Unchained

Dan Guido, cofounder and CEO of Trail of Bits, and Taylor Monahan, founder and CEO of MyCrypto, discuss all the recent hacks in DeFi, how it can be made more safely and who is responsible. 

We tackle: 

• the Hegic security incident: whose responsibility it was to make sure the contract was secure — the auditor (Trail of Bits) or the team (Hegic) — what Trail of Bits was saying in its audit summary, and how to read between the lines of an audit summary
• how long an audit should be
• upgradeability: particularly around when more advanced technology and contracts interface with older technology/contracts
• centralization vs. decentralization: whether contracts can be made safely while maintaining adhering to the principle of decentralization, why Taylor would prioritize centralization and security, and how teams can create different levels of risk for users 
• bug bounties: why asking what amount they should be is the wrong question
• the security threats posed by oracles
• and what a checklist for DeFi teams might look like

Thank you to our sponsors! 

Crypto.com: https://crypto.com 

Kraken: https://www.kraken.com 

Stellar: https://www.stellar.org

Episode links: 

Dan Guido: https://twitter.com/dguido

Trail of Bits: https://www.trailofbits.com

Taylor Monahan: https://twitter.com/tayvano_

MyCrypto: https://mycrypto.com

Initial tweet by Hegic calling the security issue a typo: https://twitter.com/HegicOptions/status/1253937104666742787?s=20

Hegic tweet saying, “It’s not a security issue”: https://twitter.com/HegicOptions/status/1253954145113038849?s=20  

Trail of Bits saying it will no longer work with Hegic: https://twitter.com/dguido/status/1254260725431894020?s=20 

Taylor breaks down the audit summary: https://twitter.com/MyCrypto/status/1254058121342803968?s=20

Molly Wintermute’s Medium post on requesting a week audit vs. three-day review: https://medium.com/@molly.wintermute/post-mortem-hegic-unlock-function-bug-or-three-defi-development-mistakesthat-i-feel-sorry-about-5a23a7197bce 

Unconfirmed episode with Haseeb Qureshi on the Lendf.me attack: https://unchainedpodcast.com/haseeb-qureshi-on-the-unbelievable-story-of-the-25-million-lendf-me-hack/

Unchained interview showing Matt Luongo's approach to kill switches and upgradeability with tBTC: https://unchainedpodcast.com/tbtc-what-happens-when-the-most-liquid-crypto-asset-hits-defi/

Discussion of the bZx attacks on Unchained: https://unchainedpodcast.com/the-bzx-attacks-unethical-or-illegal-2-experts-weigh-in/

Issue with Curve contract: https://blog.curve.fi/vulnerability-disclosure/ 

Compound bug bounty program: https://compound.finance/docs/security#bug-bounty

Taylor on “upgradeability makes things more insecure”: https://twitter.com/tayvano_/status/1222564979657723904?s=20 

Synthetix oracle incident, allowing a bot to profit $1 billion: https://unchainedpodcast.com/how-synthetix-became-the-second-largest-defi-platform/

Taylor’s tips on how to get more ROI on an audit: https://twitter.com/MyCrypto/status/1254061500244713474?s=20

Tips to follow before getting an audit: https://blog.openzeppelin.com/follow-this-quality-checklist-before-an-audit-8cc6a0e44845/ 

Resources for security in DeFi: 

crytic/building-secure-contractsGuidelines and training material to write secure smart contracts - crytic/building-secure-contractsgithub.com

https://consensys.github.io/smart-contract-best-practices/ 

https://forum.openzeppelin.com

https://swcregistry.io

https://diligence.consensys.net/blog/2020/03/new-offering-1-day-security-reviews/

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Matt Luongo, CEO of Thesis, the parent company of Fold and Keep, describes the just-launched tBTC, his plan for a censorship-resistant Bitcoin-Ethereum bridge. He explains his personal reasons for wanting such a platform, why tBTC is different from other versions of Bitcoin on Ethereum, and how it works -- including the process of becoming a signer in minting tBTC, how the system will handle crises, the reason for high collateralization levels, why staking assets are limited, and the necessity of a work token, Keep. He also discusses the economics behind tBTC-backed tBTC, his vision for DeFi, how tBTC could buffer an ETH crash, and the reasoning behind minimal governance mechanisms -- playing into why institutions trust BTC more than ETH. Plus, he contrasts the Bitcoin and Ethereum communities and talks about the possibility of tBTC2.0.  

