Unchained - The Black Swan Event That Could Cause a Fork in Ethereum (Again) - Ep. 600

Episode Date: January 26, 2024

Sign up for our free newsletter here! Listen to the episode on Apple Podcasts, Spotify, Fountain, Overcast, Podcast Addict, Pocket Casts, Pandora, Castbox, Google Podcasts, Amazon Music, or on your favorite podcast platform. This week a major potential risk to Ethereum was highlighted by a bug that surfaced in Nethermind, a minority execution client. While the bug was fixed quickly, it raised the question of what would happen to the blockchain if Geth, which is used by more than two-thirds of validators and so is considered a “supermajority client,” had a bug. The situation could potentially result in a catastrophic fork of Ethereum.  Ethereum developer Lefteris Karapetsas joined Unchained to discuss the different scenarios of what could happen, the potential impact of a supermajority client issue on staking services such as Lido, why he feels the incentive system is poorly designed, and what other solutions are out there to address the lack of client diversity.  Show highlights: What a consensus issue is in Ethereum and what happened with Nethermind last weekend Why it would be a big problem if a supermajority client had a bug The potential impact on staking services such as Lido Why Lefteris feels like he is reliving the historic Ethereum DAO hack all over again Whether the largest entities running nodes will start pursuing client diversity How the data on the prevalence of specific Ethereum execution clients is not verifiable or programmatic, making it less transparent and difficult to analyze Why Lefteris believes that the incentive system is not designed to achieve client diversity Whether there are developments in the works to try to solve the lack of client diversity  Thank you to our sponsors! Popcorn Network iTrustCapital Guest  Lefteris Karapetsas, Founder of Rotkiapp Previous appearance on Unchained: Is Code Law? Should the Hacker Be Punished? The DAO Creators Disagree Links Unchained:  Most Ethereum Staking Pools Are Using Just One Execution Client, Potentially Increasing Risks to the Network The Chopping Block: Data Availability & Why It’s Important CoinDesk: Bug That Took Down 8% of Ethereum's Validators Sparks Worries About Even Bigger Outage The Defiant: Ethereum Software Client Centralization Sparks Concern Crypto.news: Nethermind rolls out urgent fix for block processing bug in Ethereum client Lukasz Rosmej’s tweet that minority client Nethermind had a consensus issue Lefteris’ tweet on a supermajority Ethereum client bug  Coinbase CEO Brian Armstrong's tweet on what he’d do in a censorship resistance request scenario Run the majority client at your own peril! by Dankrad Feist Learn more about your ad choices. Visit megaphone.fm/adchoices

But a bug of this type happens in a super majority client, which means a client that is used more than 67% of the network. I think this is how they define it. Then we have a problem. Because the way that the consensus algorithm works right now, that means that they will not just drop off the network. They will be on their own network, which will be the wrong network because it's a bug and it will, It would not be following the specification of Ethereum. But they would even finalize this network. Because with 67%, no, more than two-thirds,

you basically have the ability to, well, finalize the chain. And once this gets done, you cannot go to the other chain. Hi, everyone. Welcome to Unchained, your new high resource for all. all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto eight years ago and as a senior editor of Forbes was the first main chain meter reporter to cover cryptocurrency full-time. This is the January 26th, 2024 episode of Unchained. With I Trust Capital, you can buy and sell crypto in a tax advantage retirement account. Enjoy significant tax advantages,

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Medcan, live well for life. Visit medcan.com slash moments to get started. Today's guest is Leveras Carapetis, founder of Rocky. Welcome Lovteris. Hey, hey Laura. Nice to be here again. This week, a potential single point of failure risk to Ethereum was identified. When on Sunday, Ethereum core developer Lucas Rosmej tweeted, that minority client, another mind had a consensus issue. What does all that mean?

Yeah, so this is an interesting problem that popped up, that actually has been identified for quite a long time and has been warned against by many core developers. So a consensus issue is when a client in Ethereum for some reason just doesn't properly identify, like create something wrong in a block, in a wrong state. And then all the rest of the clients do not agree with it.

