EigenLayer TVL Surpasses $20B; New Self-Custodial Wallet Features Launch
By Robert A. Musiala Jr.
According to recent reports, the total value locked (TVL) on the Ethereum network-based EigenLayer restaking protocol recently surpassed $20 billion, making EigenLayer the second-largest decentralized finance (DeFi) protocol (second to Lido). EigenLayer’s TVL has reportedly increased from $1.4 billion to $20 billion since the beginning of 2024. EigenLayer allows users to deposit ETH and other Ethereum-based tokens to help secure third-party networks.
According to recent reports, leading Ethereum wallet provider Metamask has launched a pooled staking service that allows users to stake any amount of ETH. This enables staking at amounts below the standard 32 ETH minimum amount required to act as a validator node on the Ethereum proof-of-stake consensus mechanism. Notably, the new pooled staking service will not be available in the U.S. or the UK.
In another wallet-related development, a major U.S. cryptocurrency exchange recently launched its self-custodial “smart wallet.” According to a blog post, the new wallet application simplifies onboarding, eliminates network fees, removes recovery phrases, and provides “cross-app portability” to provide users with “a fluid and intuitive experience without sacrificing self-custody or their security.”
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Crypto Companies Announce Investments, Report Details Crypto-AI Synergies
By Isabelle Sterling
A major Web3 development company recently announced it is acquiring Toposware, its partner in zero-knowledge proof technology development. According to the press release, the two companies have partnered to build a Type 1 zero-knowledge Ethereum Virtual Machine already, which allows any EVM chain to use the Type 1 prover to become a zero-knowledge proof-based chain and connect to Ethereum. According to the Web3 development company, the acquisition will integrate the zero-knowledge teams of both companies to advance the Web3 development company’s Ethereum layer-2 network and the broader zero-knowledge community.
According to reports, the same Web3 development company is also launching a $720 million Community Treasury to back blockchain projects over the next 10 years, focusing on those in the company’s Ethereum layer-2 network and Ethereum ecosystems. According to a recent news article, 35 million MATIC tokens (worth roughly $25 million today) will be allocated in the first round of the Community Grants Program, with the plan to distribute 100 million MATIC tokens annually. To receive a grant, projects reportedly must be built on or willing to migrate to company’s Ethereum layer-2 network and also demonstrate long term viability.
According to reports, the venture capital arm of Tether, a leading stablecoin provider, is planning to invest $1 billion over the next 12 months in technologies including artificial intelligence (AI), biotech, and emerging markets. According to a recent news article, the VC arm has already invested roughly $2 billion in tech over the past two years, including $1 billion in AI, which it will make available to all their portfolio companies. Tether’s VC spending is reportedly focused on disintermediation with traditional finance and decreasing reliance on big tech companies.
A senior research analyst at Bitwise recently published a report predicting the synergy between AI and crypto could contribute up to $20 trillion to the global gross domestic product by 2030. Among other things, the report highlights a $1.6 billion bid by an AI cloud provider to acquire a bitcoin miner as an example of the synergy. The report goes on to cite the bitcoin miner’s $3.5 billion deal to host AI services over the next 12 years as an example of partnerships spurring mutual growth.
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DOJ and NY AG Target NFT Fraud, Unlicensed Money Transmission, Crypto Fraud
By Robert A. Musiala Jr.
The U.S. Department of Justice (DOJ) recently announced charges against three UK nationals for conspiracy to commit fraud and money laundering related to “the defendants’ scheme to defraud victims into purchasing digital artwork known as the ‘Evolved Apes’ collection of non-fungible tokens (‘NFTs’).” According to a DOJ press release, the defendants “executed a type of scam commonly known as a ‘rug pull,’ where developers advertise a digital project, collect funds from purchasers, then abandon the project and keep the funds.” The defendants’ scheme consisted of “an NFT project called ‘Evolved Apes’ that involved the marketing of digital images of cartoon apes” and promises to use the funds raised from NFT sales to develop a video game that would increase the value of the NFTs. According to the press release, “[A]fter selling the NFTs and collecting large sums from purchasers … they quickly shut down the Project’s website and kept the funds … then laundered the misappropriated funds through multiple cryptocurrency transactions to their own personal accounts.”
