Arbitrum-based Rodeo Finance exploited for second time, $1.5M stolen

July 11, 2023 Coin Telegraph

Arbitrum-based Rodeo Finance exploited for second time, .5M stolen

The exploiter manipulated price oracles to gain the upper hand on trades executed using the manipulated price.

Arbitrum-based decentralized finance (DeFi) protocol Rodeo Finance was exploited for $1.53 million on July 11. The DeFi protocol was exploited using a code vulnerability in its Oracle, leading to a loss of over 810 Ether (ETH).

According to data shared by blockchain analytic firm PeckShield, the exploiter later bridged the stolen funds from Arbitrum to Ethereum and swapped 285 ETH for unshETH. The exploiter then deposited the ETH on Eth2 staking. Finally, the exploiter routed the stolen ETH using the popular mixer service Tornado Cash, which exploiters often use as an exit route to obscure the transaction’s footprint.

*Movement of funds from Rodeo exploiter. Source: PeckShield*

The exploiter used time-weighted average price oracle manipulation, which is used by DeFi protocols to calculate the average price of an asset for a specific time frame and mitigate price fluctuation due to market volatility.

However, it offers a vulnerability for exploiters to manipulate these oracles by artificially skewing the calculated average price of an asset. This allows them to gain the upper hand and exploit the protocol during a transaction.

An exploiter first borrows a large sum of an asset and then artificially manipulates the price to buy the same asset at a deflated price. Later, the exploiter returns the loan and makes a profit based on the low price managed by manipulations.

The exploiter wallet address still holds over 374 ETH, and Etherscan has marked the address as linked to the Rodeo exploit. The DeFi protocol had $20 million in total value locked (TVL), falling below $500 after the exploit.

*Rodeo Finance TVL post exploit. Source: DefiLlama*

The exploit also tanked the price of the native token of the DeFi protocol, dropping over 53% in the past 24 hours.

*Rodeo Finance token price tumble post exploit. Source: CoinGecko*

In 2023 alone, there have been 21 recorded incidents of some form of exploit on the Arbitrum Network, with a combined loss of over $20 million. The latest exploit of $1.53 million makes it the fifth largest recorded on Aribitrum in 2023. Rodeo Finance was also exploited on July 5 for around $89,000 due to a vulnerability in their mintProtocolReserves function.

Collect this article as an NFT to preserve this moment in history and show your support for independent journalism in the crypto space.

Magazine: Should you ‘orange pill’ children? The case for Bitcoin kids books

Shiba Inu Altcoin Rips After Shytoshi Kusama Reveals ‘Shibapendence Day’ Ahead of Imminent Layer-2 Launch

July 9, 2023 The Daily Hodl

Requiring DEXes to register with SEC like other exchanges is ‘impossible’, says Coinbase CLO

June 14, 2023 Coin Telegraph

Coin Telegraph

“The SEC is attempting to front run Congressional action by baking unsupported assumptions about its crypto jurisdiction into the proposed rules," said Paul Grewal.

Paul Grewal, chief legal officer of United States-based cryptocurrency firm Coinbase, has pushed back against a proposed rule change from the Securities and Exchange Commission (SEC) which could change the definition of an exchange and how digital assets are regulated.

In a June 14 Twitter thread, Grewal said the SEC proposal “tries to fit a square peg in a round hole” and was “too flawed on process and substance to move forward”. He was referring to the SEC extending the comment period for a proposed rule change in the Securities Exchange Act of 1934 which could have securities laws apply to decentralized exchanges in the same way they currently apply to securities exchanges.

“Requiring a DEX to register in the same way as a national securities exchange is impossible,” said Grewal. “Requiring the impossible violates the [Administrative Procedure Act]. And simply saying there is no economic data doesn’t absolve the SEC from conducting economic analysis, especially when that data exists.”

He added:

“The SEC is attempting to front run Congressional action by baking unsupported assumptions about its crypto jurisdiction into the proposed rules.”

Some U.S. lawmakers and crypto advocacy groups including the Blockchain Association have also criticized the SEC proposal, claiming the rule change would allow the commission to exceed its authority and expand its purview to a range of financial products not equipped to handle such regulatory requirements. According to the Coinbase CLO, there was a path forward with the proposed rule change, requiring “robust consideration of the profound differences between a DEX and a traditional exchange”.

Yesterday we filed a comment letter on the @SECGov proposed rule that seeks to expand the definition of exchange to include DEXs. Tl; dr: this proposal should NOT be adopted, and certainly not before completing the threshold steps for any rulemaking. 1/11 https://t.co/fBXAYiWb4W
— paulgrewal.eth (@iampaulgrewal) June 14, 2023

Coinbase’s comments came amid the SEC being at the forefront of attention in the U.S. concerning the regulation of cryptocurrency. The commission has filed separate lawsuits against Binance and Coinbase for alleged violations of securities laws, prompting backlash from lawmakers calling for SEC chair Gary Gensler’s removal.

Prior to the SEC lawsuit — but following a Wells notice suggesting a potential enforcement action — Coinbase filed a reply in support of its July 2022 petition for a writ of mandamus in an attempt to force the commission to provide regulatory clarity for firms seeking to register. As of June 13, the SEC was awaiting the results of an appeal filed in federal court requesting 120 days to respond to Coinbase’s request.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

Uniswap releases version 4 code, allowing for new types of liquidity pools

June 13, 2023 Coin Telegraph

Automated Market Maker

The new version features “hooks” that will allow for more customized options, but it will not be implemented until more feedback is obtained from the community.

Uniswap Labs has released a draft of the code for Uniswap V4, according to a June 13 blog post from Uniswap’s Founder, Hayden Adams. The new code features “hooks” or plugins that allow developers to create custom liquidity pools.

Uniswap is the largest decentralized crypto exchange in the world by volume. Its latest version is V3 and was deployed on May 4, 2021.

*Uniswap's official user interface. Source: Uniswap*

According to the post, V4’s “hooks” feature will allow future developers to create on-chain limit orders, automatic deposits to lending protocols, auto-compounded liquidity provider (LP) fees, and many other innovations to the exchange once it is implemented.

Releasing the source code is the first step to launching a new version of Uniswap. The team now plans to converse with members of the Uniswap community and iterate on this base code over time. Once enough consensus has been built around a final version of it, V4 will go into a formal proposal and be placed before Uniswap’s governing body, UniswapDAO.

According to Adams’ post, Uniswap V4’s purpose is to “create a way for pool deployers to introduce code that performs a designated action at key points throughout the pool’s lifecycle – like before or after a swap, or before or after an LP position is changed.”

For example, deployers will be able to create time-weighted average market makers (TWAMMs) that allow users to sell large amounts of crypto in small batches over time. This may help traders to avoid being frontrun by EVM bots or to suffer adverse price movements. On-chain limit orders will also be possible, as pools will be able to incorporate logic that lets them fulfill an order only when a token hits a particular price.

Some other examples of “hooks” include code which can redeposit fees back into an LPs pool or lend out inventory when a particular pool isn’t being used.

In a conversation with Cointelegraph, Uniswap Labs Engineer Sara Reynolds said the new version will allow automated market maker (AMM) exchanges like Uniswap to develop more rapidly than ever before, thanks to the inherent customizability it allows:

“In V4 what we really start to see is sort of this ‘primitive’ for customized logic[…]and that’s really exciting because I think it will really start to evolve AMM innovation quite fast.”

Uniswap Labs Head of Comms Bridget Frey echoed this sentiment, stating “Right now, other people have to build new AMMs to do a lot of this work. Now, what you’ll be able to do is to build your project with a hook contract on top of Uniswap’s security and liquidity in ways that hopefully make the innovation faster and easier to do for all sorts of projects.”

Decentralized exchanges have seen an influx of new users recently. The top three DEXs experienced a 444% surge in volume after the United States Securities and Exchange sued their centralized competitors, Binance and Coinbase, for allegedly violating securities regulations. This surge occurred even though the SEC has also tried to change the definition of “exchange” to include decentralized ones. Crypto venture capital firm Paradigm has argued that decentralized exchanges do not fit the definition of an “exchange” found in securities laws.

Decentralized Exchanges See Spike in Market Share Amid Regulatory Uncertainty in the US: IntoTheBlock

June 12, 2023 The Daily Hodl

Paradigm slams SEC’s ‘incoherent’ attempt to police decentralized exchanges

June 9, 2023 Coin Telegraph

Coin Telegraph

DEXes are not securities exchanges, argues crypto venture firm Paradigm.

Crypto venture capital firm Paradigm has slammed the United States Securities and Exchange Commission’s attempt to redefine the term “exchange” — which if accepted, would bring decentralized exchanges under its purview.

On June 8, the firm sent a lengthy 14-page letter to the SEC secretary, Vanessa Countryman, regarding the regulator’s proposed redefinition of the term “exchange” in the 1934 Securities Exchange Act.

The SEC plans to revise the 89-year-old legislation to encompass decentralized exchanges (DEXes) and decentralized finance (DeFi) into the definition of "exchange." Because the term DEX contains the word “exchange,” the SEC wants to treat it the same as a securities or stock exchange.

Today, @paradigm commented on the @SECGov's proposed redefinition of “exchange"

Through haphazard rulemaking, the SEC inappropriately attempts to bring crypto trading platforms, including DEXs, under its remit and regulate them as securities exchangeshttps://t.co/ibv2u1n9VU
— Rodrigo (@RSSH273) June 8, 2023

Paradigm, however, argues that fundamental differences between DEXs and exchanges make treating them as “exchanges” under the Act both “invalid and incoherent.”

“It thus appears that after suing Coinbase for failing to do the impossible — registering as a securities exchange when it was incapable of doing so — the Commission now intends to force DEXs into the same Hobson’s choice.”

Paradigm’s legal counsel, Rodrigo Seira, commented that through this “haphazard rulemaking, the SEC inappropriately attempts to bring crypto trading platforms, including DEXs, under its remit and regulate them as securities exchanges.”

In March 2022, the SEC proposed changes to the Act to include systems that “offer the use of non-firm trading interest and communication protocols to bring together buyers and sellers of securities.” In other words, any platforms that facilitate digital asset exchange or swaps.

Paradigm argues that DEXs neither serve as intermediaries nor have an “organization, association, or group of persons” that maintains the exchange.

Instead, they used market-making algorithms to balance pools of crypto assets that potential buyers or sellers can freely access. Additionally, DEXs run on self-executing code and smart contracts, not associations or groups of people, it argued.

The SEC has pulled no punches this week with twin lawsuits against two of the world’s largest crypto exchanges, Binance and Coinbase.

Furthermore, years of SEC action against crypto have seen the agency deem at least 67 digital assets as securities. However, Congress has yet to pass any official legislation for crypto markets classifying them as such.

Meanwhile, Cointelegraph revealed that enforcement action by the federal regulator targeting crypto companies surged 183% in 6 months after the FTX collapse.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

SEC crackdown on Binance and Coinbase surge DeFi trading volumes 444%

June 7, 2023 Coin Telegraph

Coin Telegraph

Total daily trading volumes on decentralized exchanges have surged by nearly $800 million over the past two days.

The median trading volume across the top three decentralized exchanges (DEX) jumped 444% in the past 48 hours as crypto investors reeled from the United States securities regulator's recent legal actions against cryptocurrency exchanges Coinbase and Binance.

According to aggregated data from CoinGecko, total daily trading volumes on Uniswap V3 (Ethereum), Uniswap V3 (Arbitrum) and Pancakeswap V3 (BSC) — which account for 53% of the total DEX trading volume in the last 24 hours — increased by more than $792 million between June 5 and June 7.

*Trading volume on Uniswap V3 (Ethereum) in the last 7 days. Source: CoinGecko.*

Additionally, the trading volume on Curve, a DEX that allows for the trading of stablecoins spiked by 328%. At the time of writing the bulk of the trading activity on Curve is focused on trading the U.S. Dollar-pegged stablecoins USD Coin (USDC) and Tether (USDT).

Trading volumes on DEXs briefly surpassed those of Coinbase during May’s memecoin frenzy. Crypto investors rushed to purchase tokens such as Pepe (PEPE) and Turbo (TURBO) through Uniswap and a number of other decentralized protocols as the memecoins were not listed on major centralized exchanges.

As DEX volumes surged, net outflows — the difference between the value of assets entering and exiting the exchange — on Binance reached a staggering $778M. It’s worth noting that current net outflows are still much lower than the exchange’s total reserve. At the time of writing Binance maintained a stablecoin balance of more than $8 billion.

Netflow to Binance over the past 24 hours is $778.6M negative on Ethereum - $871.7M in and $1.65B out

Over the past hour, netflow on Ethereum continues to be negative at $35.7M on Ethereum - $14.8M in and $50.5M out

Track it here https://t.co/nwTgpXWhZY and filter for "Binance" pic.twitter.com/jnNAN0QKVy
— Nansen (@nansen_ai) June 6, 2023

The market frenzy comes amid a swathe of legal action against crypto exchanges by the Securities and Exchange Commission (SEC). On June 6, the SEC sued Coinbase alleging it offered unregistered securities and acted as an unregistered securities broker among other charges.

A day earlier on June 5, the SEC sued Binance, Binance.US and Binance CEO Changpeng Zhao (CZ) under similar allegations. The SEC alleged Binance failed to register as a securities exchange and was therefore illegally operating in the U.S.. According to the charges Zhao was sued as a “controlling person."

Magazine: Tornado Cash 2.0 — The race to build safe and legal coin mixers

Atlanta Fed explains Web3 finance, including XRP ‘international payment medium’

May 26, 2023 Coin Telegraph

Coin Telegraph

The highly accessible introductory text mentions all the concepts and names a curious reader would need, along with some assessments.

The Federal Reserve Bank of Atlanta has piqued the interest of the crypto community with a recent publication in its Policy Hub series on the implications of Web3 for financial services. The 17-page paper by Christine Parlour, a professor at the University of California, Berkeley Haas School of Business, is intended as a basic text, and is noteworthy for its completeness.

The paper begins with an discussion of blockchains, explaining that “data are sorted and stored in specific locations called ‘wallets’ or ‘addresses.’” After providing the necessary background, Parlour looks at decentralized finance (DeFi) and financial infrastructure.

Parlour mentions the regulatory challenges of decentralized autonomous organizations (DAOs), which do not have “an obvious legal entity” to engage with. Furthermore:

“The darker side of using tokens as collateral is that it generates interconnectedness among various protocols, which makes estimating or understanding systemic risk more challenging for regulators.”

Parlour’s discussion is rich with brand names of lending protocols and stablecoins.

Web3 financial infrastructure provides advantages over traditional finance in the cost and speed of transacting, Parlour says. Trade finance can be significantly improved through cost reductions along the supply chain, for example.

The paper touches on central bank digital currency (CBDC) as it discusses foreign exchange and looks at the recently launched Project Mariana that attempts to apply DeFi protocols for foreign exchange. Parlour mentions Stellar and Ripple and describes Ripple’s XRP (XRP) token as “envisioned as an international payment medium or wholesale settlement coin.”

Ripple has garnered much attention for its deals with states such as Montenegro for the development of CBDCs. There has been much speculation about United States Federal Reserve plans to introduce a CBDC, which the Fed has not confirmed. Parlour gives no indication of any plans of this type, or that the Fed is thinking of using XRP for any purpose.

The Atlanta Fed released a report re: Web3 & finance that mentions #Ripple. They describe #XRP as an "international payment medium or wholesale settlement coin." "Wholesale settlement" is interesting context. Also a brief overview of Project Mariana.https://t.co/pzazPU8zvu pic.twitter.com/2LAC74RwSR
— WrathofKahneman (@WKahneman) May 25, 2023

Ripple is also in a legal dispute with the Securities and Exchange Commission over the status of XRP as a security.

In addition, Parlour discusses tokenized bank deposits, a concept promoted by the USDF Consortium, whose CEO Robert Morgan recently told a U.S. House of Representatives hearing about that technology, describing it as a “third way” between traditional finance and DeFi.

Magazine: Ripple, Visa join HK CBDC pilot, Huobi accusations, GameFi token up 300%: Asia Express

Uniswap will deploy on Polkadot parachain Moonbeam

May 17, 2023 Coin Telegraph

Coin Telegraph

The decentralized exchange gets a Polkadot version via the Moonbeam network.

The Uniswap crypto exchange will soon be available on Moonbeam (GLMR), a parachain of Polkadot (DOT), according to a May 17 approved proposal on the exchange’s governance forum. The proposal was put forward by educational group Blockchain at Michigan. It passed with near unanimous support, with only a single UNI token being used to vote against it.

1/ @Uniswap - the most popular decentralized exchange by daily traded volume - is coming to Polkadot via the @MoonbeamNetwork parachain, increasing volume & liquidity across the ecosystem! pic.twitter.com/lKaceLv6ce
— Polkadot (@Polkadot) May 17, 2023

The smart contracts for the exchange have already been deployed to Moonbeam, and the only tasks left to fully launch it are “front-end integration updates and including Moonbeam to the auto router,” the proposal stated.

Initial liquidity on the exchange may be low, as the proposal warns that “Due to tumultuous market conditions, promises of liquidity bootstrapping have been temporarily excised.” However, it also states that Blockchain at Michigan is exploring the idea of applying for a Moonbeam grant to provide liquidity as soon as possible. If a grant is approved, it would be “on behalf of the DAO,” the proposal said, implying that funds would be held by Uniswap’s decentralized autonomous organization.

In an accompanying announcement from Polkadot developer Parity Technologies, business development executive Omar Elassar said he thought the new version would help to increase speed and security for Uniswap users:

Polkadot is a strong fit for Uniswap, whose users can discover everything the network's parachains offer, such as high performance, scalability, security, and interoperability.

Polkadot is an interconnected web of blockchain networks called “parachains.” These chains connect to each other and share security through the Polkadot relay chain. The Moonbeam parachain is specifically focused on providing a developer environment similar to Ethereum, with the goal of making it easy for developers to port their Ethereum apps over to the Polkadot ecosystem.

Uniswap is the largest decentralized exchange (DEX) in the world by trading volume, doing over $480 million in trading per day according to CoinMarketCap. It was originally created for the Ethereum network, but has been aggressively expanding into other networks over the past few months. Uniswap launched a BNB Chain version on March 15 and deployed to Polygon zkEVm on April 14. It also produced an iOS mobile app on April 14 to facilitate onboarding of more users.

Bitcoin-Based Decentralized Exchange Token Surges 158% in Just Seven Days, Defying Crypto Downtrend

May 13, 2023 The Daily Hodl

Decentralized Exchange

Share this video