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This Week In DeFi – September 29

This Week In DeFi – September 29

“Decentralized” wallet service Mixin Network was exploited for a significant $200 million in funds this weekend.

Alex Miguel
September 29, 2023

Happy weekend, DeFi readers!

This week… 👀

Mixin Network suffers a $200M hack
The OFAC sanctions yet another ETH address
Curve Founder settles his Aave debt
The Uniswap Foundation seeks an additional $62M in funding.

Mixin Network lays out its recovery plan

“Decentralized” wallet service Mixin Network was exploited for a significant $200 million in funds this weekend.

Mixin Network founder Feng Xiaodong has announced that, as a result, users will only have access to half of their funds – with efforts currently underway to recover the exploited portion.

The project has offered the hacker 10% of the funds, or $20 million, as a bug bounty in exchange for the return of the stolen assets. Mixin is also considering issuing “bond tokens” for users to claim the remaining affected assets over time, with the company planning to repurchase the tokens in the future.

[Announcement] In the early morning of September 23, 2023 Hong Kong time, the database of Mixin Network's cloud service provider was attacked by hackers, resulting in the loss of some assets on the mainnet. We have contacted Google and blockchain security company @SlowMist_Team… twitter.com/i/web/status/1…
— Mixin Kernel (@MixinKernel)
2:50 AM • Sep 25, 2023

OFAC sanctions “cartel-associated” ETH address

The US Treasury’s Office of Foreign Assets Control (OFAC) has imposed sanctions on yet another Ethereum address – this time associated with an individual with alleged connections to a Mexican cartel.

The sanctions have followed a “counter-narcotics” operation targeting 10 individuals. The wallet in question became active just this year, receiving around $740,000 in deposits on Binance over two months.

It is just the latest of a string of sanctions against wallet addresses, raising some questions about fungibility and issues around compliance for stakers.

Yesterday, OFAC designated an Ethereum address linked to the Sinaloa cartel that dealt in both Tether and USDC stablecoins.
Circle quickly blacklisted it. Crickets from Tether, though.
— John Paul Koning (@jp_koning)
5:28 PM • Sep 27, 2023

Is $CRV finally saved? Egorov pays off Aave debt

A weight may have lifted off $CRV holders, as Curve founder Michael Egorov settled his debt on lending platform Aave. Egorov deposited CRV tokens into Silo Finance, and converted crvUSD to USDT for repayment.

He still has $42.7 million in debt across four other DeFi platforms, secured by 253.7 million CRV tokens as collateral. Egorov recently conducted OTC sales of the Curve token to reduce potential liquidation risks, following a scary near-miss on potential margin calls.

Michael Egorov deposited 68M $CRV ($35.5M) to #Silo and borrowed 10.77M $crvUSD in the past 2 days.
Then swapped $crvUSD for $USDT and repaid the all debt on #Aave.
He currently has 253.67M $CRV($132.52M) in collateral and $42.7M in debt on 4 platforms.
debank.com/profile/0x7a16…
— Lookonchain (@lookonchain)
1:41 AM • Sep 27, 2023

Uniswap Foundation wants $62M – will governance agree?

Uniswap governance is currently voting on whether to provide the Uniswap Foundation with an additional $62 million in funding – a sum which is intended to be used for operations and research grants.

The vote is scheduled for October 4. One specific planned use for the funds includes developing a software development kit for Uniswap v4.

The Uniswap Foundation, which has already received $17.3 million in the first tranche of funding, plans to distribute $10-$15 million per year from its remaining $53.2 million in grants capital.

Last year, the proposal to create the @UniswapFND passed.
Today, we provide a refreshed view into our vision for Uniswap, the role the UF plays, and the strategy we're undertaking to achieve our goals.
We discuss what we've achieved, and what's ahead.
— Uniswap Foundation (@UniswapFND)
1:50 PM • Sep 27, 2023

Tarnished tokens – a concern for the future?

The US Treasury’s OFAC office has once again sanctioned an Ethereum address, this time one that allegedly has cartel ties.

Only earlier this year, they sanctioned addresses that they claim to be linked to North Korean hackers. Last year, it was Tornado Cash addresses.

So, these addresses and associated funds are now deemed “dirty money” for US users…. But what are the implications?

More than half of Ethereum nodes appear not to care, as OFAC-compliant blocks drop to just 45% – indicating an increasingly relaxed attitude to such transactions. After all, the sanctions are US-based – the rest of the world simply may not be concerned, as they can continue to transact without worry.

However, compliant US Ethereum users may see things differently. Funds from these addresses are tarnished, and very well traceable. The distinction between “dirty” and “clean” ETH (and other tokens) may prove a tricky mess, as some coins lose their fungibility.

Naturally, the distinction is likely to cause a stir down the road, especially if OFAC compliance begins to be more harshly enforced.

Users and/or validators might stand to be punished, potentially leading to censorship of transactions – a notion that goes entirely against the ethos of crypto. In a worst case scenario, some large players may refuse to use a chain that allows any OFAC-uncompliant transactions, possibly leading to a chain split.

As the amount of sanctioned addresses and assets pile up, it will be interesting to see where things will lead. How soon might ETH fungibility become a pressing issue?