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THE DAILY INDEX

Technology, AI, software, security, crypto and business

MARKETS & BUSINESS

TLDR Crypto

FEDERAL COURTS

The founders of Tornado Cash, the scrutinized crypto mixing service, are facing charges from the US Attorney’s Office for alleged money laundering and sanctions violations. The crypto service, a byproduct of Zcash's open-source research, has allegedly been used to launder over $1 billion in assets, some of which were linked to North Korea's Lazarus Group. This investigation, ongoing since last August when the regulators declared it illegal for US citizens to interact with Tornado Cash, has raised questions about responsibility and blame in a decentralized network, as Tornado Cash runs on immutable smart contracts.

THE ENGINEER’S GUIDE TO BLOCKCHAIN FINALITY

Security researchers have discovered that some applications, like Juno and Pathfinder, are not checking for finality or are incorrectly doing so. This opens the door to attack vectors like double spend attacks. After reporting this issue to the protocols in question, the researchers put this guide together to discuss their findings, thoroughly describe finality, and propose an alternative way of checking for finality.

TOKEN

This thread cautions against using a rollup protocol’s native token for gas fees. The process risks creating no net new token demand as users sell the tokens to cover transaction costs, potentially leading to the protocol subsidizing rollup usage. Additionally, it can create issues for interoperability, complicate users’ token inventories, and add user-experience hurdles. The thread goes on to suggest alternatives like buybacks with excess sequencer revenues for more sustainable demand and stronger incentive alignment.

NETWORK

Offchain Labs, the team behind Arbitrum, has launched AnyTrust - a lower-cost alternative to rollups for developers seeking to launch on Arbitrum's network. The innovation relies on a Data Availability Committee, which stores call data temporarily, making transaction costs for rollups leveraging this option cheaper, with faster withdrawals. This innovation comes as more protocols are choosing to launch their chains on top of other stacks like the OP stack instead of creating their own stack.

CENTRAL BANKS WARN

Global central banks say that cryptocurrency assets have increased financial risks in less developed economies and should be regulated like other assets. The Consultative Group of Directors of Financial Stability urged a quicker, bolder regulatory approach, especially if crypto assets are more broadly adopted by retail investors. However, it’s not clear what risks they are referencing here - whether it’s asset volatility risk or protocol vulnerability risk. It’s been well documented that stablecoins have provided a safe haven for individuals in high-inflation environments, so it seems like it would be difficult to argue that those assets increase risk.

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