DEX Merlin had more than $1 million stolen immediately after Certik audited its code

The DEX Merlin hack occurred despite a positive assessment from leading Certik specialists who analyze the code of blockchain projects.

On the morning of April 26, hackers withdrew about $850,000 worth of USD Coin Stablecoins (USDC) from Merlin. As well as several other relatively illiquid tokens. The data in the blockchain shows that a certain entity was able to withdraw the funds. Who controlled the exchange’s liquidity pool. This may suggest that the attack was not technically sophisticated. And the theft itself may have been the work of an insider of this project.

The attack occurred despite the fact that Merlin was audited by Certik. Which is the market leader in auditing the software code of blockchain projects. The service’s conclusion from the Merlin audit stated that there were “no critical bugs” in the exchange’s code.

Certik representatives wrote on social media that they are investigating the incident. Their initial findings point to a potential problem with the management of the project’s private cryptographic keys giving access to funds. “An audit can’t completely prevent problems with keys. But we always call projects’ attention to best practices,” Certik said.

Merlin developers have asked users to revoke the permissions of wallets connected to its site. They say they are analyzing a possible vulnerability in the protocol.

Matter Labs is behind the development of the zkSync “second-tier” blockchain. In November 2022, it led several investment rounds totaling $258 million with LightSpeed, Andreessen Horowitz. And major crypto venture capital firms Blockchain Capital and Dragonfly.

Our experts note that Merlin is considered a potential candidate for token distribution in the form of an airdrop for activity in its ecosystem projects, which include the hacked Merlin platform.

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Trading volume on DEX has reached a maximum in 10 months

The growth of traders’ activity on DEX platforms in March is one and a half times higher than in February. This comes after the bankruptcy of U.S. banks and regulatory pressure on centralized cryptocurrency exchanges.

Trading volume on decentralized exchanges (DEX) reached a ten-month high. For the first time since May 2022, according to DeFiLlama, the figure rose to $133.3 billion in March, up 53% from $86.9 billion in February.

Trading volumes on decentralized exchanges topped $145 billion in May 2022, following the collapse of TerraUSD (UST) and Luna tokens. And then declined to $65 billion in October. The bankruptcy of the FTX exchange again caused an increase in trading volume on DEX – in November it was $113 billion. And then again for three months did not rise above $87 billion.

A surge in cryptocurrency trading on DEX platforms began in March after Silvergate Bank announced it was shutting down operations. For example, in the week following the news of the bank’s problems alone, trading volume on DEX was $50.2 billion, which was also the highest since the Terraform Labs token crash.

This was followed by the collapse of Signature Bank as well as a warning from the SEC to Coinbase. And the Commodity Futures Trading Commission (CFTC) lawsuit against Binance. At the end of a difficult month for the cryptocurrency industry, trading volume on DEX exceeded $133 billion.

Our experts note that Curve ($4.78 billion), Uniswap ($4.06 billion) and PancakeSwap ($2.33 billion) are leaders among decentralized exchanges in terms of total value locked (TVL).

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How decentralized crypto exchanges depend on the SEC

A wave of repression by U.S. exchange regulators is affecting the companies behind development of decentralized crypto exchanges. Review by Crypto Upvotes experts

The cryptocurrency exchange dYdX, one of the most popular DeFi trading platforms. It is on its way to becoming a fully decentralized project, not the least of which is the policy of the U.S. government. Right now it’s running on a hybrid decentralized model. But in September, developers plan to launch a new version of it. This should help reduce the influence of centralized structures, on which it still has to rely.

The exchange depends at least on the dYdX Trading behind its development and StarkWare’s solutions for scaling trading capabilities on the Ethereum network. In the new version, dYdX will run on the Cosmos blockchain and leverage its own protocols. This is to minimize reliance on centralized links, any of which could potentially be pressured by regulators.

Decentralized finance (DeFi) projects are characterized by the absence of intermediaries for trading or loan transactions in crypto-assets. An automated protocol, the smart contract, plays the role of an intermediary. However, as in the case of dYdX, the development of this protocol is the responsibility of a specific company and team of developers.

