Numerai is building a blockchain based hedge fund using crowdsourced predictions.

Numeraire

Macauley Peterson

Decentralization is a spectrum. After years of putting up with relatively centralized critical infrastructure in the node space, the industry is making progress towards achieving a more Web3-native vision.



Lava Network rolled out its Software Development Kit (SDK) Beta on Tuesday, turning the page to a new phase of its testnet. The project serves as a marketplace for high-performance, decentralized blockchain Remote Procedure Calls (RPC) and APIs.



RPC nodes are essential for users interacting with blockchains, but when offered by a few centralized companies, they present a single point of failure. They can also pose problems related to privacy, censorship and data accuracy.



Read more: <a href="https://blockworks.co/news/infura-decentralized-infrastructure-network">Consensys invites Big Tech to decentralized infrastructure network</a>



Unlike most testnets, Lava’s is already serving two hundred node providers, operating on their blockchain’s respective mainnets.



CEO Yair Cleper calls it “kind of Uber for nodes.”



So far, Lava has seen rapid organic growth of demand for the network to replace current public RPCs that are frequently run by ecosystems themselves.



“We call it an incentivized public RPC,” Cleper said, or IPRPC. “We are offering to our community — to our node runners — the option to join the IPRPC on its dedicated chain, and the ecosystem rewards them.”



The protocol, which is backed by leading crypto-native investors like Tribe Capital, Jump Capital, AlphaLab, Hashkey, and Alliance DAO, already supports 30 active <a href="https://allblocks.vercel.app/">chains</a>.



Lava Network itself is a modular layer built as a sovereign app-chain using the <a href="https://blockworks.co/tag/cosmos">Cosmos</a> SDK, and acts as a distribution channel for node providers. It automatically routes requests to the most optimal node available, according to quality of service score.



These scores, tallied by Lava based on latency, availability and “freshness” of the data, are what allows the network to feed reliable and fast data providers to developers and users. This is all done programmatically, based strictly on market forces rather than as a result of off-chain agreements.



The Lava chain tracks service scores and payouts distributed monthly, removing the need for locating nodes and contracting with them individually.



<h2 class="wp-block-heading">On a mission</h2>



Cleper and chief technology office Gil Binder both served in the Israeli army. Cleper is based in Tel Aviv, while Binder moved to New York about 5 years ago. The 2021 edition of the Solana Breakpoint conference was the pair’s first foray into crypto.



They observed shortcomings in infrastructure across the industry.



“There is a natural evolution in the way that the blockchain data is being consumed,” Cleper told Blockworks. “From the beginning — everyone running his own nodes — then going to the centralized provider; they really eliminate the barrier to consume, read, write data, but at the same time, introduce new problems.”



There have been efforts to decentralize the infrastructure stack, including <a href="https://blockworks.co/news/infura-decentralized-infrastructure-network">among the big centralized players</a>, but Lava’s approach to the problem is novel.



First, the Lava SDK is “a peer-to-peer communication protocol, straight from the browser,&nbsp;accessing only the top provider without any middle layer,” Cleper explained, sidestepping the drawbacks of the more centralized status quo.



Second, is a new blockchain primitive which Lava terms, “specs.”



<h2 class="wp-block-heading">Inspecting “specs”</h2>



The introduction of specs enables anyone to permissionlessly add support for new chains, APIs and data services to the network, significantly expanding Lava’s capabilities.



“Everyone can join lava, introduce their own specs and build it while supporting the new upcoming nascent chains,” Cleper said.



In a modular multichain world with potentially hundreds or thousands of app-chains and rollups, centralized node providers simply won’t be able to keep up, he said.



“And we thought, how do we harness the power of community to bring kind of an Amazon algorithm that automatically gives you the best provider constantly scoring the session, the service you give.”



The spec is analogous to categories of items in the Amazon store. Lava aggregates all providers adhering to a given spec, and its quality of service algorithm directly connects the user to the best available option.



To use another analogy, “a spec is like a menu at a restaurant,” Binder said. “It tells you what are the specifications, what data can you get, what&#8217;s the interface to getting the data.”



Node providers are like franchise owners of a restaurant chain with all the same dishes on the menu.



RPC nodes are only the first step, but Binder anticipates a flood of data APIs to use the network, providing structured, indexed data for all sorts of Web3 use cases. The team is in discussions with indexing providers such as <a href="https://subsquid.io/">Subsquid</a>.



Node providers, such as <a href="https://blockworks.co/tag/blockdaemon">Blockdaemon</a>, Chainstack and hundreds of others, get a pro-rated share of rewards based on quality of service. Lava facilitates reputation on-chain, based on verifiable data from the provider’s service.



“We use that reputation to increase how often a provider can get access to users,” Binder said. “It&#8217;s a market — for providers, for consumers, for champions — to bring in these opportunities and then have competition around quality, which results in better service in the end.”



It’s no longer necessary to make the case for decentralized infrastructure. “Everyone agrees with this message that decentralizing RPC, that&#8217;s the way to go, and now the question is executing the best platform that allows these providers to compete,” he said.



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Lava Network heats up the node landscape with market forces

Ben Strack

Crypto infrastructure firm Fireblocks is the latest company aiming to ease institutional investors’ counterparty risk concerns following the collapse of centralized crypto giants like FTX.&nbsp;



Via a new product called Off Exchange, Fireblocks will let users lock funds in what it calls Collateral Vault Accounts (CVA), the company said Tuesday.&nbsp;



These accounts are on-chain multiparty computation (MPC) wallets that “programmatically lock and mirror assets” to the connected exchange, according to Stephen Richardson, Fireblocks’ managing director of financial markets.



Once traders transfer assets to a CVA, a credit is issued to the exchange. Crypto derivatives exchange Deribit is the first to integrate with the new offering.



Read more: <a href="https://blockworks.co/news/ftx-meltdown-timeline">FTX began to unravel one year ago today: A timeline</a>



&nbsp;The credit can then be used for spot, margin or derivatives trading activities, and settlement occurs in real-time and on-chain. Once the CVA is rebalanced, traders can withdraw their assets to another venue, counterparty or internal wallet.



“Because the MPC wallets are on-chain, exchanges have complete transparency to monitor and validate client collateral and enforce risk management without taking custody,” he told Blockworks. “This approach protects traders’ principals by enabling them to retain shared custody of their assets in a segregated MPC wallet, and mitigates risk of exposure of funds being commingled in a custodial account or misappropriated by an exchange.”



Some providers use custodial solutions that pool traders’ assets in a commingled account, Richardson noted. In those cases, he said, settlement occurs off-chain via a sub ledger, and exchanges are sometimes required to lock funds in a third-party cold storage solution.



Luuk Strijers, chief commercial officer of Deribit, said in a statement that <a href="https://blockworks.co/tag/fireblocks">Fireblocks’</a> approach is used “to reduce client capital deposited at exchanges while providing our business with greater liquidity and transparency.”&nbsp;&nbsp;



Fireblocks is not the only crypto player who has sought to mitigate counterparty risk after <a href="https://blockworks.co/tag/ftx">FTX</a> imploded last November. FTX founder Sam Bankman-Fried was <a href="https://blockworks.co/news/sam-bankman-fried-found-guilty">found guilty earlier this month</a> on charges including wire fraud, as well as conspiracy to commit fraud and conspiracy to commit money laundering.&nbsp;&nbsp;



More recently, the US Securities and Exchange Commission <a href="https://blockworks.co/news/kraken-commingle-customer-funds">alleged in a lawsuit that Kraken commingled customer crypto assets</a> with its own. The exchange said at the time: “We disagree with the SEC’s complaint against Kraken.”



Bitcoin asset management platform Onramp last month <a href="https://blockworks.co/news/bitgo-crypto-custody-investors">launched a multi-institution custody product</a> that divides key-holding responsibilities to three institutions. Two of the three keys are needed to move the funds at the direction of the end client.



Custodia Bank earlier this month <a href="https://blockworks.co/news/custodia-banking-bitcoin-custody">debuted a custody model</a> in which a customer delegates crypto storage to a custodian that stores the assets on-chain.



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Fireblocks debuts latest tool to combat crypto counterparty risk

Bessie Liu

Code, a Solana-based crypto wallet, has fully open-sourced its code.



This move will make Code one of the first Solana-based applications to completely open-source its application using the MIT License.



The MIT License enables users to copy software code and its associated files “as is,” meaning that anyone can now use, copy, modify and distribute Code’s software without limitation.&nbsp;



Tanner Philp, the chief operating officer of Code, told Blockworks in an interview that the MIT license is one of the most permissive licenses today.



“The Bitcoin code base is also an <a href="https://opensource.org/license/mit/">MIT license</a>, so adhering to Satoshi’s vision, it is the most permissive and open license, and that’s what we’re going with,” Philp said.



