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Hackers eye up NFTs as $69M Beeple auction opens floodgates

Posted by
Ilya Abugov

Week in Review | Week #11, 2021

This was another turbulent week for the crypto industry. While BTC briefly broke through 60K, various sectors were rocked by attacks and controversies. Ethereum’s gas costs remain a major issue, and rival chains are taking advantage of it to develop their own ecosystems.

NFTs continue to dominate the headlines as new artists and celebrities give minting a try. However, as the value of these assets grows concerns also mount. There is a lot to unpack and learn from in this week’s events.

Hacks spread beyond DeFi

Over the past few months, it felt as though hackers were only interested in DeFi protocols. Their algorithmic nature and growing TVL figures made them a target for attackers looking to exploit algorithmic designs.

Source: DappRadar

Most recently Iron Finance suffered from a $170K attack. The number may seem small compared to some of the hacks from earlier in the month, but it is the overall trend that is worrisome.

Now, the plight has spread to other sectors. The hot wallet of the social platform Roll was compromised allowing an attacker to take around $7.5M in ETH. Social tokens have started gaining some awareness and traction, and so there was significant value there. However, the communities behind some of the tokens may not be as big and economically fortified, making this a big blow to the sector.

The week was full of non-algorithmic attacks. Cream Finance and PancakeSwap became victims of a DNS phishing attempt. It appears that GoDaddy accounts may have been compromised. There seem to be no issues with the smart contracts, but it is unclear if any users became victims of a phishing scam.

Source: Twitter

The NFT space was also not without an incident, as some Nifty Gateway users had their accounts compromised and assets were stolen. The breach does not appear to be on the side of Nifty Gateway and looks to be user-specific. However, this may be an indicator that NFTs are now big enough to draw the attention of malicious actors.

There was also some old fashion controversy stemming from the Alameda – Reef Finance debacle.

It is important for the industry to be aware of old and new attack surfaces and be proactive in the prevention and mitigation of exploits. Given recent events, the education of both users and teams regarding security best practices may be an important component of this.

Ethereum’s rival is attracting top projects

It feels like every week some notable projects announce that they will be launching on an Ethereum rival. This week bZx announced that it will be venturing onto Binance Smart Chain, while SushiSwap made its way over to Avalanche.

BSC has quickly grown into a serious rival for Ethereum and its ecosystem now has close to $13B TVL. While some question the level of centralization of the protocol and the limited creativity of projects launched on top of it, BSC continues to draw increasing levels of interest from project teams. EVM compatibility makes it easy for Ethereum projects to deploy on top of it.

Source: DeFi Station

Avalanche has a comparatively smaller ecosystem, but the appearance of projects like SushiSwap may spark user interest in the network.

BSC has demonstrated that once a chain attains a critical level of on-chain liquidity, momentum picks up and user and developer activity starts to grow quickly. So for younger networks like Solana, Avalanche, and Near Protocol, the path to adoption may be faster than might have been anticipated.

Interestingly, Aave has recently alluded to potential future deployment outside of Ethereum. The project has recently launched its AMM pools product enabling Uniswap and Bancor LP token holders to use them as collateral.

Aave continues to expand its offering and push the boundaries of its platform. Considering that Compound has already started to explore the multichain concept, it is only natural that Aave does so as well.

Beeple’s auction opens the floodgates

Christie’s auction of Beeple’s Everydays: The First 5000 Days, saw the NFT go for $69M+. Naturally, Sotheby’s did not want to be left behind and has announced that in April it will be auctioning NFTs from Pak.

Source: DappRadar

This is somewhat reminiscent of the DeFi SushiSwap-Uniswap saga when the latter launched its governance token after the rival. The result of the sale was so incredible that it now forces traditional auction houses, artists, and galleries to consider the NFT route more closely for fear of being left behind.

The Block has pointed out that Google searches for NFTs have spiked in 2021. This suggests that retail awareness and interest are growing. So it makes sense for established artists to branch out and try NFTs as well.

Now it looks like Damien Hirst will be doing just that with “The Currency”. The project involves 10,000 original artworks made on paper, and it may be that the sale itself would be part of the art.

Not without controversy

While Christie’s auction has drawn a lot of attention to the NFT space not all of it has been positive. Some, like Kelani Nichole, questioned whether the whole affair was just a “marketing stunt” and if the piece sold could even be qualified as an NFT.

Furthermore, when it was revealed that Beeple’s Everydays: The First 5000 Days was acquired by Metakovan more speculation ensued. With Metakovan being the founder of Metapurse, which launched the B20 tokens, some questioned if this was an attempt to pump the value of the said tokens.

The ongoing hype surrounding the NFT space has drawn a number of comparisons to the ICO hype days. At that time the market saw a variety of manipulative tactics aimed at raising token value. That period in crypto history ended with a painful crash. It is important for the industry to remember the lessons learned then.

While there appears to be no direct proof of any wrongdoing surrounding the sale, speculations raise concerns. With new retail participants entering the market education and self-regulation efforts will need to be there in order to try to prevent bad practices.

The information provided here is for informational purposes only. This is not investment advice and should not be treated as such. Strategic Round Capital and/or the author of this article holds a position in BTC, ETH, COMP, AAVE.

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