Nearly 1% of the Total Ethereum Supply is Locked in the MakerDAO Smart Contract

MKR.tools creator Mike McDonald raised a celebratory alarm on Twitter yesterday morning. According to the Ethereum blockchain, about 1 million ether  – or almost 1 percent of the total Ethereum supply – is presently locked in MakerDAO smart contracts.

MakerDAO is the project behind Dai, a second-generation stablecoin offering which very carefully enables the issuance of the US dollar on the Ethereum blockchain. The mechanics can appear complex, but Maker offers a helpful “for dummies” explanation that does not require one to be an expert economist or Ethereum developer to grasp. Author Gregory DiPrisco explains the difference between Dai and, for instance, Tether:

“You’re most likely familiar with stablecoins that hold USD in bank accounts and issue tokens on a blockchain that are ‘backed’ by these dollars. I call this legally-backed crypto, or an IOU coin, because if those bank accounts should ever be frozen or if the accountants defrauded token holders, the stablecoin now becomes an IOU on whatever’s left when they eventually get the bank accounts back (if they ever regain the bank accounts). Relying on the legal system to maintain crypto-tokens inserts an unreliable middle-man into the blockchain.”

Not All of This Ether is Contributing to Dai’s Market Cap

Although the blockchain shows around 1 million Eth locked up in Maker smart contracts, the Dai token’s market capitalization is actually somewhere around 1/3rd of that figure, at time of writing sitting around ~357,000 ETH / $72+ million.

The way the Maker system works is that users pool ether together (referred to as PETH) and are issued Dai tokens which are collateralized by the deposited ether and, through various mechanisms, are stabilized at $1. A term frequently used in these discussions is “WETH,” which is short for “wrapped Ether.” WETH is more of a concept than a product of the MakerDAO – PETH and Dai are respectively tokens issued by Maker.

A total of 967,507.91 ETH were locked in the primary Maker contract, PETH, at time of writing.

Source: Etherscan

A total of just over 103 million ETH have been generated since the smart contract platform’s funding and subsequent inception on July 30, 2015. This figure includes the initial 72 million coins that were issued as part of the Ethereum crowdsale or ICO-style funding mechanism that took place the year before.

Source: Etherscan

Which is to say that MakerDAO, which launched the PETH token and related products near the end of last year, presently accounts for nearly one full percent of all ether in existence. While some feel that Dai’s practical applications are limited, it is taking a radical approach to a complex problem, with results that have not been overly disappointing. It has built-in mechanisms to liquidate positions which might destabilize the system at large:

“[…] there remains the possibility of the incentive structures not working as expected — especially when the price of ETH keeps dipping and its value is worth less than the amount of Dai that it is supposed to be backing. […] In this situation [undercollateralization], the Maker system triggers a liquidation of the CDP’s collateral, automatically selling it off to the highest bidders for Dai as fast as possible to recapitalize and ensure that the Dai that it issued to the original user is fully collateralized.”

It also has a massive amount of Silicon Valley venture dollars in it, after Andreessen Horowitz’s (a16z) new crypto holding fund, initially capitalized at $300 million, went into Maker to the tune of $15 million last month.


Source
Author:  P. H. Madore
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Bitcoin Core Vulnerability Would Have Allowed Miners to Inflate the BTC Supply

A newly-patched vulnerability in Bitcoin Core was far more severe than initially revealed, developers disclosed in an updated statement on Thursday.

Bitcoin Vulnerability More Serious Than Earlier Announced

The statement, posted on the website for the open source project, revealed that Bitcoin Core versions 0.16.3 and 0.170rc4 not only patch a denial-of-service (DoS) bug but also address a serious vulnerability that would have allowed malicious miners to artificially inflate the supply of bitcoin through a specific type of double spend transaction.

The developers explain:

“Thus, in Bitcoin Core 0.15.X, 0.16.0, 0.16.1, and 0.16.2, any attempts to double-spend a transaction output within a single transaction inside of a block where the output being spent was created in the same block, the same assertion failure will occur (as exists in the test case which was included in the 0.16.3 patch). However, if the output being double-spent was created in a previous block, an entry will still remain in the CCoin map with the DIRTY flag set and having been marked as spent, resulting in no such assertion. This could allow a miner to inflate the supply of Bitcoin as they would be then able to claim the value being spent twice.”

Initially, developers had disclosed a lesser but still serious DoS bug that would have allowed miners to crash nodes and disrupt the Bitcoin network. However, doing so would cause them to forfeit their block reward, which is currently 12.5 BTC (~$83,500 as of Friday).

According to the statement, this bug had been present in the Bitcoin Core software since version 0.14, though it had not been discovered until this week. Version 0.15 introduced the inflation vulnerability.

Core Waited for Upgrade to Reach Critical Mass

Developers said that they waited to disclose the full extent of the bug to prevent malicious miners from exploiting it prior to the upgraded client reaching critical mass.

From the statement:

“In order to encourage rapid upgrades, the decision was made to immediately patch and disclose the less serious Denial of Service vulnerability, concurrently with reaching out to miners, businesses, and other affected systems while delaying publication of the full issue to give times for systems to upgrade.”

However, Core developers decided to disclose the full extent of the vulnerability — which they do not believe was ever exploited — after a majority of the BTC hashrate upgraded to the patched software. Nevertheless, full node operators who have not yet upgraded to the latest version of Core should do so as soon as possible.

“At this time we believe over half of the Bitcoin hashrate has upgraded to patched nodes. We are unaware of any attempts to exploit this vulnerability,” the statement said. “However, it still remains critical that affected users upgrade and apply the latest patches to ensure no possibility of large reorganizations, mining of invalid blocks, or acceptance of invalid transactions occurs.”


Source
Author: Josiah Wilmoth
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