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Audited, Yet Hacked: The Critical Role of Real-Time Monitoring in Web3

Audited, Yet Hacked: The Critical Role of Real-Time Monitoring in Web3In the evolving landscape of Web3, security remains a paramount concern for crypto companies. Most of these companies rely heavily on pre-deployment smart contract audits, believing that such audits will safeguard their projects and client funds from hacks. However, recent data reveals a stark truth: 90% of the smart contracts that were hacked had undergone […]

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Worldcoin releases audit reports showing resolved security issues

The proof of humanness protocol released security audit reports claiming that most issues were fixed or mitigated.

Proof of humanity protocol Worldcoin released its audit reports on July 28 as criticism of its data collection practices continues to mount. The new reports were conducted by security consulting firms Nethermind and Least Authority. 

According to an accompanying announcement from Worldcoin, Nethermind found 26 security issues with the protocol, of which 24 were “identified as fixed” during the verification phase while one was mitigated and another was acknowledged.

Least Authority discovered three issues and made six suggestions, all of which “have been resolved or have planned resolutions,” the announcement stated.

Worldcoin first rose to prominence in 2021 when it announced that it would give away free tokens to any users who verify their humanness, which they could do by having their iris scanned by a device called an “Orb.” The project was co-founded by Sam Altman, the co-founder of AI developer OpenAI.

At the time, Altman and other team members argued that AI bots would become an increasing problem on the internet if people didn’t find a way to verify their humanness without giving up their privacy. According to the protocol’s documentation, The Orb produces a hash of the user’s iris scan but does not keep a copy of the iris scan.

Related: Worldcoin confirms it is the cause of mysterious Safe deployments

Nethermind’s Worldcoin audit report. Source: Github

Worldcoin initiated its public launch on July 25, after nearly two years of development and beta testing. But criticism of it erupted almost immediately. The United Kingdom's Information Commissioner's Office (ICO) reportedly said the government body was deciding whether to investigate the project for violating the country’s data protection laws. French data protection agency CNIL also questioned Worldcoin’s legality.

The crypto community was divided over the project’s launch, with some participants seeing it as the start of a dystopian future where privacy would be eliminated. In contrast, others saw it as a necessary step towards protecting humans against malicious AIs.

The new audit reports cover a wide variety of security topics, including resistance to DDoS attacks, case-specific implementation errors, key storage and proper management of encryption and signing of keys, data leaking and information integrity, and others. Some issues found were the result of dependencies on Semaphore and Ethereum, including “elliptic curve precompile support or Poseidon hash function configuration,” the announcement stated.

All issues except one were fixed, mitigated, or have planned fixes. The one security issue that was not fixed by the time of verification has a severity of "undetermined" and is listed as "acknowledged."

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US Accounting Watchdog Issues Warning on Crypto Proof-of-Reserve Audits: Investors Urged to Exercise Caution

US Accounting Watchdog Issues Warning on Crypto Proof-of-Reserve Audits: Investors Urged to Exercise CautionAccording to a recent warning by the U.S. Public Company Accounting Oversight Board (PCAOB), crypto proof-of-reserve (POR) audits have limitations, and the board believes that investors should exercise caution when dealing with companies using POR audits. PCAOB Calls for Investor Caution and Due Diligence When Using Proof-of-Reserve Reports The U.S. accounting watchdog recently issued an […]

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SEC to target crypto firms operating as ‘qualified custodians’ — Report

If a majority of the five-member SEC panel votes in favor of the draft proposal, it will proceed to the next stage, which will be reviewed by other members of the SEC.

The United States Securities and Exchange Commission (SEC) is reportedly planning to propose new rule changes this week that could impact what services crypto firms can offer their clients. 

According to a Feb. 14 report from Bloomberg citing “people familiar with the matter,” the securities regulator is working on a draft proposal that would make it difficult for crypto firms to hold digital assets on their client’s behalf as “qualified custodians.”

This may, in turn, affect the many hedge funds, private equity firms and pension funds that work alongside such crypto firms.

According to those cited, a five-member SEC panel will vote on Feb. 15 whether the proposal proceeds to the next stage.

A majority vote — 3 votes out of 5 — will be needed in order for the rest of the SEC to officially vote on the proposal. If that is approved, the proposal would be amended with feedback where necessary.

While the SEC has deliberated on what should be required to be a qualified custodian of cryptocurrencies since as early as March 2019, the people familiar with the matter said it isn’t clear what specific changes the U.S. financial watchdog is seeking.

If finalized, Bloomberg explained that some crypto firms might have to move their customer’s digital asset holdings elsewhere.

The report added that these financial institutions might be subject to “surprise audits” related to their custodial relationships or other ramifications.

Related: SEC chair issues warning to crypto firms after action on Kraken staking

The news of Wednesday’s vote proposal comes on Jan. 26 report from Reuters suggested that the SEC would soon come after Wall Street investment advisers over how they’ve offered crypto custody to their clients.

In recent days, the SEC has had its hands full with Paxos Trust — the stablecoin issuer of Binance USD (BUSD) — which they believe to have issued as an unregistered security.

Paxos said they will be prepared to “vigorously litigate” if necessary.

