Last year in Review

• It all started with a massive sell-off on Curve, where was $85 million UST-to-USDC swap that had the 3-pool slightly out of imbalance.
• To put the Curve pool back into balance 50,000 $ETH was sold, and another 20,000 $ETH was sent to Binance.
• Fast-spreading Twitter rumors caused that $2 billion were withdrawn from Anchor and peg was moving between 0.987-0.995. The first peg defense was successful, but peg never fully recovered.
   
• 4 factors that were in place to make sure that the attackers would succeed:
  • ​The attackers borrowed 100,000 $BTC (from Gemini)
  • The attackers make a $1B $UST deal OTC
  • LFG (Luna Foundation Guard) is buying $BTC in March and April as a defense mechanism to protect the peg
  • The announcement of the switch from the 3-pool to the 4-pool

• LFG removed $150M UST from the 3-pool on Curve in preparations for the new 4-pool. The attacker uses $350M UST from OTC trade to drain the 3-pool. Peg has drifted into the 0-97-0.98 range
   
• ​The rumors were spreading quickly and Anchor deposits went down by $10M per minute.
   
• People were scared. The stock market was down, Bitcoin was down as well. Pure disaster. But that was far from all. The attackers have had $650M $UST left that they’re starting to sell on Binance.
   
• LFG steps in and sells $BTC to buy $UST to try to restore the peg. $BTC price goes down because of high sell pressure and the attacker was short-selling Bitcoin.
   
• The death spiral is starting to get momentum. The death spiral effect caused the constant burning of $UST and the issuance of new $LUNA into circullation.
   
• Traders start to short $LUNA which further tanks the $LUNA-price, and also shorting $UST (this is possible on FTX).
   
• Then centralized exchanges started to ban $UST withdrawals, and now the panic is in full-mode.
   
• $BTC-price goes lower because people now are waiting for LFG to sell-off more $BTC
   
• Eventually LFG understands that this is a race they can’t win and lets the peg bleed. 

• Nansen´s report reveals that Terra Crash was not caused by a single party hostile
  .
• The report said that the attack was carried out by a group of seven well-funded wallets within the Terra ecosystem.
   
• The report also concluded that the UST de-pegging was not carried out by hackers or attackers.
  
  
   
• The seven wallets initially started withdrawing UST liquidity from Anchor
   
•  Then, they started to move the liquidity to Ethereum via Wormhole bridge and were later swapped for other stablecoins on Curve’s liquidity pools
   
• Finally, arbitrage opportunities were created due to inefficiencies between Curve and several exchanges which led to the de-pegging of TerraUSD.

• Twitter user @FreddieRaynolds reported back on 25 November 2021 about how a wealthy attacker could not only break @terra_money but profit heavily doing it with a Soros style Black Wednesday attack. Here is a short summary of his observations:

Chain Reaction in 2022

• THREE ARROWS CAPITAL

• VOYAGER DIGITAL

• CELSIUS NETWORK

• FTX

• BlockFI

• Core SCientific

• Genesis Global Capital
  
  
  Great Source on Scams in Crypto:

https://www.youtube.com/@Coffeezilla

Text

https://blockworks.co/news/terraform-labs-do-kwon-sec-lawsuit

Text

https://blockworks.co/news/ftx-meltdown-timeline

Text

Text

Text

https://blockworks.co/news/genesis-sues-gemini-legal-battle

Text

https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked

Text

Text

Otázky?

Market Overview
- Bitcoin

Market Overview
- Ethereum

ETH Deposits and Withdrawals

ETH Validators Distribution

Restaking enables staked ETH to be used as cryptoeconomic security for protocols other than Ethereum, in exchange for protocol fees and rewards.

Restaking is available for both natively staked ETH and liquid staked tokens like stETH, rETH, cbETH, and LsETH. 

Otázky?

Market Overview
- DeFi

DeFi vs. TradFi

Advantages

• Completely Transparent

  • Blockchain

  • Open-Source 

• Eliminates Middlemen

• Trust-minimizing

• Open and permissionless

• Composable

• Allows unprecedented automatization

  • algorithmic finance

  • programmable money

• Allows things that have not been possible before

  • Stablecoin with no counterparty risk

  • Flash loans

Risks

• Smart Contract Risk
  • Buggy code --> loss of $ 
• Design flaws
  • Within a dapp
  • When interacting with other dapps
  • Unintended Consequences
• Legal risks
  • Who is held accountable?
  • Accessing Dapps via Interface vs. Raw contract
  • Fitting into existing legal framework vs. rethinking the legacy frameworks

• MetaMask, DeFi’s most popular non-custodial wallet, boasts over 30 million users.
   
