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Ethereum’s ‘Unannounced Hard Fork’ Was Trying to Prevent the Very Disruption It Caused

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  • The bulk of Ethereum’s DeFi ecosystem went dark earlier today after a latent bug in the Ethereum code split the network’s transaction history in two.
  • The split resulted from a code change that was surreptitiously inserted into a previous Geth update and activated today; some Ethereum node operators ignored the update, which ironically was meant to prevent the very split that occurred.
  • The nodes that did not upgrade were under the impression the update was minor and did not know it included a change to Ethereum’s consensus design.
  • A post-mortem released today by Geth indicates that a hard fork to push the update was intentionally triggered today. The case is perhaps Ethereum’s greatest challenge since the 2016 DAO fork, and it raises questions about Ethereum’s oft-touted decentralization and the effectiveness of its developer coordination going into Ethereum 2.0. 

At first, it was an apparent issue with Infura, the ConsenSys-run servers that keep a majority of decentralized finance (DeFi) applications synced to the Ethereum network.

Infura went down around 8:00 UTC Wednesday, and with it, some of Ethereum’s most popular applications like Metamask, MakerDAO, Uniswap, Compound and MyCrypto, among others. Shortly after, Binance halted Ethereum trading after noticing conflicting transactions on its Ethereum node. As other exchanges suspended trading as well, the real issue became clear: A bug in the Go Ethereum (Geth) client, whose code underpins 80% of Ethereum’s applications, had split the Ethereum blockchain in two.

Read more: Ethereum Developers Delay Berlin Hard Fork to Stem Client Centralization Concerns

The two conflicting transaction histories meant Etheruem users were temporarily interacting with different versions of the Ethereum blockchain. More than causing delays, this put user funds at risk by knocking out the majority of Ethereum’s DeFi applications for a few hours.

Infura has fixed the issue, as have other service providers who were affected by the snafu, by updating their nodes. These stakeholders were running an older version of Geth, and the split was caused by an “unannounced hard fork” that was put into a recent update (but which was only just activated) that Infura and Blockchair, among others, ignored. 

Besides these two service providers, other Ethereum users and wallet providers were also affected because they didn’t update their code, developers have told CoinDesk. 

The fiasco has critics challenging Ethereum’s perceived decentralization, while stakeholders are wondering why the hard fork was pushed in secret without coordination between Geth and other development teams. 

To some, the split is the most pressing challenge for Ethereum since the infamous DAO hack of 2016.

Ethereum’s chain split: How it happened

In a just-published post-mortem, Péter Szilágyi, a team lead at Ethereum, wrote that a hard fork “was (deliberately) triggered on the Ethereum network.”

A representative from Optimism, an Ethereum scaling project, recently posted that the project was responsible for triggering the hard fork.

A hard fork is an update which is incompatible with earlier versions of a blockchain’s software, so when the hard fork activated today, it created two versions of the Ethereum transaction ledger: one with transactions from updated Geth clients, and one with transactions from older Geth clients (like Infura).

“The fix was deployed several months ago and only today a transaction that caused that split came in,” Nikitia Zhavoronkov, the lead developer at Blockchair, an Ethereum block explorer who was affected by the hard fork, told CoinDesk in a direct message. 

Read more: Did Ethereum Learn Anything From the $55M DAO Attack?

Thinking the update was “a minor change to the code,” Blockchair didn’t bother with the update because it wouldn’t be worth the downtime for their services. But more than minor, developers apparently made a quiet change to Geth’s consensus mechanism in the update, as well. 

“The Geth team indeed changed the consensus implementation in the v1.9.17 release, however the team did not create any new rules that the Ethereum community didn’t know about or agree to,” Szilágyi writes in the post, saying these rules were laid out in an Ethereum Improvement Proposal three years ago.

“If you don’t consider accidentally introducing a bug a ‘consensus upgrade,’ then you should also not consider fixing the said bug a few months later a ‘consensus upgrade’,” he argued.

A call for transparency

Ironically, the hard fork itself was intended to fix the very consensus issue that caused the split. 

The Ethereum bounty program recently recognized John Yang, a newcomer to Ethereum’s open-source community, for discovering this and another vulnerability. Geth developer and Ethereum security expert Martin Swende tweeted the changes in the update fix the disclosed issues, intimating that the debacle is a “reminder to keep your node(s) up to date!”

Swende continues to say in the tweet thread that developers did not announce the big change to avoid drawing attention to the flaw. In his own explanation, Szilágyi said that “silently” fixing the bug invited less “disruption.”

Still, other Ethereum stakeholders are wondering why the bug could not have been disclosed in private with the teams that are building on Geth.

Read more: ‘High’ Severity Bug in Bitcoin Software Revealed 2 Years After Fix

“Each major project that the dev team is in close contact with should have a security contact that can help manage and coordinate a smooth upgrade, and we should work together,” Matt Luongo, the founder of Thesis, told CoinDesk.

“When hard forks are surprises, anyone who has built atop Ethereum like we have could lose money,” he continued.

Thesis builds the Keep Network, which issues tBTC, a form of tokenized bitcoin for the Ethereum blockchain. Luongo said the fork put tBTC users’ funds at risk, but not because of the chain split, which has been resolved after Infura and others updated their Geth clients. 

It’s because the downtime meant that users staking Ethereum in Keep Network couldn’t coordinate with the Ethereum mainchain; as a result, they risked having part of their stakes “slashed” for not meeting their fiduciary requirements.

Despite the problems the split caused, prices for ether, the Ethereum blockchain’s native cryptocurrency, rose 4.6% Wednesday after the news emerged, suggesting that traders see little systemic or long-term threat from the snafu.

Picking up the pieces

Zhavoronkov said the split was no doubt “unexpected” by the Geth developers, who he said would have announced the hard fork (per precedent) if they thought it would cause problems. Luongo shared a similar sentiment, saying that the Geth team are “good developers” but that they lack “experience running infrastructure” and are “underfunded.”

Both Zhavoronkov and Luongo said that they’re going to wait for Geth’s post-mortem before weighing in with a definitive takeaway. 

Because the core question – why was the hardfork triggered – has yet to be answered. It may have been accidentally activated, or maybe Geth, assuming users had activated, flipped the switch on the upgrade manually.

The post-mortem will “shed more light on things,” Szilágyi told CoinDesk.

Read more: Ethereum 2.0 Countdown Begins With Release of Deposit Contract

Zhavoronkov said that the mess-up was not malicious, but that “if [Geth] knew such thing could happen, they should’ve prepared a guide for node operators.” Luongo shared similar frustrations, saying that the Geth team are “good developers” but that they lack “experience running infrastructure” and are “underfunded.”

The comments key in on a frustration some Ethereum stakeholders share pertaining to why Geth kept the hard fork a secret. Going further, why did Infura, the backbone of Ethereum’s decentralized finance ecosystem, among others, not know about a consensus-breaking bug in Ethereum’s code before a hard fork had been activated to fix it?

“This is a bit of a grey area and requires a case-by-case discussion,” Szilágyi explains in the post. “We all agree that transparency is king and that we should strive as much as possible towards it, but it’s also important to look at all the details before heads start rolling.

“In the case of Ethereum, it takes a lot of time (weeks, months) to get node operators to update even to a scheduled hard fork. Highlighting that a release contains important consensus or DoS fixes always runs the risk of someone trying to beat updaters to the punch line and taking the network down. Security via obscurity is definitely not something to aim for, but delaying a potential attack by enough to get most node operators immune may be worth the temporary ‘hit’ to transparency,” he continued.

Ultimately, Geth’s team believed there was too much risk in disclosing the vulnerability, so they decided that pushing the update surreptitiously invited the least risk.

“We’d argue that it actually did work,” Szilágyi says. Even though the update “took an unexpected turn with yesterday’s network split,” Geth’s team still believes keeping the hard fork hush “was the right call”

As Ethereum approaches its largest upgrade ever in Eth 2.0, the case could be a critical study in client coordination for the Ethereum ecosystem.

