A month with Ups and Downs

February proved again that security is at the core of blockchain. If there is no security, no trust in the networks, then there is little use for blockchain. 2 large exchanges shared attempted DDoS attacks. IOTA stopped their Coordinator and thereby the network after a Trinity Wallet hack. bXz was hacked twice through the use of flash loans and the exploitation of a bug. In all cases, the attacked parties were able to minimize the worst outcome by making use of centralized control mechanisms – a controversial technique in an industry that often preaches to „decentralize everything“.

In our opinion, it makes sense for decentralized applications and protocols to utilize centralized control mechanisms during alpha status until a protocol or application is stable, and real-world tested. These attacks showed that some blockchains and in particular DeFi are in an infant stage – and a lot more education is required to help people keep their cryptocurrency safe and realize the risk of using real money in alpha-state applications.

While Central bank digital currencies (CBDCs) continue to become more and more relevant, Caitlin Long, a long-term activist in blockchain, has announced the launch of a new US bank to serve the digital asset industry in cooperation with Blockstream. Other interesting „collaborations“ include Hedera Hashgraph and Google Cloud‘s business unit as well as Tron and Steemit Inc.

Bitcoin’s price reached for the first time in 2020 10.000 USD (See Coinmarketcap). The best performing coins with more than 5 Million USD trading volume were Kyber Network (155%), Tezos (59%), Chainlink (47%), Aion (42%) and Ethereum (23%). Overall the crypto market was highly volatile, reached its monthly high around 13th of February.

Interesting research

Since DeFi is among the hottest topics in crypto and more and more projects pop up, it makes sense to take a closer look. By now, there are existing solutions such as stable coins, decentralized exchanges or lending protocols. These important components in DeFi can be leveraged for various new projects („Money Legos“) – but one should note that the combination of protocols will increase the risk as well. Since the locked-in USD value is rapidly increasing and more projects are launching, more opportunities will pop up for speculators, users and hackers. Here are some resources to inform yourself before joining DeFi:

• Coinbase provides a good „Beginner’s Guide to DeFi“
• Outlier Ventures published an overview in June 2019: „Mapping Decentralized Finance (DeFi)“
• The concept of „Money Legos“ is explained here by Totle
• Binance research shared „DeFi #3 – 2020: The Borderless State of DeFi“
• In 2020, Aave introduced Flash Loans, provided a sneak peek & insights to the first-month usage here.

Updates about protocol & blockchain solutions

We’ll provide important updates from all layer 1 protocols once we are live and in regular communication with project leaders. Similarly, we’ll present a few selected interesting blockchain solutions per month after “officially” launching.

Top News

• The hack of IOTA’s trinity wallet on the 12th of February resulted in the IOTA Foundation turning off IOTA’s coordinator on the following day. The network completely stopped and no transactions are possible until today. (You can track the progress here.)
• During the bZx hacks the attackers took advantage of pricing data and a bug within the bZx protocol’s code to secure the payouts. The hackers utilized flash loans and got 954,000 USD. A detailed write-up can be found here.
• During the attacks on Bitfinex and OKEx attackers tried to exploit several platform features to increase load in the infrastructure (DDoS attack). Both exchanges had various prevention mechanisms in place and did not loose money. But the extremely sophisticated attacks had an effect on the throughput of the exchanges and Bitfinex entered maintenance to bring in countermeasures and be prepared for all similar attacks.
• Tron acquired Steemit Inc and announced that their development teams will start working together to bring Steemit and other Steem blockchain based DApps to TRON blockchain. Since the official announcement, a soft fork happened, funds were frozen and uncertainties remain about the future and community reaction.
• The roll-out of the Bahamian Digital Dollar was announced for 2020. Sweden continued research and testing of the E-Krona. Canada’s Deputy Governor Timothy Lane explained how the Bank of Canada is preparing for a future with a central bank issued digital. And, the former CFTC Chair said that the USA must issue digital currency to account for digital consumption and to compete with China.
• Avanti Bank shall launch in 2021: It is a new US bank to serve the digital asset industry, offering new products and services not currently available in USD markets along with partner Blockstream. According to the founder Caitlin Long „A critical piece of US market infrastructure is missing—a regulated bank that can act as bridge to Fed for payments and custody. This is needed for BIG institutional money (pensions/endowments/foundations/corporations/sovereign wealth) before entering crypto in a big way. Regulation had blocked it.“
• The Google Cloud business unit joined Hedera Hashgraph’s governing council, will operate a Hedera network node, and provide some additional services. Hedera’s price increased by as much as 60% that day.
• Bloomberg shared an analysis of Bitcoin, other crypto prices and their future. A positive trend is expected for Bitcoin but not for the majority of other coins. Regulated exchange-traded futures remain a favorable indicator for the Bitcoin price. The advent of options is a primary reason for this year’s spike in trading, and it represents Bitcoin’s transition toward the institutional mainstream.

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