• Unique DeFi users have risen by 40% in 2022. Despite market conditions, DeFi users have gone from 4.7 million at the start of 2022 to more than 6.5 million.
   

• Uniswap, Lido, and OpenSea (the three largest Ethereum-based apps) now generate more monthly fees, on a combined basis, larger  than the entire Ethereum L1
   

• Real-world assets account for 57% of MakerDAO’s total protocol revenue, up from less than 10% in July

• DeFi TVL dropped by 76% throughout 2022.

• DeFi is expected to expand with a CAGR (Compound Annual Growth Rate) of 42.5% from 2022 to 2030.

• DeFi’s TVL has increased by 6,900% since 2020.

• DeFi is expected to gross $231 billion in revenue in 2030.

• Decentralized exchanges witnessed more than $850 billion in trading volume through 2022 from more than 5.6 million unique wallet addresses.

SUMMARY

●5M active daily users - 40x growth in the last 2 years
 

●100M users have self-hosted wallets
 

●TVL  5X growth in the last 2 years, despite the market meltdown
 

●Expected to 10X in the next 4 years, 20X in the next 10 years
 

●Partnerships like Paypal and Metamask will just further foster the adoption
 

●MiCA will “normalize” crypto assets from late 2024 and include them into the traditional financial services

https://defillama.com/

Data Source

Ethereum

Optimism

Polygon

Arbitrum

Tron

Terra Today

Solana

Solana

Solana lost the most TVL throughout 2022: Solana’s ecosystem lost 96% of its TVL in dollar terms in 2022. It started the year with $6.68 billion in its ecosystem and ended with $290 million.

The collapse of Alameda Research/FTX played a significant role in the collapse of the ecosystem due to how closely tied Sam Bankman-Fried was to it.

• Tax/ Legal Treatment of Stocks vs Crypto stocks?
   
• Code & Design Security
   
• Is it really immutable?
   
• Responsibility Using DeFi via UI vs. Raw transactions ––> no signed disclaimer ––> different legal implications?
   
• KYC / AML ?
   
• Real-World Assets as Crypto Loan Collateral
   
• MiCA - NFT and DeFi Out of Scope

Challenges in DeFi 

Tornado Cash

Key DeFi Protocols

Top DeFi Protocols

Uniswap is a fully decentralized on-chain protocol for token exchange on Ethereum that uses liquidity pools (AMM) instead of order books. Anyone can quickly swap between ETH and any ERC20 token or earn fees by supplying any amount of liquidity. And anyone can create a market (i.e., liquidity pool) by supplying an equal value of ETH and an ERC20 token.

Uniswap allows only one market per ERC20 token. The market creator sets the exchange rate, which shifts through trading due to Uniswap’s “constant product market maker” mechanism. When trading reduces one side of the pair’s liquidity relative to the other, the price changes. This creates arbitrage opportunities, encouraging more trading.

Uniswap

Uniswap II.

Dai - How

• First, ETH is turned into “wrapped ETH” (WETH), which is simply an ERC20 wrapping around ETH. This “tokenizes” ETH so it can be used like any other ERC20 token.
   
• Next, WETH is turned into “pooled ETH” (PETH), which means it joins a large pool of Ethereum that is the collateral for all Dai created.
   
• Once you have PETH, you can create a “collateralized debt position” (CDP), which locks up your PETH and allows you to draw Dai against your collateral, which is PETH.As you draw out Dai, the ratio of debt in the CDP increases. There is a debt limit that sets a maximum amount of Dai you can draw against your CDP. Once you have Dai, you can spend or trade it freely like any other ERC20 token.

Dai - Why

• You need a loan, and have an asset (ETH) to use as collateral for your loan
   
• You believe ETH is going up in value. You can use your CDP to buy ETH on margin — you lock up your ETH in a CDP, draw Dai against it, use the Dai to buy more ETH on an exchange, and then use that ETH to further increase the size of your CDP.--> without any third-party or centralized authority
   
• The demand for Dai drives the price above $1 USD. When this occurs, you can create Dai then immediately sell it on an exchange for greater than $1 USD. This is essentially free money, and is one of the mechanisms the Maker system uses to keep Dai pegged to $1 USD. Dai being worth over $1 USD encourages more Dai to be created.

