The biggest news this week was the drama surrounding Neutrino Dollar (USDN) dropping below its algorithmically managed peg.
On this Friday's episode of Unchained, Galois Capital co-founder Kevin Zhou explains the mechanics of USDN de-pegging from the dollar and then analyzes Terra's plans to create a new liquidity pool on Curve to strengthen UST. We also discuss what might happen to UST if Anchor were to lower yields from 19.5% down to 7-12%.
It's a fascinating show and one that might make you reconsider your use of algorithmic stablecoins going forward!
And, as is usually the case, there was so much else going on in the crypto space over the past seven days. Here are a few of the highlights...
Eight days after losing $600 million to the largest exploit in DeFi history, Sky Mavis announced plans to reimburse all affected Ronin Network bridge users.
Sky Mavis will be raising $150 million in a funding round led by Binance, with participation from Animoca Brands, a16z, and others. That $150 million in cash, along with balance sheet funds already owned by Sky Mavis, will replace the 173,600 ether and 25.5 million USDC that was drained from the Ronin bridge last week in a social engineering attack that saw four of Sky Mavis-run validators and a third-party validator run by Axie DAO compromised.
The news comes just a few months after the Wormhole bridge announced a similar reimbursement funding round from Jump Crypto following a $300 million exploit.
In the aftermath, Ronin bridge will be upgrading its security, which previously relied on only five out of nine validator confirmations for a transaction to go through. According to a Sky Mavis blog post, the new validator group will be upped to 21 validators in the next three months, split among various stakeholders (rather than just Sky Mavis).
Ronin bridge, which was shut down in the aftermath of last week’s hack, will go live after a round of upgrades and audits that could take weeks. Meanwhile, Binance will be supporting ETH withdrawals and deposits from Ronin.
Interestingly, the 56,000 ETH drained from Axie DAO will not be fully reimbursed by Binance or Sky Mavis’ balance sheet. Instead, Sky Mavis explained, “The 56,000 ETH compromised from the Axie DAO treasury will remain undercollateralized as Sky Mavis works with law enforcement to recover the funds. If the funds are not fully recovered within two years, the Axie DAO will vote on next steps for the treasury.”
In related news, the Ronin bridge hacker was active this week, moving roughly $7 million through the coin mixer Tornado Cash.
Lightning Labs, a Lightning Network developer, announced a new protocol this week, dubbed Taro, which aims to make Bitcoin’s layer 2 solution a “multi-asset network,” as explained by Lightning Labs CEO Elizabeth Stark in a blog post.
In essence, Taro’s purpose is to “bitcoinize the dollar.” Stark wrote, “With Taro, developers will be able to issue assets on the bitcoin blockchain, and then move them onto Lightning for speed and scalability, making use of BTC liquidity to ensure interoperability between assets.” Notably, according to Stark, Taro will allow assets like stablecoins to route through the Bitcoin network via Lightning.
Interestingly, Taro was only recently made possible by Bitcoin’s Taproot upgrade, which made significant improvements to contracting, security, and efficiency for the chain.
(Fun Fact: The launch of Taro was on April 5th, aka Satoshi’s birthday – the same day that Roosevelt ordered US citizens to return gold worth more than $100 for fiat in 1933.)
Crypto funding continued its rampant pace this week.
In conjunction with the Taro announcement, Lightning Labs raised $70 million in a Series B funding round led by Valor Equity Partners and Baillie Gifford. Other participants include Robinhood CEO Vlad Tenev, crypto infrastructure firm NYDIG, and Brevan Howard. Lightning Labs did not disclose the valuation.
Binance US raised a $200 million funding round at a $4.5 billion pre-money valuation. The Block reports that a Binance US spokesperson revealed that the exchange wants to raise more in the coming months and plans to go public in the next two to three years.
Near Protocol announced a second nine-digit raise in under three months on Wednesday. The protocol is bringing in $350 million in a round led by Tiger Global to decentralize the NEAR ecosystem. Near Foundation announced a $150 million raise in mid-January to support DeFi development.
Boba Network, an Ethereum scaling solution, secured $45 million in a Series A, giving the protocol a unicorn valuation of $1.5 billion.
Blockchain security firm CertiK announced an $88 million funding round that saw participation from traditional behemoths like Tiger Global, Goldman Sachs, and Sequoia Capital. CertiK is now valued at $2 billion.
Crypto payments firm Wyre was acquired by Bolt in a deal valued at roughly $1.5 billion, reports The Block.
On Tuesday, Rishi Sunak, the UK’s chancellor, laid out plans to make the UK a “global cryptoasset technology hub.”
The UK is set to make moves to regulate stablecoins, introduce an “infrastructure sandbox” for crypto firms to experiment, establish a Cryptoasset Engagement Group, and explore UK crypto taxes. Notably, the UK announced that the Royal Mint would be creating an NFT project this summer.
“It’s my ambition to make the UK a global hub for cryptoasset technology,” said Sunak.
Somewhat contradictorily, the news comes as the UK’s Financial Conduct Authority is reluctant to give firms like Blockchain.com anti-money laundering licenses, leading many firms to pull out of the cryptoasset licensing process.
