Tag: smart contract blockchain

Chinese Police Seize $14M in Crypto from Scammers Posing as Huobi Officials

The Chinese police arrested a crypto scammer gang in Wenzhou that reportedly swindled $14.3M in cryptocurrencies.  

The gang, which was made up of Chinese graduate classmates, operated by reaching out to victims through Telegram group chats, one of which was called “Huobi Global Moving Brick Arbitrage HT Chinese Group Community.” By posing as the global investment group and with the help of devised marketing schemes, the fraudsters advocated the use of “smart contract” blockchain technology in order to invest their “clients'” money. 

They claimed that the blockchain smart contract could generate Huobi Tokens (HT) – the official coin of the cryptocurrency exchange Huobi. The criminals told victims that this investment would enable the latter to earn an 8% return via arbitrage. 

The fraudsters convinced individuals to transfer Ethereum coins to a designated web address, after which the client would be compensated with 60 HT. They posed as investors and they told interested participants that all they needed to do was send their crypto coins to a fake Huobi wallet address, after which the victims would receive the promised HT tokens in return. Instead, it was reported that individuals falling for the scam only received a fake HT link in return. One victim came forward and filed a complaint to the local police. He told them: 

“Simply put, you send one unit of Ether to a designated account, and they send you 60 HT. If you sell it, the profit you gain is around 8%.” 

After investigating the criminal case for more than a month, Chinese police officers finally managed to locate the scammers. During their raid, officers arrested 10 suspects residing in a luxury villa and a commercial house in the Cangshan District of Fuzhou City. The police also seized real estate property, two luxury cars — a Ferrari and a McLaren — estimated to respectively be of $430,000 USD and $570,000 USD in value. 

Bitcoin and Ethereum win sentiment scores 

With cryptocurrencies on the rise, hackers and fraudsters have been quick to use this to their advantage. Ethereum, Litecoin, Bitcoins, and Zcash appear to be popular choices used in fraudulent activities. Though cryptocurrencies are relatively safe and secure, the guaranteed transparency of them can sometimes be problematic. 

A random sample population surveying whether people generally had a positive or negative outlook on cryptocurrencies found that Bitcoin and Ethereum generated the most positive outlooks, while Binance coin received the highest sentiment rate. Eleven cryptocurrencies were used in the experiment. 

Ethereum's Layer 2s Break New Ground in Scalability

Ethereum has marked a commendable 22% upsurge in its value as of September 2023, surpassing many substantial smart contract blockchains, according to Will Ogden Moore’s article on Grayscale blog. The escalation is significantly credited to the advent of Layer 2 solutions (L2s) which have been instrumental in bolstering Ethereum’s scalability, rendering the network 100 times more cost-effective for its users. The endorsement of this paradigm came with the launch of BASE, a Layer 2 blockchain on Ethereum by Coinbase in August 2023. This development not only accentuates the growing credence in the Ethereum ecosystem but also extends the dissemination of decentralized applications to over 100 million Coinbase users. Concurrently, leading Layer 2 blockchains on Ethereum, namely Optimism and Arbitrum, have overstepped large Layer 1 blockchains like Solana in Total Value Locked (TVL), inching Ethereum closer to becoming the predominant Layer 1 blockchain if this trajectory persists.

The essence of Layer 2s emanates from the burgeoning need to augment Ethereum’s scalability. The analogy of a congested highway necessitating express lanes mirrors Ethereum’s scenario that propelled the genesis of Layer 2s. As transaction volumes swell, the network grapples with the scarcity of block space and surging gas fees, which peaked at an average of $196 per transaction by May 2022. This surge not only impinged on the user experience due to high costs and time inefficiency but also positioned Ethereum (~14 transactions per second) far behind competitors like Solana, capable of handling up to eight thousand transactions per second.

Layer 2 solutions ameliorate Ethereum’s inherent issues by processing transactions from decentralized applications, batching them, and transmitting a condensed version back to the main network for settlement. This mechanism drastically trims fees, up to 100x less than on the main chain, enhancing the usability and transaction capacity of the Ethereum ecosystem while buttressing its network security. Additionally, the incremental activity on Layer 2s reciprocates value to Ethereum with every transaction fee shared between the L2 and Ethereum network, alongside a minuscule burn of the total ETH supply, enriching the ETH value.

August witnessed a pivotal development with Coinbase launching its Layer 2 scaling solution, BASE, on Ethereum, extending the reach of dApps built on BASE Layer 2 to over 110 million users in the Coinbase ecosystem. BASE’s launch has already shown a notable upturn, surpassing Ethereum and other Layer 2 competitors in daily transactions within a month, and further propelled by the viral growth of decentralized application friend.tech. While presently centralized, BASE has expressed a progressive decentralization roadmap, aligning with the broader vision of Ethereum’s Layer 2 scalability agenda.

The previous months have seen a consistent rise in the usage of Layer 2 scaling solutions, with the aggregate daily active addresses on Layer 2 outpacing leading Layer 1s. The TVL metric also reflects a burgeoning trust in Layer 2s like Arbitrum and Optimism, which have surpassed Ethereum’s Layer 1 competitors Solana and Avalanche. The launch of the ARB token in March 2023 further entrenched Arbitrum as a leading Layer 2, boasting a TVL of $1.69 billion, only behind Tron and Ethereum.

While Layer 2s are pioneering in scaling Ethereum, they are at nascent stages of decentralization, posing certain risks. The predominant model involves a single entity running a “sequencer” for processing and batching transactions on Layer 2s, which could potentially lead to adverse outcomes such as outage risks. However, the progressive decentralization plans shared by most Layer 2s aim to mitigate such risks over time.

Despite the general consensus of a crypto market downturn since 2022, Ethereum’s ecosystem is burgeoning, courtesy of the Layer 2 solutions. The Layer 2 paradigm not only validates Ethereum’s model but also propels value to ETH, attracting more users and developers. With BASE, Coinbase is potentially paving the path towards mainstream adoption of Ethereum-based decentralized applications. The collective advancements in Layer 2s, despite the inherent centralization risks, are deemed to foster competition and innovation, positioning Ethereum to further cement its dominance in the smart contract blockchain realm.

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