Crypto Takes The Spotlight At Super Bowl LVI

The Super Bowl is perhaps the most watched American sporting event. It is the championship game between the two best teams in the NFL (National Football League), a professional football sports organization. In 2022 it was the Los Angeles Rams against the Cincinatti Bengals, played at the SoFi Stadium in Inglewood (a Los Angeles suburb). This gave the Rams a home turf advantage in a stadium with a capacity of 70,000 but expandable to 100,240 for events like the Super Bowl. The viewership projection for the Super Bowl in 2022 comes from data analytics firm PredictHQ. They estimate that the event will attract 117 million viewers on NBC’s network. If the international market is included that could bring figures between 125 -150 million viewers.

That is great exposure for ads, and that is the reason why many are shown during the game’s broadcast. Getting to a large target market and demographic helps keep brands relevant, and does well for marketing to new consumers. With that as a reason for advertising, the crypto (i.e. cryptocurrency) industry took the spotlight with ads for more exposure to a mainstream audience in 2022.

In Super Bowl LVI, crypto-related fintech companies like FTX, Crypto.com, Coinbase and EToro used this opportunity to release their commercials. The market is not entirely in a boom phase quite yet. The market still has plenty of room to grow and we are at the early stages of adoption. Commercials that reach out to so many people, who actually watch them during the Super Bowl, is one way to get the message across. That is especially true for attracting new customers and crypto users. What is significant is that these companies are an important on-ramp to crypto.

The thing is, commercials for the Super Bowl need to be creative and engaging. This is probably the only time an audience will actually watch commercials because of the entertainment value it also brings during the event. Brands have learned that making their ads the most entertaining and engaging for the Super Bowl is how to capture their target market among the audience. For example we see the usual beer commercials and junk food items. Only this time with popular celebrities and public figures doing the endorsement since this adds more value and reputation to the brand. It is all about brilliant marketing with the theatrics of Hollywood.

How did the crypto ads do? I think they got the message across, but let’s be honest. Probably most of the audience have never before heard about crypto or simply do not understand or care about it. The commercials this year have become more engaging to try to make the target audience more curious and interested, at the very least. In one of their ads, FTX features Super Bowl champion QB Tom Brady (“Tom Brady Wants A Trade“). They feature a familiar face using a not so familiar app for crypto trading. Likewise, Crypto.com had their “Big Game Preview with LeBron James” commercial, as part of their “Fortune Favors The Brave” campaign.

These would be very expensive spots for even a few seconds, but perhaps it will be worth it. NBC was selling 2022 Super Bowl ads for record deals, closing at $6.5 million per 30-second commercial. Companies like FTX and Crypto.com will have no problem paying that amount. These are successful crypto exchanges earning billions in revenues who are willing to advertise. Advertising is a tried and tested formula for capturing new markets. For crypto it can help to bring in more adoption.

Tokenizing Stocks Is The Next Financial Instrument

Binance is offering a new financial instrument on its digital exchange. They are offering a way to purchase fractions of a company’s shares using a tokenized stock trading service. This will provide stock traded equities in financial markets for investors. Binance will begin with Tesla stock on their exchange. The instrument is called a Binance Stock Token, and this allows users to buy a stock or a fraction of a share and earn dividends as well. The prices will be settled in Binance’s BUSD stablecoin token.

For users who have no access to financial markets, they now have an opportunity to own as little as 1/4 of share in an equity like Tesla (TSLA). There is no more need to purchase several stocks when you can have just a fraction and earn from it. This gives exposure to the non-traditional crypto investors who don’t have to wait for other platforms to offer the service.

S = Shares of A Stock
p = Price of the Stock
b = BUSD

b = S(p)

The user will purchase the stock in BUSD prices (b).

Binance claims that they are not creating synthetic assets to offer as stock. They have an asset that is backed by a depository portfolio of underlying securities, which is also managed by a German investment firm. In order to follow compliance, the service is not available to all jurisdictions and only where the exchange is allowed to offer such a service. Those interested will definitely be required to submit a KYC/AML document for legal purposes.

Two things that I can expect to see:

Increase in BUSD trading as a result of the tokens use for investing in stocks. BUSD prices will not surge because it is pegged 1:1 with the USD.
Open up the stock market to first time investors who have never had exposure to equities. This allows users who were either not allowed to trade because of lack of funds or not have access to stock investments to get their chance.