And in our case, in Nethermind, because they're the minority, they just drop out of the network for a bit. And the developers of Nethermind reacted immediately. I think it was a Sunday, right? Yeah. So, you know, like the worst time for something to happen. And it was evening in Europe. And I think Nethermind is mostly in Poland, or probably, like,

I know at least the founders are in Poland. So it was like a very bad time for the thing to happen, yet they reacted fast and they released a fix and everything was okay. Yeah, and just to clarify for people, I should have said at the beginning that I was talking about a software client. So this is the software that's trying to, you know, make sure that Ethereum, that all the nodes or all the computers running the software are in sync with each other, which is of course how the blockchain, you know, comes to consensus and is able to execute all these different transactions. So, you know, as you mentioned, this had been identified as a risk previously. But why was this something that caused so much hand-wringing amongst the Ethereum community? Yeah.

So, as you said, this was identified as a problem before. But so if a bug happens right now, like it happened on Sunday, an Ethermind on a client that holds even 50% of less than 50% of the network, I think, then it's not a big problem. They will drop off a bit, a fix will be deployed, the rest of the network will track on properly. But a bug of this type happens in a supermajority client, which means a client that is, I think, used more than 67% of the network.

I think this is how they define it. then we have a problem because the way that the consensus algorithm works right now that means that they will not just drop off the network, they will be on their own network

which will be the wrong network because it's a bug and it would not be following the specification of Ethereum but they would even finalize this network because with 67% more than 2 thirds, you basically

have the ability to finalize the chain and once this gets done, you cannot go to the other chain. You cannot say, okay, oh, let's go back, let's fix it and let's put our validators into the other chain. This can't work because

you already finalized the wrong one. So, such a scenario would be really bad because that would destroy essentially almost all of the stake of the people who are staking with the super majority client

if the protocol is followed completely to the end. So the details in the math, I don't remember exactly, as I'm no longer really actively working on the protocol itself, but what would happen is that the minority client would have

this view, which is the right view of the network, where they are all who use the minority client online, but the majority of the network who, because this is why it's called super majority client, right? It's offline.

So in the right view of the network, what would happen is that they would get hit by the penalty of being offline, those who run the super majority client. Let's say GIF right now. Let's say that the bug happens in GIF. They would slowly bleed. But this slow bleeding of ether of their stake is, they had a term quadratic something.

it would be multiplied, basically, because the more people are offline at the same time, this penalty is multiplied, and then they would essentially end up losing part of their stake slowly until the people who run only the minority client end up being the majority of the network. And if the stats are as we have it right now, that would basically mean that the supermajority client's stake is almost all of it burned in order to get the network to the state. Just to clarify for people, so the current super majority client is Geph, which is Go Ethereum. It's like a shortened nickname for that. But I look this up and like at the moment of recording, Geph accounts for 79% of the network.

So that would mean that all of those stakers, I guess, would lose their stake eventually. almost all of their stake. So as far as I understood, as much of their stake as is needed in order for the by spec network, the real network, make those who run a minority client, let's say, Nethermind, be the majority. Got it. So that the percentage change enough so that they are the majority. Wow. Yeah. And so that is actually a really ugly thing to happen.

Yeah, well, I mean, any kind of unintentional chain split, obviously, well, even some of the intentional ones can be controversial. But then, you know, obviously loss of funds. And then as you mentioned, a huge loss of confidence in Ethereum, it would probably be an existential crisis for the network. You know, not just similar to the Dow, which you're probably much more familiar with than, you know, most of the people on the entire planet. But so. let's actually just so obviously that's the worst case scenario that's what everybody is upset about but so now we've discussed when a minority client has a bug in there at less than 50% when a super majority client has a bug in there at more than 67% and then do you know can you talk about the middle scenario where there's a bug for a client that has between 50 and 67% what what occurs in that situation. Yeah, I don't remember it in the, like in a lot of detail, but it's basically neither has a majority to finalize. So you will still get a split. If I remember correctly, you will still get a split. But then there is enough time for the developers to put out a

fix. So the faster you realize it, the better. The developers of the body client can put out a fix and then the network would essentially recover. Okay. So it's really not that bad. So as long as any client has less than two-thirds of the stake, we are good. Because as long as finalization cannot happen, we are okay. They're just going to lose some of their stake and will be disruptive for the users because still there will be a chain split.

