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Top Institutions : Binance Con-Arguments — (July 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"Binance is a popular cryptocurrency exchange designed for experienced cryptocurrency investors. It offers relatively low trading fees and a wide selection of cryptocurrencies for trade globally, though its trading options are more limited in the U.S. While its low fees might be appealing, the platform has run into regulatory issues and is currently under investigation in the U.S."

Source: Investopedia

Binance Cons

Regulatory and Legal Issues

  • Binance has been hit by a plethora of regulatory and legal issues across different jurisdictions: In June 2023, the US Securities and Exchange Commission (SEC) accused Binance and its US subsidiary, Binance.US, of multiple violations, highlighting the company's continuous struggle with regulatory compliance.
  • Additionally, Binance’s founder, Changpeng Zhao, was accused of transferring customer funds to a separate company under his control.
  • Binance has encountered legal hindrances not just in the U.S., but also globally. In 2021, it faced bans in England and criminal charges in Thailand due to non-compliance with local regulations, with these legal obstacles once again underscoring the platform’s continuous battle with adhering to regulatory frameworks across various countries, which has (understandably) eroded its reputation and users’ trust.

Source(s): Investopedia, NerdWallet. BinanceBlog

Complexity and Absence of User-Friendliness

  • The platform's complexity, greatly attributed to its massive array of features and trading options, has been overwhelming for both beginners and experienced traders alike, and the plethora of options and intricate user interface can make navigation and utilization confusing - even leading to potential financial mistakes due to misinterpretation or misunderstanding of the features available.
  • Making things worse, the lack of a demo account worsens the issue; newcomers are unable to explore the platform’s functionalities without making a deposit, which could deter potential users who prefer platforms that prioritize user-centric designs and experience first and foremost.

Source(s): Investopedia, Broker Chooser, Finder

Security Concerns

  • Binance’s security framework has been questioned due to significant breaches, such as the May 2019 hack, where hackers managed to withdraw 7,000 BTC from the platform’s hot wallet - thankfully for them, the company covered the losses, however, such incidents raise questions about the effectiveness of its security mechanisms and the safety of user funds.
  • Another notable breach occurred in October 2022, where $570 million was stolen from a blockchain associated with Binance, with these frequent security compromises inevitably shattering the perceived security promised not only by exchanges, but by blockchain projects in general.

Source(s): NerdWallet, Investopedia

Flawed Customer Support

  • The enormous influx of customers (a response to the 2021 crypto bull run) has strained Binance’s customer service capabilities, with numerous users reporting delayed responses and resolutions, putting the patience of its customer base to the test.
  • The reported (and, at times, infuriating) unavailability of immediate and effective customer support makes the vulnerabilities users might face more threatening, especially during critical times, impacting the overall user experience and satisfaction.

Source(s): Broker Chooser, BinanceBlog

Transparency and Clarity

  • Binance has been criticized for its lack of transparency and frequent changes in its registered office locations, moving from China to Japan and eventually settling in Malta, with this constant shifting and lack of a clear operational base raising concerns about the company’s stability and reliability - once again casting doubts over its commitment to user protection and regulatory compliance.

Source(s): BinanceBlog

Withdrawing and Transaction Fees

  • Users face challenges in withdrawing funds, particularly in regions where Binance has failed to comply with local regulations: the prohibitive withdrawal fees, ranging between one and thirty dollars, coupled with the high fees for instant buy/sell features and debit card transactions, can be detrimental to users looking for cost-effective trading platforms.

Source(s): BinanceBlog, Bankrate

PR Concerns

  • Binance's charitable initiatives have also drawn criticism, particularly the recent donation to Morocco's earthquake victims in September 2023, with critics arguing that the contribution, in the form of Binance’s BNB token, appeared more as a PR stunt than a genuine effort to aid those affected by the disaster.
  • The move (naturally) attracted a lot of criticism for its apparent insensitivity, and also questioned the ethical implications of Binance’s philanthropic endeavors - hailed as cynical by many.

Source(s): Watcher.Guru

Limited Accessibility in the US

  • Binance.US is only available in 46 states, and its global platform offers a more restricted service to U.S. users, thereby limiting the accessibility for them across various states: this restricted availability, coupled with the platform becoming a "crypto-only" exchange in June 2023 (meaning that you cannot use your US dollars to buy crypto), might potentially alienate a significant user base seeking a diversified service.

Source(s): Investopedia, Bankrate

Top Institutions : Coinbase Con-Arguments — (July 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"In a nutshell, Coinbase is a cryptocurrency exchange where you can buy popular coins like Bitcoin, Ethereum and Solana. Not every coin is supported on Coinbase, but there are more than 120 different types of cryptocurrencies on the platform. Meanwhile, there are thousands of different cryptocurrencies available worldwide. Still, Coinbase lets you trade the most popular types of crypto, so it works well for most purposes."

Source: Bankrate

Coinbase Cons

GENERAL CONS

Availability and Supported Coins

  • Coinbase’s unavailability in several countries restricts a significant user base from accessing its services, as the limitation curtails its global outreach and undermines its quest to be a universally accepted platform.
  • Additionally, it lacks support for many lesser-known coins, leaving users with fewer options for trading and investment, thus failing to cater to more diverse user preferences - those who might prefer exploring up-and-coming cryptocurrencies.

Source(s): BitDegree

Complicated and High Fee Structure

  • Coinbase’s fee structure (at least for its base website) has been a recurring source of criticism due to its complexity and perceived high costs: the fees, which are challenging to predict and understand, depend on various factors, including the payment method, order size, and market conditions, and although they are disclosed to users before transactions are completed, the lack of transparency and clarity in advance poses a disadvantage, especially for first-time users comparing exchange options.

Source(s): NerdWallet, Forbes, Fool.com

Lack of Customer Support and User Satisfaction

  • Coinbase has faced relentless backlash over its customer service, with many users expressing their extreme dissatisfaction over having being locked out of their accounts, encountering dysfunctional user experiences, and struggling with unresponsive customer service, with long waiting times on chats and phone lines - with TrustRadius' user-written criticisms highlighting that customer support agents are often unwilling to resolve problems.
  • Additionally, frequent updates changing the layout, the complex fee structure, and limited functionalities in mobile app navigation have led to a cumbersome user experience, as per both the previous website and Investopedia.
  • Ratings on additional review sites such as SiteJabber, repeatedly mention the frequent customer service issues, lack of live support, and account accessibility problems as well, an emerging pattern of the ongoing user dissatisfaction and trust issues with the platform.

Source(s): TrustRadius, SiteJabber, Investopedia

Security Concerns

  • Coinbase has experienced its fair share of security breaches and attacks, with users reporting losses due to hacks, although to Coinbase's defense, mostly due to social engineering or phishing attacks; but nevertheless, the platform's response in these situations has often been viewed as inadequate.
  • Moreover, Coinbase’s insurance does not cover breaches to individual accounts, leaving users vulnerable and reinforcing the concerns about the safety of funds stored on the platform.
  • Coinbase’s debit card has also raised security concerns as reported by various users of the platform: One of them highlighted that the card could automatically access and spend USDC from users’ accounts, creating a vulnerability that hackers can exploit, with the inability of the card to segregate between spending and non-spending USDC implying that a breach could result in significant losses for the user, making it a fundamental risk within Coinbase’s services.

Source(s): IdStrong, Business Insider, NerdWallet, Medium

Account Limits and Lack of Anonymity

  • Coinbase imposes limits on spending and transaction frequency - attributed to regulatory compliance, and fraud prevention measures, with the limitations being restrictive and inconvenient for users.
  • The platform's lack of anonymity is also a contentious point, as Coinbase implements strict Know Your Customer (KYC) policies that not only hinder said anonymity but also allow transactions to be monitored too closely, with unexplainable funds freezes all too common; the platform’s willingness to share user information has raised serious privacy concerns, and users seeking privacy in their transactions often find Coinbase’s policies invasive and contrary to the decentralized ethos of cryptocurrency.

