Opensea announced something MAJOR today - they created a protocol for NFT marketplaces called Seaport

Here's what it means, why it's big for decentralization and how this radically changes how we buy/sell/trade NFTs

🧵👇

Before I begin, think about Seaport the same way you think about Uniswap.

Uniswap changed the game with their open-sourced decentralized exchange - part of the avalanche that we now know as DeFi Summer in 2020

This move by Opensea might have the same potential because...

Uniswap is an open-source platform, and multiple copycats across different chains arose (sushiswap, pancakeswap). This led to massive growth and innovation in DEXs and DeFi in general

This move from Opensea signals to the competition: bring it on, let the best marketplace win

Ok, so wtf is a protocol?

Right now, Opensea is a marketplace platform (like Facebook). The platform offers the service of letting you buy and sell NFTs.

Opensea (the company) controls the platform 100% - so any changes to the code (such as accepting $APE) are centralized 

In contract, protocols are like "standards"

The one we're all familiar with is Email, which uses SMTP, or Simple Mail Transfer Protocol.

It's the standard protocol for sending emails across the Internet - every email client from Google to Yahoo uses it

The big thing that protocols let you do is "transfer" your account - or interoperability

If you don't like using Yahoo because you think their layout is ugly and you're getting too much spam, you can always port it to Gmail and use their client instead

So Opensea is helping decentralize the buying/selling/trading of NFTs by launching the Seaport protocol

Here are the 6 biggest takeaways from reading the Seaport and what it means for the NFT space

1. Opensource code: With Seaport, anyone can build an NFT marketplace using the protocol because it's decentralized and Open source

In the coming years, we should expect to see way more marketplaces being built

More competition = better + faster innovation

2-1) Decentralized: Opensea says that there is no contract owner to this protocol, and anyone can update or fork the code

To understand what this could mean for the future of NFT marketplaces, think about the ERC-721 token standard.

Everyone launched their NFTs with it, until..

2-2) People got fed up with high gas fees, so Azuki found contract optimizations, to save users $ on gas

While there are some limitations, lots of projects now choose to use it when they can

This wouldn't happen if a centralized organization controlled the ERC-721 standard

3) Buy or trade: Right now, you can only buy or sell NFTs for ETH or fungible tokens (APE, USDC, DAI).

On the Seaport protocol, you’ll be able to trade NFTs, or sell for ETH or erc-20 token.

So list your MAYC for 25ETH, or 5 ETH + 1 Azuki, or just 2 Azuki's - flexibility

4) Trade for specific NFTs: When trading NFTs, you can also set specific “criteria” that the NFT must have.

So, want to trade your rank 2 Azuki only for a gold BAYC? you can specify that

Only wallets with a gold ape can trade for your NFT

5) Dutch Auction listings: Not sure what the market values your NFT at?

Create a dutch auction!

With seaport, you can set a start and end price, say how long you want the auction to run.

The listing will decrease (or increase) the price until a buyer is found (or expires). 


6) Find bugs & earn $$: Opensea is conducting a two-week audit contest with a total $1 million prize pool.

Any developer can audit the code and submit reviews and errors they find, and be rewarded for their work.

https://code4rena.com/contests/2022-05-opensea-seaport-contest

The marketplace landscape is set to look very different in the coming months and years. You can bet that many will choose to build on Seaport protocol, and will increasingly become the standard for NFTs

What I'm excited about most is the innovation this opens up. Because the code is open-sourced, all marketplaces will be competing for users.

Who will create the next killer feature that attracts users? How quickly will the competition catch up or out-innovate?

I think this is the NFTs "Uniswap moment" 

What happened after Uniswap? DeFi Summer.

Perhaps there's another NFT summer on the horizon soon enough...


and check out my substack for more deep dives

https://degenuniversity.substack.com/

Or all my past thread: https://twitter.com/atareh/status/1518059206796103680?s=20&t=92LRQJoYBNXcUJeID4h_YQ https://twitter.com/atareh/status/1518059206796103680?s=20&t=92LRQJoYBNXcUJeID4h_YQ

Last week, $60 billion dollars of marketcap was wiped out in crypto.