Philp notes that the team at Code subscribes heavily to Satoshi’s vision of creating a truly peer-to-peer electronic cash system, enabling anyone to validate and build upon the infrastructure itself.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/dydx-ethereum-open-source">DYdX steps closer to v4 by open-sourcing code</a>



Traditionally, many apps built on the Solana blockchain have been built privately, with very few projects choosing to open-source their software.&nbsp;



This is likely because the <a href="https://blockworks.co/tag/solana">Solana</a> blockchain attracts many developers who have built consumer products in Web2, Philp notes.&nbsp;



“A lot of these developers land in the Solana ecosystem because it’s the most performant chain and gives you the best opportunity to build slick consumer experiences, but from an engineering culture perspective, that means a lot of people are coming from <a href="https://blockworks.co/tag/web2">Web2</a>, where open source is not usually the norm,” he said.&nbsp;



Read more: <a href="https://blockworks.co/news/solana-gets-roasted">Solana ‘roast’ reveals painful truths</a>



Philp adds that this move to open-source Code is important for the Solana ecosystem as a whole, as it can allow the network to take on more of a leadership position. He also notes that open-sourcing software tools show conviction in the tooling that has been built.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="400" height="400" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg" alt="" class="wp-image-74528" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=400 400w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2023/11/TIEXRgu-_400x400.jpg?w=80 80w" sizes="(max-width: 400px) 100vw, 400px" /><figcaption class="wp-element-caption">Code CEO Ted Livingston</figcaption></figure>



The Code team was founded by the team behind the Canadian messaging app, Kik. After struggling to find an appropriate business model to sustain its operations at Kik, the team launched its own cryptocurrency, Kin (<a href="https://blockworks.co/price/kin">KIN</a>).



On the Lightspeed podcast (<a href="https://open.spotify.com/episode/0DkQrKb9hYJYWTGAUasvXd">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/micropayments-are-cryptos-untapped-use-case-ted-livingston/id1697548240?i=1000636782136">Apple</a>/<a href="https://www.youtube.com/watch?v=aePdACgrhdQ&amp;ab_channel=Lightspeed">YouTube</a>), Code CEO Ted Livingston discusses Code’s announcement and crypto’s micropayments opportunity.



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG8207413857" width="100%"></iframe>







KIN was used to raise an initial coin offering (ICO) totaling $100 million for Kik, but after being <a href="https://www.sec.gov/news/press-release/2020-262">fined $5 million by the US Securities and Exchange Commission</a>, Kik — now under new ownership — is no longer associated with KIN.



Updated Nov. 28, 2023 at 10:40 am ET: Included photo of Code CEO Ted Livingston.



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Can ‘Code’ open up Solana’s closed culture?

The introduction of Ethereum Foundation’s <a href="https://blockworks.co/news/ethereum-erc4337-account-abstraction-smart-contract">ERC-4337 account abstraction standard</a> earlier this year drew much attention, but adoption and retention are off to a slow start.



Existing hardware wallets rely on a pair of keys. If those keys are compromised, so are tokens in the wallet. The ERC-4337 standard was instead intended as a new baseline for how users interact with crypto wallets services, including social recovery mechanisms and other multisig options.



The standard turns Ethereum accounts into “smart accounts,” which are much more flexible to suit the needs of wallet holders.



According to data on BundleBear:



<ul>
<li>Weekly retention for ERC-4337 smart wallets drops as low as 1% for accounts older than five weeks.</li>



<li>An average smart account only sends <a href="https://www.bundlebear.com/overview/all">five user operations</a>.&nbsp;</li>



<li>Revenue for transaction “<a href="https://www.erc4337.io/docs/bundlers/introduction">bundlers</a>” is also low, currently less than <a href="https://www.bundlebear.com/overview/all">$8,000</a> per week.</li>
</ul>



Read more: <a href="https://blockworks.co/news/what-are-smart-contract-wallets">What Are Smart Contract Wallets? A Beginner’s Guide</a>



At the time of writing, daily active users are at around 3%, <a href="https://dune.com/sixdegree/account-abstraction-overview">sixdegree</a> data shows. Most smart account users today are on the Polygon network, making up over <a href="https://dune.com/sixdegree/account-abstraction-overview">66%</a> of all smart account holders and almost all monthly new users by chain.



Despite the low adoption rates on Ethereum, industry participants remain optimistic about the future of smart accounts and have been actively working on proposals to spur usage.



John Rising, the co-founder of Stackup, an account abstraction infrastructure company, notes that many existing issues with ERC-4337 can be resolved with the first-ever Rollup Improvement Proposal, RIP-7560.



The existing ERC-4337 standard is considered a “<a href="https://www.stackup.sh/blog/four-shades-of-account-abstraction">semi-native+</a>” smart account, where a user does not need a private key because the trustless relay network is designed to forward transactions to the blockchain.



Rising believes that the goal is to move towards a “native” smart account, where accounts would be able to specify their own validation logic, completely removing the need for a private key — something that RIP-7560 hopes to do.&nbsp;



“ERC-4337 has always been intended as a stepping stone to native account abstraction. The account abstraction proposal, RIP-7560, is designed to be backwards compatible with ERC-4337,” Rising told Blockworks.



Further discussions around the proposal and its applicability must still be considered. Native account abstraction has drawn concerns over the complexity it adds, as it introduces consensus layer changes rather than just high-level infrastructure layer modifications.



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Ethereum ‘smart account’ adoption is low — the first rollup proposal wants to change that

One year out from the FTX implosion, traders have better choices for decentralized exchanges that remove or limit counterparty risk. But while DEXs with centralized-like user experience have begun to gain traction, they are still not as performant as their CEX competitors. And not everyone is keen on self-custody.



Cube.Exchange set out to split the difference. The platform offers spot trading of four crypto assets, differentiating itself with a user-centric approach to asset control. It takes the transparency of the blockchain, and pairs it with the convenience and performance of familiar centralized off-chain exchanges.



The exchange transitioned Tuesday from a private beta phase to a public beta. Its development was informed by the failings of centralized players, including the <a href="https://blockworks.co/tag/bankruptcy">bankruptcies</a> that wracked the industry in 2022.



Unlike conventional exchanges, Cube allows users to maintain ownership of their assets, using <a href="https://blockworks.co/news/mpc-wallets-security">MPC wallets</a>, with withdrawals and trades requiring explicit user authorization.



The team behind the exchange refers to it as a hybrid model, combining an off-chain matching engine for trading and on-chain settlement to layer-1 blockchains.



“On the custody and settlement side, we focused on using multiparty computation for custody of the assets and then focusing on directly connecting to each individual blockchains,” Bartosz Lipiński, CEO of Cube.Exchange told Blockworks.



&#8220;We wanted to find a middle ground where the exchange doesn&#8217;t own your assets — we never put them on our balance sheet as liabilities to our clients and classify them as our assets — because they are in the MPC wallet.&#8221;



When users deposit assets, such as bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>), the funds remain isolated and viewable at all times on a native Bitcoin block explorer. When they execute a trade, the transaction happens peer-to-peer. Cube batches trades and settles them periodically back to the Bitcoin network.



It&#8217;s like Cube acts as a centralized interoperability layer between chains, serving the same function as <a href="https://blockworks.co/tag/proof-of-reserves">proof-of-reserves</a>, but better, because the exchange never fully takes custody.



Read more: <a href="https://blockworks.co/podcast/bellcurve/5ca19e9a-880f-11ee-98c5-231590669273">Crosschain DEXs: The Next Frontier</a>



“Think of it as this like meta layer-2 that takes the state that happened on the exchange and settles MPC wallets to Bitcoin and Ethereum for example,” Lipinski said.



He emphasized the importance of separating asset custody from trading, citing it as a potential conflict of interest in the crypto asset trading space.



Lipinski sees a trend towards greater use of MPC solutions, citing Binance’s self-custody wallet, offerings from Coinbase and <a href="https://blockworks.co/news/fireblocks-crypto-counterparty-risk">Fireblocks</a> as examples.



The difference from, say, Fireblocks, is that Cube vertically integrates custody with the exchange and doesn’t charge clients for the MPC solution, making it suitable for retail users not just institutional players.



<h2 class="wp-block-heading">Solana in the mix</h2>



Curated Solana validators are the real-time record keepers of all trading, similar to how <a href="https://app.blockworksresearch.com/research/pyth-network-pull-not-push">Pyth’s oracle network</a> publishes price data. They also serve as “MPC guardians” to help users custody assets.



Cube itself does not hold a wallet key share, but facilitates vault recovery services for users who lose access to their own private key.



Lipinski became interested in the Solana ecosystem at an early stage, after leaving his job at Citadel, where he was head of equities application development.



“I got into it because of COVID,” he told Blockworks. “My wife told me to stop baking bread at home, so I started playing with Solana.”



Cube&#8217;s initial launch follows a $9 million fundraising round in October, and includes spot trading of native <a href="https://blockworks.co/price/btc">BTC</a>, <a href="https://blockworks.co/price/eth">ETH</a>, <a href="https://blockworks.co/price/sol">SOL</a> and <a href="https://blockworks.co/price/bonk">BONK</a> — a <a href="https://blockworks.co/news/dog-coins-dogecoin-floki-shiba-bonk">Solana meme coin</a> — each paired with <a href="https://blockworks.co/price/usdc">USDC</a>.



