ProBit Bits (Vol. 18)— ProBit Global’s Weekly Blockchain Bits
From updates on Ethereum’s Merge to a brief thought on the 3AC saga and how much has been stolen from DeFi protocols so far in 2022, enjoy reading the 18th edition of ProBit Global’s Weekly Blockchain Bits.
Ethereum Sought to Correct Misconceptions About Upcoming Upgrade
Ethereum.org last week published some popular misconceptions about the upcoming Ethereum Merge upgrade. Most topical among them is about how the upgrade will not result in lower gas fees. It will transition from the proof-of-work (PoW) to proof-of-stake (PoS) consensus but will not directly influence network capacity or throughput, they say.
Even as efforts are being focused on scaling user activity at layer 2, they say another misconception to be corrected is that the upgrade is not likely to affect the transaction speed on layer 1. The PoS finality might offer additional security guarantees, but it will not significantly speed up transactions. With PoS, blocks will be produced about 10% more frequently than with PoW but such a change is unlikely to be noticed by users. A third surrounds validators who have staked their ETH on the Beacon Chain since 2020 being able to withdraw after the Merge. They say that is not going to happen as well. Even when enabled, validator exits are rate limited hence stakers can’t all pull out at once.
Others include that anyone can run their node for free to maintain the decentralization of the Ethereum network as against the view that they need to stake 32 ETH to do so.
Hard Fork Proponents Want ETH Holders to Withdraw from LPs
Though still not confirmed to happen, the ETHW Core last week started recommending that every holder withdraw their ETH from liquidity pools (LPs). They claim that if and when the hard fork does happen, holders’ ETH in LPs like Uniswap, Sushiswap, and Compound “will be swapped or lent out by hackers and scientists using deprecated and valueless USDT, USDC, WBTC”.
The call comes as the ETHW Core says it will introduce a LP (DEX and lending protocol) freezing technology to protect users’ ETHW tokens after the hard fork.
The ETHW team also released their first code. It includes the removal of EIP-1559 — the proposal that introduced the burning of base fees in Ethereum transactions — to distribute the fees to miners.
When a community member found a loophole in the code that will roll back all blocks to before the London fork, a patch was quickly released to contain the vulnerability.
Messari Says Nodes are Not Decentralized in the Cloud
In an Ethereum-related development, crypto data provider, Messari, has called out on the need for decentralization of nodes. It claims that three major cloud providers are responsible for about two-thirds (69%) of the 65% of Ethereum nodes that are hosted in data centers. The same set of cloud providers also reportedly hosts 72% of the estimated 95% of Solana nodes hosted in data centers. Over 50% is coming from Amazon Web Services (AWS), over 15% from Hetzner, and 4.1% from OVH.
Node service providers generally run distributed node clients behind the scenes to provide ordinary users with an API key for writing to and reading from the blockchain.
Ethereum remains the largest smart contract-enabled public blockchain. However, due to its major drawback of high gas fees as a result of high demand, new blockchains like Solana are rapidly gaining traction.
Largest ENS Registrations Recorded in July
Meanwhile, the total number of Ethereum Name Service (ENS) registrations last week exceeded 2 million. ENS is the open-source blockchain-based naming protocol that seeks to complement and expand the usefulness of DNS. It focuses on use cases not currently done with DNS like crypto payments anddecentralized websites.
According to Dune, ENS registrations exceeded 378,000 in July to make it its largest month with more than 525,000 addresses participating in the auction process to register a .eth domain name. Registration and renewal fees exceeded $6.86m.
Risk Management Didn’t Get Better After Two 3AC Partners Left
Remember the 3AC saga? Well, a New York Magazine Intelligencer’s feature article published last week suggests that the departure of two Hong Kong-based partners might have been a factor that contributed to the crumbling of Three Arrow Capital.
The two, who “routinely worked between 80 and 100 hours a week managing much of 3AC’s operations” retired simultaneously. Their departure left the bulk of their work to Kyle Davies (3AC’s co-founder with Su Zhu) as the chief risk officer.
A former friend thinks “their risk management was a lot better before” Davies took over. The friend says Zhu was, on the other hand, reluctant to hire new people even though the staff complained of long hours. Aside from being worried that new people would “leak trade secrets”, Zhu is said to have viewed the opportunity to work at 3AC as a favor.
Canadian Exchanges Impose Buy Limit on Retail Investors
To protect crypto investors, some crypto exchanges in Canada last week introduced new regulatory changes for their users. There is now a CAD$30,000 annual “buy limit” for “restricted coins” for retail investors while they are allowed to buy as much Bitcoin (BTC), Ether (ETH), Litecoin (LTC), and Bitcoin Cash (BCH) as they want.
For Newton, the net buy limits imposed on accounts do not apply to residents of BC, Alberta, Manitoba, or Quebec. The limit “tallies up all of your crypto purchases minus your sells (at average cost), over a rolling 12-month period (last 365 days)” states Bitbuy which also issued a similar notice.
$1.9 bln Worth of Crypto Stolen in Hacks Until July 2022
A Chainalysis report released last week showed that as much as $1.9 billion worth of crypto has been stolen in hacks of services up until July 2022. It was under $1.2 billion at the same point in 2021.
There could be more. The first week of August saw a $190 million hack of cross-chain bridge Nomad and a $5 million hack of several Solana wallets. The blockchain analysis firm attributes the stunning rise in stolen funds from DeFi protocols to their platforms being uniquely vulnerable to hacking. It says DeFi protocols’ open source code and their urge to reach the market and grow quickly are factors that could lead to security lapses. North Korea-affiliated groups have so far in 2022 stolen about $1 billion of cryptocurrency from DeFi protocols.
Top 40 Corporations Put $6 bln in Blockchain/Crypto
After an analysis of the top 100 banks investing in blockchain/crypto by assets under management (AUM), an analytics firm, Blockdata last week found that forty top corporations made blockchain investments between September 2021 to mid-June 2022.
They include Samsung, UOB, Citigroup, and Goldman Sachs. Others are Alphabet, Blackrock, Morgan Stanley, BNY Mellon, and PayPal. In all, the 40 companies invested a total of about $6 billion into blockchain startups.
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