Digital Assets

Mysterious Whale Wallets are Waking up

Stan

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Several Whale wallets are waking up after being dormant for several years (some as long as 12 years!). I’ve always wondered what the reaction would be if one of Satoshi Nakamoto’s wallets woke up.

Here’s what we got today:

  • The Merlin Rugpull. The team drained ~$2 million from users.
  • Berachain raises $42 million. An introduction to the hot new layer one.
  • Around the Web. Mysterious movements of dormant whale wallets, what happens after the hack, Coinbase Sues SEC, and more.

Reading time: 8 minutes
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Today’s Email is brought to you by zkLend – their mainnet launch is on May 4.

📉 THE MARKETS

weekly market numbers

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“The key is to wait. Sometimes the hardest thing to do is to do nothing.” – David Tepper

🧙‍♂️ THE MERLIN RUGPULL

Mysterious Whale Wallets are Waking up

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Merlin, a zk-Sync DEX, lost around $2 million during the public sale of its MAGE token.

What is MerlinDEX? It’s an upcoming decentralized exchange on zkSync. They promised a dynamic AMM capable of supporting volatile (UniV2) and stable (Curve-like) exchanges. They also introduced directional fees for trading pairs and liquidity strategy based on non-fungible staked positions.

What happened? Merlin was conducting a 3-day public sale of its MAGE tokens. On the 2nd day, April 26, members of the Merlin Backend team drained all of their funds. They’re located in Serbia, and relevant authorities have been informed.

This rug-pull happened despite being audited by Certik, a blockchain security firm. While Certik said that they could do little in the cases of rug pulls, @redragonvn said they failed to identify the “backdoor” in the code. ​
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Don’t make the mistake of thinking…”Oh, it’s audited. It must be safe!”
1) Who audited it matters.
2) Does the protocol have multiple audits?
3) Does the protocol have public bug bounties?

Certik is launching a compensation plan to cover the lost $2 million. They ask the rogue developers to return 80% of the stolen funds. The remaining 20% will be given as a white hat bounty. We will have to wait for rogue devs to respond.

Another victim in this whole drama is zkSync. Since everyone was hyped up about the potential, zkSync, and degens have been chasing to use it. This has resulted in scammers trying to take advantage of this demand. There have been a lot of rug pulls on zkSync.

However, this isn’t a verdict on the legitimacy of zkSync. It’s the new bright shiny object, and scammers were somewhat expected. A lot of new legit projects are coming.

Let us hope Certik will be able to make all Merlin victims whole.
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Here’s an interesting “behind the scenes” of someone who was recruited to help with the project.

Together With zkLend​

​StarkNet’s Native Money Market: zkLend

Mysterious Whale Wallets are Waking up​

Last week we introduced zkLend, the native money market on StarkNet. We have a special announcement in this edition – zkLend will launch their mainnet on May 4!

In case you missed last week’s introduction, here’s a quick recap:

  • zkLend is built on StarkNet and supported by institutions like Delphi Digital and StarkWare
  • They offer a retail permissionless product (Artemis) as well as a permissioned product for institutions (Apollo)

On May 4, they’re launching the permissionless product, enabling any user to deposit, borrow, and lend on StarkNet.

But why’d they decide to build on Starknet? 🤔

Starknet is a Layer-2 on Ethereum, offering:

  • ZK-Rollup Scalability
  • Faster Transactions
  • Lower Costs
  • Ethereum’s Security

All vital components for a DeFi money market. 🔥

One use case for zkLend: Opening leveraged positions!

Let’s say you hold $150 of a particular asset – you’re bullish and want to open a leveraged position.
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1) You can use your $150 as collateral and get a loan worth $100 (in another asset) on zkLend.
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2) After swapping the $100 into the initial asset, you have a leveraged position with $250 in exposure to the asset you’re bullish on.

Check out zkLend’s testnet today and bookmark your calendars for the mainnet launch on May 4!

🐻 BERACHAIN: WHO DIS?

a bear in a chain

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Berachain raised $42MM at a $420.69MM valuation. It was a Series A round led by Polychain Capital.

Background: For the past few months, the community wasn’t sure if this was a real project. Especially because the co-founder was making so many jokes last year.

What is Berachain? It is a DeFi-focused layer-1 chain. It has two features that distinguish it from other chains.

Feature #1: Tri-Token System

Berachain will have three native tokens.

  • BERA: the gas token of Berachain
  • BGT: the governance token of Berachain
  • HONEY: the native collateralized stablecoin

No layer-1 blockchains have a tri-token system. All three tokens are designed to perform specific functions.