The exchange is actively applying for licenses around the world, but is already <a href="https://blockworks.co/tag/licensing">registered</a> as a virtual asset service provider (VASP) in Australia and Poland. The latter should provide EU-wide access to the exchange.



A public beta phase is expected to last around one to two months, Lipinski said.



“I want to build the best exchange out there, both from the market makers perspective and the user&#8217;s perspective,” he said.



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Cube.Exchange squares the circle of decentralization

Jack Kubinec

Cosmos co-founder Jae Kwon has long felt that the protocol’s community is conspiring against him. Now, he may be leaving it for good.&nbsp;



After a proposal passed to crimp inflation on Cosmos’ ATOM token, Kwon announced AtomOne — a “minimal fork” of the Cosmos Hub application.&nbsp;



Kwon and his opponents fundamentally diverge on how much inflation is needed to keep the Cosmos blockchain secure.&nbsp;



Cosmos narrowly passed on Saturday Proposal <a href="https://www.mintscan.io/cosmos/proposals/848">848</a> pledging to set ATOM’s inflation rate at 10%, down from 14%. The proposal’s proponents <a href="https://x.com/EffortCapital/status/1724486648711237867?s=20">argue</a> that Cosmos is overpaying for security by raising inflation rates to incentivize staking.&nbsp;



Other <a href="https://blockworks.co/tag/layer-1">layer-1s</a> maintain high staking demand without inflation, which needlessly puts downward pressure on ATOM’s price, advocates say.&nbsp;



Read more: <a href="https://blockworks.co/news/cosmos-ethan-buchman-blockchain-convergence">Uniting the blockchain ecosystems: Q&amp;A with Cosmos founder Ethan Buchman</a>



<a href="https://blockworks.co/price/atom">ATOM</a>’s price is down 9% in the past 24 hours as Cosmos’ founder announced his breakaway token. It is unclear how exactly AtomOne tokens will be distributed, though the token’s <a href="https://github.com/atomone-hub/genesis">constitution</a> says Proposal 848 voters will receive fewer tokens, and the fork would still <a href="https://x.com/jaekwon/status/1728533010889449732?s=20">support</a> ATOM tokens.&nbsp;



Kwon <a href="https://x.com/jaekwon/status/1723464983370203572?s=20">voiced</a> opposition at the proposal’s outset and throughout the two week voting period. For some, the founder’s inability to sway the outcome is emblematic of Kwon’s <a href="https://x.com/sachayve/status/1728527986289172619?s=20">waning</a> influence in the Cosmos community.&nbsp;



Kwon co-founded <a href="https://blockworks.co/tag/cosmos">Cosmos</a> in 2014, but has <a href="https://x.com/jaekwon/status/1525154171216834560?s=20">accused</a> the community of conspiring against him multiple times in the years since.&nbsp;



AtomOne’s GitHub page shows Kwon began working on the document two weeks ago, around the time that voting started on Proposal 848.&nbsp;



At the center of Kwon’s critique is the argument that ATOM was never meant as <a href="https://x.com/jaekwon/status/1723816927230148912?s=20">money</a>, and viewing the staking token for its financial prospects risks <a href="https://x.com/jaekwon/status/1723464983370203572?s=20">compromising</a> the Cosmos Hub’s security.&nbsp;



“In the long run this is [a] game of survival, and survival comes from strict adherence to first principles (of security especially),” Kwon <a href="https://x.com/jaekwon/status/1729196890758304171?s=20">wrote</a> on X Monday.&nbsp;



Activist minority factions forking crypto projects have generally seen limited success — from bitcoin cash to more recent <a href="https://blockworks.co/news/nouns-dao-treasury-fork-governance">“rage quits” from the Nouns</a> and <a href="https://medium.com/floordao/floordao-floork-the-future-a220ae69bd9a">Floor</a> DAOs. In each case, some forkers profited, but the forkers were ultimately unable to recapture the social capital of their predecessors.



Updated Nov. 27, 2023 at 5:10 pm ET: Clarified that the forkers, rather than forked chains, were unable to recapture the social capital of their predecessors. 



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Cosmos co-founder splits ATOM after years of infighting

A federal judge wants Binance founder Changpeng Zhao to stay in the US as he awaits sentencing. At least for now.



Zhao and the exchange he founded pleaded guilty to violating US anti-money laundering laws last week.&nbsp;



The US Department of Justice <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">detailed $4.3 billion in fines and forfeitures</a> for Binance during a Nov. 21 press conference. Attorney General Merrick Garland alleged at the time that the company’s compliance team knew the exchange was used for money laundering and illicit financial activities.&nbsp;



Zhao was released on a $175 million bail bond and is slated to be sentenced in February. He is a citizen of the United Arab Emirates and Canada.



Magistrate Judge Brian Tsuchida proposed allowing Zhao to return to the UAE to be with his partner and three children prior to sentencing — finding he was at “no risk of flight,” according to a Nov. 23 court <a href="https://fingfx.thomsonreuters.com/gfx/legaldocs/dwpkawagrpm/11242023zhao_defense.pdf">filing</a>.



Read more: <a href="https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked">Here are the details of Binance and Changpeng Zhao’s plea deal</a>



But US District Judge Richard Jones put a pause on Zhao’s return to the UAE “until such time as this court resolves the government’s motion for review,&#8221; according to a Monday <a href="https://storage.courtlistener.com/recap/gov.uscourts.wawd.328570/gov.uscourts.wawd.328570.42.0.pdf">disclosure</a>. 



The <a href="https://blockworks.co/tag/binance">Binance</a> founder, as part of pleading guilty, agreed to step down from the company’s CEO post — <a href="https://blockworks.co/news/changpeng-zhao-announces-resignation-binance">naming Richard Teng as his successor</a>. Teng was Binance’s head of regional markets and previously spent time in regulatory roles at the Abu Dhabi Global Market and the Monetary Authority of Singapore.



Teng claimed in a blog <a href="https://www.binance.com/en/blog/from-our-ceo/my-first-blog-as-binances-ceo-2887294642016890803?ref=AZTKZ9XS&amp;utm_source=RichardTwitter&amp;utm_medium=GlobalSocial&amp;utm_campaign=GlobalSocial">post</a> Monday that Binance is “stronger today than we have ever been.” He doubled down on previous <a href="https://twitter.com/_RichardTeng/status/1727214060406808920?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1727214060406808920%7Ctwgr%5E50743ffb1242a01c516ed19cf0c8af6d809321d3%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fblockworks.co%2Fnews%2Fbinance-outflows-stabilize">comments</a> he made on X that the company maintains “robust revenues and profits” and that user assets are backed one-to-one.



“As an industry, we require more focus than ever on collaborating with policymakers,” Teng wrote. “Only then may we effectively contribute to the development of a globally harmonized regulatory framework that will foster innovation while providing critical consumer protections.”



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Binance’s Zhao ordered to stay in US for now

Google Cloud has joined EigenLayer’s “Operator Working Group” alongside more than 65 other operators and solo stakers, a representative for EigenLabs, the developer behind EigenLayer, told Blockworks.&nbsp;



Google Cloud Web3 now <a href="https://goerli.eigenlayer.xyz/operator/0x8a2e63fb50c6e4ac207d17712fc18c8813b1079d">appears</a> as a node operator on the Goerli testnet for EigenLayer — a restaking protocol that lets ether (<a href="https://blockworks.co/price/eth">ETH</a>) be staked on multiple platforms at once. Google Cloud confirmed the cloud computing service’s participation in EigenLayer’s testnet in an email to Blockworks.&nbsp;



Google Cloud declined to comment on whether it has plans to move to <a href="https://blockworks.co/tag/eigenlayer">EigenLayer</a>’s mainnet or if the protocol would be added to Google Cloud’s Blockchain Node Engine.



EigenLabs also couldn’t confirm whether <a href="https://blockworks.co/tag/google-cloud">Google Cloud</a> would remain as a node operator once node operation goes to mainnet. Representatives said they expect Google Cloud’s support to continue, since the goal of testnet is to prepare for mainnet.



<a href="https://blockworks.co/news/eigenlayer-deploys-on-ethereum-mainnet">EigenLayer went live for stakers</a>, who earn rewards by locking in their staked ether, in June. Operators, who enhance security and allow stakers to delegate assets, are still in testnet.&nbsp;



EigenLayer has <a href="https://www.blog.eigenlayer.xyz/launch-of-the-stage-2-testnet-eigenlayer-eigenda/">said</a> it expects mainnet deployment to happen in the first half of 2024.



Google Cloud, the cloud computing service offered by Google, has been on a steady march into Web3 since Bloomberg first <a href="https://www.bloomberg.com/news/articles/2022-01-19/google-forms-blockchain-group-under-newly-appointed-executive">reported</a> Google’s creation of a blockchain division in January 2022.



