James Cirrone

This week, 11 crypto startups collectively raised nearly $60 million, with the majority focusing on liquid staking or smart contract security.



The top capital getter this week was liquid staking derivatives solution Helio Protocol, which secured $10 million from Binance Labs.&nbsp;



The protocol has a combined $300 million in total value locked, according to <a href="https://blockworks.co/tag/binance">Binance Labs</a>, primarily engaging in over-collateralized lending of its decentralized <a href="https://blockworks.co/tag/stablecoins">stablecoin</a> HAY.&nbsp;



It also offers “multi-chain [staking-as-a-service] and [liquid staking derivatives] services,” both of which are run through Synclub, a BNB validator that Helio <a href="https://www.accesswire.com/770839/Helio-Protocol-and-Synclub-Merge-Paving-the-Way-for-a-LSTFi-Fueled-DeFi-Summer">merged</a> with in July.



The merger will lead to the incorporation of additional liquid staking tokens as collateral on Helio. Synclub already allows native staking with polkadot (<a href="https://blockworks.co/price/dot">DOT</a>), cosmos (<a href="https://blockworks.co/price/atom">ATOM</a>), tron (<a href="https://blockworks.co/price/trx">TRX</a>) and Binance Coin (<a href="https://blockworks.co/price/bnb">BNB</a>).



Binance co-founder Yi He said that Binance Labs is committed to supporting DeFi projects like this to advance the space.



“We have seen tremendous potential in the LSDfi sector, which plays a crucial role in driving the overall growth of the DeFi ecosystem,” she said in a statement.&nbsp;



Puffer Finance is another startup involved in the liquid staking realm, <a href="https://twitter.com/puffer_finance/status/1689061773557866497">raising</a> $5.5 million in a seed round co-led by Lightspeed Faction and Lemniscap. Another major investor was the crypto arm of Brevan Howard, a large asset manager.



<a href="https://blockworks.co/news/ethereum-shapella-ok-despite-bug">The Ethereum Shapella upgrade</a>, which updated the network to a proof-of-stake model, was a major factor in Puffer’s impetus to raise money for its product lineup, according to a Medium <a href="https://medium.com/@puffer.fi/a-push-for-decentralization-puffer-finance-raises-5-5m-to-redefine-liquid-eth-staking-936a61b750f7">post</a>.&nbsp;



Puffer is particularly worried about centralized liquid staking providers outpacing decentralized ones.&nbsp;



To address that fear, it wants to “​​increase the economic viability of home stakers” by protecting them from slashable offenses with its <a href="https://pufferfinance.github.io/secure-signer/">Secure-Signer tool</a>.&nbsp;



Additionally, home stakers can join the Ethereum network through a Puffer’s pool with as little as 2 ether (<a href="https://blockworks.co/price/eth">ETH</a>), according to its <a href="https://www.puffer.fi/">website</a>. Solo stakers normally need to deposit 32 ETH to participate in the network.&nbsp;



The founders of Puffer, Amir Forouzani and Jason Vranek, released a joint statement on the funding news, saying they are trying to lower the barriers to entry for staking.&nbsp;



“Anyone can run a Puffer Node from their home to operate Web3 infrastructure and play a pivotal role in shaping a Web3 that is resilient and censorship-resistant,” the duo said.



<h2 class="wp-block-heading">A focus on smart contract security</h2>



Alchemy’s developer report for the second quarter of 2023 found that <a href="https://blockworks.co/news/developers-undeterred-headwinds-alchemy">builders are most interested in building solutions that tackle smart contract security</a>.&nbsp;



The week after that report dropped, three startups looking to protect smart contracts raised multimillion-dollar rounds.&nbsp;



One was Cube3.ai, which locked down $8.2 million in seed funding to boost its three blockchain security products. They are called Detect, Protect and Manage, all of which have free trials.&nbsp;



These products, each having a slightly different purpose, combine together to monitor and, if necessary, block malicious transactions on the blockchain, according to a company <a href="https://blog.cube3.ai/2023/08/09/real-time-web3-transaction-security-for-smart-contracts-introducing-cube3ai/">blog</a>.&nbsp;



Spearbit was another security-minded startup to raise money. The firm raised $7 million to build Cantina, an open marketplace for Web3 security auditors.&nbsp;



Framework Ventures led the round, and the money will also go toward hiring more software engineers at Spearbit, TechCrunch <a href="https://techcrunch.com/2023/08/10/spearbit-raises-7m-to-improve-security-audits-in-crypto-through-its-open-marketplace/?tpcc=tcplustwitter">reported</a> Thursday.



The first two items on the agenda, now that the firm has increased its cash reserves, are to assist solo auditors in starting smart contract audits and to establish a &#8220;guild&#8221; platform for specialized audit shops.



SphereX is the third and final company that fundraised with security top of mind.



It raised $8.2 million in seed funding at a $24 million valuation, with investors including Aleph, Pillar VC, Fabric Ventures, Mensch Capital Partners and other angel investors.



