This Week in Web3 | 3.13.23

GM to the 23,457 funky people currently subscribed to This Week in Web3! What a looooooooong week it's been 😬

Here's what we'll cover today:

• Euler Finance hacked for over $195m+

• Aztec Connect shuts down; implications for Zk and privacy tech

• Product updates from our CEO & Co-Founder, Dariya

• Community Feature: Lyra

Sarah at Layer3

WEB3 DIGEST

A sad day for DeFi

It's another tough day for DeFi. Euler Finance, a non-custodial DeFi protocol on Ethereum that allows users to lend and borrow almost any crypto asset, was targeted in a malicious flashloan hack today.

The protocol was drained of over $195m in various assets, including DAI, stETH, USDC, and WBTC, despite an initial audit and extensive bug bounties. Some have recommended that users only use immutable protocols like Silo Finance, which don't allow upgrades in its contracts (But what can you do at that point?).

In a flashloan hack like this one, an attacker can use flash loans to deposit funds and then leverage them twice to trigger liquidation. A bug was discovered in one of Euler's smart contracts where it doesn’t check for the health factor when executing the donateToReservers() function. As a result, the attacker was able to liquidate himself from the protocol, repay the flashloan and make a huge profit.

To our friends affected by Euler, we hope you're holding up alright 🫶

INFORMATION DIET

We're not talking about SVB today, actually

Welcome to Sarah's Recommended Reads! Here, I'll be summarizing well-written articles or threads by web3 thinkers and builders that you should know about. 

What do we have this week? Could it be...a breakdown of some of the most incredible VC threads on SVB over the weekend? SIKE! We are not covering the SVB, Silvergate, and general banking crisis. These events are important to the larger crypto ecosystem—but I wouldn't be giving you anything interesting that you haven't seen already.

Instead, this week we'll be chatting about the shutdown of Aztec Connect and its implications for other privacy chains/tools in web3. Aztec Connect, a privacy infrastructure that served as the encryption layer for Ethereum, was one of Aztec Network's core product offerings. They just announced that they were shutting down today.

I'm going to break down the official announcement here because I think generally there has been quite a few big conversations on Twitter about whether Aztec shutting down was due to regulatory pressures, or something else.

Regulation is a big big topic in crypto this year. Make no mistake—MiCA, SEC regs, and recent panic over stablecoins and staking has made much of the regulatory headlines. The pressure isn't just on in the U.S., either:

• India starts to include crypto companies under money laundering rules 

• Thailand SEC wants public feedback on crypto lending, staking ban

• UK wants to regulate crypto under a new financial services law this year

But the shutdown of Aztec Connect should inspire two things and neither of them have to do with regulation. A seasoned DeFi user shared the concern that Aztec might be shutting down due to regs, but a readthrough of their Medium announcement indicated the opposite. In fact, it explicitly states that Aztec is not shutting down due to regulations, and that "[They] were under no regulatory pressure nor have [they] fielded any inquiries from law enforcement."

Instead, Aztec is concentrating their efforts to build a universal language for zero-knowledge with Noir, and focused on developing their zkRollup for use. Which means...

• ZkRollups aren't just privacy tech

• Zk development continues to be a dominant crypto theme of 2023

Curious? Read it for yourself here.

Quick Hits

• Silvergate Capital To Shut Down Operations, Liquidate Bank – link

• NFTs: Amazon to launch its platform on April 24 – link

• WeChat Integrates Digital Yuan To Bolster Payments – link

• Circle to ‘Cover Any Shortfall’ in USDC Reserves, Sparking Stablecoin Rally – link

Product Updates from Dariya

Hey everyone!

This week, we'll be announcing a new feature that allows you to connect multiple wallets to your Layer3 account. This means you can participate in Quests without juggling different wallets and devices. We're partnering with two fantastic wallet providers to make this happen, and we'll be sharing more details soon – you'll have access to even more quests and cooler rewards to level up your crypto skills.

In addition, we've been actively listening to and iterating on your feedback since we launched v2 two weeks ago. We want to make it as easy and fun as possible for you to explore the world of crypto, no matter your level of crypto experience. So, if you have any questions, feedback, or just want to say hi, please hit me up on Twitter @dariyaxyz.

That's all for now. Keep an eye out for more updates from Layer3, and thank you for being a part of our community!

— Dariya, Co-Founder and CEO

COMMUNITY FEATURE

Community Feature: Lyra

Learn how to unleash the power of options with Lyra, a decentralized options automated market maker (AMM) that allows traders to buy and sell options on cryptocurrencies against a pool of liquidity permissionlessly.

Lyra is now live on the Arbitrum Network, and we're excited to partner with them to power their next stage of growth! You can check out our latest Quest with Lyra here:

As always, thank you for reading!

Join our Telegram, Discord, and Twitter to stay up-to-date on the latest Quests, communities, and more. Until next week, frens.

Cheers,

Sarah from Layer3