Welcome to this weeks Just The Metrics

Happy Sunday Folks,

here we are again, your Just The Metrics Newsletter. 

Delivering the latest updates from the Cryptoverse, Crypto Metrics, L1 Comparisons, and all about Cardano.

And the best: all delivered and explained in an easy peasy way 😄

Here's what we got this week:

1. Updates from the Cryptoverse:

• Solana Exploit

• Sygnum Bank offers Cardano Staking

2. Diving into Just the Metrics

• The L1-Assessment-Framework applied to Algorand

Ok, let's dig in!

Solana Exploit - up to $6 Million have been drained from 8000 wallets

Another day, another big hack in the crypto world.

On Tuesday, August 2. , Solana owners reported that their funds were vanishing from their wallets—and by evening it became clear a hacker was draining millions from online wallets.

This is already the second hack this week after the Nomad Bridge was stripped of $190 million of its funds on Monday and by that ranking 5th place on the Rekt Leaderboard.

How Did it Happen?

Investigations reveal the reason is a private key exploit tied to the mobile software wallet Slope

It is still uncertain how this happened, but it appears the hacker was able to approve transactions on behalf of the wallet's owner, allowing him to transfer funds without the owners’ consent.

Anatoly Yakovenko, the cofounder of Solana, thinks the exploit is the result of a “supply chain attack,” a type of cyberattack where an attacker can access users' accounts by targeting a third-party vendor.

We won't take up all the technical details and assumptions up here...the internet is full of it.

But let's instead dive into the important stuff:

Who Got Hacked?

The Solana exploit has targeted nearly 8,000 wallets. Most were Solana “hot” wallets—those connected to the internet—notably, Phantom, Slope, and Trust Wallet.

What is worrying about the hack is that it seems that the transactions have been signed properly, seemingly the attacker has acquired the private keys of the users.

What can be done for protection?

Hot wallets are typically more susceptible to attacks, as they’re connected to the internet rather than stored physically offline.

Though there are still risks, “cold” wallets, or hardware wallets stored offline, are widely considered to be the safest option for cryptocurrency investors trying to protect their funds.

What can we learn here?

Overall, this is "bad marketing" for the crypto space. Those hacks and exploits obviously do nothing good for the wider public perception of blockchain and digital finance.

It is a clear demonstration of the often practiced "move quick and break things" development mentality of so many projects. Which is unfortunately carried out on the backs of retail investors.

The Solana Co-Founder Yakovenko has the viewpoint that "You have to kiss a couple of frogs in your design to ship stuff." Which shows how serious security, reliability, and robustness aspects are taken when other people's money is in the game.

Such events and quotes, even more, emphasize the importance of qualitative and quantitative measurements taking into consideration when making investment decisions.

Hopefully, such events, as painful as they are for those affected, may help to start a mindset change for both development ethos and decision-making criteria when it comes to investing in cryptocurrency.

Cardano Staking available at Swiss Sygnum Bank

Institutional adoption of digital assets continues to ramp up!

The Swiss digital Banking institute Sygnum Bank continues expanding its crypto services.

With this announcement, the “world’s first digital asset bank,” has expanded its staking offering by launching Cardano (ADA) staking services, allowing clients to generate rewards by staking ADA via the bank’s institutional-grade platform.

Staking is the process of participating in the validation of transactions on a Proof-of-Stake blockchain in exchange for staking rewards

Prior to the announcement, Sygnum already offered staking on three cryptocurrencies, including Ethereum (ETH), Internet Computer (ICP), and Tezos (XTZ).

The addition of Cardano staking on Sygnum will increase the exposure of ADA to many institutional investors. Following a tenfold increase in gross revenues in 2021, Sygnum’s institutional client base was nearing 1,000 by early 2022.

How this institutionalization of Cardano will influence the centralization of the Cardano ecosystem only the future will reveal. In terms of exposure and mass adoption, such collaborations are necessary to make the technology more visible and accessible to the broader masses.

L1 Assessment Framework applied to Algorand

Crypto is an emerging asset class of the 21st century. And when making investment decisions in this particular asset class, it is important not to base them on hype or ever-changing narratives.

