They Tried to TAKE OVER Bitcoin!

The Bitcoin community is not the place to be if you want a quiet life. They’ve been kicking lumps out of each other for years now and this state of affairs will likely persist for the foreseeable future. 

But, if you thought the recent hoo-hah over BRC-20s and ordinals got ugly at times, then you missed an even more bitter struggle back in the day. Between 2015 and 2017 the community descended into civil war over Bitcoin’s block size. This conflict became known as the Blocksize War and its effects are still with us today.

If you’re unfamiliar, here’s the TLDR: some developers were concerned that, unless the size of each Bitcoin block was raised from its 1MB limit, then the Bitcoin network would never be able to scale to become the global payments system that Satoshi had envisaged. They became known as ‘big blockers.’ Others countered by saying that increasing the block size was intolerable and would harm Bitcoin’s decentralisation, among other things. They became known as ‘small blockers.’ The two camps became increasingly hostile towards each other.

This conflict, how it started, what took place over its duration and what happened as a result is brilliantly recounted in Jonathan Bier’s book ‘The Blocksize War: The Battle for Control Over Bitcoin’s Protocol Rules.’ It’s one of those must-read crypto books and it forms the basis of today’s video. So, for a look back at two of the most contentious years of Bitcoin’s existence, start with our video and then be sure to read Jonathan’s book when you get the chance.

You can watch that video here.

📈 Crypto Market Forecast 📈

Historically, September has been a bad month for Bitcoin and the broader crypto market. So far though, this September has been relatively good for BTC and most alts. The caveat is that the month isn’t over yet, and there’s quite a lot that could happen over the next week. As usual, it’s a combination of macro and crypto factors. And as always, it’s hard to know exactly when they will happen.

In terms of macro factors, the looming government shutdown in the US appears to be front and centre. Given this fact, it’s probably been priced in. But, be wary of something that Jerome Powell mentioned at the Fed’s recent press conference, and that’s that a government shutdown means that the Fed could be flying blind – it won’t get the economic data it needs to make interest rate decisions.

If the government shutdown lasts to a point that the Fed misses an entire month of economic data, it could make the next FOMC meeting that much more unpredictable. This is significant because investors are torn over whether or not the Fed will deliver the final rate hike its members forecast between now and the end of the year. For context, the Fed’s next decision will be made on the 1st November.

The second macro factor is closely related to the first, and that’s Japan. As with the US government shutdown, all eyes have been on the BoJ’s apparent decision to slowly exit its zero interest-rate policy. As multiple crypto media and mainstream media articles have pointed out, this could create problems for global bond markets, namely a rise in long-term interest rates (which is already starting).

What these eyes seemed to have missed however is the fiscal side of the economic equation – the Japanese government. The Kishida administration is starting to face extreme pressure from the population due to the country's high inflation and the declining yen. According to Bloomberg, this pressure is real, and Kishida will unveil a new economic plan this week.

This ties into the third macro factor, which has almost certainly been overlooked, and that’s the monetary policy of the Turkish central bank. For reference, macro analysts such as Weston Nakamura have identified strong correlations between the Turkish lira and the crypto market. When the lira weakens, the crypto market rallies, and vice versa. Weston believes this is what sparked the previous bull market.

Weston seems to be onto something, because recently Turkey’s central bank raised interest rates from 25 percent to 30 percent. (Yes, you did read that correctly. Really puts things into perspective, doesn’t it?) Anyway, lo and behold, BTC and other major cryptos seem to have fallen on the news. To be fair, this dip could have been due to the Wall Street Journal report (released around the same time) that Tether was lending out billions of USDT. However, it could have been both.

This relates to the crypto factors, the first of which is the anti-crypto bill that seems to be gathering steam in Congress. As always, Elizabeth Warren penned the paper, and she’s managed to rally her colleagues to support her latest anti-crypto crusade. Of course, this bill stands no chance of becoming law anytime soon if there’s a government shutdown. Still, it’s something to watch.

The second crypto factor to be on the lookout for is Elizabeth’s best friend, SEC chairman Gary Gensler. In case you missed the news, one of the top dogs in Gary’s gang recently warned that more enforcement actions are coming for crypto exchanges and DeFi. Given that they’ve already slapped centralised exchanges around, I suspect that they’ll turn their focus towards DeFi, specifically DEXes.

The third crypto factor is one that’s been hanging over the crypto industry for months, and that’s another enforcement action against Binance. It’s safe to say that the SEC’s recent comments foreshadow this possibility, but it’s also safe to say that this enforcement action has been priced in (something we’ve mentioned before). Even so, depending on the nature of the allegations, they could still cause volatility.

The final crypto factor to look out for is one that’s yet to be identified, but one possible candidate could be Tether’s alleged lending. In short, the fact that Tether is lending billions to entities with whom it has ‘long standing relationships’ suggests that someone somewhere is seriously short on cash, likely an offshore exchange. It’s kind of like a black hole – you can’t see it, but gravity tells you it’s there. 

🔐  State of Security Audits 🔐 

Hacks and exploits have been a common occurrence in crypto since its inception. In fact, on-chain analytics firm Chainalysis labelled 2022 as the biggest ever year for DeFi exploits, after they contributed to 82.1% of the $3.8 billion worth of stolen crypto assets that year.

