Our experts tell us what sandwich attacks are. And how trading bots generate millions of dollars for their creators by tracking profitable transactions on the blockchain

An anonymous trader who owns an Ethereum wallet with the address jaredfromsubway.eth became a star in the cryptocurrency community in one day. This became known thanks to the tactics of the so-called sandwich attacks. It earned more than $4 million in just one day and became the leader in terms of network commissions, displacing the largest cryptoservices.

Such attacks are not a new concept in decentralized finance (DeFi). The sandwich metaphor is used because a trader’s tactics are based on two-way use of information about someone else’s bid to buy a particular cryptoasset. By using special bots, the trader tracks transfers in the pool of unconfirmed Ethereum or other blockchain transactions.

When the bot finds a large order that will inevitably lead to an increase in the price of an asset. It buys the asset in advance at a lower rate, “pushing” its transaction at the expense of an increased commission. And after the order is executed and the price rises, he sells it with a profit. The process is automated and takes place in seconds.

Memes and commissions

The most attractive targets for such attacks are usually low-liquid assets. For example PEPE, a new token named after the famous meme of Pepe the frog, has become just that. PEPE quickly gained popularity when a story broke in the community about How a certain early buyer of the token turned $250 into $1.8 million at a thousand-fold increase in its price.

In search of quick profits, thousands of other traders began buying up PEPE. In parallel, similar tokens named after famous memes – CHAD, WOJAK and others – started to be launched. Due to the low liquidity of the tokens, any large purchase order pushed their prices up. And such bids were hunted by bots of traders making money on sandwich attacks.

According to analytics service EigenPhi, PEPE and WOJAK have become the most popular assets on the Ethereum network over the past week. But after the stablecoins USDC and USDT with transaction volume of more than $250 million and $120 million, respectively. The wallet owner jaredfromsubway.eth had about $1.6 million in revenues from sandwich attacks in pairs with PEPE and more than $2.8 million in transactions with WOJAK.

However, the implementation of this strategy in such volumes requires high costs to pay higher commissions to ” push transactions “. The owner of jaredfromsubway.eth spent about $1.3 million on gas on the Ethereum network in just one day. That’s about 1.8% of the network’s total commissions over the same period. At the moment, only the Arbitrum network contract was ahead of the trader in terms of commissions. Which has an entire ecosystem of applications with millions of users.

Community observers estimate that jaredfromsubway.eth has spent about $7 million in commissions on more than 180,000 transactions over the past two months. When it sought to make a profit ahead of other users’ transactions.

Sandwich attacks are not an ethical tactic

Sandwich attacks are just one tactic within the larger phenomenon of Maximal Extractable Value (MEV). It is a technique that manipulates the sequence of transactions in the blockchain for profit. For example, by arbitrage or by outperforming other people’s transactions. The profits from MEV usually go to the creators of transaction blocks on the Ethereum network. They are the ones who determine the order of these transactions and then pass it on to validators. Ordinary users cannot influence their own transactions. And wallets and applications do not have the necessary tools to use MEVs to their advantage.

It takes the Ethereum blockchain about 12 seconds to validate a single block of transactions. Bots have enough time to scan each of the unvalidated transactions in a block and get ahead of the time to close someone else’s transaction. The process whereby the bot puts its own transaction in front of another’s (which will cause the price of the asset to rise) is called frontrunning. Repositioning a transaction with a bid to sell an asset already at a higher price is called backrunning. The combination of both processes creates a sandwich attack.

Traditionally, these tactics are considered unethical. But it is not prohibited either. The lack of a central supervisory body for DeFi plays into the hands of MEV traders. Most of their transactions take place on decentralized exchanges (e.g., Uniswap). This was the case with the owner of the wallet jaredfromsubway.eth. Similar to how high-frequency trading market players lead in profits on traditional markets. So do crypto traders in the MEV segment, using a variety of tactics to generate billions of dollars in crypto-assets revenue.

How to combat this

Our experts point out that Flashbots has been fighting for a fair market in the MEV field for years, creating software and infrastructure to reduce manipulation in this area. On April 20, the developers presented a beta version of their MEV-Share protocol. The purpose of which is to distribute a portion of the profits from maximum recoverable value to Ethereum users. According to the developers, it will give users the ability to control their transactions.

African country’s authorities hope to stabilize the Zimbabwean dollar by issuing a new digital currency

The Reserve Bank of Zimbabwe (RZB) intends to introduce a digital currency. It will be backed by gold, according to local portal The Sunday Mail. It will be used as legal tender within the country. The authorities hope to stabilize the national currency – the Zimbabwean dollar (ZWL).

