Tag: Staking

Shapella Upgrade, Privacy Concerns, Hacks, and Financial Inclusion

by Blockchain News

The DeFi space had a busy week with several significant developments. The highly anticipated Shapella upgrade on Ethereum’s mainnet was successfully completed, allowing validators to withdraw their staked Ether after three years. However, only 253 validators have signed up to fully exit their staked Ether position, with analytics firm Glassnode predicting that less than 1% of the staked ETH will be withdrawn.

In addition to the Shapella upgrade, an Ethereum researcher revealed that staking Ether could become a privacy concern. The researcher found that staking Ether shows a user’s IP address information, which could lead to privacy issues. This discovery raised concerns within the cryptocurrency community.

A DeFi hack also occurred during the week, where a hacker exploited an old Yearn.finance contract and minted 1 quadrillion Yearn Tether (yUSDT). The hacker then swapped the yUSDT to other stablecoins, allowing them to take hold of $11.6 million worth of stablecoins.

However, the week also had positive news regarding financial inclusion in Africa. Fonbnk, a Web3 on-ramp that allows Africans to obtain cryptocurrency assets by exchanging their airtime credits, partnered with Tanda, a merchant network platform in East Africa, to launch an airtime trading marketplace across Tanda’s network of agents. This partnership aims to increase liquidity and earning opportunities for African micro-entrepreneurs.

Finally, the top 100 DeFi tokens had a bullish week, thanks to a late surge in the crypto market after Ethereum’s much-awaited upgrade. Most DeFi tokens traded in the green along with the rest of the market.

In conclusion, the DeFi space had a busy week with several significant developments, including the successful Shapella upgrade, privacy concerns related to staking, a major DeFi hack, and a partnership to increase financial inclusion in Africa. The top 100 DeFi tokens had a bullish week, and Glassnode predicted only a small percentage of staked ETH would be withdrawn.

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Ether Surges to Over $1,900 Ahead of Staking Withdrawals

by Blockchain News

Ether, the second-largest cryptocurrency by market capitalization, has surged to over $1,900 for the first time in over seven months, according to CoinMarketCap data. This price increase comes ahead of the Ethereum Shanghai hard fork, scheduled for April 12, which will implement Ethereum Improvement Proposal (EIP)-4895, allowing validators and stakers to withdraw staked ETH from the Beacon Chain. The upgrade is also expected to help increase transaction speeds while reducing transaction costs through other EIPs.

The last time Ether was above $1,900 was on August 16, 2022, during a broader crypto sell-off when the United States Federal Reserve was hiking the federal funds rate at a record pace to combat inflation. The recent price increase could be driven by expectations that the Fed may ease up on its quantitative tightening efforts, causing cracks in the global banking industry, or by increased demand for Ether given that staking is slated to be more flexible.

Bitcoin has also recorded gains recently, but the trading pair ETH/BTC has increased by nearly 3% in the last week, suggesting that both factors may be contributing to Ether’s price jump. It is worth noting that the price of Ether dropped sharply following the execution of the Merge on September 15, 2022, where it lost just under a quarter of its value in one week.

The Ethereum Shanghai hard fork is named after the fork on the execution layer client side, while Capella is the upgrade name on the consensus layer client side that is set to be executed shortly after Shanghai on April 12. The execution layer is where all the smart contracts and protocol rules are, while the consensus layer ensures that all network validators follow these rules.

Despite some analysts and traders suggesting that unlocking staked Ether will create sell pressure, what will occur following the Shanghai and Capella updates is speculation. The recent price surge may be an indication that investors are optimistic about the future of Ether and the potential for the upcoming upgrades to increase its value.

