The Ethereum Merge Is Complete: From PoW to PoS

The Ethereum Merge Is Complete: From PoW to PoS

The upgrade from a proof-of-work (PoW) to a proof-of-stake (PoS) blockchain is now completed. What does this mean for the first programmable blockchain? 

On September 15, 2022, after years of development, Ethereum’s developers completed the Merge – the upgrade from a proof-of-work (PoW) to a proof-of-stake (PoS) blockchain. The PoS network is expected to power a more energy-efficient blockchain while reducing transaction fees and improving scalability. 

Potentially, the payoff could be huge. Ethereum should now use 99.9% less energy. According to one estimate, Ethereum’s energy consumption dropped from 77.77 TWh on September 14 to 0.01 TWh on September 16, 2022. 

The Ethereum Merge Is Complete: From PoW to PoS

The developers of Ethereum claim that the upgrade will bring the network, which houses many cryptocurrency tokens, to a more scalable and secure state. Ethereum’s TVL (Total Value Locked) is at about $30 billion, considering all its DeFi apps – DEXs, lending protocols, NFT marketplaces, and other apps.

The Ethereum Merge was completed at 7 a.m. UTC. However, the price of Ether (ETH) started to slowly decrease, dropping by 12% on the first day after the Merge. Ether’s price started a downtrend, and many investors are bearish.  

PoS Ethereum = no more ETH miners

In 2008, when Bitcoin was created, it introduced the concept of a decentralized ledger –  a single immutable record that computers all over the globe could access and trust without intermediaries.

In 2015, Ethereum was introduced. It expanded on the core concepts of Bitcoin’s blockchain by adding smart contracts. These smart contracts are bits of code that use the blockchain to record data onto its network and trigger automated transactions when certain pre-defined conditions are met. This innovation was key to decentralized financing (DeFi) and NFTs, which were the major catalysts for the recent crypto boom.

On Ethereum’s proof-of-work (PoW) network, crypto miners were responsible for verifying transactions and adding new blocks to the blockchain in exchange for rewards paid in ETH. These blockchain operations required miners to invest in expensive hardware equipment that was capable of solving the required cryptographic puzzles – hence the intensive energy consumption of the network. 

Ethereum miners were often organized in farms, which were actually huge buildings filled with mining equipment, similar to data centers, which were a huge strain on any energy network.  

PoS Ethereum

The new proof-of-stake system for Ethereum, which is a blockchain-based cryptocurrency, completely eliminates mining.

Miners are now replaced by validators. To become an Ethereum Validator, you must stake 32 ETH on the network. This means that maintaining Ethereum’s network security will not rely anymore on an energy-intensive computer network but the value of ETH stakes. It will require a similar level of electricity as any other computer software. 

Proof-of-stake is a system where the staked amount of ETH – and not the energy expended – determines who has control of the network. This makes attacks more costly and self-destructive, according to proof-of-stake boosters. Attackers can have their staked Ethereum slashed or reduced as punishment for trying to harm the network.

However, some are skeptical about the proof-of-stake security. There are no indications that Bitcoin, for example, will ever abandon the proof-of-work (PoW) consensus mechanism, as it is still seen as the more secure system. 

Now, Ethereum’s security relies on stakers

The upgrade to a PoS blockchain ends the network’s dependence on energy-intensive cryptocurrency mining.

The idea that Ethereum would eventually switch to proof of stake was clear from the beginning. However, the transition was complicated and risky. Many people doubted that it would ever happen.

The complexity of the update was exacerbated by the fact it was one of the most complex open-source software projects in history. It required coordination among dozens of teams as well as volunteers, researchers, and developers.

Tim Beiko, an Ethereum foundation developer, played a crucial role in the coordination of the update. He believed that more investors would become interested in crypto after this monumental milestone in the crypto universe. 

Vitalik Buterin, Ethereum’s creator, suggested that there’s still a long way ahead for the network: “This is the first step in Ethereum’s big journey towards being a very mature system, but there are still steps left to go.” 

One Year of Bitcoin Payments in El Salvador

One Year of Bitcoin Payments in El Salvador

Despite the 60% price drop from last year, El Salvador is celebrating its first Bitcoin anniversary. The good news is that Bitcoin is still a legal tender in El Salvador – and so the experiment continues. 

