Bitcoin Nashville This Week: DeFi Scales, dYdX v3 'Compromised', Alkimiya Creates Market for Hedging Bitcoin Fees

We're headed to the Bitcoin Nashville conference this week and looking forward to a lot of deep discussions about building on the original blockchain

Bitcoin Events

We're headed to the Bitcoin Nashville conference this week and looking forward to a lot of deep discussions about building on the original blockchain – as well as hearing what former President Donald Trump has to say. (We understand the security will be quite tight.) I'll be moderating a panel at a side event examining how Bitcoin DeFi scales. We're aiming to get some good photos for next week's issue.

Network news

The blockchain sleuth ZachXBT posted a visual of his early efforts to trace the flow of funds after the WazirX hack. (ZackXBT/X)

ETH ETF LAUNCH: Newly approved spot Ethereum ETFs started trading on Tuesday, hauling in a net $107 million of fresh investment – including $484.1 million of outflows from the Grayscale Ethereum Trust (ETHE), and $590.9 million of inflows into vehicles launched by managers including BlackRock, Fidelity and Bitwise. While analysts have predicted a far-lower uptake for the new funds than bitcoin spot ETFs that started trading about six months ago, Bloomberg analyst James Seyffart described the first day of trading for the Ethereum ETFs as "very solid."

BOOTY OR BOUNTY? A $230 million exploit of the Indian crypto exchange WazirX got blockchain sleuths pointing fingers at North Korea-linked hackers, and various parties blaming each other for the security lapse. The funds were allegedly stolen from a WazirX multisignature wallet, or "multisig"– one that requires two or more private keys to execute a transaction. "Despite us taking all necessary steps to protect the customer assets, the cyber attackers appear to have possibly breached such security features, and the theft occurred," the exchange wrote in a preliminary report. WazirX identified the multisig wallet's provider as crypto custody firm Liminal in a follow-up post, hours after the initial confirmation. It later deleted the post, and Liminal said in a blog post that "there is no breach in Liminal's infrastructure, wallets and assets." The loot included shiba inu SHIBUSD tokens along with ETH, MATIC, PEPE and USDT. A gallows-humor-meets-geekdom moment arrived when blockchain records appeared to show that the exploiter had created a token called "WazirX Hacker Sends His Regards." The exchange filed a police complaint, and the matter is under investigation. But as of Friday, tokens on WazirX were trading at deep discounts to their prices on other global crypto exchanges, a sign of immense local selling pressure. Earlier this week WazirX announced that it would pay a bounty of as much as $23 million, or 10%, to the hacker in exchange for the return of the funds. On a running blog post chronicling the incident day-by-day, WazirX updated that it's now "actively contacting projects associated with the stolen tokens to seek their support in the recovery process." One poster on X responded by noting that the looter had apparently already "converted almost all of the stolen crypto to ETH," inquiring, "Don't you think it's too late?"

'COPYCAT WEBSITE' Decentralized crypto-exchange giant dYdX said Tuesday that the website for dYdX v3, an older version of its trading platform, was "compromised," and warned users against visiting dydx.exchange until further notice. "The attacker has taken over the v3 domain (dydx.exchange), and deployed a copycat website that when users connect their wallets to it, it asks them to approve via PERMIT2 transaction to steal their most valuable token," a member of dYdX's community team said in the project's Discord server. The attack did not appear to impact funds traders already have on dYdX, as only the web domain, and not the underlying smart contracts, appear to be being targeted, according to statements in dYdX's Discord server. The larger dYdX v4 venue (which last week saw $6 billion in trading volume) was said to be unaffected.

ALSO:

Ethereum-Based Protocol Alkimiya Creates Market for Hedging Bitcoin Fees

Akimiya founder and CEO Leo Zhang (Alkimiya)

Blockchain protocol Alkimiya launched, introducing a tool that allows users to hedge against volatile Bitcoin transaction fee rates.

The hardest part might be getting hardline bitcoiners – sometimes known as "maximalists" or "maxis" – to use the new protocol, since it's built atop the Ethereum blockchain. Target users for the platform, described as a "blockspace markets protocol," could include traders, mining pools and foundations.

"While we recognize that Bitcoin maxis may initially hesitate to use an Ethereum-based solution, our primary focus is on creating the most robust and efficient marketplace for trading Bitcoin transaction fees," Alkimiya founder and CEO Leo Zhang said in an email interview with CoinDesk.

There may be little doubt about the usefulness