March 30, 2022 | Issue #213

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Editor's Note: A few years ago, whenever we missed a CoinSnacks issue (or skipped a week) it was really no big deal. There wasn't too much to talk about. Fast forward to 2022, we now realize that one missed week will give us some serious FOMO.

That said, for your sake and ours, here's everything we missed that we felt was important. Then, keep reading below as we get back to normalcy.

Last Week's Headlines:
Coincheck decided to go public via SPAC valued at $1.25 billion. Meta continues to panic and pivot as they file trademarks for tokens, wallets, and exchanges. Time Magazine interviewed Vitalk and it was awesome. Katie Haun is branching out and launching her own fund, named Haun Ventures (which eventually broke a record). The Generalist wrote a deep dive on Multicoin Cap, who absolutely crushed it with their SOL investment – here's part I and part II. There's a new Bitcoin Island! Our team finally launched a website so it's not just a landing page anymore (do us a favor and click around, let us know if you find any bugs or if you have any suggestions). And finally, in what was perhaps the biggest headline of last week, Goldman Sachs became the first major U.S. bank to trade crypto OTC in a partnership with Novo's Galaxy Digital. But there's more on that below.👇👇

MUST READS

Goldman Sachs, Galaxy Digital Announce Milestone OTC Crypto Trade

Goldman Sachs just became the first major U.S. bank to have made an over-the-counter (OTC) cryptocurrency transaction, according to an announcement made public last week.

The Wall Street giant bought an OTC Bitcoin non-deliverable option (NDO) from Mike Novogratz's Galaxy Digital (GLXY). While an OTC Bitcoin NDO sounds complicated, it essentially means Goldman Sachs bought a contract betting on the future price of Bitcoin – rather than actually buying the digital asset itself.

Compared to the Bitcoin futures products Goldman began trading last year, the OTC options are more systematically relevant to the markets. At a high level, Goldman is taking on more risk and is further implying their trust in crypto's maturity to date.

The Bigger Picture:
Slowly, then all at once. This trade represents the first step that banks have taken to offer direct, customizable exposures to the crypto market on behalf of their clients – a small but massive step in the institutionalization of crypto assets.

Side Note:
Given that Galaxy Digital – what we often like to refer as the JPMorgan or Goldman Sachs of crypto – continues to strengthen its institutional footprint, we cannot help but wonder how long it will take before the company gets listed on the Nasdaq. 👀 Largely thanks to the announcement, the stock is up roughly 44% since March 1st.

Related: Blockchain.com's crypto OTC trading desk acquisition closed at $250 million

Exxon Subtly Edorses Bitcoin While Climate Activists Launch New Campaign

Oil and gas behemoth, ExxonMobil, is reportedly diverting some of the natural gas it has no use for to power crypto mining operations, with a pilot program in North Dakota.

The company has partnered with Crusoe Energy Systems to convert the gas into power mobile generators used for mining operations on-site. The project launched in January of last year and the company is already looking to set up similar ones in Alaska, Nigeria, Argentina, Guyana, and Germany.

Projects like this one have been touted as a win-win situation, yet continue to fly under the radar as the mainstream media conversely harps on Bitcoin's negligible environmental impact. Here's a snippet on the matter from a previous issue we wrote last September:

So What's The Point?
In the U.S., at least 1.5 billion cubic feet of natural gas is wasted through flaring (burning gas while drilling for oil) every day, resulting in significant environmental impacts. But now, instead of flaring it, the gas is being used to power onsite Bitcoin mining operations.

The Bottom Line:
The financial incentives brought to the table by Bitcoin miners can completely change the oil & gas industry, while making a positive impact on the environment. Sounds like they need to start selling some carbon credits too.

The news comes on the heels of another climate activist campaign dubbed "Change the Code, Not the Climate" advocating against Proof-of-Work (PoW), Bitcoin's consensus mechanism. The activists, led in part by Greenpeace and billionaire Ripple co-founder Chris Larsen, argue that Bitcoin consumes an unsustainable amount of energy. While flawed, this stance isn't anything new.

The campaign will attempt to lobby institutions in the industry that pledge an environmental, social, and governance (ESG) agenda, buy ads in leading publications such as the WSJ and NYT, and appeal to communities allegedly suffering from Bitcoin miners’ noisy activities to try and convince investors that Bitcoin could use a different consensus protocol that is supposedly both better for the environment and enables a similar degree of security.

Ohh, the irony...

