Wormhole confirms all $320M in funds have been restored
finbold.com
finbold.com
"Jump put up 120k of it’s own ETH because we believe in Wormhole and want to support it in this stage of its development."
https://twitter.com/KariyaKanav/status/1489312871456649228
I think Jump Crypto also also heavily trading across the bridge, which means that some portion of the lost funds were their own funds.
But:
- Oct 2020: Certus One is proud to announce the Wormhole project [1]
- August 2021: Jump Trading acquires Certus One [2]
[1]: https://medium.com/certus-one/introducing-the-wormhole-bridg...
[2]: https://www.bloomberg.com/news/articles/2021-08-03/quant-sho...
But I know people who work at Jump and they are serious as a heart attack.
I think we can all sleep easy that the terrifyingly smart rich people made the right call on how to handle their own exposure.
If retail people got jacked that’s another matter, but that’s not how I’m reading this? Did I miss something?
Side note: it's interesting that Jane Street is pretty anti-crypto and sort of indirectly results FTX from Sam and co. jumping ship.
https://www.bloomberg.com/news/articles/2022-01-24/jane-stre...
My personal Venn diagram of "terrifyingly smart people" and "people involved with cryptocurrency" is a null set.
I’m a bit of an FP weenie so I’d probably be most starstruck by meeting Wadler, but yeah, heavy, heavy hitters.
But even if it all ends in tears it will have financed research in:
- Byzantine consensus - Gossip protocols in P2P networking - Zero-Knowledge Proofs - Auction Theory - Verifiably Random Functions - Virtual Machine execution cost models
right off the top of my head.
https://www.alameda-research.com/the-team
https://www.lmax.com/press-centre
From IO-HK: “ Philip is professor of theoretical computer science at the University of Edinburgh and senior research fellow at IOHK since 2017. He is an ACM fellow and a fellow of the Royal Society of Edinburgh, and a past chair of ACM Sigplan. Previously, he worked or studied at Stanford, Xerox Parc, Carnegie Mellon, Oxford, Chalmers, Glasgow, Bell Labs, and Avaya Labs, and visited as a guest professor at Copenhagen, Sydney, and Paris. He has an h-index of 70 with more than 24,000 citations, according to Google Scholar. He contributed to the designs of Haskell, Java, and XQuery. Philip is a co-author of Introduction to Functional Programming (Prentice Hall, 1988), XQuery from the Experts (Addison-Wesley, 2004), Java Generics and Collections (O’Reilly, 2006) and Programming Language Foundations in Agda (2018). He has delivered invited talks in locations ranging from Aizu to Zurich. Philip is a past holder of a Royal Society-Wolfson research merit fellowship, and a winner of Sigplan awards for both distinguished service (2004-09) and most influential paper (‘Imperative functional programming’, by Simon Peyton Jones and Philip Wadler).”
It's kind of a new thing for them. They do HFT and the like in normal financial markets.
>Jump Trading is a registered broker-dealer and member of multiple exchanges including the CME Group and the New York Stock Exchange.[13][4] They are also members of most European exchanges including Eurex and the London Stock Exchange.[14][15]
>In September 2021, Jump announced their cryptocurrency business through a new brand named Jump Crypto
Also from their website:
>We empower exceptional talents in Mathematics, Physics, and Computer Science to seek scientific boundaries, push through them, and apply cutting-edge research to global financial markets.
so they sound a bit more of a https://en.wikipedia.org/wiki/Renaissance_Technologies type outfit
It’s a very opaque business, but AFAIK Jump’s bread-and-butter desks are more like ultra-low-latency microwave-tower Chicago <-> NY/NJ arbitrage.
When conducted ethically (which ic clearly not always), arbitrageurs and market makers provide a critical, socially useful function. There are ways to cheat, and people do everyday, but that’s any business.
Retail traders benefit from ethical HFT whether that’s on ARCA or Binance. I’m not sure the same can be said for things like PFOF, intentionally mispriced IPOs, or offering crypto traders 100x leverage.
Interesting to note that the VCs are bailing out the retail users here, instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks.
My personal interpretation of that, there are a lot of awfully rich people who are scared of the bubble popping.
Exploit happened on Solana. Jump Trading has a vested interest in the Solana ecosystem and is effectively the sole market maker on it.
The interesting thing here is how the un-bailout-able nature of ETH affects the players in Crypto. Because ETH can't be magically printed, the VCs have to decide if they will walk away or bail out the retail end users. It looks like they decided to do the latter.
This has happened more than once in Crypto - I can think of the Binance hack, where Binance bailed out the users. OpenSea has also been covering ETH lost by its users who had their Bored Apes stolen because of user mistakes.
I wonder what it is about Crypto that causes large players to cover user loses. I need to learn more.
The answer is in the comment you replied to:
> there are a lot of awfully rich people who are scared of the bubble popping.
The value or cryptocurrencies depends on hype and on convincing the next chump that they should buy in. The large players have a lot of money invested which they will lose if the cryptocurrency value tanks because people lost trust. Covering user loses is itself an investment; it contains the damage by making the issue die down.
It seemed like there was a lot of awfully well resourced individuals that were scared of slipping into a depression
Both. It was done to preserve the value of the overall economy. That impacts everyone at every level of society and therefore it was the morally right thing to do. You can argue that the specific action taken wasn't the most effective approach, but the goals were noble in 2008. The goal here is that these rich people don't want to lose their investments.
