ProBit Bits — ProBit Global’s Weekly Blockchain Bits Vol. 66

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 DeFi Platform Left Reeling After Major Exploits Drain $70m

Prominent DeFi protocol Curve Finance suffered a major attack which saw hackers drain an estimated $70m in funds. The hack took place on the weekend of July 31, 2023, and is said to have been rooted in a vulnerability in the platform’s programming language; Vyper. Curve Finance is a DeFi protocol which provides liquidity to markets without the need for third parties. Other DeFi platforms linked to Curve such as Convex Finance, Uniswap and AAVE, also suffered losses as lenders pulled their funds from the platforms, leading to a sharp decline in TVL (Total Value Locked).

Curve has since announced that the exploit has been traced back to a “malfunctioning re-entrancy lock,” while the token price of CRV—the governance token of Curve Finance—has been trading stronger in the days following the exploit. Re-entrancy attacks occur when when a smart contract interacts with another contract, which in turn calls back to the first contract before fully executing. Fortunately for Curve, some of the attacks have been reversed by white-hat hackers, who it turns out were “front-running” the transactions thanks to the mechanics of the public blockchains. It remains to be seen whether the hackers will be identified and action taken, while the effect on TVL across the various affected DeFi protocols also remains unknown.

 Binance At Loggerheads With US Authorities Once Again

Major crypto exchange Binance is once again in the crosshairs of US lawmakers, this time for fraud charges. After issuing a summons against CEO Chanpeng Zhao (aka CZ) in June, US regulators have now brought charges of fraud against the exchange, claiming that his company knowingly operated an unregistered exchange in the U.S. The main factor preventing the US government from taking further steps is the fear of a complete market collapse and mass withdrawals, similar to the infamous FTX incident.

Given that prosecutors are aiming to avoid a situation, they are instead considering other punitive measures, such as suspended sentences or fines. While it is not the outcome US regulators would hope for, it still holds Binance liable while minimizing the damage to the consumer. These charges mark the latest in a string of challenges for the top crypto exchange by volume, as it also faces major challenges in European markets, the most recent of which saw it pull its application to launch an exchange in Germany.

 Asset Managers Jump On Ether ETF Bandwagon

Major US asset management firms such as Grayscale, ProShares and Van Eck have all hedged their bets on the Securities and Exchange Commission granting crypto ETF approval by filing applications for Ether (ETH) futures exchange-traded funds (ETFs). While the SEC decision is still largely up in the air, analysts suggest that these bids are an attempt to get ahead of competitors.

Futures- or derivative-based contract ETFs are different to spot ETFs in that futures ETFs provide exposure to an underlying asset's future price movements, traded on futures exchanges and have expiration dates, while spot ETFs track the current market price of the underlying asset and trade on stock exchanges like regular stocks. As of Friday, August 4, 2023, the total number of Ether ETF applications totals 11. Should the SEC approve these applications, all 11 products will launch 75 days from their respective filing dates, with Volatility Shares the first set to go live on October 12, 2023.

 Hong Kong Raises Curtain On Crypto Trading With First Exchange License

Crypto trading has officially kicked off in the semi-autonomous territory of Hong Kong, with crypto exchange HashKey announcing that it would open retail trading operations in the territory from August 3, 2023. After being granted a Type 1 and Type 7 license by the Hong Kong Securities and Futures Commission (SFC) in November 2022, the exchange firm is now permitted to provide automated trading services to both institutional and retail users.

Hong Kong has seen significant shifts in crypto legislation over the past year, with crypto trading traditionally limited to institutional investors since 2018. From the 1st of June 2023, however, new licensing rules came into effect which allow exchanges to cater to retail traders in the territory, provided they satisfy certain conditions. These include HKD $5m ($640,000) upfront capital in line with money laundering measures, along with strictly vetted senior management. This latest move is set to position Hong Kong as a fintech hub as they aim to entice companies to open up shop in the special administrative region.

 Speculation Swirls Around Coinbase L2 Memecoin’s Links To SBF

BaldBaseBald (BALD), a memecoin referencing Coinbase founder Brian Armstrong’s shiny dome, has collapsed almost as quickly as it shot to overnight fame, with the dev executing a rug pull to the tune of $25m. Having launched on July 30, the Layer 2 token built on Optimism shot to a market cap of $100 million in only two days, attracting attention and inflows from all across the cryptosphere. As is sometimes the case with such projects, the deployer responsible for the token cashed in (or rather cashed out) on the inflows and removed $25.6 million dollars in liquidity, leading to a price drop of 90%.

With clearly malicious intentions behind the token and tenuous links to the fraudster behind the FTX collapse, some analysts have suggested that Sam Bankman-Fried is tied to the hype behind the BALD memecoin. It was at first rumored that the coin was started by none other than the Coinbase founder Brian Armstrong himself, as a way to create hype for his new blockchain, even though it hadn’t officially gone live to the public as yet.


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