Thank you to our sponsors! 

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

Episode links: 

Matt Luongo: https://twitter.com/mhluongo

Thesis: https://thesis.co/

Keep: https://keep.network/

Fold App: https://foldapp.com/

tBTC white paper: https://docs.keep.network/tbtc/index.pdf

Initial reveal: https://twitter.com/mhluongo/status/1162481737525583873?s=20

Announcement on Keep blog: https://blog.keep.network/bridging-bitcoin-and-ethereum-b2f9923630a7?gi=5c9040ed3a72

Some criticism of tBTC: https://twitter.com/peterktodd/status/1162728205607985152?s=20

Matt on the Breakdown podcast: https://www.coindesk.com/will-defi-matter-in-a-post-coronavirus-world-feat-matt-luongo

Matt on Sendwyre podcast: https://blog.sendwyre.com/announcing-tbtc-with-james-prestwich-and-matt-luongo-of-cross-chain-group-c424e2b0b40c?gi=d1e8b53ca80e

How tBTC works: https://defipulse.com/blog/what-is-tbtc/

The Block on tBTC: https://www.theblockcrypto.com/daily/55284/inside-tbtc-the-bitcoin-backed-erc-20-token-that-could-go-live-in-march

Keep raises $7.7 million: https://www.forbes.com/sites/justinoconnell/2020/04/03/coinbase-co-founder-invests-in-project-to-bridge-bitcoin-and-ethereum/#368a6f737df4

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Cathie Wood, CEO and CIO of ARK Invest, and Yassine Elmandjra, ARK's thematic analyst, discuss their investment strategy with disruptive innovation, and how blockchain technology, especially Bitcoin, plays a major role in it. They explain why the unique market circumstances due to the coronavirus have led to more correlation between crypto and the traditional financial markets, but also why, in the long-term, it will ultimately be uncorrelated. We cover why they think crypto in the age of COVID-19 will see new opportunity, and when there will be a recovery of the larger economy. They also share, from an investor standpoint, their growing conviction in Bitcoin due to its long-term value proposition compared to other chains like Ethereum. Plus, we talk about the future outlook for central bank digital currencies, and how Libra will launch, albeit differently, than expected. 

Thank you to our sponsors! 

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

Episode links: 

Cathie Wood: https://twitter.com/cathiedwood?lang=en

Yassine Elmandjra: https://twitter.com/yassineARK 

Yahoo Finance interview on ARK’s big ideas for 2020: https://finance.yahoo.com/video/cathie-wood-talks-ark-invests-222723696.html

Keynote on State of Digital Assets at Volt Capital summit: https://www.youtube.com/watch?time_continue=2729&v=c50TMCKsktA&feature=emb_logo

ARK’s Q&A video conference on COVID-19: https://ark-invest.com/research/bis2020?utm_campaign=BIS%202020&utm_medium=email&_hsenc=p2ANqtz--kCZDJ0VuIxNViHjN7KR7qOryEusndZqMfNp7JMkD4AIZJCv8otUtZm8YgPdmVYTZb3ylv4ysbxt8fRIUvngkRLcyvIw&_hsmi=85729999&utm_source=hs_email&utm_content=85729999&hsCtaTracking=14ee7e75-5bf4-46f8-8c8c-f5aeb84b32a7%7C5f5d3a43-f10e-4792-92de-96ef495eb5c6 

Feature on Cathie Wood: https://www.bloomberg.com/opinion/articles/2020-02-18/cathie-wood-s-tesla-bet-puts-ark-invest-in-spotlight

Her views on Zcash: https://www.theblockcrypto.com/post/12660/cathie-wood-on-the-block-the-crypto-revolution-is-coming-jump-on-or-get-out-of-the-way

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Mariano Conti of MakerDAO, head of smart contracts at MakerDAO, reads from his essay about his personal experience with cryptocurrency, particularly as an Argentine whose family has experienced periods of hyperinflation, and as a freelancer accepting payment from foreign countries. He describes the evolution of Maker from single-collateral Dai (now Sai) to multi-collateral Dai, and also gives his perspective on the events of Black Thursday and the subsequent debt auctions the protocol undertook to right itself. 

