MARCO OLIVERA: Hello, and welcome back. Here's why you should watch today's Real Vision Crypto Daily Briefing. All eyes are still on the Ethereum merge. Just yesterday the Ethereum Foundation gave us specific dates on when it's going to happen. We're going to get into why this matters and what it means for you. Plus, we're going to dig deep into the recent hacks and security breaches that have plagued crypto. Corby Pryor is back to break down why they're happening and what, if anything can be done to stop them?
We're going to leave you with the key takeaways from that conversation. My name is Mark Olivera, with me today, we have as always, Mr. Ash Benington. Let's get into the latest price action. It's another slow day when it comes to price action. Right now Bitcoin is roughly at $21,500. That's up nearly a percent over the last 24 hours. But Ash, what's it looking like? The merge is right around the corner, what's going on with the price?
ASH BENNINGTON: Thank you, Marco. Right now ETH is trading around 1700. That's up a whopping approximately 3% in the last 24 hours, kind of flattish, looks like a bit of a late August volume slump, Marco.
MARCO OLIVERA: Well, yeah. Speaking of ETH, our top story today is about ETH. The Ethereum merged has an official kickoff date. Yesterday, the Ethereum Foundation announced additional details regarding this much discussed update to proof of stake. Ash, you and Nico broke down proof of stake yesterday, and how it's considered more energy efficient in the current proof of work system.
And we now know the merge will start sometime on September 6, and will complete sometime between the 10th and the 26th of September. Ash, what do you make of all this? What does this mean for investors? Of course, not financial advice, but what is worth paying attention to as we get closer?
ASH BENNINGTON: Very good question, Marco. So what this is really all about is fixing and finalizing the specific parameters for the merge. The reality is that these parameters are mostly interested to folks on the tech side. Like if I were to say activation is scheduled on Beacon Chain at epoch 144896, 11:34:47 UTC, you'd be like, well, that's cool. But why do I care?
The real answer here is if you're not on the core dev team are following this closely on the technical side, you probably don't really care all that much about the specific parameters that have been fixed. But why this story is important is because of what it signifies, Marco. And what it signifies is the merge is moving forward. If this were a shuttle launch, what you just heard from Mission Control at NASA is all systems are go. The merge is imminent, and we're moving forward, Marco.
MARCO OLIVERA: All systems are go. I like that. That means we're finally here. It really does feel like the moments before a big launch that you see when you're on watching television. It's going to be truly a moment to watch. It's going to be exciting couple of weeks. Let's turn our attention to what else is making news today. Our first story here is Singapore Court Greenlights Inquiries into 3ACs finance.
As we see the damage from the Terra LUNA collapse and all the subsequent meltdowns continue to unfold, the Singapore High Court is targeting Three Arrows Capital. In case people forgot 3AC was one of the world's foremost crypto funds, they went belly up in June as Terra LUNA and Celsius created the so called death spiral. And the Singapore High Court is now allowing the liquidation of 3ACs assets to proceed. Ash, tell me why was 3AC is such a big deal? What does the move mean for the larger crypto ecosystem?
ASH BENNINGTON: So Marco, let me break this one down and recap because there's a lot here, it's a complicated story. Three Arrows Capital, often referred to in crypto land is just 3AC, obviously a very well-known crypto hedge fund founders, Kyle Davies and Su Zhu, widely held in high esteem in the crypto space, at least prior to this collapse. In the wake of the Terra collapse, well, all remember, of course, the dramatic collapsed in price in Terra, 3AC had exposure to Terra to the tune of about $200 million. According to an interview that Kyle Davies gave to the Wall Street Journal.
That exposure and perhaps some other factors caused 3AC to default on loans to void your digital. Well, those loans were worth around $650 million in cash and Bitcoin according to the contemporaneous reporting at the time. Now, you probably remember that Voyager itself then went background, excuse me, then went bankrupt. So that's the background here on this story.
One of the things that you can see when you look at it, and when you break it down and walk through this history is that the daisy chain effect or the death spiral, as you said at the top of this segment. How these projects and companies begin to fall like dominoes because of these interlinked exposures that they have to each other. So, how do we get to where we are today?
A few days later, this is back in 2022, a court in the British Virgin Islands issued a liquidation order in response to a petition by Teneo advisors, who are the liquidators of 3AC. They're the ones who are going to sell off the assets, so that the creditors can attempt to recover some of their funds. That's all back in June. So, what's the new news? What's happening right now? Why is the story back in the headlines? It's this, Marco, earlier this week in a court in Singapore, Teneo was recognized as 3ACS liquidator. So, this gives Teneo greater access to information in Singapore. That's where 3AC actually operated.
We're talking about really critical information like 3ACs bank accounts, properties and crypto holdings. All this according to reporting recently from Bloomberg. So long story short, when we look at this story, what does it mean? Well, it means that the liquidation continues and that the liquidators will have access to these critical records in the jurisdiction where 3AC operated. It also means that maybe, maybe we'll all be getting more information soon on what happened with 3AC, Marco.
