In a recent incident, MEV bots attempting sandwich trades suffered a massive loss of $25 million in digital assets due to a rogue validator. The bots were trying to execute sandwich transactions, which involves intercepting a trader’s transaction to profit from it. However, as the bots began to swap millions, the reverse transactions were replaced by a validator who went rogue, resulting in significant losses.
The losses included $1.8 million in Wrapped Bitcoin (WBTC), $5.2 million in USD Coin (USDC), $3 million in Tether (USDT), $1.7 million in Dai (DAI), and $13.5 million in Wrapped Ether (WETH). At the time of writing, most of the funds had been transferred to three different wallets.
In a Twitter thread, blockchain security firm CertiK explained that the vulnerability was due to the centralization of power with validators. As the MEV bots tried to perform front-run and back-run transactions for profit, the rogue validator swooped in to back-run the MEV’s transaction, resulting in significant losses.
The attack highlights the risks associated with MEV bots, despite their potential to earn vast amounts of digital assets. MEV bots have become increasingly popular in the crypto market, as they can execute complex trading strategies with speed and accuracy. However, they are also vulnerable to hacks and exploits, as seen in previous incidents.
CertiK warned that this attack could affect other MEV searchers conducting strategies such as sandwich trading. The team noted that there is a possibility that MEV searchers may become wary of non-atomical strategies due to this exploit.
The CertiK team emphasized the need for greater decentralization to reduce the vulnerability of validators to such attacks. This incident underscores the importance of blockchain security and the need for continuous monitoring and upgrading of security protocols to prevent such incidents.
In conclusion, the attack on MEV bots attempting sandwich trades by a rogue validator resulted in significant losses of $25 million worth of digital assets. The vulnerability was due to the centralization of power with validators, highlighting the need for greater decentralization to reduce the risks associated with such attacks. This incident underscores the importance of blockchain security and the need for continuous monitoring and upgrading of security protocols to prevent such incidents.
After an update to the validator software on February 25, the Solana network saw a decrease in the rate at which blocks were produced. Transactions were disrupted as a consequence of the event, which prompted validators to downgrade the software in an effort to restore network speed.
At around 6:00 AM (UTC), a technical problem began, which prompted validators to downgrade to version 1.13 in an attempt to get transactions back up throughout the network. However, the downgrade was not sufficient to return Solana to regular operations, and as a result, the decision had to be made to restart the network on version v1.13.6.
“A considerable delay in block production was reported by the network about the same time as an upgrade to the validator software was being implemented. The engineers are currently investigating the underlying reason of the problem “Noting Solana’s webpage for the compass
The problem is related to the upgrading from version 1.13 to version 1.14, which slowed down the process of finalizing blocks. The Solana network is in the process of being restarted, and in order for activities to continue, it is essential to have 80 percent of active stake online:
“As additional validators finish their restart, this number will climb in accordance with the amount of stake they have delegated: this implies that bigger validators such as CEX have a disproportionately high influence on restart timeframes.”
Within the first few hours after the issue was reported, Solana’s validators got together and brainstormed potential solutions to the problem. Infrastructure provider Chorus One pointed out in a Tweeter that the event “demonstrated how really decentralized the network is.” The first chorus continued: “If we didn’t have to spend so much time debating, we could get back up in an hour. However, every step along the route is up to controversy, including whether or not to downgrade, whether or not to restart, and whether to transition from an approach of downgrading to one of restarting. Voting occurs. In the end, it takes us between 8 and 10 hours to recuperate, rather than only 1.”
This is a developing story, and further information will be posted as it becomes available. Please check back for updates.
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.
The cryptocurrency industry has recently criticised a bill that was recently proposed in the Illinois Senate due to its “unworkable” intentions to compel blockchain miners and validators to perform “impossible things.” One example of this would be undoing transactions if a state court ordered them to do so.
The Senate Bill was surreptitiously submitted into the Illinois senate on February 9 by Illinois Senator Robert Peters. However, it does not seem that the community was aware of it until February 19, when Florida-based attorney Drew Hinkes mentioned it in a tweet.