Another recent DOJ press release announced an indictment charging a man in Connecticut with operating an unlicensed money-transmitting business. The defendant allegedly used two companies he controlled to open bank accounts and a cryptocurrency exchange account “to operate a business through which he exchanged customers’ cash, checks, and money orders for cryptocurrency, charging a fee for the service.” According to the DOJ press release, the defendant “exchanged more than $1 million in U.S. currency for cryptocurrency on behalf of customers throughout the U.S.” and “knew that some of the funds involved in his illegal business were derived from fraud schemes.”
A third recent enforcement action was announced by New York State Attorney General Letitia James. According to a press release, the New York attorney general has brought an enforcement action against crypto trading companies NovaTechFx and AWS Mining Pty Ltd. “for engaging in illegal pyramid schemes that defrauded hundreds of thousands of investors, including over 11,000 New Yorkers, of over a billion dollars’ worth of cryptocurrency.” Among other things, the action “seeks to ban AWS Mining, NovaTech, and its founders from doing business in New York and to secure disgorgement and damages.”
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FBI and FTC Warn of Cryptocurrency Scams
By Christopher Lamb
Recently, the Federal Bureau of Investigation (FBI) issued a public service announcement (PSA) warning victims of a new scam involving fake jobs that allows work from home “typically involving a relatively simple task, such as rating restaurants or ‘optimizing’ a service by repeatedly clicking a button.” The PSA informs that the scammers “pose as a legitimate business” and will “design the fake job to have a confusing compensation structure that requires victims to make cryptocurrency payments in order to earn more money or ‘unlock’ work.” After making the cryptocurrency payments the victims lose access to their funds.
The Federal Trade Commission (FTC) has recently issued a Consumer Alert highlighting the dangers of romance scammers. The alert warns that “[n]o matter what they say, if someone you meet online says they want to help you invest in cryptocurrency, it’s an investment scam.” Some of the warning signs of cryptocurrency scams, according to the alert, are when scammers (1) promise big profits, (2) promise no risk, (3) offer to help [people] learn to invest, and (4) steer them toward gift cards or other instantaneous payment systems.
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DeFi Protocol Hacked for $20M; New Data Published on Crypto Crime Losses
By Robert A. Musiala Jr.
According to recent reports, the DeFi UwU protocol has been hacked for approximately $20 million. The attacker reportedly drained $20 million from the UwU smart contracts through three transactions executed in six minutes. The funds used to initiate the attack were reportedly sourced from Tornado Cash.
Multiple recent reports provided new data on cryptocurrency hacks. Merkle Science published its 2024 Crypto HackHub Report, which, among other things, found that in the first quarter of 2024, hackers stole digital assets valued at $542.7 million, representing a 42 percent increase compared to the same period in 2023. The report notes that DeFi continues to be the top target for hackers, with smart contracts and protocols on Ethereum and Binance Smart Chain suffering the most exploits. According to the report, the North Korean Lazarus Group netted more than $359 million in 2023 through attacks on Atomic Wallet, CoinEx, Alphapo, Stake.com, and CoinsPaid.
A report published by Crystal Intelligence “covers data on all known crypto hacks and scams from the first on June 19, 2011, until March 6, 2024.” Among its many findings, the report finds that nearly $19 billion worth of digital assets have been lost to exploits in the past 13 years. The $19 billion in losses reportedly consist of “just over $6B in security system breaches, just under $5B in DeFi hacks, and almost $8B in fraud.”
A third recent report, published by blockchain analytics firm Elliptic, addresses AI-enabled crime in the cryptoasset ecosystem. The report identifies and analyzes five emerging typologies of AI-enabled crypto crime: (1) generative AI for deception in crypto scams; (2) creating “AI-related” scams, tokens, or market manipulation schemes; (3) using large language models to facilitate cyberattacks; (4) deploying crypto scams and disinformation at scale; and (5) enhancing illicit markets.
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