This has led those remaining in DeFi to search for signs of confidence or endorsements about the safety of any given protocol. And, in an attempt to bolster such confidence, many DeFi projects (especially new ones) often market their protocol/smart contracts as being ‘audited’ by multiple crypto security firms – the likes of CertiK, OpenZeppelin, Hacken, etc.

Given the general meaning associated with the word ‘audit’, these claims are often taken at face value, with many users interpreting smart contract audits to be ironclad proof of the ‘unexploitable’ state of the protocol in question.

However, this couldn’t be further from the truth. In fact, smart contract ‘audits’ would be better termed as smart contract ‘reviews.’

Outside crypto, the word ‘audit’ is used to refer to an endorsement of the financial or security status of a particular entity. And such, auditors often face legal liability for any bad faith practices or lapses of judgement.

The same is not true for smart contract ‘audits.’ In fact, most ‘smart contract auditors’ in crypto often paste lengthy disclaimers on their websites. This includes auditors like CertiK, whose website and reports contain a disclaimer that states CertiK’s role is only to “help reduce the attack vectors” and is in no way a “guarantee of security or functionality of the technology” they agree to analyse.

These disclaimers come in handy, especially when the DeFi protocols they ‘audit’ fall victim to exploits later down the line. This has been seen time and time again, sometimes just days after an audit. Euler Finance, Defrost, Rubic Finance, and last week’s Banana Gun exploit are prime examples of ‘audited’ protocols being successfully attacked.

So, what’s the fix?

Well, the DeFi sector has introduced a number of initiatives over the past few years to try and increase the security standards of its many and varied protocols. Interestingly, some of these initiatives have attempted to leverage financial incentives, while others have attempted to leverage reputational incentives.

As an example of a financial incentive, platforms like ImmuneFi have attempted to increase the likelihood of smart contract bugs being reported instead of exploited by introducing protocols to the concept of ‘Scaling Bug Bounty’ programs. TLDR - this involves affixing a percentage-based reward (commonly 10%) linked to the TVL at risk for bug bounty programs.

As for reputational incentives, back in 2021, security analyst Emiliano Bonassi attempted to introduce a public goods platform for smart contract security through the creation of Reviews DAO – a forum-based platform where projects and analysts can collaborate on a ‘peer-to-peer’ model for smart contract security, with the incentives encouraged to be ‘reputational’ instead of ‘monetary.’

However, incentives aside, some believe the best fix would be the introduction of an industry standard for smart contract reviews. Admittedly, the formulation of an industry standard would increase the reliability and uniformity of smart contract reviews. Furthermore, it would also encourage more analysts to enter the field of smart contract security by providing a form of recognised guidance on best practices.

However, this doesn’t solve all problems. And, there are cases where protocols themselves lie about having been audited.

Interestingly, to address this issue, an ERC standard to deal with on-chain verification of audits was proposed this week. The proposal, titled ERC-7512, aims to solve this by standardising how smart contract audits can be brought on-chain, allowing audit firms to cryptographically sign the findings.

In summary, DeFi and smart contract security have a great deal of development ahead of them. The smart contract security industry might perhaps be a rather dull one to watch, but it nevertheless remains a crucial part of the journey towards mass adoption. I’d recommend you keep your eyes peeled.

💯 Coin Bureau Club Update! 💯

Our altcoin portal continues to grow, with a video review of Axelar added this week. It joins our reviews of XRP and Tron. Voting for the next review has just closed, with the winner being …(drumroll)... Quant Network. A new poll will be up soon. 

Meanwhile, our research feed has recently featured Dan’s thoughts on an underrated crypto niche, Guy’s musings on some altcoins he’s been tracking and Kevin’s fascinating rundown of the ‘Effective Accelerationism’ movement and its relevance to crypto. 

Curious? 👉 Click here to find out more. 
 

📊 Personal Portfolio 📊

BTC 37.09% | ETH 29.35% | USDC 18.82% | USDT 7.53% | USD 3.80% | ATOM 2.37% | DOT 1.03%

🔮 Video Pipeline 🔮

• FED Press Conference Summary
• Crypto Market Manipulation: Who are the puppeteers?
• Here’s What You Need to Watch in October!
• Congress insider Trading: The System is Rigged
• Justin Sun Interview From Token 2049

🏆 What's New at CoinBureau.com This Week? 🏆

✅ How to Use Ethereum: Surfing Ethereum Transactions

✅ Ultimate Monero Guide 2023: How to Use XMR

✅ KuCoin Earn Review 2023: Earn Crypto With KuCoin!

✅ Fetch.AI Review: AI-based Autonomous Machine Economy

✅ Coinbase Base Review: What to Know About Base Layer 2

✅ TOKEN2049-Record Breaking Success!

📖 Quote of the Week 📖

The markets are in a state of apathy. Many have already left for supposedly greener pastures. Others have reverted to form and fallen into previous careers and/or interests. These ‘crypto tourists’ will never build long-lasting wealth because they have developed a routine that is nearly impossible to change. 

“Once you learn to quit, it becomes a habit” - Vince Lombardi 

Team Coin Bureau

Disclosure: Authors may own cryptoassets named in this newsletter. These are unqualified opinions, and a Coin Bureau newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor.