Source: Michael Saylor
BIP-110 is one of the more notable protocol-level disputes in the Bitcoin development community since the Blocksize Wars between 2015 and 2017, when ecosystem participants debated whether it was worth risking a chain split to raise the block size limit for scalability.
BIP-110 was introduced by pseudonymous Bitcoin developer “Dathon Ohm” with the support of Ocean protocol founder Luke Dashjr.
Hedera-based lending protocol Bonzo Lend lost about $9 million after an attacker manipulated the price of SAUCE used as collateral, allowing the account to borrow assets far beyond the value deposited.
In a preliminary incident report published Saturday, Bonzo said the attacker deposited 250 SAUCE, worth only a few dollars, before submitting a price update that inflated the token’s value by roughly 12 orders of magnitude. The wallet then borrowed 6.63 million USDC and 34.5 million wrapped HBAR from the lending pool.
The case illustrates how oracle failures can turn low-value collateral into a tool for draining large amounts of liquidity from lending protocols, even when the application and underlying network continue operating as designed.
Bonzo attributed the incident to a flaw in Supra’s on-chain oracle verifier, which accepted a manipulated SAUCE price carrying a zeroed signature. The protocol said Supra acknowledged the issue and deployed a fix, while stressing that the incident was not a vulnerability in Bonzo Lend’s contracts or Hedera’s core network.
Estimated economic impact of the incident. Source: Bonzo Finance
The US Department of Justice is reportedly moving to drop charges against the founder of BitClub Network, a purported crypto mining platform that allegedly defrauded investors of $722 million between 2014 and 2019.
A court filing shows Matthew Goettsche’s attorneys wrote to New Jersey district court Judge Claire Cecchi on Wednesday, stating that the parties “reached an agreement in principle” to resolve the pending charges “but need time to finalize the terms.”
Goettsche’s attorneys' letter to New Jersey district court Judge Claire Cecchi. Source: Bloomberg Law
The filing came after the deputy attorney general’s office in Washington reportedly ordered the New Jersey attorney general’s office to dismiss the case against Goettsche with prejudice, according to a report on Friday from Bloomberg Law, citing two sources familiar with the matter.
Goettsche was indicted in December 2019 and was set to face trial in October for conspiracy to commit wire fraud and selling unregistered securities. A reversal would mark one of the more notable changes in US crypto enforcement history, particularly given that three of his former colleagues, Silviu Balaci, Joseph Abel and Gordon Beckstead, have pleaded guilty for their involvement in the scheme.
The potential reversal follows an April 2025 memo from Deputy Attorney General Todd Blanche, who directed the DOJ to end its “regulation by prosecution” strategy against the digital asset industry.
More on the subject
Facts Only
* BIP-110 is a protocol-level dispute in the Bitcoin development community.
* Dathon Ohm and Luke Dashjr introduced BIP-110.
* Bonzo Lend lost approximately $9 million after an attacker manipulated the SAUCE price used as collateral.
* The attacker deposited 250 SAUCE, valued at only a few dollars, before updating the price to inflate it by roughly 12 orders of magnitude.
* The wallet borrowed 6.63 million USDC and 34.5 million wrapped HBAR from the lending pool.
* Bonzo attributed the incident to a flaw in Supra’s on-chain oracle verifier accepting a manipulated SAUCE price with a zeroed signature.
* Supra acknowledged the issue and deployed a fix for the oracle verifier.
* The protocol stated the incident was not a vulnerability in Bonzo Lend contracts or Hedera's core network.
* The US Department of Justice is reportedly moving to drop charges against the founder of BitClub Network.
* Matthew Goettsche’s attorneys reached an agreement in principle to resolve pending charges but require time to finalize terms.
* Goettsche was indicted in December 2019 for conspiracy to commit wire fraud and selling unregistered securities.
Executive Summary
A dispute regarding the protocol-level changes of BIP-110 has been highlighted by incidents within the broader ecosystem, such as a lending failure involving the Bonzo Lend protocol. An incident occurred where an attacker manipulated the price of the SAUCE token to cause collateral worth only a few dollars to be used for borrowing significant amounts of USDC and wrapped HBAR from a lending pool. This demonstrates how oracle failures can lead to substantial liquidity drains in lending applications, even when underlying networks operate as designed. The protocol affected, Bonzo Lend, attributed the incident to an issue with Supra’s on-chain oracle verifier, which accepted a manipulated SAUCE price with a zeroed signature. While the protocol acknowledged the issue and deployed a fix within Supra, they maintained that the event was not a vulnerability in their own contracts or Hedera's core network.
Separately, legal actions are unfolding concerning Matthew Goettsche, the founder of BitClub Network, who faces charges related to defrauding investors. The US Department of Justice is reportedly moving to drop charges against him. This legal situation involves an agreement reached between Goettsche’s attorneys and the court regarding pending charges, though final terms are still pending. This action follows an earlier indictment in December 2019 concerning conspiracy to commit wire fraud and selling unregistered securities, amid a broader shift in US crypto enforcement strategy directed by the Deputy Attorney General.
Full Take
The interplay between technical protocol debates, on-chain oracle security, and large-scale financial loss illustrates a critical gap in decentralized system resilience: the assumption that application-level fixes are sufficient when foundational data inputs can be corrupted. The Bonzo incident suggests that even robust lending protocols built on established networks are vulnerable if external pricing mechanisms—oracles—are compromised, turning low-value assets into vehicles for systemic liquidity extraction. This prompts an examination of whether protocol safety should inherently prioritize the security of external data feeds over internal contract integrity when those feeds are demonstrably untrustworthy.
The narrative surrounding Goettsche and the DOJ shift reveals a tension in regulatory enforcement philosophy: a potential shift away from "regulation by prosecution" toward a different methodology. This divergence suggests that accountability in the crypto space is being weighed against systemic stability concerns. The pattern emerging is the separation of technical/protocol disputes (BIP-110, Supra) and large-scale financial/legal accountability (Goettsche). A system relying on layered consensus must address both: ensuring mathematical integrity at the protocol layer and establishing enforceable liability for economic outcomes caused by those layers.
The implication is that cognitive sovereignty requires recognizing where risk actually resides. It is not just in optimizing block sizes or perfecting a smart contract, but in securing the external boundaries against manipulation that can translate small token values into massive financial drains, whether through oracle failure or illicit activity. What mechanisms are needed to ensure that fixes for individual component vulnerabilities cascade into genuine systemic security? What precedent does this legal shift set regarding the responsibility of developers versus the responsibility of the ecosystem, especially when real-world economic consequences materialize from seemingly isolated technical flaws?
Sentinel — Human
The text appears to be a synthesized news report weaving together details from several specific, verifiable sources regarding Bitcoin protocol disputes and US legal proceedings.