Feature #2: Proof-of-Liquidity

Just like Ethereum has proof-of-stake and Bitcoin has proof-of-work consensus mechanisms, Berachain has its own consensus mechanism. It is “Proof-of-liquidity.”

Users can deposit various tokens ($ETH, $BTC, etc.) into the “consensus vault system.” These tokens will be used for two purposes at the same time.

  • It will be moved into strategies (think Yearn) and to provide liquidity across Berachain.
  • It will be used in the consensus system as well. Users can delegate their deposits to a particular validator and receive block rewards & protocol fees in return.

Attracting liquidity is a major problem for chains. This novel mechanism allows for healthy and sustainable growth in liquidity.

These innovations have managed to attract my attention. I’m going to keep an eye on Berachain.
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Here’s an in-depth story from the co-founder on Berachain’s origins.

🔍 MYSTERIOUS WHALE MOVEMENTS

whale movements

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Old, inactive whale-wallets are suddenly on the move. It has left many people wondering what’s happening.

  • A Bitcoin whale address that has been dormant for over nine years transferred 2,071.5 BTC ($60.7 million) out last Thursday.
  • Another inactive $BTC whale decided to transfer 279 bitcoins — worth $7.8 million — to three fresh addresses last Friday.
  • Nearly $11 million was moved by a Bitcoin address that had been inactive for 12 years — this Monday.
  • Even an Ethereum address participating in its initial coin offering woke up and transferred one Ether to a new address.

We don’t know who owns these wallets. However, too many of them are moving to call it a coincidence. And are people speculating as to why this is happening.

Some possible theories:

  • One person or group is behind all the wallets – this is unlikely.
  • Governments. They might be moving crypto they got from criminals.
  • It could be wallets from any of the old exchanges. Mt. Gox is one example.
  • A wallet generator used for these old addresses might have been faulty, and it could’ve been cracked.
  • This might be a response by old-wallet users to the ongoing hack of OG wallets. They might just be moving funds to safer wallets.

Remember, these theories are purely speculative. However, that doesn’t mean we should turn a blind eye to it. Such unusual movements are suspicious. Stay alert, my friends.

📊 AFTERMATH OF HACKS

aftermath of hacks

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Source: The Defiant​
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The above table shows data associated with the top five hacks of DeFi protocols. It tracks the amount hacked, TVL on the day of the hack, current TVL, and percentage change in TVL.

(The table excludes bridge hacks, Euler hack, & hacks that didn’t result in loss of user funds.)

Key point: All five hacks have led to all protocols losing >95% of TVL.

In other words, big hacks will kill your protocol.

What is the core reason for this? The reputational hit. DeFi is infamous for being rife with exploits and rug pulls. The negative reputation that a hack creates is incredibly difficult to overcome.

Recently, Euler Finance was hacked for around $200 million. But they managed to recover most of the funds. Currently, they are returning the funds to users.

Will they return to their glory days? I don’t know. It’s definitely an uphill battle. At the very least, the team was congratulated by everyone for their role in recovering funds.

🌎 WHAT’S HAPPENING?

📰 Industry News

Coinbase sued the SEC. This was a move to force the SEC to respond to the company’s petition, aiming for a rule specific to digital assets.

The South Korean Court ruled that LUNA is not a security. The SEC had charged Do Kwon and Terraform Labs with securities fraud about the UST blowup.

Alexey Pertsev, a developer of Tornado Cash, has been released from jail. He was imprisoned for nine months without trial. He will remain under house arrest until trial.

Voyager Digital, the bankrupt crypto lender, claimed it received a letter from Binance.US terminating the agreement to buy Voyager.

Daniel Shin, the Terra co-founder, was indicted in South Korea. Shin claims that he doesn’t have anything to do with the fallout since he left the company two years prior to it.

🍿 DeFi Bites

Binance introduced its Liquid Staking Derivative. It is called Wrapped Beacon ETH (WBETH).

Arbitrum completed the distribution of $ARB allocations to projects. This was part of the initial airdrop token distribution.

Circle unveiled the Cross-Chain Transfer Protocol. It is a new method for moving $USDC between blockchains. It should improve $ USDC’s liquidity.

Sui Network decided to launch the SUI token via exchange sale on May 3, 2023. It will go live on Bybit, OKX, and Kucoin. The efforts of airdrop hunters have gone to waste now.

Ethereum Name Service is looking to build a fiat on-ramp with MoonPay. It will allow people to buy ENS names using fiat.

Sushiswap is discussing adopting a new tokenomics model to promote its adoption of Uniswap V3. The license of Uni V3 expired at the beginning of April.

Trust Wallet shared a vulnerability that affected new addresses created using a browser extension between November 14-23, 2022. The issue has been fixed.

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Mysterious Whale Wallets are Waking up

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