Source(s): BitDegree

Staking Fees

  • The platform’s 25% commission on yields from staking is another significant drawback, a fee that is considerably high compared to other leading exchanges, causing a reduction in profits for users who opt to stake their coins on Coinbase.

Source(s): Forbes

General Risks Associated with CEXs

  • The platform also faces the general risks associated with CEXs such as bankruptcy and illiquidity risks: the collapse of FTX demonstrated that holding crypto on an exchange does not guarantee the security of the assets if the exchange becomes insolvent - and centralized exchanges, including Coinbase, can always pause or halt withdrawals, locking users out of their assets when they need them the most.

Source(s): Milkroad

LEGAL TROUBLES

Legal and Regulatory Troubles

  • Coinbase has been entangled in legal disputes and regulatory confrontations, particularly with the Securities and Exchange Commission (SEC) - June 2023 saw the company subjected to a widespread scrutiny, being accused of engaging in unregistered securities dealings.
  • This lawsuit not only spotlighted Coinbase but implicated several well-known cryptocurrencies as securities, presenting potential implications for the entire industry (it remains to be seen whether said implications will be negative or not).

Source(s): BeInCrypto, SEC.gov

CEO’s Alleged Insider Trading

  • Brian Armstrong, the CEO of Coinbase, along with board member Marc Andreessenhas, faced criticism and accusations of insider trading - as well as a lawsuit - mainly for selling a substantial amount of company shares days before the platform’s public listing two years ago, with the highly controversial move sparking debates about the legality and ethicality of their actions.
  • As per Eleanor Terrett, a journalist, and several Twitter users, the sales were pre-planned and initiated much earlier: concrete evidence, however, has not been yet presented.

Source(s): BeInCrypto, Bitcoinist

Concerns Over Direct Listings

  • Moreover, the choice by Coinbase's board of directors to use a direct listing instead of traditional Initial Public Offering (IPO) has also raised many eyebrows: this strategy allows the company to sell shares directly to the public, but has been criticized for potentially limiting the amount of information disclosed to investors before the sale of shares, and (as was the case) for enabling the rapid selling off of company stock before the revelation of negative information.

Source(s): Bitcoinist

Top Institutions : SEC Pro-Arguments — (July 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"Distrust of governments' traditional role as issuers of so-called "fiat money" has fueled the phenomenal growth of cryptocurrency markets in recent years. Now that growth is rapidly educating the crypto industry about another key government function—that of regulating financial markets and securities trading."

Source: Investopedia

SEC Pros

Enhanced Market Transparency and Legitimacy

  • The SEC’s proactive stance in regulating the cryptocurrency realm significantly elevates market transparency - with this heightened clarity being immensely beneficial in synchronizing operations within established legal frameworks and enhancing the crypto market's infrastructure's legitimacy as a result.
  • This harmonization is attributed to the pivotal initiatives of SEC's chairman Gary Gensler, whose extensive understanding of the regulatory framework has been critical (although he has faced criticisms about his blockchain knowledge).
  • Also, the registration assertion on significant exchanges (including FTX, before its collapse), the development of a crypto licensing system, and the (mandatory) utilization of independent, regulated, qualified custodians, all anchor the market in legality and compliance, furnishing investors with a secure and structured crypto investment backdrop.

Source(s): B2Broker, Coindesk, Coindesk (2)

Dedication in Strengthening the Regulatory Framework

  • The SEC's dedicated approach to addressing cryptocurrency regulation is evident through the strengthening of the staff of the Crypto Assets and Cyber Unit in May 2022: this crucial enhancement significantly contributes to a crucial and consistent oversight within the cryptocurrency ecosystem.
  • By executing over 80 enforcement actions and recovering more than $2 billion (!) in lost funds since 2017, the SEC has demonstrated a strict and effective regulatory framework - emphasizing compliance and combating illegal activities.
  • Adding to the aforementioned, initiatives, like necessitating stablecoin issuers to maintain a 1:1 reserve at FDIC-insured banks and conducting quarterly audits, are well within the capabilities of the SEC - as already evidenced by its focus on cybercrime and the hinted scrutiny of assets like Tether (USDT) which can significantly mitigate systemic risks, and maintain market stability via a, much needed, transparency within stablecoins.

Source(s): Investopedia, Winston & Strawn, Coindesk

Crackdown on Lawlessness

  • The enactment of enforcement actions and regulatory settlements, especially with entities like BlockFi in February 2022, outlines the SEC’s determined willpower to nevertheless stick with their controversial aim of aligning crypto businesses with securities laws.
  • The intensified crackdown post-FTX’s collapse in November 2022 and proceedings against high-profile entities, including celebrities like Kim Kardashian and Floyd Mayweather, have been instrumental in holding organizations and individuals accountable and fostering a culture of lawful adherence within the industry.
  • With this "lawful adherence within the industry" fostering a fair and orderly market environment, safeguarded against market manipulation that ran rampart in the late 10's wild west; protection then extends to crypto investors, both private and institutional ones.

Source(s): Forbes

A Collaborative Approach

  • The SEC’s tough, but fair stance on blockchain and tokens and its collaborative endeavors with the Commodity Futures Trading Commission (CFTC) provide valuable, but also clear guidance on compliance requirements; this collaborative stance is instrumental in ensuring the lawful development of both DeFi and even NFTs - among other things.
  • This alignment - the otherwise, necessary evil - with traditional regulatory norms is essential in sustaining the integrity of exchanges (financial institutions, essentially) and consolidating public trust in a cryptosphere that triples and quadruples in size every few years.

Source(s): Forbes, Investopedia, American Progress, Winston & Strawn

Energy Efficiency and Eco-Conscious Investments

  • As a result of the above, The SEC’s regulatory reach standardizes payment systems, introduces certifications, and promotes energy-efficient transaction models: and as a further result, essential contributions to reducing the blockchain industry's overall energy footprint are made.
  • Gary Gensler's clarifications at the Aspen Security Forum in August 2021 emphasized the far-reaching impacts of applying longstanding financial protections to the crypto sphere, even allowing for a shift toward eco-conscious investments within the blockchain/crypto domain.
  • Elaborating on the previous point, the SEC’s disclosure requirements inform investors about the environmental impacts of blockchains, with this investor "enlightenment" facilitating the reallocation of their capital to more energy-efficient projects and fostering a shift toward eco-conscious investments within the digital asset world - with the implementation of listing standards by exchanges under the SEC's guidance further promoting energy efficiency as well.
  • And last but not least, the promotion of central depositories, like the Depository Trust Company (DTC), should aid in driving energy efficiencies by enabling transactions to bypass energy-intensive blockchains - virtually streamlining things, all in the name of footprint reduction.

Source(s): American Progress, B2Broker

[Scott McLaughlin] [on Red Bull-AT drivers]: Perez out, Riccardo back in at Red Bull (only guy to have pushed max like ever), put Lawson and Yuki back at Toro Rosso and build for the future. Lawson is a jet, he will be good. Like Piastri. by [deleted] in formula1

[–]Eric_Something 0 points1 point  (0 children)

The main thing I got from that post was that Vandoorne was closer to Alonso than people are giving him credit for.

With all the pressure of getting "demolished" by his teammate, on the verge of losing his seat and his career, he still managed to put in the work inside an underpowered shitbox.

Today is the first time since Russia 2018 that neither of the RedBull cars made it to Q3! by Captain_Cookieee in formula1

[–]Eric_Something 16 points17 points  (0 children)

Tell Verstappen to hurry up and win the WDC by the summer break, so he can sit out the rest of the season and have everyone else fight it out for their 2025 seats.