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Aave Launches Stablecoin GHO on Ethereum Goerli Testnet with Open Source Codebase and Audits

Aave Launches Stablecoin GHO on Ethereum Goerli Testnet with Open Source Codebase and AuditsAave Companies, the firm behind the decentralized finance (defi) project Aave, has announced the launch of a stablecoin called GHO on the Ethereum testnet network Goerli. The codebase is available on Github and has undergone audits by Open Zeppelin, Sigmaprime and ABDK. Aave Invites Programmers to Test GHO Before Mainnet Deployment On Thursday, Aave Companies […]

Best Wallet Raises $5M in New Crypto Presale, Expert Predicts 10x Potential

Elementus Raises $10 Million to Bring Clear Blockchain Analytics to Institutional Customers

Elementus Raises  Million to Bring Clear Blockchain Analytics to Institutional CustomersElementus, a New York-based blockchain firm, has raised $10 million as part of its Series A-2 funding round, led by Web3 VC company Parafi Capital. The raise, which values the company at $160 million, aims to allow Elementus to keep improving its processes for providing effective and sound blockchain analytics to Web3 companies and government […]

Best Wallet Raises $5M in New Crypto Presale, Expert Predicts 10x Potential

Snowden to Musk: ‘I Take Payment in Bitcoin’; Big Short Investor Says Audits of Exchanges like Binance and FTX Are ‘Meaningless,’ and More — Week in Review

Snowden to Musk: ‘I Take Payment in Bitcoin’; Big Short Investor Says Audits of Exchanges like Binance and FTX Are ‘Meaningless,’ and More — Week in ReviewAhead of the holidays and new year, the former U.S. National Security Agency (NSA) contractor known to the world as a staunch privacy advocate and whistleblower, Edward Snowden, has offered to step up as the new CEO of Twitter after current “Chief Twit” Elon Musk has said he is stepping down. In other news from […]

Best Wallet Raises $5M in New Crypto Presale, Expert Predicts 10x Potential

Report: SEC Heightens Probe Into Auditors Servicing Crypto Exchanges

Report: SEC Heightens Probe Into Auditors Servicing Crypto ExchangesAccording to the U.S. Securities and Exchange Commission’s Paul Munter, the agency’s acting chief accountant, the U.S. regulator is monitoring proof-of-reserves (POR) more closely. “We’re warning investors to be very wary of some of the claims that are being made by crypto companies,” Munter explained to the Wall Street Journal (WSJ) on Dec. 22. SEC […]

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Binance addresses 7 instances of recent FUD via Chinese blog post

Binance is fighting back against the tsunami of FUD it has faced in recent weeks.

The world’s largest crypto exchange, Binance, has been dealing with a torrent of FUD (fear, uncertainty, and doubt) since the downfall of FTX. The firm is now fighting back with its latest blog post.

On Dec. 22, Binance published a blog post in Chinese to address seven key issues the company wanted to clear up. At the time of writing, there was no English language version available.

The first of which was the temporary suspension of USDC withdrawals earlier this month. It explained that this was done during a “token swap” conversion period, with the exchange consolidating its stablecoin reserves into BUSD.

The next thing it addressed was the availability of sufficient reserves for withdrawals. It confirmed that “all users’ assets in Binance are supported 1:1,” and that its financial status was very healthy since it makes ample profit on transaction fees. On Dec. 16, CryptoQuant verified Binance's reserves, reporting that there was no “FTX-like” behavior.

“Binance will not embezzle users’ funds for any transactions or investments, nor does it have any debts, nor is it on the list of creditors of any company that has recently gone bankrupt.”

Regarding Mazars and the “Big Four” auditing firms refusing to work with crypto companies, it said that encrypted on-chain verification was a new field that these companies may not have the capacity to carry out.

It noted that these audits are typically aimed at the financial situation of the listed company, not verifying reserve assets.

Mazars has since removed Binance's audit reports from its website. Binance also stated that it did not need to disclose financial information because it was a private company, not a listed one.

“In many jurisdictions where we operate, we have shared or are sharing operational and financial information as required by local regulators.”

Regarding a Reuters report claiming that the U.S. Department of Justice was investigating the company, Binance stated that mainstream media has been targeting the company with salacious reporting for quite a while now. It added that it had the most compliance licenses in the world and spent the most fighting crypto crime.

Related: SBF risks 115 years in jail, Binance’s FUD, and auditors quit crypto

Finally, the blog post reiterated CEO Changpeng Zhao’s comments that Binance did not destroy FTX; FTX did that itself. Binance does not regard other exchanges as competitors, it said, adding tha“we are more focused on continuously promoting and expanding industry adoption.”

So there you have it. The FUD has been refuted but that hasn’t prevented an exodus from the exchange in recent weeks as investors moved to self-custody their crypto assets.

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Accounting Firm Mazars Stops Proof-of-Reserve Audits for Crypto Firms, Binance Audit Removed From the Web

Accounting Firm Mazars Stops Proof-of-Reserve Audits for Crypto Firms, Binance Audit Removed From the WebThe accounting firm Mazars Group has stopped doing proof-of-reserves (POR) audits for cryptocurrency exchanges and the recently published Binance POR has been removed from the web. Mazars was conducting a number of POR audits for crypto exchanges like Binance, Crypto.com, and Kucoin following the FTX collapse last month. Mazars Group Pauses Crypto Company Audits, Binance […]

Best Wallet Raises $5M in New Crypto Presale, Expert Predicts 10x Potential