News: vanishing NFTs, Free Keene not so free, Coinbase wash-trading Litecoin

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Prole art threat

I’m an “is it art?” maximalist. NFTs can be used for creative artistic value — just as anything can. The creator and the buyers are playing a game together; there can be genuine appreciation and participation there. I’m not gonna tell ’em they’re wrong.

Of course, it may be art, but it can also be a reprehensible scam. The serious problems with the wider NFT market remain. And when the KLF burnt a million quid, they only set it on fire once.

If you think of the most absolutely inept and trash-tier way of performing any real-world function, then crypto will reliably not meet even that bar.

The pictures for NFTs are often stored on the Interplanetary File System, or IPFS. Blockchain promoters talk like IPFS is some sort of bulletproof cloud storage that works by magic and unicorns.

But functionally, IPFS works the same way as BitTorrent with magnet links — if nobody bothers seeding your file, there’s no file there. Nifty Gateway turn out not to bother to seed literally the files they sold, a few weeks later. [Twitter; Twitter]

How does the OpenSea NFT platform deal with copyright violations? They keep the unfortunate buyer’s money — and tell them they should have done their own research. (Story by Ben Munster.) [Vice]

Beeple has made the wisest play in the NFT game — he got the $60 million in ether for his JPEG, and sold it for dollars immediately. [New Yorker]

 

 

This is Radio Freedom

Activists from the Free Keene movement, who seek to turn Keene, New Hampshire into a Libertarian paradise, are being ground under the statist jackboot — just for using sound money on a website!

Well, running a money transmission business — specifically, exchanging cryptocurrency for actual money — that wasn’t “licensed” by the bureaucratic oppressors who hate freedom. And something about opening bank accounts in the names of churches — “The Shire Free Church”, “The Crypto Church of NH”, “The Church of the Invisible Hand”, and “The Reformed Satanic Church” — and pretending that the money coming in was tax-deductible religious donations. The usual governmental overreach. [Justice Department; Patch; indictment, PDF; case docket]

Ian Freeman (On The Land?) had $1.6 million worth of bitcoins, and $178,000 in a safe, when the FBI raided the house where the arrestees lived — which was owned by “Shire Free Church Monadnock.” The same house was raided by the FBI in 2016 — on an investigation into child pornography. Must be one of those coincidences. [Keene Sentinel, archive; Union Leader, archive]

For those whose day isn’t complete without some cheering Cantwell News — you know who you are — this particular bunch are all ex-friends of Chris “The Crying Nazi” Cantwell, who moved to Keene specifically to join Free Keene. The recently-arrested activists now claim Cantwell was never part of Free Keene, but that’s completely false — they showed up as moral support to Cantwell’s recent trial on threats of rape, only to throw him under the bus when he was convicted. [Manchester Ink Link]

In my 2019 Foreign Policy piece on the ways neo-Nazis used Bitcoin, this bit at the end was about Cantwell: [Foreign Policy, 2019]

One neo-Nazi podcaster found a credit card processor that was fine with the content of his show but said he was untouchable for another reason: He was considered a money laundering risk because he dealt in cryptocurrency.

One story that didn’t get into that piece is how Cantwell got out of jail after the Unite The Right neo-Nazi rally in Charlottesville, North Carolina in 2017 and bought up big into Bitcoin! … right at the December peak of the 2017 bubble. He lost so much money on Bitcoin that he had to sell his guns to pay his lawyer.

 

 

Lie dream of a casino soul

Coinbase has had to pay a $6.5 million fine to the CFTC for allowing an unnamed employee to wash-trade Litecoin on the platform. On some days, the employee’s wash-trading was 99% of the Litecoin/Bitcoin trading pair’s volume. Coinbase also operated two trading bots, “Hedger and Replicator,” which often matched each others’ orders, and reported these matches to the market. [press release; order, PDF]

CFTC commissioner Dawn Stump issued an opinion that concurred with the stated facts, but disputes that the issue was within CFTC’s jurisdiction, and says that the reporting didn’t affect the market. This appears not to be the case — it did affect the markets that depended on Coinbase’s numbers. [CFTC; New Money Review]

Coinbase’s direct listing public offering has been pushed back at least to April — no reason given, but doubtless coincidental with Coinbase getting caught letting an employee run wild wash-trading on the exchange. [Bloomberg Quint]

If Coinbase — one of the more regulated exchanges — did this, just think what the unregulated exchanges get up to.