MARCO OLIVERA: Yeah. More information is always good news. It really helps us learn what went wrong, how we can prevent it in the future, what steps to pay attention to if we encounter a similar situation. So, I'm really looking forward to learning more about this in the coming months. Moving on to our final story of the day. Yesterday Tether announced that they will not preemptively freeze Tornado Cash addresses until they receive more guidance from law enforcement.
A quick refresher, recently, the Treasury Department sanctioned crypto mixer Tornado Cash, accusing it of being used for money laundering purposes. And unlike stablecoin issuers Circle, Tether is not bowing down to US regulators. That's of course getting them rave reviews from the hardcore defi crowd. But Ash, how could a move like this affect Tether stablecoin, UST and the wider ecosystem?
ASH BENNINGTON: Well, Marco, as you said what makes the story interesting is that Circle agreed to preemptively freeze Tornado Cash wallet addresses from transacting using USDC while Tether did not agree to do the same with USDT. Tether also says they're awaiting further instructions from law enforcement. And it's not been asked as of yet at least to freeze any addresses by law enforcement.
What does it all mean? I'm not really sure. It sounds as though Tether may or may not ban addresses if asked by law enforcement, in which case the story totally inverts, right? If and when Tether does freeze wallet addresses based on a request from law enforcement, it's just a totally and completely different story. Final point on this more generally speaking not in regard to this Tornado Cash situation, USDT has blacklisted at 709 addresses while USDC has only blacklisted 82 addresses. Again, this is in total, not with regard to this most recent story here with Tornado Cash.
So Tether has blacklisted eight and a half times the number of wallet addresses that Circle has. This according to reporting from the Defiant based on the analytics dashboard Dune data, which I was exploring last night. And I was also encourage people, everyone in the audience to go and check the data for yourself on the Dune Analytics dashboard.
One of the things that's cool about this space, of course, is that you and I, and anyone are just able to go and take a look at the data. And you can actually see it and get a better sense for how their reporting is being done. That's I think one of the things that makes the defi space incredibly interesting, the crypto space incredibly interesting. You're not just reliant on someone at a news network to tell you that they read a report. It's all out there. It's public. It's on the website.
Marco, big picture for me on this story is we're still in the very early innings. We're just going to have to wait and see because I think the story could totally flip upside down. Not a ton here right now, obviously, a lot of debate, a lot of stuff happening on Twitter, but we're going to have to wait and see what the story develops into in the future. And of course, we're going to be watching it, Marco.
MARCO OLIVERA: Well, wow, that's actually pretty huge. I didn't know that USDT blacklisted 709 addresses and USDC only blacklisted 82 addresses. That's something definitely worth paying attention to. I'm going to check it out myself. And it definitely shows that when you look into the deeper interest story, sometimes it's not what-- it doesn't match what the headline is saying. And I think that that's something that's really important to pay attention to here.
But speaking of the-- yeah, speaking of the more illicit side of crypto, you recently sat down to dig into all these crypto hacks and security breaches with Corby Pryor, CEO of Oorbit, one of our go to specialists on this very topic. In this first clip, you ask Corby to update us on his thesis regarding crypto security. Let's take a listen.
ASH BENNINGTON: Corby, it's great to have you back on Real Vision Crypto. You were on in March. The last time you were here, we talked about security risks in the crypto space, especially cross chain vulnerability around bridges. Where are we today? Update us on your thesis and your view.
CORBY PRYOR: Thanks for having me on, Ash. So the thesis remains the same. That cross-chain bridges are generally not safe to use for the long term, but in general they are vulnerable to hacks and exploits. So in the last a year or so, we've seen 13 Cross-chain bridge hacks, totaling up to around $2 billion losses of value for people using those bridges. Well, the thesis is still the same, and that they're not secure.
There's really only two ways to go about security. And Bitcoin was the revolutionary one. But the historic way is that if anything that's valuable and there's a lot of it, it's going to be a target for criminal activity, criminal is going to want to steal from it. So securing assets has always been the practice of centralizing the assets in a location, and then closing it off from the world so criminals don't get into it.
The big innovation that, well, that Bitcoin figured out was a way to secure assets in a decentralized way, and keeping it open for the entire world, so keeping up access. And the way that Bitcoin was able to guarantee security for all the assets in the network is by the consensus protocol. So the consensus protocol, essentially, is a way to quantify how secure the network is. And if you can quantify it, that means you can engineer a system around it and scale it and know how it's going to perform. Even when you open up to the world.
The problem with cross-chain bridge is, is it doesn't really fall into either security practice. So option one is you secure assets by closing it off centralizing it. And that's how you prevent criminals from getting into the system. The downside is that you have to trust a group of people to manage the security around the assets. But option two is if you go the Bitcoin route, and decentralize it, open up access to the entire world, you have built in a security guarantee.
The downside there is something goes wrong. Consumers don't have much protection. And it's hard to hold people accountable. The reason why bridges keep failing and why they're just generally unsafe is that they don't follow either security option. So, across-chain bridge can say they're decentralized, but they don't quantify security with the consensus mechanism.