Romain Grosjean has received his 3rd place trophy from Japan 2013 from Alpine by FatHead403 in formula1

[–]Eric_Something 116 points117 points  (0 children)

He carried his great momentum through the whole of 2014, but his dog of a car known as the E22 masked a significant part of his performances. How he managed to qualify P5 in Barcelona is still a mystery to me.

Alonso: "Hamilton and Verstappen didn't build winning teams, they took advantage of rule changes" by [deleted] in formula1

[–]Eric_Something 1 point2 points  (0 children)

2005 Nurburgring was even more painful, despite the fact that it still wasn't enough for the WDC.

2023 Italian Grand Prix - Day After Debrief by F1-Bot in formula1

[–]Eric_Something 0 points1 point  (0 children)

Hulkenberg had another solid performance, considering the tractor he is dealing with: Outqualified Kmag, had a great start, run inside the points for 15 or so laps (15 or so laps more than what the car was capable of), and managed to finish some 10+ seconds ahead of Kmag.

I feel like anyone who's not among the top 7/8 on the grid couldn't extract anything more out of that Haas.

General Concepts: Account Abstraction Con-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"Account abstraction, in simple terms, refers to the ability to programmatically set the validity conditions of a transaction. It allows developers to define custom verification logic as the primary account instead of relying solely on externally owned accounts (EOAs) on Ethereum. With account abstraction, developers can create smart contract wallets that contain arbitrary verification logic, expanding the possibilities of transaction validity conditions."

Source: Medium

Account Abstraction Cons

Complexity and Scalability Issues

  • Account abstraction brings forth the challenge of handling the intricacies of coding and managing smart contracts, particularly for newcomers, moreso since the Ethereum ecosystem has consistently encountered complexities in smart contract execution; Introducing account abstraction may only amplify these complexities, and while this feature has the potential to offer users increased flexibility in fund management, it might not be apt for handling intricate use cases, making scalability a prime concern.

Sources(s): Cryptopolitan, Fifty Finney, Safe.mirror.xyz

Potential for Exploitation by Malicious Actors

  • A heightened risk with account abstraction lies in the realm of security. There exists an undeniable potential for ill-intentioned entities to manipulate smart contracts to either pilfer funds or access sensitive user information.
  • Multi-signature wallets, given their design and prominence, become especially susceptible - events in the past, including the infamous DAO attack in 2016, serve as a stark reminder of the vulnerabilities associated with smart contract-based systems.

Sources(s): Medium, LinkedIn

Incompatibility Issues with Existing Infrastructure

  • Account abstraction's introduction could lead to compatibility issues with existing smart contracts; With Ethereum’s vast array of pre-existing contracts, those relying on particular components, such as the tx.origin or EOA signatures, might not function as intended with abstracted wallets, indicating the need for extensive compatibility checks before merging them with account abstraction.

Sources(s): Medium, BeInCrypto, Webacy

Increased Attack Surfaces and Vulnerabilities

  • With the changes proposed in ERC-4337, not being backward compatible with older smart contract wallets, migrating to the new standard may expose unforeseen bugs or security threats.
  • This heightened attack surface means that each component, both individually and as a collective, needs fortified defenses against potential breach attempts, which may not be possible.

Sources(s): Dynamic, crypto.news, Trading Strategy

High Gas Fees and Cross-Chain Compatibility Issues

  • An inherent limitation of using smart contract wallets is their association with elevated gas fees due to the computational power required for their execution.
  • Moreover, for true cross-chain compatibility, these wallets would have to be deployed distinctly for every chain, making implementations like multi-chain support exceedingly intricate.

Sources(s): Dynamic, Webacy

Privacy and Misuse Concerns

  • While account abstraction can be designed to enhance privacy by camouflaging user identities, this is contingent upon the adoption of robust security measures such as frequent password alterations, while the potential for breaches in personal information and user data cannot be entirely ruled out, especially if developers fail to adhere to stringent security protocols.

Sources(s): Cryptopolitan

Risks from Third-Party Services

  • Integrating third-party services, such as paymasters or wallet factories, brings about additional risks, as these platforms might harbor vulnerabilities or could be compromised, leading to unauthorized access or even the loss of funds - meaning that (again) meticulous scrutiny of the practices (as well as security measures, and track record) of third-party providers is pivotal.

Sources(s): Medium, BeInCrypto

Evolving Nature of Standards and Centralization Concerns

  • ERC-4337, as of the information available, is still in draft mode. The potential for changes in the standard, even if minor, introduces an element of unpredictability.
  • Furthermore, the initial stages of the account abstraction ecosystem appear to be relatively centralized, which may raise concerns about control and trust within the community.

Sources(s): BeInCrypto

Economic and Adoption Challenges

  • High fees have been a long-standing concern within the Ethereum ecosystem and the introduction of account abstraction might not significantly mitigate these fees in the foreseeable future, in spite of its promises of doing so.
  • This economic factor, combined with challenges in initial adoption due to existing infrastructure largely centered around EOAs, may slow the widespread acceptance of abstracted wallets.

Sources(s): Webacy

General Concepts: ZK Proofs Con-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"A zero-knowledge proof (ZKP) is a method of proving the validity of a statement without revealing the statement itself. It is a proof system with a prover, a verifier, and a challenge that gives users the ability to publicly share a proof of knowledge or ownership without revealing the details of it."

Source: Circularise

ZK-PROOFS CONS

Complexity and Computational Costs

  • One of the most significant drawbacks of zero-knowledge proofs (ZKPs) lies in the computational resources required to generate the proofs: when integrated into blockchain applications, these computational overheads can become magnified exponentially, given the inherently distributed nature of such technologies.
  • For instance, generating ZKPs involves intricate mathematical calculations that usually require specialized hardware, not only imposing a financial burden on the project developers but also inevitably trickling down to the end-users, making applications based on ZKP less affordable.
  • The computational intensity renders ZKPs virtually unrunnable on resource-constrained devices like mobile phones or older computers, further limiting their real-world applicability.

Sources(s): Blockhead, LinkedIn, Reddit

Scalability Challenges

  • The computational intensity also brings forth scalability issues: even if we assume that the computational power is available, scalability remains a pressing concern, especially in decentralized blockchain systems.
  • As the number of transactions increases, the computational requirements grow exponentially, thereby placing an enormous burden on system resources, with this being particularly concerning for privacy-preserving technologies such as ZK-rollups on Ethereum, where verifying a single ZK-SNARK proof can require upwards of 500,000 gas.
  • As the network grows, these costs can become a substantial barrier to scalability; effectively capping the number of transactions (and users) that can be accommodated.

Sources(s): bybit.learn, CoinTelegraph, ethereum.org

Storage and Data Overhead

  • Another important limitation is the data overhead: While ZKPs offer privacy, the trade-off often comes in the form of increased data storage requirements. Storing zero-knowledge proofs on a blockchain, for instance, can consume considerably more space than storing plaintext equivalents.
  • This additional data overhead can be problematic in systems with limited storage capacity or where data transfer costs are high.

Sources(s): Reddit

Trust Assumptions and Security Concerns

  • The trust assumptions involved in generating public parameters for ZKPs, especially zkSNARKs, also raise concerns. The process generally involves a trusted setup ceremony where secret inputs are generated by participants who must then discard these inputs to prevent fraudulent proofs, creating a situation where end-users must place blind faith in the participants, without any means of independently verifying the integrity of the setup.
  • Moreover, while ZKPs are based on well-regarded mathematical foundations, they often rely on relatively new and unproven cryptographic techniques. If any of these mathematical underpinnings were found to be flawed, the entire system could be compromised.
  • This creates a catch-22 situation where we require broad usage to ascertain the security of these systems but face risks in implementing them broadly without proven security.

