August 24, 2022 / Unchained Daily / Laura Shin
- Three Arrows Capital liquidators got approval from Singapore High Order on liquidation orders.
- Celsius sued former business partner Prime Trust over $17 million in crypto tokens.
- YouTuber Bitboy Crypto filed a lawsuit against another YouTuber called Atozy and the latter is raising funds for legal fees.
- NFT platform SudoRare rugged its users and ran off with 520 ETH.
- Celsius filed a countersuit against KeyFi for stealing valuable property.
- BendDAO’s new liquidation mechanism could lead to blue-chip NFTs like BAYC selling at a discount.
- 19 Solana-based projects supported the launch of a crypto messaging standard called Open Chat Alliance.
- U.S Congressman Tom Emmer is demanding that OFAC provide an explanation for the Tornado Cash sanction.
- Hackers lost 5 ETH trying to attack Nears Protocol’s Rainbow bridge.
- A Coinbase customer is suing the exchange for $5 million for crashing during volatile times and allegedly violating securities laws.
- Crypto exchange Bitfinex launched two post-Merge tokens: ETHW (representing Ethereum on PoW) and ETHS (representing Ethereum on PoS).
- Javier Milei, a presidential candidate in Argentina, is being sued over an alleged crypto scam.
- Billionaire investor Mark Cuban criticized the op-ed released by SEC Chair Gary Gensler.
- The floor price of the Pudgy Penguins Ethereum NFT collection almost doubled in the past two weeks.
- The DOJ charged three people in Miami in a crypto-related scheme worth $4 million.
Today in Crypto Adoption…
- Ripio, a Latin American crypto exchange, will launch a prepaid crypto card in Brazil.
The $$$ Corner…
- a16z led a $56 million funding round for Ready Player Me, a metaverse startup.
- Blockchain startup Mural raised $5.6 million in seed funding.
- Distributed Finance announced a $2.5 million round and the acquisition of Algorand NFT marketplace Rand Gallery.
What Do You Meme?
Slashing Keeps Ethereum Decentralized?
The sanctions on Tornado Cash by the US Treasury’s Office of Foreign Assets Control (OFAC) has sparked a lot of debate on how Ethereum can remain decentralized at the base layer.
To recap, on August 8, OFAC decided to sanction virtual currency mixer Tornado Cash for being used to “launder more than $7 billion worth of virtual currency since its creation in 2019” and the Ethereum addresses of Tornado Cash were added to a blacklist.
After that, the front ends to some DeFi protocols like Aave and dYdX started blocking sanctioned addresses from using their app.
These events posed many questions about the future of Ethereum, especially with the Merge so close. Is Ethereum itself censorship-resistant? Will validators comply with OFAC? What about large exchanges that offer staking services to their customers?
- “Fall out from the Tornado sanctioning & the realization that ~70% of validators are US-based, regulated custodians that have to comply with OFAC. This introduces the real possibility of base-layer protocol censorship being introduced on ETH,” said Miles Suter.
- “If we allow censorship of user transactions on the network, then we basically failed,” said Ethereum core developer Marius Van Der Wijden.
However, Ethereum has a mechanism to protect itself. In a nutshell, if a staker decides to attack the network in any way, the community can slash it, burning all the attacker’s stake.
Eric Wall, crypto analyst and former Chief Investment Officer of Arcane Assets, put out a blog post laying out these concerns and explaining how he thinks it will play out, and he made the case that social slashing is the best option for Ethereum.
Wall asked the Ethereum community what they would do if a staker chose to censor the protocol level. The answer was remarkably in favor of slashing that staker, with creator Vitalik Buterin voting for that option. This poll gave rise to the meme of the black flag 🏴, which signals support for social slashing.
Even Coinbase CEO Brian Armstrong said on Twitter last week that he’d prefer to quit the exchange’s staking services business rather than censor transactions to comply with OFAC sanctions.
“Ethereum users have superpowers. They have the ability to surgically slash those who undermine its security or censorship resistance. Competitors don’t like that you have this power. They will tell you that using your powers is unethical,” concluded Wall.
To go deeper into these issues, don’t miss Unchained’s coverage:
- Tornado Cash Sanctioned. Did the Government Overstep Its Bounds?
- Is TRM Labs Blocking Addresses From DeFi Protocols?
- The Chopping Block: Did OFAC Overstep by Sanctioning Tornado Cash?
On The Pod…
Stephane Gosselin, cofounder and chief architect of Flashbots, and Uri Klarman, CEO of bloXroute Labs, joined Unchained to discuss everything about MEV, an especially important topic now with the Merge coming. Show highlights:
- what MEV is, how it works under Proof of Work
- some examples of MEV, like frontrunning and arbitrage
- how MEV is a rabbit hole full of monsters
- the role of Flashbots in the MEV industry and how Flashbots enabled a reduction of gas fees for users
- how MEV-geth functions and how it relates to auctions systems
- how bloXroute, Uri’s company, is working with MEV
- where Stephane and Uri disagree on MEV, despite agreeing on many fundamental things
- how MEV changes with the implementation of Proof of Stake
- what MEV-Boost is and the problems it solves
- what proposer-builder separation is and the motivation behind this idea
- whether DeFi would flourish more if there wasn’t frontrunning and why MEV-Boost doesn’t prevent it
- what externalities MEV-Boost or proposer-builder separation (PBS) would solve for users
- how MEV exists in other industries and in traditional finance
- why Flashbots’ own investors would rather trade on a fair-sequenced rollup than on Flashbots
- how the number of MEV extractors has been decreasing and whether this would end up centralizing MEV
- whether exploiting certain types of MEV is illegal
- how other chains are trying to solve frontrunning, like Osmosis with threshold encryption
- what are the levers that can be pulled to solve MEV, according to Uri
- how eradicating MEV can positively affect the price of ETH, and by how much
- whether validators can potentially share MEV profits with users
- how to determine if a network has a good MEV supply chain
My book, The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze, which is all about Ethereum and the 2017 ICO mania, is now available!
You can purchase it here: http://bit.ly/cryptopians