The company’s flagship product is SphereX Protect, a security solution for smart contracts that prevents hackers from exploiting vulnerabilities in the code.



<h2 class="wp-block-heading">Other notable fundraises</h2>



<ul class="wp-block-list">
<li>Bitcoin wallet Xverse <a href="https://twitter.com/xverseApp/status/1689632046904164352">brought in</a> $5 million from Jump Crypto among others to develop its Bitcoin scaling solutions.</li>



<li><a href="https://blockworks.co/news/binance-labs-crv-investment">Binance Labs invested $5 million into Curve Finance</a>’s native token CRV to support deployment to the BNB chain.&nbsp;</li>



<li>Fxhash, a Tezos-based platform for collecting NFT generative art, also <a href="https://twitter.com/fx_hash_/status/1688927210059763713">raised</a> $5 million in a seed round.</li>
</ul>



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Crypto funding: A $60M week for liquid stakers and Web3 security providers

Macauley Peterson

Decentralized Web3 infrastructure provider Ankr sought to reassure its community Friday with an initial response to the <a href="https://blockworks.co/news/binance-chain-apps-5m-hack" target="_blank" rel="noreferrer noopener">theft of at least $5.5 million</a> from BNB Chain liquidity pools and money markets.&nbsp;



The team confirmed that Ankr’s other products — including validators, RPC nodes, and AppChain services — were not affected. That will come as a relief to holders of Ankr’s other larger staking derivatives, notably aETHc — Ankr staked ether — which carries a market cap of about $68 million.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Update on our aBNB Token Exploit: We are grateful to our community of DEXs, exchanges, and protocols that all helped us end the exploit quickly. We will use reserves to compensate liquidity providers for the aBNBc pools.<a href="https://t.co/B2yNWBAQdX">https://t.co/B2yNWBAQdX</a>&mdash; Ankr (@ankr) <a href="https://twitter.com/ankr/status/1598768146088742912?ref_src=twsrc%5Etfw">December 2, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The attacker minted a total of 60 trillion aBNBc across 6 different transactions. The thief then used the minted, but unbacked tokens to drain liquidity from decentralized exchanges on the <a href="https://blockworks.co/price/bnb">BNB Chain</a>. After turning around and buying the depressed aBNBc the attacker was able to raid borrowing and lending protocol Helio by withdrawing $16 million in HAY, the protocol’s custom stablecoin and swapping it for $15.5 million <a href="https://blockworks.co/price/busd">BUSD</a>, the Binance stablecoin issued by Paxos.



Prior to the exploit, Helio had $90 million in Total Value Locked, <a href="https://defillama.com/protocol/helio-protocol" target="_blank" rel="noreferrer noopener">according to DeFiLlama</a>.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ The team at Helio Protocol is aware of the situation and we are closely working with <a href="https://twitter.com/ankr?ref_src=twsrc%5Etfw">@Ankr</a> to manage the situation and to support our community during this difficult time.&mdash; Helio Protocol ($HAY) 🔶 (@Helio_Money) <a href="https://twitter.com/Helio_Money/status/1598710451285598208?ref_src=twsrc%5Etfw">December 2, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“Hacks and exploits from bad actors like this are an unfortunate possibility in Web3, even with every attention to detail in security processes — but we were well prepared,” Co-Founder &amp; CEO Chandler Song, said in <a href="https://www.ankr.com/blog/the-abnbc-token-report/" target="_blank" rel="noreferrer noopener">a statement</a>.



A recommended “action plan” explained how users of aBNBc can be compensated through a new ankrBNB token that will be minted and airdropped based on a pre-exploit snapshot of on-chain data.



While the attack apparently stems from malicious use of the private key for the aBNBc smart contract deployer, it&#8217;s unclear exactly how the key was compromised. Industry <a href="https://blog.openzeppelin.com/protect-your-users-with-smart-contract-timelocks/" target="_blank" rel="noreferrer noopener">best practices call for</a> multisignature wallets and timelocks on upgradeable smart contracts, to prevent this type of attack.



Representatives from Ankr did not respond to Blockworks request for comment.



Other providers of liquid staked BNB such as pSTAKE <a href="https://twitter.com/pSTAKE_stkBNB/status/1598540733044359168" target="_blank" rel="noreferrer noopener">use multisigs</a> to protect sensitive contracts, and restrict access to token minting functions, while fully decentralized dapps such as Uniswap on Ethereum are not upgradeable at all.



The full extent of the collateral damage is not yet clear, but the Ankr team <a href="https://twitter.com/ankr/status/1598803911443468289" target="_blank" rel="noreferrer noopener">expressed the intent</a> to resolve losses incurred by customers of related DeFi dapps.



For example, Ankr will cover bad debt incurred by Helio Protocol, pending the outcome of ongoing discussions, <a href="https://twitter.com/Helio_Money/status/1598710457711198208" target="_blank" rel="noreferrer noopener">according to</a> the latter’s official Twitter account.



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