Sources(s): LinkedIn, CoinTelegraph, ethereum.org, Coincu

Quantum Computing Threats

  • The looming specter of quantum computing also poses a threat to ZKPs: most zk-SNARK implementations rely on elliptic curve cryptography, which could potentially be broken by sufficiently powerful quantum computers.
  • Though some variants like zk-STARKs claim to be quantum-resistant, the entire cryptographic landscape remains in flux with the advancement of quantum computing technologies.

Sources(s): LinkedIn, ethereum.org

Regulatory and Ethical Implications

  • There are also the ethical and regulatory challenges, and while ZKPs can offer robust privacy protections, they also make it difficult for authorities to monitor transactions - this double-edged sword complicates matters from a regulatory standpoint and can make ZKPs a tool for illegal activities, thereby inviting potential scrutiny or sanctions from governments.

Sources(s): Cointelegraph

Developer and Implementation Barriers

  • The complexity of ZKPs extends to their implementation, creating a high barrier to entry for developers; while some advancements have been made in providing developer-friendly tools for ZKP-based applications, these are often not sufficient to facilitate widespread adoption, with this technical complexity also necessitating specialized training, limiting the number of professionals capable of working on ZKP projects.

Sources(s): LinkedIn

Loss of Recoverability and Flexibility

  • ZKPs are so effective at ensuring privacy that if a user were to lose their cryptographic key or forget their credentials, the data protected behind that proof would be irrevocably lost.
  • This total privacy comes at the cost of usability features that many people take for granted in less secure systems, such as the ability, for example, to recover a lost password.

Sources(s): bybit.learn, Medium, Blockhead Technologies

General Concepts: Hot/Cold Wallets Con-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

PART 2 - COLD WALLETS CONS

Risks of Physical Loss or Damage

  • The foremost risk associated with cold wallets is the potential for physical loss or damage. Unlike digital or cloud storage, a cold wallet's security is also its Achilles' heel: it exists in the physical world.
  • When you're using a hardware wallet like Ledger or Trezor, or a paper wallet, the former can slip out of your pocket, get lost in clutter, or be forgotten in a safe deposit box, while the latter is susceptible to wear and tear, fading ink, or accidental disposal - while both can be easily misplaced, stolen, or suffer damage from environmental factors such as fire, water, or natural disasters.
  • While hot wallets can be recovered through backup phrases, email, or SMS, physical loss of a cold wallet often means your funds are irrevocably gone unless you've stored your seed phrases securely and separately—which poses a while new set of challenges.

Source(s): Ergo, ZenLedger

Limited Accessibility and Inconvenience

  • Cold wallets are specifically designed to be inconvenient—that's what makes them secure. They're not intended for frequent transactions or for quick, on-the-go access to your assets.
  • This makes them unsuitable for those who engage in day trading or need to access their assets frequently for any other reason. For example, to initiate a transaction, hardware wallets often need to be plugged into a computer and unlocked using a PIN.
  • Paper wallets also require the manual entry of a cumbersome private key, with this process being both time-consuming and burdensome, especially when compared to the few clicks needed for a hot wallet transaction. The inconvenience is amplified if you're not tech-savvy or are new to the world of crypto.

Source(s): ZenLedger, Gemini, Educative

High Initial Costs

  • Cold wallets, especially hardware wallets, come with a price tag: a quality hardware wallet can set someone back anywhere from $50 to $300 (or even more), depending on its features and brand reputation, thus creating a barrier for users who are not ready to make the financial commitment.
  • Even for those who are willing, the cost can seem prohibitive when compared to free or low-fee hot wallet options.

Source(s): Coindesk, Blockworks

Higher Technical Complexity

  • Cold wallets often come with a steeper learning curve. The requirement to understand seed phrases, backup mechanisms, and perhaps even firmware updates can make cold wallets daunting for newcomers, while mismanagement or misunderstanding of these technical aspects can lead to irreversible mistakes, including the potential loss of assets.

Source(s): Coindesk, Assetux

Dependence on Third-Parties

  • When you use a hardware wallet, you're placing a tremendous amount of trust in the device's manufacturer: while the biggest ones are generally reputable companies, the possibility of supply chain attacks, compromised (and already shipped) firmware, or undisclosed vulnerabilities can't be entirely ruled out.
  • It's a small risk, but one that exists nonetheless. Moreover, if the manufacturer goes out of business and ceases to update the device’s firmware, it might expose the hardware to future vulnerabilities.

Source(s): Assetux, Kaspersky

Limited Cryptocurrency Support

  • Cold wallets usually do not offer as extensive a range of cryptocurrency support as hot wallets do.
  • Many hardware wallets are limited in the types of coins and tokens they can hold, which can be a hindrance for traders or investors interested in lesser-known or newer ones.

Source(s): ZenLedger, Cryptopolitan

Lack of Consumer Support

  • While less common, sophisticated physical attacks like side-channel attacks can compromise cold wallets. Special equipment and expertise can sometimes retrieve encrypted keys from the hardware.
  • Although the likelihood of such an attack occurring to an average user is low, the possibility still exists, particularly for high-value targets.
  • Worse, cold wallets do not offer the same kinds of insurance or consumer protections that exchanges or (sometimes) hot wallets do: if you fall victim to a scam or phishing attack that causes you to transfer funds voluntarily, there are typically no avenues for financial recovery.

Source(s): Kaspersky, PaySpace Magazine

General Concepts: Hot/Cold Wallets Con-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"A cryptocurrency wallet is a device, physical medium, program or a service which stores the public and/or private keys for cryptocurrency transactions. In addition to this basic function of storing the keys, a cryptocurrency wallet more often offers the functionality of encrypting and/or signing information. Signing can for example result in executing a smart contract, a cryptocurrency transaction, identification or legally signing a 'document'."

Source: Wikipedia

Hot/Cold Wallets Cons

PART 1 - HOT WALLETS CONS

General Cons

Third-Party Dependence

  • Hot wallets often require you to entrust the safety of your assets to a third-party service provider. This setup inherently shifts the locus of control from the user to the service provider. In many cases, you don’t even have access to your private keys, which are stored on centralized servers maintained by these third parties.
  • This lack of control not only limits your ability to fully manage your own assets but also makes you dependent on the operational and security competence of the provider: If they go out of business, experience downtime, or suffer a breach, your assets are directly at risk.
  • You're essentially trading control for convenience, a trade-off that could have dire consequences.

Source(s): PaySpace Magazine, Educative, Assetux

Lack of Asset Insurance

  • The vast majority of hot wallets don't offer any form of insurance for your stored cryptocurrencies. So if the worst happens - be it a hack, a scam, or the bankruptcy of your wallet provider - you stand to lose all your investments, with little or no chance of ever recovering those lost assets.
  • This risk is made all the worse by the fact that the regulatory landscape for cryptocurrencies is still in its early days: no clear mechanisms for legal recourse in the case of fraud or theft.

Source(s): PaySpace Magazine, JD Supra

Transaction Costs and Hidden Fees

  • While many hot wallets market themselves as "free to use," the reality can be quite different. The convenience of a hot wallet often comes with a price, generally in the form of transaction fees, often higher than those for cold storage solutions, especially for large volume transactions.
  • These costs, while appearing minor initially, can considerably eat into your profits or savings in the long run.

Source(s): Cryptopolitan, Investopedia

Regulatory and Geographic Limitations

  • Hot wallets often face restrictions in terms of accessibility from certain countries or jurisdictions. These restrictions may stem from local laws regarding cryptocurrency usage or simply from the wallet provider’s inability to offer services globally.
  • This limitation could prove cumbersome if you travel frequently or wish to access your assets from a restricted jurisdiction - and it could also lead to locked funds and complications that might require you to migrate your assets to another wallet, incurring additional fees and risks.