In conclusion, Ether’s recent surge to over $1,900, a level not seen since August 2022, is likely due to several factors, including the upcoming Ethereum Shanghai hard fork that will enable stakers to withdraw their ETH and the potential easing of the Federal Reserve’s quantitative tightening efforts. While some investors may be concerned about sell pressure following the upgrade, others remain optimistic about the future of Ether and its potential for growth. The upcoming upgrades are set to increase transaction speeds while reducing transaction costs, and it remains to be seen how they will affect Ether’s value in the long term.

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Thailand SEC Considers Ban on Crypto Staking and Lending

by Blockchain News

The Thai SEC’s potential ban on crypto staking and lending activities is part of the country’s broader efforts to regulate its rapidly growing digital asset industry. The SEC has been actively working to establish clear guidelines for crypto businesses operating within Thailand’s borders.

In a statement released on March 8, the SEC announced that it is seeking public comments on a draft regulation that would prohibit VASPs from offering any type of staking or lending services. This move follows the regulator’s decision to postpone its implementation of a new licensing rule for VASPs until June 2021.

The proposed regulation would require VASPs to obtain permission from the SEC before offering any new services or expanding their existing offerings. This would give the SEC greater control over the types of services offered by VASPs operating within Thailand’s borders, ensuring that they comply with the country’s legal and regulatory framework.

The Thai SEC’s proposed ban on staking and lending services has sparked concern among some members of the country’s digital asset industry. Some industry experts believe that the ban could stifle innovation and growth in the industry, making it more difficult for VASPs to compete with their international counterparts.

Others, however, argue that the ban is necessary to protect investors from the risks associated with these types of services. Staking and lending involve the use of complex financial instruments that can be difficult for novice investors to understand, increasing the potential for fraud and other forms of misconduct.

Regardless of the outcome of the SEC’s public hearing, it is clear that Thailand’s regulators are taking a proactive approach to regulating the country’s digital asset industry. As the industry continues to evolve and grow, it is likely that we will see more regulatory measures put in place to protect investors and ensure the long-term stability of the market.

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Slim Odds of Slashing and Best Practices to Avoid it

by Blockchain News

A fundamental developer of the Ethereum ecosystem said that since the debut of the Beacon Chain on December 1, 2020, there have only been 226 validators sliced out of a total of 524,060 validators, which is barely 0.04% of the total. This information was provided by the developer. Slashing happens when a validator breaks the rules that govern the proof-of-stake consensus. This often results in the removal of the validator from the network and the loss of a part of the Ether (ETH) that was pledged as collateral. The Ethereum core developer known as “Superphiz” pointed out these low cutting rates in a tweet on February 23. He said that staking ETH should not be a worry since the probabilities of having it slashed are very low.

In addition, Superphiz suggested a total of four up-and-coming best practices as a means of lowering the chance of being reduced even more. Because many slashings are the result of unsuccessful system migrations, one of these procedures is erasing any existing chain data on older staking machines and then reinstalling and reformatting the validator. Additionally, Superphiz advised use a technique known as “doppelganger identification,” which examines the validator’s keys to see whether or not they are operational before beginning the validation process.

The purpose of these steps is to make the process of staking ETH more safe and to convince users that the chance of having their stakes lowered is quite low. Staking Ethereum is an essential component of the Ethereum network since it contributes to the network’s overall security and offers a passive revenue opportunity to users who donate Ether. The move from a proof-of-work consensus algorithm to a proof-of-stake consensus algorithm is scheduled to take place as part of the next Ethereum 2.0 update. This change is expected to make staking ETH even more significant.

Users should have trust in staking their Ethereum (ETH) because to the low rate of slashing that occurs within the Ethereum ecosystem as well as the best practices that are advised by Superphiz. Users have the ability to further mitigate the risks associated with staking and contribute to the overall security of the Ethereum network by following the established best practices and taking the required safeguards.

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Tim Beiko announced Shapella upgrade

by Blockchain News

Tim Beiko, a key developer for Ethereum, has revealed that the next planned update for Shapella would take place on February 28. When epoch 56832 arrives, the Shapella network update will become operational on the Sepolia network.