Bloomberg reports a CFTC probe into Binance, and whether the non-US exchange had US customers — attributed to unnamed “people familiar with the matter.” There doesn’t seem to be further news on this one as yet. [Bloomberg]

Ben Delo and Arthur Hayes from BitMEX will be surrendering to US authorities to face the Department of Justice charges against them. [Bloomberg; Twitter]

Bennett Tomlin summarises what Bitfinex/Tether executives did before Bitfinex or Tether. [blog post]

 

 

Baby’s on fire

Alex de Vries (Digiconomist) has a study published in Joule on what the rising Bitcoin price means for the Bitcoin network’s energy consumption. He thinks the Bitcoin network could already ues as much energy as every other data centre in the world — with a carbon footprint the size of London. [Joule]

“Coin miners have basically added a province’s worth of electricity consumption without adding a province’s worth of economic output, so Bitcoin mining is actually a net drag on the economy as a whole,” Tim Swanson told Al Jazeera. [Al Jazeera]

In late 2017, Benjamin Reynolds of Control-Finance Ltd ran a Bitcoin investment scam in the UK. The CFTC, in association with the FCA, now have a $571 million default judgement against him. The hard part: finding him. [press release]

New Bitcoin use case found! Selling fake insider trading tips on the dark web. [SEC; complaint, PDF]

 

 

Be less Brenda

The Advertising Standards Authority (UK) has finally acted against an ad for Bitcoin — in this case, a Coinfloor ad running in local papers, featuring a woman buying bitcoins with a third of her pension. The complainant said the ad was:

  1. misleading, because it failed to make clear the risks associated with Bitcoin investments, including loss of capital, and that neither Coinfloor Ltd nor the general Bitcoin market were regulated in the UK; and
  2. socially irresponsible, because it suggested that purchasing Bitcoin was a good or secure way to invest one’s savings or pension.

The ASA upheld both objections. [ASA]

 

 

Carpe Diem

Facebook’s Diem applied for a money transmitter licence to FINMA, the Swiss regulator, in April 2020 — back when it was still called Libra. The application is still pending, nearly a year later. FINMA apparently has internal disagreements on whether to let Diem go forward — and they know they absolutely need this to be okay with regulators in the US and EU before they proceed. [SRF, audio in German; Twitter]

Kevin Weil, one of Libra/Diem’s four founders, and co-author of the Libra white paper, has quit Facebook Financial. He’s moving to satellite surveillance startup Planet.com. “I’m beyond excited to be working on a non-zombie project,” Weil didn’t quite say. [Twitter; Planet]

I’m wondering how long before David Marcus gets bored running WhatsApp Pay and wanders off too. There’s still active contributions to the Diem GitHub repo, if only from Facebook staff. [GitHub]

The East Caribbean Central Bank is launching its DCash CBDC pilot on 31 March. [ECCB, archive]

The European Central bank has blogged on their plans for a digital euro! That is: no specific plans whatsoever, and repeated reassurances that they’re not about to replace cash, impose negative interest rates, or push out the commercial banks. And they don’t have a consumer use case as yet. [ECB]

 

 

ICO, ICO

Telegram’s ICO failed so hard that founder Pavel Durov ended up owing $500 million to investors — specifically, the sort of investors who have robust ideas on how to deal with perceived shenanigans. “Pavel’s got a smart team, I’m sure they’ll come up with something,” said one creditor.

Durov announced in December that Telegram would start running advertising in public channels. [Telegram] Now Durov has announced a $1 billion bond issue. [Telegram] He is delighted to share that he can finally pay back the guys who put money into the ICO, and that he will continue to enjoy the use of his limbs.

SEC’s action against Ripple Labs, claiming XRP is a security, continues — and so far, they’re still sniping over what the case will cover:

  • The SEC asks to strike Ripple’s Fourth Affirmative Defense, “Lack of Due Process and Fair Notice”;
  • Ripple complains that the SEC won’t submit documents in discovery on what it thinks of Bitcoin and Ethereum;
  • Ripple executives Brad Garlinghouse and Christian Larsen ask to quash the SEC subpoenas to look into their personal bank accounts;
  • and John Deaton, representing a group calling itself the XRP Holders, wishes to join the case on the grounds that the SEC has damaged the value of their XRP.

