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Weekly Blockchain Blog – June 2024 #3 | Baker Hostetler
EigenLayer’s TVL exceeds $20 billion; Launch of the new features of the self-custody wallet
According to recent reports, the total value locked (TVL) on the EigenLayer restaking protocol based on the Ethereum network recently surpassed $20 billion, making EigenLayer the second largest decentralized finance (DeFi) protocol (second to Lido). EigenLayer’s TVL has reportedly increased from $1.4 billion to $20 billion since early 2024. EigenLayer allows users to deposit ETH and other Ethereum-based tokens to secure third-party networks.
According to recent reports, leading Ethereum wallet provider Metamask has launched a pooled staking service that allows users to stake any amount of ETH. This allows you to stake amounts smaller than the standard minimum amount of 32 ETH required to act as a validation node on Ethereum’s proof-of-stake consensus mechanism. Notably, the new pooled staking service will not be available in the US or UK.
In another wallet-related development, a major US cryptocurrency exchange recently launched its self-custodial “smart wallet.” According to a blog post, the new wallet application simplifies onboarding, eliminates network fees, removes recovery phrases, and provides “cross-app portability” to provide users with “a seamless, intuitive experience without sacrificing self-custody or their safety.”
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Crypto Firms Announce Investments, Crypto-AI Synergies Report Details
From Isabella Sterling
A major Web3 development company recently announced the acquisition of Toposware, its partner in developing zero-knowledge proofing technologies. According to the press release, the two companies have already collaborated to build a Type 1 zero-knowledge Ethereum virtual machine, which allows any EVM chain to use the Type 1 prover to become a zero-knowledge proof-based chain and connect to Ethereum. According to the Web3 development company, the acquisition will integrate both companies’ zero-knowledge teams to advance the Web3 development company’s Ethereum layer-2 network and the broader zero-knowledge community.
According to reports, the same Web3 development company is also launching a $720 million community treasury to support blockchain projects over the next 10 years, focusing on those in the company’s layer-2 Ethereum network and Ethereum ecosystems. According to a recent article, 35 million MATIC tokens (currently worth approximately $25 million) will be awarded in the first round of the community grants program, with the plan to distribute 100 million MATIC tokens per year. To receive a grant, projects must reportedly be built on or willing to migrate to the company’s Ethereum layer-2 network and also demonstrate long-term viability.
According to reports, the venture capital arm of Tether, a leading stablecoin provider, plans to invest $1 billion over the next 12 months in technologies including artificial intelligence (AI), biotechnology and emerging markets. According to a recent news article, the VC division has already invested around $2 billion in technology over the past two years, including $1 billion in AI, which it will make available to all portfolio companies. Tether’s VC spending is reportedly focused on disintermediation with traditional finance and decreasing reliance on big tech companies.
A senior research analyst at Bitwise recently released a report predicting that the synergy between AI and cryptocurrencies could contribute up to $20 trillion to global gross domestic product by 2030. Among other things, the report highlights a bid $1.6 billion by an AI cloud provider to acquire a bitcoin miner as an example of synergy. The report goes on to cite the bitcoin miner’s $3.5 billion deal to host artificial intelligence services over the next 12 years as an example of partnerships spurring mutual growth.
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DOJ and NY AG Target NFT Fraud, Unlicensed Money Transmission, and Crypto Fraud
The United States Department of Justice (DOJ) recently announced charges against three British citizens for conspiracy to commit fraud and money laundering related to “the defendants’ scheme to defraud victims into purchasing digital works of art known as the ‘Apes Evolved’ collection of non-fungible tokens (“NFTs”).” According to a Department of Justice press release, the defendants “ran a type of scam commonly known as ‘rug pull,’ in which developers advertise a digital project, raise funds from buyers, then abandon the project and keep the funds.” The defendants’ scheme consisted of “an NFT project called ‘Evolved Apes’ that involved the commercialization of digital images of cartoon monkeys” and promises to use funds raised from NFT sales to develop a video game that would increase the value of NFTs. According to the press release, “[A]After selling the NFTs and collecting large sums from buyers… they quickly shut down the project website and withheld the funds… then laundered the embezzled funds through multiple cryptocurrency transactions into their personal accounts.”
Another recent press release from the Department of Justice announced an indictment against a man in Connecticut for operating an unlicensed money transmitting business. The defendant allegedly used two companies he controlled to open bank accounts and a cryptocurrency trading account “to operate a business through which he exchanged customers’ cash, checks, and money orders for cryptocurrency, charging a fee for the service.” According to the Department of Justice press release, the defendant “exchanged more than $1 million in U.S. currency for cryptocurrency on behalf of clients throughout the United States” and “knew that some of the funds involved in his illegal activity came from fraud schemes”.
A third recent enforcement action was announced by New York State Attorney General Letitia James. According to a press release, the New York Attorney General has initiated enforcement action against cryptocurrency trading firms NovaTechFx and AWS Mining Pty Ltd. “for engaging in illegal pyramid schemes that defrauded hundreds of thousands of investors, including over 11,000 New Yorkers, for over a billion dollars in cryptocurrency.” Among other things, the action “seeks to prohibit AWS Mining, NovaTech and its founders from doing business in New York and to secure disgorgement and damages.”
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FBI and FTC warn of cryptocurrency scams
From Christopher Agnello
Recently, the Federal Bureau of Investigation (FBI) issued a public service announcement (PSA) warning victims of a new scam involving fake work-from-home jobs “typically involving a relatively simple task, such as evaluating restaurants or “optimize” a service by repeatedly clicking a button.” The PSA advises that scammers “present themselves as a legitimate business” and “will design the fake work to have a confusing compensation structure that requires victims to make cryptocurrency payments to earn more money or “unlock” work.” After making cryptocurrency payments, victims lose access to their funds.
The Federal Trade Commission (FTC) recently issued a consumer advisory highlighting the dangers of romance scammers. The alert warns that “[n]No matter what they say, if someone you meet online says they want to help you invest in cryptocurrencies, it’s an investment scam.” Some of the warning signs of cryptocurrency scams, according to the alert, are when scammers (1) promise big profits, (2) promise no risk, (3) offer to help [people] learn how to invest and (4) direct them towards gift cards or other instant payment systems.
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DeFi Protocol Hacked for $20 Million; New data released on losses resulting from crypto crime
According to recent reports, the UwU DeFi protocol has been hacked to the tune of around $20 million. The attacker reportedly drained $20 million from UwU smart contracts through three transactions executed in six minutes. The funds used to initiate the attack reportedly came from Tornado Cash.
Numerous recent reports have provided new data on cryptocurrency hacks. Merkle Science released its Crypto HackHub Report 2024, which, among other things, found that in the first quarter of 2024, hackers stole $542.7 million worth of digital assets, which represents a 42 percent increase. % compared to the same period in 2023. The report finds that DeFi continues to be the main target of hackers, with smart contracts and protocols on Ethereum and Binance Smart Chain suffering the most exploits. According to the report, North Korean Lazarus Group earned more than $359 million in 2023 through attacks on Atomic Wallet, CoinEx, Alphapo, Stake.com, and CoinsPaid.
A report published by Crystal Intelligence “covers data on all known crypto hacks and scams from the first of June 19, 2011 through March 6, 2024.” Among its many findings, the report finds that nearly $19 billion worth of digital assets have been lost to exploits over the past 13 years. The $19 billion losses reportedly consist of “just over $6 billion in security breaches, just under $5 billion in DeFi hacks, and nearly $8 billion in fraud.”
A third recent report, published by blockchain analytics firm Elliptic, addresses AI-driven crime in the cryptocurrency ecosystem. The report identifies and analyzes five emerging typologies of AI-enabled crypto crime: (1) generative AI for deception in crypto scams; (2) creating “AI-related” scams, tokens, or market manipulation schemes; (3) use large language models to facilitate cyberattacks; (4) widespread spread of crypto scams and disinformation; and (5) strengthen illicit markets.
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