😏 Vitalik inspires CZ to practice safe CEX

Nov 21, 2022 | Newsletter

Whats going on ladies and gents! Welcome back, happy Monday!

We hope you touched some grass and enjoyed the opening night of the World Cup…not a great start for the host nation but plenty room for imporvement. This week in the news we’ve got FOMC members Mester, George and Bullard speaking on Wednesday followed by FOMC meeting minutes on Thursday.

Buckle up it’s almost show time, with Genesis and Grayscale tettering on the edge plus Trumps Tweeting again.

Yes Donald, we think the same

And in todays edition, the word on the street is that Vitalik inspired CZ to practice safe CEX which is the talk of the town and VERY important. We’ve got a treat for you today as we break down a possible solution for safer CEX which long term will benefit all of our bags!


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The TLDR

• The Big Topic – A solution to safe CEX ft Vitalik and CZ
• Bitesized bits – Will Genesis capitulate the market? Solana get’s an upgrade but validators are slow to adopt and Trump is back on Twitter…a political disaster or a good Twitter larp?!
• Chart of the day – $BTC monthly chart…wen up?!
• Ape Chasers – 🕵️‍♂️


🔥 The Big Topic – A solution to Safe CEX

This whole SBF, FTX, and Alameda shenanigan has brought into question the best way we can practice safe CEX (whilst still being anon lol). PROOF OF RESERVE Feels like proof of spoof as Crypto.com CEO punted eth to gate.io

This year we have been witness to the collapse and failure of the FTX empire. An Empire that should have represented the people, being a voice of positivity and leading the way to freedom to continue to help our industry continue to grow at light speed.

But no.

Ole boy SBF and his knucklehead cronies decided to do us a doozy and completely REK the market in such a way that not only saw Crypto Twitter come to back life but in ways that go deep down into the ether of the dark web and beyond.

So, that’s enough of ole boy SBF and his cronies as all eyes are on safe CEX because let’s be honest, without practicing safe CEX now, it’s going to be hard to get the trust back from whales, institutes and all those who have been burnt in 2022.

Enter Vitalik.

The King of Ethereum and the man whose aubergine successfully pumped the chart $100 bux in minutes. On Saturday Vitalik made a Tweet discussing Proof of Solvency and Beyond.

<div class=”tweet” data-attrs=”{“url”:”https://twitter.com/VitalikButerin/status/1593913471967666176?s=20&t=tVxkyQSzMg5IKstn7WfpeQ”,”full_text”:”Having a safe CEX: proof of solvency and beyondnnvitalik.ca/general/2022/1…nnBig thanks to @balajis and staff from @coinbase @binance @krakenfx for discussion!”,”username”:”VitalikButerin”,”name”:”vitalik.eth”,”date”:”Sat Nov 19 10:25:59 +0000 2022″,”photos”:[],”quoted_tweet”:{},”retweet_count”:1716,”like_count”:7519,”expanded_url”:{“url”:”https://vitalik.ca/general/2022/11/19/proof_of_solvency.html”,”image”:”https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/eab1b390-fb25-426f-9826-7fccbebc8c2b_150x150.png”,”title”:”Having a safe CEX: proof of solvency and beyond”,”description”:null,”domain”:”vitalik.ca”},”video_url”:null,”belowTheFold”:true}”>

Twitter avatar for @VitalikButerin

vitalik.eth @VitalikButerin
Having a safe CEX: proof of solvency and beyond

vitalik.ca/general/2022/1…

Big thanks to @balajis and staff from @coinbase @binance @krakenfx for discussion!

Buuuuut…before we dig into Vitalik’s book of crypto karma sutra let’s remind ourselves of what Proof of Reserve is (aka Proof of Spoof if your Crypto.com and Gate.io).

The all-seeing oracle, Chainlink, made a blog post back in late 2020 called Proof of Reserve: Enhancing DeFi Transparency which looks at how we can enhance defi by providing stronger security guarantees with increased transparency.

And with devs building ever more complex and complicated decentralised financial protocols, there is now a greater need for an automated process to assess the transparency of blockchains, smart contracts, and oracles.

Proof of Reserve is there to autonomously audit collateral in real-time so that we, as degens and normies, can literally see what a project, protocol or CEX has in reserve and that way we can move towards a more trustless model of transparency. Oh and it’ll likely boost consumer confidence knowing how solvent (or insolvent) an exchange or project is.

*lightbulb* Soooo ummmm…why wasn’t something like this put in place back in 2020 or before?! That’s another question for another day whilst we dig ourselves out of this pit of goblins

Note: DefiLlama does a good job of showing exchange transparency which can be found here.

And now back to Vitaliks approach to safe CEX.

ETH Proof of Schlong

This is crypto right?! a deep dark world of technical wizards, punks and giga brains…so it only makes sense to have a cryptographic solution that can make those tradfi big cheeses weak at the knees as we open up and commit to more than just on chain transparency.

Introducing Proof of Solvency (yes…it wouldn’t be crypto without another “Proof of”). Proof of Solvency demonstrates that a crypto exchange has enough in its reserves to settle all its customers’ accounts. This basically means, that in a time of high stress, FUD, and chaotic capitulation, no customers will ever suffer that sickening feeling some of us recently had, due to having their funds locked away deep inside an exchange’s liquidity vault.

Vitalik noted that:

“Even more ambitiously, an exchange could build a system where it can’t withdraw a depositor’s funds at all without their consent. Potentially, we could explore the entire spectrum between the “don’t be evil” aspiring-good-guy CEX and the “can’t be evil”, but for-now inefficient and privacy-leaking, on-chain DEX.”

What Vitalik is saying here is that Proof of Solvency, in its rawest form, is the ability to prove customers’ deposits are equal to X (Proof of Liabilities) whilst proving ownership of private keys of X coin (Proof of Assets). That way we know that each customer’s deposits are able to be paid back, in full, in the event of a black swan contagion event.

And judging by the size of the pickle we are currently dealing with, we are stuck in the dark age (kinda like AOL) and a generation of innovation away from it (lucky this is crypto and development moves fast…usually).

Proof of Solvency looks like a good way to practice safe CEX and unsurprisingly the current big cheese on the block, Binance CEO CZ made a Tweet to let the remaining 14 of us left on crypto Twitter know that he too is reading Vitaliks book of Crypto Karma Sutra.

So it looks like the BNB devs are cooking up something with Vitalik concluding that:

“…my hope is that we move closer and closer to all exchanges being non-custodial, at least on the crypto side. Wallet recovery would exist, and there may need to be highly centralized recovery options for new users dealing with small amounts”

Looking long term and at the bigger picture, the combination of Proof of Solvency and Proof of Reserve are those “Proof of’s” that are needed in the space. This combo is likely to have the ability to draw back big institutes smaller, slightly more savvy, retail investors and those degens who have been burnt hard this year back into the space.

CEO and Founder of Avalabs, Emin Sirer agrees with this approach to safer CEX in this Tweet thread.

Our Take

The FTX fallout has, once again, banged the drums of change and proven that in a space where we boast about “transparency” and “trustlessness” because it’s “on the blockchain bro”, we don’t actually have that much of it. Especially on the CEX side of the equation.

With hindsight in mind, if we were to have had the combination of Proof of Solvency and Proof of Reserve activated, could we have prevented this contagion from spreading quite as far as it has by spotting the warning signs?

Would we have foreseen Luna and 3AC’s collapse sooner? And is Genesis going to be the final punch to the chin along this painful road to absolute capitulation?

Whether you like it or not, CEXes are needed and they do play a huge part in the bigger crypto ecosystem. To see them go down in a way that feels like a kick to the balls is tough to stomach due to the ripple effect it’s having on the wider global economy.


🗞 In The News

Will Grayscale fall? as the billion-dollar hedge fund refuses to show it’s proof of reserves due to “security concerns.”

Cathie buys another Crypto dip but this time is buying $2.8m worth of GBTC as it sees a 40%+ discount. Is this a wise move and enough to save Genesis?

Is Genesis, a ticking timebomb as the deadline for the crypto lender draws closer? The WSJ reports that in a leaked report they, so far, have been unable to secure the much-needed $1bn injection investment. Monday is going to be a big day.

Solana upgradooooors as Founder Toly annouces version 1.13.5 is live. But validators are a little slow off the mark with 44.53% making the upgrade. No surprise given the current situation that’s rekt the network.

Miracles happen at “Midnight” for ADA investors as they look on to the latest launch coming from the Cardo team. This time in the form of a confidentiality blockchain, underpinned with zk technology, Midnight. Good tech or another ADA ponzi?!

