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Today's Newsletter content 📃
No. | Index |
|---|---|
1. | BASE meme coin drops to zero |
2. | All Ethereum ETFs got Approved!! 🔥💃🏻🕺🏻 |
3. | US House Passes FIT21 Act for Crypto Regulation 📃💯 |
4. | Understanding Sybil Attacks in Blockchain Networks ⛓ |
5. | BASE >>>> OTHER L2s |
6. | Meme of the week 🤣 |
🚨Exploit Update ⚠️
Normie token experienced a catastrophic drop in value, plunging 99.80% to just $0.00008013 after a major exploit. At the time of writing, the token is struggling to recover, trading at $0.001903, still 95% below its pre-exploit price.
Market Cap Collapse and Partial Recovery
The exploit caused Normie’s market value to crash initially to less than $200,000 from its previous high of $40 million. The market cap has since seen a slight recovery, rising to about $1.5 million.
Exploit Details: Flash Loan Attack
The attacker identified and exploited a flaw in Normie’s contract, specifically targeting a weakness in its tax mechanism. Utilizing this loophole, they executed a flash loan attack, draining a substantial portion of the token’s value.
Analysis by Experts
The vulnerability lay in the Normie smart contract, particularly within the premarket user map, which bypassed checks in the swap and Liquify function. This flaw allowed tokens to be minted and sold without restriction. The contract’s verification process only checked if the token balance matched that of the team wallet. If the balances matched, it permitted the minting of tokens.
Manipulating the System
The exploiter allegedly manipulated their token balance to match the team wallet’s balance. They then began minting and selling large quantities of tokens on the open market, significantly increasing the total supply and crashing the price.
Team's Response and Negotiations
Following the attack, the Normie team addressed the situation on social media, assuring holders that they were working on a resolution. They urged people not to buy any Normie tokens being minted by the exploiter.
Soon after, the team reported that the exploiter had contacted them, offering to return 90% of the exploited Ethereum (ETH), keeping 10% as a bug bounty. The exploiter also proposed that more than 600 ETH in the dev wallet be used to launch a new token to repay Normie holders fairly.
Conclusion
Normie’s recent exploit highlights the vulnerabilities in smart contract mechanisms and the devastating impact such attacks can have on token value and market confidence. The community is now awaiting the resolution and potential recovery plans put forth by the Normie team.
SEC Approves All Spot Ethereum ETFs
The SEC has approved all Spot Ethereum ETFs, a historic decision that comes five months after approving Spot Bitcoin ETFs. This is the second crypto-based ETF approval in the U.S., further increasing Ethereum’s accessibility for institutional investors.
Applications and Approval
Eight ETF applicants, including VanEck, BlackRock, and Fidelity, received regulatory approval on May 23. Hashdex was the only issuer not approved that day. Despite the approval, the instruments won’t be available on exchanges immediately. Applicants must first secure approved S-1 registration statements, which could take a few weeks to several months.
Expected Timeline
Bloomberg analyst James Seyffart suggests the approval process for S-1 registration statements could take up to five months, while another Bloomberg analyst, Eric Balchunas, predicts a mid-June launch. Balchunas speculates that the SEC will have one round of comments on the S-1s, which could be completed in about two weeks.
Market Reactions and Projections
The market’s reaction to the SEC’s approval has been mixed. Ethereum’s price increased by just 1% following the announcement, trading at $3,840 at the time of approval and later dropping 3.5% to $3,714. Expectations for Spot Ethereum ETFs are high, with analysts predicting they could attract 10-20% of the flows that Spot Bitcoin ETFs have seen. Spot Bitcoin ETFs have accumulated $13.3 billion in net inflows, suggesting Spot Ethereum ETFs could potentially see around $2.66 billion in inflows.
Challenges Ahead
Although the approval is a significant milestone, there are challenges ahead. The SEC’s approval came from its Trading and Markets unit, and an SEC commissioner can challenge this decision within ten days. Additionally, the process of securing approved S-1 registration statements could delay the ETFs’ availability on exchanges. Applicants like VanEck have quickly filed their amended S-1s following the 19b-4 approval, and other applicants are expected to follow suit.
Surveillance and Market Integrity
The SEC was impressed by the ETF applications from issuers such as VanEck, ARK21 Shares, Hashdex, Invesco Galaxy, Franklin Templeton, Fidelity, and BlackRock. These applications demonstrated comprehensive surveillance-sharing agreements with the Chicago Mercantile Exchange (CME) through their common membership in the Intermarket Surveillance Group. This facilitates sharing information available to the CME by surveilling its markets, including the CME Ether futures market, helping to prevent fraud and manipulation.
Conclusion
The SEC’s approval of Spot Ethereum ETFs marks a pivotal moment in the cryptocurrency market, potentially increasing Ethereum’s accessibility and appeal to institutional investors. However, the journey from approval to trading on exchanges involves several steps and challenges. The market will closely watch how this process unfolds and its impact on Ethereum’s market dynamics.
The US House of Representatives recently passed the Financial Innovation and Technology for the 21st Century Act (FIT21) on May 22. This bill, largely supported by House Republicans, aims to create a clear regulatory framework for the U.S. cryptocurrency markets.
The FIT21 Act includes several key points aimed at regulating the U.S. crypto markets. It introduces consumer protection measures requiring developers to provide detailed disclosures about their projects, such as operation details, ownership, and structure. Regulatory oversight is another major aspect, with the Commodity Futures Trading Commission (CFTC) designated as the main regulator for digital assets, overseeing non-securities spot markets.