I'm curious what kind of research (or keywords to search for) there is around this topic. Is it just a morality thing or does it go beyond that?
Or people with a lot of ETH, that want to hold on to the value of the rest they still own.
On the other hand the VCs themselves that are large owners of the tokens in Solana ecosystem would incur large losses, and that's excluding additional losses from reputation in future. It just shows how successful Jump VCs are when they put up $320M in a few hours. Maybe a month of their PnL?
They're trading in chits, not money, when things like this happen. At least that's the case for as long as you can't regularly and commonly transact in ETH. The spot price/value of ETH multiplied across all the ETH that exists doesn't seem to be a description of total USD (or EUR or whatever) reserves available to convert ETH to USD, et al. as far as I can tell.
By casting a spell, today they also have 93 000 extra ETH. They are saving some of their potions for later time to cast wider spells.
Jump has stated they now still have 93 000ETH since they wish it it is so.
It might well be that they can eat a $320M loss on the regular, but if so, this situation isn't any kind of indicator of it.
Why is there so much misinformation on the 2009 bank bailouts?
The bailouts were loans and investments that became profitable for tax payers.
>In total, the government has realized a $109B profit
https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much...
It's about assessing the fair value of the bailout programs, at the time they were executed - i.e. the estimated net present value of the future cashflows under the bailout programs. The author argues that it unhelpful from a policy perspective to do an ex post analysis because it only describes what happened in this case, rather than what could've happened. i.e. when considering whether a bailout is good value, we should consider what happens if its unsuccessful.
There is absolutely no doubt that the bailouts have been profitable for the government in terms of actual repayments.
"Drawing selectively on existing cost estimates and augmenting them with new calculations, I conclude that the total direct cost of crisis-related bailouts in the U.S. was on order of $500 billion, or 3.5 percent of GDP in 2009. [...] Those conclusions stand in sharp contrast to popular accounts that claim there was no cost because the money was repaid, and with claims of costs in the multiple trillions of dollars."
From 3.1.3. See Wall's analysis of Fannie Mae and Freddie Mac for more detailed discussion of their bailout costs:
"Treasury collected $147 billion from Fannie and $98 billion from Freddie. As explained earlier, interpreting this tally as a cost measure is conceptually flawed for several reasons. Wall (2014) also discusses the shortcomings of this approach, which has been used to argue that the government has been more than fully repaid and that value should be returned to the shareholders."
From the conclusion:
"Nevertheless, the total is large enough to conclude that the bailouts were not a free lunch for policymakers as some have claimed."
What the paper is saying seems pretty clear to me: bailout costs have been inaccurately measured and reported popularly at both ends. It was neither unfathomably expensive, nor profitable to the tax payer.
If you lend me $100 and I pay you back $107 you can declare you profited from the loan if you literally only look at the principal and repayment amount, but finance is not so simple, especially at a national level. Opportunity cost, inflation, depreciation, and numerous other factors exist. The total cost of you lending me $100 could have been significantly more than $107.
The paper says that you cannot look at a successful bailout and conclude that it must have been good policy, because success was not guaranteed; you instead need to look at the range of outcomes that are reasonably possible to estimate the likely costs.
The author doesn't at all say that the "ex post" account of actual cashflows is an inaccurate measurement of what happened; only that it doesn't represent a useful policy tool for estimating whether other bailouts represent good value.
"At 3.5% of 2009 GDP it is a cost that is big enough to raise serious questions about whether taxpayers could have been better protected."
It even directly states that citing the propublica bailout tracker, which the root comment does, as evidence of "profit to the taxpayer" is deeply flawed and one of the reasons the paper is addressing the issue. This is the entire reason I cited it
"The press typically reports bailout costs on an ex post cash basis despite the problems with that approach. For example, ProPublica, a highly regarded non-partisan news organization, created a 'Bailout Tracker' that has been keeping a running tally of government asset purchases and cash receipts under TARP and from the bailout of Fannie Mae and Freddie Mac. In their most recent update dated September 27, 2018, they report a total net government 'profit' of $97 billion. Policymakers also tend to cite ex post cash results. For example, in 2012 former president Barack Obama claimed that, 'We got back every dime used to rescue the banks.' Other media outlets report skepticism about such claims,7 but news organizations generally lack the financial acumen or resources to produce credible cost estimates of their own."
You're not going to force your flawed interpretation onto me and convince me the author is not stating exactly what she's stating plain as day, and has reinforced with subsequent work and commentary. That's called gaslighting
Read the author describing her work in her own words:
https://www.barrons.com/amp/articles/how-much-the-financial-...
“My analysis imposes the discipline of a fair-value approach, which incorporates the uncertainty about the size of eventual losses at the time assistance was extended and the cost of that risk. By contrast, popular accounts simply add up realized cash flows or tally total risk exposures.”
As we look back, there is no uncertainty. We know what happened. The bailout was successful (within its parameters) and was more than repaid. You don't need to do any counter-factual analysis to show that, you can just go look at the reports to Congress from the Department of the Treasury.
To understand that paper, take an analogy from gambling.
