Cross-chain liquidity protocol THORChain has fully recovered from two summer exploits that compromised millions of dollars in user funds after the company announced Thursday that it had received passing grades in a new security audit.
The simultaneous audits, which were carried out by cybersecurity companies Trail and Bits and Halborn, allowed THORChain to implement a five-step recovery plan. THORChain’s contributors now say the protocol is fully operational after a restart brought all the major cryptocurrency integrations and cross-chain trading features back online.
In addition to the audit, THORChain announced that it has commissioned Immunefi, a leading bug bounty platform for the DeFi sector, with a bounty program to identify new vulnerabilities as they arise.
The launch of THORChain earlier this year came with much fanfare, as it marked an important evolution in decentralized exchanges. In July, however, the platform suffered two multi-million-dollar security breaches, the first being a $7.6 million Ether (ETH) exploit that generated significant backlash. As Cointelegraph reported, network activity was halted as developers investigated the extent of the damages.
Related:THORSwap closes investment round as cross-chain DEXs take center stage
Roughly one week later, a white hat attacker drained the protocol of roughly $8 million worth of ETH, but would later request a 10% bounty for returning the funds. The two thefts capped off a horrible month for THORChain, with even its biggest supporters calling for a slowdown in project ambitions.
Thorchain has had a horrible month, not going to sugar coat it. Bleh
The project needs to slow down. Time to take the tortoise strategy.
Regardless, I remain a committed supporter, and am glad these issues are being discovered during chaosnet. https://t.co/gcWCyFYuTI
— Erik Voorhees (@ErikVoorhees) July 23, 2021
Security breaches are nothing new for the cryptocurrency market, with DeFi emerging as a popular attack vector for cybercriminals. According to industry sources, roughly $1.2 billion has been lost to DeFi exploits. That figure omits the recent nine-figure exploit of Cream Finance, which suffered a major flash loan hack on Wednesday.
Non-custodial cryptocurrency exchange ShapeShift has completed its second airdrop of FOX tokens — dubbed “fairdrop” — as part of a broad decentralization pledge that was first announced in July.
The airdrop of 6,613,000 FOX tokens was distributed to over 33,000 DAO community members, ShapeShift announced Tuesday. These holders were previously ineligible for the airdrop reward because their tokens were locked in staking or liquidity operations.
A proposal to amend the token distribution process to include DAO community members was submitted on Sept. 16, receiving overwhelming support.
As Cointelegraph reported, ShapeShift airdropped 340 million FOX tokens to over one million users in July after the company announced it was dissolving its corporate structure — an industry first — as part of a broad commitment to decentralization.
In a follow-up interview with Cointelegraph, CEO Erik Voorhees described decentralization as an “iterative process,” given that some parts of an organization are easier to open source than others. As part of this process, ShapeShift has established a foundation to oversee the shift to decentralization. This foundation, said Voorhees, will become less relevant as the open-sourcing process expands in the coming years. By that time, ShapeShift will be better described as an open-source, multi-chain self-custodied cryptocurrency platform for all users.
Related:Decentralized search engine becomes default option on European Android devices
The modern premise of decentralization was made famous by Satoshi Nakamoto, Bitcoin’s (BTC) pseudonymous creator, who ushered the blockchain revolution in a 2008 whitepaper that explained the merits of a peer-to-peer electronic cash system. Many blockchain projects that have since emerged have promised decentralization, though in practice their operations have been closer to “shadow-centralization.”
Recently, Securities and Exchange Commissioner Hester Peirce warned that DeFi projects that have not embraced full decentralization risk running afoul of federal regulations. In an August interview with The Defiant, Peirce said:
“If you want to be decentralized, you really need to be decentralized, and that is going to then put you in a different category from the perspective of regulators because that’s just not something that we’ve dealt with before.”
As part of its ongoing decentralization efforts, non-custodial cryptocurrency exchange ShapeShift announced Thursday that it has open-sourced the code of its upcoming version two platform, giving developers the opportunity to contribute to the iteration process.
ShapeShift’s v2 code repository is now available on Github, making it easier for developers to download it to their local drives. “This is a great step in our ongoing efforts to open source and involve the community in iterating on the first comprehensive, multichain, community-built interface,” said Josh Foreman, engineering workstream lead for ShapeShift DAO.