Later that year, <a href="https://blockworks.co/news/google-signals-major-crypto-push-with-ethereum-solana-support">Google Cloud released the Blockchain Node Engine</a>, a service meant to let developers run blockchain network nodes more easily. Google Cloud launched a web3 startup program in April 2023.



Google Cloud showed an interest in staking before the EigenLayer integration, <a href="https://blockworks.co/news/google-cloud-polygon-validator-proof-of-stake">becoming a Polygon validator</a> in September. The investment was minimal from the tech giant, though: Google Cloud has the second-smallest <a href="https://staking.polygon.technology/validators">stake</a> out of more than 100 validators.&nbsp;



The cross-chain protocol <a href="https://blockworks.co/news/layerzero-google-cloud-oracle-operator-messaging">LayerZero partnered with Google Cloud</a> in September 2023, with the company becoming LayerZero’s default oracle to verify transactions across blockchains.&nbsp;



Google Cloud’s move into Web3 has not been without controversy, with some seeing the behemoth cloud computing service’s presence as a <a href="https://blockworks.co/news/google-cloud-layerzero-0xresearch-oracle-provider">strike against decentralization</a>.



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Google Cloud confirms participation in EigenLayer testnet

David Canellis

Binance coin and XRP, two of the largest cryptocurrencies on the market, are diverging.



Only $2 billion separates BNB and XRP’s market caps — now $35.7 billion to $33.2 billion.&nbsp;



That puts XRP squarely in flipping distance: If BNB stays flat, XRP could firmly eclipse it with just an 8% price rally.



The two were way further apart at the start of the year. BNB’s market cap was more than double XRP’s back then — long before Changpeng Zhao’s <a href="https://blockworks.co/news/changpeng-zhao-announces-resignation-binance">forced resignation as CEO of Binance</a> last week.



In fact, XRP briefly flipped BNB in July when a US federal court ruled Ripple’s XRP <a href="https://blockworks.co/news/judge-rules-ripple-xrp-not-security">sales to retail weren’t securities</a>. The news ballooned its price by 75% and once again made XRP the fourth-biggest cryptocurrency on the market, behind bitcoin (<a href="https://blockworks.co/price/BTC">BTC</a>), ether (<a href="https://blockworks.co/price/ETH">ETH</a>) and tether (<a href="https://blockworks.co/price/usdt">USDT</a>).



XRP — one of the oldest cryptocurrencies, initially issued in 2012 — had handed fourth place back to BNB by the next month. The token is the native asset of the Ripple Ledger — now stylized as the “XRP Ledger” — pitched as a low-cost intermediary asset cross-border remittances.&nbsp;



<a href="https://blockworks.co/price/bnb">BNB</a>, on the other hand, is the native token for Binance Smart Chain, a network similar to <a href="https://blockworks.co/tag/tron">Tron</a>. The network supports its own bevy of tokens and applications, including typical cryptocurrencies, stablecoins, wrapped tokens, memecoins, decentralized exchanges and DeFi protocols. Traders can also use BNB to reduce trading fees on <a href="https://blockworks.co/tag/binance">Binance</a>.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/15911487/embed#?secret=sftc6S6JpP" data-secret="sftc6S6JpP" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">XRP flipping BNB would be a return to the old normal</figcaption></figure>



BNB first overtook <a href="https://blockworks.co/price/xrp">XRP</a> in February 2021, as the last bull market was picking up steam. Sans for a brief moment a few months later, BNB has been valued above XRP ever since.



All that could change for good if both cryptocurrencies keep their current trajectories. BNB has been retracing ever since its all-time high in November 2021 — now 67% below that point.



XRP meanwhile has been on the mend, now up by more than three quarters since it bottomed out in September. BNB is only up 6% across that time.



Granted, both cryptocurrencies face existential threats. While the US has dropped claims against Brad Garlinghouse and Chris Larsen, a <a href="https://blockworks.co/news/ripple-sec-jury-trial-spring">jury trial in spring next year</a> will decide whether Ripple’s XRP sales to hedge funds and other institutional investors violated securities law.&nbsp;



Ripple’s future will stay in the balance until that matter is settled.



Binance’s problems are more pressing: it must fork out $4 billion to US authorities, its founder Zhao has been forced to step down and prosecutors are pushing for 18 months in prison for Bank Secrecy Act violations.



In response, BNB has sunk more than 10% since Zhao’s <a href="https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked">guilty pleas were confirmed</a> last Tuesday. XRP is about even.



Granted, Binance is still the world’s largest crypto exchange by reported volume by far.&nbsp;



But between the lost billions and the three-year market surveillance program forced on the exchange, the case for Binance losing ground to other prominent global platforms seems a lot stronger.



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XRP threatens to flip Binance’s cryptocurrency once and for all

Last week, the discount at which Grayscale Bitcoin Trust shares trade compared to its net asset value closed at a level unseen since 2021.



But it is unlikely to get much lower than its current 8% discount, some segment observers say. Its shares trading at a premium are even less probable, they agree.



Eligible shares of GBTC are quoted on the OTC Markets Group. The value at which those are sold has fluctuated in the form of premiums and discounts to the value of bitcoin that it holds.&nbsp;



The shares haven’t traded at a premium since February 2021, according to <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav">YCharts.com</a>. And the discount was as steep as 46% in January, the data shows.&nbsp;&nbsp;



But the discount shrunk to roughly 8% on Friday, reflecting <a href="https://blockworks.co/news/21shares-bitcoin-etf-approval-incoming">increased investor confidence</a> in the potential approval of a bitcoin spot ETF. Following its <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf">court win against the US Securities and Exchange Commission</a>, Grayscale is <a href="https://blockworks.co/news/where-does-grayscale-gbtc-stand#">working on converting GBTC to an ETF</a> — a move the firm has said would essentially get rid of the current discount on its shares.



Read more: <a href="https://blockworks.co/news/grayscale-gbtc-ethe-discounts">Grayscale trust discounts keep shrinking — here’s why</a>



The discount has historically moved as bitcoin’s price has.&nbsp;



A dip in price to about $35,700 last week — as news unfolded about <a href="https://blockworks.co/news/binance-settlement-message-to-crypto-industry">the guilty pleas of Binance and its CEO</a> — was offset by clarity that such regulatory action against the exchange had been resolved, Fineqia International analyst Matteo Greco said in a Monday research note. This led to what he called “renewed stability in the market.”&nbsp;



Bitcoin’s (<a href="https://blockworks.co/price/btc">BTC</a>) price was at about $37,500 around 12:00 pm ET Monday — down 0.4% in the previous 24 hours.



“Any news related to settlements between law enforcement and digital asset service providers plays a vital role in bridging traditional finance and digital assets, increasing the likelihood of capital inflow from traditional finance investors,” Greco added in the note.



<h2 class="wp-block-heading">Will discount turn to premium?</h2>



Chase White, senior research and policy analyst Compass Point Research &amp; Trading, said uncertainty remains around when the <a href="https://blockworks.co/tag/sec">SEC</a> could allow GBTC to convert to an <a href="https://blockworks.co/tag/etf">ETF</a>. Barring any concrete news on that front, the discount is likely to stay at a high single digit to low double digit discount compared to its net asset value, he said.&nbsp;



“This is because there’s still a risk that the conversion is not approved,” he told Blockworks. “And if the discount gets too low [or] becomes a premium, traders playing for the narrowing of the discount will sell their positions — because the trade is over and they know a premium will be wiped away at conversion just like a discount would be.”



Fund group Ark Invest has recently sold shares of <a href="https://blockworks.co/tag/gbtc">GBTC</a> — most recently shedding 94,624 shares of the trust from its Ark Next Generation Internet ETF (ARKW) on Nov. 24.&nbsp;



Dave Nadig, a financial futurist at data firm VettaFi, said there is “no mechanical reason” for GBTC to trade at a premium.



“If anything I expect outflows as parity approaches, which, because of no redemption, means more discount,” Nadig said.



Likely the only way the GBTC discount completely disappears is if other fund issuers get regulatory approval to launch a spot bitcoin ETF, Greco said. The SEC is set to rule on such <a href="https://blockworks.co/news/sec-decision-date-bitcoin-etf">a proposal by Ark Invest and 21Shares by Jan. 10.</a>



“This way customers would know that with almost certainty the GBTC conversion will be approved shortly, and buying at a discount would basically mean a strong likelihood of buying BTC at a lower price compared to the market price,” Greco told Blockworks.&nbsp;



GBTC had previously traded at a premium when ways to get exposure to bitcoin were more limited, he added. Investors have found other proxies to do so in the past three years or so.



“In the off chance that it did trade at a premium, we think that would be short lived,” White said. “Traders would sell out of their positions.”



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Could GBTC’s shrinking discount turn to a premium?

Two recent catastrophic exploits of two DeFi protocols differed in many ways, yet shared one commonality — both were audited multiple times.