Say I plan to play roulette; I'm the U.S. government, the bet is the bailout. Let's just assume I'm going to bet $1 on red.
I want to understand the cost of the bet at the time I place it; this is the fair value of the wager (bailout). The odds against winning a bet on red with an American roulette wheel are 1 1/9:1 and the payout is 1 to 1 - so the expected (fair) value of the bet is -$0.053. The author attempts to do the same for the bailout, bearing in mind the uncertainties, and comes up with -$500bn.
Now, at the roulette wheel, the expectation that I'm going to lose out $0.053 needs to be balanced against the excitement and pleasure of the wager. In the bailout case, the fair value of the bailout needs to be balanced against the anticipated broader economic results of the intervention like containment of the credit crisis and the shoring up of the mortgage system.
We spin the wheel and it's 32, red. We're lucky and so we win back our stake plus another $1. In the case of the bailout, the intervention was successful, the economy recovered, and the bailout money was more than repaid.
The popular account that the author alludes to corresponds to looking at this bet and saying "betting on red was obviously the right thing to do because I made 200% of my money back and I had fun gambling". The author isn't disputing that the bailout was more than repaid (she stipulates that in the abstract of the paper!), or that the economy rebounded. She is absolutely right that this is the wrong way to look at the expected cost of a bailout in the future.
Fundamentally, from a finance/economics perspective, there is no incompatibility between saying "the fair-value cost of the bailout was $500bn" and "the government made billions of dollars on the bailout". That's because the definition of a cost requires an analysis of the expected return. You do agree with this, right?
I said that they have not been profitable to the taxpayer. I pointed out that the conclusion that they've been profitable to the tax payer is based on flawed cost accounting methods and cited the paper.
In the paper, the author very explicitly stated it was not profitable to the tax payer, directly calls out the misleading nature of the ProPublica tracker, explains why it's misleading, verbosely explains and justifies a more accurate cost accounting methodology, describes the results of using this methodology, and commentates on how these results and the methodologies that produce them may be used in the future to make more accurate and less misleading cost assessments of bailouts in the future.
I've directly quoted the paper numerous times in which the author clearly states that the bailouts were not profitable to the taxpayer, flaws in methodologies that indicate they were profitable to the taxpayer, and why different methodologies are needed that more accurately reflect whether the true cost of a bailout results in a situation that is profitable to the taxpayer.
In conclusion, and to reiterate my original point. The bailouts were not profitable to the taxpayer except when using deeply flawed cost accounting methodologies such as ex post cash flow analysis, which the author, in great detail, explains is a woefully inadequate for measuring the cost to the taxpayer of a bailout.
Quoting the author:
In fact because it is most likely that a recession will be followed by a recovery, it is probable that the government will show a “profit.” However, bailouts are costly because of the possibility of relatively unlikely but very costly states of the world where recessions persist and recoveries are low.
As I think we can agree, it was not the case the 2008 recession was persistent with low recovery; yet it is the possibility this could have been the case that increases the cost.
Cost analysis is absolutely orthogonal to an actual accounting of profit and loss, which is why the author consistently uses quotes around the word "profit". The cost of doing a thing has nothing at all do with whether it turns out to be profitable! Profitability is exactly a matter of ex post cash accounting; there is just no other way to measure it.
I guarantee you have never quoted a section of the paper that says the bailouts were unprofitable to the taxpayer because the author never makes that claim: because it would be false. You will also never find a reference to "cost accounting" in the paper, again because those concepts are orthogonal within the author's framework. By all means double-check the paper on both those points.
If you're trying to answer the question "did the tax payers get back more money than they put in to the bailout", then the only way to do that is by ex post analysis of cash flows: the answer is "yes they did". If this were a business, that would be the definition of a profitable investment.
Until you understand that costs are nothing to do with profitability, you're doomed to misunderstand this paper.
"At 3.5% of 2009 GDP it is a cost that is big enough to raise serious questions about whether taxpayers could have been better protected."
You're just plain wrong mate. Taxpayers don't need to be protected from profitable ventures. I dunno what the hell definition for profit you're making up, but it's literally defined on the basis of cost in accounting and finance.
Protection means "structuring the bailout differently to reduce the downside risk".
Section 2.1.1 - "For a bailout cost measure to be economically meaningful, it has to be evaluated as of a fixed point in time. In most cases, the natural choice is the year the bailout is initiated, for instance, when new legislation is passed or administrative policy changes are announced or implemented, or shortly thereafter."
The author does this. She evaluates the cost of the bailout at a fixed point in time, the year the bailout is initiated, which is to say 2008. She arrives at a number of $500bn.
What happens after 2008 is irrelevant to her cost analysis. If you don't understand this, you don't understand anything about the paper at all. Look at every subsection in section 3 where the author considers the different elements of the bailout. When she's considering fair value cost, it's always in reference to contemporaneous reports (2008/2009 sources) or estimates on that basis.
Also, please stop accusing me of gaslighting: I'm not asking you to question your reality, I'm just asking you to question your understanding of an economics paper - there's no power dynamic here that would put you into a vulnerable position and allow me to bully you, even if that were my intent. We're just people on the internet.
It's a huge waste considering other higher return investments.
