Ethereum’s Shapella Hard Fork Successfully Implemented

Ethereum’s Shapella Hard Fork Successfully Implemented

Following numerous postponements, Ethereum validators are now able to retrieve their staked Ether and associated rewards from the Ethereum mainnet. The Shapella hard fork has been successfully implemented on the Ethereum mainnet, enabling validators to withdraw their staked Ether from the Beacon Chain. 

The highly anticipated Shapella update on Ethereum has been launched, introducing the much-awaited new feature, the Ether unstaking. The Ethereum community has expressed various reactions to the latest update in the ecosystem. The term “Shapella” is a combination of “Shanghai” and “Capella,” referring to simultaneous upgrades. This hard fork marks a significant milestone in Ethereum’s development, generating excitement among community members for the network’s future.

The highly anticipated update occurred at 10:27 pm UTC on April 12, during epoch number 194,048. In the initial hour following the hard fork, Ethereum block explorer reported that 12,859 Ether were released through 4,333 withdrawals.

Ether staking rewards are withdrawn

At present, approximately 44% of validators, equating to 248,043 out of 559,549 active validators, have the option to request a partial or complete withdrawal. 

Most of the current withdrawals range from 2.8 to 3.2 ETH, indicating that primarily staking rewards are being withdrawn at this time. Data from Rated Network Explorer reveals that just before the Shapella hard fork was implemented, 3,996 validators joined the exit queue.

Based on data from blockchain analytics company Nansen, crypto exchange Huobi possesses the most significant portion of withdrawable Ether at 30%. The decentralized autonomous organization PieDAO follows with a 17.7% share.

Ethereum's Shapella Hard Fork Successfully Implemented on Mainnet

Nansen data indicates that 284,622 Ether from 7,948 validators are awaiting complete withdrawal. The price of Ether experienced minimal fluctuations during the first hour after the hard fork, as forecasted in an April 11 report by blockchain intelligence platform Glassnode. In theory, the hard fork could unlock 18.1 million Ether on the Beacon Chain, which is equivalent to over $34.8 billion. 

However, the Ethereum Foundation has implemented several measures to prevent a sudden influx of ETH into the market. Glassnode’s report projected that less than 1% of the total amount would be released during the first week, and the 12,859 Ether unlocked within the first-hour accounts for a mere 0.07% of the total Ether staked on the Beacon Chain.

As for the market, the predictions are optimistic. The capacity of Ether to surpass resistance levels has led some analysts to predict a $3,000 price target in Q2 2023. Data from analytics provider Santiment reveals that whale accumulation remains robust, increasing by 0.5% in March.

This positive buying activity could support on-chain data indicating that Ether sell pressure following the Shanghai hard fork will be insignificant.

Ethereum Investment Proposal EIP-4895 facilitated the transfer of staked Ether from the Beacon Chain to the Ethereum Virtual Machine (EVM). This is known as the execution layer, thereby enabling withdrawals. This update on the Ethereum blockchain represents the most substantial upgrade since the Merge on September 15 and brings Ethereum one step closer to achieving a fully operational proof-of-stake system.

The community celebrates the Ethereum Shapella upgrade

During the Shapella watch party organized by the Ethereum Foundation team, Ethereum co-founder Vitalik Buterin expressed that the network is currently in a “really good place.” He said the most challenging and rapid aspects of the Ethereum protocol’s transition have essentially concluded. There are still substantial tasks to be accomplished, but they can proceed at a more relaxed pace.

In celebration of the new update, crypto singer Jonathan Mann performed a song at the Shapella watch party.

As some community members celebrated the event, others focused on the network’s future prospects. Ethereum community member Anthony Sassano highlighted the next significant feature, EIP-4844, which aims to improve the scalability of rollups on Ethereum.

The Shapella update is expected to attract more institutional investors to Ethereum. 

The Potential Benefits for Montana with the Approval of Pro-Crypto Mining Bill

The Potential Benefits for Montana with the Approval of Pro-Crypto Mining Bill

Recently, the Montana Senate passed a bill that aims to safeguard the interests of crypto miners operating within the state. 

The proposed law is currently being reviewed by the Montana House of Representatives and seeks to eliminate discriminatory regulations that could hamper their mining operations, both for individuals and commercial entities. 

