No day is boring.
Today was one of the busiest in recent DeFi memories. with an eight-digit hack, a massive token sale worth over eleven from none other than Ethereum’s co-founder Vitalik Buterin himself, a major update on Aave’s institutional rollout, and a proposal on the Uniswap governance forums, Turning UNI into a governance token, a suggestion again courtesy of Vitalik. Quick reactions, more or less in chronological order (assuming my memory is not completely fried as of today):
Aave announces a test pool for institutions
As Cointelegraph first reported early this morning, Aave currently has a private test pool in which institutional investors test DeFi.
I had the pleasure of talking to Ajit Tripathi, Aave’s director of institutional business development (who is also an excellent Twitter follower, by the way) about the initiative this morning. The key quote is that The test pool is in an “expanded” state. and it will likely be up and running as a KYC / AML licensed market soon.
The news sparked a wave of debate in the DeFi community whether the institutions and their legal needs (especially these KYC and AML barriers) are ideologically and technically compatible with DeFi.
The pursuit of institutions will kill this movement, mark my words. https://t.co/7AQTFcQD0P
to???? Ser Doggo IV, surname (@fubuloubu) May 12, 2021
Delighting the institutions will end this movement, remember my words.
The reality is this: In the short term, it will inevitably be beneficial for the industry to bring institutes to market. More money, more adoption, more users, more money out there to fund your favorite projects with ambitious teenagers. Take their money, their positive press, and get them what they give you.
In the long run, the lattice gardens will ultimately be a historical blink of an eye. Private pools are slower, less agile, and less fluid than the larger room: they are doomed to fail. This is a first step for institutions to join fully decentralized systems, which is the inevitable end to the game.
If that opinion makes me the pantyhose our masters of centralized finance like, so be it. The jokes at my expense were at least good:
Choke me dad https://t.co/QpRVMU9bcH
to???? banteg (@bantg) May 12, 2021
Hold me dad
xToken has suffered an exploit
One of the most promising projects in the field was used this morning for more than $ 25 million. Although the nature of the exploit was complex, combining two attacks into one and executing, it can be argued that a few simple steps could have mitigated the problem.
xSNXa and xBNTa contracts were exploited. Coin minting has been suspended on all contracts while we conduct further research.
The liquidity pools have been used up, but most of the SNX and BNT remain in xToken contracts.
We owe an explanation to the community and will be providing another update shortly
to???? xToken (@xtokenmarket) May 12, 2021
The contracts xSNXa and xBNTa were attacked. Minting has been suspended for all contracts while we conduct further research.
The liquidity pools have been looted, but most of the SNX and BNT remain in xToken contracts.
We owe the community an explanation and will be offering another update shortly.
With xToken, users can own interest bearing derivatives of basic assets such as Aave and SNX that require some involvement and / or control of the protocol in order to access their full value. The design is smart and even allows users to choose risk appetite or governance participation philosophy as options, which are much more nuanced than an “index” or “simple” product. Ndar.
However, The trade between the synthetic or derivative tokens and their parents is partly responsible for the incident that morning.
According to the white hat hacker Emiliano Bonassi, The attacker manipulated Kyber’s Dex market while at the same time taking advantage of how xToken calculates the price of its x-token derivatives. As he told me on Twitter, the attacker effectively “performed two exploits” in a single transaction:
So the problem is that the undervaluation is related to the fact that the price of the amount exchanged on Kyber is low, which is low due to the SNX flood borrowed from Aave and dumped on Uniswap (linked to Kyber via a private reserve).
to???? Miliano Bonassi | Î ?? miliano.eth (@emilianobonassi) May 12, 2021
The problem is that the undervaluation is related to the fact that the price of the amount converted into Kyber is low due to the SNX avalanche borrowed from Aave and sold in Uniswap (linked to Kyber via a private reserve).
It becomes clearer that Using a single DEX as an oracle is irresponsible without some form of average price calculation weighted in time, This mitigates the effects of flash loans that are designed to bring DEX prices down.
Products like xToken are important for tax efficiency and low effort. Let’s hope they recover soon.
Vitalik suggests making Uniswap a stable coin oracle
After the successful release of version 3, Uniswap is on the rise.
Yesterday there was news that Uniswap had outperformed Bitcoin in terms of daily commissions, and this morning none other than Vitalik Buterin considered a possible use of the UNI governance token.
In a post on the Uniswap governance forums Vitalik suggested making UNI an oracle token effectively. Use the large market cap to create an Oracle service similar to the UMA design, using cryptocurrency-based collateral to ensure respondents provide truthful answers.
While Buterin believes an oracle focused on stablecoins could improve the health of the DeFi room, Perhaps the most compelling thing from a UNI hodler’s point of view is that it would ultimately give the token a purpose.
After all, the competitor DEX SushiSwap was founded in part because the developers saw an opportunity to branch the project and create a version that didn’t have a significant team and VC token assignment. In addition to offering a token use case that goes beyond amorphous and eventual voting.
Although the Uniswap team has announced that it will move to a fully decentralized model where UNI should be more useful, This suggestion from Vitalik could give it a purpose beyond speculation. However, it doesn’t look very good that a future Nobel Prize winner would need to discover a use case …
A lot of people worry about how they think that $ Link Marines will go mad over the Uniswap oracle proposal
Not enough people care about how it took one of the best minds of our generation to find a use for $ UNI lmaooo
to???? Andrew T (@Blockanalia) May 12, 2021
A lot of people talk about how they think the Link Marines will go mad over the Uniswap oracle proposal.
Not enough people comment on how one of the best minds of our generation had to find a use for UNI, hahahaha
(For the record, the Uniswap team are brilliant and I regularly follow the log.)
Vitalik chooses violence
As Cointelegraph reported, Vitalik Buterin has sold or donated huge amounts of shitcoins today, the developers in the past Months to his wallet instead of burning it properly. Some aspect highlights of the ad hoc charity campaign from former Ethereum Foundation member Hudson Jameson:
Epic crypto donation over @VitalikButerin!
All AKITA tokens for Gitcoin Community Multi-Sig
13,292 ETH according to Givewell
1000 ETH + all ELON tokens – Methuselah Foundation
1050 ETH – MIRI (AI security organization)
500 ETH + 10% of the SHIB – @CryptoRelief_
500 ETH – Charter Cities Institute
to???? Hudson jameson (@hudsonjameson) May 12, 2021
What a series of crypto donations from Vitalik Buterin!
All AKITA tokens for the wallet with multiple signatures from the Gitcoin community.
13,292 ETH according to Givewell.
1000 ETH plus all ELON tokens to the Methuselah Foundation.
1050 ETH to MIRI (IA security organization).
500 ETH plus 10% of SHIB to the crypto fund to support Covid of India.
500 ETH at Charter Cities Institute.
All associated tokens show double-digit losses, with Dogelon down an amazing 90% last time I checked. My advice to investors who feel disappointed by events remains the same as the last one 4/20 absurd meme coin fiasco: learn to learn.
(As a side note, I liked how people used inbound transactions to turn their account into a wall of graffiti, insults, pardons, and ChainlinkGod cheering them on among the highlights.)
Buterin also transferred around 320,000 ETH to a Gnosis safe, One that I suspect will not accept unauthorized inbound transactions, which will prevent it from happening again.
Ultimately, I feel sorry for Buterin. He was placed in an insecure position and projects sent him tokens as a “burnout” in a marketing ploy. In addition, these projects are forks with little innovation and added value, simply speculative vehicles that are unusually successful in the markets in what is still an unusually volatile phase.
All of this creates an ethical mess: Is it okay to sell these tokens given the damage they would do to speculators? Is Buterin responsible for these speculators? Would you be responsible for NOT disposing of the tokens if you found that the funds could be better spent elsewhere?
It is curious, however, that answering all of these questions is a task for which he is specially trained.
Little known fact about him: He read, and I would say he was heavily influenced by contemporary moral philosopher Derek Parfit. My editor says I have to stop linking to external material, but forgive me this one, a beautiful profile of an even more beautiful mind.
Parfit’s influence on Buterin is evident. Several years ago, while analyzing the problems of competing stakeholders in a cryptocurrency governance context, he published several of his own versions of the famous Parfit paradoxes:
Suppose 4,000 people support a proposal and 6,000 reject it. * 30 minutes in the future *, however, one of the backers will be copied into 20,000 people by a Star Trek-style replicator, and from then on they will have separate lives.
Should the proposal be implemented?
to???? vitalik.eth (@VitalikButerin) May 27, 2020
For example, suppose 4,000 people support a proposal and 6,000 reject it. However, * 30 minutes in the future * one of the backers will be copied into 20,000 people by a Star Trek-style replicator, and after that they will have separate lives.
Should the proposal be applied?
We’ll see what his later blog says about it, but my suspicions are that regardless of its justification, it will be well reasoned and defended. It turned out to be more pragmatic than some scam developers expected.