Crypto Weekly News Recap: Solana’s Seven-Hour Shutdown

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The Bored Ape Yacht Club has had a spectacular first year. It's had more than $2 billion in sales, plus the cheapest Apes are going for roughly $300,000. It seemed its creators, Yuga Labs, could do no wrong.

Until last weekend. The sale it had for the digital land NFTs in its upcoming metaverse, Otherside, was a debacle. Demand far exceeded supply, resulting in people paying thousands of dollars in gas fees on Ethereum.

On today's Unchained, Eric Golden, a Bored Ape owner (as well as a Fidelity alum and the host of the podcast, Web3 Breakdowns), explains what went wrong and why. He analyzes whether it made sense for Yuga Labs to require people to verify their identities, whether they should have executed their original plan to hold a Dutch auction in which the price decreases during the auction, and why he doesn't agree that BAYC might need its own chain, aka ApeChain.

It's a fantastic episode -- I highly recommend you check it out. And now onto the rest of the drama in crypto this past week.

Solana went down for roughly seven hours on Saturday. According to its Twitter account, the network “lost consensus after an enormous amount of inbound transactions (4m per second) flooded the network.”

In a post-mortem, the team explained that the influx of transactions targeted a new NFT drop using Candy Machine, Solana's popular NFT minting tool. “Since the mint price had a fixed floor and not a dynamic Dutch auction, the first user to call the mint received the NFT, which created an economic incentive to send a huge number of transactions in hopes of winning the mint,” the team wrote.

Due to the overwhelming amount of transactions, the network validators ran out of memory and crashed, leading to consensus stalling until validators restarted the network via Discord and Google doc coordination.

This is not the first significant outage for Solana, which experienced a 17-hour shutdown in September 2021, which Solana says “shares characteristics” with the blackout this weekend.

Solana will be adding fee prioritization in its v1.11 release, along with three other mitigations in the wake of the network failure.

Elon Musk is no longer the sole purchaser of Twitter. According to a Thursday filing, Musk has raised $7 billion in funding from Oracle co-founder Larry Ellison, venture capital firm Sequoia, investment behemoth Fidelity, and Binance. co-founder

The crypto exchange will be putting up $500 million toward the acquisition.

Btw, speaking of Fidelity, Senators Elizabeth Warren and Tina Smith sent a letter to Fidelity CEO Abigail Johnson about its plans to enable people to save with bitcoin in their 401(k)s, saying that bitcoin was too risky. It also noted Fidelity may have conflicts of interest because Fidelity has been mining bitcoin and because it offers a crypto fund to wealthy clients.

A Bitcoin Improvement Proposal (BIP) introducing an opcode called CheckTemplateVerify (CTV) written by Bitcoin developer and researcher Jeremy Rubin caused a commotion in the Bitcoin community this week.

BIP 119 is not controversial at face value. Essentially, it allows Bitcoin transactions to be used in a restricted manner in the future – meaning transactions can be programmed in a limited fashion. In BIP-119 terminology, this restriction on future use is called a “covenant” (it sort of works like a baby smart contract). According to Rubin, allowing bitcoins to be programmed via covenants has interesting applications. For example, exchanges could batch transactions during times of network congestion and settle at a later date. Additionally, BIP-119 would increase the speed of the Lightning Network and make trustless CoinJoins easier to execute.

However, Rubin has asked the Bitcoin community to vote on the soft-fork upgrade via a Speedy Trial, in which a soft fork would be voted on by 90% of block miners within a specific period, then that upgrade would be approved. Speedy Trial was used in approving the Taproot upgrade, which went into effect earlier last year.

Unlike Taproot, which was proposed in 2018, Bitcoiners are worried that BIP-119 has not been studied enough. Bitcoin OG and educator Andreas Antonopoulos called Rubin’s choice of a Speedy Trial activation “entirely inappropriate.” Peter McCormack, the host of What Bitcoin Did, tweeted: “I’m nervous that something might get activated that a bunch of people just don’t agree with.”

The US Securities and Exchange Commission announced it is increasing its “Crypto Assets and Cyber Unit” team inside its enforcement division by 20 positions to 50.

The expanded unit, which has already brought over 80 enforcement actions related to crypto, will focus on securities law violations related to crypto asset offerings, crypto asset exchanges, crypto asset lending and staking products, DeFi platforms, NFTs, and stablecoins.

Gurbir S. Grewal, the director of the SEC’s enforcement division, said the regulator is expanding to protect retail investors and offer them a fair chance. "Crypto markets have exploded in recent years, with retail investors bearing the brunt of abuses in this space. Meanwhile, cyber-related threats continue to pose existential risks to our financial markets and participants," said Grewal. "The bolstered Crypto Assets and Cyber Unit will be at the forefront of protecting investors and ensuring fair and orderly markets in the face of these critical challenges."

