Author: Robert Drage

Robert is a freelance researcher, with a background in information science currently interested in blockchain technology and technical developments in the field.

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Bitcoin Bitcoin Mining Markets

Bitcoin Mining Stocks Have Been Hammered in 2022

Bitcoin mining stocks have seen a sharp decrease in value with the price of Bitcoin (BTC) and the wider crypto market going down in parallel. Mining stocks have especially suffered due to more businesses holding the asset on their balance sheets and the lack of a significant hashrate increase.

As the cryptocurrency market continues on a sharp downtrend, Bitcoin mining stocks have followed. Even though they fared very well in 2021, they’ve taken a bigger knock than the cryptos in 2022. While the digital asset itself was recording losses close to 30 percent, bitcoin mining stocks have taken what amounts to a double hit, with more than 60 percent losses in some cases:

According to Jaran Mellerud, an analyst at Arcane Research, data from the beginning of the year shows the top five Bitcoin mining stocks by market cap have all been halved. Riot – one of the hardest hit by the slump – is down 65 per cent year-to-date (YTD), but is still trading one per cent in the green (which can’t be said for the others).

Mining stocks trading in the red. Source: Arcane Research

Additionally, when looking at the top 10 mining companies, the one down the least had lost 41 per cent, a testament to the devastation of the niche. Most of these companies have not grown their hashrate as fast as investors were hoping and this has impacted them significantly. As it stands, 90 per cent of BTC has been mined and the hashrate is at an all-time high.

How are Mining Stocks Affected by BTC Price Drops?

As the price of bitcoin continues to drop, cryptocurrency mining stocks also lose out. One of the major reasons is because many tech and other companies now hold bitcoin on their balance sheets through an exchange traded fund (ETF). Any decrease in price leads to lower revenue for these companies.

Usually, when the BTC price falls, the global hashrate also decreases, but this has not been the case this year. The combination of rising global hashrate and a falling BTC price has led to less BTC mined for these companies and a lower USD denominated value of their mined BTC.

Jaran Mellerud, analyst, Arcane Research

A good example of this is MicroStrategy, which has large amounts of the mined token on its balance sheets that can be used as a proxy by investors who do not want to directly hold bitcoin in their portfolios: 

Source: Bloomberg

According to Steven McClurg, chief investment officer of Valkyrie Investments, “The correlation between the two asset classes has grown more pronounced in recent months because the number of publicly traded companies involved in blockchain and digital assets continues to grow, and is not likely to reverse course.”

As bitcoin finds its way into organisations (both listed and not), the price of bitcoin will influence their balance sheets. In the case of Nasdaq and tech stocks, both are seeing red crypto fall under their umbrella.

Categories
Crypto News Markets Stablecoins Terra

Luna Plummets 97% Amid $900 Million in Liquidations

The sea of red in the crypto market has caused issues with Terra’s UST stablecoin, which relies on bitcoin as a reserve currency. The plummeting LUNA price has also caused liquidations totalling nearly US$900 million.

Terra Stablecoin Crashes

During the past week, a marketwide correction has been ravaging the cryptocurrency market, with LUNA hit harder than others. This is mostly due to a negative feedback loop that happened when the chain tried to stabilise its native TerraUSD (UST) algorithmic stablecoin. UST works with its sister token, LUNA, to maintain a price of around US$1 using a set of on-chain mint-and-burn mechanics.

The Terra public blockchain has seen massive growth in its ecosystem and the use of its TerraUSD (UST) stablecoin, mostly due to its key DeFi platform Anchor’s 20 percent returns. LUNA is the primary asset used to regulate and maintain the value of the algorithmic stablecoin. Created by Terraform Labs and its CEO/co-founder Do Kwon, the stablecoin used reserves of BTC to back its 1:1 value against the US dollar.

LUNA/USD price chart. Source: CoinMarketCap

The UST software automatically adjusts the price of LUNA, so that $1 of LUNA always matches $1 UST, thereby mimicking the US dollar. The asset was trading at around US$90 during the past month and has since dropped to below $1, losing about 99 per cent of its value in a matter of days.

