Matrixport View_Technology #13

Matrixport Research

Summary

  • As ETH 2.0 continues its progress, it could be undergoing several hard forks in the near future. The first hard fork will be the upcoming “London” hard fork in July where the contentious EIP 1559 will be packaged with at least 5 other EIPs. The other fork is currently in discussion phase as developers seek to hard fork the beacon chain to speed up the transition to PoS mechanism.

  • The high gas fee on Ethereum continues to be a point of contention as developers continue to seek ways to ease the situation. Some of the solutions involve Layer 2 technology and new fee structure to help alleviate the issue. One of the key proposals, EIP-1559, has caused much unhappiness within the mining community, as such the developers has offered to ease the tension with the new EIP-3368 to help tide miners through the transition.

  • There are ongoing security breaches occurring across DeFi and dApp protocols.

Public Blockchain: Mainstream Tokens

EIP 1559 will be Included in the Upcoming “London” Hard Fork

Hard Fork Update ☆☆☆

  • The “London” hard fork is scheduled to be implemented in the upcoming July, where there will be at least 6 new EIPs packaged with the hard fork, including the contentious EIP-1559, where it seeks to fix the issue with high gas price by introducing a new transaction fee model

  • Despite the mining industry’s discontent with the proposal (as EIP-1559 will reduce their profits with the new fee structure), the community continues to push ahead with the scheduled hard fork

  • The hard fork has garnered support amongst developers and users, and the only way for mining pools to halt it is by being actively hostile against the network (causing 51% attack etc), however such course of action remains unlikely due to the large financial incentives involved in keeping the network running

Ethereum Moves a Step Closer to PoS Mechanism via Beacon Chain

Hard Fork Discussion ☆☆

  • In the latest proposal published by Ethereum developers, beacon chain could undergo its first hard fork adjustment, removing some of the complexity of the original design and allow it to transit faster to PoS mechanism

  • The proposal involves an “executable beacon chain”, where developers seek to execute a “minimal merge” between the two Ethereum chains, by forgoing features such as validator withdrawals to help deliver a simpler version and speed up the transition

  • The proposal is still in discussion and development, there has been no timeline set for the hard fork

New EIP Seeks to Ease Tensions Between Miners and Developers

EIP Discussion ☆

  • Due to the unhappiness amongst miners with the new EIP-1559, developers have prepared a new EIP in hope of offering a path of compromise between the two groups

  • The new proposal, EIP-3368, advocates that block rewards to be increased immediately to 3 ETH and then reduced to 1 ETH over the next two years following EIP-1559’s implementation to ease the impact on miners of Ethereum’s transition to proof-of-stake mechanism

  • While the new olive branch has appeased some of the prominent miners who had earlier pledged to organized a “show of force” by diverting their hashing power to a single pool for 5 hours, numerous miners are still dissatisfied with the offer, suggesting the miner community is highly divided on the issue

  • The proposal is in early stages of discussions and implementation is currently unknown

Sigma Prime Completes its First Merged Transaction Between ETH 1.0 and 2.0

ETH 2.0 PoS Prototype Validation ☆

  • Blockchain security provider Sigma Prime announced its first merge transaction between the two Ethereum network

  • The prototype transaction was completed by only using Proof of Stake validators, a further step towards the merging of the two networks, marking the initial steps towards Phase 1.5 in the ETH 2.0 upgrade roadmap

  • However, this is not the first of its kind, as Teku Ethereum client had also demoed a prototype capable of performing any ETH 1 transaction in an ETH 2.0 environment in Aug 2020

dApp and Layer 2 Updates

Vitalik’s Latest Proposal Seeks to Link Layer 2 Scaling Project

Cross-chain Layer 2 Proposal ☆

  • Vitalik proposes solution to link certain Layer 2 scaling projects using cross-rollup scaling to help protocols communicate with each other while maintaining interconnectivity and composability

  • Under the proposal, each Layer 2 scaling project will utilize two rollups, where one rollup will process simple transactions whereas the other has full smart contract support, enabling transfers between two smart contract enabled protocols

  • While there have been already been such proposals in the community, none have been implemented

Litecoin Launched MimbleWimble-Extension Block

Layer 2 Chain Launch (Testnet) ☆☆

  • Litecoin’s MimbleWimble-Extension Block (MWEB) proposal has been completed on March 15

  • Using MWEB layer 2 chain, users are able to convert Bitcoin to Litecoin using atomics swaps and take advantage of MimbleWimble’s privacy features

  • In addition to creating privacy for transactions, MWEB also improves scalability on the blockchain as it is able to compact transactions together, allowing the MimbleWimble chain to scale better than its base layer chain Litecoin

Hermez Network Launches Zk-Rollups on Ethereum Mainnet

Mainnet Launch ☆

  • Hermez Network launched its zk-rollup mainnet release on Ethereum chain for users, allowing them to benefit from the rollup’s lower transaction costs

  • Using zk-rollups’ zero-knowledge proofs to verify transactions, Hermez can save over 10x the block space where a Hermez transactions uses just 10 bytes on the main chain, compared to more than 100 bytes for a standard ETH transfer

  • Hermez has already secured a few notable partnerships, allowing it to integrate directly with Bitfinex and Tether, where customers can deposit their funds on a smart contract on the partners’ platforms and withdraw them immediately from Hermez Network to use on the Ethereum mainnet

Blockchain Adoption in Traditional Industries

**Financial Industry **

  • Visa recently announced that it will start accepting USDC as a settlement currency for transactions. Crypto.com is the first company to test this new feature with its own Visa-branded cards, where customers can pay using USDC and Crypto.com will transfer USDC directly to Visa for settlement instead of converting the USDC to USD first. (Digital Currency; Partnership ☆)

Security Incidents

DeFi

  • In early March, Meerkat (a yield vault project forked from Yearn.Finance) suffered from an attack that exploited a contract loophole, causing victims to lose $31m worth of funds. Two days later, a Meerkat Finance developer announced that the attack was a trial and all the stolen funds will be returned to the victims. The true intentions of the attacker remain unknown. ☆☆

  • An attacker slowly bought 33% stake in True Seigniorage Dollar, controlling the DAO voting process and hijacking it. The attacker proposed a new implementation in the code, passed it with his own stake, inserted a malicious code that printed him 11.8b TSD coins, and immediately dumped it all on PancakeSwap, The price of TSD crashed to zero for a period of time. ☆☆

  • A malicious DNS exploit targeted multiple DeFi protocols in attempt to coordinate a phishing scam across the different platforms. PancakeSwap’s team discovered the attempt and shut it down before any user information was leaked. ☆

dApp

  • A breach on Roll, a platform that allowed creators to mint and distribute their own Ethereum-based crypto, allowed a hacker to obtain the private key to its hot wallet, resulting in $5.7m being stolen. Part of the stolen funds were covered by Roll’s insurance funds, however, many users still lost large amount of money. ☆

Importance level：low-☆; medium-☆☆; high-☆☆☆

Sources: Coindesk, Cointelegraph, Crypto News, Decrypt, Reddit, Twitter, Techcrunch analyze by Matrixport

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