DeFi Research News April 2022

Bitcoin Miami Conference & Coinchange Attendance

The annual Bitcoin conference was held at the Miami Beach Convention Center earlier this month, and hosted upwards of 25,000 attendees, 450 speakers, 400 sponsors, and 3,000 companies. Some notable panelists and speakers included professional athletes Serena Williams, Odell Bekham Jr., & Aaron Rodgers, and Bitcoin evelangelists Peter Thiel, Ricardo Salinas, Cathie Wood, Michael Saylor, and Jordan Peterson. 

The four day event was filled with endless discussion regarding the current state of Bitcoin adoption. Jack Mallers, the CEO of Strike, announced that the company has partnered with Shopify, Blackhawk, and NCR to enable large processors to enable bitcoin payments over Bitcoin’s Lightning network at thousands of popular stores including McDonald’s, Walmart, & Home Depot. 

Samson Mow, the former CSO of Blockstream, whose current focus is enabling nation-state adoption of Bitcoin, announced that Próspera, located in Honduras, now accepts Bitcoin as legal tender, and that Madeira, an autonomous region of Portugal, now offers no capital gains tax on Bitcoin.

Ricardo Salinas, Mexico’s third-wealthiest citizen, talked about how his father’s business had to shut down as a result of poor financial policy by the country’s government that led to the devaluation of the Mexican Peso, and that the USD is headed down a similar path. He currently has 60% of his wealth in BTC and Bitcoin related equities. 

Coinchange CEO Maxim Galash spoke about our firm’s offerings during the Startup Pitchday. He analyzed Coinchange’s High Yield Architecture, the benefits of our product, our customers and what we had already achieved up to date.

There was plenty of fun after hours as well. The 2022 Coinchange & Maxim Bitcoin Experience, hosted at The Hyde Beach at SLS South Beach on April 9th, was the hottest party at the event. With hundreds of models in attendance, the night offered the perfect blend of luxury lifestyle and financial tech in one unforgettable nightlife experience.

Elon Musk Successfully Acquires Twitter and Prioritizes Removing Crypto Spam Bots & Stripe Enables Twitter Users to Be Paid in USDC 

Elon Musk has been an active Twitter user for years and recently had his cash bid of $44B USD to purchase the social media platform be approved by the board. The world’s richest man announced via tweet that he had a few changes in mind for the platform last week before his offer was formally accepted, including getting rid of the crypto spam bots and authenticating all human users. 

Musk has been vocal about Twitter’s failure to enforce bans on automated accounts – describing the bots as the website’s “single most annoying problem”. The crypto scam bots have resulted in users sending millions of dollars of irreversible crypto payments to illegitimate causes and too good to be true investment schemes. 

Given that Twitter has been the most crypto friendly social media platform with features such as verified NFT profile pictures and the recent test done by Stripe to allow USDC payments for users, many hypothesize that Dogecoin, Elon’s favorite cryptocurrency, will soon be integrated as a payment or tipping method on the social media platform itself. Stripe payout will occur on Polygon Network and users will be able to choose to store their funds on Polygon or swap to other crypto. 

Elon has framed his takeover bid for Twitter as an effort to protect free speech on the social media platform and allow for more open discourse. 

Justin Sun Creates UST Competitor Algorithmic Stablecoin on Tron Network & USN Going Live on Near Protocol

The overwhelming success of both Terra’s UST and Frax Finance’s FRAX algorithmic stablecoins have resulted in other protocols such as Tron and NEAR entering the market with their own take on the innovative stability model. 

Justin Sun, the creator of Tron, announced this past week that the Tron network will introduce their own native algorithmic stablecoin called USDD on May 5th. Proximity Labs, the DeFi arm of the NEAR protocol, released the USN algorithmic stablecoin on April 25th. Both USDD & USN stablecoins can be minted by depositing respectively TRX & NEAR tokens, the native crypto token of the respective blockchains, as collateral.

Ethereum 2.0 Merge Upgrade Delayed In Spite of Success on Testnet 

The Ethereum 2.0 Merge that forms a key part of the so-called Ethereum 2.0 upgrade has been delayed until the latter half of 2022. Tim Beiko, an Ethereum Foundation developer tweeted recently in a thread that “It won’t be June, but likely in the few months after,” and that, “No firm date yet, but we’re definitely in the final chapter of PoW on Ethereum.” Beiko also urged a Twitter user earlier in the thread not to invest in any additional mining equipment. 

Google searches for “Ethereum Merge” have already surpassed their all-time high that was set approximately two weeks ago.  The major protocol upgrade was running according to schedule until yesterday and the reigning narrative was that the Ethereum 2.0 upgrade would happen before the end of June 2022.

The journey towards the Ethereum upgrade has more often than not felt like taking one step forward and two steps back. Ethereum Foundation researchers doubted the merge upgrade would happen in 2020 and got pushback from Ethereum co-founder Vitalik Buterin himself. 

Earlier this year, developers responsible for the upgrade began testing the impact of the Merge on a “shadow fork” of the protocol’s mainnet, which mimics the real Merge with the validator nodes processing actual Ethereum transactions from the blockchain’s mainnet, as opposed to Ethereum “testnets”, which processed transactions with fake ETH transactions in a controlled testing environment. This new testing environment has revealed “bugs varying from sync code to request timeout,” according to Ethereum developer Parathi Jayanathi.

