Blockchain Bites: Twitter Hack Fallout, A New Way to ‘Yield Farm’ and a Hurricane-Proof CBDC
A Twitter hack, a new way to âyield farmâ digital collectibles and why stablecoin use is on the rise in Hong Kong.
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Dissent & Stablecoins
Stablecoin usage has spiked in Hong KongÂ following the imposition of the national security law, which aims to quell opposition to Chinaâs ruling class by giving the Communist Party power to freeze and confiscate assets from people or organizations. Crypto assets and encrypted communication tools are a way to resist financial surveillance and internet censorship. âMany people donât believe they can trust the government or banks to keep their assets safe anymore,â said Brian Yim, a university student in the U.K. whose family is still in Hong Kong.Â
A Billion in Crime
OverÂ $1.4 billion worth of cryptocurrencyÂ thought to be tied to Ponzi schemes, dark web transactions and hacks have moved onto global exchanges from January to June, according to blockchain analysis firm PeckShield. Huobi, Binance, OKEx, ZB, Gate.io, BitMEX, Bithumb and Coinbase were among the exchanges analyzed. âThe problem of the inflow of tainted cryptos has not been entirely put under regulation with strict enforcement,â the firm wrote in the report. âSo anti-money laundering is considered as an important issue and then thereâs no real follow-up. â¦ But itâs a matter of time, not if, [until] the regulatory hammer will come [down].â
The Bahamasâ central bank said it is âprogressingâ toward the full launch of aÂ mobile phone-based digital currencyÂ (CBDC) itâs betting can withstand the battering of a Category 5 hurricane. The move comes in the wake of Hurricane Dorian last September, which devastated the islandâs banking and financial infrastructure, according to the report. âMobile phone coverage, by contrast, was generally restored within a few days after Dorian,â it said. The central bankâs CBDC effort, known as Project Sand Dollar, is currently in the testing phase on the island of Abaco.
Not a LEND, a Raise
Framework Ventures and Three Arrows Capital announced Wednesday aÂ $3 million investment in Aave,Â the firm behind the third-largest lending platform in decentralized finance (DeFi). The two funds purchased Aaveâs native LEND tokens directly from the company. LEND has appreciated 1,200% on a year-to-date basis. âWe believe there will be a significant market shift of private borrow/lend activity moving to decentralized money market protocols,â Framework Venturesâ Michael Anderson said.
Farming Digital Collectibles
Rarible, a dapp that enables users to create and market non-fungible tokens (NFTs), will begin keeping track of all transactions on the site in order to reward users each week with itsÂ new governance token: RARI.Â Approximately 60% of the total supply will go to Rarible users who make trades, and anyone who holds NFTs now will be able to claim some. This move opens the door to yield farming digital collectibles on the Ethereum blockchain. âYield farming has turned decentralized finance (DeFi) into the juggernaut of crypto earnings here in mid-2020, but one non-DeFi startup believes its users will also be interested in earning a new governance token for making trades,â CoinDeskâs Brady Dale reports.Â
- MicrosoftÂ partners with WavesÂ to tokenize industrial assets, which might include anything from heavy machinery to basic office equipment.
- Man charged withÂ defrauding $4.5 million in cryptoÂ to fund gambling habit.
The big read
All that for 12.9 BTC.
Wednesday, aÂ coordinated hack hit Twitter,Â compromising the primary bullhorn of political, cultural and economic thought. Beginning with an assault on known crypto trader @AngeloBTC asking for bitcoin to join a private Telegram channel, the attack spread to other prominent crypto institutions.Â
More prominent crypto accounts followed.Â Binance, Gemini. Coinbase, CoinDesk and Justin Sun,Â among others, were hit, CoinDeskâs Danny Nelson reported. Emboldened, the crypto scam, went mainstream, affecting a litany ofÂ high-profile Twitter users, including some who wield tremendous political power and others who are responsible for our exuberant stock market.Â
The attack sowed the seeds of confusion, even if it wasnât financially successful. As of Thursday morning, a Bitcoin address associated with the hack has only brought in less than $120,000 fromÂ 378 transactions,Â many of which are believed to be sent from the hacker itself, in an obvious attempt to create the illusion of activity.Â
Not much is known about the hacker, who reportedly goes by the handle âKirk,â or his access point to Twitter. Vice reported the attacker gained access to an internal Twitter tool, which enabled him to send tweets and reset the associated email addresses of affected accounts.
Twitter, in aÂ message broadcastedÂ two hours after the initial hit, called it âa coordinated social engineering attack by people who successfully targeted some of our employees with access to internal systems and tools.â
That much is known. Whatâs unclear is the hackerâs motivations. Nic Carter, a prominent crypto personality, said over a Telegram DM, âThereâs so much we donât know yet, but Iâm inclined to apply Hanlonâs Razor and assume they were just trying to make some dough.â
âThe delta between the damage wrought and the apparent financial gain is shockingly large though,â he continued.Â
From at least one known address, only 87 transactions were larger than $1. Only 69 were larger than $10. Only 24 were larger than $100. Only eight were larger than $1000, according to CoinDeskâs Adam B. Levine. He crunched the numbers and found if you compare the number of addresses that sent more than a dollar against President Obamaâs 120 million followers alone, the success rate was a piddling 0.0000000725.