On one hand, we have an oil and gas empire making huge strides on flare prevention while also stabilizing the grid thanks to PoW. On the other, we have an activist group spreading lies for the "greater good" on how dangerous PoW is.
Then, as Alex Gladstein pointed out, environmental activists "face a high threat of frozen bank accounts and de-platforming... Greenpeace has literally been targeted this way before and will need censorship-resistant fundraising tech again."
And let's not forget about Ripple (XRP). Bashing Bitcoin here makes perfect sense. Bitcoin replaces banks. Ripple needs banks.

But bringing us back to the main point, if the campaign were to ever base itself on truthful research and factual arguments, it would never succeed. Be sure to watch each of these videos (exhibit A vs. exhibit B) to witness the unfortunate disparity.

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DEEP DIVES

Ronin Network Hacked For More than $600 Million

The king is dead, long live the king...

This week, Ronin Network was hacked for for ~$624 million, thus becoming the largest DeFi protocol hack in history and toppling Poly Network's record hack of $611 million.

The craziest part though? Although more than $600 million (!!) was stolen, nobody noticed it for six days. And that's where things get interesting. But first, some history.

What Is Ronin Network?
Flash back to July of 2021 and everyone was screaming about the growth of a Pokémon-like game called Axie Infinity that was doing billions of dollars in volume. The only problem was that network fees were many times higher than those charged by most crypto apps. Enter Ronin, which was launched as an Ethereum side-chain to provide Axie users fast and cheap transaction throughput.

How's the Network Work?
Simply put, the network is secured by nine validators who are used to approve of any deposit or withdrawal event. Of these nine validators, five of them (a majority) must be in consensus to approve a transaction. Pertinent to this story though, four of the nine validators are operated directly by the Sky Mavis (the makers of Axie) team.

The Hack:
What the Ronin team thought was their security ended up being their downfall. It turns out the hacker was able to compromise the Sky Mavis validators. But that was only four of the five needed. Although we don't know how the hacker gained access to the Sky Mavis validators, we do know how they gained access to the fifth which you can learn about here. Once the hacker had a majority of the validators it was time to begin the attack, stealing 173,600 ETH and 25.5M USDC to this Ethereum address.

The Icing on the Cake:
As Rekt News put it: "This theft will be remembered not just for its size, but for the surreal lack of awareness shown by the Ronin team." Although more than half a billion dollars of crypto was drained from Ronin, it took a full six days and an alert from a user, before the team realized the money was gone.

What's Next?
It just goes to show once again that many of the decentralized projects out there are decentralized in name only. Since the attack, Ronin has announced that are now requiring eight of nine validators to approve any event in an attempt to become more decentralized.

The real question is what becomes of Ronin and Axie Infinity now? Does someone bail them out like the Wormhole attack, or does Axie try to replenish the funds from their own accounts? If the latter, it may be tough as Axie's daily revenue is significantly lower than where it was only three months ago... and this hack isn't going to help.

DeFi Saver Introduces Stop Loss And Take Profit For MakerDAO Users

DeFi Saver recently introduced Automated Strategies, a major overhaul of its flagship Automation service. The update brought about a more general approach to automated DeFi management.

Now two more strategies are released. The essential Stop Loss and Take Profit market orders are for the first time available, fully on-chain, in a trustless and non-custodial manner for MakerDAO CDPs using the OG dashboard for DeFi management - DeFi Saver.

After releasing their first new automated strategy a week ago, which enabled users to automatically pay back the MakerDAO CDP debt with stablecoin assets supplied in the yield protocols like Yearn, mStable, and Rari, the essential market order strategies are now also available.

Each strategy consists of a set of triggers, and actions from different integrated protocols that are executed once conditions are met. Stop Loss and Take Profit strategies will rely on a price trigger which will execute necessary actions to close a CDP. Instead of relying on MakerDAO’s oracles, this time DeFi Saver went with Chainlink oracles for price trigger updates. An important aspect of the newly released strategies is that Closing the MakerDAO CDPs will close them to Maker’s Dai stablecoin.

Connect your non-custodial wallet and check out the new options to automate your MakerDAO positions.

DeFi Saver is an all-in-one dashboard for creating, managing and tracking your DeFi positions.

REGULATORY FRONT

Grayscale Threatens Legal Action if SEC Rejects Bitcoin ETF Conversion Bid

As we have covered more times than we can count in this newsletter, Grayscale has been working to convert its $28.5 billion AUM Grayscale Bitcoin Trust (GBTC) into a an ETF. Doing so would immediately close the 25% discount to NAV that currently exists, in turn creating billions of dollars in value for the current 800,000 GBTC investors.

After first filing an application in April 2021, the SEC has continued to delay the ruling while simultaneously approving futures-backed Bitcoin funds.

Although Grayscale ultimately believes the conversion will be approved, this week they threw out some fighting words, stating that they would consider suing the SEC if the application is rejected: "All options are on the table."

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