EDIT: see replies for much needed nuance
Government does not invest a limited pot of money like 'savings', it conjures up money out of nowhere and can deploy ulimited amount of capital. The only limit on this activity is literally breaking the economy, causing inflation, etc,
If you propose we dump that money in education, well, we should, but it does not mean we should not bail out the banks - these two problems do not compete for same resources.
For example, TARP (about $475bn) was more than 93% recovered by the end of 2012. The bank-related programs had already over-recovered $23bn versus the $245bn disbursement by that point with approximately a 4% internal rate of return.
I dunno man, I was always told that government being active in the market is socialism, and socialism always fails. /s
Surely we could extend this success by having the government invest trillions in zero carbo energy, an investment that has to succeed.
If you're referring to the 2008 bail-outs, those weren't grants, they were loans and investments. To date, beneficiaries have repaid more than the initial amount netting the government (and hence the people) a significant profit. $109B to date. And the expectation of significantly more to come. Talk about a good investment. [1]
Fannie and Freddie alone received $191B and have paid $301B in dividends so far - and all the principal remains outstanding.
https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much...
Modern economics isn't as simple as "supply up bad.")
[1] https://tradingeconomics.com/united-states/inflation-cpi
How does this chart [0] show a debasement of any sort? We were in a 'secular demand stagnation crisis' back then! Is everyone here just too young (oh God) to remember 2012?
It's the gigantic jump in the blue line almost halfway between 2008 and 2010. A spike in the value of "all assets" is the definition of currency devaluation.
Yes, the Fed's balance sheet skyrocketed, but inflation (the value of money vs. goods & services) remained lower than before that line spiked.
EDIT: And just to be very clear to the 2 people who read this comment, maintaining a balance sheet is still market support b/c you still buy treasuries on the open market to offset the principle of your existing treasuries that reach maturity. So stopping the growth of the balance sheet just means you're not accelerating support. Tapering is the thing that you do if you're worried that your balance sheet is 'debasing' the currency.
An increase in supply is always a debasement.
It's true that you might see the following chronology:
1/1/2020: value of the currency measured
6/6/2020: supply of the currency increased
1/1/2021: value of the currency measured; it's higher than it was last year!
But that doesn't mean the issue on 6/6/2020 wasn't a debasement. It definitely was, and the reason it doesn't look that way is your very low-resolution measurement of value. If the supply increase hadn't happened, the value on 1/1/2021 would have been even higher.
This is why we measure, and why Austrian economics fell out of favor decades ago.
See Japan for a concrete example. [1, 2] Their M2 money supply is almost 2.5X higher since 1990 but their CPI is dead flat over the same time period. It's actually seriously problematic for them.
How has the supply increased in this scenario? What if, instead of minting the coin, you just tell people that you've done so?
The supply of money has only increased if you're able to spend the putative addition to the money supply.
Are you asking how supply works in my hypothetical, simplified example where the point I'm trying to make is that new supply in isolation doesn't matter - what you do with it does?
Or as you asking how it happens in the real-world example of Japan, where their supply increased from 400000B JPY to 1200000B JPY between 1990 and present, while everything remained the same price? And how this is seriously problematic in their economy?
What matters isn't what you do with "money"; it's what you can do with it.
But there are other things that affect the value of money. Tripling the money supply and seeing the value of money stay constant tells you that something else was pulling the value of the yen up at the same time that additional supply was pulling it down.
This is not true, though, haha.
Which is why the Austrian model, which only takes into account the former, is obviously and woefully incomplete - and has been rejected.
It's not clear to me if you're talking about monetary or price inflation.
https://mises.org/library/money-inflation-and-price-inflatio...
> some economists have interpreted price inflation as a desperate method by which the public, suffering from monetary inflation, tries to recoup its command of economic resources by raising prices at least as fast, if not faster, than the government prints new money.
For instance, supply chain disruptions making basic goods more expensive and increasing competition for them. Or, zoning policy prohibiting construction of new housing sufficient to meet demand in high-growth metro areas raising the cost of housing. Or zoning policies in suburban areas making housing 2x bigger on average now than in the 1970s. [1]
Defining inflation as a function of supply distracts us from the real-world problems causing broad-based increases in price.
[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...
lol.
> Defining inflation as a function of supply distracts us from the real-world problems causing broad-based increases in price.
price is a function of supply and demand already. you don't need to redefine inflation unless you're trying to dupe feeble-minded rubes.
The "supply of currency units" is a fundamentally inadequate measure to capture this. It is too simplistic. Nobody takes it seriously except for a small group of very vocal online crackpots because it is so obviously unfit for purpose. [1]
We re-defined it as our understanding grew. The way we update practically any model in the face of new evidence.
Japan single-handedly demolishes the Austrian model. Their M2 supply grew 3X from 1990 to present but inflation remained 0% measured over thirty two years. Prices did not change from 1990 to 2022. [2, 3]
[1] https://www.pragcap.com/understanding-why-austrian-economics...
you're again conflating price and monetary inflation. and again mixing in somebody else's prejoratives to flavor your discussion of their topics.
here's a link [1]
> The idea that inflation is anything other than an increase in the supply of money is an intentionally confounding theoretical device with no basis in reality.
If you have 1 burger that you'd pay $10 for, and someone makes a second burger, does that make each one worth $5? No, of course not.