Raft Finance, a stablecoin provider inspired by Liquity but backed by staked ether, fell victim to an infinite mint bug two weeks ago. KyperSwap saw its liquidity pools drained on Nov. 23.



The Raft team’s post-mortem <a href="https://mirror.xyz/0xa486d3a7679D56D545dd5d357469Dd5ed4259340/_Nk6_1_VvInyC0pdvHiZuAXiqm6tYSsGYGHSfOhcO1I">analysis</a> of the incident pointed out that, “the exploited Raft smart contracts were <a href="https://docs.raft.fi/additional-information/security">audited</a> by Trail of Bits and Hats Finance. Unfortunately, the vulnerabilities that led to the incident were not detected in these audits.”



Kyber Network similarly flagged its platform’s audits from vaunted security experts, including 100proof, ChainSecurity and participants in an audit competition organized by Sherlock.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">7/ Security measures we’ve taken include internal smart contract checks, &amp; audits by 100proof (whitehacker), ChainSecurity, &amp; community developers via Sherlock’s audit competition. We encouraged further checks on the smart contracts through our Bug Bounty Program with Immunefi.&mdash; Kyber Network (@KyberNetwork) <a href="https://twitter.com/KyberNetwork/status/1728115872403976485?ref_src=twsrc%5Etfw">November 24, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Raft procured even more audits by Curious Apple and Aviggiano throughout 2023, indicating ongoing security evaluations and improvements​​ that have led onlookers to <a href="https://x.com/davgarai/status/1723351273817219445">question</a> the assumption that an audited protocol is necessarily safe.



Read more: <a href="https://blockworks.co/news/exploit-ether-defi-protocol">Raft Finance floats user bailout plan after odd exploit</a>



What’s needed is a “paradigm shift” in how blockchain projects tackle threats in the face of examples like these, says Halborn’s chief operating officer Dave Schwed, highlighting “sophisticated manipulation of smart contract functions.”



“It highlights the importance of projects taking a proactive and layered approach to security, beyond just relying on external audits,” Schwed told Blockworks.



Other smart contract specialists, including Yearn Finance security researcher Storming0x, concur. They <a href="https://x.com/storming0x/status/1724239791837917554">said</a> on X that it’s “a waste for a project to get an audit” absent attention to other best practices.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">IMO is a waste for a project to get an audit without good testing, coverage, fuzzing and at least 1 good peer review. Why? Because a good auditor will find most evident high issues at surface given the small amount time but not have time to go in depth. 7/ <a href="https://t.co/t64H0RVtC2">pic.twitter.com/t64H0RVtC2</a>&mdash; Storm Blessed 0x (@storming0x) <a href="https://twitter.com/storming0x/status/1724239791837917554?ref_src=twsrc%5Etfw">November 14, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



It is also difficult for ordinary users to tell whether an audit covers the final code in production.



<h2 class="wp-block-heading">The <s>Devil</s> vulnerability is in the details</h2>



Theoretically, a user could compare the audited code with the current published version, Schwed noted.



“Most audit reports show, or should show, a hash of the repo of the code that was audited,” he said. “There should be some automated mechanism to compare the code audited and the code in production enhancing transparency and trust.”



Michael Lewellen, head of solutions architecture at Open Zeppelin, noted that &#8220;change management&#8221; — ensuring the production version matches the audited one — was not an issue in Raft&#8217;s case. However, he does see a tendency for some development teams to ignore the advice of their auditors.



“Trail of Bits, despite missing the bug itself, did note in their report that the Raft codebase could have made improvements to their testing and verification,” Lewellen told Blockwoks.



“These recommendations should not be taken lightly by projects that might otherwise assume the audit report gives them the all-clear to launch without making improvements to other parts of their security stack,” he added.



<h2 class="wp-block-heading">Making users partly whole</h2>



After receiving feedback that it was unfair to exclude those who sold their R following the depeg event, Raft <a href="https://forum.raft.fi/t/raft-recovery-plan/237">retracted</a> its initial recovery plan.



A revised “recovery plan” was <a href="https://docs.raft.fi/additional-information/raft-recovery-plan-claim-your-dai">published</a> Friday, giving victims <a href="https://x.com/raft_fi/status/1728038665736290780?s=20">until</a> the end of March 2024, to recoup a portion of their losses.



“After substantial feedback from the Raft community, the Raft Recovery Plan has been finalized, resulting in a 42% recovery rate. This guide is for all the affected users who were included in the Raft Recovery Plan to claim their DAI,” the plan said.



For Kyber, <a href="https://blockworks.co/news/kyberswap-hacker-stole-48m">the scale of the loss was significantly greater</a> — some $48 million. The road to recovery is still unclear.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">9/ We are grateful for the overwhelming support from those who have offered assistance in aiding in the investigation. Our heartfelt appreciation goes out to our users &amp; partners who believe in our product &amp; mission. Updates will be provided as the situation unfolds.&mdash; Kyber Network (@KyberNetwork) <a href="https://twitter.com/KyberNetwork/status/1728115876749275229?ref_src=twsrc%5Etfw">November 24, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The KyberSwap exploit, noted for its <a href="https://twitter.com/KyberNetwork/status/1728115867580527071?s=20">unusual sophistication</a>, has left DeFi users wondering about the level of yield that could justify their risk-taking.



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Latest DeFi exploits show audits are no guarantee

Decels, or decelerationists, are back in the spotlight thanks to the OpenAI soap opera. Sam Altman’s momentary ousting was, in one <a href="https://www.nytimes.com/2023/11/21/technology/openai-altman-board-fight.html">version</a> of the story, an attempted coup by safety-obsessed doomers who worried he couldn’t be trusted to build such powerful technology.



Or, depending on which reports you believe, it was a move to <a href="https://www.washingtonpost.com/technology/2023/11/22/sam-altman-fired-y-combinator-paul-graham/">mitigate</a> Altman’s own hunger for corporate power.



And the US Securities and Exchange Commission is the top US “decel,” said former Kraken CEO Jesse Powell in response to a recent securities suit brought against the crypto exchange he co-founded.



Both debacles have shown us a fresh, exciting way to divide us by our philosophies: Are you a progress-loving accel (accelerationist) who embraces innovation at all costs, or are you an anxious decel eager to slow tech entrepreneurs down?



Accels would say amplifying capitalism is critical to humanity. They say we need more money, more funding and more entrepreneurs to discover all the technologies, from artificial intelligence to life extension, to concepts we’ve yet to even dream of.



“Effective acceleration” is the move until we hit the singularity, a point in the future where technology supersedes humanity altogether and runs the show from there (we clearly need some help).



<h2 class="wp-block-heading">Securities laws are so decel&nbsp;</h2>



It’s easy to see how accels and decels would butt heads over AI. If you believe in its potential, then the stakes are extremely high.



Decels are more anti-politiks who would rather we all take a beat and mull where this big ship is headed. Less “progress for the sake of progress,” more “make progress more difficult,” even if it means fewer Silicon Valley startups.&nbsp;



Despite the fact that Karl Marx <a href="https://www.theguardian.com/world/2017/may/11/accelerationism-how-a-fringe-philosophy-predicted-the-future-we-live-in">himself</a> may have been one of the very first accels, more hardline decels would <a href="https://runway.org.au/manifesto-of-decelerationism/">argue</a> powerhouses like Amazon and Walmart have been a net negative for society. Their proliferation only enriches a reactionary class of billionaires who’ve built empires on exploitation. Best antagonize them into slowing down.



But beyond <a href="https://bitcoinmagazine.com/hyperbitcoinization">hyperbitcoinization</a>, there’s no crypto version of the singularity. It’s difficult to say what crypto-accels would strive for beyond anarcho-capitalism on the blockchain.&nbsp;&nbsp;



From crypto’s perspective, the US is the antagonizer intent on controlling its growth. The SEC has long pushed the idea that almost every cryptocurrency on the market is an unregistered <a href="https://www.cnbc.com/video/2018/11/26/sec-cracks-down-on-initial-coin-offerings.html">security</a>, even before <a href="https://blockworks.co/news/gary-gensler-regulation-sec-advice">Gary Gensler</a>.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Message is clear: $30m buys you about 10 months before the SEC comes around to extort you again. Lawyers can do a lot with $30m but the SEC knows that a real fight will likely cost $100m+, and valuable time. If you can&#39;t afford it, get your crypto company out of the US warzone.&mdash; Jesse Powell (@jespow) <a href="https://twitter.com/jespow/status/1726794688433369290?ref_src=twsrc%5Etfw">November 21, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">Powell is clearly not a fan of crypto-deceleration</figcaption></figure>



Not to mention, the Federal Reserve continuously <a href="https://blockworks.co/news/legal-expert-avanti-may-face-uphill-battle-getting-fed-payment-access">refuses to award</a> “master accounts” to startup banks operating in the crypto space — which would grant them, among other things, easy access to the US banking system and federal deposit insurance.



