welcome back chain reaction.
Last week, we looked at the near-term future of crypto gaming as VCs place zero bets on consumers. This week, we’ll be looking at hardware wallets and the endless journey of feeling safe in the crypto world.
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nowhere to hide
Sent weekly from TechCrunch’s crypto editor’s desk Lucas Martney:
The crypto world can be a ruthless place, and while VCs and crypto hedge funds have been happy to bail out institutions, sometimes consumers dabbling in the space find themselves left out in the cold. Several fairly high-profile hacks have cost cryptocurrency investors millions this week, but smaller, more mysterious hacks may have novice buyers clinging to their private keys and praying for the best of.
Putting money anywhere is an exercise in trust, and it’s sometimes amusing that the word “distrust” has been a staple of the crypto-religious creed that investors use to gain conversion. All users have to do is keep their private keys close by and they can trust that their money will always be there without having to trust traditional financial institutions. But consumers are discovering some of the prestigious fine print that promises.
This week, thousands of Solana users logged into their crypto wallet app to find all their funds disappeared. Many of these users claim they have not used the wallets for weeks or months, ruling out some kind of mass signing of malicious contracts. While this is ultimately a low seven-figure hack, the mystery is worth noting. Early on, users weren’t sure if this was an attack on the underlying Solana network or the underlying service provider that multiple wallets rely on. Amid all the chaos, wallets continued to be drained, eventually emptying the contents of over 8,000 individual accounts.
Investors in the Solana ecosystem (the founders of the network gave up some options Twitter Retweet) complained that when the Nomad bridge was hacked a day earlier for $190 million, the media paid more attention to the multi-million attack. More terrifying than the amount, however, is the nature of the attack.
While users across wallets have reported the issue, the problem boils down to a vulnerability in the Slope wallet – which the user doesn’t know about – that records their private key in the backend, and if they ever import the key to a mobile device, they are Apps that are vulnerable to bad actors. This saga could become another point of trust in the system for new users who might think their funds in their wallets are safer than the vaults of a centralized exchange.But longtime crypto users shrugged and said it was another reason for users hold their funds In so-called hardware wallets — physical devices that store users’ private keys, and drastically reduce the number of hacking vectors beyond human error.
Now, pushing every new user to buy a hardware wallet of around $100 to actually protect their assets is obviously not the ticket to widespread adoption in the short term, but it seems to be the rule that the deepest in the field still hold to. While many of the richest people in cryptocurrency are sticking to a strategy that puts security first, it appears that many of them are investing in and promoting projects that emphasize speed and seamless onboarding at the expense of security. Users getting into the flashy consumer app orbit may find themselves aware of crypto’s early barriers to entry for a reason, and wealthy users buying air-gapped computers and putting their keys on a piece of paper has a lot of historical framing of theirs Paranoid.
Chain Reaction is back this week and better than ever! This week we announced two major changes to Pods. First, we have a new co-host, Jacqui Melink, join us every week to discuss the top stories in web3. Jacquie is our good friend, as TechCrunch+ reportershe’s eager to help us demystify all cryptocurrencies.
Second, we split the weekly show into two separate episodes: The Weekly News Snippet feat. Jacquie, the first one came out today, and there’s an interview segment hosted by Anita and Lucas. Stay tuned for the latest episode of interviews coming out next week, where we chat with Uniswap COO MC Lader.
For this week’s news, we take apart two High-profile hacking attacks This happened the first two days of the month (woah).We also discussed Robinhood’s latest round of layoffs The company paid a $30 million fine to New York regulators.
follow the money
The direction of the flow of startup funds in the crypto world:
- AO Lab Raised $4.5 million for its Spacebar web3 gaming platform from investors including Balaji Srinivasan and Sandeep Nailwal.
- “Green” web3 platform One Closed more than $8 million in strategic financing from investors including American Express Ventures.
- Digital Asset Derivatives Company track Raised $4.6 million from Matrixport, Brevan Howard and others.
- Encrypted Credit Agreement Debt DAO $3.5 million in seed funding led by Dragonfly Capital.
- centerCrypto infrastructure startup, raised $11 million in a seed round from investors including Thrive Capital, Founders Fund, and Volt Capital.
- Gary Vaynerchuk’s NFT project, VeeFriendsraised $50 million in a financing led by a16z.
- Quasaris a Cosmos-based DeFi protocol that raised $6 million in seed funding from companies like Polychain, Blockchain Capital, and more.
- Stadium LiveFantasy sports virtual world startup KB Partners, Union Square Ventures, Dapper Labs and others have raised $10 million in their Series A round.
- Decentralized data warehouse provider space and time Raised $10 million in seed funding from investors including Framework Ventures and Digital Currency Group.
- Play Earn Fitness App sweat coins Closed a $13 million funding round from investors including Electric Capital and Jump Crypto, including a private token sale.
week in web3
Weekly web3 reporter thought window Anita Ramaswamy:
Given the recent hacks affecting the Nomad Crypto Bridge and Solana ecosystem, now seems like a good time to talk about cryptographic security. It is increasingly clear that no matter how many assurances crypto companies make about the rigor of their security standards, investors should always be on the lookout for them. The pain could be even worse for NFT holders, who risk losing millions of dollars in value if one of their expensive JPEG files is stolen – think of actor Seth Green and his kidnapped Boring Ape Encounter it.
Today, people have several different options for how to safely store their cryptocurrencies, and they all have their own trade-offs. “Hot wallets” are connected to the internet, which makes them vulnerable to outages or connectivity issues. Additionally, a large number of hot wallets are operated by centralized entities, such as exchanges that hold user keys on their behalf — a power shift that many crypto users are reluctant to grant. Meanwhile, “cold wallets” are considered more secure, but involve bulky, difficult-to-use hardware that can be misplaced as easily as “seed phrases,” which are passwords used to unlock crypto wallets.
Upstream founder and CEO Alex Taub, who we had in last week’s pods, said his startup has a user-friendly solution that allows people to digitally control their keys without sacrificing security. It’s a unique solution, just in time.For details on how it works and why it’s different from what’s already on the market, check out my article here.
Here are some of the week’s crypto analysis from senior reporters on our subscription service TC+ Jacqueline Maylink:
Solana’s fast encryption method is attracting developers despite problems
While it’s not always sunny in the crypto market, some prominent industry players, including Solana co-founder Raj Gokal, remain optimistic about growth prospects — at least for their own projects. Gokal said that despite Solana’s recent issue of 8,000 wallets being hacked on Tuesday, the first-tier blockchain has about 15 million to 20 million monthly active addresses, some of the highest in the crypto industry. “A question we often get is how does the market affect the pace of development and the pace of construction?” His answer? It’s not, really.
Why education is key to stopping hacks like the $190 million Nomad exploit
After a security breach in encryption protocol Nomad lost nearly $200 million, security experts insist that more education and security protocols are needed to protect the web3 community from hackers. Flux co-founder Daniel Keller told TechCrunch that cross-chain operability will continue to grow as the crypto ecosystem grows larger over time, “at a high level. Focus on security and decentralization”. “However, when we bring DeFi products to the masses, we need to focus on security, not just development speed.”
Tiffany and Gucci’s foray into cryptocurrencies is a balance of reputation and income
Is the crypto integration of household names and sports teams an indication of growing use cases for digital assets and cryptocurrencies — or is it more of a marketing ploy? This week, Tiffany & Co., Gucci and FC Barcelona have all dived deep into the crypto space with partnerships in the world of digital assets. But do these partnerships really mean anything for the crypto ecosystem? Many market participants shared their views on the financial advantages, risks and business implications behind these new integrations.
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