Thank you to our sponsors! 

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

Episode links: 

Mariano Conti: https://twitter.com/nanexcool

Linda Xie’s essay about crypto memes on Unchained : https://unchainedpodcast.com/how-memes-can-help-crypto-go-mainstream/

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Kyle Samani of Multicoin Capital reads from his essay on how defensible each of the major DeFi protocols on Ethereum are, and what that says about Ethereum's defensibility.  He evaluates how easy it would be from an effort and capital standpoint to fork each of the major DeFi protocols, and makes a strong case for how and why he thinks protocols like Maker are quite defensible, and why he believes certain dexes are less so.

Thank you to our sponsors! 

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

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In this essay, Haseeb Qureshi of Dragonfly Capital explains why he thinks the focus on decentralization can be overhyped. He looks at why decentralization can be important but then makes it clear, by dissecting when it is important and when it’s not, and to whom it does and doesn’t matter, that it isn’t the be-all end-all goal for every endeavor. He talks about which questions we should be asking beyond just, “is it decentralized,” and also explains why that question doesn’t even make sense. 

Thank you to our sponsors! 

CipherTrace: https://ciphertrace.com

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

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Kyle Samani, managing partner at Multicoin Capital, dissects Black Thursday, March 12, the day the crypto markets plunged twice amid the wider sell-off in the markets due to the coronavirus. He offers several theories for the first price drop that day, how that set off a series of liquidations on various exchanges, and then why liquidations stopped for about 12 hours before the next wave, which triggered the next price slump. He also describes why, at that point, the crypto market structure broke, as arbitrageurs attempted to move collateral from one exchange to another but could not because both the Bitcoin and Ethereum blockchains became congested, setting off a downward spiral particularly in Bitcoin, as miners began turning off equipment due to the falling BTC price. This led, ultimately, to there being $200 million worth of positions to liquidate on BitMEX, but only $20 million worth of bids on the entire BitMEX order book. Then we cover what happened next that ultimately saved the price of BTC dropping to $0 on BitMEXT.

Next, we discuss the second fall in prices that day, and how that affected MakerDAO, with congestion on the Ethereum blockchain preventing keepers from being able to liquidate undercollateralized vaults. A clever keeper sent a bid to liquidate a vault with a higher gas price, but realizing that there was no competition, bid $0, walking away with $4.5 million, and a total of $8 million being won this way. We covered how the price of ETH fell to $88 but because oracles weren't properly updating, the last price of ETH on MakerDAO was at $101 — a dollar higher than the $100 where a bunch of liquidations would have occurred, which would have likely put more downward pressure on ETH, resulting in another downward spiral. 

Kyle also evaluates some of the technical options for preventing these issues in future times of volatility, why many of them aren't promising but what is. 

Thank you to our sponsors! 

CipherTrace: https://ciphertrace.com

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

Episode links: 

https://multicoin.capital/2020/03/20/march-12-the-day-crypto-market-structure-broke-part-2/

Links from news recap:

Kyle Samani: https://twitter.com/KyleSamani

Multicoin Capital: https://multicoin.capital/

Multicoin blog part 1: https://multicoin.capital/2020/03/17/march-12-the-day-crypto-market-structure-broke/

Part 2: https://multicoin.capital/2020/03/20/march-12-the-day-crypto-market-structure-broke-part-2/

Theory that BitMEX’s maintenance was to prevent a collapse in Bitcoin: https://twitter.com/SBF_Alameda/status/1238306306043162625

https://www.theblockcrypto.com/genesis/58918/money-2-0-stuff-free-price-auctions

How traders took advantage of the roiling markets: https://www.theblockcrypto.com/post/59172/surfing-the-spread-crypto-market-turmoil-arbitrage

More on the liquidations in MakerDAO: https://medium.com/@whiterabbit_hq/black-thursday-for-makerdao-8-32-million-was-liquidated-for-0-dai-36b83cac56b6

https://blog.makerdao.com/usdc-approved-by-maker-governance-as-the-third-collateral-type-of-the-maker-protocol/

