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. 

What Will Happen to Miners After the Ethereum Merge Is Complete

What Will Happen to Miners After the Ethereum Merge Is Complete

Ethereum miners will need to switch course as soon as September, when the network will no longer require miners to validate transactions and create new blocks. They might consider mining other cryptocurrencies or even give up completely. 

After The Merge, the Ethereum miners will no longer be part of the network participants, and they will have to shift their use of the network. The roles of Ethereum miners will now be obsolete, and they are forced to find alternative income streams. 

The sudden change took, in fact, years of research and development, but after The Merge, Ethereum will finally be described as a safer, energy-efficient, and scalable blockchain network. 

After the Ethereum network moved to a Proof-of-Stake consensus mechanism (PoS), it is now that Ethereum miners face a sudden change. Their role effectively ends, and they are forced to look for alternative income streams.

This historical moment for the Ethereum community, known as the “The Merge,” is expected to take place on September 15th, 2022, but might take place even sooner. 

What’s the Ethereum Merge?

The Ethereum Merge is the switch from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism. In plain English, a PoS blockchain doesn’t require miners (aka energy-intensive computers) to validate transactions and create new blocks but replies on stakers and validators.  

This will have many benefits, including the elimination of energy-intensive mining. To secure the network, the network will instead use staking.

Over the years, as more applications have been deployed on Ethereum, users have been hit with high transaction fees, low scalability, and even network congestion. But all of these are expected to change in the near future. 

When complete, the Merge will eliminate Ethereum’s high gas fees, improve scalability and security, and provide greater sustainability.

What will happen to Ethereum miners?

Since its creation, Ethereum has relied on GPU (graphics processing unit) rigs to perform the process of Ethereum mining. They are more flexible than the ones used for bitcoin mining, and can be reconfigured to mine other coins more easily. GPUs are used by gamers but can also be used to mine other cryptos such as Ergo, Ravencoin, and Ethereum Classic.

But as Ethereum is being upgraded, all these miners will have to either start mining other coins or give up crypto mining entirely. It’s worth noting that a profitable mining rig costs more than $1,000, and the operation’s success relies on the cost of electricity, which has also gone up dramatically since the beginning of 2022. 

In the past, Ethereum mining was very popular due to its profitability. However, miners will have to switch course and employ their GPUs on other blockchains. While a shift to mining other cryptocurrencies could result in a decrease in profits in the short term, it still represents income for owners of these expensive mining rigs. 

One of the biggest beneficiaries of the switch could be Ethereum Classic (ETC), as some expect many of the Ethereum miners to turn to Ethereum Classic. It’s worth noting that the ETC hashrate has started to rise since July. Some investors might even view Ethereum Classic as a hedge against potential disruptions in Ethereum’s blockchain during the transition from PoW-to-PoS. 

Can Ethereum miners switch to Bitcoin mining? Not really, because the two networks use different mining algorithms. Bitcoin requires ASIC-compatible hardware, which has a higher performance, but it’s also more energy intensive. ETH, on the other hand,  uses a mining algorithm called “Ethash,” which was designed to be ASIC-resistant.

After Ethereum moves to PoS, the most likely outcome is that miners will distribute their rigs among different networks that support GPU mining.

The Renowned Jewelry Brand Tiffany and Co. launched NFT Pendants

The Renowned Jewelry Brand Tiffany and Co. launched NFT Pendants

The world-famous jewelry brand launched its first NFT collection, consisting of diamond-encrusted pendants. These Tiffany NFTs are available for CryptoPunk NFT owners, and the collection is limited to 250 NFTs. 

The necklaces will be available for purchase by CryptoPunk holders in the form of NFTs (non-fungible tokens). These tokens can be used to redeem physical pendants. If the entire collection is sold, Tiffany will make around $12 million, but they can earn potentially more from the resale royalties.

Real product brands enter the NFT space

According to DappRadar data, $25 billion was spent on NFT trading volume in 2021. Comparatively, NFT trading organic volumes volume has increased to $3.7 billion in May 2022, surpassing the amount of the previous year.

Although many companies have entered the space, there are some brand names that attract more attention than others. One such brand is the world-renowned jewelry brand Tiffany and Co. 

In a recent Twitter announcement, Tiffany announced that they would be launching the “NFTiff”, an exclusive digital asst collection for CryptoPunks owners. These special NFTs are said to have been handcrafted by Tiffany’s artisans.

According to Tiffany & Co., the collection of 250 digital passes will be redeemable only by CryptoPunks holders “or the creation of a custom designed pendant and an NFT digital artwork that resembles the final jewelry design.”

Each of these special pendants and their corresponding NFTs will be specifically created to suit the Cryptopunk NFT of the owner. 