On September 7, 2021, El Salvador was the first country to adopt Bitcoin as a legal tender. Many have criticized the decision, and others have been waiting to see this experiment fail. But so far, the first country to adopt a cryptocurrency as legal tender has managed to survive. 

El Salvador and their pro-Bitcoin president 

El Salvador president Nayib Bukele is a true advocate for Bitcoin. In September 2021, when he adopted the Bitcoin Law, he promised that this Bitcoin adoption as legal tender would help 70% of the local population without access to banking services.

Some of the main arguments for the pro-Bitcoin law were:

  • Foreign investments. The government believed that Bitcoin would attract new investments from crypto companies. 
  • Create new jobs
  • Reduce reliance on the U.S. Dollar

While the economy is still struggling, some are now questioning the country’s economic future, as Bitcoin has lost over 60% in value since it has become a legal tender in El Salvador. 

But let’s take a look at the stats. 

On September 7, 2021, the price of 1 Bitcoin was around $46,100. 

The first Bitcoin purchase by the Salvadoran government was made on Sept. 6, 2021. They bought 200 BTC for $10.36million. That means that the average price paid for 1 BTC was $51,800. This is a stark contrast to current BTC prices, as Bitcoin fell below $19,000 on September 7, 2022. This represents a 68.78% drop in the last year.

One Year of Bitcoin Payments in El Salvador

Data from Nayib Bukele’s portfolio tracker shows that El Salvador’s government is now at loss with all its 10 Bitcoin purchases since adopting it as legal tender. 

The total purchase by the Salvadoran government adds up to 2,381 BTC. Considering the current price, the crypto holdings are now worth over $60 million less than what they originally paid. 

Alejandro Zelaya, El Salvador’s Minister of Finance, previously stated that the country did not experience any losses due to falling prices. This is because they didn’t sell the coins. Unfavorable market conditions, geopolitical issues, and delays by the Salvadoran government have caused it to repeatedly delay its Bitcoin bond project.

Despite plummeting crypto prices and the continued bear market, industry observers began to refer to El Salvador’s Bitcoin adoption in a negative light. Others suggested that it might be a failure because the country appears to have had some positive effect on El Salvador’s financial market and economy, including the cost of transactions.

But El Salvador is still advocating for crypto

The overall struggle has put some strains on individuals, and only a few are willing to trade this volatile asset. But there is a great plus to it. People use Bitcoin transactions to send money from abroad to their families in El Salvador. And that’s because BTC blockchain transactions are cheaper than wire transfer fees offered by traditional banks. 

Another great news is that the country is now a holiday spot for Bitcoin supporters from all over the world. The El Salvadorian Bitcoin Law has been a success in terms of tourism and foreign investment. Tourism in El Salvador has increased by 82% in the first half of 2022. Over one million tourists visited the country in 2022.

It seems that the Bitcoin law acted as a marketing campaign on which many countries spend billions of dollars. 

Even more, it seems that Bukele, the president of El Salvador, is one of the most popular presidents in power, with an approval rating of 85%. However, this could also be due to his tough-on-crime policies. 

Unfortunately, many businesses in El Salvador refused to use Bitcoin, and consumers rarely choose it as a payment method. 

The El Salvador Central Reserve Bank reported that Salvadorans living in other countries had sent more than $52 million in remittances between January and May 2022. A 400% increase in Lightning Network transactions in 2022 was also due to the adoption of Bitcoin by the Salvadoran government-backed Chivo wallet. That’s because citizens from abroad use it to make commission-free crypto transfers.

One Year of Bitcoin Payments in El Salvador

It seems that El Salvador is the ideal place to experiment with Lightning applications, as well as to create a trusted ecosystem of proven and interconnected services.

KyberSwap Frontend Exploit, Hacker Stole $265K

KyberSwap Frontend Exploit, Hacker Stole $265K

A malicious Google Tag Manager (GTM) website code allowed a hacker to steal $265,000 of users’ funds. The hack was targeting whales’ wallets. 

On September 1st, 8:24 PM UTC, KyberSwap discovered a bug in its website code which allowed hackers to steal approximately $265,000.

According to the DeFi platform, two “whale” addresses were apparently affected by the attack. KyberSwap announced its intention to all affected users. Kyber claimed it discovered the exploit that allowed hackers to insert fake approvals, allowing them to transfer funds to an address. The attack was detected on Sept. 1, and the threat was “neutralized” within two hours.

What happened to KyperSwap?

