Coffee, Tornadoes and Merge Madness
Coffee, Tornadoes and Merge Madness
The top 5 most interesting stories in crypto this week...and more!
Headline Roundup
1. Tornado Cash Gets Sanctioned
This week, the US treasury sanctioned the popular mixing service “Tornado Cash”. According to the US treasury, Tornado Cash has been used to launder up to $7 billion USD since it was created in 2019 and has also been used to help “Lazarus”, the North Korean government-backed hacker group.
The sanctions on Tornado Cash could have some far-reaching implications, anybody who has sent or received funds from the service may be open to the risk of prosecution from the US government.
Tornado Cash is what is known as a “mixer”, it is a privacy tool that aims to hide the origin of funds. Transactions on the blockchain are transparent, using a block explorer and knowing your wallet address, anybody can see the balance and all the transactions in and out of your wallet. To use TC, you essentially deposit funds into a pool mixed with the funds of other users and then receive funds out of the pool. This breaks traceability and hides the flow of funds.
Another feature of blockchainscryptocurrencies is that they are permissionless. Meaning you do not need anybody’s permission to transact. If I knew your wallet address, I could send funds to it without your permission and there would be nothing you could do about it. TC is sanctioned so interacting with funds that have passed through TC may put you at risk of prosecution from the US government. Yesterday we saw an anon send lots of prominent/well-known individuals 0.1 ETH that had been through Tornado Cash.
2. Coinbase Teams up with BlackRock
BlackRock are one of the world’s largest investment management firms, they have around USD 10 Trillion in assets under management. For comparison, the total market cap of all cryptocurrencies is just over $1 Trillion.
This week Coinbase announced they would be partnering up with BlackRock and their “Aladdin” Investment platform to provide institutional investors greater access to digital assets. Coinbase Prime is the institutional/prime-brokerage arm of Coinbase and will Coinbase will provide crypto trading, custody, prime brokerage, and reporting capabilities to BlackRock’s clients.
Funnily enough, in 2017 the CEO of BlackRock called Bitcoin “The Index of Money Laundering”.
3. Starbucks Unveiled a Web3 Loyalty Programme
Soon, Starbucks is set to roll out a Web3 loyalty programme including the use of NFTs. The company has said their NFTs will not just be collectables but give owners access to “exclusive content” and other perks.
At the moment, there is little information on the actual NFTs with regards to what they will look like and where you can access them. If one were to guess, it is likely they will adopt a “Web 2.5” approach where these NFTs exist within the Starbucks app and can be purchased using fiat currencies, rather than bought on a marketplace like OpenSea and held in MetaMask. Let’s see…
4. Hodlnaut and Zipmex Halt Withdrawals
Although it has been well over a month since the 3AC meltdown, the crypto industry is still suffering from its effects. Zipmex and Hodlnaut, both Asian-based crypto services have halted withdrawals on their platforms.
Zipmex is a Thai crypto exchange that lent out customer money to both Celsius (bankrupt) and Babelfinance (currently restructuring). Zipmex is owed around USD 55 Million and as a result, had to halt withdrawals due to not having the funds to meet customer obligations. This week they have slowly begun allowing users to withdraw small amounts of Bitcoin and ETH.
Hodlnaut is a Singapore-based crypto lending service (we’ve spoken about these before).
Users deposit funds to obtain an advertised return, for example, 5%. The service will take these user funds and achieve a return higher elsewhere and then pocket the difference. Many of these services did not carry out proper due diligence and ended up loaning client money to firms like Three Arrows Capital, Babel Finance or Roger Ver and have not been paid back the full amounts.
Hodlnaut has over $500 million in assets under management and is working with a legal firm to come up with a plan of restructuring. It has since withdrawn its application for the Payment Services license in Singapore, which would allow it to offer crypto services in Singapore. Withdrawing their application means they can no longer offer token swaps.
The Merge is the event where Ethereum will officially move from Proof of Work (using miners) to Proof of Stake. Proof of Stake is considered to be environmentally friendlier and should allow the Ethereum network to operate both faster and cheaper. Instead of using mining rigs, people can “stake” or pledge their Ethereum to support the blockchain and receive rewards.
It’s called the Merge because the blockchain that Ethereum is using to test Proof of Stake (Beacon Chain) will merge into the Ethereum main chain.
The Merge has faced numerous delays in the past year or so but is set to happen this September. It is drumming up an awful lot of speculation as some are not too keen on the merge, in particular - miners. Miners have invested a lot of money in equipment and are not keen on watching their investment become worthless. There is strong support for a “hard fork”, where Ethereum will split in two. If this happens, holders of Ethereum and any tokens (E.g NFTs) will receive duplicates. One copy will exist on the Proof of Work chain, and the other copy will exist on the newer Proof of Stake chain. The market will then have to decide which of the two copies is worth more. This article does a fantastic job of explaining the contention and the history of Ethereum hard forks.
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