The company also announced that open-source developers can attend biweekly community calls held on ShapeShift’s Discord channel. The meetings will feature demos and discussions related to various product engineering topics.
Related:Algorithmic stablecoins show promise of reducing volatility — ShapeShift
ShapeShift is in the process of dissolving its corporate structure and fully decentralizing its operations as part of a pledge to create an open, immutable organization. As part of that process, the company announced plans to airdrop 340 million of its native FOX tokens. Over 1 million users are eligible for the airdrop.
Decentralization has been a driving force of the blockchain revolution ever since Bitcoin’s (BTC) pseudonymous creator Satoshi Nakamoto proposed a decentralized approach to transactions. Some of Bitcoin’s most ardent proponents — dubbed “Bitcoin maximalists” by the community — argue that no other cryptocurrency has achieved a level of decentralization near that of BTC.
Related:Erik Voorhees lashes ‘disgusting’ behavior of Bitcoin maxis: ‘Not the community I come from’
Although not every crypto-based project requires a decentralized value proposition to drive adoption, decentralization is viewed as a solution to many of the perils of centralized systems. Decentralization is therefore seen as both a philosophical approach and a technical solution.
Erik Voorhees, the founder and CEO of ShapeShift, has revealed in a podcast that he felt embarrassed and disgusted by the behavior of Bitcoin maximalists at the 2021 Bitcoin conference in Miami.
A Bitcoin OG who can see some merit in altcoins, Voorhees spoke on a panel during day two of the Miami conference in June. He caused a stir when he said “Did I hear someone on that prior panel say ‘If you’re against toxic maximalism, you’re against Bitcoin and you’re against freedom?’… Yeah, that’s some bullshit.”
The ShapeShift CEO expanded on those comments in a July 27 interview on the Unchained Podcast hosted by journalist Laura Shin. The 35-year-old slammed Bitcoiners who believe that toxic behavior such as trashing proponents of other cryptocurrencies is a good thing for BTC:
“They’ve spun themselves up into thinking that trashing these people is a virtue and it’s helping Bitcoin. Frankly, I think it’s just kind of disgusting and I was embarrassed.”
He added: “These people were on stage talking about the virtues of toxic maximalism. I don’t know when they got into Bitcoin, but absolutely that is not the community that I come from in Bitcoin.”
Vorhees has spoken out before against toxic maximalism, but told Shin that the Miami conference was the first Bitcoin conference he’s been to in which he was “embarrassed about the people who were there.”
He stated that if there is a genuine enemy to Bitcoin and toBitcoin maxis, it is “central banks, banking and fiat currency” and not the “Dogecoin community or Ethereum community.”
ShapeShift is a noncustodial crypto exchange operated out of Denver and headquartered in Switzerland. The platform announced a full integration with cross-chain DEX THORChain in April which enabled direct trading of Bitcoin, Ether, and Litecoin. However, THORChain has suffered two multi-million dollar breaches from hackers this month, along with a third more minor breach.
Related:ShapeShift to decentralize entire company, plans for largest airdrop in history
Cointelegraph reported on July 16 that Thorchain came to a halt after a hacker stole $7.6 million worth of crypto assets, and last week an apparent white hat hacker stole $8 million worth of ETH.
Voorhees conceded the exploits show that ThorChain still has a long way to go, but the fact that it can provide a DEX that is chain-agnostic is a “huge development for the industry.”
“THORChain is very new early software and they’ve had a few pretty atrocious bugs recently. Right now the chain is offline. So it’s not a panacea and it’s not ready for prime time, but it works. It works with real money and it’s out in the wild getting better and better each week.”
Dogecoin co-founder Jackson Palmer called cryptocurrencies “inherently right-wing” in a lengthy tirade this week.
Coinbase CEO Brian Armstrong responded, highlighting how crypto has created wealth and equality of opportunity.
The comments from Palmer and Armstrong form part of a larger debate on the ideology of cryptocurrencies.
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Coinbase CEO Brian Armstrong has responded to Dogecoin creator Jackson Palmer’s recent slam on the cryptocurrency space.
Coinbase CEO Defends Crypto
Questions over the ideology of cryptocurrencies have sparked debate on Twitter.
