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How (de)centralized is crypto?
A look into the hack and security breach of the week
Build in Bear
October 10, 2022
This is Web3 Seems Legit, your weekly digest on all things crypto. Just 5 minutes of your day can make you 10x smarter about web3 ๐.
In this issue, we're exploring if decentralization is legit in web3, and more:
BNB chain suspended due to major hack. Another week, another bridge hack. This time, Binance Smart Chain falls victim to hackers and halts the chain entirely...but how can something "decentralized" be stopped?
Celsius exposes customer information. As part of their bankruptcy proceeding, the centralized crypto company was ordered by the judge to publish the full names and recent transaction of all their users.
What would 0% royalties mean for NFTs? Top Solana NFT project, DeGods is experimenting with 0% royalties and people are furious. Why does it matter so much?
BNB chain suspended due to major hack
DeFi bridges have not been having a good year. It's estimated that 69% of total funds stolen in 2022 happened on cross-chain bridges. Now another has been added to the list of victims: Binance Smart Chain.
Are you confused by the recent @samczsun thread regarding Binance Bridge hack ? I will explain this in the simplest terms possible: ๐งต๐
โ bartek.eth (@bkiepuszewski)
9:22 AM โข Oct 7, 2022
Here's the gist of it: a hacker exploited the bridge, "BSC Token Hub" and stole roughly $570 million. The Binance team quickly responded by halting the network, only allowing the hacker to move $127 million of the stolen assets off-chain.
Sounds like Binance handled it well by swiftly pausing the chain, right? Not quite...as you should know by now, web3 folks are never pleased when something is centrally controlled ๐ โโ๏ธ.
@cz_binance In essence, Binance hired 26 employees around the globe as BSC validators. It's as easy to shut down the network as it is for a CEO to send out a corporate memo email blast to all of his employees.
โ โฟTC Fiend โก (@BrianSchmidt9)
3:23 PM โข Oct 8, 2022
Here's the thing to be aware of: "decentralization" is a nice term that's thrown around a lot in web3. Though it's what the industry is striving towards, often times, projects aren't actually, truly 100% decentralized.
1/9) There is a good reason why some are surprised by the BNB rollback today
Even though BNB has always been entirely centralized & permissioned!
As BNB seems decentralized to an untrained eye
However, its 21 "validators" are chosen by a committee of 11, controlled by Binance!
โ Justin Bons (@Justin_Bons)
3:27 PM โข Oct 7, 2022
This is not to say that Binance was wrong for interfering to stop the hack, but it does go to show how decentralization can be misrepresented in web3.
Celsius exposes customer information
As if the situation with Celsius Network hasn't been messy enough already, the bankrupt crypto lending company continues to show the downside of centralization.
In their latest court filing for their bankruptcy proceedings, Celsius was ordered by the judge to publish the full name and recent transaction details of every user ๐คฆ.
Celsius published a 14,000-page document detailing every user's full name, linked to timestamp & amount of each deposit/withdrawal/liquidation
This horrific breach of privacy will lead to many robbed & killed
Anything not provably cryptographically private will become public https://
โ foobar (@0xfoobar)
11:42 PM โข Oct 6, 2022
To be fair, this information was ordered by the judge who rejected the request to redact full names. As a result, it exposed the harrowing transaction activity of some Celsius execs, but more importantly, of all their customers.
Celsius just doxxed all their users and oh by the wayโ- we found out their CEO withdrew $10 million right before bankruptcy.
โ Coffeezilla (@coffeebreak_YT)
11:33 PM โข Oct 6, 2022
As awful as it is, we can't say we're surprised. This is just another reminder of how centralized companies with KYC operate and why DeFi is needed ๐ซก.
What would 0% royalties mean for NFTs?
One of the great attributes of NFTs is the ability for artists/creators to earn royalties whenever their work is traded.
This is good because it creates an aligned incentive between the creator and holders. Creators get to earn on every sale, and holders get to fuel innovation in a project they care about.
Seems pretty legit, except some NFT projects are now trying to get rid of creator royalties.
Our next experiment.
โ DeGods (@DeGodsNFT)
7:59 AM โข Oct 9, 2022
So why does it matter if one NFT project decides to go 0% on royalties? Well DeGods is a top NFT project on Solana. If DeGods jumps, other NFT projects jump and people are upset about the implications.
DeGods already made millions off of royalties and have VC funding, which seems disingenuous to suddenly go 0% ๐ฉ
Creators are less inclined to provide continuous value ๐ฉ
More rug pulls will happen as creators run out of funds ๐ฉ
Without royalties NFTs lose 50% or more of their value proposition.
A thread ๐งต๐
โ KEMOSABEใรใ (@KEMOS4BE)
3:34 AM โข Oct 10, 2022
But is there more to the story of why DeGods went from 9.99% to 0% royalties?
It's inevitable - more and more people are trading on zero fee NFT platforms ๐คท
Creators will be challenged to create more value aside from royalties ๐คท
Lower fees increases adoption ๐คท
Okay, I've been seeing a lot of misinterpreted FUD around @DeGodsNFT 0% royalties pivot.
And I'd like to point out a few things and make some things clear. ๐
โ | Hyper | (33.3%) (@hyper_idk)
6:02 AM โข Oct 10, 2022
If you're an NFT holder, understanding both sides is important so you can make the decision yourself to invest in an NFT project, or not, based on their royalty % . Soon enough, it could become opt-in on major NFT marketplaces ๐.
Reading between the lines of @frankdegods's ominous call:
It is highly likely that @MagicEden / @opensea are implementing 0% opt-in royalties to take back market share from royalty free marketplaces like @YawwwNFT/ @the_x2y2
โ wab.eth โ (@wabdoteth)
3:28 PM โข Oct 9, 2022
In other news ๐๏ธ
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