The bill seeks to exempt digital assets used as payment from taxes, and allow home crypto mining that uses less than 1 megawatt of energy annually, except when it violates existing noise bylaws.

The proposed pro-crypto mining bill in Montana aims to remove any energy rate classification that hinders home crypto mining and digital asset businesses. Lobbyists and crypto companies have been working together for years to establish crypto-friendly laws in the state. Montana has high wind energy potential, but remote wind projects struggle due to the need for long transmission lines. However, the bill can be an early buyer of that power and help to bring customers (Bitcoin miners) to the state. There is a misconception that mining is bad for the grid or the environment is holding back the crypto-mining industry in the United States, despite it being a powerful tool for balancing the grid and cleaning up the environment.

Regulatory policies also fail to consider the positive aspect of this process. One of these would be the grid balancing concept. 

Crypto mining is best suited for states with grid-balancing programs. These programs pay participants to lower their power consumption during times of high power prices or low supply. Miners can easily reduce their power consumption at any hour of the day, making them ideal participants in such programs.

What is the Montana pro-crypto bill?

The proposed bill seeks to establish a “right to mine digital assets” in Montana and prevent discriminatory electricity rates for crypto miners. The bill also protects “home” mining and removes local government’s power to use zoning laws to prohibit crypto mining operations. 

Additionally, the bill prohibits extra taxes on the use of crypto as a payment method and categorizes digital assets as personal property, similar to stocks and bonds. The Montana Senate passed the bill on Feb. 23 with 37 for and 13 against, and it will now be presented to the House for approval. Finally, the bill will require the signature of Governor Greg Gianforte to become law, who may choose to veto it.

How Montana Could Benefit from Pro-Crypto Mining Bill

Proponents of the bill anticipate that Montana can attract mining companies by updating legislation, which will, directly and indirectly, boost the region’s economy. 

Montana State Senator Daniel Zolnikov, the primary advocate of the bill, believes that Montana has a lot to gain by embracing the digital asset industry. 

By permitting unrestricted crypto mining operations, Montana can potentially attract more businesses and investments from the cryptocurrency sector, creating jobs in rural communities. 

Senator Zolnikov hopes that this move will signal to the larger digital asset industry that Montana welcomes their innovation and new companies into the state.

Sustainability Concerns Surrounding Montana’s Pro-Crypto Mining Bill

Despite optimism about the potential benefits of crypto mining, some are concerned about the impact on small towns and communities. 

Colin Read, former mayor of Plattsburgh, New York, and SUNY economics professor, pointed out that mining companies often fail to deliver on their promises of job creation

Additionally, an influx of crypto mining companies could cause energy and sustainability challenges, as seen in New York, which experienced skyrocketing retail energy rates due to increased demand. 

As a result, the New York Public Service Commission introduced steeper energy tariffs for crypto miners to mitigate the issue. 

Similar challenges have arisen in Texas, where crypto mining businesses have set up operations, leading to power grid overloading during extreme weather conditions. 

In Montana, Missoula County has implemented requirements for crypto mining firms to either consume or generate enough renewable energy to cover 100% of their operations, responding to concerns about power consumption and pollution. These sustainability concerns underscore the importance of balancing the potential economic benefits of pro-crypto mining legislation with sustainable energy practices.

Montana’s weather conditions, including summer heat rising above 100 degrees Fahrenheit (38 Celsius)  and sub-zero temperatures in winter, contribute to the state’s high per capita energy consumption rate. Due to environmental concerns surrounding the environmental impact of crypto mining, several American states have implemented laws limiting energy-intensive activities, such as placing caps on energy usage or restricting energy sources. 

For instance, New York recently imposed a temporary ban on mining firms using non-renewable energy sources to reduce the state’s carbon footprint. Montana may face similar sustainability challenges if its pro-crypto mining bill is passed. 

Senator Zolnikov addressed these concerns, stating that Montana already has an attractive energy mix for digital asset mining and that the bill aims to provide legal certainty for long-term operations. Montana has access to geothermal, wind, solar, and hydro energy sources, including the Missouri River and its tributaries, which are used to generate hydroelectric energy.