Guess whos back? Trump is back! and as you can imagine he was unlocked on US President Joe Bidens Birthday (20th November)…gotta love crypto larp! Is this a good or bad thing for the social media platform or the broader political stage?

FTX Drainer up to no good again and early Sunday morning began swapping Eth for renBTC and then used the Ren Bridge to bridge back out, effectively cashing out of the Ethereum blockchain in favour of native bitcoins. So far approx 45,000 ether has been sold.

MetaMask gets an NFT update that allows users of the crypto wallet to see a price estimate of their beloved PFPs.

<div class=”tweet” data-attrs=”{“url”:”https://twitter.com/MetaMask/status/1593288173005570049?s=20&t=l98Ilb8RnUUI0SAY-o2BZg”,”full_text”:”We bring another much requested feature to 🦊 Portfolio Dapp: NFT Price Estimate nnEstimates are powered by @NFTbank_ai – their unique algorithm can provide estimates with ~90% accuracy. nnSee what your NFTs are worth at a glance🧵👇 “,”username”:”MetaMask”,”name”:”MetaMask 🦊💙”,”date”:”Thu Nov 17 17:01:16 +0000 2022″,”photos”:[{“img_url”:”https://substackcdn.com/image/upload/w_1028,c_limit,q_auto:best/l_twitter_play_button_rvaygk,w_88/z6i6xfxo4vmvifygayqq”,”link_url”:”https://t.co/w0fjFEE2rD”,”alt_text”:null}],”quoted_tweet”:{},”retweet_count”:318,”like_count”:1197,”expanded_url”:{},”video_url”:”https://video.twimg.com/ext_tw_video/1593288102273073155/pu/vid/418×270/gD8Jpf2lFtH-SHxc.mp4?tag=12″,”belowTheFold”:true}”>

Twitter avatar for @MetaMask

MetaMask 🦊💙 @MetaMask
We bring another much requested feature to 🦊 Portfolio Dapp: NFT Price Estimate

Estimates are powered by @NFTbank_ai – their unique algorithm can provide estimates with ~90% accuracy.

See what your NFTs are worth at a glance🧵👇


🛡 Chart of the day: $BTC

Bitcoin Monthly Chart | Tradingview.com

Our Take

The bitcoin 1-month chart, is quite the picture right now. And we need all the bull juice we can get to make a bullish case for our beloved golden corn. We have already sliced through the 2017 peak and slowly working out way down toward the 2019 peak.

Chances are the 2019 people will be our next big test of support. If the Bitcoin bulls fail to hold then chances we float down towards the $10,000 marker.

Bull case, we see the Bitcoin bulls bounce off the 2019 peak and send it back up above, and hold, the 2017 at around $19,600-$19,800.

Bear case, the bears slice through the 2019 peak…deploy their weighted magnets and drag the price down to the $10,000 mark and below.


🤝 Here’s the Deel

and a quick word from our super awesome sponsors who help us make this all possible

If you are a builder in this space and are hiring a remote-first team take a look at one of our partners, Deel. They allow you to hire, manage, onboard, and pay from anywhere in the world without the hassle. Yes, Deel allows you to pay your team in crypto too…


🦧 Updates from the bloc

The latest thread

Has the boredom of this bear market got you feeling unproductive? Well, check out Chief Twits’ top 6 rules for insane productivity (that probably saw the Twitter HQ walk out) from a leaker email.

The latest podcast

The first in a 2 parter with Cantering Clark himself aka trader, lifter, and market merc. As the lads chat about how discipline = freedom and how to find your edge in the markets.

Take home point from Canterting Clark, “I’d rather buy 20% higher with a confirmed move to the upside.”

Tune in on YouTube or Spotify.


🕵️‍♂️  Ape Chasers

Ape Chasers, we aren’t out of the wood yet. Monday is going to be a big day as we find out if Genesis has secured its $1bn loan along with potential movements from the FTX drainer accounts.

Keep an eye on these wallets:

FTX Drainer Wallet

Used this wallet for renBTC and looks like bought 5 random NFT’s

And we had the rumours last week of Jump Trading offloading some of their Eth bags so it’s worthwhile keeping an eye on big movements

For you detectives, ZachXBT made this useful Tweet thread which contains a few key wallets.


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