A truly accel US might open all capital controls and flood the ecosystem with funding — innovation no matter what, regardless of how many investors bottom out along the way.&nbsp;



Even a sorta-accel US would agree to the “safe harbor” <a href="https://www.sec.gov/news/public-statement/peirce-statement-token-safe-harbor-proposal-2.0">proposed</a> by dissenting Commissioner Hester Peirce, which would give crypto startups three years to rapidly innovate (read: decentralize) before having to worry about US securities laws.&nbsp;



The SEC has instead sued names including <a href="https://blockworks.co/news/sec-drops-dismisses-garlinghouse-case">Ripple</a>, <a href="https://www.sec.gov/news/press-release/2019-202">Block.one</a>, <a href="https://blockworks.co/news/sec-sues-justin-sun">Justin Sun</a>, <a href="https://thenextweb.com/news/messaging-app-kik-shutsdown-kin-sec-fight-ico">Kik</a>, <a href="https://blockworks.co/news/sec-sues-coinbase">Coinbase</a> and now <a href="https://blockworks.co/news/kraken-commingle-customer-funds">Kraken</a> for alleged violations. The US is no longer a place where you can easily attempt to innovate with crypto.



<h2 class="wp-block-heading">Can’t extradite what you can’t locate&nbsp;</h2>



It wasn’t very accel of the DOJ, either, to force Binance founder Changpeng Zhao to <a href="https://blockworks.co/news/doj-indictment-binance-changpeng-zhao">step down as CEO</a> over the breaches of the Bank Secrecy Act.&nbsp;



Of course, money laundering happens in crypto — it’s valuable money. You should see how much laundering happens in <a href="https://www.europol.europa.eu/crime-areas/economic-crime/money-laundering#:~:text=The%20United%20Nations%20Office%20on,and%201.87%20trillion%20each%20year.">fiat</a> or priceless <a href="https://www.imf.org/en/Publications/fandd/issues/2019/09/the-art-of-money-laundering-and-washing-illicit-cash-mashberg">art</a>.



But so far, Bitcoin creator Satoshi Nakamoto has escaped any government attention (as far as we know, anyway).



That’s not to say that Satoshi Nakamoto wouldn’t be given the Changpeng Zhao treatment if they miraculously returned tomorrow. Ransomware is classed a national security <a href="https://partners.wsj.com/cisco/cybersecurity-simplified/ransomware-is-a-national-security-threat/">threat</a>, and almost all cases involve BTC as a medium of exchange.



If Zhao was responsible for money laundering and other sketchy activity flowing through his software, could regulators concoct a way to hold Nakamoto accountable for creating money so perfect for ransomware, even though centralized exchanges have little in common with the Bitcoin blockchain?



Probably. Dumber things have happened. Perhaps Nakamoto didn’t want to risk it — with one theory suggesting they disappeared after a <a href="https://thenextweb.com/news/satoshi-nakamoto-left-bitcoin-because-of-the-cia-theory-cryptocurrency">meeting</a> with the CIA.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Today we filed an amicus brief in the 5th Circuit appeal of Van Loon v. Treasury regarding OFAC’s sanctions against Tornado Cash. Read Senior Counsel <a href="https://twitter.com/MTCoppel?ref_src=twsrc%5Etfw">@MTCoppel</a>&#39;s thread below for more. 👇<a href="https://t.co/1pmSAt1Bds">https://t.co/1pmSAt1Bds</a> <a href="https://t.co/c5ScaTDr9N">https://t.co/c5ScaTDr9N</a> <a href="https://t.co/e9ySvcKdeM">pic.twitter.com/e9ySvcKdeM</a>&mdash; Blockchain Association (@BlockchainAssn) <a href="https://twitter.com/BlockchainAssn/status/1726709704792100951?ref_src=twsrc%5Etfw">November 20, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">The US has also gone after makers of crypto mixer Tornado Cash</figcaption></figure>



The most accel thing the US ever did for crypto was concede there’s nobody to sue or extradite over the creation and utility of Bitcoin. In a way, this gave BTC cover to be classed a commodity. Although, that could be just because they have no idea who Nakamoto is or their whereabouts.



The second most accel thing was allowing the CFTC to approve ether (ETH) futures, <a href="https://blockworks.co/news/bitcoin-and-ether-are-commodities-says-cftc-in-binance-lawsuit">laying the groundwork</a> for its own commodity classification. But the path to that classification remains murkier, and until that changes, Jesse Powell’s point remains.



Jesse Powell’s warning for crypto startups who can’t afford to take on a costly legal battle with a largely decel US echoes his past stance on New York’s BitLicense, which prompted Kraken to exit the Empire State entirely all those years ago:&nbsp;



“Get your crypto company out of the US warzone.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">David is an Editor based in The Netherlands focused on data-driven journalism. Previously, he wrote for TheNextWeb&#8217;s crypto vertical before launching Protos in 2021. He&#8217;s a reformed hardline Bitcoiner passionate about permissionless and decentralized networks. Contact David at david@blockworks.co</div>


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Would the US arrest Satoshi Nakamoto if they returned today?

Ethereum transaction fees would be five times more expensive if not for layer-2 rollup networks like Optimism and Arbitrum.



That’s according to a recent report from blockchain infrastructure unit Chainstack. Aside from fees between 360% and 419% higher, transactions themselves would take nearly twice as long on average, Chainstack found. 



Wait times would even stretch to 114 seconds compared to a block time of about 12 seconds (the minimum wait time if transactions are sent between blocks).



Rollups are designed to solve the <a href="https://blockworks.co/news/core-dao-solve-blockchain-trilemma">blockchain trilemma</a> — a tradeoff layer-1 networks must make between security, scalability and decentralization. Blockchains can only offer two of those elements at any one time, says Ethereum co-founder Vitalik Buterin, who <a href="https://vitalik.ca/general/2021/04/07/sharding.html">popularized</a> the concept <a href="https://blog.bigchaindb.com/the-dcs-triangle-5ce0e9e0f1dc">laid</a> out in 2016.



Ethereum, for example, is built with security and decentralization in mind. But it&#8217;s not totally scalable — transaction fees generally rise alongside user activity and can grow exponentially at times of peak demand.



With rollups, Ethereum is able to offload some of the pressure. There are two popular rollup solutions today: Optimistic rollups and zero-knowledge (zk) rollups. 



<a href="https://blockworks.co/news/ethereum-optimistic-rollups">Optimistic rollups</a>, such as Arbitrum and Optimism, process transactions off-chain and then post the data of the transaction back onto Ethereum as “calldata.” ZK rollups, such as Polygon zkEVM and zkSync Era, post all data on-chain but use cryptography to validate whether transactions are accurate without revealing the information itself. 



Usage of rollups has grown considerably over the past two years, with Arbitrium and Optimism <a href="https://dune.com/blockworks_research/l2-comparison-dashboard">often</a> together handling more daily transactions than Ethereum mainnet.



“&#8230; it&#8217;s clear how roll-up transactions have gone from representing a minor fraction of the network&#8217;s activity in 2021 to playing a vital part in Ethereum&#8217;s functioning by 2023,” Chainstack wrote.



The report added that the growing number of transactions illustrated the crucial functioning of rollups to Ethereum’s overall network efficiency.&nbsp;



Although, Ethereum gas fees (currently about $1 on average) have seen a constant uptrend between 2021 and 2023 despite the popularity of rollups. But Chainstack reasoned that L2 networks have still served as a necessary and useful counterbalance. 



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Rollups saved Ethereum users a boatload of gas fees: Report

Hind Kurhan

The 2023 crypto winter has been challenging for many, not least the thieves who target crypto wallets, platforms and token protocols. So far this year, they’ve only managed to steal $1 billion in crypto assets — a steep fall from 2022’s <a href="https://www.chainalysis.com/blog/2022-biggest-year-ever-for-crypto-hacking/">record $3.8 billion</a>.&nbsp;



Unfortunately, the decline appears to have more to do with a reduction in available capital than with stronger defenses. And while the scale of attacks has fallen, their frequency has in fact <a href="https://www.dlnews.com/articles/regulation/why-criminals-only-stealing-one-billion-in-crypto-is-bad/">risen sharply</a>: from 60 hacks in 2022 to 75 as of the end of October. And the year isn’t over.



If decentralized finance is ever to be widely accepted by retail and institutional investors, then it needs to achieve its goal of democratizing global finance.&nbsp;



We must collectively do better at closing the loopholes that malicious actors are forever looking to slip through.&nbsp;



The key to locking the door against bad actors? We need to vastly improve security auditing, which, at present, is inconsistent at best and a rubber-stamp exercise at worst.&nbsp;



Specifically, our industry as a whole needs to adopt a consistent auditing methodology for decentralized technology that is rigorous, standardized and repeatable — as robust as what protects traditional finance.



Such an auditing standard, coupled with a public commitment by auditing firms to the principle of responsible disclosure — the willingness to call out projects that refuse to listen to or act on recommendations — will encourage projects themselves to raise their security standards.