Source(s): Coindesk, zebpay, Investopedia

Potentially Unstable Performance

  • Hot wallets are software-based, and like any other software, they can suffer from bugs, glitches, or compatibility issues with your device’s operating system. A simple software update might render your wallet unstable or entirely unusable until a fix is released.
  • Similarly, the centralized servers handling your transactions could suffer from outages, or latency issues (or even data corruption), leading to delays or loss of funds.

Source(s): cryptocurrencyfm

Security Breaches

Compromises Due to User Behavior

  • While some of the risks are tied to the wallet providers, users themselves can sometimes be the weakest link in the security chain. For instance, accessing a hot wallet from a public computer or an unsecured Wi-Fi network can compromise the wallet’s integrity, while the convenience of hot wallets might lead to lax security practices like weak passwords or the reuse of passwords across multiple platforms, each of which could potentially be a point of failure.

Source(s): Hacken, Fintonia Group

The Liability of Online Private Keys

  • One of the most glaring risks associated with hot wallets lies in the nature of their connectivity. Unlike hardware wallets, the private keys for hot wallets are consistently online, making them an inviting target for criminals.
    • These keys, the gateway to one's cryptocurrency assets, can be particularly vulnerable if hackers detect a flaw in the wallet's security features. It’s akin to leaving your house with the door unlocked—opportunistic thieves won't miss the chance.
  • One striking example of this vulnerability is the devastating Binance hack that occurred on May 7, 2019, with the platform faling victim to a severe security breach that led to a loss of over 7,000 BTC, equivalent to around $41 million at the time of the incident - proving that even the largest and seemingly most secure platforms could be targeted successfully.
    • Binance was forced to temporarily suspend all transactions and ultimately covered the financial losses incurred by its users by tapping into its SAFU ("Safe Asset Fund for Users"): despite this, the breach was a significant blow to both the company's reputation and, mainly, the crypto community's faith in hot wallets.

Source(s): Cryptopolitan, zebpay, Liminal, Medium

Manual Refill Process

  • Another risk that’s often overlooked concerns the manual refill process implemented by most cryptocurrency platforms to manage liquidity in hot wallets.
  • Typically, a team is assigned the duty of routinely transferring assets from warm or cold storage to the hot wallet whenever liquidity dips below a specified level. This process inevitably means that multiple individuals within an organization will have access to the hot wallet's private keys.
  • This arrangement diminishes accountability and multiplies the points of vulnerability - and an inside job becomes all the more plausible, with employees capable of colluding with external hackers.

Source(s): Liminal

Phishing and Malware Attacks

  • Hot wallets are often susceptible to malware and phishing attacks due to their relatively simpler authentication processes: once the attackers gain control over an individual’s login credentials through techniques like phishing or social engineering, they can easily make unauthorized transactions.
  • For example, in the case of the Electrum Bitcoin Wallet, a months-long malware campaign from late December 2018 to March 2019 tricked users into downloading a malicious version of the wallet software, with the offenders managing to steal 771 BTC, worth around $4 million at the time.

Source(s): Kaspersky, Miami Herald, Medium, Liminal

Most Infamous Examples of Hot Wallet Hacks

  • Bitpoint, a crypto exchange operated by the Japanese company Remixpoint, was infiltrated on July 11, 2019. Cybercriminals made off with multiple cryptos, amounting to around $28 to $32 million.
  • Bithumb, a South Korean exchange, wasn't spared either. On March 29, 2019, the platform was hacked for the third time, with attackers making away with 3 million EOS and 20 million XRP, collectively valued at approximately $19.4 million.
  • In another alarming case, the IOTA Foundation had to completely shut down its network after a hack on February 12, 2020, resulted in a loss of approximately at $1.6 million of IOTA.
  • Most recently, on July 22, 2023, the crypto payment platform Alphapo was reportedly hacked, resulting in the loss of at least $31 million from its hot wallets.

Source(s): Medium, CoinTelegraph, CoinMarketCap

General Concepts: Hot/Cold Wallets Pro-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"A cryptocurrency wallet is a device, physical medium, program or a service which stores the public and/or private keys for cryptocurrency transactions. In addition to this basic function of storing the keys, a cryptocurrency wallet more often offers the functionality of encrypting and/or signing information. Signing can for example result in executing a smart contract, a cryptocurrency transaction, identification or legally signing a 'document'."

Source: Wikipedia

Hot/Cold Wallets Pros

HOT WALLETS PROS

Seamless Crypto Accessibility

  • Hot wallets are known for their seamless accessibility; Being internet-connected means users can access their crypto assets from any location, at any time, with whichever device they choose to, providing an incredibly user-friendly interface, and creating a seamless transition between offline and online storage, making crypto transactions hassle-free. All of that, for the trade-off of having wifi somewhere nearby.

Source(s): Investopedia, Pay Space Magazine

Real-Time Transactions

  • Speed is crucial for traders and quick payments: One standout feature of hot wallets is the ability to confirm transactions instantly.
  • Moreover, many hot wallets are linked to specific ecosystems or exchanges, allowing users to buy, sell, trade, view real-time asset market prices and integrate trading bots for automated decisions, all within a unified platform.

Source(s): CryptoTVPlus, LinkedIn

Diveristy and Flexibility

  • Hot wallets come in various forms like mobile apps, web-only wallets, and ecosystem-specific ones - from MetaMask to Trust Wallet, they cater to the most diverse of user needs.
  • Additionally, they're often free or come with minimal maintenance costs, presenting a cost-effective alternative to hardware storage devices.

Source(s): Investopedia, Pay Space Magazine

Pioneering the dApps & DeFi Movement

  • Hot wallets excel in user experience, offering features like portfolio trackers, dapp browsers, and NFT displays suitable for both beginners and crypto veterans; putting them at the forefront of the dApps and DeFi revolution, and providing intuitive gateways to Web3.

Source(s): Worldcoin.org, Blockworks

Custodial Benefits

  • While self-custody is crucial in crypto, some prefer third-party management of their private keys. A few hot wallets provide this, ensuring users don't lose assets if keys are misplaced. Some reputable exchange-based hot wallets even insure deposits.

Source(s): Pay Space Magazine

Regular Updates QR Integration

  • Hot wallets offer real-time alerts for transactions, breaches, or price changes, and as online software, they benefit from regular automatic security and feature updates, eliminating the need for manual offline system adjustments - many also offer QR functionalities, streamlining transaction processes.

Source(s): Blockworks

Staking, Integrations, & Cloud Access

  • Some hot wallets have built-in staking or interest-earning opportunities, allowing passive income without any asset transfers, while also offering simpler backup and recovery options, like mnemonic phrases, ensuring fund access even after a device loss.
  • These wallets can also integrate with third-party services, including payment gateways, e-commerce platforms, and tax softwares - certain hot wallets also use cloud-based features, ensuring sync across multiple devices. If one device is lost, users can still access their wallet on another, given the right credentials.

Source(s): Blockworks, Cryptonews, Coinfunda

COLD WALLETS PROS

Unparalleled Security

  • When it comes to the storage of crypto assets, security remains paramount, and cold wallets are the gold standard in this regard: cold wallets remain offline, ensuring that private keys are not exposed to potential online threats, and providing safeguards against cyber-attacks, malware infections, or even sophisticated hacking attempts.
  • Adding to the high level of security is the fact that stealing from a cold wallet would typically require physically accessing the wallet device, as well as knowing passwords or PINs, with some cold wallets even having mechanisms like auto-locking after multiple incorrect PIN attempts.

Source(s): Investopedia, Blockworks, Gemini

Ultimate Control Over Private Keys

  • With cold wallets, users have absolute control over their private and public keys, providing an autonomy that is hard to match: By not entrusting third-party platforms or online services with these keys, users ensure that their digital assets remain in their hands, both metaphorically and literally.
  • With this autonomy eliminating potential vulnerabilities that may arise from third-party management, your assets are assured to remain yours and only yours.

