Welcome to The Node. This is Daniel Kuhn and Xinyi Luo, here to take you through the latest in crypto news and why it matters. This week the newsletter will feature guest essays from CoinDesk’s Crypto 2023 series – where some of the sharpest minds in crypto have made their predictions about the months and years ahead. In today’s newsletter:
Publicly-traded crypto miner Argo Blockchain requested a 24-hour suspension of trading in U.S. marketplace – ahead of a planned statement on Wednesday. Earlier this month, the London-based company said it was close to restructuring to avoid bankruptcy. Separately, crypto lender Nexo sent an open letter to creditors of Vauld, a rival firm Nexo intended to acquire then seemingly backed away from yesterday, saying it wanted to deal directly with the creditors. Nexo added Vauld’s interpretation of the supposedly sour deal was “misleading.”
Migration
DeGods and Y00ts, two of the top Solana NFT projects, are ditching the network. DeGods will go to Ethereum while Y00ts will move to Polygon following an undisclosed grant from the layer 2’s partnership fund. “There’s an argument to be made that [DeGods] has capped out on Solana,” project leader Rohun Vora said Monday. The migration speaks both to Polygon’s success at brand partnership development (including moves with Starbucks, Nike, Reddit, Instagram and DraftKings this year) and Solana’s tarnished reputation after the collapse of its biggest promoter, Sam Bankman-Fried.
Hack Return
Defrost Finance, a decentralized leveraged trading platform, is planning on dispersing an estimated $12 million in stablecoins to users after recovering the funds from an exploit. On Sunday, the Avalanche-based protocol’s V1 and V2 products were hit with a flash loan attack that blockchain security firm PeckShield said looked like a “rug pull.” “We will soon start scanning the data on-chain” to return funds, Defrost’s team, which had initially gone radio silent following the attack, wrote on its website.
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Bitcoin and Ethereum both have deeply dedicated communities and developers working to advance the peer-to-peer networks. Whatever the technological differences separate the two largest crypto protocols, both also have a strong cultural and psychological divide – and remarkable similarities. These different ecosystems and different aims have an impact on how the networks progress.
This year, Ethereum transitioned from proof-of-work to proof-of-stake. Last year, Bitcoin introduced Taproot. Both processes relied on a few common tools: Git merge requests and comments, live chat and mailing lists. Both projects also have relatively small groups of core developers (counted in the dozens) making decisions, (in the case of Bitcoin Core, only a few have commit access). Both projects utilize “rough consensus,” have long periods to scrutinize proposals (i.e., BIPs and EIPs, or Bitcoin or Ethereum Improvement Proposals) and make minor changes quite regularly.
Both have also had to address major bugs. For Bitcoin: On Aug. 15, 2010, a hacker created over 184 billion BTC due to a number overflow error – despite its 21 million coin cap. The issue was spotted within an hour and a half, and Satoshi implemented a fix along with Jeff Garzik. Meanwhile, in 2016, Ethereum’s first DAO was exploited after raising $150 million worth of ETH in a token sale. The blockchain was eventually hard forked to restore the stolen funds.
Some see this moment as Ethereum’s cardinal sin (resulting also in the doomed Ethereum Classic fork), and a sign that Ethereum developers put their own interests above the network. While others see it as Ethereum’s ability to coordinate and judge situations pragmatically. At the most basic level, Ethereum doesn’t work like Bitcoin in that it doesn’t have a single reference implementation. Each implementation has committers (e.g., Go-Ethereum, Nethermind, Besu, Erigon) but none of them is sufficient to change the entire protocol.
“In many ways, our development process is more decentralized,” Ethereum dev Tim Beiko said. No one person in Ethereum can “unilaterally force a change.”
Bitcoiners typically resist “consensus changes” that create forks. “Standardness rules,” however, are more flexible due to not being consensus critical. Soft forks are a strict subset of the previous rules. Ethereum co-founder Vitalik Buterin wrote about the issue.
“Things moving slowly ensures that things are done safely with plenty of discussion, review and testing…In this way, the psychology of the Bitcoin community is a big part of its decentralization,” former Bitcoin Core dev Samuel Dobson said. But the idea that Bitcoin will never change is false.
Perhaps Erik Voorhees said it best, crypto exists on a “spectrum of decentralization” and both Bitcoin and Ethereum have weaknesses and strengths. Though, as long as they’re technically decentralized to survive attacks – that’s what matters most.
– Bill Ottman, founder and CEO of decentralized social media platform Minds.com
Off-Chain Signals
What Would Crypto Look Like Without Centralized Exchanges Like FTX? (Decrypt)
From CryptoPunks to Redditors — and a Trump card: The year in NFT charts (The Block)
Crypto Bankruptcies Chip Away at Customers’ Anonymity (WSJ – paywalled)
Emails reveal Sam Bankman-Fried’s courtship of federal regulators (LA Times)
Former CoinDesker Brady Dale writes about crypto’s resilience (Axios)
Following the collapse of FTX, user trust in crypto exchanges’ transparency, security and liquidity have proven to be critical to the continued adoption of crypto. The 2022 World Cup is therefore a unique opportunity to showcase to over 4 billion potential viewers how crypto firms are prioritizing security and risk management, facilitating the adoption of crypto even during the crypto winter.
We’ve already seen a few Web3 and crypto players leverage FIFA as a chance to pave the way for the global adoption of Web3 technologies.Continue here.