MakerDAO weighs emergency shutdown: https://www.coindesk.com/defi-leader-makerdao-weighs-emergency-shutdown-following-eth-price-drop

MakerDAO adds USDC as collateral: https://www.coindesk.com/makerdao-adds-usdc-as-defi-collateral-following-black-thursday-chaos

Kain Warwick on USDC as Dai collateral: https://twitter.com/kaiynne/status/1239795250882740225?s=20

Eva Beylin on USDC as Dai collateral: https://twitter.com/evabeylin/status/1240039492985085952?s=20

Huobi’s derivatives platform introduces circuit breaker: 

https://www.theblockcrypto.com/linked/59210/huobis-derivative-platform-now-includes-a-circuit-breaker-function

Debate over circuit breakers in crypto: 

https://twitter.com/TusharJain_/status/1238311534767595520

https://www.coindesk.com/does-crypto-need-circuit-breakers-last-weeks-price-crash-ignites-a-debate

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In this essay, Chris Burniske of Placeholder Capital talks about what kind of world crypto entrepreneurs are creating and want to be creating with the systems they build. He talks about different kinds of values, the dangers of only pursuing market values, and why crypto has a unique opportunity now to recalibrate those market values and incorporate more of the societal virtues we hold dear. Then he dives into which values he hopes to imbue into crypto networks and how that informs his thinking as a VC in the space.

Thank you to our sponsors! 

CipherTrace: https://ciphertrace.com

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

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Soona Amhaz, general partner at Volt Capital, and Yele Bademosi, founder of Microtransaction, explain why they believe Africa is poised to become a hub for crypto development. They give some interesting stats on how crypto is currently used and traded on the continent, plus talk about how these factors interplay with the region’s unique demographics and the status of some of the continent’s fiat currencies to create what could be a unique environment for increased crypto activity. They end with what they think crypto entrepreneurs should be working on to help further that development.

Thank you to our sponsors! 

CipherTrace: https://ciphertrace.com

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

Episode links: 

Soona Amhaz: https://twitter.com/soonaorlater

Yele Bademosi: https://twitter.com/YeleBademosi

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In this fireside chat from ETH Denver, crypto-friendly governors Jared Polis of Colorado and Mark Gordon of Wyoming discuss how they each became interested in crypto and blockchain, how their states became friendly to the industry and how to resolve some of the thornier problems in crypto regulation, such as the state-by-state money transmission licensing regime. We also dive into the details on some of the regulations in their states, such as the regulations that make it possible to hold state-specific ICOs, what types of companies are taking advantage of those, and whether there's a bipartisan attitude toward crypto regulation. 

Thank you to our sponsors! 

CipherTrace: https://ciphertrace.com

Crypto.com: https://crypto.com/

Kraken: https://www.kraken.com

Episode links: 

CO Governor Jared Polis: https://twitter.com/jaredpolis

WY Governor Mark Gordon: https://governor.wyo.gov/

CO Governor Jared Polis’s background: 

https://gazette.com/election/profile-entrepreneur-jared-polis-sees-governor-s-race-as-a/article_af2d0222-c1b2-11e8-8b2b-afa916b3b182.html

Governor Polis’s letter to SEC chairman Jay Clayton and then-CFTC chairman Christopher Giancarlo on crypto regulation: https://www.coindesk.com/lawmakers-renew-calls-us-lead-crypto-innovation

Colorado’s Digital Token Act: https://www.coindesk.com/colorado-could-be-next-in-the-race-to-bank-crypto-and-cannabis

https://leg.colorado.gov/sites/default/files/2019a_023_signed.pdf

https://thetokenist.io/colorado-signs-digital-token-act-into-law-some-digital-assets-exempt-from-securities-requirements/

Wyoming passes three crypto-friendly laws: https://www.coindesk.com/wyoming-lawmakers-pass-three-bills-in-boost-for-states-crypto-industry

Wyoming laws: https://www.wyoleg.gov/Legislation/2018/HB0070

https://www.forbes.com/sites/caitlinlong/2019/03/04/what-do-wyomings-new-blockchain-laws-mean/amp/

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