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Regulators

US watchdog prohibits interactions with Tornado Cash

The US Treasury Department added Ethereum’s most popular mixing protocol Tornado Cash to its Specially Designated Nationals and Blocked Persons List (SDN), essentially banning all US citizen and entities from using the mixing service or interacting with any wallet addresses tied to the protocol.

According to regulators, many cybercriminals have used Tornado Cash to launder money, including the North Korean Lazarus Group — tied to the $625 million hack of Axie Infinity’s Ronin Network.

The news raised serious concerns in the crypto space as the US watchdog didn’t sanction individual addresses tied to criminal activities, but rather prohibited all US individuals from interacting with open source software. The new ban also means that all US persons have to ensure they do not interact with addresses that used Tornado Cash, which can push people to prefer centralized custodial platforms over self-custodial wallets.

While US sanctions sent a strong message to all users of privacy protocols, Tornado Cash was specifically designed in such a way that it cannot be turned off. Tornado Cash is a non-custodial service with open source UI that uses immutable smart contract on the permissionless Ethereum blockchain.

However, the service will clearly experience temporary infrastructure problems due to reliance on centralized services. Following the ban, project’s website went down, GitHub page and accounts of its contributors have been deleted, Infura and Alchemy blockchain API providers started blocking RPC requests to Tornado Cash, and stablecoin issuer Circle has frozen 75,000 USDC belonging to protocol’s users.

Ethereum co-founder Vitalik Buterin has publicly admitted using Tornado Cash when donating to Ukraine.

NFT

Yuga Labs to get a cut from each Meebits sale

Yuga Labs announced a 5% royalty on the Meebits collection, meaning that the company will get 5% from each NFT sale on the secondary market (OpenSea, LooksRare).

The Meebits collection has been created by Larva Labs, a well-known company in the NFT space for the creation of the CryptoPunks profile picture (PFP) collection released in June 2017 that reached nearly 70 ETH floor price and over 3 billion market capitalization in January 2022, according to NFTGO.

Yuga Labs has acquired brands and intellectual property (IP) rights of Meebits and CryptoPunks from Larva Labs earlier in March. Following the acquisition, the company has promised to grant the commercial rights of all CryptoPunks and Meebits images to their respective NFT holders in a similar way like the company did with its other collections.

They also raised $450M this year in a funding round led by a16z with projected revenue of $539M in 2022, according to a leaked pitch deck. Since the company didn’t meet its revenue goals with land sales of the Overside metaverse project through the primary market, it has to find alternative revenue streams.

The introduction of royalties to the Meebits collection has generated very polarized opinions. On the one hand, the company needs to get a cut from secondary sales in order to channel those funds into the brand development. On the other hand, a unilateral decision to introduce royalties without any DAO vote goes against principles of decentralization. In order to circumvent the royalties, some NFTs traders suggested to switch to zero fee marketplaces with a built-in feature to voluntarily tip creators during the sale.

NFTs from Yuga Labs’ most famous creation Bored Apes Yacht Club (BAYC) have been acquired by many celebrities and featured in the latest Eminem and Snoop Dogg video clip, despite accusations of the collection containing hidden alt-right memes and inside jokes.

In other news

  • The Lido DAO has voted to sell 10 million LDO — or 1% of the LDO token supply from the DAO treasury — to venture firm Dragonfly Capital with a 1-year lockup period. The previous proposal to diversify the treasury got rejected because it didn’t include any lockup period.

  • A security vulnerability has been discovered in cross-chain bridge Nomad, leading to multiple exploits by various parties that resulted in a total loss of $190 million. Following the incident, the team managed to recover $22 million by offering a 10% white-hat bounty for returning the stolen funds.

  • Due to low security standards of the Slope wallet, nearly 8,000 Solana addresses lost their funds to the total of about $4 million worth of SOL, USDC, and other Solana-based tokens. The exploit was possible because seed phrases passed to Slope’s server were stored in the unencrypted plain text format.

  • Layer-1 blockchain NEAR Protocol disclosed a data breach that included SMS and email addresses used as recovery options in its wallet.

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