This is the story of one man's stablecoin, that mutated into a monstrosity that collapsed the entire ecosystem and caused a massive downturn in crypto with it.

This is the story of @stablekwon and the Terra

So what really happened? 

I'm guessing most of you still don't really know. 

Yeah, you got a soundbite you repeat so you don't sound dumb, but cmon.

While the collapse blindsided most people, some did see it coming

While the #LUNAtics were having a big old party, some saw the giant lie at the heart of the Terra

a few weirdos and outsiders saw it early on and tried to warn everyone

We'll meet them later @freddieraynolds


Now before I get into the guts of this story, fair warning, you're going to hear a lot of DeFi terms like:

- Stablecoin
- Peg
- Collateral
- Algorithmic stablecoin
- Marketcap
- APY

It's pretty confusing, right? Does it make you feel bored? Or stupid?

Well, it's supposed to

DeFi loves to use confusing terms to make you think only they can do what they do.

or even better, for you to leave them the fuck alone.

But we don't have Margot Robbie in a bubble bath to explain, you're stuck with me

So, here's what you need to know:

1) Stablecoin: a crypto coin that matches the value of fiat (usually USD). Helps normies use crypto because it's familiar and not "volatile" 🙄

2) Peg: to match a value. UST was "pegged" to fiat USD so 1 UST *was* always = 1 USD



3) Collateral: proof that an asset is worth something because something else is backing it up (ex: when you buy USDC stable coin, they buy 1 fiat USD to keep in the bank)

4) Algo stable coin: a stable coin backed by user incentives instead of collateral or reserves

5) Marketcap: the price of a coin * total available coins. How much a cryptocurrency network is worth

6) APY: annual percentage yield. Commonly used as a reward for "staking" your coins to get free coins at a percentage

Now, let's jump into the story

Terra was founded in January 2018, at the peak of the 17/18 bull run.

At the time, ETH was not second-largest cryptocurrency (surprisingly) - it was XRP (remember them?)

Things were very different back then 

in hindsight, Jan 2018 turned out to be the top.

The total crypto market cap peaked at ~$800M in Jan 2018 and would proceed to bleed out to ~100M over the following year

Mant learned in the months and years to follow, that what goes up must come down.

and because bear markets are for builders and that was Do Kwon's mindset (@stablekwon)

Kwon took on the position of CEO of Terraform Labs to build: 

"a protocol to create decentralized price-stable cryptocurrencies (stablecoins) to usher in crypto payment processing"

Their plan was simple: 

1) Launch a coin to fund development
2) Launch stablecoins
3) Create a DeFi ecosystem to sustain their community
4) ???
5) Solve the global payments infrastructure

Specifically, the coins they launched were LUNA and UST.

LUNA held their ICO in Jan 2019, letting early investors buy LUNA for $0.80, which got them $62M

Then, a year and a half later, Terralabs launched their algorithmic backed stable coin TerraUSD (UST) in September 2020

(fun fact: they also launched TerraKRW, a Korean won stable coin earlier that year and spoiler: same fate as UST)

The idea of LUNA and UST was simple enough. 

Since UST should always be $1 and that is dictated by how much UST is out in the market, Terra designed a way to mint or burn UST

When the price of UST > $1, you could burn LUNA to get equivalent value UST.

Why? because there was an arbitrage opp:

if 1 LUNA = $50, you get 50 UST for burning LUNA

if UST price was $1.1, then you sell 50 UST for $55

This selling pressure would balanc UST back to $1

and the opposite works as well,

if UST is at $0.95, then the arbitrage is to buy UST for cheap, and burn it for $1 LUNA

In the terra ecosystem, burning always gives you the $1 quote price, irrespective of what the market price is.

Again, this mechanism was built into their ecosystem and designed to always ensure that 1 UST = 1 USD

But how well did that actually work? 

Did UST ever depeg from $1 before?

Well yes, and guess what bailed it out? 

Not the proposed LUNA <> UST burn mechanism...

https://twitter.com/FreddieRaynolds/status/1486975826180644867?s=20&t=Q7ZEerJkdGUfhcypiqc1Gw

That's right, when UST Depegged from the dollar to 0.93 May 2021, a VC fund bailed them out with a couple hundred million...

So much for Burn/Mint mechanism...

But let's put that aside. That's one day and only one depeg event. 

The Terra ecosystem is strong. 

Ethereum was hacked before too and look at it now. and besides, have you heard about their savings program?

No? well, let me tell you all about it!

If the instability of UST didn't raise alarm bells, well how does free money sound?

Terra's first main product was a "savings platform" called Anchor. They promised you 20% APY on a stable coin.

Let me be very clear: that APY ABSURD, especially for a stable coin

That is the literal definition of Ponzi - because you were incentivizing people to hold and stake your currency,

so that they could get more free money, all the while promising that UST currency will always be pegged to the US Dollar. 

🚩🚩🚩🚩🚩

While Terra said that the Anchor protocol made money and 20% was sustainable - that was a lie. They were dipping into their own reserves of LUNA and selling it to give people 20% annual return

But once again, nobody really gave it any thought. Free money, right?

At its peak, just before the crash, Anchor held $14 Billion dollars in UST

and it's at this point in the story I should formally introduce the Michael Burry of this story: @freddieraynolds.

Before the 2008 financial collapse, Burry was one of the first to notice that the housing market would collapse and proceeded to short the banks

I'll be honest - don't know much about Freddie except that he called out how vulnerable Terra was in November 2021

and for that, he was called "stupid + [redacted]" by Do Kwon 😂 

What triggered Do Kwon to turn to 5th-grade insults was that @freddieraynolds detailed a plan on how someone with ~$1 billion dollars could destroy the Terra ecosystem (while making a shit tone of money too)

The plan was honestly simple - you can read the full thread below but in short, it's:

destabilize the UST $1 peg by repeatedly buying selling and converting large amount of LUNA to UST. 

Do this enough and you'd start a death spiral

https://twitter.com/FreddieRaynolds/status/1463960623402913797

Why would this work? 

Well, remember what I said 9 tweets ago? 

No? K screenshot is below

The depeg to 93 cents in may of 2021 was solved by a VC fund dropping hundreds of millions to rescue it, NOT the mint/burn mechanism

Not very stable, @stablekwon

But even still, nobody believed @freddieraynolds - or at least very few people did.

Do Kwon responded professionally (for once) and still said this sort of attack was impossible

https://twitter.com/stablekwon/status/1464943691143921664?s=20&t=Q7ZEerJkdGUfhcypiqc1Gw

And yet, here we are, with LUNA and UST both sitting close to $0. 

It's hard to say if someone deliberately used Freddie's thread as a blueprint to attack the Terra ecosystem, 

but we do know that a large whale with  $1 Billion in UST started the initial depeg on May 7

That would be the last day UST would hit $1, because as each day passed, more and more people panicked. 

The longer the price stayed below $1, the more people pulled their UST out of anchor, which led to more people selling.

A death spiral, just like @freddieraynolds said

All it took to break a 60 billion dollar ecosystem was an opportunistic attacker with a billion dollars

Was it an attacker? Where did they get that from? Is Citadel behind this? or eas it the US Fed?

Conspiracies have been running wild, but it misses the point entirely

when you play the game of crypto, you win or you die. 

If your ecosystem can be taken down in such a fashion, it shouldn't have existed in the first place. 

Financial systems need to be anti-fragile - they should be able to take on little tremors and big earthquakes

Otherwise, you will get exposed, which is what happened here.

But why did the overall crypto market drop that week as well?

Well, the market was already headed down because the US increased interest rates, but of course, Do Kwon's actions played into this

You see, in January 2022, Do Kwon started buying BTC - to be put in the Luna reserve as collateral...

Sidebar - I thought this was an algorithmic stable coin Kwon... I thought it didn't need collateral... wasn't that your whole point?

Why you gotta ruin my BTC bags too 😭 

In total, the Luna Foundation Guard (LFG for short... smh🤦), amassed 80,000 BTC, or 3 billion dollars

So, they bought a wildly volatile asset, to backstop their wildly unstable stablecoin, and they thought that was a good idea

So, when the market downturn started on May 7th, along with the UST attack, they had to start selling their 3 billion dollars worth of BTC to "defend the peg"

This meant, there was going to be 3 billion dollars of selling pressure in Bitcoin

So like any good trader, people sold or shorted BTC too, which dropped it 25% from 36K to a low of 26K in 1 week

This is a long thread, and it barely even covers the surface of what happened in the Terra ecosystem, but this implosion has brought the world's attention onto crypto and web3 - and once again, for the wrong reasons

There is now talk of major regulation coming to stablecoins, stories of people committing suicide and who knows what else.