It is interesting to note if other DeFi products will follow that can interact with the Tesla stock. Binance also has its native Binance Smart Chain(BSC) which uses smart contracts that can lock tokenized stocks in a different protocol and earn from it. Some DeFi protocols may even accept tokenized stocks as collateral, depending on how valuable it is in the market.

This can also further boost Tesla stock prices as it has seen a phenomenal surge. Binance can gain more investors while helping bring Tesla stocks higher. While the trends look good for Tesla, investment always involves risk so users must do their due diligence and research always before investing.

Disclaimer: This is not financial advice. The information provided is for educational and reference purpose only, not for making investments. Do your own research always.

Your Funds Are #SAFU With Me, CZ

Binance is one of the largest cryptocurrency exchanges. There are threats from bad actors, who can affect the operation of digital exchanges that also affects users. When an exchange gets hacked, holders of coins who have left funds on the exchange usually have no way of getting their digital assets back. This is why a form of mitigation to be able to recover funds is becoming important. The Mt. Gox hack wiped out that digital exchange of 850,000 BTC (Bitcoin). To this date there has been no formal settlement with former coin holders.

Binance provides its own security measure to address this problem. It is called the SAFU (Security Asset Fund for Users). It is an emergency insurance fund announced back in July 3, 2018.

According to Binance:

“To protect the future interests of all users, Binance will create a Secure Asset Fund for Users (SAFU). Starting from 2018/07/14, we will allocate 10% of all trading fees received into SAFU to offer protection to our users and their funds in extreme cases. This fund will be stored in a separate cold wallet.”

The story of SAFU goes back to a time Binance CEO Changpeng “CZ” Zhao tweeted “funds are safe”. It became a regular message from CZ to assure exchange users on their status. Later a content creator named “Bizonacci” uploaded a video called “Funds Are Safu” on YouTube. It went viral and the term “Safu” instead of safe has stuck ever since.

This insurance fund collects a percentage of fees from transactions on the exchange. This would be used in the event of a serious breach that compromised the funds stored by the system. It is also stored in secure hard wallets away from online access to hackers. The fund is released in the event of an emergency only, so it continues to accumulate unless otherwise.

These are good measures to provide customers if you are a digital exchange. However, if you are the customer you might consider not storing your coins or tokens on an exchange because of the risk. Since exchanges do not guarantee the safety of your funds, if anything should happen like a software glitch or hack, your funds should they get stolen cannot be fully reimbursed by exchanges. Depending on jurisdiction, you can only pursue a lawsuit if there is any responsibility on the part of the digital exchange to reimburse you based on the policy agreement. Most of the time there is no obligation by the exchange, so storing funds in their custodial wallet is at your own risk.

The best solution is to have your own SAFU to store your funds. That means a hardware wallet that is offline in your own possession. This also gives you control of your own private key, something that digital exchanges don’t provide. Using online wallets (e.g. Exodus, Metamask, MEW, etc.) are also options, but since they are online they are still at risk from being attacked. Whichever wallet a user chooses, what is important is to keep the private key and seed phrase secure.

The Bitcoin Binance Hack And The Lessons Learned

At the time of this writing it is the start of blockchain week In New York City. One of the hot topics that will be discussed has to do with the most recent Binance hack that led to $40.7 Million of stolen Bitcoin (worth 7,000 BTC at the time of the incident). This is actually not the first time Binance has been hacked, they have a track record. Despite their concern for cybersecurity, it seems their system is not really that secure. This is not to say that Binance does not take cybersecurity seriously, because they do. They implement a 2FA type of authentication which requires using either an authenticator that generates a random code or the code is sent via an SMS text message to a smartphone. It is pretty secure after the fact, yet it was foiled time and time again. At this point the best that Binance can do is to track the stolen BTC and get the cooperation of other digital exchanges to freeze the funds. We actually know which address moved the coins (The transaction was traced from this link).

Fortunately, Binance has what it calls a SAFU (Secure Asset Fund for Users) which is a way of providing an insurance to users on the exchange in case of emergency. Changpeng Zhao or CZ, Binance CEO, has guaranteed that those who lost Bitcoin from the hack will be compensated for their losses. That is good to know, but will this be the end of these type of hacks? It has already happened before, so there is likelihood that it can happen again. That is unless Binance will add new security measures that tighten their systems even more. Then that gives hackers a new problem to deal with.