It's a bad scenario, not an Armageddon. Okay. And then the last thing that I wanted to mention is, as far as I understand, this issue wouldn't be resolved simply by having one software client. So can you explain why that is? Meaning if we didn't have multiple and there was just one, you know what I'm saying? So that there wouldn't be, yeah. Yeah, of course. I mean, if you have one client, the client's view of the network is the truth. Right, that's it. Right, but if there's a bug, then... So if you have only one client. Yeah. Right?

Well, then everybody follows the bug. That's the thing. The bug becomes the network. Yeah, and I saw, so I guess it's what in the Dankrad blog post where he outlines kind of like all the different scenarios. He said that that's not a solution because then you would actually, in that scenario, you usually just need to roll back the chain to before the bug. And obviously when that happens, again, it's the same issue where it, you know, causes a loss of confidence in Ethereum. You know, people are upset.

Like it, you know, as you know, from the Dow, which, you know, you were one of the white hack, you were. Yeah. These kind of bugs, they are, many times it would be, it could be like a really small thing in the state that just causes the consensus to not, not much. But it doesn't really matter. So I don't remember that it was really, I really. It's been quite a bit of time, but there was one of the bugs that just, you know, it wouldn't have matter if you so, so to call it enshrine it, just say, okay, let's accept it. Because nobody gets more money, nobody loses any money, nothing bad.

It's just that something went a bit unexpected, but it didn't matter to anybody. Even if it doesn't matter to anybody, in the case that we discussed with a supermajority client, it will lead to this scenario. Okay. In a moment, we'll discuss the events that happen after the nethermind bug, but first a quick word from the sponsors who make this show possible. Did you know you can buy and sell crypto with tax benefits in an individual retirement account? I trust capital makes this possible. But what does this mean? When you buy crypto outside an IRA, like on an exchange, you face taxes on gains. But in an IRA, like a Roth IRA, gains can be tax-free. I-Trust Capital also has some of the lowest fees in their industry and 24-7 accessibility.

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another mind bug was identified, there was, you know, there were a number of different responses from the community. What are some of the things that happened? It really felt like the Dow again, even though nothing happened, but they were just discussing what would happen. So the discussions range from, we don't care about this if it ever happens, no matter how distraction, how much chaos this would bring to the network, the stake of anybody. running a super majority client should be completely, as by the protocol, destroyed.

And then let the network be in a disarray for a while. Let's go through the Armageddon moment and then everybody will finally respect client diversity. So this was the one extreme. The other is like, who cares?

If such a thing ever happens, we'll just fork it out. No worries. Keep going. So these are the two extremes. which are both extremes, in my opinion. I think if such a thing happened, the middle ground would be somewhere in between, so some kind of change still that would allow faster.

Because everybody is on it, everybody puts out patches on the clients. We can't bring the network up faster, but still give a penalty to the people who are doing the wrong thing. This is per the protocol. because right now we are a very big network with so many stakeholders and to just let it all burn for something like that to me it sounds a bit too weird so these are various reactions and also a lot of hand ringing and like accusing here and accusing there for running Heath or for not not running

Heath and like yeah a lot of drama yeah and you know at least some of the you know bigger entities that are running notes, they said that they, you know, intend to at least consider running some of the other clients. So, for instance, Coinbase said that Geth was the only client that met their technical requirements in the past, but they're going to be doing another technical assessment. And they said, quote, that they do that with the goal of adding another execution client to our infrastructure. So potentially we could see the balance of the different clients change somewhat soon. So, you know, there are other systems that have successfully, you know, created more client diversity. So for instance, amongst staking, we've seen that

there's diversity in, I think it's called the consensus clients. So these are, I believe, the execution clients, and then there's consensus clients. So how was diversity and consensus clients? So how was diversity and consensus clients achieved or, you know, what lessons do you think from that could be applied to create more diversity in execution clients? Yeah. So, Ethereum notes, since the Mertz is basically two clients, the execution client and the consensus one. So we had the problem of the consensus layer having mostly, I think, Prism. And then there is also a lighthouse. And Teku, and probably Nimbus, I think. So these are the other ones.