Not everyone at the SEC was excited about the approach to crypto the agency is taking. SEC commissioner Hester Peirce tweeted (from her personal account): “The SEC is a regulatory agency with an enforcement division, not an enforcement agency. Why are we leading with enforcement in crypto?”

This past weekend, on top of Solana experiencing a network outage and Yuga Labs making Ethereum unusable, there were two major DeFi exploits.

Rari Capital and Fei Protocol fell prey to a re-entrancy bug that cost the platforms more than $80 million. According to PeckShield, a blockchain security firm, the attack vector was similar to other successful hacks on Compound-based forks. For their part, Rari paused borrowing, and Fei Protocol offered to give the attacker $10 million as a bounty if the remaining funds were returned.

Saddle Finance, a stablecoin DEX, also experienced an exploit this weekend. Peckshield reports that the hack was made possible due to a wrong library being used to calculate swaps, leading to the hacker getting away with $10 million. On the bright side, a white-hat hacker team at BlockSec was able to recover $3.8 million.

There was also an attempted attack on Rainbow Bridge, which connects Near Protocol and Ethereum. However, a single MEV bot moonlighting as a bridge watchdog was able to thwart the attacker and come away with a 2.5 ETH reward.

The International Monetary Fund told Bloomberg this week that the Central African Republic’s decision to adopt BTC as legal tender will raise major challenges: politically, economically, and legally.

The news comes just a week after the country’s president signed a law legalizing crypto and making BTC legal tender. The IMF has been similarly negative regarding El Salvador’s adoption of Bitcoin. According to Bloomberg, the IMF staff is assisting CAR authorities in addressing concerns regarding the new policy.

Ethereum Name Service domain registrations (aka .eth handles) surpassed one million this week (with over 350,000 unique owners).

The collection also shot up into the top 10 of all NFT projects by volume this week on OpenSea – a rarity for the domain service.

The spike in registration coincides with a surge in popularity for three- and four-digit ENS domains, like 123.eth and 6969.eth. For example, on May 2nd, the floor price for three-digit ENS names was 44 ETH, while the four-digit ENS names were going for a minimum of 2.45 ETH.

Starbucks, the coffee giant with over 30,000 locations and 27 million active rewards members, is joining web3 in a big way.

The company announced plans for NFTs this week, explaining the technology’s potential for community building and access.

We believe NFTs have broad potential to create an expanded, shared-ownership model for loyalty, the offering of unique experiences, community building, storytelling, and customer engagement,” the team explained in a blog post. “And, while doing so also being a source of accretive business that can benefit a number of stakeholders in the process, while creating a new type of digital ecosystem to complement Starbucks current digital platform offering.”

Details are slim, but the team hinted that the NFTs will drop this year and will carry “community membership” and “exclusive experience and perks” with them. Additionally, Starbucks is thinking of building a web3 platform that would be chain-agnostic.

As previously covered on Unchained, the Cosmos-based Juno blockchain community officially voted to confiscate the holdings of a whale’s wallet after the entity allegedly gamed the airdrop. The vote was not close, with 72% of users voting in favor of the move.

However, it appears that the Juno team accidentally sent the seized Juno (worth $36 million) to the wrong address due to a copy and paste error in the code. The funds are currently sitting in an unobtainable address, but the team plans to move the funds during an upgrade that will rewrite Juno’s ledger to send the funds to the community account it was supposed to be destined for to begin with.

Luna Foundation Guard, the entity working on backing UST with a $10 billion forex reserve, announced the acquisition of 37,863 BTC on Thursday.

The deal was done over the counter, with $1 billion worth of UST traded via Genesis and another $500 million in BTC purchased from Three Arrows Capital.

The news, however, coincided with a 7% dip in the price of BTC.

One blog post from @mattigags of Zee Prime Capital, was quite humorous this week. Titled “How To Sell Your BS ‘Web3’ Idea To a VC,” the blog gives out great advice like…

And my personal favorite:

“This is the easiest part, however, it requires you to actually have a call with investors. Just memorize the phrases below and slip them into the conversation.

“So I cannot say who will lead but waiting for Kyle to respond next week.”

This will make them think - which Kyle? Davies? Samani? Damn, I better be fast. Even if they know one of the Kyles and they check with him it still can be the other Kyle. Or some freaking Kyle they’ve never heard of - OMG I cannot be bested by Kyle!”

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Cover Credit: NurPhoto / Contributor