News: 9 billion tethers, Reddit tokens, Kik is doomed, Singapore joins Libra, China’s CBDC — and J. K. Rowling asks about Bitcoin

• Cryptopia the Film is now up! Here’s me in the trailer, being a party douse. [Twitter] Here’s the full launch trailer. [YouTube] And here’s the film, purchasable from the site — yours to view for a few dollars’ equivalent. There’s also a fancy download pack, with extra materials. [Cryptopia Film]

 

!David is spoiling all the Crypto Fun!@davidgerard pic.twitter.com/ogcnyhsgR4

— #CryptopiaFilm available on #PrimeVideo now (@CryptopiaFilm) May 7, 2020

 

Forget the Halvening — Tether brings you the Doublening!

In just six weeks, Tether’s circulation has doubled to 9 billion USDT! Gosh, those stablecoins sure are popular! [Tether Transparency; archive, 07:17 UTC 15 May 2020]

And every single tether is backed by a US Dollar on deposit in a bank! Except the tethers backed by bitcoins. Or backed by loans, including loans from one iFinex company to another iFinex company. Or something. [Affidavit of Stuart Hoegner, 2019, PDF]

Don’t believe those Tether conspiracy theorists who think that 4.5 billion tethers being pumped into the crypto markets since 31 March 2020 has anything to do with keeping the bitcoin price pumped — such conspiracists as (checks notes) Giancarlo Devasini, CFO of Bitfinex, who worried that the Bitcoin price “could tank to below 1k” if Tether couldn’t operate. [Affirmation of Brian M. Whitehurst, NYDFS, PDF, 2019]

 

 

Bitfinex and Tether are filing subpoenas across the US, in the hunt for the $800 million that Crypto Capital didn’t give back to them — despite Devasini’s heart-felt plea. They will surely find the true killers. [CoinDesk]

Bitfinex’s cold Bitcoin wallets are slowly draining — 57,000 BTC in the past few months — and there’s considerable BTC withdrawals by customers on the exchange. [BeinCrypto]

Trolly McTrollface has a theory on what’s backing Tether — loans to Bitcoin miners, backed by bitcoins. [Twitter]

Cas Piancey: “Was asked to comment for an OkEx Insights article, and ya know what? The piece is really good.” What’s Driving Demand for Tether in the Run Up to Bitcoin’s Halving: In-Depth. [OKEx]

 

2017: Ethereum is amazing, it can hold and process anything from health records to property transactions, it's going to revolutionise the world!
2020: Ethereum's main use case is to keep records on $6 billion worth of fraudulent Tether coins. pic.twitter.com/3KnbGl5DfD

— Trolly McTrollface (@Tr0llyTr0llFace) May 14, 2020

 

Well, we all shine on

It looks like forum site Reddit is getting into crypto nonsense after all. Some Ethereum hodler has attained a high enough position at Reddit that the site is rolling out “community currencies” — in the form of ERC-20 tokens on Ethereum. [CoinDesk]

At present, Reddit users get “karma” — calculated from upvotes or downvotes on their posts and comments. Community currencies will get you tokens for your karma points — if you’ve signed up on the Reddit mobile app to use the Reddit Vault.

There are no plans to make the tokens exchangeable for actual money — but you can use them to buy premium features on Reddit.

This time around, Reddit are starting with the /r/CryptoCurrency and /r/FortNiteBR subreddits. Community currencies will use a testnet for now, with plans to move to the public Ethereum chain later. [The Block]

A small version of community currencies was rolled out on /r/EthTrader last year, and the completely predictable disaster ensued:

it led to a community split to /r/EthFinance from all of the drama. Adding a monetary reward for comments and posts really skews the incentives of the community members who choose to participate. When you tie things like this to governance (your coins affect your vote weight on the polls) it really creates a perverse incentive for commercial products to come in and create astroturfing content to farm coins. [Hacker News]

I’ve been part of r/EthTrader that is one of the subreddits that has this feature and had it for about 2 years now. Dynamics within subreddit members got so bad that the subreddit split, and now almost all the action happens in r/EthFinance that does not have any community currency. The main deterioration was actually corruption. Because “karma” had monetary values and “karma monetary policy” could be set by admins, there was massive concentration of wealth for mods, with no incentive to change the rules. [Hacker News]

Social scientists have understood for a long time that extrinsic rewards tend to swamp intrinsic rewards — that if you hook social behaviour to money, it immediately becomes all about the money. But such tawdry squishy notions of “knowledge” are beneath our noble crypto STEMlords, because all other fields of human endeavour are simplified cases of front-end JavaScript coding.