Atomic Wallet’s refusal to heed a February 2022 <a href="https://www.coindesk.com/tech/2022/02/10/least-authority-discloses-security-risks-in-atomic-wallet/">public disclosure</a> of serious security vulnerabilities by auditor Least Authority resulted in <a href="https://cointelegraph.com/news/north-korean-hackers-swipe-over-100m-from-atomic-wallet-users">the loss of more than $100 million</a> to hackers in June 2023.&nbsp;



At its best, a third-party security audit is a thorough investigation by a skilled team that analyzes every aspect of a system’s design and implementation, seeking out weaknesses and flaws that could affect operations or users — or offer bad actors access to sensitive data or assets.&nbsp;



A good audit also carefully assesses whether developers and designers have adhered to best practices in a system’s creation and roll-out.



Vulnerabilities come in many forms; incorrect or insufficiently secure cryptography, sensitive information leaks, unprotected system parts, inconsistencies between system design documentation and the code used in implementation.



Weaknesses like these can result in anything from the exposure of sensitive and secret user data to the loss of user and system assets.



That audits are as detailed — and consistent — as possible is therefore essential to both a project and its users’ safety.



There are dozens of firms out there offering audit services, but with no industry standard, quality can and does indeed vary drastically. Even within reputable firms, there is neither consensus on what should be audited nor a consistent set of yardsticks.



There is, of course, no guarantee that even the most experienced auditors will either sniff out every weakness in a system or protect every user from loss. But if they are thoroughly and regularly carried out, security audits have been proven to sharply reduce the risk of a serious vulnerability going undetected.



Read more from our opinion section: <a href="https://blockworks.co/news/blockchain-security-team-communication">It’s time for blockchain security firms to join forces</a>



However, audits can’t stop social engineering attacks — those that involve the manipulation of human beings — such as when North Korean group Lazarus <a href="https://www.elastic.co/security-labs/elastic-catches-dprk-passing-out-kandykorn">convinced engineers</a> at an unidentified crypto exchange earlier this year to download malware disguised as an arbitrage bot. Preventing that type of attack only comes from vigilance and team training.&nbsp;



It is true that every audit will be different, just as every project is different.&nbsp;



But my long experience in the security auditing space has taught me there are specific steps an auditor must take to maximize the effectiveness of the security audit for the benefit of clients, users and the ecosystem.&nbsp;&nbsp;



What are these requirements? An auditing standard that aims to make decentralized systems more resilient and protect their users from potential losses must include an exhaustive assessment of the following:&nbsp;



<ul>
<li>The project’s threat model&nbsp;</li>



<li>The security by design&nbsp;</li>



<li>The security of implementation</li>



<li>The use of dependencies</li>



<li>Testing&nbsp;</li>



<li>Project documentation</li>



<li>The scope of the audit, and whether or not it is sufficient.</li>
</ul>



To ensure that any improvement in standards benefits blockchain as a whole, we also advocate knowledge-sharing and the creation of public goods such as research, tooling and training.



By working together to improve the standards of the security auditing industry as a whole — and thus the decentralized technology sphere — we can go a long way toward stopping the blockchain black hat hackers from breaking 2022’s record for crypto assets stolen.



And that’s one record we don’t want to see broken again.



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<div class="wp-block-post-author-biography">Hind Kurhan is a Co-Founder of Thesis Defense, a decentralized technology security auditing company whose mission is the facilitation of broad adoption of decentralized technology by improving security and audit consistency throughout the blockchain sphere.
</div>


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Blockchain needs standards

Hannah Finnerty

Get ready: Spotify Wrapped is just days away.&nbsp;



We get it, your number-one artist is likely Taylor Swift, and your top track is probably that one song you don’t know the name of that you’ve been playing on repeat since you discovered it on TikTok this summer.&nbsp;



Nothing wrong with being a Swiftie. But if you wanted to diversify a bit, good news — you have a week or two to turn that around.



Let’s take a look at five podcast episodes — all available on Spotify — from the Blockworks archives so you can show your friends you have range (and a bit of crypto know-how):



<h2 class="wp-block-heading">1. <a href="https://blockworks.co/news/ftx-empire-sam-bankman-fried-trial-recap-week-one">‘Bombshell’ testimony and ‘hard to watch’ cross-examinations: A firsthand account of the SBF trial</a></h2>



Blockworks reporter Casey Wagner appeared on the Empire podcast to discuss her time covering <a href="https://blockworks.co/tag/sbf-trial">Sam Bankman-Fried’s criminal trial</a> in New York. (Yes, your friends will say, “Oooh, they like true crime!”)



Sure, the trial has come and gone. And yes, we all know the outcome. Spoiler alert: SBF is guilty.



But Wagner offers up an in-person perspective, which is highly unusual for crypto reporting. In an industry where most news gathering is done through a computer screen, the trial was an opportunity for color and character where often there is none.



She shares tales of <a href="https://blockworks.co/news/sam-bankman-fried-trial-sleeping-juror">jurors too sleepy</a> to be bothered, the occasional collapse of Barbara Fried’s typical stony composure, and of the defense’s <a href="https://blockworks.co/news/gary-wang-ftx-not-fine">painful cross-examinations</a> and frantic binder flipping.



This interview was released after the first week or so of the trial. Much of Wagner’s conjecture holds up to the test of the time.



“It’s looking bad for Sam,” Wagner said.



It’s almost as if she had a <a href="https://blockworks.co/news/sam-bankman-fried-found-guilty">crystal ball</a>.&nbsp;



<h2 class="wp-block-heading">2. <a href="https://blockworks.co/news/solana-gets-roasted">Solana ‘roast’ reveals painful truths</a></h2>



Throw some logs on the fire, and pass the bag of Jet-puffed: It’s time for a roast. (Your friends will say, “Oooh! They like respectful debate!”)



In this episode of Lightspeed, Superteam founding member Kash Dhanda and Framework Ventures principal Brandon Potts offered up their critiques of the Solana ecosystem — no holds barred.



Dhanda picks on Solana’s civil war — an “annoying and unnecessary” conflict between the ecosystem’s diehard builder types and the Web3 NFT folks.



“There are these two groups that don’t seem to talk that much, and they actually seem to not think very highly of each other.”



(Solana is not only fighting internally: The monolithic vs. modular blockchain dispute <a href="https://blockworks.co/news/monolithic-modular-blockchain-debate">recently reared its head</a> again.)



Another pet peeve of Dhanda’s: They may be divided, but the Solana community has a shared “culture of&nbsp; entitlement.”&nbsp;



Just because you survived the bear market doesn’t mean you deserve a gold medal, he said.



<h2 class="wp-block-heading">3. <a href="https://blockworks.co/news/crypto-crackdown-got-you-down">Crypto crackdown got you down? Historian Rosenthal says we’ll ‘get it right’ — eventually</a></h2>



History is doomed to repeat itself.&nbsp;



Josh Rosenthal, historian and co-founder of The 6ixth Event, said on the Empire podcast that crypto has found itself in one of those repetitive narratives. (Your friends will say, “Oooh! They’re interested in history!”)



When limited liability companies first hit the scene in the early 1900s, Rosenthal said they were perceived as great evils that would be “the end of economics,” that would “undo the Renaissance,” and destroy “the spirit of capitalism.”



Lo and behold, the LLC would bring about the beginning of the American financial system as we know it today.



But the US government’s first reaction to the LCC? Ban it.



A <a href="https://blockworks.co/news/doj-announcing-crypto-actions">similar situation is unfolding now</a> — over a century later — with crypto.&nbsp;



If you’re interested in financial history, listen to this episode. If you’re not interested in financial history, well, you should still listen to this episode.



<h2 class="wp-block-heading">4. <a href="https://blockworks.co/news/tinder-web2-apps-monetization-web3">Reaching a billion users is ‘the wrong goal’ for crypto, says former Tinder VP</a></h2>



Forget the next billion users. We need to focus on usability, Jeff Morris Jr. said on the Lightspeed podcast. (Your friends will say, “Oooh! They like smart commentary from business execs!”)



The former vice president of product and revenue at Tinder says “the benefit of Web3 is — everything is very monetizable. It’s one of the reasons why I actually think the space is really interesting as an investor.”



But before we bring more people into the space, he argues Web3 needs to improve the quality and ease of user experience.



Morris gives Friend.tech as an example. To most crypto-native users, the social media app is fairly accessible, he said. But what would users unfamiliar with Web3 have to say about the app?&nbsp;



“We have a long way to go.”&nbsp;



<blockquote class="wp-block-quote">
<h2 class="wp-block-heading">5. <a href="https://blockworks.co/news/proving-humanness-on-internet">Proving ‘humanness’ is no easy task on the internet</a></h2>
</blockquote>



This will lead to an immediate “Oooh! They&#8217;re plugged into the AI debate.”



