Into the Ether

6 min readSep 6, 2021


Ethereum underwent another chain split as developers rapidly worked to fix a “high severity security issue” in the Ethereum EVM codebase found by code auditing firm Sentnl.

The exploit was caused by a number of node operators not updating their Geth software client, which is run by 75% of Ethereum nodes. The vulnerability was found and operators were implored to update their nodes without being given details of the exploit to avoid more potential attacks, but many failed to do so.

The exploit created a higher chance of double-spending on the chain, which would’ve lasted long enough for money to leave the system before the chain could correct itself. A Go Ethereum developer, Marius Van Der Wijden, speaking personally, stated that it was only a matter of time before the bug was found and exploited, and had hoped more operators would’ve upgraded by that time.

With the attack happening 3 days after the update was made available, the chain split from the upgraded nodes and those that had not. It is unclear if the attacker was attempting to specifically cause a chain split.

Something very similar happened in November 2020 when nodes failed to be upgraded in a timely manner, causing a chain split and despite offering a fix and communicating the urgency to update nodes this time around there was still a period for the exploit to be taken advantage of.

Continued and expensive attacks on the Ethereum protocol are doing little to deter users. The recent $610 million hack of DeFi PolyNetwork acting as the highlight of a suite of DeFi hacks this summer. Next up — fractionalized NFTs look like a tasty and oversized honeypot for malicious actors to turn to next.

Yet, this is nothing new to Ethereum. It has had a rocky and turbulent upbringing with the DAO hack way back in 2016, the first of many, and caused the initial divergence away from the original saying of ‘code is law’ into being a more malleable and reactive platform for throwing value around via smart contracts.

There is something very cool about being able to transfer value around on Web 3.0 via smart contracts and the last several years of Ethereum has essentially been an ideas smorgasbord of high time preference stories being attached to transferring value. The DAO and shortly after, the ICO boom, dApps (those dang kitties), ERC20s, ERC-721s, DeFi and now NFTs. All are novel ways of passing value and each has a different narrative and story. But ultimately they are all very similar, in that they’re using smart contracts to extract money to/from users.

So while Ethereum has undergone a number of improvement proposals and upgrades over the years, the actual underlying mechanisms haven’t, more the perception, marketing and hype around projects has. There’s nothing wrong with this and still being within the first decade of its inception means the novel ideas are going to be tested at breakneck speed. A cambrian explosion of projects, followed by huge extinction events — remember when dentists having their own monetary system seemed like the greatest imperative to humanity for about a month? Remember how mempool front-running and semi-popular dapps completely decimate the usability of ETH. Remember how UniSwap became unusable unless you were prepared for some eye-watering fees. All this experimentation may result in a lot of deadweight and bloat for the network.

What is quite telling is that those selling the shovels to these products are taking the bet that this version of Ethereum will continue a lot longer than planned. Mining firms and manufacturers are increasing their investments in mining despite Ethereum’s much anticipated (and continuously delayed) switch to proof-of-stake, which completely removed the necessity of miners. To be fair to them, mining was meant to end four years ago. I do remember being at a talk at UCL where several student devs were exclaiming how proof-of-stake will change everything and finally flip bitcoin — while the lead dev and lecturer, Gavin Wood, outlining the Polkadot concept, being a bit more reserved with the dates and outcomes. Ah, what easier times.

What is different this time around is that Ethereum now has a burn rate of around 3000 ETH a day in order to transition to Proof-of-Stake. It will be interesting to see if this has any notable effect on the price, miners and transaction fees — which are still high compared to historic averages. But following this a little, ETH generates ~6500 blocks per day, each producing around 2 ETH. So even with its current burn rate — it is still producing 550 ETH a hour. Maybe the burn rate will increase and the mining rewards will be limited, but for the idea that Ethereum is now deflationary after the London update just is not true for the time being.

The upcoming ‘Ice Age’, now set for December 2021 (proposed in 2015, delayed multiple times) should change this by jigging the mining rewards and aligning the incentives to switch to proof-of-stake. There are two key factors here — firstly, no one will want to give up such lucrative mining and won’t do so without some serious pushback, which could be partly the reason as to why it has taken so long. Secondly, Ethereum is now back over $3,000, homes the majority of decentralized finance, NFT projects, and a plethora of new businesses, so its dependability and stability need to be protected, with any potential exploits or vulnerabilities worked out far in advance of a major rollout.

Currently, the majority of Ethereum mining is done by individuals or small-scale companies, unlike Bitcoin, however large miners and manufacturers are lining up to start taking huge slices out of that pie. Nvidia and Bitmain are releasing specialized mining hardware for Ethereum and existing mining firms are upping the ante as the buyback time on these new mining goodies is 5–6 months — a very quick turnaround — and a good indicator that Ethereum mining will still be around well into 2022. Similar to how this played out before when Ethereum was meant to switch over the proof-of-stake back in 2017/18, those that took the risk of investing in mining back then have made huge profits. Looks to be the same play this time, but will it come in again? How much longer can the bucket be kicked down the road while Ethereum’s competitors are making ground (even if their biggest attention-grabbing use cases is to be the platform of hacks and rugpulls).

Across the board, across all metrics, Lightning continues to look stronger and stronger each day — I’m sure it’s nothing for Binance Smart Chain, Cardano or Ethereum and the rest to worry about.

Twitter testing Lighting payments

Twitter is rumored to be testing the lightning network as a payment mechanism for tipping users on the platform. While these are still rumors, it looks to be using Strike as the software provider and integrating it directly into the platform.

This shouldn’t really be news given just how bullish Twitter CEO Jack Dorsey has been on lightning and keen on providing the tools for more direct cryptocurrency integration into his businesses. Moreover, there are already several automated lightning tipping accounts on the platform such as @Bottlepay and @satoshi_LN_bot which users can call commands to tip one another — the process is still not as smooth as it could be — but having paid out nearly 500,000 sats so far (via @satoshi_LN_bot), the clunky, fan-made MVP was probably enough for others to spend some time improving the potential.

FTX acquires LedgerX in order to provide crypto derivatives in the US

The exchange FTX is in the process of taking on LedgerX for an undisclosed sum as a means to offer a range of crypto derivatives to their US customers, who are currently prohibited from making use of such products. FTX already offers derivatives to customers outside of the US, but clearly intends to give the option to their US users via FTX.US after finding there to be ‘deep demand’ from retail and institutional traders.

LedgerX is a US-regulated crypto-derivatives exchange and clearinghouse. The general plan is to maintain the existing services of Ledger’s business while working to bring the regulated products under the FTX.US corpo as well. There are also reports from July that FTX is looking to offer traditional stocks and assets in the future.

The trend of those with regulatory clearance being brought out by larger players is one that will likely continue in the future, especially as different jurisdictions and regulatory bodies start molding more bespoke approaches to crypto. Binance attempted to get UK regulated via acquisition recently which did not go down too well, with the FCA banning the UK arm of the company, Binance Markets Limited, from providing derivatives in the UK after they were deemed too high risk.