In the end, it's not Do Kwon, Terra or its employees, or their investors that held the bag. 

It was regular people - people that bought into a vision. People that hoped for a better life - and they were screwed.

What's going to happen? Should someone go to jail? Why is Do Kwon paying people to publish articles that downplay his net worth?

https://twitter.com/FatManTerra/status/1526459450193764353?s=20&t=_dUmd3GDAD4rhfZXlNd8OA

I don't have the answers, but I hope something meaningful happens and people are made whole in some way.

Every time an irresponsible actor comes into the space and promises riches, and ultimately fails to deliver, more people get turned off and burned by web3

We only have so many chances to get this right - so let's not get caught in the spell of a boisterous leader again.

Let's put our money behind ethical people and ethical companies.

You can read the unrolled version of this thread here: https://typefully.com/atareh/gMGyXrF

How crypto wallets can protect users from phishing attacks - a proposal on "locking" NFTs

👇 🧵 

If you read part 1 of this thread, you know that a common attack vector for hackers is to create phishing websites and launch them around events that require you to verify ownership of your NFT 

(think, NFT gated merch sale)

https://twitter.com/atareh/status/1517965611376070656

Their goal is to get you to connect your wallet and trick you into signing a "set approval for" transaction (which costs gas), vs what real websites ask you to do - sign a gasless message

This has tricked countless people and millions of dollars worth of JPEGs have been stolen

But what if there was a way to prevent you from accidentally signing over permission to these hackers?

What if our wallets had security features built-in, that protected us?

I have some thoughts on how @coinbase_wallet @MetaMask @rainbowdotme can address this

but, let's be clear - nobody knew that ERC-721 tokens would be worth as much as they are today - so much so that metamask still doesn't have an interface to view NFTs

They need to catch up

and here's how they can catch up in a big way

Introducing, what I'm calling, "NFT locking"

The idea is simple: let users "lock" specific NFTs

When NFTs are "locked", your wallet prevents you from accepting new permissions for that specific NFT

Specifically, the "set approval for all" permission that hackers are always targetting

Here's how this helps:

When bad actors are trying to phish you and get your NFT, they need you to the "set approval for all" permission for your NFT

This gives their smart contract permission to swoop in and take your NFT

But if you have your NFT "locked", then your wallet will automatically reject any new transactions asking for that permission

Remember, when you're verifying ownership to access merch drops, websites never ask you to pay for a transaction, only to sign a message

So, a locked NFT would still allow you to verify, while stopping the bad actors at the same time


At the technical level, there's actually nothing special happening. 

Your NFT isn't really "locked" to your wallet on the blockchain

This is just a wallet level security layer that prevents new permissions on locked NFTs

If you're trying to sell an NFT on Opensea and need to set that permission, you can go ahead and unlock it (via password)

Because we trust Opensea, we are comfortable giving them that permission - they need it to move your NFT when it sells

Almost every scam in NFT spaces relies on tricking the user, and most of them use phishing websites to target that one specific permission on your NFT

With NFT locking, our wallets are actively protecting us in moments when our assets can be most vulnerable

It's clear that as this space grows and matures, we need better design decisions to address the challenges that come with a self-custody, ownership focused world

This could be a step in the right direction - something sorely needed for NFTs and users

I would love to hear everyone's feedback and comments on this proposal - share them below. 

and if you think this is worth the attention of @MetaMask @CoinbaseWallet, @rainbowdotme, tag them below

If this is a good solution, then with enough attention, we can get crypto wallets to pay attention and make these changes. 

At worst, they can at least think of their own solutions.

