Block 1: Essential news
- Sam Bankman-Fried trial continues
Sam Bankman-Fried (SBF), ex-CEO of FTX, is currently on trial, accused of orchestrating fraudulent schemes on the FTX platform. Three key witnesses (Gary Wang, FTX co-founder, Caroline Ellison, his ex-partner and ex-CEO of Alameda Research, and Nishad Singh, FTX's ex-CTO) have provided damning testimony against him, making it difficult for his lawyers, who have seemed hesitant and limited in their cross-examinations. The lawyers feel they are hamstrung, unable to broach subjects that would show SBF in a more positive light, notably the possible reimbursement of customers, or Sam Bankman-Fried's charitable acts. One decision is still pending: whether or not to call the former FTX boss as a witness, which could extend the trial by another week.
- France: a law to regulate NFTs
The SREN bill, including the Jonum law, has passed its first reading in the French National Assembly. This law aims to regulate blockchain-based digital gambling, such as non-fungible tokens (NFTs). It imposes rules such as age verification of users to prevent gambling risks among minors and limit the promotion of such games by influencers to an underage audience. It also includes measures to combat money laundering and the financing of terrorism. The law will be applied on an experimental basis for three years, and a report on its impact will be presented to Parliament within 18 months.
- ECB: preparatory phase for the digital euro begins
The European Central Bank (ECB) has announced that the digital euro project has entered the preparatory phase, which will begin on November 1 and last for two years. During this phase, a set of rules will be drafted and technologies and infrastructures selected for the future central bank digital currency (CBDN). The ECB has clarified that the launch of this phase does not guarantee the issuance of the digital euro, a decision which will only be taken once the European Union's legislative process has been completed. The digital euro is not expected to appear before 2026.
- Ferrari accepts cryptocurrency payments
Ferrari has announced that it will accept cryptocurrencies as a means of payment for its vehicles, initially in the USA before expanding to Europe. Using BitPay's services, Ferrari will convert cryptocurrency payments directly into fiat currencies, minimizing the risks associated with their volatility and ensuring compliance with anti-money laundering regulations stresses the company. The brand believes that accepting cryptocurrencies will enable it to reach a new customer base. Bitcoin (BTC), ether (ETH) and USDC will be the first cryptocurrencies to be accepted by the famous company.
- Reuters (@Reuters) October 14, 2023
Block 2: Crypto Analysis of the week
In the wake of the 2008 global financial crisis, bitcoin emerged as a provocative response to the established financial authorities, embodying the desire to decentralize currency. It promised a network beyond the sole domination of governments or corporations, while cultivating the idea of a space where information and access to value flourished democratically. The Bitcoin blockchain is an illustration of this, as it operates discontinuously, with no single owner and no fixed geographical location.
But when we move away from Satoshi Nakamoto's work, reality often diverges from this vision of decentralization.
The worrying "51% attack" is at the heart of the difficulties faced by public blockchain developers. This attack occurs when a single entity obtains more than half of a network's computing power, enabling it to manipulate the blockchain, modify transactions and "double spend" digital tokens.
Recently, Coinbase revealed some alarming information: ViaBTC, a collective of cryptocurrency miners, had accumulated 51% of the computational prowess of the Zcash network, renowned for its strong privacy protections to carry out transactions. We're talking about a blockchain capitalized to the tune of $385 million at the time of writing. To mitigate potential repercussions and protect users' assets, Coinbase has implemented strict measures, temporarily limiting Zcash markets to reduce the volatility of the price of its native cryptocurrency: ZEC.
The idea of a 51% attack occurring on a well-known network is unsettling. But in reality, there are many other blockchains operating with a miner controlling 51% of the network. For Slava Karpenko of mining pool 2Miners, this situation is "quite common" among less popular cryptocurrencies.
This is partly explained by the economics of miners: the greater the computing power of a mining pool - it's a grouping of several individual miners, but managed centrally - the more blocks of transactions it orders, and the more cryptocurrency rewards it obtains. And the mining pool that obtains more rewards attracts more users, resulting in concentration.
On the other hand, market dynamics also play a key role. Falling cryptocurrency values have reduced the appeal of miners, making smaller blockchains even more vulnerable to 51% attacks.
In search of a more resilient solution, Zcash envisions an evolution away from the conventional mining paradigm. Like Ethereum's transformation from Proof-of-Work to Proof-of-Stake, Zcash aims to adopt a "Proof-of-Stake" mechanism, a transformative approach to the validation of transactions using digital currency holdings, or staking.The aim of Zcash is to adopt a "proof-of-stake" mechanism, a transformative approach to transaction validation using digital currency holdings, or staking, to validate transactions and secure the network, rather than using the computing power of miners, which is specific to the proof-of-work mechanism.
However, the move to "proof-of-stake" does not remove the spectre of centralization. For blockchains operating under proof-of-stake, such as Ethereum, you need to hold 34% of all tokens deposited on the blockchain to be able to forge transactions - a lower threshold than for proof-of-work blockchains managed by miners (51%).
This Zcash episode highlights the inherent vulnerabilities and evolving nature of blockchain networks, where rented decentralization often remains an ambitious goal. For your information, the Bitcoin network's main mining pool holds 29.2% of total computing power, according to Blockchain.com.
Block 3: Gainers & Losers
(Click to enlarge)
SBF's magic hair and other highlights of the FTX trial (Wired)
The strange case of Sam Bankman-Fried (Project Syndicate)