The latest developments in the world of Web3!
Lots of news to get to in a post-merge world!
In the last week, the news dominating all media outlet’s was the eth-merge, which successfully took place, Ethereum finalized ‘The Merge’ at block 15537393 on September 15, 2022, at 1:42:42 EST. Biden also examined crypto-regs and gave his proposals. There were also a few hacks — black and white hats. The white hat ‘hack’ on Arbitrum was the most interesting and wins our ‘Hack of the Week’ 🥇 with the Wintermute black hat hack coming in second place. 🥈
Meanwhile, in South Korea, the authorities have requested that Interpol issue a “Red Notice” on Terra Co-Founder Do Kwon, the Ministry of Science and ICT urges the adoption of specific Metaverse laws and Busan signed an MoU with Huobi, receiving further support for the local cryptocurrency exchange.
This newsletter is a summary of a number of largely unrelated news pieces from the crypto-verse that might be crypto/DeFi/NFTs/VCs/Macro but touch upon DeFi. It is aimed at people who want to stay abreast of some of the news but are not following along too closely. It is put together by Bisonai — a DeFi company in Seoul that bridges together AI + Blockchain.
- After completion, the Ethereum Merge ushers in a new era for the second-largest blockchain.
- Biden examines cryptocurrency regulation proposals and mentions the possibility of fraud.
- Hack of the Week: Hacker Receives 400 ETH From Arbitrum After Finding a $400 million Critical Vulnerability
- Market maker Wintermute had $160 million stolen from it.
- Report: South Korea requests that Interpol issue a “Red Notice” on Terra Co-Founder Do Kwon.
- A ministry in South Korea urges the adoption of specific Metaverse laws
- Busan signed an MoU with Huobi, receiving further support for the local cryptocurrency exchange
After completion, the Ethereum Merge ushers in a new era for the second-largest blockchain.
After years of development and delay, the enormous Ethereum redesign known as the Merge has finally taken place, transferring the digital machinery at the center of the second-largest cryptocurrency by market value to a system that uses a great deal less energy, according to CoinDesk.
It was no easy task to switch from proof-of-work to proof-of-stake, two different ways to operate a blockchain. Before the Merge took place, Justin Drake, a researcher at the nonprofit Ethereum Foundation, told CoinDesk, “The metaphor that I use is this idea of switching out an engine from a running car.”
The potential reward is enormous. Now, Ethereum should use 99.9% less energy. According to one estimation, it appears as though Finland’s electricity grid has abruptly been turned off. The network, which supports a $60 billion ecosystem of cryptocurrency exchanges, lending organizations, non-fungible token (NFT) marketplaces, and other apps, will become more secure and scalable, according to Ethereum’s developers.
Biden examines cryptocurrency regulation proposals and mentions the possibility of fraud.
The Biden administration stated on Friday that US government agencies must step up enforcement in the digital asset industry and pinpoint regulatory vulnerabilities in cryptocurrencies, emphasizing the potential for abuse and harm while also highlighting their expanding importance in global banking.
The White House refrained from endorsing a digital dollar, but the Treasury Department will head a group of government organizations that will study a central bank digital currency.
Following an executive order President Joe Biden signed earlier this year on “Ensuring Responsible Development of Digital Assets,” the government has taken collective action, which has been announced in a number of public papers.
“Innovation is one of the hallmarks of a vibrant financial system and economy, but as we’ve painfully learned from history, innovation without adequate regulation can result in significant disruptions and harm to the financial system and individuals,” Treasury Secretary Janet Yellen told reporters.
Hacker Receives 400 ETH From Arbitrum After Finding a $400 million Critical Vulnerability
On September 19, one of the most well-liked Layer 2 Ethereum solutions, Arbitrum, rewarded a white hat hacker 400 ETH (about $560,000) for uncovering a potential flaw in its code, as reported by Crypto Potato.
The Solidity-written smart contracts are found to have vulnerabilities by the white hat hacker known as Riptide on Twitter. The “multi-million dollar vulnerability,” according to Riptide, may possibly affect anyone wishing to transfer money from Ethereum to Arbitrum Nitro.
A few weeks prior to its release, the hacker carefully examined the Arbitrum Nitro code, reviewing the contracts to “see if the update had been a success.”
Riptide discovered various issues that prohibited the bridge from functioning properly after the upgrade. After more examination, Riptide found that the inbox sequencer was running slowly.
“A client can send a message to the Sequencer by signing and publishing an L1 transaction in the Arbitrum chain’s Delayed Inbox. This functionality is most commonly used for depositing ETH or tokens via a bridge.”
Following a second scan of the contract, Riptide was able to confirm that the inbox sequencer bug had created a serious flaw that could have allowed Riptide or another malicious hacker to steal millions of dollars by diverting incoming ETH deposits from the L1 to the L2 bridge into their wallets without being noticed.
Instead of waiting for the $2 million incentive that Arbitrum promised as its top tier, Riptide chose to report the vulnerability and request for a reward, which, to their surprise, was just 400 ETH. The hacker protested the payment after getting it, saying it was out of proportion to the significance of the defect and the risk it carried.
More information can be found in a blog that Riptide wrote about his findings here.
Crypto market maker Wintermute had $160 million stolen from it.
According to Evgeny Gaevoy, the founder and CEO of Wintermute, a cryptocurrency market maker based in the UK, the company was the most recent victim of hacks targeting decentralized finance (DeFi), losing almost $160 million.
Etherscan reports that “Wintermute exploiter” received transfers of over 70 different tokens, including $61,350,986 in USD Coin (USDC), 671 Wrapped Bitcoin (wBTC), equivalent to about $13,030,061, and $29,461,533 Tether (USDT). It indicates that USDC has the highest token amount.
As the hacker(s) withdrew money from the company’s DeFi operations, the over-the-counter and centralized financing operations were unaffected. Gaevoy emphasized that consumers’ cash are secure by claiming that the market maker is solvent and still has twice as much equity as was taken. More info in the Coin Telegraph report.
Report: South Korea requests that Interpol issue a “Red Notice” on Terra Co-Founder Do Kwon.
Do Kwon, the co-founder of the now-defunct stablecoin issuer Terraform Labs, is reportedly the subject of a request from South Korean authorities to Interpol for the issuance of a “red alert” due to the fact that his whereabouts are unknown, according to a report in The Financial Times. Kwon’s blockchain network crashed in May, and it was thought that he was in Singapore. However, on Saturday, the Singapore Police Force told the press that Kwon was no longer there. A Red Notice asks law enforcement agencies all around the world to find and temporarily detain a suspect pending extradition, surrender, or other legal action.
Kwon said in a tweet that he is not hiding from the law, is cooperating fully with them, and has “nothing to hide.” He added that you have no business knowing my GPS coordinates unless “we are friends, have plans to meet, or are participating in a GPS-based Web3 game.”
South Korea Ministry urges the adoption of specific Metaverse laws
The South Korean Ministry of Science and ICT (MSIT) has made plans to stop enforcing conventional video game legislation in the Metaverse. Instead, the ministry chose to publish new regulations to encourage the development of the emerging ecosystem.
The $200 million investment South Korea made for the development of an internal metaverse demonstrates its desire to gain access to the Web3 and the metaverse ecosystems. Parallel to this endeavor, the MSIT discovered that applying outdated regulations acts as a barrier to the development of new ecosystems.
We won’t make the error of regulating a new service with existing law, MSIT stated in the first meeting of the National Data Policy committee. The idea of classifying the Metaverse as a video game is still up for debate.
The ministry came to the conclusion that new businesses, such as the Metaverse, autonomous vehicles, and OTT streaming services, necessitate the creation of new legislation. Concerning the Metaverse, MSIT expressed worries about the absence of institutional and legal support impeding industry development. A rough translation of the press statement, which revealed the strategy, read:
“Establish guidelines for classification of game products and metaverses for rational and consistent regulation and support for enactment of related laws (enactment of special metaverse laws, etc.)”
Busan signed an MoU with Huobi, receiving further support for the local cryptocurrency exchange
Huobi Global has signed a development deal for a blockchain environment, making it the third major cryptocurrency exchange to do so, according to Coin Telegraph.
As Huobi Global joins the development environment, South Korea’s “blockchain” city of Busan continues to sign deals with major players in the cryptocurrency business.
The Busan Metropolitan City government and Huobi Global and its Korean office have signed a memorandum of understanding to collaborate on the development of the city’s blockchain business.
An official statement from Huobi states that as part of the cooperation, the business will support the Busan Digital Currency Exchange financially, technologically, and in terms of research and development. Huobi will also help the local exchange in Busan find and hire blockchain experts.
The South Korean Financial Services Commission granted Huobi an obligatory regulatory license in 2021, and the company has been running a local office there since 2019. To help Busan achieve its objective of becoming a major cryptocurrency and blockchain centre, the company points to its operating experience within the nation.
The experience of the Huobi Research Institute and Huobi Academy, as well as the company’s connections with Korean blockchain ecosystem players, were cited by Huobi Korea CEO Junyong Choi as major factors in the agreement.
“We believe that Busan has strong attributes for fostering innovation and growth, and share their belief that blockchain technologies can transform and benefit traditional industries.”
As part of the arrangement, Huobi has also agreed to sponsor the Busan Blockchain Week at the end of October 2022.
Bits and Bytes
- Goldman Sachs’ bearish macro outlook puts Bitcoin at risk of crashing to $12K
- Craig Wright’s Abnormal Psychology
- Australian Crypto Conference Recap by the Aus DeFi Association (Twitter Spaces podcast)
- Australian senator drafts bill aimed at stablecoin, digital yuan regulation
- Bandai Namco, SEGA among video game giants eyeing blockchain gaming
Meme of the week
The Week ahead?
- Ripple, SEC case heads for conclusion after ‘summary judgment’ filed
- Token 2049 begins in Singapore on 26 September. Will you be going?
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Previous newsletters can be found here. Until next time, have a great week ahead!
- Oleg Smagin, Post Voyager / Cryptofinance Senior Manager will talk about the State of Web3 2022: South Korea
- Sun, Pangea Swap will talk about the DeFi on Klaytn, Pangea Swap Philosophy and the methodology behind their growth