The names Shanghai and Capella (Shapella) are now being considered for the forthcoming Ethereum hard split. On the execution layer client side, the fork is referred to by the name Shanghai, whereas on the consensus layer client side, the upgrade is referred to by the name Capella.

On the execution layer, some major Ethereum improvement proposal (EIP) enhancements include push withdrawals on the Beacon Chain and warm coinbase. Warm coinbase should not be confused with the cryptocurrency exchange. By using a new “system-level” operation type, the push withdrawals will make it possible for validators to withdraw funds from the Beacon Chain and send them to the Ethereum Virtual Machine. Warm Coinbase, on the other hand, has the potential to be a game-changer by lowering the network costs that builders must pay.

The piece of software known as Coinbase is what builders on the network use to be credited with newly issued coins. Each and every new transaction on the network is required to have many interactions with the Coinbase program. Because the program takes more time to “warm up,” the charge for the first engagement is higher than the fee for subsequent interactions, which decrease as the number of contacts increases. However, with the implementation of EIP-3651, the coinbase software will stay warm from the start, and users will be required to pay a lesser gas charge in order to access it.

The initial unique historical roots have been replaced by complete and partial withdrawals for validators, as well as independent state and block historical accumulators. These are some of the major modifications that have been made to the consensus layer.

The ability to make a partial withdrawal enables validators to continue verifying transactions while withdrawing ether (ETH) rewards in amounts greater than 32 ether. Validators have the option to entirely abandon the system, collect all 32 Ether and awards, and call it quits if they wish to make a full withdrawal.

The next update will provide validators the ability to transfer their staked Ether (stETH) from the Beacon Chain to the execution layer so that they may spend it. In addition, the update would bring about modifications to the execution and consensus layers, as well as the addition of new functionality; hence, it would be an essential upgrade after the Merge.

In order to take advantage of the Sepolia update, however, stakers and non-stakers who run nodes are need to bring their nodes up to date with the most current versions of the Ethereum client. The next phase would be the release of the Shanghai upgrade on the Ethereum Goerli test network, which is anticipated to begin in the month of March. This would be the following step after the deployment of the Sepolia upgrade.

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The amount of ETH burned will continue to increase as transaction fees are burned

by Blockchain News

Since the completion of the Merge network upgrade six months ago, the quantity of ether (ETH), the second-largest cryptocurrency in terms of market value, has been steadily decreasing across exchanges. In September 2022, the Ethereum network went through a significant upgrade that consisted of switching from a proof-of-work (PoW) network to a proof-of-stake (PoS) network during an event that was referred to as the Merge.

The quantity of accessible ETH that is now languishing on exchanges continues to decrease, as shown by on-chain data that was published by the cryptocurrency analytics company Santiment. Since the Merge, the amount of ETH available on exchanges has decreased by 37%. It is a positive indicator when there is a consistent decrease in supply on exchanges. This is because there is less ETH accessible on the market for buying and selling.

Before the Merge, there were a total of 19.12 million ETH worth $31.3 billion trading hands on exchanges in the month of September. As of the second week of February, the number had dropped to 13.36 million ETH, which corresponds to a value of $19.7 billion.

A significant portion of the Ethereum supply is now being shifted into self-custody, while the Shanghai upgrade is drawing near and many traders choose staking as an investment strategy instead. The next version for Ethereum, known as Shanghai, is expected to release in the month of March. Stakeholders and validators will be able to remove their holdings from the Beacon Chain after the Shanghai hard fork, which will combine more upgrade suggestions for network advancements and enable for this functionality.

At the now, 14% of the entire supply, or 16 million ETH, is staked on the Beacon Chain. This amounts to nearly $25 billion at the prices that are currently in effect, and it is a significant quantity that will gradually become liquid following the Shanghai hard fork.

