This week, we reported on SBF’s 25-year imprisonment, the progress of the SEC v. Coinbase case, and the interruption of blobscription on Ethereum.
SBF Sentenced to 25 Years in Prison
After the collapse of FTX, Sam Bankman-Fried (SBF) has been sentenced to 25 years in prison for defrauding customers, lenders, and investors. Judge Kaplan, who presided over the case, stated that SBF caused losses of $1.7 billion to investors, $1.3 billion to lenders, and $8 billion to customers, totaling $11 billion. SBF was also convicted of witness tampering and three counts of perjury, including falsely claiming to be unaware of spending customer funds prior to the fall of 2022.
The verdict has garnered comments from various parties. Victims expressed their dissatisfaction and highlighted concerns about the handling of liquidation and customer fund refunds. SBF himself voiced his responsibility for FTX’s collapse but did not take responsibility for the actions that led to it. His defense argued that his mistakes were a result of managerial failure, not “malice,” and referred to him as a “beautiful puzzle.” Prosecutors emphasized in their closing statement that SBF committed heinous crimes and would likely repeat them unless given a full sentence. Judge Kaplan, in his closing remarks, pointed out that SBF’s crimes were purposeful and deceitful: “When he is not lying, he is equivocating and nitpicking, trying to get the prosecutor to rephrase his questions. I’ve been doing this job for almost 30 years, and I have never seen a performance like this.”
SBF was initially found guilty of seven counts of fraud by a New York jury in November 2023 (see our November report). He has 14 days to appeal, and his legal team has stated that they will do so.
Our Take:
FTX’s collapse triggered a domino effect in the entire crypto industry, resulting in billions of dollars in investment write-offs and a market-wide crash. The consequences, apart from investor losses, have severely damaged confidence in the cryptocurrency market, led to legal and regulatory scrutiny worldwide, caused a severe contraction in market liquidity and credit, and inflicted significant reputational damage. SBF and FTX quickly went from being the epitome of the crypto future to a standard example of crypto destined to fail.
Some argue that the conditions that led to SBF’s rise still exist today. This is clearly a mistake. New exchanges have emerged that allow users to self-custody their funds. These platforms aim to address the issues of custody and transparency that led to FTX’s collapse by ensuring that users have direct control over their digital assets. Exchanges that do not offer self-custody have started implementing reserve audits to provide verifiable evidence that they hold the funds they claim to represent on behalf of their users. This is a crucial step forward, as U.S. users can finally access regulated Bitcoin ETFs, providing them with investor protection similar to buying stocks and further reducing the incentive to turn to unregulated offshore exchanges.
In addition to technological and operational changes, the crypto industry has been pushing for better regulatory frameworks and self-regulatory practices. Government officials are no longer getting their talking points and regulatory directions on cryptocurrencies from the same person who defrauded customers of billions of dollars. Honest stakeholders are participating in discussions to create clearer rules that protect consumers while promoting innovation. These conversations are crucial for creating a stable environment and minimizing the possibilities of fraud and mismanagement. Unfortunately, progress in this field continues to be hindered by the lack of clear guidance from regulatory agencies (see SEC Commissioner Hester Pierce’s recent dissent).
Despite these advances, the crypto industry still faces challenges. After SBF’s conviction, an anonymous individual accumulated over $30 million in deposits based solely on a tweet about launching a memecoin. This highlights the ongoing loopholes in the crypto space. The road ahead remains arduous, and harmful practices that have damaged the industry’s reputation in the past must be prioritized for resolution and correction. As SBF’s downfall comes to an end, we must continue moving forward. – Lucas Tcheyan
SEC v. Coinbase Case to Proceed
According to a court ruling, Coinbase will have to face the SEC’s lawsuit. On March 27, a federal judge ruled that the SEC’s lawsuit, initially filed against Coinbase on June 6, 2023, will proceed, accusing Coinbase of engaging in unregistered securities offerings by handling 12 specified tokens. Specifically, the SEC’s complaint alleges that Coinbase operates an unregistered securities exchange, broker-dealer, and clearing agency, and that its staking program itself constitutes an unregistered security. Coinbase filed a motion to dismiss the charges in August 2023, claiming that the tokens specified in the complaint are not “investment contracts” and that the subject of the lawsuit “falls outside the agency’s jurisdiction.”
