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Some loans on Maker are never liquidated, prompting debt auction overhaul

Maker’s keepers are not particularly reliable, researchers find….

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The Maker (MKR) community is looking for solutions after an analysis by B.Protocol suggested that it is possible to exploit the liquidation system to create under-collateralized debt.

The researchers created small vaults for $128, just above Maker’s “dust” parameter that defines the minimum size for new vaults. As Maker’s oracles updated to new prices that made these vaults eligible for liquidation, BProtocol found that the debt remained unclaimed for several hours.

While the researchers later closed the bad debt loans on their own, the mechanism could be abused to create a Dai position that would never be liquidated. Splitting a $1 million loan in small tranches of slightly more than $100 would cost about $5,000 in gas — a small price to pay for the possibility of completely avoiding liquidation, the analysts assert.

The reason why these vaults are not liquidated has likely to do with gas prices. Each liquidation process costs approximately 500,000 gas, about ten times higher than the cost of opening each vault or sending a token transaction. Given that liquidation auctions are often extremely heated and rely on keepers outbidding each other with very large gas fees, small vaults are unlikely to be worthwhile to liquidate.

Yaron Velner, the founder of B.Protocol, told Cointelegraph that this was most likely because liquidation bots are instructed to ignore vaults below a certain threshold “based on some gut feeling.”

In response to the findings, the Maker community began researching ways of limiting the potential attack vector. If it were to be exploited on a large scale, it could lead to similar consequences as the Black Thursday incident. Bad vaults could eventually fall decisively below the 100% collateralization threshold, meaning that even if they were liquidated, they would still leave the system with unbacked DAI. Alternatively, high gas costs could mean that the largest profitable bid would not return enough DAI to cover the debt.

The Maker community is studying a quick remedy of raising the minimum vault size, but Velner was skeptical of this solution, as it is unclear if a higher minimum would suddenly make these vaults attractive to liquidator bots. A longer-term solution is “Liquidations 2.0,” where the protocol would directly pay liquidators for securing debt.

Velner believes this is largely an issue of incentives, noting that the cut-throat competition between liquidators introduces uncertainty in the expected profits that cannot be estimated analytically. B.Protocol aims to reduce the extent to which liquidators compete with each other, limiting it to periodic auctions where they bid for the right to engage in liquidations undisturbed. B.Protocol was also responsible for bringing to light Maker’s critical weakness to flash loans.

Other protocols relying on liquidation auctions could also be vulnerable to this issue, Velner noted.

Alex Melikhov, CEO of Equilibrium, a cross-chain lending protocol similar to MakerDAO, argued in a conversation with Cointelegraph that Maker’s complex auction mechanism resulted in a “poor track record of maintaining normal operations during times of market pressure.”

The solution adopted by Equilibrium relies on “bailsmen” who continuously commit liquidity, which is then automatically drawn by the protocol to patch up bad debt. According to Melikhov, the system suffers “none of the drawbacks we’re learning about MakerDAO’s auction mechanics.”

Victims of the Black Thursday crash were ultimately not refunded by the Maker community, partially due to the belief that it was a market failure and not an issue with the system. Nonetheless, given the current efforts to overhaul debt auctions, it appears that the community is beginning to recognize their limitations.

Source: https://cointelegraph.com/news/some-loans-on-maker-are-never-liquidated-prompting-debt-auction-overhaul

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Cointelegraph

Binance Coin reaches 37% of Ethereum’s market cap: 3 reasons why BNB is soaring

Binance Coin (BNB), the native cryptocurrency of Binance Smart Chain, has been rallying after seeing an uptick in transaction volume.

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Binance Coin, the native cryptocurrency of Binance Smart Chain, has been surging with a massive uptick in transaction volume.

Binance Coin reaches 37% of Ethereum’s market cap: 3 reasons why BNB is soaring

Binance Coin (BNB), the native cryptocurrency of Binance Smart Chain and top digital asset exchange Binance, is starting to close in on Ethereum (ETH) in market capitalization.

As of April 12, BNB is valued at $87 billion at the price of just under $600. The valuation of Ethereum is hovering at around $246 billion, which is 2.8 fold larger than that of Binance Coin.

— Joe Grech (@JoeBGrech) April 12, 2021

The technical momentum of BNB has been so strong that it briefly surpassed the volume of the BTC/USDT pair on Binance.

This trend is significant because USDT is the biggest stablecoin in the global market and the BTC/USDT pair is one of the most liquid trading pairs in crypto.

Why is Binance Coin surging so hard?

Binance Coin has been rising due to the three key reasons: an overall uptick in the popularity of Binance Smart Chain, strong technical momentum, and the gap between BSC and Ethereum projects.

Binance Smart Chain transaction volume. Source: BSCScan.io

In recent weeks, the transaction volume on Binance Smart Chain has tripled the volume of the Ethereum blockchain.

Particularly in Southeast Asia, the usage of Binance Smart Chain has been rising, according to Coin98, the biggest venture capital firm in Vietnam that is building a DeFi ecosystem targeted at Asia.

Considering that the price of BNB was much lower than Ethereum until late March, this discrepancy between BNB and ETH likely made BNB a compelling trade.

There is also a big gap in valuations between the Ethereum DeFi ecosystem and Binance Smart Chain, which has been fueling a large portion of the demand for BSC projects.

This has caused the value of BNB to rapidly rise over the past two weeks while ETH has been relatively stable at just over $2,000.

A journalist who covers crypto in China known as “Wu Blockchain” explained:

“BNB broke through an astonishing $600, but Ethereum’s Fees fell to its lowest point in a month. Although the transaction volume of BSC is 3x that of Ethereum, the two are not in a competitive relationship. The top 10 addresses of BNB hold more than 88%, and Eth is 20%. The future of Ethereum depends on the upgrade of EIP-1559 and 2.0. The only two things Binance needs to worry about are the government suppression and hackers.”

Traders foresee BNB to undergo a more explosive rally in the foreseeable future if it breaks out against Bitcoin.

Kaleo, a pseudonymous cryptocurrency trader, said:

“$BNB breaking above this level on the $BTC pair could lead to the type of explosive momentum needed to actually close in on $1,000.”BSC/BTC 1-day price chart (Binance). Source: TradingView.com, KaleoWill the capital rotate back into Ethereum?

However, Kelvin Koh, the managing partner at Spartan Group, one of the largest DeFi-focused funds in Asia, said that for now, he expects the capital to rotate back into Ethereum as BSC projects near the valuation of ETH equivalents.

He emphasized that there is a huge valuation gap between BSC and ETH projects. This gap could be making BSC projects compelling to the market. He said:

“BSC is having its own DeFi summer….so much alpha to be discovered in BSC ($XVS, $CAKE). If you are wondering why Ethereum DeFi coins are lacklustre, its because of the huge valuation gap that still exists between the BSC coins and ETH equivalents. Until this gap closes, money isn’t rotating back to ETH DeFi coins.”

Source: https://cointelegraph.com/news/binance-coin-reaches-37-of-ethereum-s-market-cap-3-reasons-why-bnb-is-soaring

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Cointelegraph

Our Man in Shanghai: Scandal as $45M of stolen government funds lost using 100X leverage

A blockchain security company’s future is in doubt after its CMO allegedly lost $45M betting on Bitcoin; Chinese netizens turn the other cheek to Peter Thiel’s warnings, and more

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The Chief Marketing Officer a blockchain security company has been charged with embezzlement; Peter Thiel calls Bitcoin a ‘weapon’ of China (but no one cares), and CZ’s net worth rises to $1.9 billion.

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Our Man in Shanghai: Scandal as $45M of stolen government funds lost using 100X leverage

Blockchain security company Beosin has been the focus of a major scandal after its Chief Marketing Officer Gao Ziyang was taken into custody and charged with embezzlement of state-owned assets. He is alleged to have been using government funds to unsuccessfully short BTC, resulting in a massive liquidation of over 300 million renminbi, or $45 million dollars.

Beosin, also known as Lianan Tech, had a working relationship with Chinese authorities and was helping them investigate fraudulent fundraising schemes. After the seizure of funds back in 2020, Beosin was tasked with storing and selling the assets, to be later returned to the state treasury. Instead of selling the assets, CMO Gao Ziyang allegedly opened a short position in late August, hoping to increase the size of the positions for personal gain. At the time, BTC was trading around $12,000.

Authorities say that records obtained from OKEx show the position began using 10x leverage, before increasing to 100x, and eventually ended up in liquidation. They began to ask about the whereabouts of the funds, before finally realizing that the assets were no longer in the wallet. Online, people have marveled at the age of Gao Ziyang, who was described as in his twenties. The future of Beosin, which was once regarded as a credible blockchain security company in China, is now in serious doubt.

Peter Thiel’s Bitcoin claims ignored

On Wednesday, PayPal co-founder and venture capitalist, Peter Thiel warned that the Chinese government may be using Bitcoin as a “financial weapon” to undermine the stability of the U.S. Dollar. The reaction was quite muted, as only 30 comments responded to the story on Sina Finance, a social media account with over 23 million followers. One of the top comments simply pointed out that “Bitcoin wasn’t invented by China” while another comment simply stated “Impossible”.

Binance billionaire

On Thursday, Binance founder Zhao Changpeng, better known as CZ, appeared as #1664 on Forbes’s annual billionaire list. His net worth is now listed at $1.9 billion, an increase of $700 million from the last list in 2020.

Nanjing Ribensi bought by US company

US Company Future FinTech announced earlier this week that they had agreed to a deal to acquire China-based mining company Nanjing Ribensi Electronic Technology Co. Nanjing Ribensi operates a mining farm that can handle up to 30,000 Bitcoin mining machines. The deal was worth approximately $9.1 million dollars and stipulates that the mining company must generate no less than approximately $2.3 million dollars in 2021.

Blockchain standards accelerated

China’s National Development and Reform Commission called for the accelerated implementation of blockchain standards in a new plan released on April 1. The plan was jointly issued by 28 government departments and also included technologies such as cloud computing, IoT, and big data.

This weekly roundup of news from Mainland China, Taiwan, and Hong Kong attempts to curate the industry’s most important news, including influential projects, changes in the regulatory landscape, and enterprise blockchain integrations.

Source: https://cointelegraph.com/news/our-man-in-shanghai-scandal-as-45m-of-stolen-government-funds-lost-using-100x-leverage

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CoinMarketCap removes South Korea crypto exchanges from Bitcoin price tracker

The crypto analytics provider also removed South Korean exchanges from the price calculations of cryptocurrencies in 2018 “due to the extreme divergence in prices.”

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“If the prices on South Korean exchanges stabilize, then we will add the data back in, but that hasn’t happened yet,” said a CoinMarketCap spokesperson.

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CoinMarketCap removes South Korea crypto exchanges from Bitcoin price tracker

Crypto price trackin website CoinMarketCap has removed many South Korean exchanges from its calculations for the price of Bitcoin as the coin dipped under $58,000 again.

As of today, CoinMarketCap’s Bitcoin price tracker shows no data from major South Korean crypto exchanges including Upbit, Bithumb, Coinone, and Korbit. The website uses data from many exchanges to estimate the average price for cryptocurrencies. At the time of publication, the price of Bitcoin (BTC) is $57,721, having fallen more than 2% this morning.

Speaking to Cointelegraph, CoinMarketCap content manager Molly Jane Zuckerman said the removal was due to the premium observed on crypto exchanges based in South Korea. The crypto analytics provider estimates the BTC price to be roughly 6% higher than that on other exchanges.

“If the prices on South Korean exchanges stabilize, then we will add the data back in, but that hasn’t happened yet,” said Zuckerman.

The last time the price tracking website took similar action was in 2018, when CoinMarketCap announced it had “excluded some South Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity.”

During roughly the same time three years ago, the price of XRP was falling significantly after reaching an all-time high of $2.96 on Jan. 2. However, the token is looking bullish today, having briefly surpassed $1.00 for the first time since 2018 after it rose more than 20% in the last 24 hours. The price has since fallen to $0.9694 at the time of publication.

CoinMarketCap said only its Bitcoin price index was affected today, given the large volume of the crypto asset on South Korean exchanges. Last month, the volume of transactions in the South Korean digital currency market — driven in part by the price of BTC reaching an all-time — briefly exceeded the daily average transaction amount of the country’s stock market.

Source: https://cointelegraph.com/news/coinmarketcap-removes-south-korea-crypto-exchanges-from-bitcoin-price-tracker

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