The bill, which would give the courts the authority to alter or rescind a blockchain transaction that was carried out through the use of a smart contract, would be given the title “Digital Property Protection and Law Enforcement Act,” and it would give the courts this authority in response to a valid request from the attorney general or a state’s attorney that is made in accordance with the laws of Illinois.
Any “blockchain network that executes a blockchain transaction originating in the State” would be subject to the act if it were to become law.
When it comes to blockchain technology and cryptocurrencies, Hinkes referred to the proposed legislation as “the most impractical state law” he has ever seen.
“This is a shocking about-face for a state that was previously supportive of innovation. Instead, he tweeted that the state had enacted “probably the most impractical state legislation relating to cryptocurrency and blockchain I have ever seen.”
According to the provisions of the law, miners and validators on the blockchain might be subject to fines ranging from $5,000 to $10,000 for each day that they disobey the instructions of the court.
Hinkes said that it would be “difficult” for miners and validators to comply with the measure suggested by Senator Peters, despite the fact that he acknowledged the need of passing legislation that would increase consumer protection.
Hinkes was also surprised to learn that miners and validators who worked on a blockchain network that “has not adopted reasonably available processes” to comply with the court orders would have “no defense” open to them.
The law also seems to dictate that “any person utilizing a smart contract to supply goods and services” must include code in the smart contract that may be used to comply with court orders. This code can be used to ensure that the terms of the smart contract are followed.
“Any person utilizing a smart contract to supply goods or services in this State should incorporate smart contract code capable of implementing court orders respecting the smart contract,” is the full text of the law.
Other members of the bitcoin community have replied with derision of the measure in a manner similar to what was previously said.
On February 19, the crypto analyst “foobar” remarked to the 120,800 people who follow him on Twitter that court-ordered transactions would need to be changed “without having the private key” of the participants, which he found to be “hilarious.”
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.
Crypto staking involves locking up one’s cryptocurrency holdings to earn interest or rewards. Technically, “staking” is how certain blockchain networks verify transactions.
From an investor’s perspective, staking cryptocurrency is a way of growing one’s crypto holdings without needing to buy more. Staking crypto for maximum passive income is a legitimate way of earning yields through one’s existing crypto holdings. Investors who participate in staking enjoy interest that is greater than what is offered through a regular bank account.
If you’re interested in staking cryptocurrency but are unfamiliar with the term, let us get you up to speed. Before we go there, it’s essential to understand the concept of blockchain technology. Cryptocurrencies are built with blockchain technology. Transactions involving such cryptocurrency need to be validated before the corresponding data can be stored on the blockchain. This validation process is called staking.
Let’s break it down further.
Because blockchain networks are decentralized, there are no middlemen. This is in stark opposition to traditional financial systems that use banks, for example, to serve as a repository of the public’s money.
As such, decentralization calls for a publicly accessible record across the network to ensure there is complete transparency and validity across all transactions. Transactions are collated into “blocks” and are submitted for inclusion into this record, which is immutable.
That’s kind of the greatest security feature of blockchains, by the way. Since everything is accessible and verifiable through a distributed public ledger (the record), it’s very hard to trick or hack.
That being said, once these blocks are accepted, users who own these blocks get a transaction fee as payment in the form of cryptocurrency.
What does staking have to do with all of this? you might ask. Simply put, staking is a safeguard against errors and fraud that may happen during the process.
Every time a user proposes a new block or votes to accept a proposed block, they place some of their cryptocurrency on the line. This process incentivizes adhering to the rules. So, in principle, the more crypto a user puts at stake, the higher the chances of earning transaction fee rewards.
However, if a user’s proposed block is found to have fraudulent or inaccurate data, they can lose what they put up as a stake. This process is called ‘slashing.’
How does crypto staking work?
There are many ways to start staking crypto. For starters, you can choose to validate transactions using your own computer. You can also “assign” your crypto to someone you trust and ask them to validate you.