The tokens will be a form of electronic money. Which will be backed by the country’s gold, which is stored at the Central Bank. Holders of Zimbabwean dollars will be able to exchange them for tokens backed by gold. The regulator calculates that this will help people save in a highly volatile environment.

The value of Zimbabwe’s national currency is depreciating rapidly and has started to do so quite some time ago. The authorities have held several denominations. And since 2009, Zimbabwe, after a period of record hyperinflation in world history, withdrew its own currency from circulation. Instead of the Zimbabwean dollar began to use U.S. dollars. As well as GBP and the currencies of neighboring countries.

Since 2016, the country issued a quasi-currency – surrogate dollars, officially pegged to the U.S. dollar at a ratio of 1:1. And designed to compensate in the market a shortage of U.S. dollars and other currency circulating in the country. In 2019, the Central Bank of Zimbabwe announced that surrogate currencies would no longer be exchangeable at a 1:1 ratio to the U.S. dollar.

Other African countries

Our experts point out that Zimbabwe is not the first African country to struggle with inflation. And other money circulation problems through the introduction of digital currencies. A year and a half ago, Nigeria introduced the eNaira digital coin. In doing so, it tried to attract about 40 million people to use it. And to get a share of the multi-billion dollar remittance flows and increase the tax base.

One year after eNaira’s launch, only 0.5% of Nigerians have used it. To boost adoption of the coin, the country’s authorities tightened cash withdrawal limits at banks and ATMs at the end of 2022.

KuCoin promises to compensate users for losses incurred due to the incident and strengthen security measures

Cryptocurrency exchange KuCoin warned about the hacking of its official Twitter account. The incident occurred on the night of April 23 to 24. The platform reported that a small number of users lost funds due to actions related to fake tweets.

KuCoin is a centralized crypto exchange that ranks 7th in terms of trading volume. In the last 24 hours, according to CoinMarketCap, that figure on the platform was $514 million.

Hackers gained access to the KuCoin account for 45 minutes. After the exchange recovered the account, it identified 22 transactions. And that included Bitcoin and Ethereum transactions that were linked to the incident. The platform estimated the total loss at approximately 22,600 USDT.

“Kucoin will fully reimburse all asset losses caused by the social network hack and fake activity. To prevent more users from being harmed, we are currently checking and blocking suspicious addresses,” the statement reads.

Our experts note that Kucoin claims that users’ assets on their exchange remain safe. An investigation into the incident is underway. In addition, in addition to the existing two-factor authentication. Additionally, the platform intends to introduce additional security measures on its accounts in social networks.

SG Forge, a digital subsidiary of Societe Generale, announces the launch of Stablecoin

Digital services provider and subsidiary of Societe Generale. SG Forge, announced the launch of a EUR CoinVertible (EURCV) stablecoin tied to the euro exchange rate for institutional clients. This token runs on the Ethereum blockchain.

The goal of issuing stablecoin was to “bridge the gap” between traditional capital markets and the digital asset ecosystem, SG Forge said in a statement. The company envisions the coin to become a secure means of payment. It will enable new solutions in corporate treasury and cash management. And it will be used to provide liquidity in the network.

SG Forge points out that the system provides “full segregation” of collateral assets. At the same time supporting the value of EUR CoinVertible, from the issuer of tokens. And it will update daily the information about the reserves on the company’s website.

The new digital asset will only be available to customers registered by Societe Generale Group in accordance with existing KYC verification procedures. And AML (Anti-Money Laundering) requirements.

In early April, Brazilian investment bank BTG Pactual announced the launch of the BTG Dol, a U.S. dollar-linked stablecoin. In Japan, banks are also considering issuing stablecoins, so far it is a matter of testing.

European Parliament members voted in favor of new rules for the digital asset industry in the European Union

European Parliament members in favor of the Markets in Crypto-Assets (MiCA) bill to regulate cryptocurrencies. The EU became one of the first jurisdictions in the world to introduce comprehensive rules for cryptoassets. As well as consumer protection, financial stability and innovation, the European Commission said in a statement.

The MiCA project, the main provisions of which were agreed upon last year. It will allow cryptocurrency exchanges and cryptocurrency storage companies to offer their products legally in the EU. The document also establishes rules for stablecoins issuers.

Once the law enters into force, cryptocurrency companies will have to obtain registration in one of the EU member states. This will allow them to work in the entire European Union.

The law will come into force in July after being formally approved by the 27 member states of the bloc, expects European Commissioner Mairid McGuinness. In this case, some provisions of the act will come into force gradually. For example, the rules governing stablecoins will apply from July 2024.