Or looking at it from another point of view: the money spent on bailouts wouldn't be stored under a mattress if it were not spent that way, therefore you cannot compare $109B with $0. You have to compare it, for example, with the money lost from the moral hazard of rewarding the irresponsible behaviour which led to the most destructive recession in 75 years, or to the effect the money would have had it been spent helping the millions of people that lost their jobs or had their homes foreclosed on, etc.
The Fed's charter is to maintain a low, predictable rate of inflation over the medium term and to maximize employment. You (in aggregate) won't have a job if all the employers go bankrupt due to direct investments and contagion. This will directly impact (in aggregate) your ability to make your mortgage payments.
Secondarily, regulation of the financial sector to ensure this doesn't happen again isn't JPow's job, it's the job of Congress.
Bailing out the institutions does not preclude further regulation to prevent the situation from happening again. And it certainly doesn't preclude creating a meaningful social safety net.
Congress should not be in the business of preventing banks from imploding in on themselves via regulation. Congressional regulations should insulate consumers from predatory financial institution practices. FDIC insurance exists to protect consumers in the event their banks behave irrationally. There should be no backstop for the banks themselves. Even if they wanted to Congressional regulations couldn't keep pace with the speed at which financial instruments of institutional suicide are forged.
1 https://www.federalreserve.gov/supervisionreg/reglisting.htm
Say a factory is poisoning the riverwater, what is more likely to disssuade such actions: penalties to the company (taken in stride as the cost of doing business), or actual jail time and forfeit of assets to the person making the decision and reaping the profits from it?
Unemployed? No. Earn what you did before? Anecdotal, but my parents know a lot of people in their 50s that when laid off, never went anywhere close to their prior salaries.
This was especially true for people who couldn't get their current job with their credentials. Plenty of senior people in places like factories and warehouses don't have degrees for example. Would they find work again if laid off?
probably because you, collectively speaking, kept electing people who didn't pass anti-eviction laws or strengthened tenant rights. Which most countries by the way did put in place during covid at the very least.
But even more, if the Fed basically designates a bank "too big to fail" (as the Fed did) and loans the bank the money it currently needs, the markets can this. And this allows the bank to "print money" itself by issuing bonds - since now the market knows those bonds are effective guaranteed by the Fed and so equal to money. Thus the bank can easily issue enough bonds to repay or over-pay the Fed. But that's not a "see, problem solved!" situation.
The theoretical problem of this sort of action is naturally these large entities potentially issue loans and borrow without being disciplined by risk. That might be compensated for by other actions - say preventing them from issuing risky loans. But things still wind-up a bit "distorted". I'd recommend Doug Noland's Credit Bubble Bulletin on the subject.
The central bank did not make these investments, Congress did, and so the yields did not accrue to the central bank but to the Treasury. If you've ever met the IRS you know that the job of the Treasury is in fact to accrue revenue.
The central bank's charter is to maintain a low, predictable rate of inflation over a medium term and to maintain maximum employment.
> The theoretical problem of this sort of action is naturally these large entities potentially issue loans and borrow without being disciplined by risk.
I agree, which is why Congress needs to better regulate the sector. However that's Congress' job not the Fed's.
While one can debate whether just regulation can prevent private investors from engaging in risk, there are other impacts as well. Putting a whole lot of money into bank which invest in "safe assets" like real estate, causes the relative price of those assets to increase. This distorts the economy - that disproportionate rent and real estate price increases over the last ten and twenty years are arguably a product of Fed largess. And these have been a disaster for anyone not being buoyed by the risings - the majority of those in lower income categories.
Japan for instance has seen their M2 money supply 3X from 1990 to 2022, while the affordability of a house there hasn't decreased since 1995. [2]
This is due to their federal zoning rules which permit housing construction practically everywhere. [3]
The increase in price of housing is what's driving inflation, not vv imo.
And for what it's worth, I think Glass-Steagall (brought in as part of the post-Great Depression reforms) did a very good job of preventing retail banks from investing in toxic garbage and its repeal in 1999 was IMO a major contributing factor to the crisis in the first place. [4]
[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...
[2] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI
[3] https://marketurbanism.com/2019/03/19/why-is-japanese-zoning...
[4] https://www.federalreservehistory.org/essays/glass-steagall-...
I mean I've no doubt that's some sort of a factor, but on the other hand the population of Japan is also almost exactly the same as it was in 1995 whereas the US population has increased by 25% in the same period - I'm not sure I'd so easily rule out demographics as a factor!
In their case it was a combination of a declining population and zoning rules. However, the decline AFAIK was concentrated outside urban areas. Tokyo grew from 32.5M to 37.5M between 1990 and 2022 without any increase whatsoever in the real dollar price of housing.
That's like saying "price increases lead to inflation". Which is true but illuminating.
Limitations on housing construction certainly made homes especially valuable as an investment in places like California. But the vast amount of money-created-out-of-thin-air was what sought this reliable investments. The situation you mention is just related to what I describe, it doesn't refute what I describe.
The main thing is that this inflating of money has a number of noxious qualities, the inflation of housing costs just being one of them. Prices are signals for how resources should be allocated and distorted prices result in distorted allocations of resources. For small example, there's a daft and dangerous plane to restart a fricken gold mine in the little tourist next to my town - with all attendant potential for multiple types of pollution and with gold only getting kind of play because it's a fixed asset with a price driven sky-high by the present money creation process.
