The Weekly Wrap: EU Parliament impedes crypto transactions, Greenpeace campaign against Proof-of-Work, Ronin bridge exploit

1. EU Parliament passes rules aiming for transactions to unhosted crypto wallets

The Facts:

• The European Parliament’s Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties, Justice, and Home Affairs (LIBE) voted on AML legislation for transactions (sender and receiver) >EUR 1,000 from unhosted wallets such as MetaMask.
• Besides, the amendments to the Transfer of Funds Regulation (TFR) would require exchanges to share sensitive transaction data related and to verify the identity behind unhosted wallets, where individuals hold their own private keys.

Why it’s important:

• According to Brian Armstrong, CEO of Coinbase, the vote will unleash an entire surveillance regime on exchanges and stifle innovation.
• As the amendments will add major compliance and operational costs for most crypto service providers and exchanges, it might also push users to leave their crypto assets with centralized entities.
• Especially the AML legislation introduces unjustifiable reporting requirements as every transaction over EUR 1,000 would need to be reported creating massive personal data honeypots.

2. “Change the Code, Not the Climate” campaign against Bitcoin’s Proof-of-Work

The Facts:

• Greenpeace and other environmental groups along with co-founder and executive chairman of Ripple, Chris Larsen, launched a campaign titled “Change the code, not the climate”.
• The campaign aims to decrease the energy consumption by changing part of Bitcoin’s PoW consensus mechanism to a more environmentally friendly model like PoS.

Why it’s important:

• With Bitcoin’s energy use growing significantly over the last few years, the campaign launches amidst an increasing political controversy about Bitcoin’s PoW and ESG.
• While Greenpeace cites concerns over Bitcoin primarily using fossil fuels, BTC miners consistently optimize for more efficient hardware and successfully increase their share of renewable energy.
• Moreover, the well-intentioned campaign serves the mainstream narrative, that is largely based on misinformation about Bitcoin energy use and a misunderstanding about Bitcoin’s security.
• Bitcoin offers a global, tamper-proof, uncensorable digital monetary network like no other – at minimal energy cost compared to all alternatives.

3. $600m worth of ETH and USDC drained from Ronin

The Facts:

• Assets worth >$600m were stolen from the bridge contract of Ronin, an Ethereum sidechain made for the blockchain game Axie Infinity owned by Vietnamese parent company Sky Mavis.
• 173,600 ETH and 25.5m USDC (addresses blacklisted by now) were drained from the contract, marking it one of the biggest bridge exploits to date besides the $611m hack of Poly Network in August 2021 and the $326m exploit of Wormhole in February 2022.
• The Ronin bridge is secured by 9 keys, of which any 5 are sufficient to unlock funds.

Why it’s important:

• In contrast to previous hacks where the weak link was found in smart contract bugs, Ronin was exploited via their multi-key security setup.
• It showcases that trust-minimized bridging is highly important and serves as a reminder that cross-chain bridges are vulnerable.
• Moreover, the recent bridge hacks weaken the narrative of a cross-chain future for crypto and strengthens the camps of rollup centric and multichain, meaning natively deployed assets on various chains, advocates.
• Permanent bridge balance monitoring and alerting implementations are essential, as it appears to be not sufficiently realized for Ronin since six days passed until the hack was noticed.

In other news

• Vietnam seeks to regulate crypto (via Blockworks)
• Solana NFTs launching on OpenSea (via CoinDesk)
• MicroStrategy increases Bitcoin position by a Bitcoin-collateralized loan (via Decrypt)
• Nifty Gateway to partner with Samsung for first Smart TV NFT Platform (via PR newswire)
• Putin demands to buy gas in rubles as rubles recover (via CNBC)
• Lightning Network now available on Kraken (via Nasdaq)