Most DeFi projects issue their own tokens, which are traded on cryptocurrency exchanges. After the head of the U.S. SEC Gary Gensler said. that almost all existing crypto-assets are considered securities by the agency, any token issuer potentially falls under the agency’s oversight.

Repressions from the SEC of epic proportions

Speaking to community members during a conference call on March 30. The head of another decentralized exchange, SushiSwap, Jared Gray. Said he “stopped getting inspired” by his work. Gray spoke candidly about his attitude towards American regulators. In particular, he mentioned Senator Elizabeth Warren’s campaign platform, which included a total ban on cryptocurrency transactions in the United States. Politico published an article about Warren, saying in the headline that she was “raising an army against cryptocurrencies.

The week before, Gray revealed that he had received a subpoena from the SEC regarding his involvement with SushiSwap. To fund the impending lawsuit, Gray brought a proposal to the exchange’s existing Decentralized Autonomous Organization (DAO). In it, he proposed setting aside $4 million from the Treasury of the Record to create a “Sushi DAO Legal Defense Fund.”

“This is about an onslaught and retaliation of epic proportions, and it’s only going to get worse,” warned former SEC official John Reed Stark in a commentary for Bloomberg. Stark served as a senior adviser to the agency. And headed the Internet enforcement offices. He observed that regulators initially left market leaders untouched, focusing on easy-to-access projects. But now they’re targeting the big players as well.

What’s already happened this year

Also earlier this year, the SEC sued the cryptocurrency exchange Gemini because its Earn. Which allows users of the site to earn interest from lending their tokens. The service then fined Kraken exchange $30 million, while equating its stacking service with making money from unregistered securities. Later, the agency banned Paxos from issuing the BUSD token. It was second only to Tether’s USDC and Circle’s USDC in terms of capitalization.

In late March, the SEC accused Tron blockchain founder and Huobi exchange co-owner Justin Sun of artificially inflating trading volumes on the exchange. Just the same day, Coinbase received a notice from the SEC. It threatened to sue over a number of tokens and financial products available on this platform.

Full decentralization is needed to save crypto exchanges

Decentralized exchanges are already passing Coinbase in terms of trading volumes. Uniswap reached $71.6 billion in March, according to The Block Research. This is 45% higher than Coinbase’s $49.4 billion in the same month. Among traditional crypto exchanges, Coinbase is second only to Binance in terms of volume.

Summing up the results of the first quarter of this year Coinbase representatives wrote. That the trends on the exchange reflect a larger market. The actions of the SEC and CFTC only underscore the uncertainty surrounding Ethereum and other altcoins.

Referring to the Coinbase situation, in an interview with Bloomberg, dYdX head Antonio Giuliano says. About more and more cryptocompanies refusing to actively engage with regulators in the U.S. against the backdrop of what is happening. His company, dYdX Trading, will continue to work on the protocol after the launch of the new version of the exchange.

According to Giuliano, the network on which the next version of dYdX will run will work with multiple transaction validators. This is to minimize the risks of being banned or censored, to which the centralized mechanism is subject. The exchange will not technically have the ability to reject or censor transactions.

Our experts believe that the final form for everything in DeFi should be complete decentralization !

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Trading volume at SushiSwap crypto exchange increased 50% for one week

Growth in volume is due to development of SushiSwap ecosystem and announcement of important developments and innovations in 2023. Crypto-Upvotes expert review

Trading volumes on decentralized crypto exchange (DEX) SushiSwap increased by 50.8% to $476 million during this week.

During the same period, competitors’ trading volumes decreased: on PancakeSwap – by 42%, on Uniswap – by 8.1%. And the Curve platform lost 3.8%. All Dex fell 9.67% over the week to $18.2 billion.

SushiSwap is a decentralized crypto exchange on the Ethereum blockchain. The trading floor allows market participants to conduct transactions with digital assets directly from their cryptocurrency wallets – without intermediaries. DEX gets its liquidity from pools, which receive funds from platform users who lock their assets in protocol.

Growth in trading volumes at SushiSwap is taking place against an active development of its ecosystem. On Jan. 16, the head of this project, or as the community calls this position, “chef.” Jared Gray presented plans for the organization in 2023, including the goal of making Sushi a leader in DEX.

The SushiSwap team plans to launch a DEX aggregator in the first quarter of this year. And to open a decentralized incubator, Sushi Studios (a platform for launching new crypto projects). A number of other new services, including the NFT marketplace Shoyu, are also in development, according to Gray’s report.

On Jan. 25, it was reported that the developers of SushiSwap would launch a decentralized futures exchange on the Sei Network blockchain. According to journalists, this will expand Sushiswap’s capabilities by linking the project to non- Ethereum-based systems.

Our experts point out that new trends in the crypto market are forcing developers of DeFi-services to adapt to them in order to keep their positions. In addition to launching new products in 2023, SushiSwap recently introduced the “xSwap” solution for simple token exchange between networks. And also Furo Streaming, a service that automates regular distribution of funds to multiple addresses.

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Telegram founder Durov announced plans to launch a DEX exchange for trading cryptocurrencies

Founder of Telegram announced plans to launch a decentralized platform for trading digital currencies. Our experts told us how successful this project could be. And whether its development will be hindered by regulators

The next step in development of Telegram is the creation of decentralized tools. Including cryptocurrencies, as well as decentralized cryptocurrency exchanges, Pavel Durov said on November 30.

“This is how we can correct the mistakes caused by excessive centralization, which has failed hundreds of thousands of cryptocurrency users,” wrote the head of Telegram.

He explained that the blockchain industry was built on the principle of decentralization. But it turned out to be concentrated in the hands of a limited circle of individuals abusing their power.

“As a result, many people lost their money when one of major crypto exchanges FTX went bankrupt,” Durov recalled.

He said the solution to the problem is for blockchain projects to return to decentralization. And users should switch to transactions and wallets that do not depend on any third party.

The founder of Telegram said that he and four other people launched a decentralized domain name auction platform Fragment in five weeks. It is based on the blockchain platform TON, which Durov called fast and efficient enough to host popular apps. At the same time, Durov criticized Ethereum, calling it outdated and expensive, even after the latest global network upgrade.

“Fragment is amazingly successful. In less than a month the platform has sold $50 million worth of user names. This week Fragment will go beyond user names,” Durov said.

How will regulators treat Telegram cryptoexchange?

In terms of resources and the existing experience of Telegram team in developing TON project. Creation of such a project as a decentralized exchange and cryptocurrency wallets seems realistic, our experts believe. However, the current global trend in regulation of cryptoassets turnover is tightening and streamlining of control requirements.

Since details of this project and specifics of functioning of announced project are not disclosed. At the moment, it is difficult for our experts to assess how it will meet the requirements of the legislation of different countries.

What are the future prospects for this Telegram project?

Decentralized crypto exchanges are difficult to regulate because they are essentially not companies. Therefore, it is legally possible to prohibit such exchanges, but it is more difficult to limit their activities. Our expert stressed that liability in case of using such exchanges from the legal point of view does not apply to their creators. It extends more to ordinary users in each specific transaction.

Our experts admit the possibility that the launch of this site may be timed to the lifting of SEC ban. Which is imposed on Durov until July 2023 because of the attempted launch of the TON platform with the participation of investors from USA.

Most likely, the new DEX exchange will not be connected to Telegram in any way. Except for simplified authorization and a number of mechanics. Otherwise, they are definitely two different products.

What risks will ordinary users face when using a new DEX exchange from Telegram?

Most likely, DEX exchange will be created on TON blockchain. The main advantage of a decentralized platform is that it does not store users’ cryptocurrency. The exchange only brings together buyers and sellers of digital financial assets, without intermediaries. And users do not need to open an exchange account for such transactions – transactions are made from investors’ wallets.

That is, there is no risk of losing their funds if the exchange decides to block them. As, for example, happens now with the centralized exchanges, which go bankrupt.

The only risk of participation in transactions on the decentralized exchange is the risk of losses due to delays in price updates. And you will need to pay a commission for transactions on that DEX exchange.

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