This week in crypto. August 9-15: White hat hacking and investor protection, K-Pop NFTs and more...
Poly Network hack
This Tuesday an event on a cross-chain DeFi protocol Poly Network had major newspapers around the world speaking. No, they did not grow overnight an expertise in the decentralized finance and even less in the very specific part of it, which is blockchain interoperability. The reason was the biggest exploit so far in the crypto history: a hacker stole $600M from the three networks Poly was bridging: Ethereum, its second layer Polygon, and Binance Smart Chain (BSC). According to Poly Network, the hacker exploited a vulnerability between smart contract calls, which allowed them to rerout the funds to their addresses.
The crypto community mobilized to track and block the stolen funds: Tether froze the $33M associated with the attack and the executives of leading exchanges also engaged to help limit the damage.
And then… the hacker decided to return the funds, saying “It's already a legend to win so much fortune. It will be an eternal legend to save the world.” Within 24 hours of the attack they have returned pretty much all of the stolen funds, except for the frozen USDT ($235M are still in a shared multisig account controlled by Poly and the hacker). It should have been a great relief for the Poly team to see that the hacker was of a white hat variety, aiming at making the protocol more secure, even in such a dramatic fashion.
Investor protection redefined
The general media did not go into the details of course, and while many headlines read simply “crypto hack”, the articles called Poly Network a “crypto transfer company” and proudly quoted “warnings” of anti-crypto politicians. They also forgot to mention that cross-chain DeFi protocols are a specific and rather complicated thing, which is now used mostly by specialists, and it might be too early to start spreading panic among average crypto hodlers. And while many spoke of “investor protection”, which is cited by every old-school official when it comes to crypto, virtually noone asked themselves a question what this term really means, and how it can evolve.
The old way of protecting investors is to gather data on company owners and threaten them with judicial pursuit if things go south. It has been that way for many years, and yet it could not prevent thousands of scams, technical accidents, hacks or other unfortunate events that costed investors their money. And it’s totally understandable: as long as the process is controlled by a trusted third party, there will always be mistakes or corruption – for we are mere humans.
The new way of ensuring investor protection could be to decentralize the protocol by deploying it on a blockchain (which limits the possibility of a scam), and make sure that its code is bullet-proof – and that’s exactly what Mr White Hat did for Poly Network.
In the meantime, the DeFi world had another opportunity to learn from Poly mistakes.
Here are some excerpts from the the Q&A embedded in Ethereum transactions sent from the account controlled by the hacker ( published by Tom Robinson)
Art and NFT
K-Pop is a huge phenomenon, with millions of fans around the world that help it dominate the social media (over 7.5 Bn related tweets in a year!). It is also one of the key elements of South Korea’s thriving cultural export, estimated at $10 Bn and expected grow in the coming years. Now it will have one more tool to conquer the world – the NFTs.
K-Pop star Se7en recently released a single in the form of NFT, a girls band Brave Girls created limited-edition NFT collectibles… it seems like the combination of K-Pop and NFT can go far in the entertainment world.
Markets
Bitcoin
The recent struggles of crypto-related legislation in the US Senate did not affect Bitcoin price much, maybe because it is yet to be debated in the House in September, or maybe because crypto is resilient by nature.
If things go wrong, it would probably be hard for the American crypto industry to change country as fast as the banned Chinese miners did, but it is possible. El Salvador is waiting for it of course, but other Latin American countries could be attractive as well. Why not Argentina? This week its President Alberto Fernandez had shared a quite positive outlook for crypto, acknowledging its importance of hedging against inflation. It would be interesting to see if the American practical thinking could prevail over the old-style politicians’ resistance.
As to Bitcoin price, it gained another 6% this week, ending at around $47’250.
Ethereum
Helped by the good news of reduced ETH supply thanks to the EIP1559 upgrade, Ethereum gained over 8% this week, ending at $3280.
Quote of the week
“I don’t want to go too far out on a limb [...] but there is no reason to say ‘no’. They say the advantage is that the inflationary effect is largely nullified.”
Argentina’s President Alberto Fernandez on considering a CBDC or even recognizing Bitcoin as a legal tender