According to the latest ruling, “the Court finds that the SEC has adequately alleged that Coinbase engaged in the unregistered offering and sale of securities through its Staking Program.” However, the judge did side with Coinbase, dismissing the accusation that Coinbase acted as an unregistered broker through its Coinbase Wallet. Coinbase’s Chief Legal Officer, Paul Grewal, stated on Twitter that the court’s ruling was expected, Coinbase remains confident in their legal arguments, and they are “eager for the opportunity to get evidence from the SEC for the first time.”
Both parties must submit a case management plan by April 19. The start of the evidentiary discovery phase of the SEC v. Coinbase court proceedings has yet to be determined.
Our Take:
Judge Failla partially denied Coinbase’s motion, allowing the SEC’s lawsuit to proceed to the discovery phase, which should be an exciting heavyweight battle with meaningful implications for the broader crypto industry. Overall, the court’s ruling does not specifically favor Coinbase’s arguments, although Judge Failla did make some favorable findings for the exchange. It is important to note that, in evaluating a motion to dismiss a complaint, the court must assume that all facts alleged by the SEC are true for purposes of deciding whether to proceed with the case (but this does not mean that the alleged facts are actually considered true). The judge only makes sufficient findings on which issues to proceed to trial.
When applying the Howey test, Judge Failla asserts that some of the crypto assets offered on Coinbase’s platform may be classified as “investment contracts” transactions. Judge Failla affirms that the tokens themselves are not “securities,” although certain transactions involving these tokens may be classified as “securities” transactions depending on the circumstances. The ruling also assumes that some customers purchase tokens on Coinbase’s secondary marketplace for investment purposes and reasonably expect to profit from the managerial efforts of the token issuers. Additionally, Judge Failla ruled that the SEC has made a plausible claim that the structure of Coinbase’s staking program qualifies as an investment from which investors expect to earn profits from Coinbase’s operation of the program.
However, with the SEC’s claim against Coinbase Wallet dismissed, Coinbase has achieved a meaningful victory. Judge Failla concluded that even if Coinbase Wallet were used to initiate token transactions that qualify as “investment contract” securities transactions under Howey (a big “if”), the SEC failed to demonstrate that Coinbase acted as an unregistered broker by operating Coinbase Wallet as a platform available for its users. Judge Failla’s ruling on Coinbase Wallet takes into consideration Coinbase’s argument that it is merely a software provider and does not exercise substantial control over user funds.
The SEC v. Coinbase case is likely to set an important precedent for the regulation of cryptocurrency exchanges and the classification of crypto assets. As this high-stakes legal battle unfolds, it will shape the regulatory landscape for the entire industry. – Charles YuBlobscriptions Cause Ethereum to Miss Block Rate Surge
On Wednesday, March 27th, Blob fees surged for the first time. Blobs are a new transaction type introduced on Ethereum through the Dencun upgrade, providing cheaper block space for large amounts of data. Ethereum protocol developers envisioned Layer-2 Rollups, which rely on Ethereum for data availability, as the main buyers of Blob space. However, on March 27th, the launch of a website called “blobscriptions.io” caused a surge in blob transaction activity. The website allows users to easily store any type of data, including digital images and text, using blobs. Most of the blob activity on the 27th was not from aggregated batch transaction data, but rather from users writing other types of data into blobs. A real-time view of the types of data recorded through the blobscriptions site can be seen here. It is apparent that the activity of blobs on Ethereum is fundamentally similar to the activity of blobs on Bitcoin, including users minting non-fungible and fungible tokens on-chain. From March 26th to the 27th, the total amount of Blob fees paid to Ethereum per hour increased from less than $5,000 to over $15,000.
Additionally, the increase in blob activity led to a surge in the percentage of blocks lost on Ethereum. On average, approximately 2% to 4% of blocks were missed or not included in the canonical chain of Ethereum every half hour. However, this average skyrocketed to over 15% on Wednesday, causing widespread concern among Ethereum protocol developers. After further investigation, Terence Tsao, a client developer for Prysm, stated that the root cause appears to be related to the Bloxroute MEV relay. On ACDE #184, Tsao explained that 99% of the missed blocks were initially sent by the Bloxroute relay, and once the Bloxroute team shut down the relay, the missed block rate returned to normal levels. Shortly after the ACDE call, Uri Klarman, CEO of Bloxroute Labs, tweeted that he is “absolutely confident [Bloxroute] could relay blocks and blobs correctly.” He stated that the team is still investigating the cause of the issue but believes it may lie in the Ethereum network layer rather than the Bloxroute relay software. While Tsao mentioned that the issue causing the missed blocks is unrelated to client software, the Lighthouse client team released a patch on Wednesday to address “blob-related issues” that affect node stability and performance. Other client teams, including Prysm and Teku, have also released new versions of their software to address various issues with nodes since the Dencun upgrade.