If security is important to you, head back to the top, retweet the first tweet to help share

and follow me @atareh for more writing, check out my substack for long-form writing

https://degenuniversity.substack.com/

Check out my previous threads

https://twitter.com/atareh/status/1518059206796103680?s=20&t=V7tNTLePmZjHHqMjhay6BA

and lastly, check out degenuniversity.co for merch, and all other media links

Where there is value, there are bad actors

In crypto, we see that in NFTs - @boredapeyc are often targets of attacks, like this ape that was stolen during the BAYC merch drop

In this two-part thread, let's first break down how this happened + how you can protect yourself.
👇 🧵

1/ To start, let's adopt the mindset of a hacker. 

As a hacker, it's easiest to succeed in stealing an NFT when a person's guard is down and FOMO is high.

As in, when emotions are operating (vs your logical brain), you're most susceptible to an attack

2/ What sort of attack? The most common is a phishing attack. 

This is when a hacker creates a website that masquerades as the real one in hopes of getting your belongings

In web2, this meant credit cards and passwords.

In web3, this is the contents of your wallet or seed

3/ But in web2, you had a failsafe: credit card chargebacks and updating passwords. 

However, web3 is centred on ownership and self-custody.

Meaning, once your wallet is compromised, that's it. 

They've got your assets. No do-overs.

In web3, you play for keeps.

4/ That's the dark side of self-custody and ownership - a severe problem we need to create elegant solutions for (more on this later)

But hackers are clever. You don't just create a phishing site and hope someone falls for it; you wait for the right timing

5/ The best timing is when NFT projects  ask their holders to verify ownership.

"Proof of ownership" is simply a project asking you to confirm you own a specific NFT. 

If you provide proof, you get access to whatever is behind the NFT gate (merch drop, exclusive content)

6/ With NFTs, proving ownership is as simple as connecting your wallet and signing a message.

This is a harmless, gasless transaction that verifies you own the wallet and the contents inside.

7/ For the March @boredapeyc merch drop, you needed to connect your wallet containing your BAYC/MAYC and sign a message to get access to buy

But this is where the hackers strike

8/ They set up replica merch store with a different URL - the site that got @cameronmoulene's ape was boredapeyaRhtclub dot com (R instead of a C in yacht).

But instead of signing a message to verify account ownership, you're signing a transaction (which costs gas)

9/ This transaction is called "set approval for all," and it costs gas.

This is the same transaction that we pay for on Opensea when listing an NFT for the first time.

10/ This permission happens at the smart contract level and lets the approved party move your NFT associated with that specific contract.

In Opensea's case, this permission is needed to move your item when your item sells

11/ Hackers will try and trick you into accepting a "set approval for all" transaction so that their smart contract can extract your NFT from your wallet.

You can see that transaction here in the victim's wallet.

Minutes later, the ape was gone.

12/ This leads us to the first takeaway: when you're verifying ownership of your NFT on a website, you should ~NEVER~ be paying gas. 

This will always be a gasless signature like the following. 

Anything more is a scam. Run. 

13/ This ape was stolen with a phishing website, coupled with tricking the owner into approving their NFT around the FOMO and hype of the BAYC merch drop in March

This leads us to the second takeaway...

14/ Takeaway #2: your vigilance for security needs to be the highest around key events that require verifying ownership.

This is when hackers are most likely going to strike, when you're most susceptible and when FOMO and emotions are high.

15/ This is why we've been inundated with verified Twitter accounts with Moonbird avatars for the last week. 

Or why previous to that, we were getting tagged in fake apecoin profiles on Twitter.

For hackers, timing is everything. 

16/ So, I laid out one of the most common ways you can have your valuable NFTs stolen - phishing

But what if there was a way to prevent these sorts of attacks? 

And what if our wallets had security features to protect against these threats?

What would that look like?

17/ Find out in tomorrow's thread, where I'll detail how I think crypto wallets like MM and @coinbase_wallet can build features to protect our valuable NFTs.

18/ Becoming more security literate helps keep everyone safe and creates a more robust community

If you found this thread helpful, retweet this thread to help spread the word - help keep your friends safe.

19/ I'll be back tomorrow with the second part.

In the meantime, sign up for my substack for long-form writing on web3, crypto and NFTs

degenuniversity.substack.co

20/ and check out the degenuniversity.co website for courses, video content, and merch

You can read the unrolled version of this thread here: https://typefully.com/atareh/YLPv3qd