2. FED raises rates another 75 bps

The Facts:

• On Wednesday, the FOMC concluded, and the FED approved another 75 bps rate hike bringing their benchmark lending rate to a range of 3.75%-4%, the highest since January 2008.
• As the FED wrestles with sticky and high inflation, the move was the fourth consecutive 75 bps interest rate increase making history by marking the toughest policy since the 1980s.
• Following the FED decision, the BoE warned of a prolonged recession and raised its interest rate by 75 bps on Thursday to a benchmark rate of 3%, its largest hike since 1989, marking the eight consecutive hike of the main lending rate.
• Fighting with heavy inflation too, the ECB also raised its interest rate 75 bps to 3% last week before preliminary euro zone headline inflation hit a record high of 10.7% on Monday, its highest ever since the euro zone’s formation.

Why it’s important:

• Not only inflation is sticky but also the stamina of hawkish central banks sticking to their tight monetary policy in order to finally curb inflation matching Powell’s post FOMC statement that "we still have some ways to go".
• Powell dismissed the idea of a dovish monetary policy by the FED for the time being, while not ruling out discussions about slowing the pace in following meetings that might lead to a slight cool-down in the next FOMC meeting happening in December 14.
• The hawkish policy however will likely deepen the economic pain for millions around the world as the FED policy has global implications on almost every currency due to the power of the dollar.
• ECB’s Lagarde is also prepared to push rates higher stating that a mild recession would not stop the ECB from raising rates even if the euro zone saw slower economic growth recently (GDP up 0.2% in Q3).

3. Developer triggers two major bugs in Bitcoin/Lightning mainnet within one month

The Facts:

• On October 9, Bitmatrix founder and Bitcoin/Lightning developer Burak Keçeli (@brqgoo) completed a very large 998-of-999 multi-signature Taproot transaction.
• Although the transaction containing 998 private keys went through, it caused one of the node clients, “btcd”, to not accept it as valid due to a bug in its Taproot code.
• The most widely used “bitcoind” client and others processed it correctly, however. the larger problem emerged on the Lightning network, because “lnd”, the popular Lightning client is using “btcd”.
• As a consequence, it became incompatible with the Lightning network, disrupting all Lightning users ability to transact safely.
• On Tuesday, Burak created a Taproot transaction that caused “lnd” Lightning nodes to fail and triggered Lightning Labs, the company maintaining “lnd”, to issue an emergency hot-fix release.
• In contrast to the first transaction this one contained a note by Burak hinting to the fact he was aware in advance that it could break “lnd”.

Why it’s important:

• While a multisig requiring nearly 1000 private keys may seem to be an edge case of little practical use, it nevertheless constitutes a valid transaction that the Bitcoin network is supposed to handle properly but did not.
• What makes matters worse is that not only did it cause an entire type of clients (“btcd”) to stop functioning properly, it affected the Lightning network profoundly barring users from keeping in sync with the network.
• The fact that an obscure layer-1 bug turned out to cause much more damage on layer-2 is testimony to the complexities involved in designing multi-layer blockchain protocols securely.
• Should bugs be exploited publicly or disclosed in private in a public blockchain network environment? Both incidents can be considered stress tests to the still nascent Lightning network.
• Opinions on how Burak went about "testing" were split: some applauded the effort and encouraged him to continue doing real-life stress tests on both layers while others suggested to limit the damage by using testnet and “responsible disclosure” to minimize disruption for users on mainnet.
• The incidents also refuel the strategic debate whether a blockchain network is better off focusing on a single client node (PRO: intense testing/review by entire community, CON: if it fails, the entire network is affected) or on multiple client node implementations (PRO: not all clients affected at once, CON: less scrutiny per client as developer capacity is spread out).
• Bitcoin and Ethereum follow different development paradigms in that regard.

In other news

• Instagram to enable minting and selling of NFTs via Polygon (via CoinDesk)
• Hot wallet of crypto exchange Deribit hacked for $28m (via Twitter)
• Singapore grants USDC’s Circle in-principle license to operate (via CoinDesk)
• MetaMask moves towards gaming industry (via Twitter)
• South African grocery retailer Pick n Pay to accept crypto payments (via Reuters)
• Cloud service provider Hetzner blocks >1’000 Solana validators (via Decrypt)
• MakerDAO co-founder Nikolai Mushegian found dead in Puerto Rico (via Cointelegraph)
• Santander imposes crypto exchange transaction limits in the UK (via The Block)
• Japanese Digital Ministry creates own DAO to explore use cases (via CoinDesk)

Source: Bankless

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