DeFi's gut punch
Plus mysterious memecoins
Welcome back. Many of you have asked about our thoughts on Solana—and now the Coinsider team is answering. Kevin just dropped a new video over on the Coinsider YouTube channel explaining his POV on SOL. Check it out here.
Today: The hack that threatened DeFi, the plan for FTX’s comeback, and the memecoin that stirred conspiracy theories. Let’s go.
All eyes were on DeFi last week after Curve Finance, one of crypto’s most influential decentralized exchanges, was hit with a multi-million-dollar hack that posed a systemic risk for all of DeFi.
What happened: Hackers nabbed $73 million worth of tokens from Curve Finance last week in a sophisticated exploit of its programming language. Following the attack, the total value of assets locked on Curve dropped from $3.7 billion to $2.1 billion as investors took precaution and withdrew their funds.
Things went from bad to worse. The price of Curve’s native token CRV tanked some 30% after the attack. This put the $168 million worth of CRV in open lending positions held by Curve founder Michael Egorov at risk of liquidation.
$168 million worth of CRV equates to 34% of the token’s total market cap. The liquidation of Egorov’s positions would have put substantial sell pressure on CRV's price.
Other DeFi protocols would’ve been hit, too. CRV is a systemically important asset that’s widely used in trading pools across DeFi. Egorov’s outstanding loans to other major lending platforms could have resulted in bad debt for multiple projects in the space.
Luckily, a few over-the-counter deals helped crypto avoid catastrophe. Egorov offloaded some $42 million worth of CRV to Justin Sun, DFC God, and other big crypto names to improve the health of his positions.
But the implications for DeFi are huge. The Curve fiasco raised several important questions:
Is DeFi really that much better than TradFi? Much like the U.S. government bailing out banks in the 2008 financial crisis, a bunch of rich crypto whales coming to the rescue of CRV doesn’t exactly inspire confidence in the system.
How was a single person able to lend so much of a systemically important token’s supply in the first place?
Should DeFi lending protocols like Aave implement safeguards to limit large positions like Egorov’s that have the potential to introduce systemic risk?
Is FTX Making a Comeback?
Does the idea of FTX 2.0 sound bad to you? FTX’s bankruptcy administrators certainly don’t think so—a new court filing from last Tuesday proposed a plan to reboot the defunct exchange.
The proposal organizes creditors into different classes of claimants, one of which may opt to pool their assets to create a rebooted version of FTX.
This new exchange would only be available to customers outside of the U.S.
If FTX 2.0 actually happens, creditors could choose to forgo a cash payout of their claims for equity in the new exchange.
Notably, the filing doesn’t account for holders of FTT, FTX’s utility token that provided access to the trading platform’s features and services. This suggests that FTX’s current restructuring plan will not compensate holders of FTT for their financial losses (FTT dropped from $25 to just above $1 following FTX’s collapse last year).
Not a new idea: The prospect of restarting FTX doesn’t come as a complete surprise—May legal filings from FTX’s interim CEO already referenced a “FTX restart” and “2.0 reboot.”
Zoom out: At this point, FTX 2.0 is nothing more than a thought experiment. Ultimately, creditors have the last say on whether to reboot the defunct exchange. But if they do, one thing is clear—the new FTX won’t look anything like the original.
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Has SBF Gone BALD?
Did Sam Bankman-Fried spin up a new memecoin for the lols? Crypto Twitter (sorry, crypto “X”) is abuzz with conspiracies that SBF is behind BALD, the latest memecoin rug pull.
Some context: BALD—which allegedly references Coinbase CEO Brian Armstrong’s signature hairstyle—launched on July 30 and spiked a staggering 4,000,000%. But after the token’s anonymous developer pulled an exit scam, BALD’s price plummeted 85%.
Some clues: Blockchain sleuths quickly discovered that the deployer wallet behind BALD previously received thousands of ETH in funding from wallets associated with FTX and Alameda Research.
- Bald deployer DYDX posts sound like SBF
- Onchain activity times line up with court dates/bail
- We know SBF was doing stuff through VPN recently
— hype (@hype_eth)
Jul 31, 2023
But: Not everyone’s convinced it’s SBF. After all, it’s kind of hard to spin up a new memecoin when your internet access is restricted to sports websites and a flip phone.
Guys, SBF hasn't had access to a normal phone or laptop since April 2023 when his bail conditions changed. He's basically been using a flip phone without internet connection & a laptop with restricted access to whitelisted websites (e.g. NYT, WSJ, Courtlistener, etc).
Note: He… httptwitter.com/i/web/status/1…
— Tiffany Fong (@TiffanyFong_)
Jul 31, 2023
In other news:
Coinbase set the launch date for its new L2 blockchain Base for this week.
We finally know who hacked Bitfinex in 2016.
The DOJ is considering fraud charges against Binance but fears it could trigger a run on the exchange.
Kenya became the first country to fully block Worldcoin operations.
SBF might be going to jail—for real this time.
Crypto Job Board
Web3 reward system PairedWorld is looking for a Social Media Manager with strong communication skills.
Good at multitasking? Decentralized data protocol Cere Network is hiring a Technical Marketeer to execute projects, implement growth strategies, and manage stakeholders.
Smart contract-as-a-service provider Bunzz is hiring a Developer Advocate to spread its gospel to web3 developers.
And that’s what you need on your radar today in crypto. I’m taking bets on whether FTX 2.0 is actually happening. Hit reply and share your thoughts. Catch you back here next Tuesday!