The act also establishes a clear process to determine whether a crypto token is a security, regulated by the SEC, or a commodity, regulated by the CFTC. The bill received bipartisan support, passing with votes from 71 Democrats and 208 Republicans, while 3 Republicans and 133 Democrats opposed it. Despite this support, President Joe Biden has opposed the bill but has not indicated a veto.
White House and SEC Chair Gary Gensler also opposed the act, citing concerns about potential regulatory gaps and risks to investors. The crypto sector, however, has welcomed the bipartisan approval, with Coinbase praising it as a significant step forward and CLO Paul Grewal noting the support from 71 Democrats as "real progress.”
The FIT21 Act is not yet law and will need to pass a Senate vote.
The outcome in the Senate will determine whether these regulatory changes will take effect.
The FIT21 Act represents a significant effort to bring clarity to the regulation of digital assets in the U.S. While it has garnered strong support from some lawmakers and the crypto industry, it also faces substantial opposition. The ongoing debate highlights the complexities of balancing innovation with consumer protection in the evolving cryptocurrency market.
Sybil attacks represent a significant threat to blockchain and peer-to-peer networks. Named after the protagonist of the book "Sybil," which discusses Dissociative Identity Disorder, a Sybil attack involves a single entity controlling multiple network nodes to deceive and manipulate the network.
The concept was first defined by Microsoft researchers Brian Zill and John R. Douceur in the early 2000s. In a Sybil attack, attackers create and control many pseudoanonymous identities to influence the network. This can lead to 51% attacks or transaction censorship in blockchains and misinformation in social media networks.
Types of Sybil Attacks:
Direct Sybil Attacks: Malicious nodes directly communicate with honest nodes to control decision-making or consensus.
Indirect Sybil Attacks: Malicious nodes indirectly influence the network by boosting the reputation of certain nodes or altering the network topology.
Networks vulnerable to Sybil attacks are usually defined by pseudoanonymous participation, such as blockchain networks and social media. These networks are designed to be open, making it easy for attackers to create multiple entities.
Examples:
Ethereum Classic: In August 2020, Ethereum Classic suffered a series of 51% attacks, leading to multiple block reorganizations and millions in stolen funds.
Verge: In 2021, Verge experienced its third 51% attack, resulting in a major block reorganization that rewrote over 200 days of transactions.
Prevention and Defense:
Cryptoeconomic Security: Proof-of-work and proof-of-stake mechanisms make it impractical for attackers to control a majority of nodes, hashrate, or stake.
Reputation Systems: Delegated proof-of-stake and reputation-based systems limit the influence of Sybil attackers.
Identity Verification: Validating node identities can prevent Sybil attacks, though it’s often unviable for public blockchains.
Blockchain networks are designed to be resilient against Sybil attacks while maintaining an open and permissionless nature. This balance is a core innovation of public blockchains. As blockchain technology evolves, so will defense strategies against Sybil attacks. From new digital identity solutions to advanced consensus mechanisms, the future of blockchain security looks robust.
Sybil attacks are a known threat, but with ongoing advancements in blockchain security, the ecosystem continues to strengthen against these attacks.
Why Build on Base?
Base is an Ethereum scaling solution developed by Coinbase, the world's second-largest crypto exchange. Base is not built by Coinbase from scratch, instead leverages the OP Stack, an open-source Layer-2 (L2) scaling solution created by Optimism.
Before diving deep, let’s quickly understand why Ethereum needs scaling, what are L2 scaling solutions, and how Optimistic rollups work.
The Blockchain Trilemma
Like every other blockchain, Ethereum faces an engineering trilemma between decentralization, security, and scalability. While Ethereum excels in decentralization and security, it struggles with scalability. This results in slow transaction speeds and high costs, making it difficult to scale effectively.
How L2 Solutions Help
L2 solutions like Base work by running a layer of transactions parallel to the Ethereum blockchain, similar to how a flyover helps distribute traffic from a congested highway. These solutions offload transaction processing from the main chain, reducing congestion and making transactions faster and cheaper.
Optimism and Optimistic Rollups
Optimism is an L2 scaling solution that moves transactions and computations off the main chain. Transactions are bundled off-chain, verified, and then relayed back to the Ethereum blockchain. This process is called "optimistic" because it assumes all off-chain activities are valid, but allows for a challenging period where participants can dispute any fraudulent activity.
Benefits of Building on Base
1. Coinbase Integration: As the largest crypto exchange in the US and one of the biggest globally, Coinbase provides significant transaction traffic, liquidity, users, and financial products. Developers building on Base can leverage these resources to enhance their projects. Coinbase’s push to onboard 150 million users to crypto will offer deep liquidity, high transaction volumes, easy fiat on-ramps, and a variety of financial tools, significantly enhancing the web3 experience.
2. Superchain: The OP Stack enables Optimistic L2s and L3s, called “op-chains,” to communicate through a shared message-passing format. This creates a “Superchain,” providing the scalability of parallel chains with the composability of a single blockchain. As Optimism puts it: “Optimism isn’t building a blockchain—it’s building a digital society.”
3. High Throughput: Base promises up to 1000 transactions per second (TPS) compared to Ethereum’s 12-15 TPS, making it suitable for a wide range of applications.
4. Low Fees: Base is 10x cheaper than the Ethereum mainnet, making transactions nearly gasless. It also supports gas abstraction, making it more accessible for developers and users, encouraging mass adoption and a robust ecosystem.
5. Easy Development: No code changes are needed to build on Base. It is EVM equivalent, so all your existing code, tools, and infrastructure will work seamlessly.
Conclusion
Building on Base offers numerous advantages, from leveraging Coinbase's extensive resources to benefiting from the high throughput and low fees of the OP Stack. It’s a powerful platform that simplifies development while providing a robust, scalable solution for Ethereum’s limitations.
Meme of the week
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