Note that not all cryptocurrencies can be used to stake. We’ll discuss more of this later, so keep reading.
What is proof-of-stake?
Proof-of-stake is a consensus mechanism that allows blockchains to validate transactions. In proof-of-stake (PoS), the number of coins (or the amount of stake) determines the chances of validating a new block.
PoS was created as an alternative consensus mechanism to the original proof-of-work (PoW). PoS is one of the most common consensus mechanisms and is continually gaining traction for its efficiency and the possibility of earning crypto staking rewards.
Unlike PoW which is very energy-intensive and requires a lot of computing power, PoS does not require as much computational work to verify transactions. Coin owners “stake” their coins as collateral in order to validate blocks.
What are staking rewards?
Staking rewards are incentives provided to blockchain participants. In every blockchain, there is a certain amount of crypto rewards allotted for the validation of transactions. As such, participants who stake crypto receive staking rewards when they are chosen to validate transactions.
Basically, staking allows participants to earn more crypto. Interest rates vary depending on the network, but participants can earn as much as 20% to 30% yearly. Many people stake crypto to earn passive income or invest their money.
Ways to Stake Crypto
To stake crypto, one must select crypto that uses the proof-of-stake model, such as Ethereum. There are various ways to stake cryptocurrency:
Through an exchange
You can choose to use an exchange to stake your tokens on your behalf. An exchange is an online service that specializes in crypto matters. Most exchanges ask for a commission in exchange for staking services. Some popular exchanges that offer staking are Binance.US, Coinbase and eToro.
By joining a staking pool
Some investors don’t use exchanges simply because not all of these platforms support a wide array of tokens. So, another alternative is joining what’s called a “staking pool,” typically operated by another user.
You’ll have to connect your tokens via your crypto wallet with the validator’s pool. To ensure the legitimacy of these validators, ensure you check out the official websites of proof-of-stake blockchains to understand how they should operate.
By being a validator
Validators are coin owners with staked coins. They are selected at random to validate a block. It’s the equivalent of ‘mining’ when using a competition-based mechanism such as proof-of-work.
Naturally, one of the most effective ways to stake crypto is by becoming a validator yourself. Blocks are validated by more than one validator, and when a specific number of the validators verify that the block is accurate, it is finalized and closed.
However, it’s a bit more complicated than using an exchange or joining a pool, as it requires you to build your own staking infrastructure. You need to have the proper equipment with adequate computing power and software and download the blockchain’s entire transaction history.
Becoming a validator typically involves a high entry cost as well. On the Ethereum network, one needs to have at least 32 Ether (ETH), which roughly converts to $140,000, give or take. Read more about staking and becoming a validator on the Ethereum network here.
Is staking crypto profitable?
So, the burning question really is: How does staking crypto make money?
Let’s put it this way. If you’re already familiar with the practice of mining and trading crypto, then that’s a great start. Staking can be just as profitable, minus the risk that comes with mining and trading.
So, yes, staking crypto is profitable. Basically, you have to buy and hold some coins and add them to the mining pool. The profits you make, which typically come in the form of transaction fees, will depend on how much you stake and how long you do it.
Things to consider when increasing your staking profit
Generally, you make more profit with staking as you continue to stake more. However, there are other things to consider when it comes to increasing your profits:
Coin value: Steer away from staking a coin with very high inflation rates. You may earn big rewards initially, but since the value of the coin is volatile, you may be left with little to no profit.
Fixed supply: Ensure that the token or coin has a fixed supply. Limited circulation of coins within the market ensures a healthy demand and constant price boost.
Actual applications: Cryptocurrency demand largely depends on a coin’s actual applications. If it is widely used for various applications in the real world, such as for digital payments, it will continue to have a healthy demand and price.
Which crypto is best to stake?
As mentioned earlier, not all crypto is viable for staking. Bitcoin (BTC), for example, does not support staking because it uses a different method of validating transactions: proof-of-work. Generally, if a cryptocurrency is linked to a blockchain that uses proof-of-stake as its incentive mechanism, it might be eligible for staking.
Ethereum
Ethereum offers substantial staking returns because it remains one of the most popular altcoins in the market today. The average rate of return for staking Ethereum is at 5-17% annually.
Cardano
Like Ethereum, Cardano is also a smart-contract platform. Cardano (ADA) is the digital currency that powers the platform’s proof-of-stake network. Binance supports the staking of ADA and offers yields of up to 24%.
EOS
EOS is also used to support decentralized programs, much like Ethereum. EOS (EOS) can be staked to earn rewards averaging at 3.2%.
Cosmos
Dubbed the ‘internet of blockchains,’ Cosmos allows different blockchains to transact with each other via interoperability. Various platforms support the staking of Cosmos (ATOM) including Coinbase, Kraken and Binance. ATOM staking yields an average of 7% per year.
Tezos
Tezos is an open-source network with Tezos (XTZ) as its native currency. XTZ can be staked on various platforms like Kraken, Binance and Coinbase. The average yield for staking XTZ is currently at 6%.
Polkadot
Polkadot, like Cosmos, encourages interoperability between various blockchains. Despite being relatively new, staking Polkadot (DOT) is supported by several platforms including Kraken, Fearless and Binance. The current average yield for staking Polkadot is at 12% yearly.
Can you lose money staking crypto?
When investing, the first and most important thing to consider is the risk involved. So, is staking crypto safe?
You bet it is, but there are definitely a few risks involved.
Generally speaking, you cannot “lose” money from staking crypto per se. What you have to look out for are things such as inflation and illiquidity, to name a few. Given how volatile cryptos are, there are chances that the coin you put up for staking could fall. For example, if you stake your crypto and it loses value even after you earned yields after staking, then technically speaking, you could still lose money.
And, if you’re a day trader, you cannot use the coins for several weeks or months and thus miss the opportunity to bet on lucratives. This is why it’s important to be wise when choosing which coins you want to stake.
Review the tips we outlined in the section “Is staking crypto profitable?” to ensure that you’re making the right choice before staking.
The United States-based venture capital fund Andreessen Horowitz (a16z) has picked T-Systems MMS validator group, a subsidiary of Deutsche Telekom, to delegate its native Celo (CELO) assets.
According to a notice on Deutsche Telekom’s website on Tuesday, T-Systems MMS is running the validator nodes via the company’s Open Telekom Cloud which reportedly delivers robust security capabilities.
As previously reported by Cointelegraph, Deutsche Telekom invested in Celo back in April, becoming the first telecom firm to join the Celo Alliance for Prosperity. At the time, the company also purchased a significant amount of the mobile decentralized finance platform’s native token — CELO.
T-Systems MMS is staking its parent company’s CELO tokens as well as other Celo-based assets held by a16z.
A16z has been a supporter of Celo and has regularly participated in capital raises for the open-source blockchain payments project. Back in April 2019, a16z joined Polychain Capital and other investors in a $30 million funding round for Celo.
Commenting on its choice to delegate its Celo assets to Deutsche Telekom subsidiary, a16z general partner Katie Huan said:
“Electing a diverse set of globally distributed validators is critical to maintaining a blockchain network that is secure and technically robust. We partnered with Deutsche Telekom because their incentives align with Celo’s vision of building a global payment platform that can be used by anyone with just a mobile phone.”
Related: Deutsche Telekom invests in mobile DeFi platform Celo
Apart from Celo, T-Systems MMS is a node operator on Chainlink (LINK) with the company also providing support infrastructure for Flow, another blockchain project. Andreas Dittrich, the company’s blockchain head, describes public blockchains as “the future of value-based collaboration.”
CELO, like the rest of the crypto market, is currently experiencing a significant downturn since setting a new all-time high of almost $7 back in April. As with other altcoins, CELO’s price decline has seen the token lose close to 74% from its April high.
Eth2 staking has its downsides — people may not have the means to contribute 32 ETH, or the technical knowhow to run a node. Can these issues be solved?