European Banking Authority (EBA) and European Securities and Markets Authority (ESMA). They will ensure that crypto platforms comply with the rules. And use the necessary risk management processes.

Our experts note that European Parliament members voted in favor of a law to regulate transactions. This document requires operators of cryptocurrency platforms to identify their clients in order to prevent money laundering.

Our experts tell us how the infrastructure of Conflux project is set up. How developers manage to achieve partnerships with large technology companies, and what led to the growth of the CFX token

In April, major cryptocurrency exchange Binance and decentralized platform Uniswap announced support for a new blockchain, Conflux. Behind its development is a team with the open support of the Chinese government. And the project’s infrastructure is also being implemented in major technology companies. And the market capitalization of the Conflux native token is approaching the $1 billion mark.

Investments and Partnerships Investments and Partnerships Conflux Network

Conflux Network is registered in Singapore, but the investors and all of its key employees are from the Chinese tech elite or have roots in mainland China. Founded in 2018, the company has raised $40 million from investment funds including Sequoia China and Baidu Ventures. In late March, the DWF Labs fund made a $10 million purchase of CFX tokens directly from the company, which was also a strategic investment in the project.

Fang Long, an associate professor of computer science at the University of Toronto, is behind the development of Conflux. And Andrew Chi-Chih Yao, who is the only Chinese Turing Prize winner to hold the position of chief scientist for the project. At least 10 of the company’s development team graduated from Tsinghua University’s computer science program.

Conflux’s blockchain went live in 2020. And since then, more than 300 platforms, brands and companies have used it, according to the developers. In 2023, the company partnered with China Telecom, China’s second-largest telecom operator, to create the “first SIM card on blockchain. As well as the popular social network Xiaohongshu to introduce NFT technology. The social network has 200 million users and is considered the Chinese analogue of Instagram.

Conflux works on the Tree-graph consensus algorithm, a kind of hybrid between Proof-of-Work (PoW). At that, on which Bitcoin operates, and Proof-of-Stake (PoS), which Ethereum or Cardano use. According to the developers, the network can process up to 3 thousand transactions per second. At the same time maintaining a high level of security and reliability. The blockchain has two subnets – Core and eSpace. eSpace is used for decentralized finance (DeFi) applications. The Conflux blockchain already has a CNH stabelcoin tied to the CNY exchange rate. And another “stablecoin” pegged to the Hong Kong dollar is expected in the future.

Support for a Chinese state

The developers themselves call Conflux the only regulatory-compliant blockchain in China with an indigenous Chinese team. They emphasize that the project has never conducted any form of ICO banned in China. In 2021, the Shanghai government gave Conflux Network a grant of more than $5 million. The company later received approval from Hunan provincial officials. With whom it was able to reach an agreement to incorporate its infrastructure into the government’s document workflow. And an administrative data verification system.

In China, government approval often allows a company to gain access to lucrative contracts in the public sector. Building relationships in the country plays an important role in doing business. And such an official endorsement is a notable event whose implications for Conflux go beyond mere PR.

China dominates the global blockchain market with an 84 percent share, compared to the United Kingdom (11 percent) and the United States (14 percent). Conflux wrote this when announcing the partnership with Uniswap. This, they said, is evidence of a “thriving ecosystem that makes China a critical player in Web3 project development.” Regulatory barriers in the U.S. and EU are expected to boost the growth of the crypto industry in Asia. More than 80 companies plan to open offices in Hong Kong. Where the government’s loyal attitude toward the blockchain industry “creates a vital link to mainland China,” the publication said.

Our experts note when the developers announced their partnership with Uniswap. Then they stressed that projects operating in currencies other than the U.S. dollar will benefit from it in a noticeable way.

Former U.S. President Donald Trump released a new series of 47 thousand tokens, it was sold out within 24 hours

Sales of the first NFT collection of Donald Trump rose 860% after the launch of the second series of tokens. According to the Cryptoslam platform, secondary sales of items from the first issue of Trump Digital Trading Cards totaled $384,000 per day. During the week before the announcement of the new batch of NFTs, sales were $20,000 to $40,000 per day.

Also sales of the second series of NFTs featuring the former U.S. president began April 18. He appears on them as Elvis Presley, the chess king, in company with a fire lion and in other flamboyant images.

The new collection includes 47,000 NFTs – 2,000 more than the first issue. Buyers of the 47 tokens got a chance to be a guest at a dinner with Trump at his Mar-a-Lago resort in Florida. The number 47 could be a hint at his intention to become the 47th president of the United States.

The initial cost of the “cards” remained the same – $99. However, as stated on the site, all tokens have already been sold out.