KyberSwap was the victim of a website exploit. On Sept 1st,  8:24 PM UTC, they discovered a suspicious element on their front end. In order to further investigate the issue, they decided to shut down the website while the smart contracts and everything related to the blockchain were not disturbed. The issue was a malicious Google Tag Manager (GTM), which allied the attacker to steal users’ funds. 

It seems that the Google Tag Manager was designed to specifically target whale wallets to grant the attacker access to larger funds. After the code was eliminated, the KyberSwap UI was restored and made available for users. The UI was unavailable for just over two hours. Meanwhile, the malicious code was eliminated from the KyberSwap UI, and the hacker’s wallet was identified. 

The KyberSwap announced to its users about the recent bug on the platform’s Twitter account and urged other DeFi protocols to inspect their frontend code to prevent similar attacks. 

This decentralized exchange allows users to trade currencies across different blockchains. The blockchain contracts of KyberSwap were not affected. They have also identified the affected addresses. 

Kyber tweeted, “We have compiled a complete list of confirmed and suspected attacker addresses used during this period, including tracking interactions with centralized exchanges and OpenSea.”

While this attack ranks amongst the lowest losses suffered by the DeFi projects, these thefts add up to millions of dollars that have disappeared from users’ funds. It also makes it very clear to anyone paying attention that DeFi platforms have penetrable UIs that can be exploited by creative hackers. 

KyberSwap is not safe to use, although users are advised to exert caution when doing so. 

A complete list of the confirmed and suspected attackers’ addresses have been made public on their blog. There’s also a complete list of the addresses of the smart contracts related to using KyberSwap.  Additional info about the incident can be found in the same blog – Notice of Exploit of KyberSwap Frontend

Will KyberSwap retrieve the stolen funds?

Blockchain transactions are irreversible, and KyberSwap might not be able to get the funds back, even if they have traced the wallets. The only way to get the stolen funds back is if the hackers decide to transfer them back. 

For that reason, the Kyber protocol has urged the attacker to send the funds back. Not only that, but they are offering a bug bounty of 15% from the stolen funds. 

Here’s the message for the KyberSwap hacker: 

“Hello attacker. We know the addresses you own have received funds from central exchanges, and we can track you down from there. We also know the addresses you own have OpenSea profiles and we can track you through the NFT communities or directly through OpenSea. As the doors of exchanges close upon you, you will not be able to cash out without revealing yourself. As a bug bounty, we are offering you 15% of the funds if you return it and have a conversation with our team. To confirm, send the funds to the following Polygon address: 0x2dc0ba6ba3485edd61f17ffabf4c7a9626001d50” 

ENS’s eth.link Could Be Lost Because There’s Nobody To Renew Its Web Address

ENS’s eth.link Could Be Lost Because There’s Nobody To Renew Its Web Address

Eth.link will be put up for sale on Sept. 5, according to GoDaddy.

The eth.link page domain is about to expire, and the members of the ENS DAO community are forced to replace it. The Web3 sites use decentralized structures like the ENS (Ethereum Name Service), which are similar to the traditional DNS. 

The only person that has access to renew the domain is the former Ethereum developer, Virgil Griffith, who is currently serving a 63-month sentence. He pleaded guilty to helping North Koreans to use cryptocurrencies to circumvent the sanctions. After giving a talk about cryptocurrencies in Pyongyang in April 2019, Virgil Griffith was arrested in November 2019. 

Although the maximum sentence for the crime was 20 years, Griffith’s plea agreement with federal prosecutors reduced the sentence to a range between 63 and 78 months, which is approximately 5 to 6.5 years. Since Griffith is still serving his sentence, the eth.link expired on July 26, and there’s nobody else who can renew it. As of September 6, 2022, the eth.link domain will be available for registration, and anyone can take it. 

What is eth.link?

The eth.link is the EthDNS that serves the .eth community. 

ENS DAO, a decentralized autonomous organization (DAO), governs the Ethereum Name Service protocol. This is a Web3 version for Domain Name Service providers. ENS is responsible for many.eth domains that have appeared in the Ethereum community. As a way to purchase their own domains, users have purchased .eth name. ENS names can be linked to your wallet address to make it easier to send and receive cryptocurrency (instead of typing out a complex Ethereum address).

The ENS gives DNS information to the distributed authority without conflating ownership and authoritative serving. Using ENS, domain owners have full control of their DNS records. Smart contracts allow ENS to irrevocably assign subdomains of domains to other entities.

So far, the ENSLink was used as the EthDNS, and anyone who used an ENS was able to use it to see the associated ENS records. 

However, instead of showing all the information about how to use the ethDNS, the eth.link will now show an empty page with an expiration banner on top. 

The Executive Director of ENS stated that Virgil Griffith was working with the Ethereum Foundation when ENS was launched, and he was an early contributor to the ENS protocol. However, it’s important to note that ENS is a permissionless protocol, and it can be used by anyone to build decentralized applications (DApps) on top of it. Virgil Griffith used the eth.link traditional domain to build an application that would resolve the ENS domains. The DAO got used to the DApps, and it was using it to fetch information about all ENS names. However, the ENS DAO is now operating another domain (eth.limo) which is now handling the same requests and resolving the ENS domains. 

What is ENS?

ENS or Ethereum Name Service is a distributed naming system that interacts with the Ethereum blockchain and map human-readable domains to blockchain addresses. 

ENS is used as a store for DNS information. It provides the distributed authority of DNS without conflating ownership and authoritative serving of information. By using ENS, the owner of a “.eth” domain has full control over their own DNS records. Effectively, an ENS is doing for the Ethereum blockchain what the DNS is doing for the WWW. 

In the last couple of years, the ENS has seen significant growth. While the first million domains were sold over the course of five years, it only took about four months to surpass the 2 million milestone. 

Dogechain Offers Smart Contract Capabilities to DOGE Owners

Dogechain Offers Smart Contract Capabilities to DOGE Owners

The U.S. government decided to act upon the Ethereum blockchain, and it’s imposing a ban on Tornado Cash, the cryptocurrency tumbler. 

At the beginning of August 2022, the U.S. Treasury Department announced that it had banned Tornado Cash, the famous crypto-mixing service. In a move likely to have wide-reaching implications for crypto, all American “persons” are prohibited from interfacing with the open source protocol.

Circle, the issuing entity behind USDC stablecoin, immediately removed 38 addresses from their transaction history that were connected to Tornado. Anecdotal evidence suggests that bans are being enforced by other platforms and companies.

By instating this bad, the Office of Foreign Assets Control has created made it a crime to use Tornado Cash. It is now more difficult to maintain transactional secrecy for Ethereum, the most widely used blockchain. Platforms and individuals need to assess their exposure and take steps toward avoiding regulatory action. However, it’s still unclear whether or not the regulators will enforce such a ban and how blockchain protocols will comply. 

What is Tornado Cash?

Tornado Cash is an open-source project that allows crypto users to hide their transactions histories from the public. It is claimed by the U.S. government that Tornado Cash was used to launder more than $103.8 million through hacks of Nomad Token Bridge and Horizon Harmony Bridge earlier in the summer and was also used by Lazarus Group, a North Korean hacker group. 

The U.S. Treasury sanctioned Tornado Cash for its use by Lazarus Group, a North Korean hacker group. Also, it cited the laundering of more than $103.8 million through hacks of Nomad Token Bridge and Horizon Harmony Bridge earlier in the summer.

Since its 2019 launch, Tornado Cash was used to launder more than $7 billion worth of cryptocurrency.

Soon after the U.S. Treasury announcement, the Discord server for that group vanished, and unknown persons also took down the forum on Tornado Cash’s community website. A member of Tornado Cash’s developer group was also taken into custody in the Netherlands by law enforcement.

Who uses Tornado Cash?

Instead of pursuing identifiable bad actors or targeting hackers, the government has placed a ban on the protocol. Elliptic, an analytics firm, claimed it had found $1.5 billion worth of illicit funds through ransomware fraud, hacks, and hacks.

Chainalysis, the blockchain analysis company, released a report that claimed that the use of crypto-mixers hit an all-time high monthly level in April 2022. This was after $51.8 million had been laundered through different platforms.

Tornado is also an important component of the Ethereum money stack. While this wasn’t the only method to anonymize transactions on blockchain, or the only coin tumbler used, it was the most widely used tool. The vast majority of applications supporting ETH will have exposure to the mixing service. Even Ethereum co-founder, Vitalik Buterin, has admitted to having used Tornado Cash before donating money to Ukraine in the spring of 2022.

But a government can’t really ban a blockchain protocol

But as with any smart contract deployed on a blockchain, it can’t be shut down by any authority. Although the use of the Tornado Cash smart contract has been deemed a criminal action, the ruling can’t actually stop anyone from using it or even re-deploying its open-source code on a different blockchain. 

Surely, there have been some reactions to the ban. Some Tornado Cash users have been sending small amounts of crypto to celebrities’ crypto owners. The issue is that anyone who knows your public wallet address (which is not hard to find) can send you transactions, even a transaction from Tornado Cash, and there’s no way to refuse a transaction. In this case, there can be innocent people that might have wallets that can be tied to the banned protocol – but are they really to be blamed?

While some platforms such as Circle and MakerDAO are trying to follow the rules, it is clear that blockchain financial apps can’t exist by following the archaic regulations of governments. 

Tornado Cash Becomes the First Smart Contract Banned by the U.S. Government

Tornado Cash Becomes the First Smart Contract Banned by the U.S. Government

The U.S. government decided to act upon the Ethereum blockchain, and it’s imposing a ban on Tornado Cash, the cryptocurrency tumbler. 

At the beginning of August 2022, the U.S. Treasury Department announced that it had banned Tornado Cash, the famous crypto-mixing service. In a move likely to have wide-reaching implications for crypto, all American “persons” are prohibited from interfacing with the open source protocol.

Circle, the issuing entity behind USDC stablecoin, immediately removed 38 addresses from their transaction history that were connected to Tornado. Anecdotal evidence suggests that bans are being enforced by other platforms and companies.

By instating this bad, the Office of Foreign Assets Control has created made it a crime to use Tornado Cash. It is now more difficult to maintain transactional secrecy for Ethereum, the most widely used blockchain. Platforms and individuals need to assess their exposure and take steps toward avoiding regulatory action. However, it’s still unclear whether or not the regulators will enforce such a ban and how blockchain protocols will comply.

What is Tornado Cash?

Tornado Cash is an open-source project that allows crypto users to hide their transactions histories from the public. It is claimed by the U.S. government that Tornado Cash was used to launder more than $103.8 million through hacks of Nomad Token Bridge and Horizon Harmony Bridge earlier in the summer and was also used by Lazarus Group, a North Korean hacker group.

The U.S. Treasury sanctioned Tornado Cash for its use by Lazarus Group, a North Korean hacker group. Also, it cited the laundering of more than $103.8 million through hacks of Nomad Token Bridge and Horizon Harmony Bridge earlier in the summer.

Since its 2019 launch, Tornado Cash was used to launder more than $7 billion worth of cryptocurrency.

Soon after the U.S. Treasury announcement, the Discord server for that group vanished, and unknown persons also took down the forum on Tornado Cash’s community website. A member of Tornado Cash’s developer group was also taken into custody in the Netherlands by law enforcement.



Who uses Tornado Cash?

Instead of pursuing identifiable bad actors or targeting hackers, the government has placed a ban on the protocol. Elliptic, an analytics firm, claimed it had found $1.5 billion worth of illicit funds through ransomware fraud, hacks, and hacks.

Chainalysis, the blockchain analysis company, released a report that claimed that the use of crypto-mixers hit an all-time high monthly level in April 2022. This was after $51.8 million had been laundered through different platforms.

Tornado is also an important component of the Ethereum money stack. While this wasn’t the only method to anonymize transactions on blockchain, or the only coin tumbler used, it was the most widely used tool. The vast majority of applications supporting ETH will have exposure to the mixing service. Even Ethereum co-founder, Vitalik Buterin, has admitted to having used Tornado Cash before donating money to Ukraine in the spring of 2022.

But a government can’t really ban a blockchain protocol

But as with any smart contract deployed on a blockchain, it can’t be shut down by any authority. Although the use of the Tornado Cash smart contract has been deemed a criminal action, the ruling can’t actually stop anyone from using it or even re-deploying its open-source code on a different blockchain.

Surely, there have been some reactions to the ban. Some Tornado Cash users have been sending small amounts of crypto to celebrities’ crypto owners. The issue is that anyone who knows your public wallet address (which is not hard to find) can send you transactions, even a transaction from Tornado Cash, and there’s no way to refuse a transaction. In this case, there can be innocent people that might have wallets that can be tied to the banned protocol – but are they really to be blamed?

While some platforms such as Circle and MakerDAO are trying to follow the rules, it is clear that blockchain financial apps can’t exist by following the archaic regulations of governments.