#64 | High Profile Security Slip-ups Suggest Stepping Up Wallet Safety

Estimated Read Time: 5 minutes

Hey friends,

A big warm welcome back! This time around, we have our weekly Blockchain Brew Up section as well as some innovative stories on NFT wallets and the future of Web3 music. Let's jump into it!

The Blockchain Brew Up ☕

Amidst a surprising rise in crypto prices this week, there have been updates regarding FTX assets from their attorney.

The FTX scandal will no doubt go down in cryptocurrency history as a shocking revelation when back in November the world bore witness to hundreds of thousands of crypto investors being locked out of their assets. US prosecutors were hot on the case accusing the founder Sam Bankman-Fried of orchestrating an “epic” fraud that may have cost investors, customers and lenders billions of dollars.

In a turn of events, Andy Dietderich an attorney for FTX recently told the bankruptcy judge that “We have located over $5bn of cash, liquid cryptocurrency and liquid investment securities”, but the legal team was still working to create accurate internal records and the actual customer shortfall remains unknown. The US Commodities Futures Trading Commission has estimated customer losses at more than $8 billion, so let's hope this recovered $5 billion can go a long way to helping those affected.

A new report titled “Blockchain Security and AML Analysis” from blockchain security firm SlowMist which found the crypto industry lost over $3.7 billion in hacks and scams in 2022. Unfortunately, 2022 broke records for the highest security breaches in the crypto industry with 303 attacks. That's a rise from the previous years which had 2021 and 2020 reporting 236 and 123 such incidents, respectively. Despite the more attacks, the overall 2022 losses are 61% lower than 2021, which saw a record $9.8 billion get lost. This $3.7 billion number was also backed up by a separate report from blockchain analytics firm TRM Labs, really putting into scope the scale of FTX’s blunder with that more than $8 billion in customer losses.

Although not the most joy-inspiring blockchain brew-up, it's important to highlight these news items so everyone can stay on their toes during the very early and volatile stages of this emerging technology, and never undervalue the importance of protecting your assets.

Headlines Around the Web3 Space

Bored Ape Yacht Club Embraces “Warm” Wallets

With the Blockchain Brew Up’s coverage of all this “disappearing” money, let's switch it up with a recent positive story of how security and safety are improving. But to first set the scene, it's not just crypto that suffers from fraudulent scams, the NFT industry has been plagued with over $100 million of NFTs stolen being stolen since 2021, of which the Bored Ape Yacht Club alone has had a collective $13.5 million in Apes stolen. A common reason for this? Unsuspecting users interact with misleading links or fake mints that unfortunately drain their wallets of everything.

One of the remedies for this was instead of using a hot wallet that held your wallet's keys online with your NFTs always connected to the internet, it is highly recommended to use a cold wallet that keeps your assets protected through a physical hardware device that holds your keys offline. Cold wallets aren't the be-all and end-all, though, because you would still need to connect your precious NFTs online to access token-gated content and utilize any utility in general. Insert the top NFT project Bored Ape Yacht Club (BAYC) and their promotion of innovative “Warm” wallets, previously strongly promoted by the 10KTF project from Wenew Labs which has since been acquired by Yuga Labs.

In partnership with warm.xyz and delegate.cash, BAYC is setting a precedent for Warm wallets through the Trial of Jimmy the Monkey and its coming mint which is hoping to further Warm's use. In between a 'hot' and 'cold' wallet, "Warm lets you use your hot wallet as if it owned the assets in your cold wallet, comfortably interact with Web3 apps without the fear of exposing your valuable assets” whereas Delegate.cash furthers the importance of this breakthrough by saying “Keep your vaulted NFTs safe. Claim airdrops, prove ownership, and more from your hot wallet”. Although this may not be a direct NFT story, arguably your wallet is just as important as the NFT it holds, and these “warm” wallets are an excellent example of the innovation happening to make our NFT and Web3 world safer for everyone.

New NFT Metaverse Platform For Music Artists

For those unfamiliar with AR Rahman: he's an internationally renowned multi-talented Indian music artist, film composer, and philanthropist who holds two Grammys with hundreds of millions of music streams. On his 56th birthday, he announced to his 24.4 million Twitter followers the development of music metaverse platform “Katraar”. This new initiative is aimed to empower the artists of this generation by making the emerging opportunity of Web3 and NFTs easily accessible to “bring in new talents, technologies, and to bring direct revenue for artists”.

The name “Katraar” means “a group of learned people who change the world”, and although AR Rahman has been a pioneer in the Indian music industry for decades, he now has his eyes set on using unique NFTs to change how people create, interact and engage with music and art online. Music has always been intertwined with Web3 from the new revenue streams and utility that NFTs can facilitate. Just last edition we covered Mastercard and its NFT music accelerator program, and we have covered many others from Universal Music Group’s Web3 label, Warner Brothers NFT music platform, Snoop Dogg's Death Row Records moving to Web3, and the Chainsmokers implementing a real life example with there 1% album streaming royalties given to NFT holders.

You can find more information about this music metaverse platform on the official Katraar website, but fundamentally a highly respected industry leader fusing NFT into music and art is pretty cool, but its even better with the motive being to empower new artists and creators with a sustainable community. Re-defining the music industry through Web3 is no doubt an awesome use case of this new tech, and it will be exciting to see how all this unfolds.

Thanks so much for joining us today, while we curate the next round up of news we hope you have a great couple of days, take care!

What's the NFTea?

It's not officially the start of a new year without a major project or influencer getting hacked and their account being used to tweet out fake surprise mint phishing links. This time around, it was content creation influencer NFT_GOD's turn.

It all started with CirrusNFT spotting an accepted WETH offer for a familiar looking Mutant Ape...

And indeed, was followed up with Twitter, Discord and Substack email list followers receiving sudden updates for a new NFT project mint.

NFT_GOD himself revealed the source of the 'hack' to be installing malware from sponsored Google search results in a thread detailing his experiences of a hectic day scrambling to undo the damage.

The installed malware, in addition to an improperly installed Ledger cold wallet, were what ultimately led to his crypto and NFTs getting drained.

This seems as good a point as any to point out that the security from a hardware wallet comes from the fact that the private keys (and access) to a wallet have never been input to the internet, thus only allowing the holder of the hardware wallet access to the assets within. However, if you set it up as a hot wallet, inputting the private keys to your computer, then that entirely defeats the purpose of a hardware wallet.

Although many shared empathy towards NFT GOD's misfortune, there were others that were far more critical towards the incident and took it as unprofessionalism for someone who is supposedly an expert in this field.

Basic crypto security for every user is a must if we aim to build a decentralized world. There will always be bad actors, and unless we look out for ourselves, there is no guarantee that anyone else will be there to protect us.

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DISCLAIMER:

None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.