But Prismu was the very top. I guess the same thing that you saw happen right now, like community calling out people, is what happened with the consensus client. But it's also easier to monitor, if I'm not totally mistaken here, to monitor consensus client usage because of the packets that are being sent around

for the consensus. So because of the work that consensus client is doing, it's easier to see who is using what, how much percentage of the network. So it was probably easier to confirm that we were wrong to change. Also, lighthouse, which is

now the second most used one, in the beginning was very low. It's actually an amazing client. So I also have running a small staker, and I always used lighthouse from the very beginning because it's just very performant very easy to use.

So I would say probably having good clients not having one bad client no sorry, one really good client and then like three or four more bad and to just use them for diversity. Not saying that this is the case with execution layer. So a combination of those

like having good clients so to not make someone running the minority client actually lose in attestations so have less performance for their staker or have to have a heavier machine so to cost more resources. I guess this. There is another problem.

If you compare concessions and execution, as I said, it's very difficult to judge from what they say. I'm actually, as I said, I'm not a core dev anymore, to find out who is using what client. So right now, that percentage that you are seeing if you actually click around in that website, the client diversity, whatever it is,

it says that the data is just gathered by asking the biggest-staking operators. And that's it. That's the data. So basically, it was 84 on Sunday. Now it's 79. Now it will probably drop a bit more

because one more operators said that they went completely all in on BESU. You actually sent me the tweet. Yeah, all nodes. Exactly. So that is actually really weird problem because that means that we have no program or like verifiable way to know what the network is running. We used to have something that was showing GIF as much, much less, like I think 40 something percent. And because it was an opt-in thing or I don't remember exactly how it was working, like people using an extra.

client when they were running the client and maybe from the peers that they connected, just try to ask them, who are you, who are you? And they made a blog post why this is not accurate, so they just completely dropped it. Right now, I'm not even sure if that is accurate either, because, okay, sure, the biggest part of the validators in the network are probably, yes, indeed, like Coinbase and Lido and all that. But just asking them has problems in the sense that both you are completely disregarding any solo stakers or any big solo stakers. and that you're completely trusting them. The counter argument there is that they have absolutely no incentive to lie,

but I'm not so sure about that the more I think about it. I thought about it a lot since Sunday, and I think that, yeah, actually, maybe they do because they're businesses. And as any business, you advertise your business and you want to get clients and what are your clients, people who state with you. You get the percentage, right? This is a professional stating. So where would I stake my eth?

if I don't want to run my own client with someone who actually runs a minority client. So if you say that, you know, you run a minority client and you advertise it to everybody, then it will help you. And there is no way to verify that you're actually saying the truth. So if we assume, which is not true, like for Nethermind, I have actually also used Nethermind, that Nethermind, let's say, or there is some kind of minority client that is slower and much more resource intensive. But you advertise that you use it to get users,

but you end up using the most performant one, which is also the super majority, let's say. Then you do have an incentive to actually lie. Right. Yeah, I get that. But going back to kind of how you were talking about how there are these extremes and the community in terms of their reaction, I did see that somebody on Reddit posted a comment

about that scenario in which the super majority client has a bug. And they said, no matter what happens, rest assured that the majority will find a way to not lose money, just like the Dow hack and other events. In fact, it is far more likely that the minority clients will end up being screwed. In the end, it is always going to be much safer to be in the same boat as all the big players. I was curious for your reaction to that. I saw that, yeah.

Yeah, I don't think that this is right. Because I don't think that they would lose all their stake. I really think that something would happen. Because it would be too catastrophic for the network to just burn it all. But they wouldn't go unscathed. And definitely the minority clients would not be screwed. So it really is on your, as a staker, so if you're stating, it really is on your benefit to run a minority client.