What are the conditions of these Tiffany NFTiff? 

  •  Only 250 NFTiffs passes are available for purchase (launching on August 5th, 2022)
  • Each customer may purchase a max of 3 NFTiffs.
  • The price of an NFTiff is 30 ETH.

Related: Best ways to earn free cryptocurrency and free NFTs

How are the Tiffany NFTs related to the CryptoPunks NFTs?

Tiffany’s designers will use each custom CryptoPunk to design a custom pendant for their owner, using their 87 attributes and 159 colors to select the gemstone and enamel color for the pendants. 

Of course, the final product will be unique and inspired by a very specific CryptoPunk NFT, but Tiffany also stated that they would use at least 30 gemstones and/or diamonds for their designs, such as Sapphires, Amethyst, and Spinel. The NFTiff owners will receive the first rendering of their pendants’ designs by October 2022, and they will not be able to participate in the designing process. 

What is the blockchain for the Tiffany NFTs? 

Tiffany is launching its NFTiffs on the Chain protocol, which is making all the necessary technical preparations. Deepak Thapliyal, Chain’s CEO, posted a teaser on Twitter for this upcoming collaboration with Tiffany a week before the grand announcement. 

Other big brands that have launched NFTs 

Digital ownership is attracting more investors than ever, and the metaverse seems like a place where most people want to be. That’s why we can see an increasing number of big-name brands launching their own NFTs. 

Some of these are:

  • Gucci (started a partnership with NFT marketplace SuperRare) 
  • Coca-Cola (they are minting and selling NFTs for charity)
  • Nike (the company bought RTFKT Studios, a Web3 company that creates one-of-a-kind sneakers and digital artifacts)
  • Lamborghini (they sold five beautifully designed images of a Lamborghini Ultimae launching into space above the Earth) 
  • Adidas and Prada launched a joined NFT project  (“Into the Metaverse” collection, which grans owners of Bored Ape Yach Club (BAYC) NFTs physical wearables and other digital perks)

However, not all NFT and crypto enthusiasts are pleased by all these news and big companies joining the space. Some argue that these NFTs are only meant for individuals who “love to flex.” 

Vitalik Buterin at EthCC Paris 2022: The Upcoming ‘Merge’ and ‘Surge’ 

Vitalik Buterin at EthCC Paris 2022: The Upcoming ‘Merge’ and ‘Surge’ 

Ethereum’s co-founder presented the future of Ethereum at the EthCC Paris 2022 conference. 

In July 2022, took place the 5th Paris Community Conference, during which Vitalk Buterin presented the long-term road map for Ethereum

At the developer-focused conference, Buterin spoke about the “Merge,” in which Ethereum will undergo a complete transition from proof-of-work (PoW) to proof-of-stake (PoS). 

What’s next to come for Ethereum?

Buterin spoke about the Merge’s short-term and long-term outcomes. He stated that the network’s roadmap also includes the “Surge”, which will increase the scalability of rollups through sharding.

According to Buterin’s statements, Ethereum would be much more scalable after the completion of the road map. When everything is complete, Ethereum will be capable of processing 100,000 transactions per minute.

Ethereum’s overall network development will be at 55% completion once the Merge is completed. That means that there is still much work ahead for developers.

Buterin stated that the network’s deep changes would include an update to its monetary policies and token issuance, as well as its security model, transaction inclusion, and its security model.

It is hard to pursue these decentralized goals due to the network’s complexity and rapid changes. He said that everyone had been anticipating these network upgrades for a while.

When Vitalik asked the crowd, “Who wants to cancel proof-of-stake?” – he did not raise a hand.

He joked, “Even though you want to, it’s not going to be canceled.”

Ether has been trading at around $1,500 and up 34% in the last month.

Buterin spoke at last year’s EthCC and stated that Ethereum needed to go beyond decentralized finance (DeFi).

The conference was busiest on Thursday (July 21st), according to many conference attendees. Many said that Buterin’s talk would make Thursday the most memorable day.

What is the “Merge” for Ethereum?

It’s a known fact that the Bitcoin and Ethereum blockchains use the proof-of-work (PoW) consensus algorithm to secure their networks. This allows miners to compete to secure it by solving complicated computational puzzles. However, it has been criticized for its high energy consumption.

But there’s an alternative to that, and it’s called proof-of-stake (PoS). This is a version of the protocol that has been adopted by chains such as Solana or Tezos, and it replaces miners with validators. In the case of Ethereum, the PoS Eth will have validators stake 32 ETH on the Ethereum network, and each one can be randomly selected to add blocks to the chain.

In both of these mechanisms, PoW and PoS, adding blocks to a chain usually grant rewards to the block issuer.