As reported earlier this month, the stablecoin lost half of its value because it started losing its peg to the dollar:

This is $18 billion in wealth that we’re seeing evaporate before our eyes, and people are losing money.

Todd Phillips, director of financial regulation and corporate governance, Center for American Progress

Liquidations Triggered by Collapse of UST

As the price of Bitcoin crashed past US$30,000 – a 10-month low – over-leveraged traders were also caught out. According to data from Coinglass, in the past 24 hours almost 300,000 traders have been liquidated for US$896 million:

This situation stands as a reminder of why stablecoins – which play a pivotal role in the functioning of decentralised finance – not only pose a risk to individual traders but also a systemic risk to the entire crypto ecosystem if not managed responsibly.

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Crypto News DeFi Hackers

DeFi Protocol ‘Fortress Lending’ Exploited for $3 Million

The Fortress decentralised finance (DeFi) protocol – a crypto borrowing and lending platform – has seen an estimated US$3 million of its funds drained. The Binance Smart Chain (BSC)-based platform fell victim to an oracle attack last weekend with the loss of “all funds”:

Price Oracle Targeted by Hackers

Both PeckShield and BlocSec have noted that the oracle used by Fortress “can be hijacked by anyone due to the lack of power verification”. PeckShield also warned the oracle network Umbrella about its involvement in the incident. This exploit could be used against anyone using the same Umbrella oracle, the firms warned.

In response, Umbrella released its own statement saying it was “aware of the recent exploits that may have stemmed from an Umbrella Network price feed error”.

The attacker was able to call the function and change the price of the native Fortress token (FTS) manually, then buy a large enough amount of FTS to pass a vote for a proposal to allow FTS tokens to be taken as collateral. As a result, the attacker used 100 FTS as collateral to borrow all other assets in the protocol.

The stolen 1,048.1 ETH and 400,000 DAI were then promptly bridged to the Ethereum network and washed through TornadoCash.

FTS Price Takes a Tumble

Considering the market-wide crash that’s been happening during the hack, Fortress’s native token has taken quite a beating, dropping over 60 percent in the past two weeks and down 99 percent over the past year, according to CoinGecko:

Hackers have been a major thorn in the side of the DeFi sector this year. According to PeckShield, as of the beginning of May more than US$1.57 billion in cryptocurrency had been stolen from DeFi platforms in 2022:

During the past week alone, Rari Capital was hacked for more than US$80 million and MM.Finance for US$2 million, only adding to the year’s negative tally.

Categories
Australia Crypto News Industries Payments

Aussie Entrepreneur Banks $267 Million After Selling Crypto Start-up ‘Wyre’ 

Well-known US e-commerce platform Bolt has bought the crypto payment service Wyre in a billion-dollar deal, with the Aussie start-up’s founder joining the Young Rich List as the Silicon Valley deal earns him more than A$260 million.

On May 5, Bolt announced that it had acquired Wyre for an estimated US$1.5 billion, netting the latter company’s Australian founder, Michael Dunworth, an estimated A$267 million for handing over his 12.5 per cent holding in the company.

Secure, Regulated Crypto-to-Fiat Payments

Wyre uses blockchain-based technology to offer merchants fast cross-border payments. The start-up also vends a crypto-based payments application programming interface (API) that allows businesses to plug directly into secure, regulated crypto-to-fiat payment infrastructure.

Founded in 2013, Wyre has spent the intervening years attaining its money-transmitter licences, now valid in 27 US states and also legally operable in China and Brazil.

This acquisition will pave the way for seamless, secure crypto transactions, and NFT enablement for our retailers.

Maju Kuruvilla, CEO, Bolt

Growing Demand to Pay with Crypto

According to the press release from Bolt, the acquisition was made because of the “growing demand for purchasing goods and services with cryptocurrency and the opportunity of Web3”. Wyre’s API will help reduce the barriers to entry to utilise cryptocurrencies for payments from Bolt’s massive list of retailers.

Bolt CEO Maju Kuruvilla also stated in an interview that he hopes the integration will increase crypto adoption as it allows new functionality for “every crypto asset, every chain, to every merchant, irrespective of any shopping platform”.