If Reddit’s community currency gets any significant use, the other thing that will happen next is Ethereum clogging. Again.

Kik it to the kerb

Failing messaging service Kik Interactive, desperately trying not to go broke, tried selling a token called Kin in 2017. The SEC prosecuted them in 2019, for selling unregistered securities.

Like Telegram, Kik tried selling their tokens by the Simple Agreement for Future Tokens (SAFT) model — you sell tokens as securities to accredited investors, you say some magic words, the tokens transmute into non-securities, you dump them on retail.

It turns out magic words don’t work on the SEC, who called in March for summary judgement — as did Kik. The SEC and Kik have opposed each others’ motions, of course. There’s also a flurry of other filings, including hundred-page disputes over the other side’s claims of basic facts. [SEC opposition, PDF; Kik opposition, PDF; case docket]

Don’t be fooled by the “no, you” from Kik for every SEC filing — Kik’s case is very like Telegram’s, and about as badly supported. The SEC’s motion relies strongly on the case in which they just resoundingly defeated Telegram. If Judge Castel’s reasoning in the Telegram case is legally sound, then the SEC will likely win against Kik.

How obvious was it that the SAFT model was complete flimflam? As usual, Preston Byrne got there early: “In this 2017 blog post I flagged a risk that the two-step SAFT token distribution structure might be found a ‘mere conduit for wider distribution’ to US investors. The SEC is now using this argument vs Telegram and Kik.” [CoinDesk; Preston Byrne; Twitter]

Kik’s “Defend Crypto” site, which was then taken over by the Blockchain Association, is down. The domain name has expired, and the site isn’t working. DefundCrypto is still up and working, of course. Cas Piancey: “a million dollars vs three dudes and a domain name.” [archive of Defend Crypto, last Google Cache, 3 May 2020; Twitter; DefundCrypto]

Telegram’s defeat is bad news for other crypto schemes, too — if it ends at retail, you’re in trouble. Stephen Palley: “The Telegram case makes mincemeat out of any argument that XRP is a decentralized scheme disconnected from Ripple, and is a preview of future rulings in the various and sundry Ripple lawsuits.” [Twitter] Just as there’s another class action suit against Ripple, claiming XRP is an unregistered security — filed by Bitcoin Manipulation Abatement, LLC, in the Northern California District Court. [Decrypt]

Libras wobble, but they don’t get up

Singapore’s government-owned sovereign wealth fund Temasek Holdings has joined Libra. This is one of the funds that keeps Singapore economically healthy and the Singapore dollar (SGD) on an even keel — with $210 billion of assets under management, it’s a hefty player to find joining Libra. Last year, Libra was proposing to add the SGD to the Libra currency basket — which could have badly destabilised the SGD. So I strongly suspect Temasek is joining so as to be on the inside and not the outside. [Reuters]

Libra has also added crypto hedge fund Paradigm, private equity firm Slow Ventures and payments processor Checkout.com as members. [Libra press release, Checkout.com blog post]

Libra now hopes to launch … something … by the end of 2020.

Libra has a new CEO: Stuart Levey, currently Chief Legal Officer at HSBC. [Libra]

The Alliance for Prosperity, the Celo Foundation, is launching in mid-May. It’s not clear from the marketing materials what this thing is. Financial inclusion, via cryptocurrency stablecoins on a blockchain that doesn’t exist yet — Libra without Facebook. I’m sure it’ll be great. [Medium]

Facebook had its Q1 2020 earnings call on 29 April 2020. Neither Libra nor Facebook Pay rated a mention. [Twitter; Motley Fool; slides, PDF]

Central banking, right, but not on the blockchain

The Chinese central bank digital currency (CBDC) has a whacking dose of Libra envy — in a 5 May speech, Li Lihui of the National Internet Finance Association of China talked at least as much about Libra as he did about the planned CBDC. [Decrypt]

China wants its CBDC to work without a central connection — “without a network, as long as two mobile phones with DC/EP digital wallets touch, the transfer or payment function can be realized.” But it also wants to have complete traceability of transactions. [BJNews, translation]

Yves Mersch of the European Central Bank gave a talk about the euro as a CBDC — in the blockchainish sense — at Virtual Consensus 2020. Mersch speaks entirely in hypotheticals and contains not the sniff of a plan of action. But crypto media seems to think it’s good news for crypto in any case. [ECB]

Central Banking surveyed central banks on CBDCs. Very few central banks have any plans to issue one — and blockchain-based versions are not happening. [Central Banking, free with login]

I heard it on the blockchain

Come to Zug, Switzerland, home of the bountiful riches of Crypto Valley! … which is now asking the government for 100 million CHF (US$102.7 million) of subsidy. “About 80% of 203 firms surveyed by the Swiss Blockchain Federation recently warned of imminent bankruptcy. Only half of the 50 biggest companies in crypto valley expect to last a year in business.” [news.bitcoin.com]

Blockchain tokens as art work way better in the manifesto than in practice. Harm van den Dorpel of Left Gallery says that “I still think that the discourse around decentralized storage of ownership, provenance, artificial scarcity, tokens, etc., could have tremendous potential in the digital art space.” But I’d question the usable potential of something that no buyer turns out to use or want — crypto usage at Left Gallery has dropped to zero. [Twitter; ThreadReaderApp]

We built a high-speed blockchain, and nobody showed up — the majority of transactions on the EOS, Tezos and XRP (Ripple) blockchains are completely useless. “95% of the transactions on EOS were triggered by the airdrop of a currently valueless token; on Tezos, 82% of throughput was used for maintaining consensus; and only 2% of transactions on the XRP ledger lead to value transfers.” [arXiv]

Corona-chan’s done her best to take out the blockchain. Can the blockchain fight Corona-chan? No, but it can certainly grift off her — the Veteran’s Administration in the US signed a $34.5 million deal for N95-compliant face masks, with a company that advertised “block chain” solutions and had only existed for two years. [ProPublica]

The European Parliament’s Science Forecast Unit has issued a report: 10 Technologies to fight Corona-chan! Number two is “blockchain”, and the rest of the document is every bit as bad and stupid as number two. Will blockchain solve COVID-19 before AI, nanotech and synthetic biology do? [Europarl, PDF]

 

(source)

 

Good news for Bitcoin

A wild Institutional Investor appears! “Macro investor Paul Tudor Jones is buying Bitcoin as a hedge against the inflation he sees coming from central bank money-printing, telling clients it reminds him of the role gold played in the 1970s.” Well, no — he’s not buying any bitcoins at all. He’s buying CME Bitcoin futures — that is, he’s placing a US dollar bet on what the US dollar price of Bitcoin will be, to be settled in US dollars. Evidently Mr Jones is unfamiliar with how Tether and BitMEX affect the price of Bitcoin. [Bloomberg]

There’s a Bitcoin ETF, on the Toronto Stock Exchange — “The Bitcoin Fund” or “Fonds Bitcoin”, QBTC.U, run by Montréal resident Frederick Pye. He’s marketing it as providing exposure to Bitcoin without having to go through the ridiculous nonsense involved in buying and holding actual bitcoins. The Bitcoin Fund opened on 9 April. For some reason, I’m not hearing about this from the people who usually claim that a Bitcoin exchange-traded fund will proceed directly to moon. [La Presse, translation]

Ernst and Young have issued an Interim Claim Status Report for creditors of the defunct Quadriga crypto exchange. There are 16,959 claims to date, and not much money left to pay them out. And Quadriga didn’t pay its taxes, so the Canadian Revenue Agency might have first dibs. It will likely be years before anyone gets paid. [EY, PDF; Decrypt]

