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— Jeremy Diamond ☕️ (@Jer_Diamond) March 22, 2022
In rooms of dirty laundry
Bitcoin was invented to be a form of money outside government scrutiny. This appeals to privacy-minded libertarians — but it also appeals to crooks.
Whenever criminals’ notable interest in crypto is pointed out, coiners are fond of quoting the Chainalysis claim that only 0.15% of crypto transactions are illicit. But that’s the amount of crime only if you carefully don’t include most of the crime.
Alison Jimenez goes through the rest of the crime:
- The 0.15% is only known illicit transactions by known criminal actors — Chainalysis do point out that there will be a lot more crime going on, but the crypto pumpers saying “0.15%” never seem to have noticed that bit.
- The figure only counts on-chain activity, not transactions in Layer 2. The vast majority of transactions in the crypto system are on exchanges. Lightning Network transactions aren’t included in the 0.15% figure either.
- Chainalysis seems to exclude transaction layering to launder dirty funds from the crimes, but not the total. The figure compares criminal volume to a claimed figure for total transactions — but that total includes the layering transactions. That is: Chainalysis included layering in the denominator, but not in the numerator.
Jimenez doesn’t note it here, but market manipulations in commodity trading are also illegal — and there’s a hell of a lot of manipulation happening in crypto, on-chain and off-chain.
Jimenez thinks the analytics reports are worth reading — but watch for the disclaimers. [Securities Analytics]
Code is LOL
The Ronin network, used by the horrifyingly exploitative “play-to-earn” game Axie Infinity, has been hacked for 173,600 ether and 25.5 million USDC — that’s $625 million, which is being called the largest hack in DeFi history, and certainly the largest in tokens with any liquidity. (Poly was taken for “$611 million” in August 2021, but that was mostly in illiquid minor altcoins.)
The hack happened on 23 March and was discovered on 29 March. The attack was on the bridge between the Ethereum and Ronin blockchains. Of the nine Ronin validators, the attacker compromised five of them, so they could do anything they liked. [Ronin blog]
Dirty Bubble Media is still chasing crypto lender Celsius. “Over 60% of $CEL trades on #Uniswap are wash trades. Here we prove it.” [Substack]
The Bank of England sets out the Financial Policy Committee’s position on crypto-assets, DeFi and so on: “where crypto technology is performing an equivalent economic function to one performed in the traditional financial sector, this should take place within existing regulatory arrangements” [Bank of England]
Mere pseud mag ed
Kevin Roose of the New York Times has been covering the crypto beat for a while. In February, Roose posted a desperate plea to be allowed to write about crypto with a conflict of interest: “Crypto is pretty experiential compared to traditional finance, and it’s going to get harder for journalists to report on this stuff if they’re prohibited from touching it at all.” [Twitter, archive, archive]
Roose is advocating “skin in the game” — that is, a massive conflict of interest — as the sort of thing the NYT should be putting into its financial coverage.
This is, of course, blithering nonsense — as I’ve noted at length, non-clownshoes financial press such as the Financial Times and Bloomberg do just fine with rules forbidding any position in assets a journalist writes about, including when covering crypto. When papers send someone to cover a crypto story, the paper pays for the asset. This has never been complicated.
Roose deleted his Twitter thread, but he came back on 18 March with a New York Times Sunday magazine piece, “The Latecomer’s Guide to Crypto.” Roose claims a position of centrist balance, then recites a list of transparent crypto marketing points. This article is correctly viewed as a plea from Roose to his editors to be allowed to use his job as a journalist to pump his intended crypto holding. [NYT]
Molly White of Web 3 Is Going Great got a pile of crypto skeptics together and produced The Edited Latecomer’s Guide to Crypto. “Around fifteen researchers and critics have annotated Kevin Roose’s thinly-veiled cryptocurrency advertisement that ran in the New York Times last Sunday. We try to provide the editorial scrutiny and critical perspectives that the piece so irresponsibly lacked.” [Molly White]
The New York Times has plenty of cynical editors who expect a journalist to be able to back up every phrase. They must all have been off that day.
Fast Company did a nice interview with Molly on how and why she’s doing Web 3 Is Going Great. [Fast Company]
But, the Lightning Network!