On this episode of Empire, Worldcoin co-founder Alex Blania (yes, that <a href="https://blockworks.co/news/worldcoin-privacy-concerns">Worldcoin</a>) talks about increasingly sophisticated artificial intelligence and the problems that arise from such developments.



Read more: <a href="https://blockworks.co/news/worldcoin-eyeballs-scan-brooklyn">Worldcoin hackable by cutting off someone’s face, draping it over your own</a>



If computers are getting better and better at behaving like humans, how do we prove that we’re human?&nbsp;



Worldcoin’s proposed solution? The iris-scanning Orb, of course.



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Resuscitate your Spotify Wrapped with these 5 podcast episodes

Katherine Ross

2023 has been a tumultuous year following the late 2022 collapse of FTX and the slew of bankruptcies that happened after the UST depeg.&nbsp;



It’s also been a year with a lot of legal action, and we mean a lot. From bankruptcies to regulatory lawsuits to class action suits, there’s been a boat load of back and forth.



But, when looking at the most notable cases this year, only a few come to mind.



Let’s start with the most obvious ones: the Securities and Exchange Commission’s cases against Binance and Coinbase.&nbsp;



The suits shocked the crypto world this summer after being filed back to back. While the companies face some of the same charges, the lawsuits are inherently different.



<h2 class="wp-block-heading">SEC v. Binance</h2>



The <a href="https://blockworks.co/news/sec-allegations-against-binance">regulator accused Binance</a> of not only offering unregistered securities, but also of commingling customer funds.&nbsp;



The lawsuit, filed back in June, also named Binance CEO Changpeng Zhao, BAM Trading and BAM Management — the latter two entities run Binance US.&nbsp;



The unregistered securities claims by the SEC target BNB, Binance’s native token, and BAM Trading’s staking program.&nbsp;



Binance filed a motion to dismiss back in September, but the SEC pushed back against the filing earlier this month.&nbsp;



The defendants made the argument that the commission had failed to “plausibly” allege securities violations and that the SEC was overstepping its regulatory reach.&nbsp;



The SEC, in its response, said that the invocation of the major questions doctrine — a Supreme Court <a href="https://www.supremecourt.gov/opinions/21pdf/20-1530_n758.pdf">ruling</a> that seeks for agencies to prove “clear congressional authorization’ for the authority it claims.”



The case, however, is ongoing.



Now, keep the overreach argument in mind for Coinbase.&nbsp;



<h2 class="wp-block-heading">SEC v. Coinbase</h2>



A mere day after the SEC targeted Binance, it unveiled another lawsuit. This time, the regulatory agency targeted Coinbase.&nbsp;



While some of the accusations in the Binance suit may have come as a shock, the Coinbase suit wasn’t too surprising. The US-based exchange had already received a Wells notice, which is the SEC’s warning before action is taken, earlier this year.&nbsp;



In fact, Coinbase had actually served the SEC with a suit prior to the SEC serving Coinbase. What goes around… it seems.&nbsp;



On June 6, the SEC announced that it was targeting Coinbase for alleged securities violations and accused it of operating as an unregistered exchange.



“But while paying lip service to its desire to comply with applicable laws, Coinbase has for years made available for trading crypto assets that are investment contracts under the Howey test and well-established principles of the federal securities laws,” <a href="https://blockworks.co/news/sec-sues-coinbase">the SEC claimed in June</a>.



<a href="https://blockworks.co/news/coinbase-binance-suits-different">One lawyer told Blockworks at the time</a> that while there were similarities between the Coinbase and Binance suits, there’s a “fundamental difference” between them. That difference? Coinbase is being accused in a “straight registration violations case.”



But let’s talk about a similarity the two have, which brings us right back to the major questions doctrine.&nbsp;



Coinbase has also <a href="https://blockworks.co/news/coinbase-sec-motion-securities">used major questions in its attempt to dismiss the suit</a>. It’s also claimed that the regulator can’t “seize power” in regulating crypto, and <a href="https://blockworks.co/news/sec-cant-seize-power">therefore doesn’t have the authority it claims to bring a case against the exchange</a>.&nbsp;



In its case against the SEC (not the SEC’s case against Coinbase, don’t get them confused!) Coinbase tried to push the SEC for clarity on crypto regulation. <a href="https://blockworks.co/news/sec-responds-coinbase-mandamus">However, the SEC pushed back against it</a>.



Similarly to the suit against Binance, this case is ongoing.



<h2 class="wp-block-heading">Legal woes of Celsius</h2>



Unlike the rest of the cases, Celsius didn’t face just one suit. Are you ready for some alphabet soup?



The Federal Trade Commission, SEC, Commodities and Futures Trading Commission all filed suits against Celsius, with a few naming ex-CEO Alex Mashinsky.&nbsp;



On the same day, the Department of Justice unsealed an indictment against Mashinsky as well.



The <a href="https://blockworks.co/news/sec-sues-celsius-former-ceo-for-market-manipulation-securities-fraud">SEC accused both the bankrupt lende</a>r and its former CEO of unregistered and “fraudulent” crypto asset sales.&nbsp;



The <a href="https://blockworks.co/news/cftc-ftc-sue-celsius">FTC accused Celsius of duping customers</a> into depositing crypto by claiming that deposits were safe. Spoiler alert: They weren’t.



It also announced a $4.7 billion settlement with Celsius — but not Mashinsky.



The CFTC accused Celsius of acting as an “unregistered commodity pool operator of the Celsius Pool by soliciting, accepting, and receiving assets for the purpose of trading commodity interests” and for defrauding investors.&nbsp;



The DOJ specifically targeted Mashinsky, and it was <a href="https://blockworks.co/news/doj-freezes-mashinsky-assets">later revealed that they also froze his assets.&nbsp;</a>



The Justice Department claims that Mashinsky “orchestrated a scheme to defraud customers of Celsius Network” alongside the former Chief Revenue Officer Roni Cohen-Pavon.



Mashinsky <a href="https://blockworks.co/news/mashinsky-files-dismissal-ftc">filed a motion to dismiss</a> the FTC’s suit against him in September.



<h2 class="wp-block-heading">New York Attorney General vs. Gemini, Genesis, DCG</h2>



Say that five times fast.&nbsp;



Back in October, the NY AG released a “sweeping lawsuit” targeting Digital Currency Group, DCG CEO Barry Silbert, ex-Genesis CEO Michael Moro, Gemini and Genesis.&nbsp;



The <a href="https://blockworks.co/news/genesis-gemini-nyag-lawsuit">suit claims that both Gemini and Genesis conspired to commit</a> two schemes with the Gemini Earn product, leading to investor losses of over $1 billion in November of last year.&nbsp;



Oh, and also that Gemini Earn falls under the definition of an investment contract.



“The Genesis Entities, DCG, Moro, and Silbert falsely assured counterparties and the public that Genesis Capital was ‘well-capitalized’ and that DCG ‘absorbed the losses’ from the Genesis Entities,” the complaint claims.&nbsp;



Through this, Gemini “falsely” claimed to the public that the Genesis Capital loan book was overcollateralized, which was not the case.



Gemini used the suit as a way to show that it — alongside Earn users — were “victims of a massive fraud and systematically ‘lied to’ by these parties about ‘Genesis’s financial condition.&#8217;” It also pushed back against being named in the suit, claiming it was just a victim and was also “defrauded.”



Gemini targeted Silbert, Genesis and DCG following the fallout of the Earn program. It filed a lawsuit against Silbert and DCG earlier this year as well.



DCG, on the other hand, claimed it cooperated with the NY AG’s investigation and was “blindsided by the filing of the complaint.”



Yes, this case is also ongoing.



<h2 class="wp-block-heading">USA v. Sam Bankman-Fried</h2>



Alright, this isn’t technically a 2023 court case since the original charges were announced back at the end of 2022, but it’s definitely one of the biggest cases to go to trial this year, so we saved the best for last.



A panel of jurors <a href="https://blockworks.co/news/sam-bankman-fried-found-guilty">found Bankman-Fried guilty</a> of all seven counts of fraud as his October trial came to a close.&nbsp;



The trial, which lasted a month, saw former FTX insiders including Bankman-Fried’s ex-girlfriend and former inner circle take the stand and testify that, at Bankman-Fried’s urging, FTX commingled customer assets prior to its November 2022 collapse.&nbsp;



There were also a number of highlights from the trial, from jurors (who would later find Bankman-Fried guilty) <a href="https://blockworks.co/news/sam-bankman-fried-trial-sleeping-juror">falling asleep</a> during testimonies, to Ellison explaining how <a href="https://blockworks.co/news/sam-bankman-fried-trial-day-6">FTX and Alameda used alleged Thai sex workers</a> in an attempt to bribe Chinese officials.



Bankman-Fried’s courtroom days aren’t over, however, as he still faces a possible 2024 trial centered on his political donations.&nbsp;



At least that indictment was filed in 2023!



Bankman-Fried’s sentence remains unknown, though he has a date set earlier next year with Judge Lewis Kaplan to decide how long Bankman-Fried will remain behind bars.



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