Our experts note that the first collection of 45 thousand NFT on the blockchain Polygon Trump released last December. There were 44 thousand tokens for sale. All NFTs were sold out in the first 24 hours. And initial sales brought the project nearly $4.4 million.

Despite an increase in sales of NFTs from the first collection, the minimum price for them on the largest NFT-marketplace OpenSea fell by 64% overnight. On April 19, it stands at 0.1396 ETH ($279), almost three times the initial price of NFT.

Decentralized social networks allow you to monetize your own free time. And also regulate the algorithms of your page impressions and the security of personal data. And all this is possible now, not in the distant future.

Modern social networks are approaching a dead-end situation. Users are getting tired of constant control and censorship. Therefore, the world is moving into the Web 3.0 stage. Back in 2019, Facebook creator Mark Zuckerberg recorded the trend toward small, closed groups. And communication between people in closed mode.

And no wonder, because social networks are regularly accompanied by problems. Facebook, for example, is “famous” for leaking data of hundreds of millions of users. In this case, all content in the social network is moderated according to the policy of this company. And a special algorithm regulates its displays. All of this, for the most part, applies to other classic social networks as well.

Despite its shortcomings, the social networking market remains in a phase of active growth. Among others, this factor is influenced by the change of generations. Young people are using social networks more actively. And in a few years, it will become the focus of interest for all marketers. The market will adjust to the needs of today’s younger generation.

The desire for independence, the need to monetize not only work time, but also personal time – all this describes today’s youth. Current social networks look like obsolete dinosaurs in this context. Which require an urgent upgrade.

What is the solution to the current situation for social networks?

The next logical step is for the industry to move toward Web 3.0. Estimated Web 3.0 revenue by 2023 is $23.3 billion, and by 2026 it will be $678 billion. A significant portion of this market is decentralized social networking.

In 2021 alone, more than 34,000 new developers joined Web3 projects. And companies have invested hundreds of millions of dollars. For example, the co-founder of Reddit and Solana Ventures launched a $100 million joint investment fund. Many social media platforms are adding Web3 capabilities for Web2 users by offering NFT integration. For example, Twitter allows NFT avatars for Twitter Blue subscribers. Web3 has been attracting investments at full speed. For example, a Web3-enabled messaging and group wallet app raised $3.3 million in a pre-funding round. And the CyberConnect platform raised $15 million in a Series A round.

Blockchain technology allows for secure and confidential messaging. And it is the problem with the risk of leaks of user data that is one of the main problems at the moment. Another trend is the monetization of user creativity. The simplest example: YouTube, which gives 80% of its revenue to content creators. SocialFi has gone further – they offer to monetize not only the content, but also any activity of their users.

Decentralized social networks – past and present

The first blockchain-based social network, GNU Social, appeared back in 2010. And it still works today and is reminiscent of Twitter in terms of functionality. However, as in the case of other early projects. To access it for the average user, far from the world of technology, is a difficult task. This is one of the main barriers to the widespread dissemination of any innovation.

Newer projects have solved the problem. For example, in one of the largest social networks Web3 MAIN, part of the functionality works in a format familiar to all. But the ownership, management and monetization functions have been moved to blockchain. So anyone can start using the platform without installing any wallets. At the same time, as the user immerses himself in the topic, he can gradually work more actively with Web3 functionality.

MAIN is the largest social network on the blockchain BNB Smart Chain. Its monthly audience of registered and active users exceeds 20 thousand people worldwide. The project was launched in 2021 on the blockchain BNB Smart Chain based on the social platform. Where users received tokens for their posts. Also, token holders can not only store them or use them within the platform. But also send them to staking Earnpark (maximum pool – 10 million tokens).

Classic social networks are now avoiding the community theme. Because fast content is more profitable for maximizing advertising revenue. People suffer because they can’t communicate with each other in their niche communities. However, MAIN gives users that opportunity. The project offers a system of thematic communities (boards) created and managed by users. Each board has its own coins and the users manage the community in proportion to their share.

The platform is accessible through mobile applications. And users’ assets are stored in their wallets. Therefore, even if the account is blocked, the assets in the personal wallet can be sold through the exchange. And in order to receive tokens, it is enough to be an active member of the boards. As well as to create their own content or perform administrative functions.

Next step of the social media industry

Our experts note that traditional social networks are losing user trust. Data leaks and total control are relics of the past. Which will logically go away with the development of this industry.

Decentralized social networks are the future because they meet the demands of young people. Among the main advantages of SocialFi are the ownership of one’s data and assets, the absence of censorship and the ability to monetize one’s personal time and multifunctionality.

