Alameda's $65B 'backdoor'; Thailand's digital wallet system

Rep. Tom Emmer roasts Gary Gensler in fiery speech on the House floor

HSBC to launch custody service for tokenized securities

The biggest news in the cryptoverse for Jan. 17 saw court proceedings reveal that Alameda Research had a $65 billion artificial credit line at FTX. Meanwhile, Thailand has created a mandate that will require crypto companies to establish a digital wallet management system. Polygon has completed its hard fork, Ethereum’s weekly gas expenditure is on the rise, Kazakhstan’s mining hashrate is declining, and Silvergate has posted a $1 billion loss. Plus, research on mining company holdings.

CryptoSlate Top Stories

Alameda had $65B artificial credit line, 43,000% more than FTX market makers

A recent court filing in the FTX bankruptcy case has revealed a “$65 billion backdoor” between Alameda and FTX. The filing includes a deck detailing the current findings relative to FTX group funds.

The deck includes an illustration of the FTX liquidation process alongside a code sample that allegedly represents the Alameda backdoor.

While customers were auto-liquidated based on the margin terms offered by FTX, Alameda was allegedly exempt from auto-liquidation. Further, Alameda was not required to post any real collateral for trades. Instead, it was allowed to trade with “artificial capital.” If proven true in court, this offense alone would be one of history’s most significant examples of fraud.

Thailand’s SEC mandates exchanges to establish digital wallet management system

The Securities and Exchange Commission (SEC) of Thailand has mandated digital asset providers to establish a digital wallet management system to ensure the safety of customers’ assets.

The SEC on Jan. 17 released three sets of requirements aimed at providing regulatory guidelines for digital asset providers/exchanges to establish an efficient digital wallet management system.

According to the SEC, digital asset providers are required to communicate with the commission on policies and guidelines it implemented for overseeing risk management and management of digital wallets.

Polygon completes hard fork upgrade to minimize gas fee spikes, chain reorgs

Polygon announced the completion of its proof-of-stake hard fork upgrade in an attempt to reduce gas spikes and chain reorganizations(reorgs) on January 17.

The two proposals included in the hard fork were submitted last December. About 87% of Polygon validator teams voted for approval.

The hard fork proposal aims to reduce gas spikes by reducing the BaseFeeChangeDenominator to 16 from 8, according to a January 12 statement. Although gas fees will continue to increase during peak demand, they will be aligned with Ethereum gas dynamics.

Bitcoin mining emissions down 10% as Kazakhstan’s hash rate share decreases

Kazakhstan’s share in the global Bitcoin (BTC) hash rate decreased to 6.4% since the first quarter of 2022, which brought the carbon emissions of the whole network down 10%, according to ClimateTech Vice Chair Daniel Batten’s recent analysis.

Batten said that the mainstream media failed to reveal this impact, which proves that the BTC network “keeps tracking in the right direction.”

Silvergate Capital posts $1B loss in Q4’22

Silvergate Capital Corporation and its subsidiary Silvergate Bank announced a $1 billion net loss in the fourth quarter of 2022, according to a company report.

The net loss attributable to common shareholders for the quarter stood at $33.16 per common share.

Silvergate’s fourth-quarter report also disclosed a decrease in digital asset customers and a decrease in digital asset customer-related fee income.

Ethereum mainnet hits record-breaking 32B weekly gas expenditure

Ethereum (ETH) Layer 2 (L2) networks spent a record-breaking 32 billion gas — a year-on-year increase of 22.8% — to validate transactions and activate bridges between Jan. 9 and Jan. 15, according to Dune Analytics data.

Optimism (OP) contributed around 50% of the gas spent — with a seven-day moving average of 2.8 billion gas — followed by Arbitrum with about 30% of the share, according to Dune Analytics data.

As of Jan. 17, L2 network gas expenditure on ETH mainnet was 66.35 billion, placing it on track to beat the 100 billion mark for the third consecutive month —having first crossed the 100 billion milestone in November 2022.

Research Highlight

Research: A review of bitcoin mining company holdings in 2022

Glassnode data analyzed by CryptoSlate shows that Marathon, Hut8, and Riot built the top three largest Bitcoin (BTC) pools, while Bit Digital recorded a 134% growth in reserves in nine months.

BTC miners entered the year 2022 with resources acquired through cheap debt in 2021. The majority of them invested these resources into growing their ASICS, which kept increasing their BTC holdings until May.

However, the bear market started in May introduced immense pressure and led to distribution across miners. The Russian-Ukraine war increased energy costs, the BTC price fell, and the hash rate increased, which heated the competition for block space.

Distribution emerged as the main theme for BTC miners in the second half of 2022. However, the BTC volume in exchanges didn’t grow. Throughout the whole year, less than 60,000 BTC got sent to exchanges.