March 30, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits ✍️✍️✍️

• OpenSea will support Solana NFTs starting in April 2022.

• Polygon launched a zero-knowledge proof identity service.

• Ripple co-founder Chris Larsen started a $5 million campaign to try and convince Bitcoin to move from PoW to a low energy validation method that had many Bitcoiners shaking their heads.

Today in Crypto Adoption…

• The WWE signed a deal with Fanatics to release NFT trading cards via Candy Digital.

The $$$ Corner…

• MacroStrategy, a subsidiary of MicroStrategy, purchased$205 million in BTC with a BTC-collateralized loan via Silvergate Bank.

• Luna Foundation Guard has already purchased roughly $1.3 billion in BTC; LUNA hit an all-time high yesterday.

• HBAR Foundation announced a $155 million fund to supportDeFi on Hedera Hashgraph.

What Do You Meme?

What’s Poppin’?

Ronin Gets Hacked – Big Time

Ronin Network, the layer 2 blockchain home to Axie Infinity, was exploited for 173,600 ETH and 25.5 million USDC this week in what amounts to the largest DeFi hack in history.

According to a community alert from Ronin, the attacker was able to fraudulently control 5/9 validator nodes securing Ronin chain, leading to over $600 million in ETH and USDC being drained from the protocol. Notably, the initial attack took place on March 23rd. However, it was not discovered until yesterday morning when Sky Mavis was notified that a user could not withdraw 5K ETH from Ronin bridge.

“In order to recognize a Deposit event or a Withdrawal event, five out of the nine validator signatures are needed. The attacker managed to get control over Sky Mavis’s four Ronin Validators and a third-party validator run by Axie DAO,” wrote Ronin. “Once the attacker got access to Sky Mavis systems they were able to get the signature from the Axie DAO validator by using the gas-free RPC.”

In the aftermath of the attack, Ronin announced it would be changing its validator threshold from five to eight nodes. Ronin Bridge is paused, along with Katana DEX.

Yesterday afternoon, Ronin revealed that the attacker had left a few clues for them to follow. “The attacker’s wallet was funded from Binance. They have sent funds to FTX and Crypto.com. All of these could have left potential breadcrumbs.  All 3 exchanges have signaled their cooperation. We will spare no effort or resources to recover the stolen funds,” noted Ronin in a since-deleted tweet.

However, crypto security expert Mudit Gupta thinks the Binance and FTX leads could be a dead-end. He explained: “I’m 99% sure that the hacker is someone seasoned with a lot of cybersecurity experience (not a crypto degen kid). It’s naive to think that such an attacker will transfer money to his own accounts on CEX like FTX or Crypto. It’s either a honeypot or they are using money mules.”

For now, Ronin says they are working with various government agencies to find the criminals and are in discussion with both Sky Mavis and Axie Infinity stakeholders on next steps.

The Ronin hack seems to be part of a trend, as the three largest DeFi hacks have all been bridge-related, with Ronin losing $624 million this week, Poly Network getting exploited for $611 million in August of 2021, and Wormhole experiencing a hack worth $326 million in February.

With that in mind, Arjun Bhuptani, the founder of Connext and bridging expert, believes the next hack could see over $1 billion lost. “Expect this trend to continue as multisig bridges scale and liquidity fragments further across chains. The next big bridge hack will be for $1b+,” he tweeted. Bhuptani believes that as long as bridges rely on multisig validators, the hacking trend will continue. “👏 We 👏 need 👏 better 👏 bridges 👏. Even if we ignore economic attacks/collusion, multisig bridge validators are still massive honeypots.”

Recommended Reads

1. Vitalik Buterin wrote about the roads not taken in Ethereum’s development:

2. a16z’s Porter Smith on basics of staking:

3. Rawson Haverty on stablecoins:

On The Pod…

Do Kwon Is Backing UST With Bitcoin – And Here’s What Else He Is Building

Do Kwon is the CEO of Terraform Labs and a director at Luna Foundation Guard. On Unchained, he explains why LFG is spearheading a plan to partially back Terra’s $15 billion stablecoin UST with Bitcoin. He also dives into another project idea that would transform developer salaries into financial assets that, as far as I can tell, he has not yet spoken about publicly.

Part 1: Everything you need to know about Terra, UST, and BTC.

• how Terra works and why Do thinks UST will soon be the third-largest stablecoin

• why Do and LFG decided to back UST with bitcoin

• why Do thinks LUNA’s price will continue to appreciate despite UST’s new dependence on bitcoin

• how UST might perform if the price of a bitcoin were to crash

• why diversifying UST with different types of collateral could help Terra politically

• how LFG plans to use bridges, smart contracts, and an AMM reserve pool to secure its bitcoin

• why Do thinks Terra is now a Layer 2 project for Bitcoin

• who is deciding to purchase bitcoin and who determines what other assets to purchase as collateral for UST

• how a bitcoin reserve pool would help UST not de-peg from the dollar

• whether Do thinks Anchor’s 19%+ yield is sustainable and why Anchor is moving to other chains

Part 2: Do, the self-described “toymaker” of DeFi.

• why Do is fascinated with creating a fungible labor market

• how developer working hours could become a token traded on an AMM and used to take out loans

• why Do thinks developer salaries in crypto should be cyclical

• how on-chain identity and history will be similar to credit scores

• why Do is a personal fan of Thorchain – but is reticent to use it as a bridge for LFG

• why Do is interested in Prism Protocol

• what Do thinks the impact of a pro-crypto president will have on South Korea

Book Update

You can purchase it here: http://bit.ly/cryptopians