MARCO OLIVERA: So Ash, here we have Corby saying that cross-chain bridges keep failing because they don't follow the typical routes of securing assets. He mentioned too in this clip, can you break down what Corby's talking about here? Can you give us the big picture?
ASH BENNINGTON: So basically, what Corby is saying here is there are two separate ways to secure computer systems. The first is to centralize access and to apply traditional centralized asset controls. This is the way for example, your bank account is secured, your brokerage account is secured, traditional centralized data security. The second way is to use open decentralized protocols, the most famous of which is probably Bitcoins proof of work consensus mechanism.
And what Corby is really talking about here, his fundamental core point, is that these cross-chain bridges don't do either one. They are neither fish nor fowl. And this is obviously a major security's concern in his view. And we've seen that borne out numerous times in terms of the exploits and hacks that we've seen executed. Corby has been warning about the risks of these for some time. He's done it here on the Real Vision platform. He's done it with me on Real Vision Twitter spaces. And it's been proven right with each subsequent cross-chain bridge attack, Marco.
MARCO OLIVERA: Yeah, absolutely. One of the questions that I feel is on the top of everyone's mind when you watch that kind of clip is how do we even get to this point? And in this next clip, we have Corby talking about why we see so many cross-chain bridges operational despite these vulnerabilities. Let's take a listen.
ASH BENNINGTON: Corby, when you were here in March, you said words that unfortunately proved prophetic. You said, unfortunately, we're going to have to feel the pain before we solve the problem. And just about, I guess, a week or two ago, we saw this hack on Nomad, another cross-chain bridge, where about $200 million was lost. What's your sense of how long this goes on, for how much pain we need to feel before people start taking these problems more seriously?
CORBY PRYOR: We probably have a long way to go. Maybe we're halfway there. More bridges are ready to fail. [?] is talking to the last bridge to fail. And I think that VCs traders, everyone in crypto has gotten the message at this point in time, that there's something wrong with cross-chain. It continues to be the biggest vulnerability in the crypto ecosystem. And I think people are ready to evaluate the problems and figure out new ways to do it.
So the original culture, or there's two different cultures within crypto and the building community. The first one is the academic time, which moves really slowly there and to build technology. But sometimes there's over engineered. And then the other group of people are developers that pride themselves in shipping product really fast, build, build, build. Let's do it really quickly. Let's get it out there. Both mentalities I think are great for different applications and different use cases. It depends on what you're building.
But for cross-chain bridges, what we saw is that there's a lot of developers who had this build fast mentality, just ship the product. And the tradeoff was that they kept building and secure bridges that led to packs and exploits. And so the Nomad bridge was able to raise money from every single credible VC to get that stamp of approval. And so people just assumed that it was safe.
But if you were to actually apply first principles, and ask the Nomad team if there's a consensus protocol guaranteeing quantifying security, they wouldn't be able to do that. So there's this problem, like from a cultural standpoint, that if there's a stamp of validation because the technology is so complicated and so complex, that we're just going to have to trust someone who did the due diligence before us. Which is not a bad thing to do, but it leads to incidents like these.
MARCO OLIVERA: So Ash, this build fast mentality. Corby mentioned here is not something new. We've been in an era of move fast and break things ever since Mark Zuckerberg coined the term, but you would think with hundreds of millions of dollars or billions of dollars at stake on these bridges, there'd be more due diligence. Can you explain Corby's view here in this clip?
ASH BENNINGTON: Oh, Marco, that's exactly right. Move fast and break things, I would say it works fine as a methodology, for example, during the early years of Facebook. If you had to wait 20 minutes to post a picture on Facebook of like a juicy stake on your Saturday night out, I mean, so what? Nobody cares. Facebook was pretty much a toy at that point anyway.
But what Corby is talking about here is a fundamental mismatch between culture and use case. When you have hundreds of millions of dollars secured, or maybe we should say, allegedly secured by a move fast and break things ideology and culture, that doesn't really fit with the mission critical nature of moving hundreds of millions of dollars on cross-chain asset bridges, Marco.
MARCO OLIVERA: Well, on that point, speaking of ideology, Corby also mentions this idea of first principles. Can you help me understand what does that even mean?
ASH BENNINGTON: Yeah. First principles is a term I believe, originally adapted from Aristotelian logic. It's something that scientists talk about a lot. Corby, of course, his background is in math, physics and computer science. He studied quantum computing at University of Pennsylvania. So basically, what he's saying here is there's a way to do this. That's the way the marketplace does it when you're coding cool, fun things like social media.
And then there's the way that scientists who think very deeply before they act, do things. This very slow methodical way of breaking things down to the core first principles. He's just talking about that flip in culture, basically comparing or contrasting, I should say, the move fast and break things with a deep scientific way of thinking of first principles, Marco.
MARCO OLIVERA: Yeah. So it kind of like the academic one he mentioned on in the clip. Okay, very interesting. Well, so far, Corby has made it really clear that cross-chain bridges are a problem, and they need to be fixed. And so here in this next clip, Corby talks about one way he thinks we can fix them, it's not a way that too many people would like to hear. Let's see what he has to say about it.