The Baking Sheet - Issue #162
Unraveling the Curve Finance Hack and Embracing the Future with Tezos' Smart Rollups: A Deep Dive into the Tezos Ecosystem
Welcome to another edition of The Baking Sheet, your weekly guide to the Tezos universe. This newsletter is here to help you navigate the complex and ever-evolving landscape of blockchain technology.
This week, we're starting with a sobering look at the recent Curve Finance hack. It's a stark reminder of the vulnerabilities inherent in the world of decentralized finance. But it's not all doom and gloom. We'll also explore how Tezos, with its unique approach to creating trading rules, could potentially prevent such issues. Arthur Breitman, co-founder of Tezos, has some thought-provoking insights on this matter, and we'll be delving into his perspective.
Next, we'll journey into the world of Tezos Smart Rollups, a groundbreaking technology that promises to revolutionize scalability and interoperability on our platform. We'll cover the latest developments, including the "Tezos on Tezos" Rollup, Etherlink Rollup, the Data Availability Layer, and the Ultra-High Throughput Rollup. It's a thrilling time to be part of the Tezos ecosystem, and we can't wait to share these advancements with you.
In our ecosystem spotlight, we're featuring Arthur Breitman's reflections on the disruptive potential of blockchain technology. Arthur's views, always insightful and often challenging, offer a unique perspective on the evolution of the crypto ecosystem. It's a conversation you won't want to miss.
Finally, we're thrilled to bring you our latest episode of TezTalks LIVE, where we sit down with Piero Guicciardi, the Co-Founder of re—tain, an innovative new generative art platform on Tezos. We'll discuss the inspiration behind this exciting project and what sets re—tain apart from other generative art platforms currently operating in the space.
As always, this newsletter is here to help you make sense of the complex and fascinating world of Tezos. So grab a cup of coffee, settle in, and let's dive into this week's edition of The Baking Sheet.
Understanding the Curve Finance Hack and How Tezos Could Prevent Similar Issues
If you have been following the space, Curve Finance was hit by a series of hacks this past week. These attacks led to a significant loss of funds from several of its trading pools. The root cause of this problem was a glitch in the system used to create the rules for trading on the platform, known as smart contracts. This article will break down what happened in simpler terms and explore how another blockchain, Tezos, could potentially prevent such issues.
What Happened with Curve Finance?
The attacks targeted four trading pools on Curve Finance. The attackers were able to drain these pools of their digital tokens, with losses ranging from $1.6 million to $14.2 million per pool. The glitch that allowed this to happen was in the system used to create the trading rules, which failed to provide the necessary security.
The attackers used a complex series of steps to exploit this glitch. They borrowed a large amount of tokens, added them to the targeted pool, removed them, and then added them back again. Due to the glitch, the system didn't correctly track these actions, allowing the attackers to create an unlimited number of tokens for themselves and claim all the funds in the pool.
How Could Tezos Prevent This?
Arthur Breitman, co-founder of Tezos, chimed in on X suggesting that the way trading rules are created on platforms like Curve Finance makes them vulnerable to these types of attacks. He suggests that they could benefit from using the approach taken by Tezos.
On Tezos, the rules for trading don't allow for other rules to be called in the middle of a transaction. Instead, a transaction is fully completed, and then a list of messages is sent to other contracts. This doesn't completely eliminate the risk of similar attacks, but it makes them much less likely.
In the case of the Curve Finance attack, the glitch allowed the attackers to interfere with the transaction while it was still happening. If the Tezos approach had been used, the transaction would have been completed before any other rules were called, preventing the attackers from interfering.
The attack on Curve Finance is a stark reminder of the potential risks involved in trading cryptocurrencies on decentralized exchanges and the importance of strong security measures. While platforms like Curve Finance have been popular for trading due to their flexible trading rules, this attack highlights a significant weakness in their design.
Tezos offers a promising alternative with its unique approach to creating trading rules, which could significantly reduce the risk of similar attacks. As the world of cryptocurrency continues to evolve, it's crucial to learn from these incidents and continually improve the security and reliability of these platforms.
Unleashing the Power of Tezos Rollups: What’s Next
Cryptonio from Tezos Commons dives into the world of Tezos Smart Rollups, a technology that's set to revolutionize scalability and interoperability on our platform.
Recap: What are Rollups?
In case you missed my previous articles (Part I, Part II), rollups are a solution that helps to scale blockchains. Tezos has implemented a unique version of these rollups, which are part of the Layer 1 protocol and fully decentralized. These rollups are based on WebAssembly (WASM) and are highly customizable, allowing developers to create rollups that fit their specific needs.
What's New in Tezos Rollups?
"Tezos on Tezos" (Michelson VM) Rollup: The Baking Bad team is developing this rollup, which will reduce operational costs, provide a custom MEV-resistant solution, and make contract wallets first-class citizens.
Etherlink (EVM) Rollup: Etherlink is a layer-2 solution for Tezos that provides scalability and compatibility with Ethereum-based applications. This means developers can deploy Ethereum-compatible smart contracts on Tezos, and users can connect with their MetaMask wallet.
Data Availability Layer (DAL): To fully leverage the potential of smart rollups, we need to ensure the availability of rollup transaction data. The DAL, being developed by Nomadic labs, Marigold, Functori, and Trilitech, is a fully decentralized approach to store data and ensure its availability through Layer 1 consensus.
Ultra-High Throughput (UHT) Rollup: Announced at TezDev 2023, the UHT Rollup aims to create an "all in one" rollup with low latency, interoperability, and composability. It will support multiple contract types and be compatible with both EVM and Tezos indexers.
The Future of Tezos and Its Smart Rollups
Scalability is key to achieving mass adoption of blockchain technology, and Tezos is making significant strides in this area with smart rollups. By enhancing scalability without sacrificing decentralization, Tezos is positioning itself as a dark horse in the blockchain space.
This Week in the Tezos Ecosystem
Arthur Breitman: Unleashing the Disruptive Potential of Blockchain Technology
Why it matters: Arthur, co-founder of Tezos, recently shared his insights on the role of blockchain technology and how it’s shaping up. His views provide a unique perspective on the evolution of the crypto ecosystem and the potential of blockchains to disrupt traditional financial systems.
Driving the news: Tezos uses a governance system that allows token holders to vote on the future of the blockchain. This approach, Arthur argues, makes it less susceptible to forks that have affected other protocols like Ethereum and Bitcoin.
Arthur believes that the real value of decentralized blockchains lies in their ability to solve social and institutional problems.
While the entry of traditional financial firms into crypto could bring more people and investments into the space, Arthur sees blockchains as more about disruptive innovation than incremental innovation.
Drawing from his background in finance, Arthur pointed out that designing a blockchain requires a multidisciplinary understanding, including cryptography, systems, finance, and economics.
He believes that a lack of understanding of basic economic principles has led to some of the disasters in the crypto space over the past few years.
Arthur highlighted the technological advantages of Tezos over Ethereum and Bitcoin, stating that Tezos is faster, more scalable, and more robust.
He also pointed out that Tezos has a culture of innovation, bolstered by its governance model, which has led to 14 successful upgrades voted on by the community.
On the topic of Bitcoin, Arthur criticized the cryptocurrency for its refusal to change and adapt, which has led to it being stuck in the past.
He emphasized the importance of improving throughput for Tezos, stating that no blockchain has truly scaled yet, and there are use cases that depend on a large amount of throughput.
What to watch: Arthur pointed out that even though Tezos already has much lower fees than Ethereum, it's essential to ensure that these fees remain low even with increased adoption.
The bottom line: Arthur believes that we are currently limited in the assets traded on markets. He sees potential for blockchains to improve financial infrastructure, allowing for a wider array of businesses and alternative assets to have liquid markets. He also envisions a more global financial system, less focused on developed markets, with blockchains playing a significant role in this shift.
TezTalks LIVE featuring a new generative art platform on Tezos, re—tain!
We sit down with Piero Guicciardi, the Co-Founder of re-tain, a cool new upcoming generative art platform. We'll talk about why they started this awesome project and what sets re-tain apart from other generative art platforms currently operating in the space.