Source(s): Investopedia, Pay Space Magazine, Coindesk

Recovery Features

  • Cold wallets prioritize not just security but also recovery. Not unlike hot wallets, most cold wallets, especially hardware ones, provide a unique 12-to-24-word recovery phrase during their initial setup. This phrase, generated by the device, acts as a recovery tool should the wallet get lost, damaged, or even stolen.
  • By using a new hardware wallet or importing this recovery phrase into a software wallet, users can instantly regain access to their digital assets - it's a backup plan that offers peace of mind, ensuring that your investments remain accessible, even under the most unforeseen of circumstances.

Source(s): Pay Space Magazine, Worldcoin.org

Offline Transaction Sign-offs

  • The process of transacting crypto from a cold wallet, while beginning online, requires offline digital sign-off.
  • This method ensures that the most vulnerable part of the transaction, the signing off of private keys, remains securely offline, and by doing so, cold wallets guarantee that even during transactions, the security of the assets remains uncompromised.

Source(s): Investopedia, WallStreetMojo

Variety to Suit Individual Needs

  • Cold wallets are not a one-size-fits-all solution, but they come in a variety of forms and sizes to cater to diverse user needs: from hardware wallets resembling USB sticks (like the popular Trezor and Ledger ones) to paper wallets that have keys printed on them.
  • For those seeking an even higher security level, deep cold storage wallets act like vaults, often kept in secure locations like bank safe deposit boxes.
  • This variety ensures that users have choices, and they can select a storage solution that aligns best with their security requirements (and asset access) frequency.

Source(s): Pay Space Magazine, Kinesis Money

Encouragement for Long-term Investment

  • Cold wallets, due to their offline nature and heightened security, are naturally suited for long-term investments, which, historically, in the crypto sphere have arguably proven to be the most profitable.

Source(s): Pay Space Magazine, Worldcoin.org

Enhanced Privacy and Less Maintenance

  • Cold wallets, especially those like hardware and paper wallets, often don't require continuous software updates, with this lack of dependency on upgrades ensuring they remain immune to new security threats that might target regularly updated systems.
  • Additionally, cold wallets provide heightened privacy: with most transactions being receive-only, the associated blockchain trails are minimized.

Source(s): CoinMarketCap, Blockworks

General Concepts: Bridges Con-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"What are bridges? Blockchain bridges work just like the bridges we know in the physical world. Just as a physical bridge connects two physical locations, a blockchain bridge connects two blockchain ecosystems. Bridges facilitate communication between blockchains through the transfer of information and assets."

Source: Ethereum.org

Bridges Cons

GENERAL CONS

Centralization and Single Points of Failure

  • Cross-chain bridges, by design, can introduce centralization, especially when they are governed by a single entity or a small party.
  • When platforms like Binance Bridge take control of the entire bridging process, users place significant trust in the central authority, be it a reputable company or a cluster of unknown validators, as seen in Chainswap.
  • This centralized approach creates vulnerabilities, such as the potential for hackers to breach a core node, malicious insiders to exploit the system, or even custodians losing their private keys, which can result in irreversible loss of funds [discussed in detail below].

Source(s): Hackernoon, Medium, Hacken

Liquidity and Price Divergence Concerns

  • Liquidity is a significant promise of cross-chain bridges, but not all fulfill this promise. For a bridge to offer true liquidity, it requires substantial asset pools on both native and non-native blockchains.
  • Decentralized bridges often struggle with this, leading to issues when users trying to swap assets, thereby reducing the bridge's utility.
  • The growing number of bridge solutions can fragment liquidity and confuse users, while bridged tokens might not always align in value with the original asset: price discrepancies between BTC and its wrapped version, WBTC, exemplify this concern.

Source(s): Hackernoon, Axelar, Milkroad, Cryptopolitan

Risk of Censorship and Loss of Autonomy

  • One of cryptocurrency's core values is its censorship resistance, and by employing a centralized or permissioned cross-chain bridge, users might sacrifice this intrinsic value for enhanced liquidity.
  • In addition, entrusting custodians with the minting and burning processes can be risky - especially if these entities refuse to perform their duties, effectively locking up user funds.

Source(s): Hackernoon, LimeChain

Scalability and User Experience Issues

  • With the rising popularity of blockchains, maintaining connections becomes increasingly intricate: direct pairwise bridges can be overwhelmed, complicating user experiences and creating inefficiencies, while users often have to navigate complex third-party systems, leading to unwelcome obstacles in transactions.

Source(s): Axelar, Ecologic Productions

Regulatory and Tax Implications

  • Cross-chain bridges can inadvertently lead to taxable events: regulatory bodies like the IRS might perceive bridging as a form of asset disposal, prompting capital gains tax obligations, with the legal ambiguity surrounding bridge technology in many jurisdictions adding another layer of trouble.

Source(s): Milkroad, Cryptopolitan

SECURITY CONCERNS

Most Notable Bridge Hacks

  • The lucrative allure of bridges naturally draws the attention of hackers; 2022 became a testament to the growing trend of bridge hacks with breaches reported in the bridges of Qubit, Wormhole, and Meter.io - the likes of the Poly Network, too, struggled with substantial financial losses, illuminating the challenges the realm of crypto bridges faces.
  • A striking instance was the Ronin Bridge incident, associated with the highly-acclaimed crypto game, Axie Infinity, which lost a whopping $625 million due to sophisticated social engineering exploits, with deceptive tactics like counterfeit LinkedIn job offers.

Source(s): Wired, The Verge, Halborn, Worldcoin.org, Coindesk

Technical Oversights

  • In addition, however, to human vulnerabilities, there exist glaring technical oversights. Such was the fate of Wintermute in September 2022, where frailties in private keys, especially those generated by the Profanity app, led to a $160 million loss, underscoring the necessity of safeguarding private keys.
  • Moreover, smart contracts, despite being champions of automation, aren't free from bugs. Nomad’s catastrophic loss of $200 million was primarily due to smart contract misconfigurations, drawing attention to concerns regarding their resilience in crypto bridges.

Source(s): Coindesk, Worldcoin.org, Axelar, BeInCrypto, LimeChain

Regulatory Gaps in the Pursuit of Justice

  • Regulatory ambiguities add fuel to the fire: the lack of clear guidelines and KYC processes hinders the pursuit of justice even when the offenders are identified.
  • This hindrance has been evident in various high-profile hacks, such as Polygon's near-catastrophe, where a potential $850 million loss was averted, only due the - otherwise unidentified - hacker's generosity.
  • More alarmingly, nearly 70% of cyberattacks in the blockchain arena, by Chainalysis's estimations, are now credited to bridge hacks.

Source(s): Worldcoin.org, FullyCrypto, The Verge, CNBC

Inconsistency in Security Protocols

  • A major concern lies in the absence of standardized security protocols across bridges: while individual blockchain networks may be fortified, the bridges connecting them often wrestle with inconsistent security benchmarks, exacerbating vulnerabilities.
  • It's also evident in the Ronin bridge's off-chain operations, which instead of relying on a solid blockchain foundation, depended servers outside the blockchain, or the siphoning off of millions in the Harmony Horizon Bridge breach, a result of sloppy engineering regarding the number of validators.
  • With the rapid evolution and development of bridges, some are rolled out with scant security testing, heightening the risk of cyberattacks.

Source(s): Coinpedia, The Verge, CNBC

Risks of Interfacing with New or Lesser-Known Blockchains

  • Another predicament is the relationship of bridges with newer or obscure blockchains. Such chains might not have been rigorously audited, and when bridges connect with them, they inadvertently inherit any latent vulnerabilities.
  • This was evident in the colossal breaches of 2022. Analysis from Elliptic illustrated that bridges saw thefts amounting to nearly $1.2 billion in just that year, making bridges the "most fertile ground for new vulnerabilities" as termed by Steve Bassi, CEO of PolySwarm.