“The most important thing here IMO is that the folks who made this call are transparent about the reasoning, own any mistakes, and grow,” Luongo said. “Monero has dealt with [consensus bugs] well in the past, as has Bitcoin and Zcash. There are many examples, and while it’s always tricky to coordinate across an industry, eschewing any sort of coordination is extremely dangerous. 

“I hope this fork leads to tighter relationships and rethinking how projects on Ethereum interact with client development.”





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MicroStrategy Buys Additional 13,005 Bitcoin for $489 Million

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With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion.

MicroStrategy Inc (NASDAQ: MSTR) has continued its Bitcoin acquisition spree as it has purchased another $489 million worth of BTC. As of the 21st of June, the Nasdaq-listed business intelligence company holds 105,085 Bitcoins.

The company announced its latest Bitcoin acquisition earlier today. According to the company, the newly acquired BTC totaled 13,005 at an average price of about $37,617, fees and expenses included. The purchase came after MicroStrategy generated $500 million in cash from the sale of debt to fund the purchase of BTC.

Before MicroStrategy purchased the most recent Bitcoin, the company had unveiled plans to buy Bitcoin in a filing with the US Securities and Exchange Commission (SEC). In the filing, MicroStrategy said it would be selling up to 1 billion of its class A common stock through an “Open Market Sale Agreement” with Jefferies LLC. The company added that proceeds from the stock sales would be used to buy more Bitcoin. MicroStrategy explained:

We intend to use the net proceeds from the sale of any Class A common stock offered under the prospectus for general corporate purposes, including the acquisition of bitcoin, unless otherwise indicated in the applicable prospectus supplement.

MicroStrategy Focuses on Bitcoin Acquisition

In addition, MicroStrategy has made Bitcoin acquisition a focus for the company. The company said that it mainly pursues two corporate strategies. Apart from growing its enterprise analytics software business, a major strategy for the company is to acquire and hold BTC.

In the SEC filing, the Nasdaq-listed company added that it is currently seeking opportunities to implement Bitcoin-related technologies like blockchain analytics into its software offerings. Also, the company intends to hold its Bitcoin holdings long-term and not engage in regular trading.

MicroStrategy became the first publicly-traded company to buy Bitcoin in August 2020. At the time, the company bought 21,454 BTC worth $250 million, making BTC its primary treasury reserve asset. When MicroStrategy made its initial Bitcoin purchase, BTC was trading at $11,653 per coin. This means that the price of Bitcoin has surged about 5 times since the first purchase.

After debuting into the crypto space in August last year, MicroStrategy had purchased more and held more than 90,000 BTCs before its latest acquisition, announced on the 21st of June.

At the time of writing, Bitcoin is hovering around $33,000. With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion. According to MicroStrategy, its new subsidiary – MacroStrategy, manages about 92,079 BTC of its coins.

MSTR stock is currently at $595.79, a 7.64% decline over its previous close of $646.46. The company has grown nearly 403% in the last twelve months and 53.57% in its year-to-date record. In addition, MicroStrategy stock has gained more than 26% over the past month. However, MSTR has shed 17.65% over the past three months and has dropped 0.30% in the last five days.

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Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.



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Wise Fintech to Go Public via Direct Listing on London Stock Exchange

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In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company.

British fintech Wise, formerly TransferWise, announced Thursday its plans to go public via a direct listing on the London Stock Exchange (LSE). The money transfer company said it had sufficient funding and therefore, did not require underwriters or issuing of new shares.

Wise will pioneer direct listing in London, a deal which will be finalized on July 5. Sources speculate the listing could value Wise at anywhere between $6-7 billion, up from its latest $5 billion valuations. This would also make it one of the biggest floats this year.

Founded in 2010, Wise has managed to accumulate 10 million customers who use its services to send £5 billion ($7 billion) every month. Its rivals include Western Union and MoneyGram in addition to startups like WorldRemit and Revolut.

Since 2017, Wise’s track record shows consistent profitability with a 54% annual growth rate. The latest 2021 fiscal year report shows it made £30.9 million in profits out of the £421 million ($589 million) sales revenue. This year, the company’s payments app registered £54.4 billion of international transfers for 6 million clients.