Bolt is an incumbent in the payments space, and they can see crypto is where the market is heading […] They are like Peter Parker, and we’re the spider that’s going to bite them, turning them into Spider-Man.

Michael Dunworth, founder and CEO, Wyre

The newly added crypto functionality is planned to be fully integrated before the end of the year. Once complete, the acquisition will bring the power of Bolt’s CheckoutOS – its one-click checkout service that helps with authentication, payments, and fraud protection – to the cryptocurrency ecosystem.

This acquisition is the fulfilment of a longtime ambition. When I wrote the draft business plan for Bolt, I had always imagined cryptocurrency at its centre.

Ryan Breslow, founder and executive chairman, Bolt

Another Australian blockchain start-up, Lygon, recently secured more than A$12 million in funding for the joint venture of the ‘Big Four’ Australian banks and IBM to create the first digital bank guarantee.

Categories
Bored Ape Yacht Club Hackers Illegal NFTs Scams

Bored Ape Yacht Club’s Instagram Compromised in $2.8 Million NFT Phishing Scam

Bored Ape Yacht Club’s (BAYC) Instagram account has been hacked in a phishing scam resulting in an exploit of US$2.8 million worth of NFTs:

Yuga Labs, the creator of BAYC, is investigating the attack, tweeting followers not to click on links or mint new tokens. The attacker stole 133 NFTs after using BAYC’s Instagram account to promote a fake “airdrop”. The scam promised people free tokens if they connected their MetaMask wallets to the site linked through the post.

No Compensation As Yet

It is not yet known how the hacker accessed the Instagram account, and Yuga Labs has yet to announce whether it will compensate those affected by the scam:

According to Yuga Labs, “At the time of the hack, two-factor authentication was enabled and security surrounding the Instagram (IG) account followed best practices.” It added: “We’ve regained control of the account, and are investigating how the hacker gained access with IG’s team.”

According to blockchain data, the hacker’s wallet, which has been identified in connection with the attack, holds 91 NFTs and is said to be worth US$2.8 million based on the floor prices of the respective collections. The attack has seen 24 Bored Apes and 30 Mutant Apes stolen.

Yet Another Attack on BAYC

The news of this latest attack comes only weeks after the BAYC Discord servers suffered a phishing scam which led its governance token to plunge by 20 percent. Another possible hack was witnessed a couple of weeks ago when a BAYC NFT worth US$350,000 was sold for just US$115. Many question whether it was an exploit or just a massive error.

Categories
Crypto News Ethereum Illegal NFTs Scams

$34 Million ‘AkuDreams’ NFT Project Locked Permanently by Smart Contract Error

An error in a smart contract has led to NFT project AkuDreams locking up US$34 million worth of Ethereum. The project was hit by an exploit through its refundable Dutch auction on April 22 in which the hacker did not profit but managed to lock up the funds:

Cryptocurrency developer Foobar tweeted coding (see above) showing that “$34 million, or 11,539 ETH, is permanently locked into the AkuDreams contract … It cannot be retrieved by individual users or by the dev team.”

‘No Malice Intended’

The AkuDreams Twitter account confirmed the exploit and said: “We are locked down and consulting with some of the best on the next steps. We will mint your NFTs, and reveal them as soon as humanly possible. We will also be working to issue funds for those passholders who bid with the intention of securing a price .5 ETH below the final price.”

Refunds and Withdrawals Blocked

The auction opened at 3.5 ETH on the premise that the lowest bid would set the final price, and anyone who placed a higher bid would receive a refund. AkuDreams passholders were also promised a 0.5 ETH discount on each NFT they minted. But due to a bug in the contract, an exploiter was able to halt refunds and withdrawals from the contract, which meant that auction participants who bid above the final NFT price could not receive the ETH they were owed. As a result, refunds and withdrawals from the contract could not be passed.

AkuDreams acknowledged the issue in saying that the exploit “was not done out of malice” and that it was looking into the incident. The announcement that followed contained the admission, “To be clear, this is our fault.”

The project has promised to return funds to the community and later confirmed that the NFTs would be airdropped to bidders, and that it would honour refunds for the passholders who are owed a 0.5 ETH discount.

