Cryptospace Spotlight 2022 #23 (05 Jun 2022)
Crypto exchanges cut headcounts as they prepare for strong headwind, Japan to regulate stablecoins and Terra ecosystem got exploited with ill-planned Luna2.0!
Technology & Industry
26 influential technology personalities wrote an open letter to Congress on the Support of Responsible Fintech Policy. The group outlined in the letter what it described as potentially grave dangers of cryptocurrencies. [more][more-letter]
The letter’s signatories include Harvard cryptographer Bruce Schneier, Google engineer Kelsey Hightower, Netscape Navigator pioneer Jamie Zawinski, the England-based blogger and author David Gerard and Molly White, the popular blogger and social media presence who was one of crypto’s earliest critics.
The Solana network suffered its latest outage Wednesday, felled for over four hours by a bug in how the blockchain processes a niche type of transaction that’s designed for offline use cases. [more][more-2]
Durable nonces on Solana are designed for token holders with complex offline signing setups that can’t always prep their transactions fast enough for the speedy network.
For example, a custodian that signs Solana transactions with two air-gapped computers might not be able to finish the job within a single block. Normal transactions on Solana would fail in this scenario. Durable nonces give the token holder time to work.
What happened on Wednesday was a failure in Solana’s ability to handle durable nonces. Instead of treating these niche inbounds as a single transaction, the network’s validators double-counted them as a single transaction at two different block heights, Federa said. This impossible situation effectively broke Solana’s consensus mechanism.
The ‘Google of Blockchains’, The Graph, announced it will urge developers to migrate to its Ethereum-based indexer network as it shuts down its centralized service by early 2023. [more]
Automated market maker and decentralized finance (DeFi) protocol Balancer has officially deployed on Optimism, the highly touted Ethereum layer-2 scaling solution, in a move designed to enhance user functionality by increasing scalability and reducing fees. [more]
The CEO of Bank of America says that his bank has hundreds of blockchain patents but regulations will not allow it to engage in crypto. [more]
Siam Commercial Bank (SCB), one of the biggest banks in Thailand, has entered the DeFi realm. [more]
The bank’s venture arm, SCB 10X, is using Compound Treasury’s 4% yield service via the Fireblocks custody platform.
Entering NFTs -
A number of bigger Terra (LUNA) ecosystem investors abandoned their positions as the terraUSD (UST) peg began to slip away last month – with smaller-scale investors continuing to buy as the coin’s price plummeted, according to the trading firm Jump Trading Group’s crypto arm Jump Crypto. [more]
Dubai hotel, The Manor Hotel by JA, partnered with Binance to accept crypto payments. Guests can use Binance coin (BNB), Bitcoin (BTC) or Ethereum (ETH) to pay for the hotel fare. [more]
Crypto exchanges -
Coinbase is hoping to weather the current market downturn by pursuing cost-cutting measures including a freeze on new hires. [more]
Gemini lays off 10% of workforce as the ‘crypto revolution’ enters its ‘contraction phase’. [more]
Goldman Sachs reportedly eyes crypto derivatives markets with FTX integration. [more]
Crypto.com secures provisional approval to open crypto exchange in Dubai. [more]
Regulatory
United States -
United Kingdom - A consultation paper suggests the Bank of England should oversee payment systems that “threaten the stability of the UK financial system”. [more]
Proposal will give the Bank of England greater regulatory oversight over stablecoin issuers.
Stablecoins are not yet an accepted form of payment in the UK, although proposals to legalize cryptocurrencies are in motion.
Japan - Japan’s Parliament has passed a new law that would create a regulatory framework for stablecoins, essentially defining them as digital money. [more]
Under the new legislation, which will come into effect in 2023, stablecoins must be linked to the yen or another legal tender and guarantee holders the right to redeem them at face value.
The bill also says that stablecoins can only be issued by licensed banks, registered money transfer agents, and trust companies, with the FSA reporting that regulations governing stablecoin issuers are to be introduced in the coming months.
South Korea -
The country’s ruling party announced Tuesday that it would launch a new Digital Asset Committee in early June. [more]
The committee will serve as a watchdog over the crypto industry and will be responsible for policy preparation and supervision.
South Korean authorities have launched a full investigation against the developers of Terra (LUNA). [more]
The initiative will be led by the Joint Financial and Securities Crime Investigation team of the Seoul Southern District Prosecutors Office, the local media claims. All Terraform Labs, the company behind the development of Terra, will be investigated and asked to surrender relevant documents and materials.
The government will invest over 223.7 billion won ($177.1 million) directly in various Metaverse projects. The program is headed by South Korea's Ministry of Science and Information and Communication Technology led by Lim Hyesook, who called the metaverse “an uncharted digital continent with indefinite potential,” indicating the government’s interest in taking the lead in the Metaverse tech. [more]
Singapore - The Monetary Authority of Singapore (MAS), the city-state’s central bank, this week announced what it calls Project Guardian, to test risk-management in blockchain asset tokenization and decentralized finance (DeFi) initiatives. [more][more-2]
Security and Risk
29 May - Anchor Protocol, a DeFi app on the Terra blockchain, got exploited with launch of Luna 2.0 for $800,000. [more]
Due to the price oracle bug, LUNC (Luna Classic) went to $5 despite the price of the actual assets being significantly lower than $5.
One of the users on Anchor's platform noticed the bug and deposited around 20 million Lido Bonded Luna tokens, which was considered $100 million by the platform. The real value of deposited funds should have been around $200,000.
After noticing the issue, a user took a loan of 40 million UST and withdrew it at a massive $800,000 profit.
Other users also noticed the issue with the price oracle on the platform and tried to exploit it but faced an error almost immediately. The platform's team was fast enough to fix the bug and avoid additional losses.
30 May - Mirror Protocol, a DeFi app on the Terra blockchain, has suffered another exploit for more than $2 million, with several pools drained. [more] [more-analysis]
The issue is that the majority of validators running nodes on the Terra Classic chain are running an outdated version of the price oracle. As a result, these nodes are telling the Mirror Protocol that LUNC is worth 5 TerraUSD (UST) ($0.10), instead of being just a fraction of a cent.
Mirrror Assets (mAssets) pool - mBTC, mETH, mDOT and mGLXY pools have been drained.
Twitter handler FatManTerra noted that Mirror disabled the usage of mBTC, mETH, mGLXY and mDOT as collateral in the nick of time to prevent further exploitation.
4 Jun - The Bored Ape Yacht Club (BAYC) Discord server was hacked on Saturday, with the attacker making off with 200 ETH ($360,000) worth of NFTs. [more]
The hack took place after the project’s community manager, Boris Vagner, had his Discord account compromised, which the attacker then used to post phishing links in both the official BAYC and its related metaverse project called Otherside’s Discord channels.
In response to the incident Saturday, one BAYC founder blamed Discord for the lapse in security and indicated the need for better platform for Web 3 communities.
4 Jun - FOMO DAO suspected hacked. $110,000 moved to TornadoCash. [more][more-2]
Blockchain security company PeckShield noted that there are DeFi exploits in May decreased by -82% month on month. As of May 31, TVL has dropped from ～$200b in January to ~$110b (-50%).
Coffee-chat
ABC News - Crypto Mania: Behind the hype of cryptocurrencies | Four Corners