The Lightning Network will totally solve all of Bitcoin’s scaling problems, and its pitiful maximum speed of seven or so transactions per second! Arcane Research has written a 60-page report detailing the stupendous scaling capacity of Lightning, and what a brilliant innovation it is for humanity. Potentially.
So how many transactions per second does Lighting actually do? Lightning advocates will say that nobody can see the transactions, so you can’t prove it isn’t doing zillions. But Arcane gives the game away on page 25 of the report:
Per our Lightning Network transaction estimates, we find that the Lightning Network processed 663,000 transactions into and from commonly used wallets in September 2021.
That’s 0.25 transactions per second over that month.
Oswald defence lawyer
The Caked Apes NFT project made an agreement to work together on a project — or perhaps a number of projects. They didn’t set it out as a contract — and now they’re suing each other over it.
Taylor Whitley says he was wrongfully ousted from Caked Apes, losing “years of his own work” and access to future projects he’d had a hand in. The defendants in Whitley’s case speak of Whitley’s “unhinged, destructive and egotistical acts.” [complaint, PDF; complaint, PDF]
Actual lawyer Mike Dunford goes through these very stupid suits: [Twitter]
- Chat logs from a community Discord server can technically imply a contract — but that’s probably not formal enough when we’re talking about hundreds of thousands of dollars of alleged value. The court will have to work out the details of what the contract was for.
- Everyone agrees there was a partnership, though it was just an unincorporated bunch of guys.
- What the partnership was doing is disputed — Whitley says it was multiple projects, the other side says it was for a single project.
- The fun part is copyright. The defendants argue that they have some sort of licence to Whitley’s work because they bought one of his “floppy disc NFTs” — and they might. But the big project is a derivative of a Bored Ape Yacht Club NFT image — which carries some usage rights with it, but almost certainly not the rights all the parties here claim it does. So Whitley may be selling the project rights in the Bored Ape that aren’t his to sell.
I tell you, the entire field of blockchain remains an inexhaustible comedy gold mine. “You could say they didn’t have a very smart contract” — thorodkir.
Craig Wright claims that a pile of his bitcoins were hacked — and he sued the developers of the Bitcoin, Bitcoin Cash, Bitcoin Cash ABC and Bitcoin SV blockchain software to reassign the coins to him. Mrs Justice Falk of the High Court has told Wright that the developers have neither a fiduciary duty nor a duty of care to him, so he can bugger off: “In conclusion, TTL has not established a serious issue to be tried on the merits of the claim.” [BAILII]
Matt Furie created the cartoon character Pepe the Frog. Pepe was then co-opted by alt-right neo-Nazis on 4chan, to Furie’s horror. Totally-not-alt-right crypto fans then created the Rare Pepe NFT collection. Finally, Furie answered the siren call of free money, and did a collection of 47 official Pepe NFTs. He auctioned one NFT, which went for $537,084 to Halston Thayer. Furie then released the other 46 Pepes for free. Thayer is now suing Furie for cheapening his investment. Below: the image of Pepe’s ass-crack at issue in the dispute, which I have pixelated in the interest of taste. Has anyone said butt-coin? [Kotaku; complaint, PDF]
The IRS is getting into crypto investigations, and is noticeably zippier than the SEC or CFTC. Ethan Nguyen and Andre Llacuna rugpulled the Frosties NFTs in January 2022, and were arrested and charged with wire fraud and money laundering in March. [Press release; complaint, PDF]
Australians are suckers for crypto scams, and MyCryptoWallet just traded while insolvent for two years and disappeared with everyone’s money. The Morrison government is responding in its usual style, with a good idea done the worst possible way: a “badge of approval” for crypto exchanges. The meat of the plan seems to be custody requirements for the exchange’s holdings. The Treasury is running a consultation on the idea — closing date is 27 May 2022. [ZDNet; Treasury, PDF]
Thailand bans crypto payments from 1 April. Businesses won’t be allowed even to say they accept cryptos. The SEC and the Bank of Thailand believe that cryptos risk affecting financial stability. [SEC, in Thai]
The Advertising Standards Authority has issued more than fifty UK crypto companies with an enforcement notice detailing the rules for crypto advertising — what they can say, what they can’t say, and what they must say. [press release; notice, PDF]
India makes crypto investment suck — you won’t be able to offset gains on one crypto with losses from another. And crypto miners won’t be allowed tax breaks on infrastructure costs. [Bloomberg]
Fol de rol
The game Storybook Brawl is developed by Good Luck Games. The company was just bought by crypto exchange FTX — who plan to introduce NFTs. The player base has recoiled in disgust, as is usual in these cases. “Whelp, it’s been fun. 1400 hours in the game. Uninstalled and changed my steam review today. Real shame the game was a ton of fun but I won’t support NFT/Crypto.” [Press release; Eurogamer; Resetera]
ApeCoin is an ICO from Yuga Labs, the company behind the Bored Ape Yacht Club NFTs. The ApeCoin ICO is a good old 2017-style unregistered penny stock offering. There’s a DAO with votes attached, which doesn’t do anything. [Amy Castor]
There’s now an ApeCoin Twitter scam. Hacked accounts of verified Twitter users spam gullible crypto holders with an offer of a free ApeCoin. The tweet contains a link for you to connect your MetaMask wallet to receive the coin. All your apes: gone. Twitter seems to have no interest in stopping this easily detectable crypto scam that’s being run in public tweets. [DeCential]
Yuga Labs is attempting to greenwash their assorted NFT projects. [Amy Castor]
Stephen Colbert makes a short crypto thriller: “NFT Heist.” [YouTube]
Bingo master’s breakout
Cryptocurrency is surprisingly small — it’s most usefully viewed as a single unified casino. There’s a tiny number of entities who are in all the businesses together — miners, exchanges, crypto hedge funds, whales.
Anyway, the Bitfinex crypto exchange and its conjoined twin the Tether stablecoin are getting into Bitcoin mining. iFinex CTO Paolo Ardoino’s claimed goal is to make sure mining has “enough geographical and political diversity.” Tether has bought into Enigma, a mining rig manufacturer — which I think is unrelated to the 2017 Enigma ICO. [The Block, paywalled]
Here’s a long read on crypto mining in Kentucky. State senator Brandon Smith put through tax incentives to lure crypto miners in. Tax revenue lost is around $9 million a year; the Bitcoin mines employ … about 5 to 10 people per operation. [Thomson Reuters]
Bitcoin miners Red Dog are not making friends in Limestone, Tennessee. “It looks like a German POW camp,” says one of the county commissioners who approved the project — he thought it was a data centre — and now regrets his decision. “We couldn’t have people over to gather in our front yard because we could hardly hear one another talking,” says one resident. Todd Napier of Red Dog says that the noise is his “number one” priority — possibly because the county is suing over it. [Washington Post; WJHL, archive]
Here’s a video I was sent today of the Mayor of Austin, Steve Adler, describing web3. It’s a three dimensional spreadsheet. It can use energy, but it doesn’t have to. It’s like a cell phone without apps yet. So the city should support it. Huge “I understand not a one of the words I’m saying, but by God I’m going to say them” energy here. [Twitter]
I don’t really mean to have a go at a politician for not understanding tech. This is a worked example of how badly a politician can get snowed by a tech grifter.
Politicians often have to make decisions on stuff they first heard of a day ago. But then, a politician is not just one guy, but a team — and Adler’s team failed him here.
The Austin blockchain promotion appears to be the work of the CityCoins crew. I didn’t note it in the CityCoins article, but Muneeb Ali of Stacks and CityCoins is a Peter Thiel acolyte, if you’re wondering what he’s like.
Congressman Stephen Lynch (D, MA-08), chair of the House Fintech Committee, has put forward the Electronic Currency And Secure Hardware (ECASH) bill, a new take on electronic cash, to be issued by the Treasury — not the Federal Reserve — and kept in an official government hardware wallet. It’s not quite a CBDC, and it doesn’t run on a blockchain or any other sort of ledger — it’s token-based and lives in its hardware wallet.