In a Wednesday tweet storm, Dogecoin co-founder Jackson Palmer sparked controversy when he called cryptocurrencies “inherently right-wing” and alleged the industry is controlled by a “powerful cartel of wealthy figures.”
After years of studying it, I believe that cryptocurrency is an inherently right-wing, hyper-capitalistic technology built primarily to amplify the wealth of its proponents through a combination of tax avoidance, diminished regulatory oversight and artificially enforced scarcity.
— Jackson Palmer (@ummjackson) July 14, 2021
In response, Coinbase CEO Brain Armstrong argued in favor of cryptocurrencies, saying that Bitcoin has made “many people wealthy” and that the industry creates wealth mobility and “more equality of opportunity for everyone.”
7/ Crypto is not going to solve wealth inequality – it’s not trying to create the same outcome for everyone. But it does create wealth mobility and more equality of opportunity for everyone. It levels the playing field, at least to some degree.
— Brian Armstrong (@brian_armstrong) July 15, 2021
Armstrong took a bold stance against engaging in political activism last year in ablog posttitled “Coinbase is a mission focused company.” In the post, he stated Coinbase would no longer advocate for political causes or engage with societal issues, as doing so would take the focus away from the company’s core mission. Armstrong likely took issue with Palmer’s politicization of cryptocurrencies and felt compelled to respond.
Understandably, Palmer doesn’t see things the same way as Armstrong. Palmer created Dogecoin in 2013 but hasn’t financially benefited from the network’s success because he doesn’t own any tokens. Speaking toDecryptin 2018, Palmer said:
“I made a lot of people rich but I didn’t come away with any money. I get to tell people that I created Dogecoin, which is fun.”
Dogecoin soared in value to a market cap of over $94 billion in May, helped by ongoing support from Tesla CEO Elon Musk. It has since shed well over half its prior value, currently sitting at a market cap of $23.4 billion.
The Coinbase CEO was not the only prominent figure to respond to Palmer’s tweets. ShapeShift CEO Erik Voorhees also took issue with Palmer’s view that crypto is right-wing but agreed that it is hyper-capitalistic.
Disclaimer: At the time of writing this feature, the author owned BTC and ETH.
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In 2014, Erik Voorhees founded ShapeShift. By the end of 2021, ShapeShift will cease to exist as a company. It will become a DAO, a Decentralized Autonomous Organization. The owners of their FOX token will have complete governance over it, and they will “Open source all ShapeShift code and infrastructure.” That’s according to thecompany’s official announcement,which also states:
It has become clear to us that decentralization is the only way to achieve borderless, immutable finance. Therefore, decentralizing ShapeShift is how we choose to maintain fidelity to the principles first established by Satoshi and the Bitcoin whitepaper.
In Voorhees ownblog postabout the change, the CEO promises, “Our corporate entities will be dissolved completely toward the end of the process.” Voorhees also details all of the red tape they encountered while trying to establish ShapeShift’s vision, and states that right now, “The frictionless trading of digital assets across chains, without custody, done in a manner that respects and protects users is once again possible.”
Related Reading | After Crypto Giants Bitmain & ShapeShift Cut Staff, So Does Blockfolio
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In a phoneinterview with Coindesk, the CEO gave them a candid answer that explains the situation plainly:
“It’s definitely radical. A year ago I would have thought this was sort of fanciful, but at this point I’ve seen how this tool is getting built and I’ve seen how these communities get built around a token instead of an equity structure. The fact that ShapeShift is really closing its corporate entity sets it apart.”
It really does. ShapeShift’s navigating uncharted waters.
Ok, But, How Will The ShapeShift DAO Work?
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In the next few months, ShapeShift will airdrop 340 million FOX tokens all over the DeFi space. The “largest airdrop in history.” Everyone who used ShapeShift in the past is eligible. And users from other well-known DeFi projects will get their share also. The company hopes that the process will spread its seed around, and bring more people into the project.
With time, governance over the entire ShapeShift open-source platform will move to FOX holders. This will be a process in which decision making moves from the fully centralized shareholder/board structure of ShapeShift today to a fully decentralized community/token structure in the future.