Will the pro-crypto bill pass?

Montana’s pro-crypto mining bill aims to attract more cryptocurrency mining businesses to the state, potentially bringing positive transformations. However, the bill’s approval could lead to initial sustainability challenges related to eco-friendly and sustainable energy. 

While Montana presently has both renewable and non-renewable energy sources, the state’s response to emerging changes in the wake of the pro-crypto mining legislation will be crucial. Balancing economic benefits with sustainable energy practices will be a delicate balancing act for Montana.

Flash Loan Attack on Euler Finance Drains It of $195 Million

Flash Loan Attack on Euler Finance Drains It of $195 Million

Euler Finance fell victim to a flash loan attack that resulted in the loss of more than $195 million in stablecoins and ERC-20 tokens. 

On March 13, Euler Finance, a noncustodial lending protocol based on Ethereum, was hit by a flash loan attack. This resulted in the theft of millions of dollars in Dai (DAI), USD Coin (USDC), staked Ether (stETH), and wrapped Bitcoin (wBTC). As per the latest update from on-chain data, the attacker carried out multiple transactions and was able to steal almost $196 million, making it the largest hack of 2023 thus far. 

The funds stolen include the following:

  • DAI (8,877,507.35)
  • wBTC (849.14)
  • stETH (73,821.42)
  • USDC (34,413,863.42)
  • stETH (3,897.50)
  • stETH (8,099.30)

As per findings by the crypto analytic company Meta Seluth, the recent attack appears to be linked to the deflation attack that occurred a month ago. The attacker leveraged a multichain bridge to transfer the funds from BNB Smart Chain (BSC) to Ethereum and executed the attack today.

This DeFi attack on Euler Finance is one of the most significant hacks of 2023 thus far.

Movement of funds from Euler Finance. Source: Meta Seluth

ZachXBT, another well-known on-chain investigator, confirmed the correlation and stated that the attack’s fund movement and approach bear striking similarities to those of bad actors who recently targeted a BSC-based protocol. 

In the previous attack, the attackers deposited the funds into Tornado Cash, a cryptocurrency mixer. Presently, the illicitly obtained funds are residing in the following hacker-controlled addresses:

  • 0xebc29199c817dc47ba12e3f86102564d640cbf99 (Contract) – 8,877,507.34 DAI
  • 0xb2698c2d99ad2c302a95a8db26b08d17a77cedd4 – 8,080.97 ETH
  • 0xb66cd966670d962c227b3eaba30a872dbfb995db – 88,752.69 ETH & 34,186,225.91 DAI

Euler Finance has acknowledged the exploitation and reported that they are working closely with security experts and law enforcement agencies to address the matter. 

According to Slowmist, a blockchain security firm that conducted an in-depth analysis of the attack, the attacker utilized flash loans to deposit funds and then proceeded to trigger liquidation by leveraging them twice. After donating the funds to the reserved address, the exploiter performed a self-liquidation to obtain any remaining assets.

The exploit’s success can be attributed to two key factors. Firstly, the funds were donated to the reserved address without undergoing a liquidity check, resulting in a soft liquidation. Secondly, the soft liquidation logic was activated by high leverage, allowing the liquidator to acquire most of the collateral funds from the liquidated user’s account by only transferring a portion of the liabilities to themselves.

The entire process occurred within a single transaction (one per pool) using flash loans obtained from AAVE.

It seems that one of the smart contracts in Euler has a glitch where it fails to verify the health factor during the execution of the donateToReservers() function. As a result, the attacker could liquidate their position from the protocol, repay the flash loan, and generate a substantial profit.

In a funding round last year, Euler Finance secured $32 million in investments from notable entities such as FTX, Coinbase, Jump, Jane Street, and Uniswap. Euler Finance garnered significant attention for its liquid staking derivatives (LSDs) offerings, which enable stakers to unlock liquidity for staked cryptocurrencies like Ether and potentially increase their returns. LSDs are a relatively new type of token, and they now account for up to 20% of the total value locked in decentralized finance protocols.

Euler Finance tries to retrieve the stolen funds

Shortly after the announcement of a $1 million bounty, the illicitly obtained funds were transferred to the cryptocurrency mixer Tornado Cash

Euler Finance issued a demand for the hacker to return 90% of the stolen funds within a 24-hour period to potentially avoid facing legal consequences. 