Those loans and investments weren't guaranteed to be paid back, the government took a risk.
Assuming risk of loss is a valuable thing that gets traded all the time through futures, options, swaps and other derivatives. Those futures, options and swaps have a cost.
The fact that the government gave away that value for free means it was a massive gift to Wall Street banks.
I don't think it's reasonable to say that this was given away "for free". If it was "free" then there wouldn't have been any over-recovery at all, would there?
In the CPP, the government bought preferred stock in a number of banks (mostly not Wall Street ones, but whatever). That stock could've been worthless if the banks failed, but otherwise the banks were required to pay an annual dividend of 5% through 2013 and 9% thereafter; plus there was a whole host of supervision of their activities, including limitations on their ability to pay ordinary dividends.
It makes no sense to say "in 2008, the government expected to lose money on the CPP so that's what happened; gift to the banks that was never paid back" and then drop the mic while ignoring what actually happened.
For example: TARP's Congressional Oversight Panel estimated that the $25bn capital infusion into Wells Fargo represented a subsidy (difference between fair market value of the preferred stock and the amount paid) of about $1.75bn.
However, in 2009, Wells Fargo bought back the investment after having paid $1.44bn in dividends. Then, in 2010, the Treasury also sold $840mm in Wells Fargo warrants that were part of the CPP deal.
What we thought would happen: lose $1.75bn. What actually happened: made $2.28bn. If that isn't "paying back" from your perspective, could you please suggest what would be?
A bit of googling brought me to a paper which points out that even the CBO and the Congressional Oversight Panel independently came to the conclusion that the bailouts subsidized the banks to the tune of over 60 billion dollars [0]. The paper itself puts the value closer to 90 billion. From the article:
> Costs on an ex post cash basis were only identified for a subset of the above programs, but it is likely that on that basis the government came out ahead. Hopefully, the reader has been convinced that there is little meaningful information in this fact.
[0] https://gcfp.mit.edu/wp-content/uploads/2019/02/BailoutsV12....
[1] https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-lo...
If that had really happened there would be a txid, and people would be parading around an etherscan link.
At the moment, this is no different from "funds are SAFU"
It's the case in Bitcoin, but not as much in Ethereum and other ecosystems. The latter have a track record of compromising on that principle to bail out thefts enabled by shoddy engineering practices (this, The DAO, etc).
> For example, suppose that you have 100 ETH on Ethereum, and Ethereum gets 51% attacked, so some transactions get censored and/or reverted. No matter what happens, you still have your 100 ETH. Even a 51% attacker cannot propose a block that takes away your ETH, because such a block would violate the protocol rules and so it would get rejected by the network
> Now, imaging what happens if you move 100 ETH onto a bridge on Solana to get 100 Solana-WETH, and then Ethereum gets 51% attacked. The attacker deposited a bunch of their own ETH into Solana-WETH and then reverted that transaction on the Ethereum side as soon as the Solana side confirmed it. The Solana-WETH contract is now no longer fully backed, and perhaps your 100 Solana-WETH is now only worth 60 ETH. Even if there's a perfect ZK-SNARK-based bridge that fully validates consensus, it's still vulnerable to theft through 51% attacks like this.
[1] https://twitter.com/vitalikbuterin/status/147950136619213209...
PS: I should pay more attention to HN's usernames lol
It's very much like saying "I thought we had free speech in this country" when your post is being deleted from the New York Times comment section.
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
But in this case, the bridge is a smart contract. You too can create a smart contract with full power given to yourself. So being a smart contract does not say that it’s centralized or decentralized. A decentralized smart contract is called DAO, if we omit some details.
Jump Trading fixed the problem by depositing $320M ETH tokens into the Wormhole's ETH account to ensure the falsely issued wETH tokens are backed. The fake Solana tokens released from the fake wETH were deposited back into Wormhole's Solana account. They are still in Wormhole's Solana account after the re-capitalization. It's basically they're using the $320M ETH tokens to buy a bunch of Solana tokens, created by the hackers.
So at the end, they're not really out of $320M money; they still have the $320M Solana tokens, fake or not. It's just the general public got screwed by having $320M of Solana tokens inflated up on them.
Bridged assets are really just an IOU issued by the bridge, all the assets remain in custody of the bridge on whatever network they came from (in this case, Ethereum mainnet). As long as you can take that "IOU 1 ETH" to the bridge and get back 1 mainnet ETH, everything runs smoothly. If you can't, the market will decide the value of those IOUs accordingly.
The general public didn't get screwed here. Solana ETH is an IOU for ETH. Now it's backed by ETH. It's not like anyone got diluted or anything.
So how were the seed Solana tokens backed by ETH based on the distribution? Weren’t they created out of the thin air?
txid please
The wETH pairs X amount of SOL with an ETH. When it's settled, it releases both the SOL and the ETH to the corresponding parties. When the wETH is falsely created, it creates the SOL it wraps.
In the case of the Wormhole bridge, there are transactions on both the Ethereum mainnet side (paid for in Ethereum gwei) and the Solana network side (paid for in Solana gwei). The only lossy factor is in the bridging fees themself which are typically a "flat" fee.