The Ethereum roadmap has been hinting on this upgrade from PoW since 2015, but engineering complexities have caused this shift (Ethereum 2.0) to drag out for several years.

Although the Merge will not reduce Ethereum’s high fees or improve the transaction speeds, it will have an immediate impact on Ethereum’s energy consumption.

As of July 2022, Ethereum’s Sepolia testnet switched to PoS. Goerli will be the third and final public testnet to go through the Merge process. It will take place on Aug. 11. The next Ethereum Foundation All-Core Developers conference will determine the parameters that will trigger the test. These testnet mergers were used as a kind of dress rehearsal for the real thing, and each moved developers one step closer to Ethereum’s mainnet PoS update.

When is the Ethereum merge going to happen?

Tim Beiko, from the Ethereum Foundation, predicted that the Merge could take place around September 19th 2022.

The Merge will see Ethereum move from an energy-intensive proof of work (POW), a consensus mechanism that was brought forward by Bitcoin, to a more efficient proof-of-stake system (PoS). Some PoS proponents believe that switching to other mechanisms will bring security and scaling benefits, in addition to cutting down the network’s energy consumption by 99.95%.

Beiko, an Ethereum protocol engineer, gave his September estimate during a PoS implementers call. Beiko provided a timeline and a date for the Merge, as well as a possible date.

Although he did not offer a hard date for the Merge, but Beiko repeatedly pointed out – on Discord and Twitter – that it is very likely that things will change.

The DeFi and NFT Markets Are in a Downtrend, but Users Feel Hopeful

The DeFi and NFT Markets Are in a Downtrend, but Users Feel Hopeful

According to a report, the on-chain for DeFi apps has slowed down, but the industry has managed to retain most of its daily active users.

CoinGecko published a report for Q2 2022 that reveals the market trends and analysis for decentralized finance (DeFi). The most unexpected statistic is that the DeFi market experienced a 74.6% decline in Q2, but the user activity has remained relatively robust. 

Cryptocurrency market chances in Q2 2022 (statistics) 

  • Top 30 cryptos market capitalization decreased by 55.9%, losing over half its value and falling below $1 trillion.
  • The top 15 stablecoins lost almost a fifth of their market cap, -18.3% or -$33.9B
  • The top 30 crypto market cap correlation with the S&P500 was 0.92 (that’s a high correlation).
  • Bitcoin’s hash rate decreased by 1.7%
  • +17.82% of total ETH Staked in Q2 2022. (Almost 13 million ETH was staked, representing roughly 11% of the total ETH supply).
  • There was a 34.5% decrease in average daily DeFi Users compared to 1st April 2022
  • The NFT trading volume decreased by 26% from Q1 to Q2 2022

DeFi market in Q2 2022

The CoinGecko report states that the total DeFi market cap dropped from $142 million (in Q1) to $36 million (in Q2). This was primarily due to the collapse of Terra’s stablecoin UST in May 2022.

Another worrying statistic is the increase in DeFi exploits, which has contributed significantly to this fall. Some of the most notable hacking events involved Inverse Finance and Rari, and the lost funds accumulated up to $1.2 million and $11,000,000, respectively. These attacks affected the token prices’ tremendously, and investors have also lost confidence in these protocols. 

But it’s not all doom and gloom in the DeFi space. Although on-chain activity has slowed, the DeFi industry still retains most of its active users daily.

The DeFi daily active users decreased by only 34.5%, from 50,000 to 35,000 in Q2. There were also numerous instances that led to an increase in DeFi activity.

After Terra’s collapse, there was a spike in users’ on-chain activity. Of course, that could be explained by users who used Curve Finance or Uniswap to sell Terra (LUNA and USTC).

The second spike was seen in June when Celsius, a crypto lending platform, imposed withdrawal restrictions due to financial difficulties. Celsius filed for bankruptcy on July 12. 

The users’ behavior is normal in both f these cases, as they were trying to escape the dramatic consequences of these protocols. 

What’s happening to NFTs?

Also, the report found that the trading volume for nonfungible tokens (NFTs) decreased by 26.2.% reaching $7.6 billion since the same time last year. 

In June 2022, the NFT trading volumes reached $830 million. This coincided with the collapse of the floor prices of NFTs.

For the first time ever, we also witness a change in the NFT marketplaces’ arena. 

OpenSea maintained its grip on the top spot, despite being in decline. In May and June, however, Magic Eden, X2Y2, seemed to have caught up and took turns to surpass OpenSea’s daily and weekly volumes. 

Despite having a more advantageous fee structure, LooksRare & X2Y2 are still behind OpenSea. However, they are slowly gaining ground.

NFT trends in Q2 2022

It looks like the Play-to-Earn (P2E) games are gaining more popularity, and we can see it in the NFT trends. 

