
Louis Vuitton releases new NFTs as fashion brands continue experiments in gaming.
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