DeFi Daily Digest 2022-07-11: Missing-Su-Zhu 3AC'S $270M Loan Dragging Down Blockchain.com, and a Governance Attack on Yam
No one knows the whereabouts of Su Zhu and the other co-founder of 3AC, even their lawyers. Meanwhile, the mess of their loan of $270M became a problem for Blockchain.com. While the community has started to discuss the post-MERGE MEV, Yam Finance stopped a shady governance attack.
Stablecoin
L1
Resources about PoS MEV: mev-boost and in-protocol proposer-builder separation (PBS)
Discuss: whether to switch the open auction into a sealed bid auction where builders can’t see other builders’ bids in the design of MEV-Boost during the message passing period. More information can be found here.
Reason for enabling MEV Boost infrastructure at the Merge: to ensure that validators have a safe and transparent way to permissionlessly earn MEV rather than relying on private channels
Reason for waiting after upgrade: to reduce complexity around the Merge activation process
Flashbots will soon release a blog post about MEV Boost and the areas of possible conflicts of interest and vulnerabilities that exist with the software.
Currently under PoW, the MEV software provided by Flashbots is permissioned, that is Flashbots can whitelist miners and has the power to blacklist them as well.
Flashbots is working on building tools for monitoring MEV activity under MEV Boost and they aim to set up a public relay monitor to increase data transparency around MEV post-Merge.
Regulation
MicroStrategy’s CEO Michael Saylor said Ethereum is a security.
Ethereum is not a commodity because of its changeability status, Saylor says. Ethereum has had an initial coin offering, and hard forks that can be used to change its characteristics. According to Saylor, the digital assets whose code could be changed in a way that fundamentally affects their value or issuance means it passes the Howey Test under the Securities law.
Under the Howey Test, an investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others." Four criteria are needed to determine whether an investment contract exists: 1) An investment of money; 2) In a common enterprise; 3) With the expectation of profit; 4) To be derived from the efforts of others.
Saylor believes that Bitcoin is not a security because it is fully decentralized, has no initial coin offering, and has little interest in changing the network’s code.
Fed vice chair: Bank involvement with crypto increases the risk of the stability of the core financial system.
The Investment Association, the trade body representing the UK’s asset management industry, proposes a new task force to examine how investors to customize their portfolios with holdings in private companies and cryptocurrencies.
CEX & DEX
Crypto exchange Blockchain.com faces a $270M hit on loans to Three Arrows Capital
Celsius Network pays off $22.2 million towards its loan from Aave & Compound, dropping its debt to $235 million, suggesting that Celsius started to make good on the $258 million debt
Should Celsius fully pay off the loans, the crypto lender will theoretically be able to reclaim about $950 million in assets.
At 6:10 am on July 11, the Celsius wallet owed $130 million to Aave in Circle’s USDC stablecoin and another $85 million to Compound in Maker platform’s DAI stablecoin.
The collateral Celsius pledged against the Aave and Compound loans was worth about $380 million and $214 million, respectively, in the form of various cryptocurrencies or derivatives such as WBTC, ETH, LINK, SNX, UNI and COMP.
Security
Yam Finance prevented a malicious governance attack designed to cede control of its reserves to an unknown third party, the project said on Saturday.
The attacker has deployed an unverified contract and governance proposal submitted via internal transactions to make it harder to notice. But the attack was noticed and the proposal has been canceled.
Yam Finance has a treasury worth more than $3 million. If the attack had succeeded, it would have been able to drain the Yam Finance treasury, which currently holds $3.1 million worth of crypto assets.
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