Exploits, Exploits, and More Exploits

The crypto space has of late been rife with exploits taking place in every sector. In October 2021, a bug in the DeFi protocol Compound saw its users mistakenly rewarded with US$80 million in COMP tokens. Qubit Finance earlier this year lost US$80 million after its protocol was hacked, making it one of the biggest exploits so far this year.

Categories
0x Coinbase Crypto News NFTs

0x Token (ZRX) Soars 53% Amid Coinbase NFT Partnership

The native token for the Ox crypto exchange has recorded a massive spike following its partnership with Coinbase that allows Coinbase to use Ox Labs’ NFT standard for its new social NFT marketplace.

As recently reported, the Coinbase NFT social marketplace has gone into beta and will be tested by 3 million selected users on the waitlist. For Coinbase to get the market up and running, it partnered with Ox Labs which boasts that it has the “most robust feature set of any exchange protocol”.

Coinbase Partnerships Good for Price Action

According to data from CoinMarketCap, after news broke of Coinbase’s partnership the Ox token (ZRX) rallied 53 per cent. The token was at a five-month high of US$1.17 and also traded just over $1 billion volume on the day as well. The coin has since stabilised at around the $1 region.

We’re thrilled that Coinbase is using Ox to power [its] new social marketplace for NFTs and anticipate this launch will unlock a massive wave of new users into the blockchain space.

Will Warren, co-founder and co-CEO, 0x Labs
0x/USD price chart. Source: CoinMarketCap

In the past, other projects such as Mina and Propy that partnered with Coinbase also saw considerable price movement when word got out they were collaborating with the US crypto heavyweight.

What 0x Labs Brings to the Table

The Ox open standard will be the engine of the Coinbase marketplace, aiming to deliver up to 54 per cent lower gas fees to users. Additionally, Ox Labs stated in a blog post that extra features include free non-custodial listing, instant royalties for creators, collection orders and more.

Building on Ox significantly reduces the effort required by Web3 developers and NFT marketplaces to deliver a seamless multi-chain experience to their users, giving them more time to focus on their products.

0x Labs blog post

One of the big things to come out of Ox Labs is the new V4 of its protocol that allows swaps between NFTs, so that users can exchange collectibles as easily as tokens.

Categories
Coinbase Ethereum Markets NFTs OpenSea

Coinbase Launches NFT Marketplace to Battle OpenSea Dominance

Leading US crypto exchange Coinbase has announced the imminent launch of its new NFT marketplace, with a social spin to it – like Instagram – to help connect users and creators.

The NFT marketplace is now in beta after Coinbase unveiled its plans in October last year for a “Web3 social marketplace”. It is being built on the Ethereum (ETH) blockchain and reportedly “any NFT that’s for sale on the Ethereum blockchain will be searchable” on its platform.

Users who are interested in the beta and want to have a look at their collections can do it here. At launch, the exchange will allow its 43 million users to easily access NFTs through the platform. The marketplace will also be adding support for other blockchains in the near future.

Coinbase NFT marketplace beta. Source: Coinbase

For a limited time, the platform will incur zero transaction costs, except for Ethereum gas fees to process a transaction on the blockchain. The platform will also require users to use a self-custody wallet such as Metamask or the Coinbase wallet.

Social Platform to Build Engagement

The platform’s beta testers who join through the waitlist are encouraged to make use of all functions, including new social features. Having received over 8 million applications, the platform may well be in a position to compete with market leader OpenSea. This could be done by not only being an NFT marketplace, but also a platform where creators can build and engage with their communities.

According to the Coinbase announcement:

We learned that people don’t just want better tools to buy and sell NFTs – they want better ways to discover them, better ways to find the right communities, and better spaces in which they can feel connected with each other.

Sanchan Saxena, VP of product, ecosystem products, Coinbase

To create more of a community feel, the platform will add social feeds to facilitate browsing of other creators’ portfolios. In an Instagram-like approach, users will have profiles tied to their wallets so users can interact with each other. The marketplace will also incorporate a recommender based on buying history, who the user follows, and other metrics.

