Linea Halts Amid Velocore Exploit

• Linea temporarily halts amid an exploit.

• Biden vetos the repeal of SAB-121.

• OP Labs update on baseline decentralization.

• Matter Labs withdrawals ZK trademark applications.

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Line, an EVM-equivalent ZK-rollup by ConsenSys, temporarily halted block production on its L2 network as part of an initiative to recover stolen funds from DeFi protocol Velocore. Over the weekend, an attacker manipulated pool fee calculations to simulate large withdrawals and used a flash loan to drain all variable AMM pools on Velocore across zkSync and Linea. Linea reported that the attacker had bridged 700 ETH out of Linea using a third-party bridge. In response, Linea paused its sequencer and censored transactions from the attacker to prevent further withdrawals. Velocore has reported losses of $6.8 million and is currently in negotiations with the attacker. Linea's sequencer has resumed operations since the halt.

President Joe Biden vetoed the repeal of SEC Staff Accounting Bulletin (SAB) 121, a regulation that mandates custodians to account for the crypto assets in their possession as their own, requiring significant reserves to back the assets. The requirement makes it harder for custodians, including banks, to custody crypto assets. Biden argued that repealing the rule would restrict the SEC’s ability to establish necessary safeguards. However, the rule has been labeled as illegal for violating the Administrative Procedures Act. Congress sucessfully voted to repeal SAB-121 in mid-May with bipartisan support. Biden previously declared his intention to veto the repeal even before the congressional vote took place.

OP Labs released a progress update in achieving baseline decentralization, a status characterized by Permissionless Output Proposals (PoPs) and decentralized control over bridge upgrades, both which are now live on the OP Sepolia testnet. Permissionless Output Proposals enable users to transfer assets from Layer 2 to Layer 1 without relying on a sequencer. Decentralizing bridge upgrade control allows users to verify their withdrawals through a dispute game system. The Security Council will still be able to intervene in the dispute system during emergency situations. Pending OP governance approval for mainnet, the upgrades will reduce centralized control and enhance user autonomy.

Matter Labs, the developer of zkSync, has chosen to withdraw its ZK trademark applications. The company concluded that establishing a universally accepted and neutrally perceived group, as initially envisioned, would be unachievable. According to The Block, zkSync is expected to release its native token later this month.

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