Especially in the light of recent events, it becomes more & more evident that fundamental and metrics-based decision-making is key for a profound project assessment.

So here is the Blockchain Trilemma as Assessment Framework

Let's take a look at certain metrics of Algorand that determine its degree of

• Security

• Scalability &

• Decentralization

General Decentralization Metrics:

Initial Token Distribution:

• Algorand suffers from extremely concentrated token distribution in which >60% of the token supply is controlled by founders and private insiders.

• Hence, we cannot call the token distribution of Algorand fair.

The number of individual staked wallets & staking ratio:

• The unique staking mechanism of Algorand allows for the high participation of individual wallets in the consensus.

• Although the number of individual staked wallets is not available, Algorand enjoys a high staking ratio of 85.14%.

Permissioned vs Permissionless Node (Yes/No):

• The decentralization of a system is equal to the minimum decentralization of any of the components that makes up the system.

• In that context, Algorand is not a permissionless blockchain

• Because only the operators selected by the Algorand foundation can run a relay node.

The total number of validator nodes/relay nodes/stake pools:

• As of 07.08.2022, Algorand has 1398 participating nodes/validator nodes and there are currently up to 160 Algorand relay nodes. Their details of relay nodes are public, but difficult to view without technical knowledge (Source: metrics.algorand.org )

Factors Enabling Decentralization:

Size of a full node: 883 GB, which is bigger than #Ethereum (842.48 GB) (Source)

Minimum hardware & connectivity requirements for running a validator node/relay nodes/stake pool:

• Algorand has fairly minimal requirements for participation nodes:

  • 4 vCPU

  • 8GB RAM

  • 100 GB SSD (NVMe SSD recommended)

  • 100 Mbit broadband (Source)

• But to ensure the performance of the overall Algorand blockchain, participation nodes (especially with high stake) and relays have higher requirements:

  • 8 vCPU

  • 16GB RAM

  • 500GB NVMe SSD

  • 1Gbps broadband symmetrical with low latency connection to the network (Source)

The Algorand full node has a bigger size (883 GB) than Ethereum, which makes it difficult to run a full node for a normal user.

To ensure the high performance of the blockchain, Algorand has to rely on participation and relay nodes with high requirements. This significantly influences the scope of decentralization of Algorand.

General Security Metrics:

Cost of 51% attacks:

• An attacker controlling 51% of the Algorand network will cost over USD 1.24 billion, not factoring in the price appreciation that will occur with a buyer trying to purchase that much ALGO.

Vulnerability to denial-of-service (DoS) and distributed denial-of-service (DDoS) attacks:

• Relatively low vulnerability to DDOS attacks.

Propagation network types (a peer-to-peer propagation network or a relay propagation)

• Currently, Algorand has a relay propagation network.

Factors Enabling Security:

Full Node/Partial Node Ratio:

• Considering the relative high size of the Algorand full node, it should have a low Full Node/Partial Node Ratio. But no such metrics are available to the public.

Client Diversity:

• According to the information available to the public, Algorand has only one client, which is not optimal and client diversity is critical for the long-term viability of Algorand

General Scalability Metrics:

Transaction throughput: Peak TPS: 1154 TPs, which is pretty high for an L1

Transaction latency & finality time: Around 4.2 seconds

Active Layer 2s (rollups/state channels): Currently no active rollups/state channels.

Factors Enabling Scalability:

Status of data availability that enables rollups:

• Algorand blockchain allows for the data availability (DA) that enables rollup implementation (Source)

Number of projects building Layer 2s (rollups/state channels):

• Rollups: 1 Milkomeda (Source)

This is a really low number if we take the Ethereum ecosystem as a benchmark. But considering the low number of blockchains that can enable rollups, Algorand is in a better position to embrace the rollup-centric future.

So what does now the overall verdict look like:

Decentralization: Low-Moderate

Security: Moderate-High

Scalability: High

Algorand network shows a relatively high degree of security & scalability,

But in the current state, it clearly lags in the decentralization metrics. Especially, due to the permissioned nature of the relay node network.

💎 Gem of the Week 🧵

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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.