Because you don't know what will happen in such a case. I think it's really, well, naive. to think that you will just get away with it. If you just run Gith and hope, I mean, Gith, like nothing wrong with Gith, right? It's just like whoever is a super majority client at the moment, if there is one, and that you will get away with it. Basically, you are risking your money and if you,

especially if you are a professional and you're staking other people's money, well, then it's, wow, that's basically, I don't know. It's not just a professional. You shouldn't be running a professional sticker if you risk other people's money like that. Right. I mean, it gets super confusing, though,

because you also did just say that it's better for them for professional stickers to advertise that they're running the minority. But anyway, but I guess, yeah, you did say it's... What I was saying there is that we don't have a verifiable way. And this is what really annoys,

me about this system that exists right now. So there's a lot of problems with the system. So we have a system and I don't understand why they designed it like that. What is the idea behind this? We have a system that enshrines basically client diversity. If there is no client diversity, then we have a huge problem because as long as there is multiple clients and we get to the situation of a majority bug, then it's an Armageddon scenario.

So it's such a bad scenario that you would expect, along with creating such a rule, that you would have two things, both of which are missing, have a positive incentive for running a minority client. There is no positive incentive. There really is really no positive incentive, like get some kind of, I don't know, more staking power or some kind of way to identify them and give them a retroactive airdrop, whatever. So with the lack of a positive incentive and only having this negative incentive in the case of a black swan scenario, I don't see this design as really smart. And then the worst thing comes, okay, you want to run a staker. Let's see the stats. Who is the supermajority so that I don't run it? As I told you, there is no way to verify it.

Right now, our stats are basically just asking the biggest operators what are they running. This is it. This is what makes the decision. And right now, maybe it is indeed, probably it is indeed Gith. Maybe it's not this percentage, but probably quite close. But later, If it comes to more clients or, like, I don't know, wreath, this Rust Ethereum that is being made by a paradigm, when this gets a lot of users, then we will have another question, again, between like two or three clients.

And maybe because everybody will switch to that, because it will be very performant because it's made in Rust or whatever. This is like, okay, maybe I shouldn't have said that, but let's say that it's super performant and better and you won't. Many people try it and the specs are amazing. so we can have the same problem again, we will still have no verifiable way to actually check

what at any point is the supermajority client, if any. And one question, because I know at least for wallets that an analytics provider can kind of look at certain sort of like fingerprint type things about transactions to kind of figure out what wallet was being used, but that doesn't, that you can't do that with blocks and these execution clients? So as far as I understand,

and I'm not a client developer, so I can't really speak with confidence to this, but I have asked them, but there is no way that is not spoofable. So everything can be spoofed. The only way that they could probably make it complete identifiable is they have some closed source DRM thing on the client that runs, but that would go very much against their.

idea because this also goes not only so both problems are actually very related right what I said the positive incentives and they identify and identification of the actual percentages of the client diversity they are tied because they all both depend on how do you identify a client and don't in a non-spoofable way because especially if you put positive incentives then everybody would be like, okay, who is the minority client, who would get the most stuff, let me spoof it. Because the incentive change then.

And that's why they say that the only incentive that cannot be spoofed is, well, when you get slussed because of a super majority bug. But by then it's too late. So this is my problem with this design. So if we get to that point, it would be really bad for the

ecosystem, basically. Oh, okay. Well, it's unfortunate that we can't end on a positive note, with some change in the future that could resolve this problem, but hopefully down the way. I did hear something. I did hear that some Nethermind devs in Twitter, they said that they're working on a way to identify the clients better. Oh. So they are trying to, I mean, they identify that this is a problem. They are trying to work on this. And Peter from Gith also said draft of an idea. It was a bit complicated.

It exists in GitHub. But they would have a thing that would run the state verification in every client as a module so that you could see if what you are about to push to the network agrees with the view of every other major client that exists so that you don't end up causing this kind of bug. I just gave it a look. I'm not a client developer, so this is kind of what I understood. So if you want a positive note, it would be that these problems are identified and they're looking at them to try and, well, I mean, make things better. So that we don't have to worry about a black swan.