Dai - Peg Mechanism

• If Dai < $1 USD, CDP owners can pay down their debt at a cheaper price!
  • fe. CDP with $1000 in ETH --> draw out 500 Dai to close the position --> pay back 500 Dai (paying debt destroys Dai).
     
• If Dai < $1 USD, then buy cheaper DAI (fe 0.99 USD) --> pay off debt with a 1% discount == free money — $500 loan (500 Dai) --> 500 Dai for $495 (0.99 * 500 = 495, a 1% discount)
• --> demand for Dai increases its price, until it approaches $1 USD.
  If Dai stays below $1, CDP owners continue to pay down debt and remove Dai from the system.
   
• --> When Dai goes above $1 USD, Dai is created to feed the demand. It is this push and pull, creation and destruction, supply and demand which ensures that Dai always matches the $1 USD peg.

Dai - Taking a Loan

1. Deposit ETH to Metamask

2. Wrap ETH --> WETH (via Dai.makerdao.com)

3.Exchange it for PETH (pool eth), used for collateral

4. Create CDP (the loan)

5. Lock your PETH collateral

6. Mint new DAI (max. 60% of collateral)

7. Exchange DAI for ETH

8. Send ETH to any exchange and get EUR, BTC etc.

Dai - Repaing a loan

Dai - Repaing a loan

Dai - Repaing a loan

1. Get some ETH

2. Exchange it for DAI (which you owe) and MKR (for governance fee) on Oasis DEX

3. Return DAI to the smart contract and pay the fee in MKR

4. You cancel CDP smart contract

5. Unlock your PETH

6. Exchange PETH for WETH

7. Unwrap WETH --> ETH

8. You have your ETH back

Otázky?

Market Overview
Stablecoins

Stable Coins 

Stablecoins Market 

https://etherscan.io/token/0x6c3ea9036406852006290770bedfcaba0e23a0e8

Etherscan Data

Synthetic Stocks

Other interesting Trends

1. https://delphidigital.io/

2. https://messari.io/

Key Data Sources for DeFi

3. https://defillama.com/

ZkEVMS

Type 1

Fully Ethereum equivalent

do not change any part of the Ethereum system

Type 2

Fully EVM equivalent

except for gas

Gas Costs Inereased for some specific operations
may break some tooling

Differ in data structure and state trees

Type 3

Almost EVM equivalent

few sacrifices to remove features that are difficult to implement in a zkEVM system

Type 4

High-level language equivalent

Contracts written in Solidity/Vyper and compiled in another language used in the zkEVM system.

NFTs & Web3

What is the role of NFTs in all this?

Text

Non-fungible tokens

Bitcoin ordinals were launched in February and gained momentum in Q2, generating over $400 million in trading volume in May with a total sale count of 832,648. However, the hype seems to have subsided, with monthly volumes shrinking to less than $5 million as of mid August 2023.

Friend.tech, an innovative social application, recently launched on Base, Coinbase's new Layer-2 solution. Friend.tech enables users to purchase shares of Twitter influencers, granting them exclusive access to private group chats with these social media personalities

Metaverse

Metaverse

In the fourth quarter of 2020 and first quarter of 2021, the gaming industry had two of its largest-ever initial public offerings (IPOs) in Unity Technologies and Roblox Corporation, both of which wrapped their corporate histories and ambitions in Metaverse-related narratives.

Metaverse II.

Start in the 1970s with text-based virtual worlds known as Multi-User Dungeons. MUDs were effectively a software-based version of the role-playing game Dungeons & Dragons.

Using text-based commands that resembled human languages, players could interact with one another, explore a fictional world populated by non-playable characters and monsters, attain power-ups and knowledge, and eventually retrieve a magical chalice, defeat an evil wizard, or rescue a princess

Metaverse III.

Great leap came in 1986 with the release of the Commodore 64 online game Habitat, which was published by Lucasfilm, the production company founded by Star Wars creator George Lucas.

Habitat was described as “a multi-participant online virtual environment” and, in a reference to Gibson’s novel Neuromancer, “a cyberspace.”

“Citizens” of Habitat were in charge of the laws and expectations of their virtual world, and had to barter with each other for necessary resources and avoid being robbed or killed for their wares. This challenge led to periods of chaos, after which new rules, regulations, and authorities were established by the player community to maintain order

Metaverse IV.