But, on the other hand, since Jump restored 120k wETH (valued at $320 M), they kind of are “out” that money in the sense that they would not have spent that without the hack. They are now forced into an “investment” of 120k wETH. They may profit from their investment if the price of the asset rises, but they may also lose some of their investment if the price decreases. Likely, it won’t fall to 0 so they are not “out” $320 M in the sense that the hackers directly stole that, but they essentially forced to trade $320 M for 120k wETH.
I don’t see how the public is screwed here. There is no “inflation.” They essentially increased the backing assets of the bridge by 120k wETH at current ETH market price.
Compare this Wormhole example to what happened with the Ethereum DAO attack that was "reversed".
https://levelup.gitconnected.com/how-ethereum-reversed-a-50-...
Do you have an etherscan link (ie txid) for this?
At the moment all we've got is a "funds are SAFU" tweet.
$320M is not chump change. I have trouble believing this ends any other way than (a) Wormhole goes kaput, (b) hacker gets doxed and gives back the loot. There might be a lot of fractional-reserve posturing before one of these occurs, of course.
Where is this money coming from?
Who had enough ETH lying around to refill the bridge? They certainly didn't just buy it on the open market, that would have moved the SOLETH ratio.
[1]: https://www.bloomberg.com/news/articles/2021-06-18/jane-stre...
https://www.coindesk.com/markets/2021/07/16/tether-hasnt-pri...
They’re not playing with real money here.
It's not too absurd.
See the top comment.
It's parent company is huge HFT trading company too - Jump Trading
https://www.coindesk.com/business/2022/02/03/jump-trading-ba...
They just market bought ETH, nothing to do with ETH/SOL ratio.
If you don't have any other liquid asset, it would make sense to go the route of selling your SOL for ETH. But it looks like this was not necessary and the ETH to fill up the contract again was either at hand or sold over the counter.
The $21B is the trading volume for all pairs. Most ETH pairs are BTC, fiat currencies or stablecoins. If somebody had sold SOL to get ETH that would have been noticeable.
In second largest DeFi hack, Blockchain Bridge loses $320M Ether - https://news.ycombinator.com/item?id=30186894 - Feb 2022 (561 comments)
https://twitter.com/kelvinfichter/status/1489050921938132996...
I love FOSS, but attackers being able to exploit bugs they read in fixes before they are deployed is certainly a downside - especially when the project manages billions of dollars.
What process can/should be implemented to address this attack vector?
With $320M pay days it's one of the best bounty programs I've ever heard of.
Your argument about security is as old as FOSS itself, and it usually comes down to whether security through obscurity is valuable or not. I wouldn't say I'm qualified to weigh in on it either way myself
Would node administrators accept a non-OSS (or post-adoption open sourcing) patch, and run it on their nodes trusting the devs until adoption is wide enough to prevent exploitation?
It seems like blockchains could be in a pickle where bugfixes will inherently get exploited if they aren't released obscurely, but their users wont tolerate obscurity.
They got robbed. Their parent and VC stepped in to bandaid over the terrible terrible press by throwing money at the problem in a bid to rebuy trust.
I've started asking people explicitly: how can anyone who has ever programmed professionally, entrust themselves to someone's program?
The interesting lemma is, don't we do that all day?
To which the obvious rejoinder is, yes, but when we do so, it is almost always in contexts in which litigation and consumer action and introduced a massive obligation of transparency, best practices, liability, insurance, and other regulatory oversight and burdens. Which still fails, e.g. when Boeing bug kill planeloads.
The wild west of this "smart contract" world has almost none of that.
Sadly the answer to the rhetorical "what are people thinking!?" is no mystery. Those that are, are mostly on the side of the grift.
My argument for why the future will be multi-chain, but it will not be cross-chain: there are fundamental limits to the security of bridges that hop across multiple "zones of sovereignty".
Note that cross-rollup apps within one zone of sovereignty are still fine. Not also that this also is a limit to the "modular blockchains" vision: you can't just pick and choose a separate data layer and security layer. Your data layer must be your security layer.
https://twitter.com/vitalikbuterin/status/147950136619213209...
Despite being large, it was still an isolated incedent compared to the multi-chain heist one could pull off with a 51% attack on a single chain.
In his example, someone uses a bridge to create wrapped Eth on another chain, and then 51% attacks Ethereum, returning the Eth they used to themselves, while keeping the wrapped Eth on the other chain.
It's just as easy to have a scenario where someone sends Eth to an exchange, sells it, and then does the same thing.
They would want to be confident there are no more bugs, only a few days ago this happened, did they do a full audit of things before tipping it in? Imagine if they lost another 320m !
The previous HN tweet thread story about this described so many dependent moving parts that I imagine great difficulty in properly testing and proving that the entire system worked correctly in all cases. If it is built as described in that story, auditing would be an enormous task... and further, putting your name on that audit would be very risky to your reputation (since almost inevitably you will miss something and it will be exploited).
In summary, the system was too complex and offered too many ways for something to go wrong or be exploited.
So I'm curious to hear: do people consider this "stealing"?
The article uses the word often and even goes as far as "unlawful" but would this have broken any laws? Even CFAA seems out since no computer was accessed without authorisation.