Polygon Launches Super Net Chains to Build Crypto Based Internet 

Ethereum scaling solution, Polygon, has launched a new network for Web3 development called Polygon Supernet, and is pledging $100M USD to developers who can help fast track its adoption. The Supernet aims to lower the barrier of entry for developers compared to those who previously used Polygon’s Edge solution by increasing both security and decentralization. 

The Polygon Supernet chain allows developers to build their projects in a fully customizable environment without either hosting or operational costs. Validators on each Supernet chain will stake their MATIC tokens on the mainnet to ensure a robust level of security.

Polygon co-founder Sandeep Naliwal recently stated, "The infrastructure tooling enables users to achieve desired outcomes easily and quickly." He emphasized that the Polygon network’s goal is to bring mass adoption to Web3 as the key to blockchain adoption is to provide a comprehensive range of options for enterprises.

Fidelity to Offer Bitcoin as part of 401k Offerings

Fidelity Investments announced that some of their 401(k) offerings will soon enable employees at more than 23,000 Fidelity-associated companies to administer their retirement accounts to provide Bitcoin investment options to customers through dedicated “Digital Asset Accounts”. Microstrategy has already signed up for the service and will be the first client to offer this service to the company’s employees. 

The firm’s crypto product will not be a mutual fund and will allow each plan sponsor to have a separate employee account that holds both Bitcoin and short-term money market investments for liquidity. The bitcoins would be held by Fidelity on its digital asset platform and would charge 0.75-0.90% in annual management fees for accounting, administration, & custody. Fidelity has announced that the company will slowly offer other digital assets to the investment option based on market demand.

Earlier this month Fidelity also announced their Metaverse ETF offering which gives employees the opportunity to invest in publicly traded companies involved in the execution of the metaverse including hardware, digital infrastructure, design and engineering software, game software, & web development. As the nation’s largest retirement plan provider, Fidelity’s decision will help make digital assets even more popular and mainstream in the public consciousness.

Axie Infinity’s Ronin Bridge Exploited For More Than $600M + US Govt Finds Connection With North Korea

The Ronin Bridge that connects Axie Infinity’s Ronin sidechain to Ethereum has been drained of 173,600 ETH ($590M) and 25.5M USDC in what may be DeFi’s biggest exploit yet.  Last week, the team behind the video game announced on Twitter that they discovered the attack when trying to withdraw 5000 ETH from Ronin. 

Nine validators currently validate the Ronin sidechain, of which five signatures are required to approve any deposit or withdrawal to the network. The hacker managed to get access to four validators belonging to Sky Mavis’s alongside Axie DAO’s validator. The Ronin team has changed withdrawals to now require eight of nine validator signatures to bridge funds in response to the hack.  

A surprising fact about this exploit is that The US government was able to make a connection between the North Korean hacker group Lazarus and the above Axie Infinity's Ronin sidechain network hack. An address previously flagged on EtherScan as "reported to be involved in a hack targeting the Ronin bridge" was included in The US Treasury Department’s national sanctions list update. $5.8M USD of the stolen funds that were transferred to Binance were frozen by the cryptocurrency exchange and returned to the Ronin team.

Hacks targeting innocent users happen all the time, but nowadays all the stakeholders including the US government are taking steps to make sure funds are recovered and users are protected with the widespread acceptance of cryptocurrency by the mainstream.

Chainanalysis, a cryptocurrency firm specializing in investigating on-chain addresses for malicious activity, confirmed that the Lazarus group is in fact tied to North Korea’s intelligence agency Reconnaissance General Bureau. The communist country’s cybercriminals had a very successful 2021, defrauding innocent users of nearly $400 million worth of stolen digital assets last year through a minimum of seven cyber attacks on various cryptocurrency platforms. 

The above cyber attacks targeted both investment firms and centralized exchanges specifically, and made use of several common exploits including phishing lures, social engineering through social media platforms like Twitter, malware, and smart contract code exploits to divert funds from these organizations into North Korean controlled addresses. The criminals subsequently started a careful money laundering process to cover up and cash out the funds thereafter.

Such vulnerabilities in a protocol, like Ronin Bridge, can be mitigated and filtered out of usage if protocol assessment processes are being used before engaging with the said protocol. Coinchange’s Intelligence Team has created advanced Risk Assessment frameworks for risk analysis before we integrate with all of the protocols we use.You can learn more by visiting the Coinchange security page. 

The Central African Republic and Panama have become the second and third nations in the world to adopt bitcoin as legal currency 

The Central African Republic announced on April 27th that Bitcoin has been adopted as legal tender in the nation state alongside CFA Franc. They are now the second country behind El Savador to enable citizens to use the digital currency in commerce. President Faustin Archange Touadera signed the measure into law after politicians and regulators in the African country voted unanimously to legalize BTC as currency. 

The President’s Chief of Staff, Obed Namsio, stated “The CAR "is the first country in Africa to adopt bitcoin as legal tender. This move places the Central African Republic on the map of the world's boldest and most visionary countries."

Not even a day later Panama announced that the Central American country is moving to make Bitcoin legal tender and removing capital gains taxes for the country with the President just needing to sign the official bill. 

El Savador, which declared BTC as a national currency in June 2021, did not have the majority of its population using the banking system at the time; however, the majority of the nation’s population were online. The situation is completely different in CAR, with only 11.4% of the population having access to the internet. This could be a significant roadblock in actual usage of the decentralized and permissionless currency.