Okay. All right. Well, hopefully we'll have more positive news on that front at some point down the line. Well, left Harris, this has been very illuminating. Thank you for coming on Unchained. My pleasure. Don't forget. Next up is the weekly news recap.

Today, presented by Unchained contributor, Megan Christensen. Stick around for the seeking crypto after this short break. Defy just got way easier with Volcraft. Your no-code toolkit for building, deploying, and monetizing automated yield strategies in a few clicks. Forget spending months of R&D and capital when you can instantly launch your crypto fund with Valkraft on any EVM chain. From wallets and institutional service providers to a non-DIFIDGens, anyone can use ValkCraft to supercharge their crypto. Join Valkraft's referral program, unite with the community, and supercharge your crypto. Details on Valkraft.io.

Welcome to this week's Crypto Roundup. In today's recap, we'll delve into the unfolding legal challenges between the SEC and Binance, the decision to delay Ethereum ETFs, and the significant liquidation of Bitcoin seized from Silk Road activities. We're also covering the bankruptcy filing of Terraform Labs, security breaches impacting the industry, and the community support for tornado cash developers facing legal issues. Thanks for tuning into the weekly news recap. I'm Megan Christensen, a producer here at Unchained. In the ongoing case between the SEC and Binance, the largest crypto exchange, by trading volume, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia questioned the SEC's vague definition of digital assets as securities. During the court hearing,

Jackson expressed frustration emphasizing the need for the SEC to express between what constitutes a security and what does not. The SEC's stance that Binances B&B token is offered, sold, and traded as an investment contract remains a central point of contention. This case is among a series of recent and current legal challenges for the SEC, notably including its courtroom loss against Ripple last summer. In the courtroom, Jackson rigorously questioned lawyers for both Binance and the SEC, although she showed limited interest in Binance's defense regarding its initial coin offering. In related news, a U.S. judge denied Chengping Zao's request to travel to the UAE, despite the Binance co-founder offering his $4.5 billion in Binance U.S. equity as a security.

Zao pled guilty to charges related to anti-money laundering failures at Binance and agreed to step down as CEO, faces 10 to 18 months in prison. He requested permission to attend an unnamed individual's hospitalization and surgery in Abu Dhabi. The SEC has delayed its decision on Black Rock's application for a spot Ethereum ETF. This postponement, announced in a filing by SEC Assistant Secretary Sherry Haywood, prolongs the weight for the conversion of Black Rock's I shares Ethereum Trust. The SEC extended its review process because it had received no public comments yet on the proposal. This move conforms with SEC's pattern of extending deadlines for similar crypto-related applications. A final decision on the Ethereum ETF is now anticipated in May.

The recent approval of 11 spot Bitcoin ETFs had fueled optimism for an Ethereum equivalent, but the SEC chairman, Gary Gensler, emphasized that their decision on spot Bitcoin ETFs is limited to that specific asset and should not be extrapolated to Ethereum or other cryptocurrencies. In a similar vein, the SEC has also postponed its decision, on Grayscale's proposal for a spot Ethereum ETF. This additional delay was accompanied by an order to institute proceedings and seek public comment, particularly on issues related to Ethereum's proof-of-stake mechanism, and the potential for fraud and manipulation.

A report has revealed that the FTX estate of the now defunct crypto exchange FTX was responsible for approximately a billion dollars of the outflows from the Grayscale Bitcoin Trust, with many pointing to this as the reason why Bitcoin's price has come down so much recently. despite the highly anticipated launch of spot Bitcoin ETFs. In a related matter, Alameda Research, the trading firm linked with FTX, has voluntarily dismissed its lawsuit against gray-scale investments. Initiated over allegations of high fees and a ban on redemptions, this lawsuit was a point of contention in the crypto community.