Crypto Market Volatility: Impact of Silvergate’s Liquidation, KuCoin Lawsuit, and Powell’s Comments

Crypto Market Volatility: Impact of Silvergate’s Liquidation, KuCoin Lawsuit, and Powell’s Comments

Silvergate Capital Corporation has revealed that it will close its operations due to “recent industry and regulatory developments”. The company confirmed that the liquidation of Silvergate Bank would involve the complete repayment of all customer deposits.

This decision follows the withdrawal of support by various crypto companies, including Coinbase, Paxos, Gemini, BitStamp, and Galaxy Digital, following an investigation into Silvergate’s alleged participation in the collapse of FTX. The bank also announced the closure of its exchange network on March 3, stating that the decision was based on risk considerations.

Silvergate had established itself as a significant banking partner for several crypto companies. However, apprehensions about its financial stability arose when it announced a two-week delay in filing its annual 10-K report, which typically offers a summary of the company’s financial position.

The departure of Silvergate has left the potential impact on other crypto companies that have funds held by the bank or have exposure to it uncertain. The bank stated that the transfer volume of customer fiat deposits had decreased by approximately $50 billion in Q3 of 2022 compared to the corresponding period in 2021.

Debate over Silvergate’s downfall and the future of crypto banking

The collapse of Silvergate bank sparked a debate over who was responsible for the chain of events that led to its downfall. After the bank’s voluntary liquidation announcement, numerous reactions from lawmakers, crypto analysts, executives of crypto firms, and commentators appeared on social media. 

Some lawmakers in the United States have seized the opportunity to comment on the crypto industry, characterizing it as a “risky, volatile sector” that poses a risk to the broader financial system. 

Senator Elizabeth Warren has referred to Silvergate’s collapse as “disappointing but predictable,” urging regulators to take action against the risks associated with crypto.

Senator Sherrod Brown expressed his apprehension about banks that engage with cryptocurrencies. In his opinion, they pose a potential risk to the financial system. 

The senator emphasized the need for robust safeguards to protect the financial system from the dangers associated with crypto. The senator’s comments have drawn criticism from some members of the community who argue that the issue was not caused by crypto but instead by fractional-reserve banking. They point out that Silvergate held considerably more in-demand deposits than cash reserves, which they believe was the primary factor behind the bank’s troubles.

Some companies have taken the opportunity to reaffirm their dissociation from the bank. Binance CEO Changpeng Zhao said on Twitter that the crypto exchange does not have any assets stored with Silvergate. Likewise, Coinbase issued a similar statement. 

On the other hand, Nic Carter, the co-founder of Castle Island Ventures and Coin Metrics, a crypto intelligence firm, opined that the government was responsible for “accelerating the collapse” of Silvergate. Similarly, Ram Ahluwalia, the CEO of Lumida, a financial services company, shared a similar perspective, asserting that a letter from a senator had eroded public confidence in Silvergate, resulting in a bank run. He argued that the bank was denied due process.

Previously, Carter mentioned the existence of “Operation Choke Point 2.0.” He claimed that the U.S. government is utilizing the banking sector to orchestrate “a sophisticated and extensive crackdown on the crypto industry.” 

However, some individuals think that the downfall of Silvergate might not necessarily have an adverse impact on the crypto industry. Instead, they believe that combined with proposed tax law changes, it could intensify the departure of crypto firms from the United States.

In the wake of Silvergate’s liquidation, there has been a growing concern about where crypto firms will turn to for their banking needs. 

Coinbase, which previously accepted payments through Silvergate, announced on March 3 that it would be facilitating cash transactions for institutional clients using its other banking partner, Signature Bank. 

However, Signature Bank had disclosed in December its intentions to lower its exposure to the crypto sector by decreasing deposits from clients holding digital assets. 

In a bid to further diminish its crypto exposure, Signature imposed a minimum transaction limit of $100,000 on transactions processed through the SWIFT payment system on behalf of Binance.

 The market is down

Given the liquidation of Silvergate Bank, the cryptocurrency market has experienced a decline. The other factors involved in this downfall include the lawsuit against KuCoin exchange, and comments from the United States Federal Reserve chair Jerome Powell that have worried investors. 

