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Rating Change!
Given the potential insolvency of the FTX exchange (discussed more below), we have downgraded the FTT token from a Neutral rating to a Deficient rating.
FTT’s centralization around a for-profit company and poor token distribution were the top 2 Weaknesses displayed in our Fundamentals report. Unfortunately, those vulnerabilities were exposed over the last week, and the future of FTX and the FTT token is unclear. At this stage, the asset’s utility and value are in question, and there are no reasons to own it.
SOL downgraded from Bronze to Neutral
Over the past ~week, due to the collapse/insolvency of FTX and Alameda, the total value locked (TVL) across Solana has decreased by ~45%, while the price of SOL has plummeted by 45% over the same time period. The dramatic sell-off in price and TVL is due to the close ties and support Solana enjoyed from major players like FTX, SBF, and Alameda as covered in our report. Having the backing of some of the biggest players in the crypto space is an incredible advantage that many L1s did not enjoy. However, now that those entities are potentially insolvent/bankrupt, Solana no longer has this “advantage” and will undoubtedly suffer in the near due to the collapse.
The recently released balance statement of Alameda reveals that the company has about $1.1 billion in locked and unlocked SOL tokens. If the transaction with Binance falls through, the company may be obliged to liquidate these assets. Additionally, Solana validators will also release more than 50 million SOL tokens (13% of total supply) in the near term.
This is a devastating blow to a chain that was heavily reliant on VC backing. While it is possible for the blockchain to persevere and come out stronger in the long term, these last few days have fundamentally altered the strength of the network. Aside from this, Solana will still need to contend with network outage issues that still plague the chain as well as very well-understood limitations of its monolithic design.
It is for these reasons that Solana (SOL) has been immediately downgraded to a Neutral rating.
Bonus
Before using a new exchange or trading a new token, verify its safety/trustworthiness by checking:
- “Trust Score” on CoinGecko
- “Exchange Score” on CoinMarketCap
3. Trading volume (more the better) and cross-check that number with Nomics’ Transparency volume and Exchange grade
Hacks, Exploits, and the Bad Stuff
Bitcoin’s Lightning Network experienced two separate vulnerabilities over the last ~30 days. In the most recent attack, only Lightning nodes operating on LND, the most common Lightning Network client created by Lightning Labs, were affected. Due to the seriousness of the danger to Lightning funds, Lightning Labs was compelled to provide an emergency update to their Lightning Client that includes a fix for the vulnerability.
This flaw was discovered and reported to the Lightning Labs team two weeks prior by @ajtowns. The fact that @ajtowns exposed the vulnerability and Lightning Labs didn’t take action for two weeks demonstrates the consequences of disregarding ethical reports.
Prior to the bug exploit last week, the same actor, identified as Burak, created a 998 of 999 multisig transaction that caused a significant portion of Lightning Network to crash by causing nodes to fall out of sync, preventing LND nodes from parsing new blocks and causing a significant portion of Lightning Network to miss a block during its block production process.
- Solana's Mango Market was exploited for ~$114 million. A few days later, the assailant revealed his identity, claiming to be a member of a group of investors who engaged in a "very profitable trading method," meaning their activities were lawful.
- 1,000+ Solana validators have had their server access restricted by cloud provider Hetzner, affecting more than one-fifth of the network-securing Solana stake.
- An attacker breached BNB Smart Chain and stole 2 million BNB ($560 million) from the Binance cross-chain bridge. After investigating the situation, the pseudonymous researcher "samczsun" uncovered a flaw in the manner in which the bridge validated security proofs, allowing attackers to fake arbitrary messages. Learn more about blockchain bridges and their vulnerabilities here.
- NYDIG CEO Robert Gutmann resigns while also firing one-third of staff the same month
- The largest public Bitcoin miner by hash rate, Core Scientific, may file for bankruptcy
- Argo Blockchain shares plummet ~%50 as the company miner suffers negative cash flow
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