Since it became deflationary after the London upgrade, the total quantity of ETH on the market as a whole has also decreased, in addition to the ongoing decrease in the amount of ETH stored on exchanges. The fee-burning mechanism that was first implemented as part of Ethereum Improvement Proposal (EIP)-1559 is where the deflationary model can be found.

Since the London upgrade in August 2021, a total of 2.9 million ETH has been burnt, which would have had an equivalent value of around $4.5 billion in today’s currency.

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LidoDAO is considering selling or staking its $30 million

by Blockchain News

The decentralized autonomous organization that is responsible for Lido, which is the biggest Ethereum staking pool, is now debating whether or not it should stake the $30 million in Ether (ETH) that is currently in its treasury or sell it.

Steakhouse Financial, the financial arm of the DAO, put out a proposal on February 14 that examines four potential courses of action. One of these options is the possibility of the DAO staking some or all of its ETH to Lido in the form of Lido Staked ETH (stETH).

Another possibility involves the LidoDAO selling some or all of its 20,304 ETH in exchange for a stablecoin. This would be done with the intention of extending the DAO’s runway.

The suggestion comes at a time when ETH staking withdrawals will soon be possible via Ethereum’s Shanghai and Capella upgrades. According to the Ethereum Foundation, both upgrades are scheduled to take effect at some point in the beginning of this year.

Although changing the ETH to Staked ETH might result in an increase in the number of protocol awards, the DAO is mindful of the possibility that excessive staking could result in the organization not having sufficient Ether on hand “just in case.”

Steakhouse Financial said that in order to “preemptively secure more runway,” it may be required to exchange Ether for a stablecoin. This statement was made with reference to operational expenditures.

With the price of ETH fluctuating between $1,100 and $1,700 over the last few months, Steakhouse Financial observed that with LidoDAO’s current inflows at roughly 1000 stETH each month, the DAO is producing about $1.3 million to 1.5 million per month.

According to Steakhouse Financial, the numbers should be “sufficient to pay monthly operating expenditures” on their own.

However, they are currently considering whether or not it would be beneficial to convert their surplus of stETH into a stablecoin in order to better prepare themselves for any changes in market circumstances that may result in higher operational expenditures.

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What the U.S. Congress Decides on Crypto Will Ultimately Overstepping their authority

by Blockchain News

The policy expert for the cryptocurrency advocacy group Blockchain Association says that despite attempts to police cryptocurrency through enforcement actions, United States financial regulators “are bound by legal reality,” and Congress will ultimately decide what regulations should be put in place for cryptocurrencies.

Jake Chervinsky, the chief policy officer of the organization, contributed his thoughts to a lengthy Twitter conversation on the topic of the current status of crypto policy on February 14.

He made the observation that the Securities and Exchange Commission as well as the Commodity Futures Trading Commission “do not have the ability to completely oversee cryptocurrency.”

Given the ideological divide that exists between the House Republicans and Senate Democrats, Chervinsky is of the opinion that a compromise on the crypto legislation is “unlikely.” He said that the Securities and Exchange Commission and the Commodity Futures Trading Commission had exceeded their powers in an effort to “get things done” without Congress.

Chervinsky issued a plea for the sector to maintain its composure in the wake of the recent flurry of action from the SEC, which he referred to as “crypto’s biggest opponent.” As an example, Chervinsky cited the SEC’s crackdown on staking services.

The settlement that the SEC reached with the cryptocurrency exchange Kraken on February 9, which forbade Kraken from ever selling staking services to consumers in the United States, has been publicly criticized by SEC Commissioner Hester Peirce.

Peirce expressed his disagreement with the majority opinion in a statement dated February 9, in which he said that regulating a growing business via enforcement “is neither an effective or equitable manner of governing” the industry.

It was proposed by Chervinsky that litigation is one method the cryptocurrency business may press for appropriate legislation. Chervinsky said that the court plays a key role in influencing policy that has been “ignored.”

