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News Overview 8/2: Nomad, Craig Wright, USA, Ethereum, CryptoPunks

There was another token bridge hack! This time losses are over $200 million. Bitcoin SV frontman Craig Wright is in the headlines due to a lawsuit. Important economic data came out from the United States. The Merge hard fork is approaching. Soon it will be possible to get a jewel made by Tiffany with CryptoPunks NFT.

The Nomad token bridge hack

Let’s start by reporting on a large-scale hack in the DeFi industry. Between Monday and Tuesday night there was a whopping $200 million hack on the Nomad token bridge.

A token bridge is a bridge between two different blockchains. Ethereum is often on one end, but in Nomad’s case, the bridge also enables token transfers between several other blockchains.

There have been massive hacks on token bridges in 2022: Horizon $100 million, Wormhole $300 million, and Ronin $600 million. And let’s not forget the $600 million hack of the Poly Network in autumn 2021, which at least had a happy ending.

Twitter handle samczsun summarizes last night’s events in the thread below.

The team that built the Nomad bridge changed certain parameters in the smart contract during a routine update without realizing the implications. After the error, hackers were able to reprocess previously sent transactions by changing the recipient’s address.

If someone had previously transferred for example 10 ETH across the bridge, that transaction could be copy-pasted to be processed again with a new receiving address. This operation was repeated numerous times until the funds on the bridge were drained.

What makes the hacking peculiar is that the Nomad bridge was apparently also cleared by a number of outsiders when word of the vulnerability spread on Discord.

Why are token bridges in general so vulnerable? DeFi specialist Tuomas Pigg explains:

Token bridges usually store large amounts of money, which makes them very attractive targets. Token bridges also tend to be quite centralized, lightly audited and only lightly monitored. Put all these pieces together and the result is repeatedly stolen funds.

The Nomad bridge was in fact marketed as a safe alternative to competitors. “A security-first cross-chain protocol”. The development team also received $22 million in development funding this spring.

Nomad is unlikely to be the last $100+ million hack this year, unfortunately.

Craig Wright featured in lawsuits

Craig Wright is one of the most controversial figures in the world of cryptocurrencies. He is the front figure of the Bitcoin SV cryptocurrency. BSV was born in November 2018 as a hard fork of Bitcoin Cash. However, Craig Wright is best known for claiming to be Satoshi Nakamoto.

Wright has been in the spotlight in recent years due to various lawsuits. This week is no exception. Yesterday saw the verdict in the Craig Wright vs Peter McCormack case.

Peter McCormack is the founder of the popular What Bitcoin Did podcast. McCormack made multiple remarks on Twitter in 2019 accusing Wright of being a fraud, in relation to Wright’s claim that he was Satoshi Nakamoto. McCormack repeated these comments numerous times on social media. Wright sued McCormack for this.

The verdict announced yesterday was quite extraordinary. McCormack was found guilty but ordered to pay one pound in compensation. The tweet below is a screenshot of the summary page. The judge was apparently not satisfied with the evidence offered by Wright (paragraph d).

What is noteworthy in this case is that McCormack gave up the so-called defense of truth at the beginning. In other words, the question of whether Craig Wright is Satoshi Nakamoto wasn’t addressed in the trial. The case was only about the damages suffered by Wright.

Apparently, the case is not yet fully finalized. Based on the discussions on social media, the parties have very different views on who will have to pay the legal costs and suffer the financial loss of the case. This will be decided later.

McCormack was satisfied with the court’s decision. He refrained from commenting further on the case as the process is still ongoing. Wright’s law firm Ontier and his backer, billionaire Calvin Ayre, declared the result a victory for Craig Wright.

A similar trial will also take place in Norway in September. The other party will be Hodlonaut, who, like McCormack, blasphemed Wright on Twitter in 2019. Time will tell what relevance yesterday’s outcome has to this case.

Important economic data out of the US

Last week was a really important now when it comes to US economic data. Global tech giants like Apple and Amazon reported Q2 results, the Fed held a meeting and the country’s Q2 GDP figure was released.

All this data has a major impact on stock markets, especially technology stocks. Since cryptocurrencies go hand in hand with the Nasdaq, the topic is worth addressing.

Let’s start with the Fed’s decision to raise the interest rate by 0.75 percentage points. Why did the aggressive raise send markets flying on Wednesday? The backdrop was commented by Governor Jerome Powell that the Fed is not on autopilot and will make decisions only based on data.

As US economic data continues to deteriorate, investors came to a clear conclusion: the Fed cannot tighten for much longer. Currently, rate hikes are expected to end after 2022. Once that point is reached, we can probably move towards a new bull market.

US GDP was also negative (-0.9%), which means that the US economy is technically in recession. Traditionally, the definition of a recession has been two negative quarters in a row. Recent weeks have seen some interesting political theatre as the US leadership has denied the existence of a recession and tried to change its definition.

But the fact is that the economic data look weaker and weaker. The housing and labor markets are starting to take a turn for the worse. Logically, this is bad for equities. However, we live in a central bank-led economy where bad news is good news.

The more the US economy starts to worsen, the more the Federal Reserve will have to support it. This even means lowering interest rates and triggering the famous dollar sprint. That, in turn, is good for equities and, by extension, for cryptocurrencies.

Ethereum’s last test before The Merge

Ethereum’s The Merge update is guaranteed to be the biggest topic in the cryptocurrency world in late 2022. Important information regarding The Merge has been published last week.

The Merge is the biggest update in Ethereum’s history and moves the smart contract platform from Proof of Work to the Proof of Stake consensus. In other words, the ongoing mining will come to an end. The Merge will also have a massive positive impact on Ethereum’s inflation, among other things. Read more from our in-depth guide.

We last reported on this two weeks ago. Back then, The Merge was dated for the end of September, just over a month away. Last week, another important date was set.

The Merge update will run on the Goerli and Prater test networks from the 6th of August.  The two test networks will merge into Goerli. This will be the last test before the Ethereum MainNet update!

We also received information that the tenth shadow fork has been successfully completed. Shadow forks are smaller-scale tests that update individual parts of the network rather than the whole network.

One of the expected effects of The Merge is an increase in institutional interest. This is for two reasons. Many institutions are guided by ESG, a sustainable investment principle that does not look favorably on the power consumption of mining. Ethereum will become ESG-compliant after The Merge.

Its Proof of Stake blockchain has been running since December 2020 under the name Beacon Chain. Institutions love staking, but many are waiting for The Merge to make a successful run. In this context, the following news was received yesterday. Coinbase will start offering US institutions the possibility of Ethereum staking.

We are sure to see more news like this at the end of 2022.

Tiffany & Co launches NFT collection for CryptoPunks

Finally, news from the NFT world. This time the digital and physical worlds are coming together!

CryptoPunks is, along with Bored Apes, one of the most popular NFT collections in the world. They are pixel graphics images of the faces of various characters. The punks have been traded recently at prices of around 50-100 ETH/each. At today’s price, that means around $75,000-150,000 per NFT.

Tiffany & Co is a US publicly traded company known for its expensive jewelry. Its latest experiment connects physical world jewelry to the CryptoPunks NFT collection. Check out the video below.

Tiffany will launch a unique NFT collection called NFTiff. The point of the collection is that every owner of a Tiffany NFT is entitled to a piece of jewelry created by the company. However, this will only work if you also own a CryptoPunks NFT.

The floor price of the NFTiff collection is 30 ETH, which is more than $45,000 at today’s exchange rate. In total, only 250 of these NFTs, which can be converted into jewelry, will be released. It is likely that they will all be sold within a few minutes. The actual piece of jewelry measures about 3 cm long and 2-3 cm wide. It contains gold and other precious stones.

The news has already had a significant impact on the popularity of the CryptoPunks collection; their trading volume increased by 248% the day after the news broke.