October 2, 2024

Exploring the tech behind crypto

one block at a time

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Hi, Bradley Keoun here,

When trying to determine if your crypto company might be unwittingly employing North Korean workers, sometimes it helps to pay attention to little details that just don't seem to add up – such as when your workers claim they were distracted by an earthquake in Japan, when there was no recent earthquake in Japan. That's just one of the tantalizing details from our Sam Kessler's investigative opus, hot off the press, detailing North Korea's successful campaign to place its workers on crypto-company payrolls.

PLUS:

EigenLayer's EIGEN token unlock draws scrutiny.
What Diddy and SBF might share in common, besides a jail cell.
Cute hippo Moo Deng gets own memecoin.
Looking back at the success (and failure) rates of crypto projects that got funded in 2022 – just as the market entered a deep freeze.
Top picks from the past week's Protocol Village column: Alpen Labs/Strata, Tezos/Tez Capital, Bedrock/Chainlink, Codex, Avalanche.
>$30M of blockchain project fundraisings.
Ranking September returns for the CoinDesk 20: Bitcoin was strangely strong – and yet still a laggard versus blue chip peers (except for Ethereum's ETH).

Network News

"Naoki Murano," one of the suspected North Korean IT workers identified by ZachXBT, provided companies with an authentic-looking Japanese passport. (Image courtesy of Taylor Monahan)

HERMIT EMPIRE: An investigation published Wednesday by CoinDesk's Sam Kessler reveals just how aggressively and frequently North Korean job applicants have targeted crypto companies in particular – successfully navigating interviews, passing reference checks, even presenting impressive histories of code contributions on the open-source software repository GitHub.

Kessler spoke to more than a dozen crypto companies that said they inadvertently hired IT workers from the Democratic People's Republic of Korea (DPRK), as the nation is officially called. These interviews with founders, blockchain researchers and industry experts reveal that North Korean IT workers are far more prevalent in the crypto industry than previously thought. Virtually every hiring manager approached by CoinDesk for this story acknowledged that they had interviewed suspected North Korean developers, hired them unwittingly, or knew someone who had.

"The percentage of your incoming resumes, or people asking for jobs, or wanting to contribute – any of that stuff – that are probably from North Korea is greater than 50% across the entire crypto industry," said Zaki Manian, a prominent blockchain developer who says he inadvertently hired two DPRK IT workers to help develop the Cosmos Hub blockchain in 2021. "Everyone is struggling to filter out these people."

Among the unwitting DPRK employers identified by CoinDesk were several well-established blockchain projects, such as Cosmos Hub, Injective, ZeroLend, Fantom, Sushi and Yearn Finance. "This has all been happening behind the scenes," said Manian. This investigation marks the first time any of these companies have publicly acknowledged that they inadvertently hired DPRK IT workers.

ELSEWHERE:

Ethereum-based restaking project EigenLayer unlocked its native EIGEN token for transfers this week, apparently allowing some traders to dump: The price surged moments after it was listed on exchanges, leading to a price discovery period that culminated in a 22% slide from its momentary record high. Some community members complained that early EigenLayer investors, while still subject to a token lockup period for a while longer, were nonetheless able to stake their tokens – and sell any rewards received from the activity.
Sean "Diddy" Combs has hired Sam Bankman-Fried's lawyer, Alexandra Shapiro, to appeal a New York judge's decision to keep him locked up while he awaits trial for racketeering and sex trafficking charges.
Moo Deng, a newborn Thai hippo at the Khao Kheow Open Zoo in Bangkok, has captured the hearts of many online through her cute antics. Now, she's the star of a $100 million memecoin.

Crypto Winter-Era Seed Startups Mostly Persist Despite Tumult and Crisis

Ethereum had the most projects among the 2022 cohort, Bitcoin had the lowest fail rate, and Binance had the highest fail rate. (Lattice)

Crypto's hellish 2022 was awash in washouts: Terra-Luna crashed, FTX rugged and crypto lenders bombed. Yet the disasters failed to sink many of the teams perhaps most vulnerable to mayhem: early-stage startups.

Over 80% of the crypto startups that announced seed rounds in 2022 continue to build today, according to a new report from Lattice VC.

The finding may add some retrospective hope to what was otherwise crypto's darkest year yet. Venture capital companies deployed over $5 billion into 1,200 teams that unveiled their seed rounds during the tumultuous months of 2022 – 2.5 times more capital than in 2021.

"Because of the massive influx of capital for 2022, there was just a natural expectation" of a higher fail rate, said Mike Zajko, co-founder at Lattice. The prediction hasn't really come to fruition.

Go here for the full article by CoinDesk's Danny Nelson

Breaking News: The First 40+ Speakers Announced for Consensus Hong Kong

The industry's most influential event in Web3 and digital assets is coming to Asia with a stellar lineup of 40+ global thought leaders already confirmed. Be part of the game-changing discussions, key announcements, and high-impact deals that will shape the future of innovation.