Much of this will be dealt with in pleadings to be filed over April, May and June. [Case docket, with linked PDFs]

Trailofbits has been fuzz-testing the compiler for Solidity — the language most blockchain smart contracts are written in — for bugs and vulnerabilities. [Trailofbits]

 

 

Things happen

The crypto ban in India looks set to go ahead, penalising miners and traders — “Officials are confident of getting the bill enacted into law as Prime Minister Narendra Modi’s government holds a comfortable majority in parliament.” You’ll have six months to liquidate your holding. [Reuters]

In the meantime, Indian companies will have to disclose their crypto holdings in their profit-and-loss and balance sheets. [Ministry of Corporate Affairs, PDF; Finance Magnates]

How’s Reddit’s subforum crypto token experiment going? Well, /r/cryptocurrency is now pay-to-post — 1000 MOON tokens a month, or $5. You can imagine my surprise at seeing the scheme end up being run as a scam to enrich local forum moderators. [Reddit]

Visa moves to allow payment settlements using dollar-substitute stablecoin USDC, in a pilot programme with Anchorage and Crypto.com: “Visa has launched a pilot that allows Crypto.com to send USDC to Visa to settle a portion of its obligations for the Crypto.com Visa card program.” The size of the “portion” is not specified. Visa also tweeted some non-detail details. [press release; Reuters; Twitter]

Former SEC chair Jay Clayton has his first post-SEC crypto consulting gig — as an advisor to One River Digital Asset Management. [press release]

 

 

Living on video

I did a ton of media on NFTs in the past month, including the BBC’s explainer: What are NFTs and why are some worth millions? “The same guys who’ve always been at it, trying to come up with a new form of worthless magic bean that they can sell for money.” [BBC]

Business Insider writes on NFTs, quoting me — and the Independent quotes Business Insider quoting me. [Business Insider, Independent]

I went on the Coingeek Conversations podcast again, to talk about NFTs with Josh Petty, a.k.a. Elon Moist of Twetch. We ended up agreeing on most stuff — that you can definitely do good and fun things with NFTs, but the present mainstream market is awful. [Coingeek]

I don’t yet know of anyone busted for money-laundering through NFTs, but it’s the obvious use case for objects of purely subjective value being traded in an art market at the speed of crypto. Crypto News has an article, with quotes from me. [Crypto News]

I was interviewed on NTD about NFTs: Expert Warns About NFT Digital Crypto Art. [NTD]

Kenny Schachter from Artnet writes about NFTs. He’s an art professor, and very much into the potential of NFTs, but he was great to talk to about this stuff. [Artnet]

I can’t name it until it airs — they’re worried about their competition sniping them — but I recorded a segment this evening on NFTs for a TV show with quite a large and important audience. Should be out tomorrow, or maybe the day after.

Someone sold a house for $3.3 million in bitcoins. I went on a TV segment about it, to explain what the heck a bitcoin is. [video; transcript]

Sky News Arabia has a 28-minute bitcoin documentary, with me in — my bits are 15:19–15:34, 16:42–17:13 (holding up one book backwards) and 17:42–18:12. It’s all in Arabic, so I have no idea of its quality, but they’re part of the sane Sky News (UK), not the crazy one (Australia). I’m told the voiceover translations of my bits are accurate. [YouTube]

I talked about celebrity crypto scams on NTD — the Elon Musk scams on Twitter, and the Instagram influencer who conned his followers out of bitcoins. Had to use the laptop camera, but ehh, it gave usable results. My segment starts 17:34. [YouTube]

Not cryptocurrency related — that’s coming later, when we do the “Bitcoin Nazis” episode — but I’m on the podcast I Don’t Speak German, talking to a couple of antifa commies about Scott Alexander, author of the Intellectual Dark Web rationalist blog Slate Star Codex. I Don’t Speak German is mostly about neo-Nazis and white nationalists, and Slate Star Codex isn’t really that — but Scott Alexander is a massive and explicit fan of eugenics, “human biodiversity” (scientific racism), sterilising those he sees as unfit, and the neoreactionary movement, so that was close enough for our purposes. (For cites on all those claims, listen to the podcast.) It was a fun episode. Also appearing is Elizabeth Sandifer, author of Neoreaction a Basilisk (UK, US), and the person responsible for me starting Attack of the 50 Foot Blockchain. [I Don’t Speak German]

Hint for crypto video media: when sending a query, say who the hosts and all the guests are, and what the format is. The media arm of one crypto news site that’s definitely large enough to know better nearly (inadvertently) sprang an ambush live debate on me, until I questioned more closely. Don’t be the outlet that your prospective subjects warn each other about.

 

 

 



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