The 1990s saw no major “proto-Metaverse” games, but advances continued. That decade, millions of consumers took part in the first isometric 3D (also known as 2.5D) virtual worlds, which gave the illusion of three-dimensional space, but only allowed users to move across two axes.

Not long after, full 3D virtual worlds emerged. A number of games, such as 1994’s Web World and 1995’s Activeworlds, also empowered users to collaboratively build a visible virtual space in real time, rather than through asynchronous commands and votes

ELECTRONIC MONEY IN THE 90s and 2000s

Metaverse V.

2007 - stock exchange was launched in Second Life
with the aim of helping Second Life–based companies raise capital using the platform’s Linden Dollars currency.

Throughout the 2010s, bands of users collaborated in Minecraft to build cities as large as Los Angeles—roughly 500 square miles.

One video game streamer, Aztter, constructed a stunning cyberpunk city out of an estimated 370 million Minecraft blocks, having worked an average of 16 hours per day for a year.

Metaverse VI.

Fortnite’s social experiences -- its famous 2020 concert with Travis Scott. In that case, “players” converged on a much smaller portion of the map.

The title’s standard cap of 100 players per instance was halved, while many items and actions, such as building, are disabled, thereby further reducing the workload. While Epic Games can rightly say that more than 12.5 million people attended this live concert, these attendees were split across 250,000 separate copies (meaning, they watched 250,000 versions of Scott) of the event that didn’t even start at the same time. 

EVE Online stands apart from games like World of Warcraft and Fortnite because all users are part of one singular and persistent realm.

Metaverse VII.

Over the course of an average day in 2021, over 350 million people participated in a battle royale game—just one genre of high CCU game—and billions were able to do so. In 2016, only 350 million people in the world owned the equipment needed to render a rich 3D virtual world. At its peak in 2021, Roblox had 225 million monthly users

Roblox and Minecraft are among the most popular games in the world, their reach is modest when considered in the broadest terms. These two supposed titans have 30–55 million daily active users, a fraction of the global internet population of 4.5–5 billion. In effect, they are still at the ICQ stage of virtual words

Metaverse VIII.

Concurrency is one of the foundational problems for the Metaverse, and for a fundamental reason: it leads to exponential increases in how much data must be processed, rendered, and synchronized per unit of time.

Microsfot Flight Simulator -the most realistic and expansive consumer-grade simulation in history. Its map is over 500,000,000 square kilometers—just like the “real” planet earth—and includes two trillion uniquely rendered trees (not two trillion copy-and-pasted trees, or two trillion trees made up of a few dozen varieties), 1.5 billion buildings, and nearly every road, mountain, city, and airport across the world.

Metaverse IX.

Microsfot Flight Simulator -the most realistic and expansive consumer-grade simulation in history. Its map is over 500,000,000 square kilometers—just like the “real” planet earth—and includes two trillion uniquely rendered trees (not two trillion copy-and-pasted trees, or two trillion trees made up of a few dozen varieties), 1.5 billion buildings, and nearly every road, mountain, city, and airport across the world.

Microsoft Flight Simulator aspires for every town to not just differ from one another, but to exist as they do in real life. And it doesn’t want to store 100 types of clouds and then tell a device which cloud to render and with what coloring; rather, it wants to say exactly what that cloud should look like.

Metaverse X.

By the end of 2021, Adopt Me!’s virtual world had been visited more than 30 billion times—more than fifteen times the average number of global tourism visits in 2019.

Furthermore, developers on Roblox, many of whom are also small teams with fewer than 30 members, have received more than $1 billion in payments from the platform.

By the end of 2021, Roblox had become the most valuable gaming company outside of China, worth nearly 50% more than storied gaming giants Activision Blizzard and Nintendo.

1. The Streaming Book  by Matthew Ball, freely online

2. The Metaverse Book, and Blog by Matthew Ball

3. Virtual Economy by L'Atelier

Metaverse sources

Otázky?

Crypto in Financial Institutions

Ethereum Enterprise Alliance

In March 2017 a group of 30 enterprises announced formation of Ethereum Enterprise Alliance, which has recently grown to more than 200 members, making it probably the largest blockchain consortium today.
 