We’d like to make Coinbase NFT a little bit more like Instagram, as opposed to, say, an auction like eBay or something like that […] I think having people that you can follow, your favourite artists or creators, and having a feed of content that gets populated from those people you follow, could be really powerful.

Brian Armstrong, Coinbase CEO

NFT Marketplace to Become Decentralised in the Future

At this stage, the platform will operate on Coinbase’s centralised servers, but in time it will be moved to decentralised solutions. In that event, the platform will include functions such as airdrops, minting, and token-gated communities. The platform will also be used to host drops by some of its many launch partners.

Royalties play a very important part in keeping the creator economy alive and are therefore one of the major focus points of the new marketplace:

Categories
DeFi ICHI Markets

ICHI Token Sinks 90% Amid Cascading Liquidations on Rari

One of Ichi Foundation’s pools on Rari has spun itself into a debt crisis due to falling BTC prices and an overzealous tolerance for collateral.

Negative Debt Cycle Hurts ICHI Token

According to a statement tweeted by Ichi, recent volatility seen with the ICHI token was caused by a cascade of liquidations made worse by the fact that the pool was overcollateralised. This then forced the price of the coin down dramatically.

In a tweet from Rari Capital – a lending and borrowing protocol that hosted Ichi’s Fuse pool – the pool was “experiencing bad debt due to cascading liquidations”:

The cascading liquidations were brought on by various events, one of them the allowance of millions of dollars as collateral to be taken and borrowed. When the price began to decline, there wasn’t enough liquidity in the decentralised exchange (DEX) to allow liquidations. This meant that highly leveraged positions couldn’t be closed, causing the pool to fall into debt.

When prices across the crypto market dropped – following the US$250 billion market wipe at the beginning of this week – “there wasn’t enough liquidity to absorb all the ICHI liquidations, causing the price to cascade”, according to Ashwath Balakrishnan, vice-president of research at Delphi Digital. Cascading liquidations can cause the price of an asset to decline rapidly and dry up liquidity, leaving the pool in debt and holders out of pocket.

ICHI/USDT price chart: CoinMarketCap

ICHI was ranging around US$120 before April 11, the pool liquidations started around 12:30 UTC on that date and continued until 2:30 UTC on April 12. Prices have dropped all the way down to US$1.81 and have since stabilised.

Putting in the Proper Checks

The problem arose where some important parameters on the pool weren’t set optimally. As noted by Jack Longarzo – a developer for Rari Capital – the collateral factor was considerably higher than needed:

Longarzo also mentioned that the team could have added supply caps to limit the amount of collateral in the pool to prevent a situation such as this. He added that a red flag for users of Fuse should be to check if the collateral in a pool is significantly more than what can be liquidated.

Categories
Crypto Staking Ethereum Mining

Ethereum’s Move to PoS Advances as Mainnet ‘Shadow Fork’ Goes Live

With Ethereum’s move to Proof-of-Stake (PoS) getting closer developers have created a “shadow fork” that will allow them to test the new configuration on mainnet-like conditions.

A critical testing period for Ethereum’s move to Proof-of-Stake (PoS) from the power heavy Proof-of-Work (PoW) consensus algorithm has been initiated. The so-called “shadow fork” will be implemented to test the effects of the transition under the network’s current circumstances.

According to a tweet from Marius Van Der Wijden – an Ethereum software developer – this is an historic moment for Ethereum: “Today will be the first mainnet shadow fork ever.”

Ethereum Foundation developer Parithosh Jayanthi also tweeted that this was a good opportunity for the community to “practise running their nodes, deploying contracts, testing infrastructure, etc”, so they can get used to the “post-merge world”.

What is a ‘Shadow Fork’?

The term “shadow fork” refers to copying mainnet data to a testnet where developers can test new features under realistic conditions before deploying major changes on the mainnet:

At the time of writing, the shadow fork had processed over 5 million transactions with an average block time of 14.2 seconds, according to the BlockExplorer page shared by Van Der Wijden.

To reiterate, a shadow fork does not affect the canonical chain in any meaningful way. Transactions submitted to the shadow fork could be included in the main chain as well. Proceed with extreme caution!

Parithosh Jayanthi, Ethereum Foundation developer