Wise Listing on LSE

Listing the giant company is a great accomplishment for London as it competes with “The Big Board”, New York Stock Exchange Group (NYSE), to attract more high growth and Blue-chip firms. As of 2020, the NYSE had 2800 company stocks and its market cap as of June, 2021 was $24.68 trillion. LSE, on the other hand, has listed over 1300 companies and its market cap is at 40.08 from today’s MarketWatch data.

To further this development, the British government is considering increasing leniency in firm enlisting guidelines to encourage issuing of dual-class shares. However, European stock markets have been hit with a lot of volatility this year, with at least two IPO cancellations in recent weeks.

The dual share structure is what Wise is opting for as it allows them to retain voting control while accommodating investors and customers into their shareholder base. At present, however, it locks them out of the lucrative Financial Times Stock Exchange (FTSE) indices.

Nevertheless, the company intends to issue both class A and class B shares with the latter holding the privilege of 9 votes per share. The expiry for Class B shares is in the fifth year following Wise’s IPO. It is likely for concerns to arise over this structure as it may give executives excessive influence on shareholder votes.

In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company. Financial endeavors for the company are advised by Goldman Sachs, Morgan Stanley, Barclays and Citigroup.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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JPMorgan Acquires Nutmeg Robo-Advisor, Furthering UK Retail Banking

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Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs).

JPMorgan Chase & Co (NYSE: JPM) said Thursday it has closed a deal to purchase Nutmeg, an online investment management service, for an unnamed price. US biggest bank hopes the agreement, which awaits regulatory approval, will complement its launch of a standalone digital bank brand in the UK during the year.

Using the latest technology from Nutmeg will help boost JPMorgan’s retail and institutional push since the company aims at establishing as many branches as it can outside the US.

With over £3.5 billion (4.9 billion) worth of assets under management, the decade-old Nutmeg is one of the UK leading and award-winning robo-advisors. The company offers various investment accounts including Individual Savings Accounts (ISAs), general investment, and pensions accounts.

Additionally, its competitors include Wealthsimple, Moneybox, and Moneyfarm. Before the take-over, Nutmeg had raised over $150 million in investments from Goldman Sachs and the British venture capital firm – Balderton Capital.

JPMorgan CEO Jamie Dimon stated last year that the banking giant would be “much more aggressive” in adding assets by conducting more acquisitions. The bank may also be stepping up to competition from adversary Morgan Stanley (NYSE: MS) which, in recent years, has spent $20 billion in merger agreements with E-trade and Eaton Vance.

Dimon also mentioned leveling up against blue-chip tech firm Alphabet Inc (NASDAQ: GOOGL) and other fintech firms such as PayPal Holdings Inc (NASDAQ: PYPL).

JPMorgan Stock Market and Nutmeg Acquisition

Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs). This is not the first time the bank has partnered with a company then acquired it later. In October 2020, JPMorgan partnered with 55ip, a tax-smart fintech start-up, then bought it a couple of months down the line.

Differing regulatory guidelines in Europe and the UK made it necessary for JPMorgan to purchase the robo-advisor, rather than use investment technology available in the US. However, its US-based investment service You Invest is currently doing well, with assets valued at about $50 billion, as Dimon states.

JPMorgan’s tech initiative marks one among many happening in Britain’s retail banking sector. Banks such as Revolut, Starling, and Monzo manage digital-only checking accounts which have attracted a host of clients. Going by data from Innovate Finance, FinTechs in the UK probably make up the world’s largest markets, having pulled in $4.1 billion investment from venture capitalists as of last year.

JPMorgan Securities served as financial advisor in the JPMorgan-Nutmeg transaction, while Freshfields Bruckhaus Deringer acted as legal counsel. Arma Partners was Nutmeg’s financial advisor and Taylor Wessing was legal counsel.

As of June 17, 2021, at 7:59 p.m. EDT, JPMorgan stock closed at $151.76, down 2.89%. In the after-hours session, it was trading at $151.48, down 0.18% in 24-hours.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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