Said shareholders aren’t walking away empty-handed. They will have no special privileges, but they can be as involved as they choose. According to Voorhees blog:
Our shareholders will receive all financial assets of the corporation as it unwinds. Further, they have received pro-rata FOX Tokens, which unlock over three years, and with these they can participate in governance going forward. They can be as involved as they wish, but they have no special privileges.
And Voorhees himself will still be heavily involved:
For transparency, I will be the largest FOX holder, with just over 5% of max total supply, unlocking linearly over three years, all on chain. The next largest holder has roughly 1.6%, and the long tail extends from there.
Will the experiment succeed or are they trying to fly too close to the sun?
ETH price chart on Poloniex | Source: ETH/USD on TradingView.com
How Will Voorhees And Company Handle The Transition?
The CEO for the time being explains what they’re trying to accomplish:
Governed by its users, ShapeShift will integrate with the most desired crypto and DeFi protocols, a neutral interface to the future financial system that everyone can influence, and no one can control.
And Voorhees told Coindesk what he thinks their service ultimately is:
“We’re essentially a crypto interface,” Voorhees said, and it has been built with an eye toward integrating with any wallet, app, blockchain or primitive entrepreneurs want to build.
But, how will they get there? Well, there’ll be a foundation, as ShapeShift’s announcement explains:
ShapeShift will establish a well-funded non-profit organization—a Foundation—with the narrow objective to promote and facilitate a transition to a completely decentralized, community-owned project. As sufficient decentralization is achieved, this Foundation has a mandate to dissolve away.
And Voorhees elaborates via his blog:
The ShapeShift DAO treasury has beenestablished, endowed with over 242,000,000 FOX Tokens (24% of max total supply). Any FOX unclaimed from the airdrop after three months will be added to this treasury.
Related Reading | “Check Out Thorchain (RUNE),” ShapeShift CEO Erik Voorhees Says
So, in conclusion, ShapeShift will dissolve and decentralize itself. They will open-source their software and organize around the FOX token. Or, in their words, “economics that revolve around a borderless, liquid token rather than a traditional equity structure bound by jurisdiction.”
What an interesting experiment.
Featured Images by Karen on Unsplash - Charts by TradingView
ShapeShift, a leading non-custodial cryptocurrency exchange, is planning to open-source its platform and dissolve its entire corporate structure — an unprecedented move that underscores the company’s commitment to decentralization.
Largest airdrop in history
As part of its decentralization pledge, ShapeShift plans to airdrop 340 million FOX tokens to over one million users who traded $1 or more of Ether (ETH) or any ERC-20 token through the platform prior to June 9, 2021. Both current and past users of ShapeShift are eligible to receive the airdrop. The breakdown of the FOX token distribution is as follows:
1-4 trades: 200 FOX
5-9 trades: 350 FOX
10-24 trades: 750 FOX
25-99 trades: 1,500 FOX
100+ trades: 8,500 FOX
Wallets registered with ShapeShift that are holding cryptocurrency balances as of June 9 will also receive 250 FOX. Furthermore, users of KeepKey who have connected with ShapeShift as of June 9 are also eligible for 900 FOX.
The airdrop effectively transfers ShapeShift governance rights to the users, who will begin governing the now community-owned platform. Over 60% of the total FOX supply will be allocated to the ShapeShift community. Over 120,000 decentralized finance (DeFi) users from other platforms, including THORChain, Curve, Balancer and Uniswap, will also be eligible to collect FOX tokens through the airdrop.
The first round of FOX liquidity mining will begin at 9:00 am MT on July 16.
Airdrop recipients are not bound by lockup periods, the company confirmed. All employees and shareholders, as well as the ShapeShift DAO Governance Treasury, have a three-year vesting period through June 2, 2024.
Open-sourcing to begin shortly
All of ShapeShift’s code and infrastructure will be open-sourced in the coming months, the company said, explaining that:
“Anything that cannot be open-sourced in the short-term will be run by the Foundation, with the intention of it open-sourcing and decentralizing when possible in coordination with the community.”
The open-sourcing process also seeks to decentralize all protocol functionalities that currently rely on centralized infrastructure, such as ShapeShift oAuth, which allows partners to request third-party applications access from users.
