This week saw a $120 million DeFi hack, Square rebranding to Block, and banks wanting to make cash loans — backed by bitcoin.
Meanwhile, NFTs were making a splash at Art Basel in Miami, though my guest for this week’s Unchained, Ryan Zurrer, says that the main exhibition failed to capitalize on the buzz around NFTs, which attracted the most attention.
Zurrer would certainly know about NFT buzz — he bought the most expensive NFT for a single artwork — $29 for Beeple’s (aka Mike Winklemann’s) Human One. Hear Zurrer talk on my show about what Beeple’s studio/factory/campus is like, where Zurrer thinks NFTs will go in the next year, and why he thinks the traditional art world doesn’t quite yet get NFTs.
In the meantime, read on to find out about the biggest news stories this week.
BadgerDAO, a DeFi protocol built to provide yield on bitcoin, fell victim to an attack on Wednesday night.
According to PeckShield, the total loss is over $120 million. Based on PeckShield data, it appears roughly 85% of the $120 million came from four large Bitcoin addresses, which lost 906, 491, 203, and 184 BTC, respectively -- equating to losses approximating $51 million, $27 million, $11.4 million, and $10.3 million (assuming a BTC price of $56,500).
As of press time Thursday afternoon, the cause of the exploit has yet to be confirmed. However, Tritium, a Badger core contributor, speculated in the Discord that it could be a front-end issue with the Badger.com user interface. Tritium wrote: “There is no problem with the smart contracts. It looks like a bunch of users had approvals set for the exploit address allowing them to operate on their vault funds, and that was exploited. Once we noticed we froze all the vaults so nothing can move and are trying to figure out where the approvals came from, how many people have them, and what next steps are.”
Such an attack, which targets the front end of BadgerDAO rather than the decentralized protocol, raises many questions, which a BadgerDAO Discord member named SciGuy laid out in the main Discord chat:
While Badger devs have yet to release any answers to the above question, Egirl Capital’s @CryptoCatVC pointed out on Twitter that front-end exploits can be avoided through proper “MetaMask approval hygiene.”
Practicing proper wallet approval techniques can save users from giving DeFi “unlimited allowances” on certain tokens, a feature deployed by dapps where users only have to approve the wallet-dapp connection once, rather than for every token deposit. While convenient, this setup leaves users' funds at risk, as hackers have shown the ability to drain users' wallets giving unlimited allowance to DeFi protocols. To avoid this, @CryptoCatVC explained, “Don’t trust the site's UI. Take the address manually from the MetaMask data, and look at the contract on Etherscan.” She added, “Never approved more than you plan to use. You can always approve more in the future. Yes, it costs a few $ more, so is psychological help once you will get rugged.”
Square, the Jack Dorsey-led payments firm, is rebranding its corporate identity to “Block,” according to a press release on Wednesday.
Since launching in 2009, Square has expanded its scope to include a variety of crypto-linked services, including Square Crypto, a Square offshoot focused on Bitcoin development, Cash App, a mobile payments service turned Bitcoin exchange, TIDAL, a music streaming service with NFT aspirations, and TBD54566975, a yet-to-be-built decentralized crypto exchange. In addition to building out services for crypto assets, Square also purchased roughly $170 million of BTC back in February.
The rebrand acknowledges that Square is no longer just a payments company specializing in commerce solutions, software, and banking services for Seller businesses, says the company. “We built the Square brand for our Seller business, which is where it belongs,” said Jack Dorsey, co-founder and CEO of Block. “Block is a new name, but our purpose of economic empowerment remains the same.”
Much like how Facebook’s rebrand to Meta did not alter the name of Facebook the social media app (disclosure: I write a newsletter for Facebook/Meta), Block explained that its name change only distinguishes the corporate identity from the other parts of the company, like Square, Cash App, TIDAL, and TBD54566975 -- and each of those entities will keep its name. Square Crypto, however, is rebranding to Spiral:
The news comes just on the heels of Block CEO Jack Dorsey stepping down from the CEO position at Twitter, the social media app he co-founded. In June, Dorsey famously explained, “If I were not at Square or Twitter, I’d be working on bitcoin. If it [it] needed more help than Square and Twitter, I will leave them for bitcoin,” Dorsey told the crowd at Bitcoin 2021. With his time at Twitter over and Square’s rebrand to Block, it appears that Dorsey is making his summer statement reality.
Metaverse real estate is getting hot. Data from DappRadar shows that out of the top ten most expensive land purchases on The Sandbox, a virtual metaverse game, eight of them happened within the last two weeks -- with each plot of land selling between $81,000 to $191,000. On Decentraland, a similar metaverse game, five of the top ten most expensive land purchases happened in the past 14 days -- with eye-popping values stretching from $415,000 to $2.42 million.