Bitcoin is giving signs of a bearish future, and the crypto Twitter community talks of a potential bottom at $12,000. Ether has also experienced a decline.

The expectation of interest rate hikes and a softening economy weighs on risk assets, and Powell’s comments regarding a possible uptick in inflation have added to investor concerns. 

The recent enforcement actions against Paxos and Binance and the SEC crackdown on centralized staking have also prevented the development of sustainable bullish momentum across the market. 

The uncertainty regarding crypto regulation has led to market volatility, and the liquidation of Silvergate Bank is expected to make regulators keep an even closer eye on the sector. 

Banks are already implementing robust anti-money laundering measures in preparation for further crypto regulation. While the crypto market had a strong start to 2023, investors’ appetite for risk is likely to remain muted until there is more transparency regarding the roadmap for crypto industry regulation and signs that U.S. inflation has peaked.

RBI Executive Director Reveals India’s Testing of CBDCs Offline Capability

RBI Executive Director Reveals India’s Testing of CBDCs Offline Capability

Ajay Kumar Choudhary, the executive director of the Reserve Bank of India (RBI), has revealed that the recently launched digital rupee, India’s in-house central bank digital currency (CBDC), is undergoing offline functionality testing. 

Apart from evaluating its offline capability, the Reserve Bank of India (RBI) is assessing the potential of CBDCs for cross-border transactions and their integration with legacy systems of other nations.

The wholesale segment pilot was launched by the RBI on November 1, 2022, with 50,000 users and 5,000 merchants onboarded for real-world testing. As of the end of February 2023, around $134 million and 800,000 transactions have been completed via wholesale CBDCs.

In addition to offline functionality, the RBI is also exploring the CBDC’s potential for cross-border transactions and its linkage with the legacy systems of other countries. Choudhary stated that the RBI is eagerly anticipating the participation of private sectors and fintechs in CBDC, especially on offline and cross-border transactions.

Furthermore, the banks’ executive stated that the CBDC would soon become the medium of exchange. That’s why it needs all features of physical currency, including its anonymity. 

The launch of CBDC is India’s motivation for improving regional financial inclusion and leading the digital economy. CBDC would also eventually replace cryptocurrencies, as per Choudhary’s statement on behalf of the RBI.

India’s CBDC for remittances

India’s national payment network, the Unified Payments Interface (UPI), has expanded its services to Singapore as of February 21, 2023. 

The integration of UPI with PayNow enables citizens of both countries to transfer funds across borders with great speed.

The facility was launched by Shaktikanta Das, Governor of the Reserve Bank of India, and Ravi Menon, Managing Director of the Monetary Authority of Singapore, through token transactions using the UPI-PayNow linkage.

This integration of UPI with PayNow will allow users from India and Singapore to transfer money across borders with great speed. Users can send or receive money from India using only a UPI-id, cellphone number, or virtual payment address for money held in bank accounts or e-wallets. UPI’s instant real-time payment system allows for immediate cash transfer between the two bank accounts via a mobile interface.

Initially, four major Indian banks, namely State Bank of India, Indian Overseas Bank, Indian Bank, and ICICI Bank, will support outgoing remittances. Incoming remittances will be facilitated by Axis Bank and DBS Bank India. Users in the region will have access to the service through Singapore’s DBS Bank and Liquid Group.

ICICI Bank is one of the participants in India’s central bank digital currency (CBDC) program. 

According to Sathvik Vishwanath, CEO of Indian crypto exchange Unocoin, this integration of UPI with PayNow is a valuable addition to India’s payment rails. As close to 30% of Singapore’s population consists of expatriates, and they send money to India once a month or quarter, this integration eliminates friction, reducing the processing time and costs.

While India’s digital payment infrastructure has expanded significantly over the last few years due to COVID-19, the government remains skeptical about cryptocurrencies. The government imposed a 30% tax on crypto gains, forcing major players to relocate from the country. However, the government is eager to utilize blockchain technology for its CBDC program and intends to use existing infrastructure to scale the CBDC program.