With numbers like that, many are asking, What was the point? At this point, it can be safely assumed the attacker was familiar with the crypto community. The use of a new SegWit address, repeated transactions to empty the wallet down to 6.15 Bitcoin â a known meme â as well as severalÂ renamed wallet addressesÂ with cryptic messages like â1BitcoinisTraceabLeâ¦, 1YouTakeRiskWhenUseBitcoin and 1WhyNotMoneroâ¦â point to the possibility of this being an elaborate troll.Â
Alex Stamos, director of the Stanford Internet Observatory and the former chief security officer at Facebook, told theÂ New York TimesÂ the hacker âmade rookie mistakes.â The biggest was that by sending identical messages it was easy to identify and neutralize the scam posts.Â
Stamos also noted that inÂ choosing Bitcoin,Â which creates a public record of all transactions, the attacker basically nullified its ability to cash out.Â
So what does this mean for Bitcoin? Well. Itâs part of the public conversation again, for one. Prominent New York Magazine reporter Josh Barro tweeted, âYou know, we wouldnât have to worry about this sort of thing if cryptocurrency was illegal.âÂ
While this take reinforces existing biases against crypto beingÂ associated with criminals,Â it is shared by other mainstream publications and a swath of the public.Â Stephen Colbert,Â tweeted, âThankfully, my Twitter was not hacked, because of the rock-solid cyber-security I recently purchased for just $12,000 in bitcoin and my social security number. Thanks @cyberscambelarus!â
Within the crypto industry, some say this could be neutral to good for crypto. Joe DiPasquale, CEO of BitBull Capital, toldÂ First Mover:Â âEven if there is a small percentage of bitcoin that is used for illicit activity, investors now understand this is no different than cash, except that digital currencies are much more traceable.âÂ
And the strong measures taken by exchanges like Coinbase to blacklist the address early, does show how far the industry has come to meet the basic demands of the traditional financial system.Â
The larger question is less about crypto itself and whether Bitcoin is mainstreamed as a payment or reserve system than about itsÂ ideological underpinnings.Â This hack, like theÂ EquifaxÂ one before it, is one movement in a leitmotif running through the public consciousness: Why do we trust centralized, near-immovable authorities to shape our lives?Â
âA hack like this demonstrates how desperately needed privacy and data security legislation is needed in the U.S. Securing oneâs network is not a profit maker, itâs a loss leader, and companies wonât do it right until there is some liability attached to not doing so,â Gigi Sohn, a former counselor at the Federal Communications Commission, said via email to CoinDesk.
As Coin Centerâs Neeraj Agrawal put it: âIf this happened because someone got access to Twitterâs admin tools, that means itâs not a cryptocurrency incident. Itâs a centralized point of failure incident.â
Volatility or Bust
BitcoinâsÂ characteristically high volatility could returnÂ soon, giving exhausted traders an end to months of abnormally calm price action. A new metric for on-chain activity makes this prediction by measuring exchange volumes and on-chain transaction volume together to derive a signal for inflection points in bitcoin volatility. Published to popular charting interface TradingView on Tuesday, the volume ratio aims to derive market sentiment as a function of both types of volume. When overlaid with price data, high on-chain transaction volume dominance over exchange volume frequently corresponds with imminent, significant price movements, or volatility.
Still,Â short-term sentiment in the options market has flippedÂ bearish. Bitcoin fell to $9,070 this morning, reversing the 2.5% rise to $9,450 seen last week, according to CoinDeskâs Bitcoin Price Index. Reflecting the downward trend, the one-month put-call skew for bitcoin options, a metric that measures the price of (bearish) put options relative to (bullish) call options, has risen to 4.9%, according to data provided by crypto derivatives research firm Skew.Â
OKCoin has launched a new API feedÂ for the decentralized finance (DeFi) spaceÂ that has already been picked up by lender Compound. The San Francisco-based exchange said Wednesday that OKCoin Oracle would provide on-chain data for DeFi products and features. Rival oracle system ChainLink works broadly along the same lines, although it rewards third-party entities with LINK tokens for providing accurate data, and takes them away again when they donât. San Francisco-based exchange Coinbase unveiled its own price feed plugin for the DeFi space in April.
Privacy coin Zcash has successfully hard forked in the planned network update âHeartwood.â With the update,Â miners can receive coinbase transactions right to a private address,Â effectively adding privacy to the blockchainâs security protocol. The hard fork occurred on July 16 at 10:58 UTC at block height 903,000, according to the Electric Coin Company (ECC), the for-profit development house behind the project, which was also supported by the Zcash Foundation. The fork also adds support for lightweight clients that verify transactions.
Democratizing Digital Dollars
Transparent Systemsâ Chief Legal Officer Patrick Murck and Global Head of Policy Linda Jeng reflect on theÂ democratic possibilities a digital dollarÂ can open by reducing economic inequality. âBeyond governance, community-based ownership would allow the economic gains of the network to be equitably shared among all participants and not reserved for those who have access to capital and connections,â they write.Â
Dangerous, Downward Spiral
The latest episode of The Breakdown offersÂ a primer on the U.S. and Chinaâs âNew Cold War.âÂ From the virus to the trade war, and from TikTok to the South China Sea fissures are opening between the leading global economic powerhouses.
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