Coinbase, a cryptocurrency exchange, is also the subject of an SEC investigation that is similar to the one that led to Kraken’s settlement.

A more stronger position has been adopted by Coinbase CEO and co-founder Brian Armstrong, who believes that it would be disastrous for the United States to do away with staking for cryptocurrencies.

In a tweet dated February 12, Armstrong contended that Coinbase’s staking services are not securities and said that he would “gladly defend this in court if it were necessary.”

The decisions that judges make in important cases establish new standards in the law. If such a case were to be taken before a court and the judge concluded that Coinbase’s staking services did not qualify as securities, then other cryptocurrency businesses who are in a situation comparable to Coinbase’s may utilize the precedent as part of their defense.

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Coinbase Executives Stand Up for Crypto Staking Services

by Blockchain News

Trade in cryptocurrencies Executives at Coinbase are defending the company’s cryptocurrency staking services, arguing that they cannot be categorized as a security and threatening to take the subject to court in the United States.

The Chief Executive Officer of Coinbase, Brian Armstrong, said on Twitter that the business is prepared to “fight this in court if necessary.” The decision to take this action comes after the cryptocurrency exchange Kraken came to a deal with the Securities and Exchange Commission on February 10 to cease providing staking services or programs to customers in the United States.

According to the Securities and Exchange Commission (SEC), Kraken did not “register the offer and sale of its crypto asset staking-as-a-service program,” which the SEC has determined to be a security. Kraken has agreed to pay $30 million in disgorgement, prejudgment interest, and civil penalties, in addition to ceasing its services, as part of the settlement.

In a recent blog post, Coinbase’s chief legal officer, Paul Grewal, expressed his opinion on the matter. He said that “staking is neither a security under the US Securities Act, nor under the Howey test.” Grewal continued by saying, “Trying to superimpose securities law onto a process like staking does not help consumers in any way, and instead imposes unnecessarily aggressive mandates that will prevent US consumers from accessing basic cryptocurrency services and push users to offshore, unregulated platforms.”

Grewal contends that staking does not satisfy the requirements of the Howey test, which need a commitment of money, participation in a common venture, a reasonable expectation of rewards, and the assistance of other people. According to what he stated, “The Howey test originates from a 1946 Supreme Court decision — and there is a different conversation to be conducted about whether or not that test makes sense for current commodities like crypto.”

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SEC Chair Gary Gensler Warns Crypto Companies

by Blockchain News

After the United States Securities and Exchange Commission revealed that it had reached a settlement with the cryptocurrency exchange Kraken, the chair of the SEC, Gary Gensler, issued a warning to crypto businesses, urging them to “come in and respect the law.”

During an appearance on CNBC’s Squawk Box on February 10, 2018, Gensler said that cryptocurrency exchanges should register with the SEC in order to be in compliance with rules in the United States. He claimed that many participants in the business were “choosing” not to do so. The head of the Securities and Exchange Commission (SEC) said that the business models of many cryptocurrency projects were “rife with conflict,” and that these projects needed to “disentangle” their bundled goods.

According to Gensler, “time-tested norms and laws to safeguard the investing public” are necessary for the industry to have any hope of surviving and thriving in the future. “Don’t put your hand in the customer’s wallet by utilizing their money for your own platform,” the sales pitch advised.

After the SEC announced that it had reached a settlement with Kraken, Gensler made his statement. As part of the settlement, Kraken agreed to pay $30 million in disgorgement, prejudgment interest, and civil penalties. Additionally, the exchange agreed to cease offering its staking services and programs to customers in the United States. Kraken said that it will keep providing staking services for customers located outside of the United States via a different business.

There has been a lot of backlash to the settlement that the SEC reached because many people see it as regulators taking action against companies that need to navigate a regulatory landscape that does not have clear standards. Hester Peirce, a commissioner for the SEC, said that the staking program had “served individuals well” and that the SEC’s actions might be described as “lazy and patronizing.”

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