Our take: The significant blob activity on Ethereum highlights the negative impact of client software and potential MEV-Boost relays on network health. While investigations into the cause of the increased missed blocks are ongoing, it is evident that the large amount of blob data on Ethereum is causing longer block processing times than under normal circumstances. The root cause may be due to certain client implementations and/or MEV relay implementations. Without understanding and addressing the root cause, blob activity may continue to degrade network health, resulting in block delays longer than before the Dencun upgrade.
The significant blob activity on Ethereum also highlights interesting similarities between Ethereum’s blob space and Bitcoin’s witness data space. Although the data in both types of additional block space is transient, meaning that Ethereum or Bitcoin nodes do not need to retain this data indefinitely, users still need to fill this low-cost block space with data. On Bitcoin, users who want to mint fungible and non-fungible tokens through witness block space must rely on off-protocol standards and third-party data archiving solutions to track these tokens and their associated data. Even so, for Bitcoin users, there is no widely accepted way to issue tokens on the network. However, on Ethereum, users who want to mint fungible and non-fungible tokens do not need to use blob space. In fact, not using blob space means that users can directly mint tokens into the regular Ethereum block space, which is retained indefinitely by full nodes without the need for third-party data archiving solutions. The advantage of minting tokens through blob space is that sometimes it is cheaper than regular transactions. Before Wednesday, blobs had almost no cost because aggregation did not utilize the full capacity of blob space. With the launch of the blobscriptions.io website, blobs quickly occupied a significant portion of underutilized blob space. As of Thursday, March 28th, the trend for Blob fees on Ethereum is approximately $12 per Blob and $3 per transaction. As Blob fees continue to increase, it appears that the share of blobs in blob space is decreasing, as the demand for blobs cannot support the rising prices of blob space. Looking ahead, the prices for aggregation may surpass the prices for the majority of blob minting activity on the network in the first few weeks after the Dencun activation. With the adoption and increasing value of Rollups, they are likely to become major participants driving blob costs. For more data-driven insights on Blob fees and activity, please refer to the Galaxy Research EIP 4844 Blob Dune dashboard. – Christian Kuhn
This Week’s Chart
Blobscriptions allow users to write data to Ethereum’s Consensus Layer (CL) blob objects, which has resulted in a significant increase in CL blob costs. Prior to March 27, 2024, CL blob fees were virtually costless, with the median fee per blob fluctuating around 0.000000001 USD (eight zeros). As of March 28, 2024, the median fee is 11.89 USD. The increasing demand for limited Blob space per slot has led to rising costs.
As of March 28, 2024, a total of 107.5 ETH was spent on CL blob fees, and 248.6 ETH (base fee plus priority fee) was spent on EL blob transaction fees. The total amounts to 356.1 ETH.
The total cost is close to 1.3 million USD. CL blob fees accounted for a total of 380,100 USD, while EL blob transaction fees accounted for 907,000 USD.
Please refer to Galaxy Research’s EIP-4844 Dune Analytics dashboard for more detailed information on the evolution of Ethereum L2 and EIP-4844 economics.
Other News
The Blast application Munchables has been hacked, resulting in the theft of 62.5 million USD worth of ETH.
The liquidity staking protocol Prisma Finance has exploited 9 million USD worth of mkUSD and stETH.
Vitalik has published a blog post outlining the future direction of Ethereum after the launch of blobs.
Bitcoin DeFi layer Alex has raised 10 million USD in strategic funding.
Ethereum has reached the milestone of 1 million validators and has staked 26% of the supply.
Hong Kong asset management firm VSFG and Huili Fund have applied for a physically-backed Bitcoin ETF.
Portugal has ordered Worldcoin to stop collecting biometric data.
Polygon zkEVM experienced a 10-hour interruption.
Circle has launched the Cross-Chain Transfer Protocol (CCTP) on Solana.
Tags:
Coinbase
Galaxy Digital
SEC
SOL
Ethereum
Bitcoin
Source link:
https://news.marsbit.cc/20240401193022473563.html
Note: The views expressed in this article are solely those of the author and do not constitute investment advice.
Original article link:
https://www.bitpush.news/articles/6558634
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