🏴☠️ Largest crypto hack ever
This is Shashank’s Newsletter, a newsletter with bite sized content on everything that happened in web3 over the past week.
First up, apologies for the delayed newsletter post this week. I was off the grid for the week on a 2000+ mile roadtrip celebrating my wife’s birthday :)
Now let’s get to it….
In today’s email,
🏴☠️ Largest crypto hack ever
🪙 Intro to $NEAR protocol
🏦 Traditional bank goes DeFi
🤝🏼 Opensea x Solana
📊 Interesting stat
Weekly gainers
Few thoughts on the sweet crypto market recovery in the past few weeks:
Recent political situations in Russia/ Ukraine/ Canada have demonstrated the importance of financial sovereignty leading to increased demand
Institutional adoption continues to grow
Crypto starting to gain real life use cases (like integration of financial products such as mortgages) and several quality projects being built
All in all, several bullish factors and future is as bright as ever for crypto 🐂🐂🐂
🏴☠️ Largest crypto hack ever
Axie Infinity is one of the leading crypto gaming platforms and their sidechain Ronin was hit by $600 million exploit and nobody noticed for six whole days. 🤯 (FYI a sidechain is a separate blockchain which runs in parallel to Ethereum and operates independently with its own consensus algorithm. It is connected to Ethereum by a two-way bridge.) This hack beats the 325M$ wormwhole hack we spoke about in my first ever post.
So what happened? Ronnin sidechain uses 9 validator nodes to validate all the transactions. The hacker was able to get access to 5 of the 9 private keys on these nodes which gave them full access to the funds.
Why is this hack so crazy? Right after the funds were stolen, someone (allegedly the hacker) took a huge short position against $AXS, assuming the price would drop once the news gets out. But crazy enough, this was not noticed for a whole 6 days until someone tried to complain about their $AXS withdrawals 🤦♂️. Meanwhile, the price went up during that time and the short position got liquidated. Ouch!!
If we keep getting smart contract exploits, architecture exploits, consensus exploits all the time, it makes you wonder whether we'll be able to provide enough security to settle trillions of $ worth of value long term. Very scary stuff, we need more people doing security and building resilient systems. That’s why we need the talented web2 builders who’ve experience building highly secure, resilient and reliable large scale systems.
🪙 Intro to $NEAR protocol
First, what is NEAR protocol? Near is an ETH competitor that uses a PoS (proof of stake) mechanism to secure the blockchain and has smart contract capabilities. It already has a large market cap of 10B.
Why NEAR? NEAR claims to deliver on a lot of core ideas of ETH2 that are yet to be implemented.
User experience: NEAR uses a progressive security model allowing developers to create user experiences that resemble well-known web experiences without having to learn several blockchain concepts. For example, onboarding process for creating a NEAR wallet is super simple and it has predictable gas fees unlike ETH’s dynamic auction model.
Developer friendly: NEAR offers a very comprehensive SDK and toolkit in several well known programming languages. Most importantly, it also provides economic incentives to developers. Whenever a smart contract is called on NEAR, developers get a portion of the transaction fee paid to the network.
Scalability: NEAR uses a smart sharding architecture to dynamically split the network nodes into multiple shards when demand increases. Sharding distributes computation across multiple parallelized shards making transaction processing faster. This sharding design is something ETH2 plans to implement in the coming years.
Decentralization: NEAR uses a staking mechanism that has low entry barriers, thereby decentralizing the network sufficiently. The more nodes that participate in staking, the more decentralized a network is.
Block space is always going to be constrained considering the demand for blockchain applications and there will be multiple blockchains optimizing for various use cases like we have seen with Solana, Terra and others. Such blockchains might not kill ETH but I do believe NEAR has a lot of potential to grab large portions of the marketshare in the next phase.
🏦 Traditional bank goes DeFi
MakerDAO is hooking up with a 151 year old traditional bank with over 500M$ in assets. 👀
What is MakerDAO? MakerDAO is one of the most successful DeFi projects built on Ethereum with over $7.1 billion in TVL (total value locked). The sole purpose of this project is to make DAI token, a digital dollar backed by crypto assets like ETH, BTC, USDC and more. Essentially, Maker lets you deposit $100 of ETH and borrow up to 66 DAI at a low interest rate… similar to how you’d borrow from a traditional bank but it’s all permissionless and automated by the code in Maker.
So, what’s happening? An application to onboard loans originated by Huntingdon Valley Bank, for use as collateral in MakerDAO has gone live on the platform’s forum. If its loans are accepted as collateral by MakerDAO, that would mark the first time a traditional lender has been able to borrow against its assets using DeFi.
How is this happening? Just like Maker lets users borrow DAI off crypto assets, it would let small banks borrow DAI over real world loans. The bank would sell their loans to a trust which would hold the loans the same way Maker’s smart contracts manages collateral like ETH.
Why would community banks do this? 1) Banks could convert the borrowed DAI to fiat dollars and write more loans, thereby increasing the earned interest. 2) Small banks are also required to sell portions of their loans to other competitors for diversification and regulatory requirements. Instead of sharing their revenue with competitors, community banks could now share that with software platforms like Maker (who are not their real world competitors).
This is a great sign bridging the gap between TradFi and DeFi and is very bullish for crypto in large as it enables such real life use cases.
🤝🏼 Opensea x Solana
Opensea, the #1 NFT marketplace is expanding to Solana blockchain in addition to Ethereum and Polygon.
Brief context on Solana: It uses a consensus mechanism called Proof-of-History, which enables it to execute transactions with high throughput— more than 60k transactions per second (TPS) comparable scale to VISA. In comparison, Ethereum can currently process only up to 15 TPS for now. It also has significantly lower transaction fee compared to Ethereum. Since it enables low cost NFT minting, Solana has seen large increase in #unique NFT buyers over the past few months.
This partnership could ultimately fuel faster adoption of Solana-based NFTs.
📊 Interesting stat
There are roughly 27m software developers in the world. Only about 18k of them, or 0.07%, work on crypto or web3 every month.
Those 18,000 active engineers have created $2 trillion in market cap across the top 100 projects - $112m of value per person.
Most of the valuable smart contracts in web3 are written in Solidity and Rust, which are both influenced by lower level languages like C++. The learning curve for these languages is significant. With so few writing in these languages, web3 companies face recruiting challenges to staff their teams limiting their speed.
With such massive potential impact, why are there so few engineers working on web3? We need you now….
How did you enjoy this week’s edition?