Related:Decentralized insurance could save DeFi from contagion, according to ShapeShift report
Promoting a decentralized future
ShapeShift founder and CEO Erik Voorhees said the decision to dissolve the company’s corporate structure and transfer governance rights to the users was inspired by the DeFi community, which has grown significantly over the past year. Voorhees explained:
“Inspired by the broader DeFi community, we’ll now help pioneer a new model of economic coordination for the 21st century. No corporate entity, no banks and no borders. The tools are ready. Our customers, and the broader crypto community, are now the primary stakeholders of a decentralized, open-source digital asset platform for the world.”
In an interview with Cointelegraph Magazine earlier this year, Voorhees credited DeFi in general and decentralized exchanges (DEXs) in particular for helping ShapeShift reorient its business model back to its original vision, after traditional banking rules forced the company to implement Know Your Customer, or KYC, identity verification procedures.
“I had learned with Satoshi Dice that an economic relationship didn’t need anything other than a public key to send in a transaction, and anything else could be based around that,” he said.
Self-custody.
Decentralization.
Immutability.
Each requires the former.
This is the way.
— Erik Voorhees (@ErikVoorhees) June 16, 2021
ShapeShift’s support of decentralized exchanges began in January 2021 after the platform integrated with Uniswap, Balancer, Curve, Banor, Kyber, 0x and others.
Voorhees has spoken at length publicly about the ethos of decentralization and decentralized planning, also known as market competition. In May of this year, he gave a presentation titled “Decentralization & Use of Knowledge in Society” at the Cryptocurrency and Hayek Conference at George Mason University. In the presentation, he said:
“Amid the volatility, the periodic disasters, the silly dog memes, people often miss just how profound cryptocurrency as a social and economic phenomenon has become. This is a phenomenon where one-and-a-half-trillion dollars of wealth has been created in just over a decade. […] Where lending and exchange markets have formed to trade billions of dollars of value per day and yet which have no office, no CEO and are run by no company.”
ShapeShift, a cryptocurrency exchange based in Switzerland, has announced full integration with THORChain, enabling direct trading of native Bitcoin (BTC) with Ethereum (ETH) and Litecoin (LTC).
As of Tuesday, ShapeShift’s mobile users have the ability to make cross-chain swaps without the use of an intermediary, custodian or counterparty of any kind. This capability will be extended to ShapeShift’s web-based platform in the coming weeks.
Erik Voorhees, ShapeShift’s founder and CEO, explained the importance of the THORChain integration:
“We believe finance must be open and immutable. The THORChain team has built technology that brings these properties to the trading of bitcoin and other leading chains for the first time.”
THORChain integration is a “continuation of our commitment to offer users an easy, self-custody platform for their decentralized trading needs,” Voorhees added.
A growing market for cross-chain transfers has put THORChain on the map in recent months. RUNE, the protocol’s native cryptocurrency, has done a 9x since the year began. At a current price point of $11.40, THORChain has a market capitalization of $2.6 billion, placing it 49th among active cryptocurrencies.
As Cointelegraph previously reported, ShapeShift’s embrace of decentralized exchanges, or DEXs, began in January 2021 with the support of Uniswap, Balancer, Curve, Bankcor, Kuber, 0x and mStable. In the process, ShapeShift relieved users of burdensome Know Your Customer, or KYC, requirements while offering better liquidity and pricing.
In a January 2021 podcast with Bankless, Voorhees described the rise of Uniswap as one of the most important stories in cryptocurrency, offering a clear indication that ShapeShift would continue moving in that direction. During the same month, Voorhees indicated that “all non-DEX trading on ShapeShift will be retired” later this year.
This week on the “Bitcoin Magazine Podcast,” host Christian Keroles sat down with early Bitcoin adopter and entrepreneur Erik Voorhees. He has had an enormous impact on Bitcoin’s history starting some of its earliest companies, participating in the scaling wars and embracing the Ethereum ecosystem.
Voorhees sees the Bitcoin space in a different way than many Bitcoiners. He described everything within the “crypto” ecosystem as part of the same tree and argued that, although there are nefarious use cases and scams, that does not invalidate the entire space outside of Bitcoin.
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While still holding the majority of his value in bitcoin, Voorhees believes that Bitcoin was just the first building block of a decentralized finance ecosystem that he is excited to build.