The latter purchase, for 618,000 MANA, was claimed by the Metaverse Group, which announced “the largest metaverse land acquisition in history” -- a 116-parcel estate in the heart of Decentrand’s Fashion Street district.
Notably, the Metaverse Group purchase outdid an anonymous Thanksgiving-eve acquisition of “Genesis” land in Axie Infinity for 550 ETH, or roughly $2.3 million, which marked “the largest sale ever for a single plot of digital land” at the time, according to Axie Infinity’s Twitter account.
In total, DappRadar data shows that over $100 million worth of digital real estate traded hands over the seven days ending November 30. According to digital asset manager Grayscale, such buzzy numbers from the metaverse are to be expected going forward. “The Metaverse is estimated to be a trillion-dollar revenue opportunity across advertising, social commerce, digital events, hardware, and developer/creator monetization,” wrote Grayscale in a recent report.
A report from CoinDesk’s Ian Allison says that Goldman Sachs is among a group of US banks attempting to figure out how to use bitcoin as collateral for cash loans. Allison cites three sources familiar with the plans.
“Goldman was working on getting approved for lending against collateral and tri-party repo,” said one source. “And if they had a liquidation agent, then they were just doing secured lending without ever having bitcoin touch their balance sheet.”
Coinbase and Fidelity Digital Assets were mentioned as potential custodians with whom the US banks are in discussion.
Goldman, and a handful of other big banks, are attempting to follow in the footsteps of digital asset-friendly banks like Silvergate and Signature, both of which already released a bitcoin-backed cash loan program earlier this year.
Approximately $31 million in cryptocurrencies were stolen from MonoX in a hack on November 30th. MonoX, a DeFi platform specializing in liquidity pools, saw about $18.2 million in WETH stolen, along with $10.5 million in MATIC. Other tokens were taken as well.
According to security researcher Mudit Gupta, “The exploit was caused by a smart contract bug that led to incorrect price updates when doing token swaps.”
He added, “The attacker did a bunch of swaps from MonoX token to MonoX token to pump the price of MonoX token in the system. Once the price was obscenely high, they swapped their MonoX tokens for all other assets in the system.”
In a post mortem, MonoX noted that it has a $1 million insurance pool, which it is working on distributing. MonoX also hinted that more compensation could be coming for affected users: “Please know that fixing the issue is at the forefront of our thoughts, and most importantly how we can restore what was lost by our community. Be on the lookout for a compensation plan in the near future.”
An upcoming congressional hearing titled "Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States” is going to be chock-full of crypto industry heavyweights.
According to Maxine Waters, the House Financial Services Committee chair, witnesses include Circle's Jeremy Allaire, FTX's Sam Bankman-Fried, Bitfury's Brian Brooks, Paxos' Chad Cascarilla, Stellar's Denelle Dixon, and Coinbase's Alesia Haas.
Notably, Coinbase’s Alesia Haas is the only witness not to hold the title of CEO and is appearing in place of Brian Armstrong, who has been very outspoken in his displeasure with how regulators have handled the crypto industry.
The hearing will take place next Wednesday, December 8th.
Cypherpunks and techies no longer dominate the crypto industry. Every day, web3, crypto, blockchain technology -- whatever you want to call it -- seems to move another step towards the mainstream, as evidenced by three big-time companies making crypto-based moves this week.
Adidas x Coinbase? Probably Nothing.
On Thursday, Adidas also announced official partnerships with Bored Ape Yacht Club, NFT collector Gmoney, and NFT collection PUNKS Comic.
Beer.eth Was Just the Beginning
Budweiser launched an NFT collection this week, dropping 1,936 unique digital cans -- referencing the year of the first Budweiser can. The pricing of the NFTs, which sold out in under an hour, depended on scarcity. As of press time, the so-called Budverse Cans held a price floor of .24 ETH. This is not the company’s first crypto foray -- Budweiser recently purchased the Ethereum domain beer.eth -- which it now proudly displays on Twitter.
Buy Tickets, Get an NFT
AMC and Sony are collaborating to drop a special collection of NFTs to customers who pre-purchase tickets for the upcoming Spider-Man movie. According to AMC’s Twitter account, the first 86,000 members who buy tickets and attend the showtime will receive a link to download a Spider-Man NFT. Notably, the NFTs are based on Wax, a blockchain that states it is carbon neutral -- a point that AMC prominently displays throughout its marketing, touting the Spidey NFT drop as “eco-friendly.”
If you'd like to get into crypto and understand what you're buying: