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Arbitrum airdrop: Hacked vanity addresses used to siphon $500K

The tokens were stolen by someone who compiled vanity addresses eligible for ARB airdrops.

Hacked vanity addresses have reportedly been used to steal $500,000 worth of tokens from layer-2 scaling solution Arbitrum’s March 23 airdrop.

A vanity address is a customized cryptocurrency address containing specific words or phrases chosen by the user, aiming to make them more personal and easily identifiable. However, the safety of vanity addresses is questionable.

The tweet explained that the tokens were stolen by someone who compiled vanity addresses that were eligible to receive ARB tokens, then generated similar addresses using vanity address generators, directing the airdropped tokens to them instead. The hacking of these vanity addresses makes it impossible for the original owners to claim their ARB tokens.

Several crypto users have expressed sadness as they tweeted about their stolen ARB tokens. Most individuals affected are unaware of the reason behind the loss and have no idea what to do about it.

Creating a vanity address requires using special software or services that could potentially compromise the security of users’ private keys. Hackers who gain access to the private key could steal any crypto assets tied to that address.

Related: Arbitrum airdrop sells off at listing, but traders remain bullish on ARB

Arbitrum's token giveaway caused a lot of excitement and overwhelmed several websites. However, according to Nansen, there are still 428 million ARB tokens available to claim. As of late Thursday, around 240,000 addresses had not yet claimed their governance tokens, even though 61% of eligible crypto wallets had already done so. The 428 million unclaimed tokens, worth nearly $596 million at press time, represent 37% of the total 1.1 billion ARB allocated for Arbitrum’s airdrop.

Considering these figures, certain eligible addresses that haven’t been able to claim their token could be in the category of hacked addresses.

This isn’t the first time vanity addresses have been compromised by scammers in the crypto space. In January, Metamask warned crypto users about address poisoning.

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Coinbase Tries AI Assistant Chatgpt for Pre-Listing Risk Assessment of Tokens

Coinbase Tries AI Assistant Chatgpt for Pre-Listing Risk Assessment of TokensCrypto exchange Coinbase has tested Openai’s Chatgpt as a token verification tool comparing it with its standard security procedure. In over half of the cases, the AI platform produced the same results as the manual review, but it also failed to recognize some high-risk assets. Chatgpt Approves 5 High-Risk Tokens, Coinbase May Use It for […]

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Metaverse brings new problems and opportunities to music licensing

With the rising popularity of Web3 and the metaverse, songwriters and musicians are wondering what music licensing will look like in this new space.

The term “metaverse” is becoming increasingly common, but while many people have likely heard it used, they often don’t know what it means. 

It can be difficult to explain the term to someone outside the Web3 space, as the metaverse is still relatively new and evolving. The most important thing to know is that it has the potential to revolutionize the internet and how people live, work and play.

The metaverse is a new frontier of innovation and creativity, centered a great deal around media, which should come as no surprise since many Web2 apps are as well, especially music.

There are entire social media platforms dedicated to sharing music, and those that aren’t have incorporated music in other ways. While this has increased awareness about music licensing in digital spaces, it has also highlighted that some systems in place are outdated and struggling to keep up with the breakneck pace of new technology.

With new possibilities for music in the metaverse, the current licensing system may need to be revamped, given the changing ways music is created and consumed, especially with Web3 innovations like nonfungible tokens (NFTs).

Music in the metaverse has had great success. Many top-name artists have performed concerts in the space, and many artists have seen the appeal of releasing music as NFTs.

Despite the uncertainties and the evolving landscape of Web3, licensing music in the metaverse has massive potential.

Current licensing challenges

Technology is rapidly advancing in the Web3 space, and given how new it all is, there are many kinks to work out. Presently, the metaverse is all about experimentation, so if something fails organically, it will serve as a lesson to others.

Despite much experimentation in the metaverse, licensing remains undeveloped. For Web2 social media platforms, there is a known standard on licensing, and what can and cannot be done. This does not currently exist in the metaverse. The mixture of set standards and laws surrounding copyright and licensing isn’t as concrete as needed for a solid licensing landscape.

Spottie Wifi, a musician and Web3 proponent, sat down with Cointelegraph to discuss the current state of licensing in the metaverse.

“There is a difference between traditional licensing for music and licensing music in the metaverse. The main difference I have seen is that a music license for the metaverse needs to clearly include the metaverse as a distribution channel listed within the scope of the license, or the scope of the license should be so broad that the metaverse would naturally be included,” he said.

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This would undoubtedly be a simple solution to what is often seen as a nuanced issue. Still, compared with Web2, there are complications around music licensing in Web3 — thanks to NFTs.

“I recorded a concept album in 2021 about life in the metaverse, and I sold the album as an NFT collection, which grants the NFT holders a license to use and commercialize the music however they like while I still retain ownership of my masters and publishing,” added Spottie Wifi.

“There are NFT collectors that use music in this way in the content they develop, including metaverse experiences, video games, podcasts, films and advertisements.”

Musicians want to avoid exploitation and ensure that their music is used appropriately. This requires properly enforcing intellectual property (IP) rights, which is a complicated process in the metaverse.

“For now, the most effective means of enforcing IP rights as a songwriter in the metaverse is probably to simply enforce those IP rights on Web2 platforms like YouTube, Instagram, etc., through what is known as Content ID. Content ID is an automated system that removes content from those platforms if that content infringes someone’s music copyright,” Spottie Wifi explained. “This can help enforce copyright in the metaverse because a lot of content that is broadcast in the metaverse still comes from those Web2 platforms.”

This brings to light another issue surrounding copyright. If users can create their own virtual spaces or events within the metaverse, they will likely want to include copyrighted music as a part of their creation, just like on social media platforms. This could raise issues around obtaining the necessary licenses to use the music, and monitoring and enforcing those licenses.

As the metaverse is likely to be global, determining who monitors and enforces licenses could pose challenges because copyright law, performance rights, music licensing and regulation would be cross-jurisdictional. The global aspect also causes other issues outside of copyright, with questions about how to properly compensate musicians when their work does get used. As a standard for music licensing gets set for this space, royalty structures that differ from traditional music licensing models could be complex.

Licensing potential in the metaverse

Broadcasting music into the metaverse from Web2 platforms to protect artists might be the easiest thing to do now, but this method will become outdated when music licensing in the metaverse provides more protection.

According to Hendrik Hey, founder of media licensing firm Media Industry Licensing Content — a blockchain-based content licensing company — a new approach to licensing is on the horizon.

“There is a simple interface being developed where any musician can enter their license information. Licensing music in the metaverse works with the addition of blockchain technology. In a blockchain, anyone who knows what they are doing can create a hash in which they store all the information relevant to the license. The assets that someone would want to license are then found in the metaverse itself,” Hey told Cointelegraph.

While not entirely theft-proof, the blockchain hash is relatively safe and transparent, and could make the licensing process much easier.

“The blockchain hash will be automatically generated and would then serve as proof that the information of the license is correct. It is important to be able to prove that you are the true owner of a license and that the information is accurate, and the blockchain can clearly show who the real owner is in the event of a legal dispute,” Hay added.

The developments Hey discusses would simplify the process, as the places where the music is found would provide explicit information about what the licensor wants. The user could then decide if they want the license or not. This cuts out many steps, gets everyone to their destination quickly and can set standards currently missing in the space.

Recent: Web3 a hot topic at SXSW despite bear market and declining interest in NFTs

From developmental and artistic perspectives, the future of the metaverse is bright, with massive potential for success and high earnings for content creators.

When Spottie Wifi sold his album as an NFT collection, he generated $192,000 in just 60 seconds. The revenue went directly to his wallet, and intermediaries were cut out. With NFT releases, the artists own their music and increase potential revenue.

The metaverse could become the new mainstream as its popularity increases. With people like Hey developing the space, and artists like Spottie Wifi experimenting with it, music licensing will become less complicated and no longer fold under the pressure of digital spaces.

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Microsoft Is Testing an Ethereum Wallet in Its Edge Web Browser

Microsoft Is Testing an Ethereum Wallet in Its Edge Web BrowserMicrosoft, the software conglomerate, has introduced an Ethereum-based cryptocurrency wallet in the testing version of its Edge web browser. The new feature, which software sleuth Albacore discovered, is named “Crypto Wallet” and would allow users to store and transact Ethereum and Ethereum-based tokens in a non-custodial way, acting like a Metamask clone. Microsoft Introduces Ethereum […]

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Real-world assets tokenization lacks infrastructure, not just regulation

Next-generation of securities, assets tokenization has been held back by lack of infrastructure, as well as regulatory standards worldwide according to BlackRock's Larry Fink.

The merger between decentralized finance (DeFi) and traditional assets, has been held back by lack of infrastructure and regulatory standards worldwide, sources recently told Cointelegraph. 

"There simply haven’t been good institutional grade systems for these companies to get involved. Obviously, they’re not going to just run their whole system using a regular blockchain wallet and centralized exchanges," said Colin Butler, global head of Institutional Capital at Polygon.

Tokenization is a path to fractionalization, allowing more people to own a portion of an asset that would have to be sold as a whole before under a higher value. Estimates from Big Four firm PwC set global assets under management to reach $145.4 trillion by 2025, a massive market expected to welcome more investors and, thus, improve assets' liquidity through tokenization.

Institutional investors — meaning players managing this capital across the world — are seeking "services that work well with what they’re already doing, that are easy to implement, flexible and upgradeable," noted Butler.

Polygon said it has been working with many of those global players. In January, investment firm Hamilton Lane announced the first of three tokenized funds backed by Polygon blockchain, bringing part of its $824 billion in assets under management on-chain. By tokenizing its flagship Equity Opportunities Fund, Hamilton Lane was able to lower the minimum required investment from an average of $5 million to $20,000.

Another example was JPMorgan. In November, the American giant executed its first cross-border DeFi transaction on a public blockchain. The initiative was part of a pilot program exploring DeFi potential for wholesale funding markets. The trade was also performed on the Polygon network.

Despite recent progress on integrating DeFi into traditional markets, the lack of clarity regarding regulations continues to keep many from embracing emerging technologies. One of the major questions about this topic is: what are securities? The United States Securities and Exchange Commission (SEC) has beenasserting through enforcement actions that this definition may apply to a broader range of assets and services than many crypto firms expected. As Butler stated:

"If you tokenize a security, does the digital token become a security itself, or just represent one?" 

Jez Mohideen, co-founder and CEO at Laser Digital, the crypto arm of Japanese banking giant Nomura, believes the lack of regulation is affecting digital asset risk management, as it prevents firms from effectively separating units and business models.

"More regulation is especially necessary in certain parts of businesses, for example, making sure capital is looked after by individuals with fiduciary responsibilities. As more and more regulatory enforcement of this nature comes into play, there will be an increasing amount of institutional interest," he told Cointelegraph.

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Signum Digital scores approval to offer security tokens in Hong Kong

Hong Kong’s Security and Futures Commission greenlights Signum Digital to offer security tokens in the city after inviting applications for virtual asset trading licenses.

Signum Digital, a joint venture of Coinstreet and Somerley, has announced that it has received an approval-in-principle from the Hong Kong Securities and Futures Commission (SFC) for its security token offering (STO) and subscription platform.

Security tokens are a new category of digital assets built on blockchain technology representing ownership of tangible assets, such as private equities, real estate, art and collectibles. By being linked to real-world assets, the tokens may lower risks for potential investors, facilitate research processes and provide a foundation for the market value of the investment opportunity.

Signum Digital has claimed that, following the receipt of final authorization from Hong Kong’s SFC, it will manage the STO platform using the brand name “CS-Pro.“ This platform will be a pioneering development in Hong Kong, according to Signum.

Last month, the Hong Kong SFC released preliminary regulations for virtual asset trading platforms and urged the general public to provide their input. Under the upcoming licensing system scheduled to begin in June, the SFC mandated that digital currency exchanges submit license applications that would let everyday investors trade specific high-capitalization tokens.

Hong Kong has been proposing new initiatives for the city’s cryptocurrency and digital asset sector since last year when it invited firms interested in providing STO services to pitch proposals.

Related: Hong Kong’s losses to crypto scams doubled to $217M last year: Report

Cryptocurrency exchange Huobi Global also announced last month that it is applying for a license to operate in Hong Kong, possibly moving headquarters from Singapore to the special administrative region.

Recently, Hong Kong has displayed much interest in becoming a crypto hub, investing heavily in supporting the potential of technologies like Web3.

In mid-December 2022, Hong Kong launched its first two exchange-traded funds for cryptocurrency futures, which raised over $70 million ahead of its debut. The event came soon after the head of Hong Kong’s SFC announced in October that Hong Kong is willing to distinguish its crypto regulation approach from the Chinese crypto ban enforced in 2021.

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Developed markets lagging behind in digital payments: BlackRock CEO

In a letter to investors, BlackRock CEO Larry Fink highlighted the benefits of digital assets and said developing nations like the U.S. are lagging behind in innovation.

The CEO of American investment company BlackRock, Larry Fink, highlighted the potential of digital assets and tokenization for the asset management industry in his annual chairman’s letter to the company. 

The letter was published on March 15 and addressed various topics of interest to the firm over the last year, including digital assets. Fink highlighted the rising and sustained interest in these types of assets despite the FTX catastrophe.

He said beyond the hype, “interesting developments” are happening in the space. He especially noted the “dramatic advances” in the digital payment solutions that help forward financial inclusion in many emerging markets like India, Brazil and Africa.

However, according to Fink, developing markets are not at the same pace innovation-wise:

“By contrast, many developed markets, including the U.S., are lagging behind in innovation, leaving the cost of payments much higher.”

BlackRock currently manages around $8 trillion in assets and is one of the largest asset managers in the world. Fink said the asset management industry could have some “exciting applications” of the technology underlying these digital asset innovations.

Specifically, he praised the tokenization of asset classes with their potential in “driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”

His statement ended not leaving out the risks and need for regulation of the crypto space but still pointing out that the company will be further exploring digital assets going forward.

Related: It’s not the end of crypto: EU asset manager gives 5 reasons why

This is not the first time Fink has made commentary on decentralized finance. After the fall of FTX, he commented that the FTX Token (FTT) caused the exchange’s downfall because it goes against “the whole foundation of what crypto is.

However, in the same conversation, he openly called the underlying technology of crypto and the blockchain revolutionary.

Back in September 2022, BlackRock released a new exchange-traded fund that invests in 35 blockchain-related companies.

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Tokenized mortgages can prevent another housing bubble crisis, says Casper exec

Current mortgage term sheets lack transparency because they are not machine-readable, according to Ralf Kubli, board member of the Casper Association.

The 2008 financial crisis was a devastating time for many, as the collapse of the United States real estate market caused ripple effects impacting the employment and livelihoods of millions of people.

According to TheStreet, one of the chief causes of the crisis was the opaqueness of the mortgage industry. Mortgages were bundled into packages called “mortgage-backed securities (MBS)” that could be bought and sold by banks and other investors who relied on rating agencies to determine how risky the securities were.

The banks sometimes “packaged AAA-rated securities with lower-quality ones, and these bundles were passed off as top-rated securities when they were sold to investors.” These investors didn’t necessarily understand that they were buying low-quality securities, which were likely to be defaulted on, leading to massive losses once the crisis revealed the truth.

According to Ralf Kubli, a board member of the Casper Association, this fundamental problem that sparked the crisis still exists, but it can be fixed through blockchain technology.

Kubli hails from both the traditional finance sector and the crypto industry. He has previously worked in various mergers and acquisitions, sales and executive management positions at Sika, Starmind International, BCM Europe, and other companies. In 2021, he joined the Casper Association board, a nonprofit promoting the Casper blockchain network.

He told Cointelegraph that tokenization of mortgages could allow them to become “observable, verifiable and enforceable” on a public blockchain, making the mortgage industry more transparent and helping to avoid the kind of surprises that arose during the 2008 crisis.

Interpreting paper agreements in a digital world

When financial agreements are written, they are put on “pages and pages of paper,” Kubli explained. Afterward, they are given to analysts and programmers who interpret these written documents as machine-readable code.

However, these analysts often have disagreements, he noted. Under normal circumstances, disagreements are small and can be resolved through negotiations. However, situations like the 2008 financial crisis show that disagreements can sometimes be considerable, causing catastrophic results. As Kubli explained:

“You have a written contract that then gets translated into computer code that then runs in these core banking systems, and after about 40 years when these core banking systems are still running, no one really remembers exactly what they programmed and how they programmed it […] and that gives us the world that you saw in the Big Short [film about the financial crisis].”

Kubli agreed that tokenization can help revolutionize the economy, saying “everything will be tokenized in the future.” However, he claimed that developers need to be careful with how they tokenize mortgages in particular. One way to tokenize mortgages would be to create a PDF file of a term sheet, then put a hash of that file into a token contract. But this would be a “dumb token” that isn’t any better than what we already have in traditional finance.

U.S. home ownership rates plummeted after the crisis in 2008. Source: A Wealth of Common Sense

In his view, for tokenization to succeed, the tokens have to be “smart,” meaning the financial agreement has to be machine-readable and the various parties involved must agree to the code itself. Otherwise, differences in interpretation and analysis will continue, causing future disruption in financial markets.

DeFi doesn’t solve the problem

Lenders and borrowers already accept machine-readable contracts through decentralized finance (DeFi) apps today. When a borrower takes a loan from a DeFi app like Compound, for example, they never sign any legal agreement to repay the loan. Instead, by using the smart contract associated with the app, the borrower is understood to have agreed to the code running within the contract.

However, most DeFi apps require the borrower to put up cryptocurrency as collateral to secure the loan, and the value of the collateral has to be greater than the loan amount. Kubli argued that this limitation prevents DeFi from competing with traditional finance. “In DeFi, you’re not having cash flows over time, in DeFi you’re having collateralized or overcollateralized loans only” but “The world runs on credit, and credit is payment over time” he said.

Some industry experts have argued that “Soulbound” tokens — digital identity tokens representing the characteristics or reputation of a person or company — can extend DeFi into under-collateralized and overcollateralized loans.

However, Kubli emphasized that this only solves the problem of “underwriting the creditworthiness of a counterparty.” It doesn’t allow a stream of cash flows over time to be tokenized.

Digital term sheets

To ensure that the terms of a mortgage are transparent, Kubli believes that a “machine-readable, machine-executable and machine-auditable native digital term sheet” has to be created and agreed upon by all of the counterparties to the mortgage. This agreement must be written as a mathematical formula and entered into a smart contract that is observable, verifiable and enforceable, which he calls a “smart financial contract.”

Kubli said that once a digital term sheet is tokenized through a smart financial contract, defaults can be observed transparently on the blockchain. This can prevent situations like in 2008, where mortgage defaults were unobservable to the people who were trading the mortgages, as he explained:

“The reason why the financial crisis happened [is] because they couldn’t observe and they couldn’t verify that none of these payers in Florida that picked up all these mortgages were not paying […] nobody observed these payment flows […] but the point here is that gives you smart financial contracts which are a completely different animal, then, for the future of finance.”

To the extent that loans have collateral related to them, these can also be tokenized and locked inside smart contracts. For example, the tokenized title to a home or a car can be put inside a smart contract and given to the lender after a certain period should the buyer default.

Once a loan is put into a smart financial contract, Kubli says it can be securitized “with the push of a button.”

For example, say a bank has made loans to plumbers and painters throughout the United States, and there has been some flooding in North Carolina and Virginia. A pension fund may want to buy loans from these states because the plumbers and painters there will have lots of work. The fund should be able to easily purchase a basket of these loans once they are tokenized, “and then securitization is done,” he said.

Open-source standards for tokenization

Kubli argued that for these tokenized financial products to be possible, an open-source standard must be built to define how smart financial contracts can be built. In his view, this has already been done with the creation of Algorithmic Contract Types Unified Standards (ACTUS), available on GitHub.

He said CasperLabs has been working on Nucleus Finance, a project attempting to produce ACTUS-compliant financial products. The team has already produced loans for two clients, one of which is reportedly a major leasing company and the other “is one of the largest infrastructure providers in capital markets in Europe.”

Related: What is the global financial crisis and its impact on the global economy?

However, he said that these products are not being “used productively” by the clients yet, but Nucleus is seeking to find new clients that can benefit from the technology.

Other tokenized mortgage solutions

Kubli is not the only expert to tout tokenized mortgages as the solution to financial crises. Security Token Advisors’ head of research, Peter Gaffney, has written a blog post making a similar argument. He claims that if mortgages undergo “double tokenization,” with mortgage tokens wrapped inside of a larger token to create a tokenized mortgage-backed security, this will “provide transparency to not only the pricing and ratings of the MBS itself, BUT also transparency and ratings to the underlying mortgages.”

Gaffney claims that Security Token Advisors “has seen several promising clients that are working to bring the proper technology to this industry” and will announce these initiatives “as they come to fruition.”

Cointelegraph has reached out to Security Token Advisors for comment but has not received a response by the time of publication.

Several researchers have recently attempted to tokenize various aspects of the mortgage industry. In March 2022, Cointelegraph Research revealed that real estate had become the leading securitized blockchain asset. In June, Citigroup released research suggesting that an increasing number of mortgages may be collateralized with crypto assets, although the investment bank warned that this practice might carry heightened risks.

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Meta Winding Down Support for NFTs on Facebook, Instagram

Meta Winding Down Support for NFTs on Facebook, InstagramU.S. tech giant Meta is giving up on operations with non-fungible tokens (NFTs) amid ongoing turbulence in the crypto space. The company allowed creators to share digital collectibles on its leading social media platforms last year. Meta Platforms Cutting Off Support for Non-Fungible Tokens California-based technology conglomerate Meta is winding down support for digital collectibles […]

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Stargate foundation advises DAO against reissuing STG tokens

The Stargate Foundation, in agreement with FTX liquidators, has advised the DAO that issuing the STG token could put its safety at risk and may violate the automatic stay.

Stargate Foundation has advised its decentralized autonomous organization (DAO) against reissuing Stargate’s native Stargate Finance (STG) token due to concerns raised by FTX liquidators. The liquidators have expressed the belief that such a move would violate the automatic stay and could result in legal repercussions.

In March 2022, Alameda Research, the former cryptocurrency trading firm, purchased the entire STG auction for $25 million. However, in November of the same year, FTX declared bankruptcy, following which FTX and Alameda’s wallets were hacked for roughly $500 million. The liquidators eventually transferred all assets to new wallets.

Related: Modular blockchains could be the next hot crypto market trend in 2023

In light of these events, Stargate DAO has proposed reissuing the STG token to move the funds from the potentially compromised wallet to a safer one. However, the FTX liquidators have rejected this proposal.

Stargate DAO maintains that the liquidators’ concerns are unfounded and that reissuing the STG token would not violate the automatic stay. Stargate tweeted that “nothing in any interaction the foundation has had with the liquidators indicates that they have a firm grasp of the reality of the smart contracts, how the contracts work, or how they will interact with the contract to secure the funds.”

Despite the efforts of exchanges, protocols and external parties to ensure the security of funds, the foundation is standing by its recommendation against reissuing the STG token due to the opinion of FTX liquidators.

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