Register today before prices increase and use code TP15 for an additional 15% off.

Money Center

Fundraisings

Please see details in Protocol Village: SecondLive ($12M), Mind Network ($10M), Peach Worlds ($1.14M), Lync ($1.5M), HelixLabs ($2M), Nexio ($2.2M), Echelon ($3.5M), Meridian ($4M)

Deals and Grants

Jon Atack (Maelstrom)

Maelstrom, a decentralization-focused venture firm managed by the family office of BitMEX co-founder Arthur Hayes, announced in a press release Thursday that Jon Atack (GitHub profile) is the second recipient of its Bitcoin Grant Program, to continue his research and development work. According to a bio, Atack started contributing to Bitcoin Core in 2019 and recently was made a maintainer and editor of the Bitcoin Improvement Proposals (BIPs) repository. "Bitcoin isn't perfect," Atack said in the press release. "Among other things, it needs further decentralization, continued vigilance, review, bug-fixing, updates, maintenance and improved robustness, performance, privacy, scaling, documentation and user experience."
Christie's to Offer Blockchain-Based Ownership Certificates for Photography Collection
Franklin Templeton Adds Aptos Blockchain to Support Tokenized Money Market Fund

Data and Tokens

Regulatory, Policy, and Legal

Protocol Village

Top picks of the past week from our Protocol Village column, highlighting key blockchain tech upgrades and news.

Diagram of Strata's system architecture (Strata)

PROTOCOL VILLAGE EXCLUSIVE: Alpen Labs, a Bitcoin-focused developer, has unveiled "Strata," described as a "platform for endgame money on Bitcoin built with ZK rollup tech." According to the team: "Strata is being unveiled after two years of R&D by Alpen. In the first phase, Strata will be a ZK rollup on Bitcoin with the most trust-minimized BitVM bridge available. Long term, Strata's will be a settlement layer for ZK proofs directly on Bitcoin. Settlement of ZK proofs is a unique opportunity to extend the properties of BTC as money. We're looking to create a platform for all digital money with cheap payments, self-custody and large-scale verifiable finance on Bitcoin." CoinDesk reported in April that Alpen emerged from stealth with $10.6 million in funding.
A proposal by Tez Capital won approval from the Tezos blockchain community after being floated as an alternative to the core Nomadic Labs team's "Quebec" upgrade plan. According to a Reddit post, "this is true Tezos governance at work. The people have spoken." The Quebec proposal called for a reduction of block times to eight seconds from 10 seconds, while also instituting maximum issuance bounds for the Adaptive Issuance mechanism. The alternative "Qena" proposal from Tez Capital kept the technical aspects of the Quebec proposals, but without the changes to Adaptive Issuance. It called for "emphasizing stability and technical progress without disruptive economic changes." One respondent to the Reddit post wrote, "Ngl, it's pretty amazing to see a community member's proposal get pushed through."
Bedrock released a post-mortem on a vulnerability in the uniBTC smart contract that was exploited, "allowing the exploiter to mint 30.8 uniBTC and swap them for wBTC in Uniswap pools." According to the post: "In response, we paused the vulnerable contract and implemented a fix to mitigate the vulnerability, which was later confirmed to have affected approximately $2 million in liquidity, primarily within the Uniswap pool." Separately, the Chainlink team sent this message: "Following today's security exploit on Bedrock's platform involving uniBTC, Bedrock is integrating Chainlink Proof of Reserve (PoR) to help secure their minting function and fortify the security of their protocol."
Codex, a decentralized data-storage protocol promising censorship resistance and durability guarantees, has deployed its first testnet and released a whitepaper, according to the team: "The combination of erasure coding and the proving-system upgrades will provide higher durability with cost-savings over time, benefiting both storage providers and users. ZK proof-based remote auditing with ongoing proof aggregation optimizations will reduce costs in the network, allowing support for real-world use cases, first with static data and then hotter data."
The foundation supporting the Avalanche network is releasing a $40 million grant program to reward developers for building new protocols in the blockchain ecosystem. The program, called Retro9000, is supposed to encourage developers to build on Avalanche ahead of a much-anticipated upgrade known as Avalanche9000, the Avalanche Foundation said in a press release.

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Bitcoin's Uncharacteristically Strong September Yields to Unpleasant October Surprise

Bitcoin (BTC) is suffering its worst start to October, typically its most bullish month, as Israel-Iran tensions have flared. Some $450 million in bullish crypto bets were liquidated.

September, on the other hand, looked bullish – typically in the largest cryptocurrency's worst month of the year.

Looking back on September, the CoinDesk 20 index of blue-chip digital assets outperformed the Standard & Poor's 500 Index, as well as gold. Here's what that looked like, courtesy of my colleague Tracy Stephens at CoinDesk Indices: