News: Bitcoin miners can’t sell their bitcoins, SushiSwap theft, Coinbase Lend, crypto seasteading

  • Signed books are in stock, with a free sticker while they last! I just got some more in. £25 the pair, plus post/pack/track £6 UK, £10 Europe, £12 rest of the world.
  • If you like what I do, sign up for the Patreon — your $5 or $20 a month really does help. [Patreon]
  • If you’re new here, don’t forget to subscribe to get every new post by email! [scroll down, or click here]
  • This post was very long as it was, so El Salvador news will be next time.

 

 

’Twas on the good ship ’Toshi, by Craig you should have seen us, it was a little squashy and the end result was “penis”

Chad Elwartowski is a man who won’t give up. In 2019, he set up a floating coffin, twelve nautical miles off the coast of Thailand, and declared himself a sovereign country, independent of your statist oppression! Local authorities noted that intent to impact the sovereignty or deteriorate the independence of the state carried the death penalty. Elwartowski demurred.

Unfazed, Elwartowski decided to buy an old cruise ship in 2020, on sale cheap during the pandemic — Regal Princess, renamed Pacific Dawn, and then renamed Satoshi, because #notacult — and sell rooms to gullible idiots his fellow captains of industry.

Sadly, Elwartowski’s plans to run an anarcho-capitalist plague ship fell afoul of the statist jackboot of maritime regulation — he couldn’t get insurance for this idiot scheme.

Sophie Elmhirst has written a heartwarming story in the Guardian about the disastrous voyage of Satoshi, the world’s first cryptocurrency cruise ship.

“Last year, three cryptocurrency enthusiasts bought a cruise ship. They named it the Satoshi, and dreamed of starting a floating libertarian utopia. It didn’t work out.”

For one thing, “The high seas, while appearing borderless and free, are, in fact, some of the most tightly regulated places on Earth. The cruise ship industry in particular is bound by intricate rules.” It turns out that potentially deadly environments have a lot of rules.

For another, owning a boat is very like standing fully clothed under a cold shower while tearing up $100 notes. Seasteading is rapidly disproven by knowing anything about boats.

This article is comedy plutonium, and is best savoured sitting back with a large cool drink. [Guardian]

You may also enjoy this Twitter thread, in which Samira Nadkarni, a journalist and academic who happens to be an expert on maritime law, live-tweets the article. “This is a lifetime original movie about a bunch of rich people dying at sea just waiting to happen.” [Twitter]

(section title by SnoweCat7 on Reddit /r/buttcoin)

 

 

De’d in the Fi by my own DeFi

Let’s pay someone we have no idea who they are to work on our financial system, and give them the keys to all our stuff! That will surely work out well. Sushiswap hired an anonymous contractor, and the contractor put a ‘sploit into the code of MISO, Sushi’s token platform, and hacked an NFT auction for 864.8 ETH.

Sushiswap CTO Joseph DeLong explains: “The attacker inserted their own wallet address to replace the auctionWallet at the auction creation.” DeLong called it a “supply chain attack” — though “pull request: give me all the money” isn’t really a supply chain attack. At least DeLong didn’t call it a “bad hack thingy.”

The project is seeking Know-Your-Customer information on the attacker from Binance and FTX. In the finest libertarian tradition, they’re threatening the exchanges with the FBI if they don’t cough up. Binance are helping, but FTX may not have collected KYC at all.

As I was quoted by Information Security Media Group: “DeFi apps are correctly viewed as a piñata written in Solidity.” [Bank Info Security]

Look, theft is bad, stop giggling. [Twitter thread, archive]

 

 

Baby’s on fire, but the market isn’t

North American Bitcoin miners are seeing record months — as they “stockpile” 18,000 BTC! [The Block]

Not selling freshly-mined coins as soon as possible is unheard-of from crypto miners in the past ten years. Sometimes miners might keep some coins back if they know a pump is coming — but not most of a billion dollars’ “worth.”

The only reason I can think of for “stockpiling” coins is that … the liquidity doesn’t exist to sell the BTC for actual dollars without crashing the price. The suckers have gone home.

I’m reminded of Bitmain’s disastrous attempt to push Bitcoin Cash instead of BTC — and how they ended up with “inventory” of 1 million BCH that nobody wanted to buy.

Maybe there’s a fabulously clever business move here other than “selling all the coins we’re mining would crash the price” — but every alternative reason I’ve heard suggested is a more complicated variant of this.

I doubt miners see BTC $1 million on the horizon either. Miners suddenly turning into moon boys for the first time in ten years is implausible.

One /r/buttcoin poster suggested: “Take the money from the investors to pay yourself and your bills while on paper your mining company continues to gain huge paper gains that you can then leverage to get more dollars, leaving your investors and the company’s creditors in ruins when your assets lose their value overnight.” But again, this is hypothetical — we don’t know of evidence they’re doing this. [Reddit]

Maybe they just love Bitcoin so much they just want to hug it all to themselves. Yeah, that must be it.

New from Alex de Vries (Digiconomist) and Christian Stoll (MIT): “Bitcoin’s growing e-waste problem” — Bitcoin mining produces 30.7 metric kilotons of electronic waste annually, equivalent to the Netherlands. That’s half an iPad of e-waste average per transaction. The average Bitcoin mining rig lasts 1.29 years — and is likely never to mine a block in its existence. [Science Direct]

Crypto miner Luxxfolio has signed up to the Crypto Climate Accord “committing” them to power all their mining with 100% renewable electricity. How are they implementing this? By buying 15 megawatts of coal-fired power from the Navajo Nation! They’re paying less than a tenth what other Navajo pay for their power — and 14,000 Navajo don’t have any access to electricity. The local Navajo are not happy. [press release; Facebook]

Who says Bitcoin can’t compete with upstarts like Chia? The Guardian also quoted me on Chia’s sterling work in the field of generating e-waste. (This was from a chat with Alex Hern a few months ago, but it’s still valid and applicable.) [Guardian, archive]

 

 

Regulatory clarity

The Financial Stability Oversight Council — whose job is making sure the 2008 financial crisis doesn’t happen again — is looking at deeming stablecoins a systemic risk. Representatives and senators previously threatened Facebook’s Libra stablecoin with FSOC in 2019. The US Treasury also plans to flag stablecoins as a serious risk, per a leaked treasury report. [Reuters; Bloomberg]

The Treasury is turning up the sanctions regime to stop ransomware. Treasury alluded to this in 2020, under the previous administration, but now they’re going to “issue fresh guidance to businesses on the risks associated with facilitating ransomware payments, including fines and other penalties.” That means the crypto exchanges, such as Coinbase. [WSJ, paywalled]

The first crypto exchange to be sanctioned in its entirety for facilitating ransomware is Suex, in Russia. [CoinDesk]

New Jersey and Texas have told DeFi lender Celsius to stop offering interest-bearing accounts. Alabama has told Celsius to show cause why it shouldn’t do the same. [NJ OAG; Bloomberg]

The New York Times tells the story of crypto lender BlockFi. It’s pretty sympathetic to poor BlockFi, confused by the evil regulators not giving them an excuse to play shadow bank, but the explanations for the Ponzi-like returns are clearly implausible handwaving. [NYT]

 

 

Lie dream of a casino soul

Encouraged by BlockFi and now Celsuis’s complete lack of any issues with the authorities, popular crypto exchange Coinbase decided it would get into the crypto lending game too — with Coinbase Lend! Coinbase would make loans, and you could buy a share in the loans. [Coinbase, archive]

As it happens, this is a type of security called a “bond”, and it’s listed in the first page of the Securities Act of 1933.

The SEC sent Coinbase a Wells Notice — the letter they send before prosecuting. Coinbase haven’t put the letter up, but they did say it was the SEC threatening them with prosecution if they went ahead with Lend.

Coinbase’s CEO, Brian Armstrong, posted a Twitter thread about the SEC’s “really sketchy behavior,” and Chief Legal Officer Paul Grewal blogged about how “We don’t know why.” [Twitter; Medium]

The responses divided roughly into:

  • crypto people: darn that SEC and their vicious lack of regulatory clarity!
  • non-crypto people: it’s clearly a bond, Coinbase can’t possibly be this stupid in real life.

The SEC tweeted a helpful thirty-second video explaining what a bond was. [Twitter]

Doomberg wondered how the Wells Notice could be about Lend, because it hadn’t launched yet — “you don’t get a Wells Notice for something you are considering doing, you get one for deeds you’ve already done.” But Coinbase filed an 8-K about the Wells Notice, saying it was for Lend. [Substack; SEC]

Coinbase insiders dumped a pile of stock the day they received the Wells Notice. Coinbase pointed out that the sale was scheduled in the proper manner — but you’d think a Wells Notice was a sufficiently material event to cancel such a dump. [Twitter; Medium]

Eventually, Coinbase realised that a public company blatantly violating the Securities Act after an SEC warning is probably not a winning move — even if it gets you clout on crypto Twitter. Lend is no longer being offered. The company plans to still argue the point, though. [Coinbase, archive; Twitter]

The Thailand SEC is revoking permission for the Huobi crypto exchange to operate in the country. The SEC investigated Huobi in February and March, and issued a notice in April. Huobi failed to come into compliance despite multiple extensions. Huobi must return all assets to Thai customers within 3 months. [Thailand SEC, in Thai]

South Korean crypto exchanges are required to have real-name bank accounts for their customers. This regulatory regime is so unduly harsh that a pile of minor altcoin exchanges — the local euphemism is “kimchi coins” — are getting shut down. The “investors” are whining that their minor altcoins will be untradeable. Oh no! Perhaps they could use their names? No, no, unacceptable. [FT, paywalled]

The CFTC investigates Binance for insider trading. Shocked to think a completely unregulated exchange might trade against its own customers! [Bloomberg]

 

 

Putta block

Enterprise blockchain hype is going around again. IBM’s largely out of the game, but that doesn’t stop the scammers.

Blockchain hype reflects the price of Bitcoin: it’s a way to say “Bitcoin” without saying “Bitcoin”. Or “DeFi” or “NFT” or whatever.

If you’re faced with blockchain hype, here’s the concise version of the antidote:

  1. What is a blockchain? Just an append-only ledger.
  2. Why is a blockchain? Weird Bitcoin libertarianism that doesn’t work.
  3. The magical promises are marketing BS with “tech” as the excuse.
  4. Sell good enough promises, you never even have to deliver! And it doesn’t.

If you want a nice video version of that for a non-techie audience, this is what you’re after: 22 minutes for the what and why, listenable at 1.25×. Here’s the more techy version.

Meanwhile, Microsoft shut down Azure Blockchain on 10 September. There were apparently customers, who have been moved to Consensys’ Quorum Blockchain Service.

I haven’t heard a peep about Azure Blockchain shutting down since the announcement in May. I’d have thought someone would care, but I can’t find anything. You’d almost think enterprise blockchain had always been hot air.

The Azure Blockchain page is still up, listing use cases! I’m sure the companies in question are all delighted. I can’t find much solid evidence of any that kept going past the original 2019 press releases, but press releases are job number one in enterprise blockchain. [Microsoft, archive]

My favourite recent press release on the subject is from Fortune Business Insights™, using Microsoft Blockchain as evidence of enterprise blockchain’s startling upward curve in popularity … four days after it shut down. [press release, archive]

China’s e-CNY (aka DC/EP) central bank digital currency is the work of the People’s Bank of China Digital Research Institute. It was inspired by blockchains — but doesn’t run on one. Two years in, they’re still looking into whether using a blockchain is a good idea. I’m pretty sure the only reason they’re even considering it is blockchain hype. [Sina, in Chinese]

 

 

I fought the law

Cryptocurrency investment innovator and captain of industry Stefan Qin has been jailed for 7½ years for running a Ponzi scheme. The SEC filed suit in December 2020, alleging that Qin “fabricated records, failed to redeem $3.5 million in investments and sought to withdraw $1.7 million in investor funds to pay off Chinese loan sharks.” Qin claimed his remarkable investment returns were from “cryptocurrency arbitrage.” He pleaded guilty in April 2021. [WSJ, paywalled]

The SEC has fined GTV Media Group, Saraca Media Group and Voice of Guo Media, run by Chinese billionaire Guo Wengui, $539 million, and the New York Attorney General has fined them around $480 million, for raising nearly half a billion dollars in unregistered offerings of company stock and “a digital asset security referred to as either G-Coins or G-Dollars.” Steve Bannon, the US’s former dollar-store Rasputin, is an associate of Guo’s and a former director of GTV. [SEC press release; SEC order, PDF; NYAG press release]

Ghaleb Alaumary has been offered an eleven-year exclusive government contract for his expertise in facilitating the international flow of value in commerce! Including to North Korea. “Alaumary and his coconspirators used business email compromise schemes, ATM cash-outs and bank cyber-heists to steal money from victims and then launder the money through bank accounts and digital currency. He previously pleaded guilty in the Southern District of Georgia in two money laundering cases.” [Justice Department]

Local business entrepreneur Chase Hite buys bitcoins for $35,000 in cash from an undercover IRS agent who is using the name “Mr Coins” via US mail, then proceeds to detail the workings of his entire drug empire via WhatsApp messages. The “Probable Cause” section of the warrant is the comedy gold. [IRS, PDF]
 

 

Sales receipt fan fiction

Nate Chastain, a staff member at NFT exchange OpenSea, got busted front-running their customers — he’d buy NFTs that were about to hit the front page, profiting from a quick resale. How did he get busted? Someone spotted the evidence on the blockchain and tweeted about it. Worldwide press ensued.

OpenSea is an asset exchange pretending to be an art dealer. I was quoted in the BBC: “It’s jawdropping that OpenSea is only now making a rule that staff shouldn’t trade against their own customers. This is a worked example of the need for regulation in the crypto world, and it should be phrased so as to include NFT markets. It also shows that if you’re going to do something that might be questionable, then it’s probably unwise to do it on a permanent public blockchain that shows all transactions.” [BBC]

 

 

Things happen

Mastercard Acquires CipherTrace to Enhance Crypto Capabilities and get itself some in-house crypto anti-money-laundering capacity. [Press release]

Revolving door: Previous CFTC commissioner (2017 to 2020) Brian Quintenz is joining Andreesen Horowitz as an “advisory partner” on their crypto team. Let’s see if this one also turns out to be a waterslide into the abyss. [Twitter]

Remember the KrioRus ICO from 2017, which took money to fund cryonics, i.e., freeze the bodies of foolish rich people who thought this was the path to immortality? The couple running KrioRus split up, one stole the frozen bodies and brains of the wealthy Brits and Americans who’d signed up for this possibly-dumber-than-crypto idea, and they’re at loggerheads over who’s the rightful owner of the firm. Yes, it’s the Daily Mail, but goodness me. [Daily Mail, archive]

How Bitcoin adoption works, and why the Kiwix project, which does offline downloadable versions of wiki-based encyclopedias, won’t be accepting Bitcoin donations: “At this stage there have been more people who came out of nowhere in two days to downvote our decision not to accept Bitcoin out of environnmental concern than there have ever been offers to donate in crypto over the past 4 years.” [GitHub]

 

 

Hot takes

Ben Munster writes about the comedic world of DAOs. “When I put it to the founder that she would be making the same amount of money as her subordinates, instead of the generous executive salary she was used to, she spoke with a hint of dismay. ‘Yes,’ she ruminated. ‘That is something we’ll have to figure out.’” Oops, I tried to do a capitalism, but I did a worker’s co-op. [Decrypt]

Dan Davies tells you — yes, you, the crypto industry insider looking desperately for an exit into clean fiat actual-money — how to break into the lucrative career of SEC whistleblower — “the last place in banking where the average lunk can make nine figure bonuses.” [eFinancialCareers]

FT goes in hard: Inside the cult of crypto. Chris DeRose is alive and well (hi Chris!) and still has a number of opinions on Bitcoin. He also appeared on Aviv Milner’s podcast. [FT, paywalled; Anchor.fm]

Naked Scientists podcast: Confused by cryptocurrency? This is substantially an interview with me. It’s a followup to my previous podcast with these guys, in April. [Naked Scientists]

 

 



Become a Patron!

Your subscriptions keep this site going. Sign up today!

4 Comments on “News: Bitcoin miners can’t sell their bitcoins, SushiSwap theft, Coinbase Lend, crypto seasteading”

  1. In the most technical sense possible, “merging PR from contractor without reading” is a supply-chain attack. It’s not really an interesting one, as that would normally require at least a few more hops of “I buy X from Y”. It is also much more stupid than it is a supply-chain attack.

  2. Do you think it’s a coincidence that the three figures in the ‘collapse’ illustration in the FT article look like a trio of dildos?

    Because I don’t.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.