Some of the most traded in-game NFT assets are Stepn’s shoes (move to earn game), GoblinTown, and Art Blocks. 

It’s also important to note that Solana has been reducing Ethereum’s NFT share. It will be interesting to see if this momentum can last long-term.

Some of the rising NFT projects on Solana include OkayBears, Trippin’ Ape Tribe, and DeGods. 

Former Terra NFT Projects Are Migrating to Polygon

Former Terra NFT Projects Are Migrating to Polygon

In May 2022, after UST’s collapse on the Terra blockchain, many projects operating on Terra had to decide their future. The options were to use Terra 2.0, or the new Terra blockchain as their new blockchain, or to migrate away from Terra completely. Polygon offers support to any of the projects looking to migrate, and 48 projects that were formerly launched on Terra are now part of the Polygon ecosystem.

Due to Terra‘s recent events, many projects and members of the community have suffered losses, including their treasuries and sense of community. The projects lost their platform and got thrown into chaos. But there is hope. Many believe that by migrating to Polygon, they increase their chances of success and keep on developing the future of Web3. 

Big fundamental shifts for former Terra projects

The Polygon Studios CEO, Ryan Wyatt, announced that 48 projects were already successfully migrated to Polygon. He suggested that Polygon’s Terra Developer Fund, a multimillion-dollar fund that Polygon has created to attract the talent that was suddenly thrown into limbo by Terra’s collapse in May.

Why is Polygon so attractive? Polygon is a network that serves as a layer-2 scaling solution for the Ethereum network. 

Some of the projects mentioned are NFT marketplaces and metaverses. Some of the high-profile names mentioned by Ryan Wyatt were the OnePlanet NFT marketplace, the Lunaverse (LUV), and the Derby Stars P2E game. 

OnePlanet was instrumental in helping other NFT projects migrate to Polygon. It has evolved into a platform devoted to the assistance of NFT projects from Terra through its Ark*One initiative.

Why Polygon?

Polygon Technology, Polygon Studios, and Polygon Technology have made significant strides in developing their NFT ecosystem over the past year. There are partnerships with major players such as Meta, E-Bay, Animoca Brands, Stripe, and Meta. Polygon Studios also assists celebrities and large commercial and consumer brands in launching their own NFT models and marketplaces. 

The projects claim that they have done extensive research before deciding to migrate to Polygon. OnePlanet said that they had many meetings with representatives of other blockchains and foundations before choosing Polygon as the new home for OnePlanet’s Terra NFT projects. 

Polygon has the highest number of onboarding entities and projects, taking into account key factors like stability, mass adoption, and market opportunities.

Also, Polygon houses some of the most prominent brands in Web2 or Web3, including Adidas, Sandbox, and Decentraland. These partnerships have made Polygon a leader in mass adoption from crypto and non-crypto native lands. Polygon’s low average gas fee and its high throughput (it can process up to 7k transactions per second) are two other advantages that make it a great choice to attract a wider audience.

Why Polygon and not Ethereum?

Another key advantage is the EVM environment that provides a much-needed scaling solution for NFT projects. Ethereum layer 1 remains the dominant space, with the highest liquidity, but gas fees make it unaffordable for many.

Polygon, originally known as Matic, has been added to many centralized exchanges since its inception in 2017. A robust ecosystem of DeFi and DAO, developer tools, as well as stablecoins is available.

Polygon’s TVL is $2.7 billion (Polygon Bridge TVL, Ethereum $5.6 billion) and a monthly MAU of 1 million. This provides ample liquidity and exposure for users.

OnePlanet NFT and Terra NFT will play a significant role in diversifying NFT ecosystems, as well as these large brands inviting mass audiences to the world NFTs.

OnePlant’s Saturday blog highlights how Ark*One helped 48 NFT projects migrate to Polygon.

Can projects still migrate to Polygon?

The migration was enabled by the OnePlannet platform through Ark*One. However, applications closed officially on June 15, including financial support from our partners Polygon Studios.

Projects who wish to migrate to Terra will continue to receive technical support. OnePlanet said it would use its regular launchpad to help new projects launch on Polygon.

The mass salvage operation helped 48 NFT projects. This includes 90 NFT collections. This is a significant proportion of Terra projects, even those that were not launched on One Planet prior to the cataclysmic re-peg event.

These include the P2E metaverse Lunaverse and the A.I. Terra’s most successful PFP collections Hellcats, Babybulls, and the NFT universe DystopAI.

What other blockchains are considered for migrations? 

Polygon seems to be more successful in attracting Terra projects than the VeChain ecosystem. It appears that not many Terra projects have moved to the layer-1 ecosystem, despite VeChain openly inviting Terra developers to apply for grants.