But India is in no hurry to push out CBDC

Despite joining the CBDC race a few months ago, the Indian government is in no hurry to rush its central bank digital currency (CBDC) pilot. As per a report by The Economic Times on Feb. 8, India’s digital rupee pilot, launched by the Reserve Bank of India (RBI), has attracted 50,000 users and 5,000 merchants.

At a press conference, RBI Deputy Governor Rabi Sankar announced the first public milestones of India’s digital currency and emphasized the government’s plan to proceed with CBDC testing in the smoothest way possible. Sankar stated that the RBI doesn’t want to push CBDC developments without having a full understanding of its potential impact.

Furthermore, Sankar noted that the RBI has set targets in terms of users and merchants and plans to go slowly with the CBDC testing. He stated that they want the process to happen gradually and slowly and that they are in no hurry to make something happen so quickly.

The latest announcement is in line with data from an official digital rupee application, which indicates that the pilot has reached its capacity for users. As per the data from the digital rupee app by the ICICI Bank, India’s CBDC program is full at present, suggesting that more users will be able to join the trial at a later date.

India’s CBDC development came after countries like China aggressively rolled out digital currency in April 2020. However, despite significant efforts to promote the use of CBDCs, some former central bank officials claimed that the digital yuan’s usage has been low.

SEC Crypto Regulator Is Not Doing Its Job, According to Kraken’s CEO

SEC Crypto Regulator Is Not Doing Its Job, According to Kraken’s CEO

The CEO of Kraken, Jesse Powell, has accused U.S. regulators of enabling “bad actors” in the cryptocurrency industry to grow to an enormous size at the expense of legitimate players. 

In a recent tweet, Jesse Powell, present a personal idea about the true intentions of the regulators: 

Jesse Powell has claimed that regulators, including the Securities and Exchange Commission (SEC), are allowing crypto companies to operate without enforcement actions as a distraction from their real targets. 

Many of the respondents agree and offer personal perspectives on why the regulators are more interested in pursuing their secret politics than in offering a safe investment environment for individuals. 

Powell argues that this could lead to the destruction of the industry by allowing bad actors to dominate the market, while legitimate players are forced to compete for dwindling resources. According to Powell, regulators will simply jail violators later after the damage has already been done.

Jesse Powell, the CEO of Kraken, has claimed that U.S. regulators are favoring “bad guys” over “good guys” in the cryptocurrency industry and that the legitimate players are being treated as enemies. Powell warned that if the bad actors are allowed to run unchecked, they could potentially wipe out the legitimate players. Powell made these statements after Kraken settled with the SEC by agreeing to discontinue staking services and pay a $30 million settlement. 

Many in the crypto community have criticized the SEC for its “regulation by enforcement” approach, which has also targeted celebrities endorsing tokens on social media. 

In September 2022, Powell announced that he would be stepping down as CEO and transitioning to the position of chair of the board, while Kraken’s chief operating officer, Dave Ripley, would take over as CEO. 

Meanwhile, Paxos is also reportedly facing SEC enforcement action for alleged violations of investor protection laws related to the Binance BUSD stablecoin.

SEC vs Kraken’s crypto staking option

Following the settlement with Kraken, Gary Gensler, the Chair of the United States Securities and Exchange Commission (SEC), has issued a warning to other cryptocurrency companies to comply with the law. 

Gensler emphasized that crypto exchanges must register with the SEC to operate within the regulations of the U.S. He claimed that many companies in the industry are deliberately avoiding registration. Gensler pointed out that the business models of many crypto projects are full of conflicts and urged them to separate bundled products. Gensler stressed the need for time-tested rules and laws to protect investors and prevent companies from misusing their customers’ funds. He warned companies against having their “hand in the customer’s pocket.”

Gensler made this statement in response to the SEC’s settlement with Kraken, where the exchange agreed to cease staking services and programs for its U.S. customers and pay a $30 million settlement. 

Kraken announced that it would still offer staking services to non-U.S. users through a subsidiary. 

The SEC’s actions have been met with criticism from many in the industry, who argue that firms are being punished for operating in a regulatory environment with unclear guidelines. 

SEC Commissioner Hester Peirce has criticized the regulator’s actions, calling them “lazy and paternalistic,” and pointing out that the staking program had been beneficial to its users.