Weekly Wrap #3 - EU Banning Non-Custodial Wallets?
Week of March 28th - April 4th 2022
This week in the cryptocurrency space, the price of Bitcoin is being supported by massive buys from popular whales. The first Avalanche subnet just went live which teases a potentially promising future for Avalanche. There were more multi-million-dollar funding rounds to help grow this space. On the other hand, we saw one of the biggest exploits that crypto industry has ever seen while the EU continues applying regulatory pressure on crypto.
Macrostrategy & Do Kwon continue buying BTC
Michael Saylor is the CEO of Microstrategy. They made a pivot to Bitcoin a few years ago and have consistently been buying BTC every year. Recently, MicroStrategy created a subsidiary called MacroStrategy which will be focused on positioning itself for macro market outlooks. They recently announced that they have taken a $205m loan from Silvergate Bank to buy more Bitcoin.
In addition to this, Do Kwon, the founder of Terraform labs which is the foundation that created the Terra Blockchain, announced the Luna Foundation Guard (LFG). LFG is an initiative to make BTC the reserve asset that will be used to back the stablecoin UST. They are expected to buy a total of $3 billion in BTC making approximately $125m buys everyday.
This constant buy pressure from both of these whales has kept BTC strong hovering above the $45k mark.
$600M Ronin Bridge Exploit
Axie Infinity is the biggest P2E game which had around 2 million users at its peak. Being on the Ethereum mainnet their users faced issues with the network congestion and high gas fees. Ethereum is not optimized to support an application with such heavy usage, hence the Axie Infinity team decided to make their own chain called Ronin Network. With the Ronin Network they made the Ronin bridge which connected Ethereum to Ronin allowing users to easily port over their assets.
On the 29th of March, it was announced that this bridge had been exploited. A total of 173,600 ETH and 25.5M USDC was stolen. That’s a little over $600m making this the biggest exploit in the history of crypto, topping the Polychain exploit where exactly $600m was stolen. The Ronin bridge is run by 9 validators, 5 of these 9 validators were compromised giving the exploiter full control of all the money in the bridge. He then moved his funds to this wallet https://etherscan.io/address/0x098b716b8aaf21512996dc57eb0615e2383e2f96 where they still remain. The hack actually happened 6 days earlier on the 23rd of march but the team only found out on the 29th of march.
EU look to ban non-custodial wallets
Recently, the EU had a parliament vote on banning Proof-of-Work mining altogether. This bill was not passed marking a regulatory victory for the crypto space, but the offensive from the EU has not stopped there. The ECON & LIBE committees voted to ban the use of non-custodial wallets and subject them to a Know-your-customer (KYC) standard for transactions above 1000 Euros. Examples of non-custodial wallets include Metamask, Trust Wallet, and Wallet Connect & hardware wallets such as Ledger or Trezor.
This bill was overwhelmingly approved but still has a few more levels of government to pass through before it will begin to get enforced. At this moment it is unclear how this law will be enforced but what we can infer is that this enforcement of KYC is a direct attack on the transactional privacy of users.
LayerZero & Blockchain.com fund raises
Every week we see millions of dollars being raised and this week is no different. Starting with LayerZero, the cross-chain protocol which saw lots of success after the launch of Stargate. On the 30th of March they announced a $135m raise in a series A round led by A16Z, FTX ventures, and Sequoia. Not only did this round involve some of the most popular crypto-focused VC funds, but it also featured some athletes and celebrities.
The other raise came from Blockchain.com. It was founded in 2011 with a focus on allowing users to buy and store crypto assets. They currently have 37 million verified users and 82 million wallets created. In a round led by Lightspeed ventures they raised money at a $14 billion valuation. This is major step up from their previous round where they raised at a $5.2 billion valuation. The exact amount raised still remains unclear.
CrystalVale Subnet Live
The launch of Avalanche subnets has been long awaited. Subnets are basically an architectural solution by Avalanche to horizontally scale their Blockchain. DeFi Kingdoms is a popular P2E game that really caught the attention of crypto twitter last year. They were native to the Harmony blockchain but their users were experiencing many issues. They had announced a while back that they will deploying their own subnet on Avalanche and on the 1st of April this became a reality with the launch of CrystalVale.
Since being live, the Subnet has had 550k transactions, 28k unique senders, and a max TPS of 190. So far it has been a success but it is still early days so we are yet to see what problems the future holds. However, if this remains successful then it is extremely good news for the Avalanche ecosystem as a whole. This will attract many existing projects, especially gaming ones, to come over and make their own chain through subnets. If this happens then Avalanche will see a tremendous growth in new users.
That is all for this week’s newsletter covering all the big events that happen in crypto for the week. Tune-in next week for another edition.