Also, the attacker definitely exceeded authorization - it was literally the authorization component of the code that the attacker bypassed by substituting part of it with their own ringer code.
If code is law, attacker was playing by the rules. I don't think this is clear-cut illegal. It looks illegal-ish, but I think a good lawyer could argue it isnt.
Does Solana/Wormhole have ToS that (in the courts eyes) overrides the state of the blockchain? If they did, doesn't that kind of defeat the purpose of a decentralized blockchain?
It would depend entirely on what a judge and a jury think about how the law ends up getting applied, were this tried in US courts.
What is the legal distinction between mining (which is intent of the protocol) and this attack (presumably not the intent of wormhole)? Do blockchain services need to create ToS's which can legally supercede in the case of bugs in order for courts to punish attackers? Would blockchain users accept a service with such a delegation of state?
code is code, code isn't law. Even if you try to call it 'smart contracts'.
I'd actually be interested to know if crypto can, from a legal perspective, be owned. Has crypto theft been successfully prosecuted before?
As for exceeding authorisation, yes, true, but IIUC, CFAA only makes illegal the unauthorised access to a _computer_. Since this is a crypto program, is there an identifiable computer that was accessed without consent?
To be clear, I'm not making any moral judgements here, I'm just curious how our current laws and moral positions apply to crypto.
See https://www.justice.gov/sites/default/files/opa/press-releas... for the initial criminal complaint, which is well worth reading.
https://www.bloomberg.com/news/articles/2022-02-02/blockchai...
Teleported, elsewhere, through mathematimal impossibilities no-one with a computer can prove; and if they do, all the value put in disappears into the void.
> Notably, the hacker carried out an unlawful mint of 120,000 wETH, which was valued at around $322 million at the time. They carried out the assault by taking advantage of a Solana VAA weakness, a bridge function that verifies asset transfers.
Could anyone provide specific details as to what occurred, and how the weakness was actually exploited?
https://twitter.com/KariyaKanav/status/1489351031125426180
gg to the people who worked on fixing this.
"decentralized finance"
Bitcoin's network cannot be stopped by anyone. How does Solana achieve that? What does "decentralized" even mean when everything depends on individual operators?
While in principle a bug like this could have happened on Ethereum, or any programmable blockchain platform, ultimately this attack happened on the Solana blockchain and is an attack on Solana. The people who have a vested interest in seeing Solana survive will have coughed up the funds.
Finally, it's worth keeping in mind that while failures like these become very public and it seems like cryptocurrencies are always doing nothing but crashing, failing, and losing money, there are also plenty of people making millions and even billions of dollars a year offering crypto related services. To those folks 300 million dollars, while not trivial by any means is also not the end of the world if it will allow them to continue operating.
Centralized Exchanges are extremely slow in listing new blockchains, especially meta assets on those blockchains. For example, want USDC on Solana? Sorry even if your exchange listed Solana and allow for withdrawal of native SOL, they aren't allowing withdrawals of tokens to the Solana network. They dont know, don't care, don't have the development resources to prioritize that, aren't even familiar with a erc-20 standard of tokens yet, and legal hasn't gotten the rubber stamp from the New York Department of Financial Services anyway so why bother catering to the rest of the world..
Whereas the permissionless bridges plug in immediately and billions of dollars of assets can move in without bothering with a centralized exchange. Building starts immediately, forget about the permits.
So, private participants fixing a crucial bridge is the rational move.
Similar story, rich people protecting their assets.
Its a similar story, but this time no individual at the top reversing the whole blockchain of that transaction and hard forking it to cause a revoult against the main blockchain or a new group creating something like Solana Classic, etc. whilst talking about 'code is law'.
At least this is indeed 'Code is law'.
When the wETH coins are initially set up, there's a way to deposit the initial ETH tokens into the Wormhole's ETH account to jump start the whole process.
When a user wants to convert Solana to ETH, he deposits the Solana tokens to the Wormhole smart contract and it issues the wETH tokens at some exchange rate, taking a 1-1 ETH from Wormhole's ETH account, tying the Solana and the ETH in the wETH tokens. After the dust is settled, the user can convert the wETH tokens to ETH. The Solana tokens held in the wETH tokens are deposited in Wormhole's Solana account, the ETH tokens held in the wETH tokens are released to the user. Everything is good.
The hack was to create a bunch of Solana based wETH tokens out of the thin air, exploiting a bug in teh Wormhole smart contract. The hackers forced a settling of the fake wETH tokens against Wormhole's ETH account, taking the ETH away. In the process, leaving whole bunch garbage Solana tokens in Wormhole's Solana account. Now Wormhole's ETH account is down by $320M. Whatever wETH tokens floating out there have no 1-1 backing from the ETH account. The whole thing can collapse with a bank run.
They fixed it by depositing $320M ETH tokens into the Wormhole's ETH account to ensure the fake wETH tokens are backed as well. The fake Solana tokens are still in their account. It's basically they're using $320M ETH tokens to buy a bunch of Solana tokens, which the hackers created.
So at the end, they're not really out of $320M money; they still have the $320M Solana tokens, fake or not. It's just the general public got screwed by having $320M of Solana tokens inflated on them.
https://explorer.solana.com/address/CxegPrfn2ge5dNiQberUrQJk...
this is why I advise you to use qredonetwork :)