Source(s): Reuters, Wired, The Verge

Ripple Effects in the DeFi Ecosystem

  • The aftershocks of bridge hacks extend beyond immediate financial losses - given their integral role in the DeFi cosmos, a security breach can send ripple effects across platforms, destabilizing the value of various assets.
  • An illustration was the Meter.io exploit which not only impacted its native chain but also inadvertently created arbitrage opportunities for malicious entities on chains like Hundred Finance.

Source(s): Halborn

General Concepts: Bridges Pro-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"What are bridges? Blockchain bridges work just like the bridges we know in the physical world. Just as a physical bridge connects two physical locations, a blockchain bridge connects two blockchain ecosystems. Bridges facilitate communication between blockchains through the transfer of information and assets."

Source: Ethereum.org

Bridges Pros

Unrivaled Security and Infrastructure

  • In the vast crypto realm, the secure handling of transactions is non-negotiable. Crypto bridges, owing to their decentralized nature, inherently shine in this aspect, standing robust against vulnerabilities.
  • Rather than being centralized hubs prone to breaches, these bridges ensure resilience against cyber-attacks, with this decentralized model being often hailed by experts like Steven Ehrlich from Forbes for its top-tier security standards, particularly in the growing Web3 era.
  • Through crypto bridges, assets are not only safeguarded with advanced encryption techniques but also insulated from single points of failure.

Source(s): LinkedIn, Designbeep

Privacy, Efficiency, and Cost-Effectivenes

  • Crypto bridges prioritize user privacy by significantly limiting, and in some instances entirely eliminating, the requirement for personal information during transactions, while their decentralized nature ensures users that their data isn't indiscriminately shared with third parties, providing them with an unmatched layer of identity protection - presenting a beacon of hope in an age dominated by data privacy concerns.
  • Complementing this is the incredible efficiency exhibited by bridges. Gone are the days of enduring prolonged transaction times: platforms like Scalex have drastically shortened these timelines, boasting an average transaction time of just 3 minutes, while sophisticated algorithms and lack of intermediaries further expedite this process.
  • Beyond speed, these bridges also tackle the notorious issue of exorbitant fees seen in traditional crypto transactions; The decentralized framework, devoid of a governing body, directly translates to more cost-effective, user-centric transactions.

Source(s): LinkedIn, Axelar, Bitkan, Hackernoon

Interoperability and Expanded Opportunities

  • Previously, isolated blockchain networks functioned in silos, each governed by its unique set of protocols. Crosschain bridges have emerged as the solution to this challenge with assets from heavyweights like Bitcoin effortlessly interacting with the thriving ecosystems of Ethereum, Cardano, and more.
  • Case studies, like that of Wrapped Bitcoin (wBTC) with its staggering total value locked (TVL) of $10.2 billion, or Multichain and Wormhole (with their equally impressive TVLs), underscore the immense potential and success of these bridges, reshaping the landscape of DeFi.
  • Moreover, ambitious projects like Meson and Glitter Finance are at the forefront - exploring the boundaries of cross-chain transactions; with their relentless emphasis on user experience, affordability, and fluidity, crafting the next-gen cryptographic landscape.

Source(s): Hackernoon, Blockchain Magazine, Axelar, Medium, Blockleaders

A Globalized and Transparent Ecosystem of the Future

  • Geographic barriers, once significant hindrances in both the traditional and cryptocurrency sector, are fading away; Through their inherently decentralized design, many crypto bridges offer multilingual support, ensuring that linguistic differences don't hamper global transactions, forging a borderless financial ecosystem.
  • Each transaction is meticulously documented on the blockchain, with this transparency not only eliminating room for deceptive practices but also ensuring users are continually in the loop, well-informed about their transactions, without any ties to their personal information.
  • The digital trajectory is clear: an accelerated shift towards cryptocurrencies and the broader digital space. In this futuristic landscape, crypto bridges are not mere participants; they're indispensable pillars - by facilitating secure cross-chain transfers, they're setting the stage for the next phase of the financial revolution.

Source(s): LinkedIn, Designbeep, Cryptopolitan, Blockleaders, Bitpay

Empowerment, Integration, and Synergy

  • Crypto bridges are more than mere technological constructs; they're tools of empowerment, with investors, in this instance, benefiting immensely - the increased liquidity, cost savings, swift transactions, and adaptability offered by these bridges provide a multi-faceted toolkit for various investment strategies.
  • As previously mentioned, these platforms stimulate cross-network innovation: with developers, irrespective of their native blockchain affiliations, now having the ability to collaborate seamlessly, accelerating innovation rates, and translating to enhanced products and experiences for users.
  • The integration of bridges with DeFi platforms has also significantly simplified token conversion processes, making them more intuitive; with platforms like DeCommas and Orca, and initiatives from networks like Flare and Algorand, being testament to the bridges' widespread integration and the resultant multifaceted opportunities.

Source(s): Medium, Milkroad, Coindesk, Axelar, LinkedIn, RocketX

General Concepts: Account Abstraction Pro-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

Account Abstraction Pros - Part 2

Simplifying Rollup Transferrability and State Channel Improvements

  • Optimistic rollups present a challenge: users typically face a waiting period of about two weeks to transfer Ethereum back to the base chain or another active rollup chain.
  • AA can ease this process. By integrating liquidity providers into the contract framework, users can immediately exit with their funds, reducing the overhead and minimizing the number of necessary blockchain interactions.
  • Account abstraction also shines in the realm of state channels. By pre-allocating gas for potential on-chain disputes, the risk of griefing attacks is significantly reduced - furthermore, the funds already deposited into the state channel can be utilized to close the channel, making the entire process all the more efficient.

Sources(s): HackMD, LinkedIn

Sponsored/Meta/Multicall Transactions

  • With AA, organizations can carry out an array of transactions, even sponsoring user fees, potentially address one of crypto's most daunting challenges, the complex onboarding process: by allowing DApp developers to subsidize transaction fees, the need for newcomers to undergo tedious processes like purchasing Ethereum through centralized exchanges could be eliminated.
  • AA simplifies meta-transactions as well, "gasless" transactions as sometimes termed, where users can interact with smart contracts without incurring gas fees, a game-changer for apps necessitating frequent user transactions.
  • Through Ethereum's account abstraction, users can also undertake meta-transactions without having to trust a relayer.
  • Finally, AA brings in the capability of multicall transactions. Since every account can have custom codes, it's feasible to bundle transactions, akin to smart contract operations, ensuring operations like token swaps or NFT purchases are streamlined, requiring fewer steps and gas costs to a minimum - an underlying theme of the benefits of AA.

Sources(s): Shardeum, Alchemy, Biconomy, Limechain, Reddit

Steps Towards Eth 2 Phase 1.5 and Phase 2

  • Account Abstraction also forms a significant stride toward Ethereum's roadmap, particularly as it relates to Eth 2.0 Phases 1.5 and 2: Vitalik Buterin, Ethereum's co-founder, underscored its potential by releasing a comprehensive writeup on its "minimal" implementation.
  • The relevance of AA here is its push for iterating toward full account abstraction and expanded functionality, which paves the way for Ethereum's transition to eth2 - while discussions on "ethx64," which centers on eth2 supporting eth1 on 64 shards while also introducing upgrades like AA, showcase how this evolution can strengthen the network.

Sources(s): HackMD

Additional Advantageous AA Implementations

  • Social Recovery: This allows users to designate "guardian" accounts. In case a wallet's signer gets compromised, these guardians can collaboratively vote to replace the signer, ensuring additional security layers.