Raúl Carrillo, Rohan Grey and Devina Khanna worked on the act. Grey in particular has pushed hard for any official digital US dollar to allow the sort of privacy that small physical cash transactions currently have. Grey told the New York Times there was bipartisan support for the bill. [NYT; Twitter thread]
Portsmouth, New Hampshire is now accepting bitcoins for tax payments! But only via PayPal, who just send Portsmouth dollars. PayPal don’t let you move bitcoins into PayPal from the outside world at all, so you can only pay Portsmouth with bitcoins you already bought on PayPal with dollars. The story reads like the journalist had never heard of bitcoins before — a blessed fellow indeed. [Portsmouth Herald]
The Australian Securities Exchange started an exciting new project to replace its creaky old CHESS settlement system with … a blockchain! That was in 2016. I wrote about the project in Attack of the 50 Foot Blockchain, chapter 11, in 2017, when the delays were already mounting up. Anyway, the system’s been delayed yet again, and is unlikely to go live in April 2023 as planned. [The Trade]
ANZ Bank, one of the Big Four banks in Australia, is doing an Australian dollar crypto trading stablecoin, the A$DC. Every A$DC — an amazingly terrible name — is backed by a dollar in ANZ. The A$DC is presently a test case for two clients, Victor Smorgon Group and Zerocap, with a test transaction sent on Ethereum. ANZ is “working with its regulators to ensure they understand the offering.” [AFR]
I am sorry to say that Max Howell, the original author of Homebrew, the open source package manager for Macintosh computers, has gone crypto grifter. (At least he hasn’t contributed to Homebrew since 2013.) He’s doing a project called Tea, to pay open source developers in his token — a bad idea that’s been tried a few times before. We can only hope the “incredible startup journey” post is sooner rather than later. [Medium]
Australian social media influencers risk jail time if they break rules on finance tips. The Australian Securities and Investments Commission has written an information sheet just for you! [ASIC]
How are things in El Salvador? Well, the country has just declared a 30 day state of emergency over gang violence that led to 62 murders on 26 March. Constitutional rights suspended include freedom of gathering and association, the right to legal defence, and the inviolability of correspondence and telecommunications. Suspects can be held for 15 days, up from 72 hours. Soldiers have attacked a photojournalist from El Diario de Hoy and deleted images from his camera. [La Prensa Latina; Elsalvador.com, in Spanish]
The year is 2063. The global currency is Moosecoin. Here’s a great new long-form video: “Web3.0: A Libertarian Dystopia” by Münecat. This is a delight. (I helped a bit with the technical objections section.) I shall henceforth be calling Bitcoin mining “extreme bingo.” Video includes copious salty language. [YouTube]
Crypto Critics Corner has a great podcast on Bitcoin in El Salvador and what’s happened to the Bitcoin Bonds, featuring Salvadoran techies Mario Gómez and Oscar Salguero. Their theory is that the bonds really were just undersubscribed. But also, that Nayib Bukele’s government is very good at making huge announcements that only happen months or years late, if at all. [Bennett Tomlin]
Paris Marx: “Crypto evangelists promise Web3 will be a truly free and democratic internet — but it’s failing to live up to that hype.” [Business Insider]
Here’s yet another article on those wacky nocoiners, this one in Vice. There’s at least one more big article on nocoiners in the pipeline too. [Vice]
Venture capitalist and PiTato farmer Balaji Srinivasan has a book coming out in July — The Network State: How To Start a New Country. I expect it to be amazing, in its way. I have critiqued Balaji’s dumb and bad ideas before. Srinivasan only has a small number of ideas, and they’re all bad; I expect this to be more of the same. If you’re a venture capitalist, you can self-publish using the Kindle Cover Generator and still rack up the preorders. [Amazon UK; Amazon US]
— Jascha oder: tomate 🏳️🌈 🍅 (@herrurbach) March 23, 2022
The year is 2035. The US Constitution has been ported to a smart contract. A typo in BillofRightsDAO has given us "feedom" of speech; now you have to pay to speak. You might say that this was, in fact, not an accident – but Peter Thiel would get a royalty when you did so. https://t.co/4VFm9bEtrH
— Chris Shaffer (@DrShaffopolis) March 22, 2022
"You don't understand, Nyssa. The blockchain is *decentralised*." pic.twitter.com/NmqLUchpW9
— MindProbe (@RefinedMicrobe) March 24, 2022
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