The CoinBase and Gemini crypto exchanges finally get decent US banking — with JPMorgan, no less. JPMorgan will be handling wire transfers to and from customers, and cash management for the exchanges. [WSJ, paywalled]

 

The good thing about bitcoin regularly dropping and gaining 5-10% in a day is that everyone’s narrative is covered so they can all claim to be right

— Angus Champion de Crespigny (@anguschampion) May 10, 2020

 

Craigness

Dr Craig Wright may become Mr Craig Wright again — he may have plagiarised large slabs of his 2017 Ph.D. thesis. “Substantial, deliberate plagiarism is present in at least thirty pages of Wright’s thesis, including almost the entirety of Chapter 6.” There’s bits where he copied from an ornithology paper, and changed “bird’s nest” to “website security”. [Medium]

Charles Sturt University obviously can’t discuss individual cases until the matter is resolved — but they have confirmed they’ve received the allegations. [Twitter]

The Kleiman v. Wright trial is finally scheduled — starting 6 July 2020, at 9am EDT. There’s also a pile of motions and documents filed by both sides in the past week, including deposition transcripts. [Scheduling Order, PDF; case docket]

What’s the end game for Wright and his employer, Calvin Ayre? According to a tweet from Ayre, the plan seems to be to get the court to order Bitcoin miners to declare the Satoshi stash is owned by some proportion of Wright and the Kleiman estate. I’m pretty sure that governments ordering movements of coins was, literally, the precise threat model that Bitcoin was expressly designed to head off — but maybe Ayre knows better. [Twitter, archive]

 

Bitcoin is falling due to something called “the halving” which is an event where Craig Wright (the CEO of bitcoin) calls the banks and asks them to halve the exchange rates.

— MalwareTech (@MalwareTechBlog) May 11, 2020

 

Things happen

Jacob Kostecki is being sued over the aborted Massive Adoption conference, in a class action being put together by David Silver of Silver Miller — who is doing this one pro bono. Kostecki claims he’s been paying refunds — but there’s nobody who says they’ve received one, and plenty who haven’t. [Twitter; complaint, PDF; Decrypt; CoinDesk]

De Nederlandsche Bank: Register by 18 May, or be shut down. This is the requirement, enacting the Fifth European Anti-Money-Laundering Directive (5AMLD), that Netherlands Bitcoin bank Bittr shut down over, two weeks ago. [DNB; CoinDesk]

Can’t wait to read Satoshi Potter and the Transphobes of Doom. [Twitter]

 

I don’t understand bitcoin. Please explain it to me.

— J.K. Rowling (@jk_rowling) May 15, 2020

 

Hot takes

I’ve been getting repeated marketing spam email from Investopedia — they want me to change links on this site from Wikipedia to Investopedia. In response, I will probably go through and remove existing links to Investopedia. I suggest that everyone else should remove any Investopedia links too — they’re spammers, and should not be rewarded for it.

“Impossible Finance — The Cryptocurrency Bridging Currency” by Martin Walker: why cryptocurrency-based remittances (including XRP-based) can’t work in theory, and have turned out not to work in practice. [Medium]

“Impossible Finance — “The Counterparty-Free Asset.” In which Martin dissects Ripple throwing around literally meaningless finance-sounding jargon they don’t understand, much like the rest of crypto. [Medium]

Bitcoin Post-COVID & Pre-Halvening: 4 Leading Experts Open Up on BTC — this is the audio from the Finance Magnates webinar last week. Crypto’s story is not so great in the present — but the future, that’s amazing! Potentially! [Finance Magnates]

 

Just remember

If you don't get rich off crypto

The years on spent on Twitter when you could have really done something with your life will be definitely worth it

— Cryptofungus (@crypt0fungus) May 5, 2020

 

Should be a huge arbitrage opportunity for the first country that readopts the gold standard, right?

— CasPiancey (@CasPiancey) May 5, 2020

 

Guys texting girls they like:
– Tiktok videos
– Spotify playlists
– cute cat memes

Guys texting me:
– screenshots of S&P500 chart
– "should I buy bitcoin”
– random oil memes

— Celia Wan (@celiawan2) May 12, 2020