Now here is what is concerning. In an official statement made by Binance regarding the hack:

“The transaction is structured in a way that passed our existing security checks. It was unfortunate that we were not able to block this withdrawal before it was executed. Once executed, the withdrawal triggered various alarms in our system. We stopped all withdrawals immediately after that.“

The fact that it “passed our existing security checks” is a cause for concern that is what they are working to improve. According to this Coindesk article, Binance is going to do a revamp of their security system. They will certainly look into improving their API for 2FA as well as their withdrawal validation process. If a hacker can easily hack a user’s API key or 2FA credentials, you don’t really have a secure system. It was probably not an easy feat for the hackers, so now Binance should make it even more difficult to decrease the likelihood of any successful breach.

Phishing attacks are one of the exploits hackers use to get information from users. Once they trick a user to giving them that information, the hackers then use it to access the exchange. That is really all you need to do to get past Binance’s security check. Binance implements withdrawal limits for unverified users but for those who are verified, the hacker can wipe out their entire balance on the exchange.

Other ways a Binance user account was compromised can be from spyware, keyloggers or remote viewing software like VNC. Having an antivirus and cyberbsecurity software installed on a computer can help detect these malware. Another way to foil these attacks is to not keep funds stored on an exchange. Using a cold storage (not connected to the Internet) on a hardware wallet provides more security. In fact, some smartphones like the HTC Exodus and Samsung Galaxy S10 provide hardware wallet support for cryptocurrency now. For the strictest security, keep your digital assets safe in cold storage and not on hot wallets or custodial services like digital exchanges.

According to CZ:

“We are working with a dozen or so industry-leading security expert teams to help improve our security as well as track down the hackers.”

That’s right. Binance is definitely going to need more help in cybersecurity to fix this problem. Remember, it is not the blockchain that got hacked, it is Binance’s system. Binance also announced support for hardware devices with 2FA, a more secure way to connect to Binance. A system like that would require hackers to have possession of the actual hardware device. Think of this as a sort of physical key, that only gives access to the user who owns it.

The risk of a more digital world is computer hacking. Binance has been successfully hacked in the past. A user lost 2 BTC when a hacker used the credentials from their hacked e-mail address. Another hack occurred in July 2018, which was a “potential” hack that led to the theft of $45 Million of Syscoin and dumping of BTC. It was not Binance’s direct fault, but more on the Syscoin wallet. Regardless, it was a system anomaly that Binance admins detected. Binance immediately shutdown and then reset their API keys. That’s exactly what they did with the most recent hack. It seems that the answer to the problem is just shutting down and resetting everything. However, that does not solve the problem apparently.

Due to this large loss of BTC, someone from the BTC development community reached out to CZ. A suggestion was made to reorg the BTC blockchain and give back the stolen funds to their respective owners. Now the reaction to this was not good at all and thankfully, CZ decided not to do this. That would require Binance to use a “51% attack” to gain majority hashing power on the Bitcoin network to overturn transactions. The problem with this is an ethics issue because it would require Binance to get a consensus among miners and nodes on the network to support this plan. It goes against the main ideology of the blockchain, which is about decentralization and immutability. When you get a collusion of miners to provide Binance with majority hashing power, it centralizes the network to benefit one organization. This may also lead to inconsistencies on the blockchain if several bad actors try to mine on their own chain to gain control of the network. The idea that a consortium of miners with hashing power can overturn a trnsaction goes against immutability on the blockchain. It would be a terrible idea to do this.

The result of a reorg may lead to more factions in the Bitcoin community. There might even be a fork and this is not going to be good for the price of BTC as a store of value. It may even ruin the market leading to turmoil and massive sell offs as users collect their money. There needs to be a clear direction for BTC and a reorg is probably not in everyone’s best interest since it really only benefits Binance and the hacked accounts. This is not a consensus of the network’s interests.

The good thing is that the hack did not affect BTC prices. FUD didn’t lead to any massive dump or sell off, proving that there is confidence in the market. Taking care of the real problem, which is cybersecurity, is what needs to addressed. Binance vows to increase their security which is the most important feature right now for any digital exchange. Users need their funds to be safe from hackers, so this is going to be the responsibility of digital exchanges.