Network congestion and downtime cripple DeFi space
Although the DeFi space is in constant upgrade to accommodate the never-ending influx of new users, scalability still remains one of the biggest issues yet to solve. Recently, the Solana blockchain — one of the major Ethereum competitors — has suffered another severe network congestion, leading to degraded performance. In the end of last year the Solana blockchain faced similar problems with network performance and was even shut down for a few hours, needing to be manually restarted. The incidents have previously sparked debates over security of Solana’s Proof-of-History consensus algorithm.
Similarly, Ethereum’s Optimistic Rollups-based layer-2 scaling solution Arbitrum One has been down for over 7 hours. The team behind Arbitrum broadcast a layer-1 transaction on Ethereum’s mainnet to record 284 layer-2 transactions that were submitted to their scalability network right before its sequencer went offline.
Arbitrum had experienced a shorter outage earlier in September that was resolved within an hour. According to DeFi Llama, Arbitrum One is Ethereum’s major scaling solution with nearly $2 billion in total value locked, alongside with Optimism and Polygon.
Speaking of Polygon, this also popular layer-2 scaling solution for the Ethereum network experienced congestion due to Sunflower Farmers - a simple resource-gathering agriculture game that requires blockchain transactions to record in-game actions. Polygon’s downgraded performance has been blamed on bots that exploit the game for value extraction, which sent transactions fees from less than a cent to $0.50.
The fact that even after four years since the CryptoKitties clogged the Ethereum blockchain, just one play-to-earn game can still jam the whole Polygon network is a strong argument for application-specific chains such as Axie Infinity’s Ronin, according to Delphi Labs developer larry0x. In other words, game developers should build their own dedicated chains or layer-2 scaling solutions instead of competing with other dapps for the block space.
News outlets are concerned about Bitcoin mining industry in politically unstable Kazakhstan
Bitcoin has fallen below $40,000 for the first time since last summer, amid fears of the US Fed rising interest rates, essentially turning off the flow of “cheap money” that pump the world markets.
Another reason for uncertainty came from a Central Asian country on the opposite side of the globe. While Bitcoin network’s total hashrate was breaking records, Kazakhstan — a large hub for Bitcoin miners — has been thrown into turmoil by the protests that started on January 2 because of surging fuel prices, and then grew into massive nationwide anti-government protests in all major cities.
Many mainstream media outlets rushed to report about sharp drop in Bitcoin hash power with sensational headlines, but in reality the impact was limited and expected to be short-lived. According to data from Blockchain.com and BitInfoCharts, the Bitcoin hashrate stayed within normal volatility range with slight decrease during the internet blackout in Kazakhstan, which occurred as the government started to suppress riots in the country.
Within a few days of social unrest, thousands of people have been detained and at least dozens have died. Russian-led military alliance CSTO sent “peacekeeping forces” to the central Asian country as per request of Kazakhstan’s president.
Following China’s crackdown on Bitcoin mining last summer, Kazakhstan became a popular destination for miners to relocate their hardware. According to the latest data from Cambridge Centre for Alternative Finance, Kazakhstan is the second-largest country by Bitcoin hashrate after the US, contributing an estimated one fifth of the total network hashrate in the second half of 2021.
In other news
Liechtenstein-based cryptocurrency exchange LCX has been hacked to the tune of $6.8 million worth of various tokens such as ETH, USDC, LRX, and SAND. The exchange confirmed that one of its hot wallets has been compromised, and suspended all deposits and withdrawals.
The Republic of Kosovo, a partially recognized Southeast European state that declared independence from Serbia in 2008, has banned Bitcoin mining due to a growing energy crisis. The local police has seized 272 ASICs - hardware used for Bitcoin mining.
Global non-profit news organization the Associated Press (AP) is set to launch an NFT marketplace at the end of January with photos from its award-winning photojournalists. The market place was built by blockchain infrastructure firm Xooa and will run on Ethereum’s Polygon.
Another NFT platform LooksRare has launched with a so-called “vampire attack” on OpenSea — the world’s largest NFT marketplace by trading volume. LooksRare airdropped its native token LOOKS to users of OpenSea who have traded more than 3 ETH on the rival platform between June 16 and December 16.