The lawsuit's end aligns with the unfolding of events surrounding FTX's bankruptcy proceedings and the liquidation of its GPTC holdings. John Ray III, FTC's CEO, has criticized gray scales handling of the fund for aiming to, quote, maximize recoveries for creditors, end quote. The United States government filed a notice to dispose of over $117 million in Bitcoin, confiscated from Silk Road related activities. This move involves a sale of about 2,900 Bitcoin's linked to Ryan Ferris and Sean Bridges. Ferris, who pled guilty to money laundering in Maryland, and Bridges, a former Secret Service agent who pled guilty to theft during the Silk Road investigation,

were both ordered to forfeit their Bitcoin holdings. The sale, aimed at liquidating assets tied to these criminal cases, represents a significant action by the U.S. in managing assets obtained through legal forfeitures in the cryptocurrency domain. Terraform Labs, the entity behind the Terraluna ecosystem, has filed for Chapter 11 bankruptcy in the United States. This is a significant development given the size of the collapse and the company's notable legal challenges.

CEO, Chris Amani emphasized that the bankruptcy filing would enable Terraform Labs to maintain operational continuity while resolving pending legal issues. The documentation for the bankruptcy states that the company's assets and liabilities ranging from 100 million to 500 million, with fewer than 200 creditors involved. This move is critical for Terraform Labs, particularly in light of the SEC's ongoing lawsuit, which accuses former CEO Doquan and the company of a $40 billion fraud. The Chapter 11 filing provides Terraform Labs a structured opportunity to reorganize and address this liabilities. And this week, the SEC disclosed the cause of the social media prank that prematurely announced

its approval of the spot Bitcoin ETFs. The breach was a result of a, quote, sim swap, end quote, attack. In this cyber attack, the perpetrator hijacked the SEC's account by transferring the associated phone number to a new SIM card under their control. The SEC's investigation revealed that the account's multi-factor authentication had been disabled for six months due to access issues, a lapse that the agency has since rectified. In related news, There are two other notable security breaches. A fishing scam involving a fake coin telegraph and wallet connect air drop led to a loss of nearly $580,000. Users were deceived until linking their wallets to a fraudulent website. And Hardware Wallet Company Trezer reported a data breach affecting 66,000 users

due to unauthorized access to a support ticketing portal, potentially exposing them to fishing risks. Fortunately, no funds were lost. Tornado cash developers, Roman Storm and Alexei Pertsev have raised over $350,000 for their legal defense, with prominent backing from Edward Snowden. The Tornado Cash Service, designed to provide anonymity in crypto transactions, is at the center of U.S. allegations of money laundering and sanctions violations. Storm is under house arrest in Washington State, and Pertsov has been jailed in the Netherlands as they wait to face these charges. Pertzov's wife, Anna, spearheaded the fundraising campaign. Snowden, the former U.S. National Security agency whistleblower has publicly supported their cause, emphasizing the importance of privacy

and its distinction from criminality. This case highlights the ongoing tension between privacy in the digital age and regulatory compliance, drawing significant attention within the crypto community. As these developers confront legal challenges, the outcome may set a precedent for the treatment of privacy-focused technologies in the industry. The Avalanche Foundation, steering the $100 million $1,000 cultural catalyst program, has defined its criteria for meme coin investments. This move follows their December 23 announcement to support meme coins. The criteria encompass security, maturity, and popularity factors. Key standards include a fair token launch, resistance to snip bots, verified security,

and certain market presence indicators like a minimum of 2,000 unique holders, over $200,000 and total liquidity, and a market capitalization above a million dollars. Additionally, the top 100 holders should own less than 60% of the total supply. And now time to find bits. Suu, co-founder of Three Eros Capital, has emerged from a four-month jail stint with some surprisingly upbeat reviews of prison life. In a podcast, Zhu extolled the virtues of his time behind bars in Singapore, declaring it, quote, good for you, end quote, and even, quote, enjoyable, end quote.

His unusual endorsement of jail time included praise, for the regimented sleep schedule, the joys of simple living and the unexpected health benefits of sleeping on prison mats. Zuz's lighthearted musings went further, noting how prison life offered a chance to connect with his ancestors, and how doing push-ups became a newfound hobby. The internet reacted with a mix of amusement and skepticism, with some humorously suggesting Zou might appreciate an extended stay to further enjoy all these benefits. And that's all. Thanks so much for joining us today.

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