The industry is just beginning to develop. Which means that now there is an opportunity to become the same early user who once mined Bitcoin on a laptop. It is quite possible that after a few years the idea of decentralized social networks will seem obvious. But already well assimilated and become part of everyday life.

The collapse of a major crypto exchange FTX cleared the market of “toxic leverage” and showed investors the importance of self-storage of digital assets

Analysts at investment firm Bernstein believe that the collapse of FTX was the catalyst for a new bullish cycle in cryptocurrency markets, CoinDesk reported, citing a report from their company. The collapse of a major crypto exchange cleared the market of “toxic leverage.” And showed crypto investors the importance of decentralization and self-storage of digital assets.

Macroeconomic factors are supporting Bitcoin. Such as the weakness of regional U.S. banks and the continued outflow of deposits to money market funds. And the “big four” U.S. banks (Bank of America, Citigroup, Wells Fargo and JPMorgan Chase) reflect investor concerns about the “centralization of money,” according to Bernstein.

“Any potential shocks, in the credit sector or from the government <…> make Bitcoin an ideal safe haven asset alongside gold,” the analysts wrote.

Since the beginning of the year Bitcoin’s rate grew more than 80% – from $16.5 thousand to $29.8 thousand only in March on the background of bankruptcies of American banks (Silvergate Bank, Silicon Valley Bank (SVB) and Signature Bank) price of the first cryptocurrency grew from $23 thousand to $28 thousand.

Bernstein’s experts also pointed out that fees on the Ethereum network tripled after the FTX collapse. Which reflects the growth of user activity and interest in the asset itself. Ethereum has risen 75% since the beginning of the year, from $1,200 to $2,100.

Our experts note that at the end of March, analysts Bernstein noted that now there are “ideal conditions” for the growth of the crypto market. Problems in the U.S. banking sector could lead to a decentralized financial system as an alternative to traditional banks.

Our experts told us why it is too early to talk about the start of general growth of altcoins (Altseason) other than Bitcoin and Ethereum. And what market conditions are needed for this.

The former head of BitMEX crypto exchange Arthur Hayes, known for his analytical forecasts on the cryptocurrency markets, announced the onset of the next Altseason. At the same time, he pointed to the sharp growth of Ethereum as the basis of his assumption.

Altcoin season (Altseason)  is a slang term for cryptocurrency traders that refers to a period of active one-time growth of alternative cryptocurrencies. Altcoin season is thought to take place in four phases: the rise of Bitcoin, the rise of Ethereum, the rise of large-capitalized cryptocurrencies, and the massive growth of the rest of the crypto market. This includes low-liquid assets with no fundamental value. Which is accompanied by a massive rush by retail traders.

Our experts told us why it’s too early to talk about an altcoin season and what market conditions are needed for it to start.

Altseason hasn’t started yet

Despite numerous claims that an “Altseason” has started in the digital asset market, our experts cannot agree.

Since the start of this year, Bitcoin’s (BTC) dominance has seriously increased. And at the moment, it shows no signs of decreasing. In general, Bitcoin has shown one of the most consistent dynamics in the cryptocurrency market since January. While the standard model of market behavior in the period of altcoin growth is the presence of BTC rate in a medium-term “sideways”. And without a strong rise or fall, and currently the medium-term uptrend on BTC is too confident for “Altseason”.

As for altcoins themselves, we can notice that there is no active capitalization growth there. Individual low-capitalized assets are “growing.” But this is not an indicator of the altcoin season, it only speaks to the local interest of participants in these assets.

The TOTAL2 index, which measures the growth of the total market capitalization of all altcoins (not including Bitcoin), is very slightly ahead of the total market capitalization index (TOTAL). This indicator shows that there is no multiple growth in demand for altcoins.

An important factor of Altseason is also the growth of the volume and number of transactions in the networks. As well as the growth of developer activity and audience activity. Again, we see growth of these indicators in individual assets. For example, in Ethereum, which had a successful fork allowing to take tokens from stacking. But overall, we are not seeing multiples of growth in investor and developer activity right now. After strong growth in January and February, the market is now looking for some balance. Which again does not signal that we have started an altcoin season.

When to expect growth

Our experts think that such a season is quite possible this year. But not before the second half of the year. The cryptocurrency market is still gathering energy for growth. And although we passed the bottom at the end of last year, the market has not yet reversed upwards: it takes time.

The growth season for cryptocurrencies, including altcoins, will start with the stabilization of stock markets. For that, there needs to be no geopolitical shocks. And also there were no problems such as still ongoing problems with banks in the U.S. and Europe. And also there were no predictions of an imminent global recession, and there are more and more of them.