February was a month of high-stakes events and bold moves in crypto. The Lazarus Group made headlines with the largest crypto heist ever, exploiting Bybit for $1.5 billion in ETH. Meanwhile, the SEC, under its newly reorganized leadership, dropped major cases against Uniswap, Coinbase, and other key players—signaling a potential shift in regulatory approach. On the innovation front, Uniswap launched its own Layer 2 solution, Unichain, aiming to tackle Ethereum’s fragmentation and improve user experience. These developments highlight both the risks and rapid advancements shaping the industry today.
February marked the month that the Ethereum Pectra upgrade was finally launched on the Holesky testnet. The Pectra Upgrade is a combination of the previously planned Prague and Electra upgrades. Key features include the long-awaited account abstraction EIP-7702, which unifies and replaces previously implemented account abstraction EIPs, enhanced staking options through EIP-7251 which increases validator limits from 32 ETH to 2048 ETH to reduce the raw number of validators and thus the network’s peer-to-peer networking overhead, and EIP-7742 and EIP-7691 which aim to improve blob capacity for rollups. The testing phase on Holesky ran into a finalization issue, but with a fix deployed Pectra is scheduled to hit the Sepolia testnet early March, with a mainnet launch slated for late March. Furthermore, Ethereum increased the network’s gas limit above 30 million, with over 50% of validators indicating the same change. More than half of the validators’ approval was needed for the gas limit adjustment to take effect. This is the first time such a change has been implemented under Ethereum’s proof-of-stake consensus mechanism, and aims to improve throughput of the base chain. The last adjustment took place in 2021 when the gas limit doubled from 15 million to 30 million gas units.
More big news this month was the return of the notorious North Korean hacking collective called the Lazarus Group. The group managed to exploit Bybit and ended up draining approximately $1.5 billion in ETH, setting a record as the largest cryptocurrency heist to date. The breach exploited a "Blind Signing" exploit related to their usage of the Safe multi-sig, which enabled the siphoning of funds from Bybit's cold storage wallets. A forensic report clarified that the breach wasn't due to inherent vulnerabilities in Bybit’s systems or the Safe smart contracts. Instead, it was traced back to a compromised machine belonging to a Safe developer. This vulnerability allowed the hacker to propose a malicious transaction that appeared legitimate, leveraging a hacked front-end of Safe’s website specifically targeting transactions from Bybit. In response to the incident, Bybit managed to recover the financial stability by securing funds through stakeholder contributions, loans, and buyback programs, and overall they handled the situation very well. As a testament to the profitability of crypto centralized exchanges, it seems as though the very sizeable loss will not majorly impact Bybit moving forward. Naturally, the Lazarus Group has been trying to launder the ETH they stole from Bybit via cross-chain decentralized exchanges like Thorchain and portfolio company Chainflip. Interestingly, Thorchain initially chose not to intervene at all, whereas Chainflip was extremely fast with an announcement to prevent the illegitimate funds flowing through their protocol.
Since Donald Trump took office, he reorganized the SEC completely, where the newly formed committee has already taken a completely different approach than its predecessors. First and foremost, they dropped the 2021 ongoing case against Uniswap claiming they operated as an unregistered securities exchange. Furthermore the SEC also dropped its cases against ConsenSys, Gemini and Robinhood, which were also amongst the larger investigations by the committee. On top of that, the SEC even dropped its case against Coinbase for unregistered securities offering, not pursuing the investigation for now. Lastly, the SEC even decided to clarify that memecoins are not considered securities but will fall under collectibles rather than under the Securities Act of 1933. All in all, while Trump’s involvement in our industry has been considered dubious by some, the regulatory clarity created by his administration can only be construed as a net positive.
The European Central Bank is developing a blockchain-based payment system which financial institutions can use to settle transactions using central bank money. This system aims to enhance the efficiency and security of transactions. Potentially this is a step towards issuing a digital euro and integrating distributed ledger technology into Europe’s financial infrastructure. Furthermore, on the other side of the world the Bank of America expressed their plans to launch their own stablecoin as soon as U.S. legislation provides the necessary regulatory framework. CEO Brian Moynihan even emphasized the readiness of the bank to venture into the stablecoin market during his speech at the Economic Club of Washington.
Uniswap Labs has launched their highly anticipated ‘Unichain’, a Layer 2 solution aimed at enhancing UX and addressing the current fragmentation issues on Ethereum. Unichain introduces ‘Rollup-Boost’, a new block building mechanism for faster transaction times and reduced MEV through a fair priority gas auction model. However, traction thus far has remained limited, with little TVL and trading activity having migrated to Unichain thus far. Similarly, Ondo Finance launched their new Layer 1 blockchain called the Ondo Chain, combining the security of permissioned systems with the accessibility of public chains. Ondo Chain is receiving guidance from major financial institutions like Franklin Templeton and Wellington Management. Furthermore, Hyperliquid launched their HyperEVM, enabling DeFi applications to launch their applications on the Hyperliquid. HyperEVM blocks are integrated into the L1 execution and fully secured by the HyperBFT consensus mechanism. Hyperliquid can now facilitate spot transfers between the native HYPE token on the mainnet, and its counterpart on the HyperEVM network, where HYPE serves as the native gas token.
Another highly anticipated item was the launch of Berachain, a new Layer 1 blockchain designed to optimize scalability and security. Additionally, Monad released their testnet, allowing developers to experiment, identify, and resolve potential issues in a controlled environment. And finally on top of that, Arweave launched the mainnet of “AO”, their computing platform. AO operates as a “hyperparallel computer”, utilizing Arweaves decentralized storage to ensure data immutability and accessibility, whilst driving demand for their storage service. The primary function of the AO token is to secure messages within the network via incentivized attestations.
Furthermore, portfolio company Redstone had their TGE and launched as the 64th project on the Binance Launchpool. Redstone is a multi-chain oracle aiming to enhance DeFi by providing reliable and efficient financial data across both EVM and non-EVM compatible blockchains. In addition to that, MyShell also launched their token through a Binance offering. Myshell aims to integrate decentralized AI within the consumer sector.