Inverse Finance, an Ethereum lending protocol, lost $15 million to an exploit this week, making it the 34th largest hack in the DeFi space, according to Rekt.
“The manipulation was not a flash loan attack and was un-related to Inverse's smart contract or front end code,” wrote the team. Instead, the hack involved a “capital intensive manipulation” of the INV/ETH pair price oracle on SushiSwap. Once the oracle was tricked into showing a fraudulently high price for INV, the hacker was able to borrow $15.6 million worth of DOLA, WBTC, and YFI.
(For those of you who missed out on this week’s episode of The Chopping Block, I recommend listening, as Tarun Chitra and Tom Schmidt do a great job of explaining how the price manipulation worked and how the hacker pulled it off in a single block.)
The Inverse Finance team has committed to reimbursing all affected users and is currently trying to figure out the most efficient way to repay users without affecting the peg of DOLA, Inverse Finance’s algorithmic stablecoin.
The headline for this section could have been about a multi-billion-dollar hack, according to OpenZeppelin. The security firm uncovered and resolved a bug on Convex Finance that could have resulted in a $15 billion rug pull due to how Convex’s multisig wallet was configured.
(Again, for more information, watch this week’s episode of The Chopping Block, which talks about how OpenZepellin forced Convex Finance to add members to its multisig before revealing the critical bug.)
The US Securities and Exchange Commission approved a new bitcoin futures ETF from NYSE Arca and Teucrium on Wednesday, as reported by CoinDesk.
Bloomberg Senior ETF analyst Eric Balchunas called it a “good sign” regarding the approval of a spot bitcoin ETF because previous bitcoin futures ETFs were approved under the Investment Company Act of 1940, while the NYSE Arca and Teucrium’s ETF is the first bitcoin futures ETF to gain approval from the SEC under the Securities Act of 1933.
This is a marked change. According to an early-January thread from Bloomberg’s James Seyffart, the approval of an ETF under the 1933 Act “would hinder some of the SEC's arguments against spot Bitcoin ETFs due to CME futures not being of significant size, subject to manipulation, etc.” Interestingly, Seyffart notes that the pricing methodology for futures and spot bitcoin ETFs will be the same, meaning “the futures [the SEC has] approved are based on the pricing from exchanges that they say is subject to manipulation.”
In related SEC crypto news:
SEC chair Gary Gensler called for further SEC oversight on stablecoins in a speech on April 4th.
“The three largest stablecoins were created by trading or lending platforms themselves, and U.S. retail investors have no direct right of redemption for the two largest stablecoins by market capitalization. There are conflicts of interest and market integrity questions that would benefit from more oversight,” said Gensler.
During the same speech, Gensler revealed that the SEC is working with the CFTC to potentially split duties regarding crypto purview.
“I’ve asked staff to work with the Commodity Futures Trading Commission on how we jointly might address such platforms that might trade both crypto-based security tokens and some commodity tokens,” said Gensler.
FTX US CEO Brett Harrison told the Decrypt Daily Podcast that the exchange is holding back from listing assets due to regulatory uncertainty regarding crypto tokens and securities law, which is spearheaded by the SEC. FTX US only supports 27 assets in comparison to FTX’s 322.
According to new guidelines, the SEC wants crypto exchanges to treat customer crypto holdings as liabilities on their balance sheet.
In related news, Treasury Secretary Janet Yellen made her first speech about digital assets on Thursday in which she called crypto “transformative.”
Bitcoin’s annual conference in Miami took place this week. In an on-brand move, the festivities were kicked off with Miami mayor Francis Suarez unveiling an 11-foot, 3,000-pound laser-eyed robot bull statue.
The event featured speakers like Peter Thiel, Jordan Peterson, and Jack Mallers. However, one prominent speaker, El Salvador’s president Nayib Bukele, canceled his appearance at the event due to “unforeseen circumstances in his home country.”
On Thursday, Bitcoin 2022 experienced its first big announcement when Robinhood Chief Product Officer Aparna Chennapragada told the audience that the trading platform had activated crypto wallet functionality for two million customers. Users will now be able to send BTC, ETH, and DOGE to self-custodied wallets. Robinhood will also add support for Lightning Network.
In other Bitcoin news, two of the most prominent sats stackers did what they do best this week: they bought more bitcoin. On April 5th, MacroStrategy, the subsidiary of MicroStrategy, purchased an additional 4,167 BTC ($190 million). And on the 6th, Luna Foundation Guard added roughly 5,040 BTC ($231 million) to its $1 billion+ stack.
In related Terra news, Terraform Labs announced a $100 million token swap of LUNA to AVAX on Thursday between Terraform and Avalanche Foundation.
Tweet DAO caught my attention this week due to a fun twist on NFT utility. The DAO sold a batch of 1,000 NFTs (each depicting the iconic Twitter egg), giving holders the ability to tweet once per day from the official TweetDAO Twitter account – with absolutely no restrictions.
As this is Crypto Twitter, the content is a bit unhinged, but somewhat humorous. The NFTs, for those interested, are selling for a floor price of .319 ETH. For those who need a smile, I would recommend giving Tweet DAO’s feed a scroll – it’s quite funny.
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Cover photo: Meme courtesy of the Unchained intern.