EEA’s focus in bringing Ethereum to the enterprise environment, meaning moving from a public, permissionless to a private, permissioned setting, which means it will be easier to provide better support for privacy and performance. There are some plans to support anchoring on the public Ethereum network as a way to securely timestamp the chain state.

Otázky?

Insurance

https://etherisc.com/

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/grid/trade-finance-placemat.pdf

Trade Finance

Trade Finance - Komgo

September 2018, fifteen of the world’s largest banking and commodity companies announced the formation of komgo - a global blockchain-based trade financing platform.

Collaboration between: ABN AMRO, BNP Paribas, Citi, Crédit Agricole Group, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Société Génerale
 

While using ETHEREUM, it will launch with two initial products: a KYC process and a Letters of Credit product.

https://media.consensys.net/enterprise-blockchain-for-trade-financing-c005ec8fa079

Crypto Companies & Products
CZ&SK

Coinmate

Fumbi

Paralla

CryptoDiggers

Firefish

Hydranode.net

Štosuj

2bminer

Vexl

Tropic Square

Trezor

Anycoin

Portu - Krypto cez ETP

Wexo

Crypton Digital

Rull.world

Wing Riders

Blockmate

NuFi

Mangata Finance

HydraDX

Bitcoinmat.sk

Cryptomat KYC & AML measures

• ID Verification
   
• Fingerprint Check
   
• Sanction Address screening
   
• Regular AML checks against sanction lists
   
• Withdrawal Limits per Address,
  • per 24 hours,
  • or lifetime

Crypto Companies & Products
- World

Bitwage

Xapo

UMA

Wirex

Monolith

Otázky?

Enterprise KYC & AML Tools

• PEP Check (PEP+RCA)
• Identity verification
• Sanctions List Screening
• Adverse Media Screening Tool
• Access to records from World-Check for customer screening.
• Enhanced media search and monitoring.
• KYB, transaction screening, and case management features
• Ongoing Monitoring
• Rule-based risk classification dashboard for in-depth analyses.

SumSub

Seon

Onfido

Refinitiv

Comply Advantage

On Dato

Chainalysis

Elliptic

Crystal Blockchain

Coinfirm

Enterprise Custody Tools

Anchorage

BitGo

Bitcoin Suisse

Copper

Fireblocks

Coinbase

Ledger Enteprise

Ledger Vault

Role Division

Ledger OS

Enviro Questions

Most Frequent Fraud Techniques

BTC Investment Schemes

Fraudsters contact investors in BTC investment schemes. As part of the scam, the so-called investment managers claim to have made millions of dollars investing in Bitcoin and promise their victims that they will profit as well.
 

To get started, the scammers want a charge. The Scammers then steal the upfront payments instead of making money. Scammers may also ask for personal identity information under the guise of transferring or depositing payments and gaining access to a person's crypto. Another sort of crypto scam is the use of phony celebrity endorsements.

Giveaway Scams

Scammers offer to equal or multiply the cryptocurrency transferred to them. Their messages can create a sense of legitimacy and urgency. This seemingly 'once-in-a-lifetime chance may entice people to send assets immediately in hopes of a quick return.

They often use impersonation techniques and fake  Social Media Accounts (Twitter, FB, Youtube, IG) of companies or Famous Personalities

Ransomware

This method includes sending links to files containing virus to the victims which get their PCs locked afterwards.
The attackers demand ransom to send decrypting keys.

Other ransomware may include keyloggers that log passwords of the victims when they sign into different crypto services, or that just replace crypto addresses of the victims with the ones of the attacker. 

Phishing Scams

Crypto phishing scams have been around for a while and are still prevalent. In order to collect personal information, scammers send emails containing harmful links to phony websites. 

Phishing Smart Contract

Victims sing transactions that give permissions to the fraudulent smart contracts to transfer their crypto, e.g. ERC20 tokens. 

Rug Pull Scams

Involve investment in a new project, NFTs, or coin in order to obtain money. Scammers steal money and then vanish with it. Because the code for these investments prevents customers from selling Bitcoin after they purchase it, they are left with a useless investment.

Sometimes hard to recognize as it may appear that developers just left the project (and new ones will maybe take over).

Pump & Dump Schemes

Similar like Rug Pull. The attackers create a new project with a liquid coin, commission a market maker, or coordinate with some entities with bigger capital to pump the price of the coin on some low liquidity exchange. When the investors start to buy in, the creator sell all their stash and leave.