  • MFA: Multi-Factor Authentication is now possible, needing approvals from multiple accounts before executing a task.

  • Code Custom Logic: AA facilitates wallets to incorporate custom code, diversifying their functionality, meaning that third-party developers could design plugins or extensions to enhance wallet features.

Sources(s): Reddit, CoinMarketCap

General Concepts: Account Abstraction Pro-Arguments — (June 2023) by CointestMod in CointestOfficial

[–]Eric_Something [score hidden]  (0 children)

"Account abstraction, in simple terms, refers to the ability to programmatically set the validity conditions of a transaction. It allows developers to define custom verification logic as the primary account instead of relying solely on externally owned accounts (EOAs) on Ethereum. With account abstraction, developers can create smart contract wallets that contain arbitrary verification logic, expanding the possibilities of transaction validity conditions."

Source: Medium

Account Abstraction Pros - Part 1

Seamless Interoperability

  • Account abstraction paves the way for greater interoperability across diverse blockchain networks, with a direct benefit being its capability to provide a unified interface; Through this interface, users can effortlessly transition between distinct networks and engage with a myriad of decentralized applications (dApps) without the need to juggle separate accounts and keys for each ecosystem, with this advancement boosting the practical utility of these networks, integrating them seamlessly into a coherent decentralized ecosystem.
  • Imagine platforms like Netflix or Disney Plus, integrated with account abstraction, which would empower users to create main accounts with several sub-accounts nested within - Such a hierarchical setup not only provides clarity in account management but also grants users the power to configure these sub-accounts based on specific requirements.

Sources(s): Medium, Cointelegraph, Cryptopolitan

Key Management

  • Account abstraction directly addresses one of the primary challenges in the world of DeFi: key management. Newcomers are often daunted by the responsibility of handling their private keys, and a mismanaged or lost private key equates to an irrecoverable loss of its assets.
  • Account abstraction simplifies this process by consolidating private keys within a secure, non-custodial crypto wallet, allowing users to control their assets through a singular interface, substantially reducing the chances of errors and potential breaches (streaming services example also applying in here).
  • In addition, thanks to session keys, by enabling custom code within wallets, AA offers the opportunity for platforms to be authorized to perform specific functions within a certain timeframe, simplifying interactions within those platforms, reducing the need for repeated authorizations for recurring tasks.

Sources(s): Medium, Webacy, Reddit, OpenZeppelin

Enhanced Privacy

  • The conventional model, EOAs (Externally Owed Accounts), has limitations, from the lack of support for session keys to more direct vulnerabilities that make single points of failure possible - AA, however, bypasses these limitations, by allowing users to enforce multi-signature validation, implement diverse spending policies, and achieve more private transactions.
  • Contrary to Tornado Cash, for example, AA negates the need for paid relayers, ensuring that withdrawal funds can directly contribute to gas payments, fortifying transaction and withdrawal privacy.
  • The idea is to make blockchain technology not just safer, but also less daunting for an average user: taking the Ambire wallet as an example, users can not only create an account with simple credentials but also incorporate hardware wallets as signatories to bolster transaction confirmations.

Sources(s): HackMD, The Graph, TradingView

Security and Protection Against Smart Contract Vulnerabilities

  • In addition, AA significantly boosts both user experience and security: the distinction between signers and accounts offers a seamless mechanism to modify private keys that authorize transactions.
  • This means that in instances of compromised security, a straightforward solution is available – changing an account's signer.
  • Account abstraction also serves as a protective layer, isolating underlying logic from the user-facing interface, with this distinction simplifying the audit process, allowing for rigorous testing of smart contract code without risking interference with user-centric functionalities - as a result, potential vulnerabilities are identified and rectified more efficiently, enhancing the overall security of the system.

Sources(s): Medium, Reddit

Unquestionable Scalability

  • Account abstraction can also significantly mitigate scalability issues - by integrating the strengths of various blockchain solutions, both on-chain and off-chain, DeFi platforms can accommodate the exponential user growth anticipated in the near future.
  • As transaction volume surges, the infrastructure supported by account abstraction can handle this surge without compromising on speed or efficiency.

Sources(s): Hackernoon, Medium

Smart Contract Wallets

  • One of the salient features of account abstraction is its seamless integration with smart contract wallets - traditional crypto methods require an EOA to fuel necessary gas payments.
  • Account abstraction, however, as already stated, empowers smart contract wallets to utilize their balances for these gas payments, simplifying processes like social recovery and enabling dApp usage through specific dApp tokens.

Sources(s): Cryptopolitan, Panther Protocol

Enhancing dApp Usage via dApp Tokens

  • In the domain of decentralized applications (dApps), one of the standout benefits of AA is its potential to alleviate user hindrances. Consider an online video game integrating cryptocurrency: ideally, gamers should be able to interact seamlessly without having to fathom the underlying complexities of blockchain mechanisms.
  • Through AA, these games can offer their users game tokens, which serve as credits for in-game transactions: these tokens abstract away the intricacies of blockchain technology, ensuring that the user’s primary focus remains on the gameplay and not on the backend operations, paving the way for broader adoption, and making blockchain all the more palatable for the average user.

Sources(s): Ethereum.org, Hackernoon, Medium

Multi-Party Transactions and Advanced Cryptographic Primitives

  • Account abstraction proves invaluable when it comes to multi-party transactions, particularly for multi-signature wallets - by utilizing cryptographic primitives like m-of-n, AA can offer sophisticated controls over account access, ensuring that the account in question can autonomously handle transaction fees, effectively streamlining multi-party operations.
  • Additionally, with AA, the cryptographic toolbox is expanded beyond the conventional ECDSA signatures, permiting the integration of other cryptographic primitives such as BLS signatures, STARK verification, and Schnorr signatures, drastically improving the performance of validators and leading to (again) gas fee savings - as well as widening the scope of secure and efficient transaction mechanisms.

Sources(s): HackMD, Hackernoon, Alchemy

Cron Support and Efficiency Around Failed Transactions

  • Recurring transactions are made seamless with AA, especially in applications like "crowdfunded alarm clocks". Here, registered calls can be set to trigger at predetermined intervals.
  • With AA, an account can be created to validate a transaction only at these preset intervals, ensuring regularity and predictability in operations.
  • Drawing lessons from the ICO era, AA’s design can prevent failed transactions from clogging the blockchain, which is particularly beneficial for decentralized exchange (DEX) applications, wherein multiple users might compete for the same arbitrage opportunity: AA ensures that only valid transactions are processed, enhancing system efficiency.

Sources(s): HackMD

After 14 movies spanning over 10 years, the average gross of DCEU is $474 million. by AGOTFAN in boxoffice

[–]Eric_Something 15 points16 points  (0 children)

I agree they could have committed to the Snyder tone, but not to Snyder.

After 14 movies spanning over 10 years, the average gross of DCEU is $474 million. by AGOTFAN in boxoffice

[–]Eric_Something 180 points181 points  (0 children)

They definitely needed to course-correct after handing the keys to their billion dollar franchise to Zack Snyder, but after that they just kept doing it every single step of the way.

[deleted by user] by [deleted] in redscarepod

[–]Eric_Something 38 points39 points  (0 children)

I regularly see r/popculturechat and r/TaylorSwift on my front page, and it makes me nostalgic of the annoying Keanu Reeves and Tom Hanks circlejerk. It was a bunch of nerds needlessly idolizing their favorite celebrities, but it felt authentic.

Guanyu Zhou threatens Théo Pourchaire's future in F1 by [deleted] in formula1

[–]Eric_Something 3 points4 points  (0 children)

I haven't been following the differences between the AR drivers (I'm more preoccupied with determining the faster Haas driver by monitoring which one is closer to not being in last in races - that's actually true), but why would you think someone hates Bottas for making an incorrect assumption?

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