Issue 3 – Stablecoin switcheroo
by Molly White on
Happy September! If you’re also in the temperate portions of the northern hemisphere, and you revel as much as I do in cozy sweaters and hot tea, I hope you get to enjoy it soon if the cooler weather hasn’t yet reached you.
- Coming up
- In the news
- The crypto overview
- The Web3 is Going Just Great recap
- Week in review
- Worth a read
- Did you know…
I can now share the big news I mysteriously alluded to last week, which is that I will be a featured speaker at SXSW 2023! If you happen to be attending (March 10–19 in Austin, TX), come see my talk! I’m not sure yet precisely which day it will be, but it will be during the “2050” conference track which runs in the first five days of the conference. I’m also planning to check out a bunch of the other talks and events and hopefully talk to a lot of people—I’ll be curious to see if it’s quite as crypto-manic as last year.
In the news
Scam Economy: “Crypto’s Summer From Hell” (video podcast)
I made my fourth (!) appearance on one of my very favorite podcasts, Matt Binder’s Scam Economy. He spent a few weeks blissfully offline, so we caught up a little bit on what happened while he was away, including Martin Shkreli claiming to have been hacked (in an event that caused his project’s token to lose over half its value, from which it still hasn’t recovered), the Tornado cash sanctions, Binance claiming not to have acquired the Indian WazirX exchange (despite previously announcing they had), Helium ditching its blockchain, and Michael Saylor being sued for tax evasion. If you want to catch an interesting discussion about whether people should have a right to financial privacy, or if you’ve just always wanted to hear me say the phrase “big tits, round asses” out loud, then you’ll want to catch this.
The Morning Brew: “The future’s relentless positivity”
Amanda Hoover writes about toxic positivity in crypto and web3, as well as crypto’s appeals to marginalized groups. I talked to her about why the crypto space is so prone to it, and she also cites my essay on “Predatory community”.
Le Monde: “Au Crypto Policy Symposium, les sceptiques de la cryptoéconomie entrent en résistance” (in French)
Nastasia Hadjadji writes up the Crypto Policy Symposium, with quotes from a few familiar faces including my own.
The crypto overview
The Vermont Department of Financial Regulation submitted a filing in the Celsius case, putting their support behind the request that an independent examiner be appointed to untangle Celsius’ finances. The DFR filing included a fairly bombshell claim that over the past two years, “at least at some points in time, yields to existing investors were probably being paid with the assets of new investors”—aka, Celsius was operating as a Ponzi scheme for quite some time. The filing also alleges that Celsius was bolstering its balance sheet by manipulating the price of their CEL token, and that Celsius was regularly recording absolutely massive losses while its CEO publicly proclaimed the excellent health of the business.
Another development: Celsius has requested permission from the court to allow users of its Custody and Withhold accounts to withdraw their assets. If granted, this would be huge news for the Celsius users who have assets locked in these types of accounts, which are simply for holding crypto (rather than for earning interest or borrowing). Since April, non-accredited investors in the U.S. have only been allowed to open Custody accounts, but there’s a fairly substantial group of non-accredited U.S.-based users who opened their rewards-earning accounts prior to the change and were allowed to continue to use them (just not add more assets).
The Ethereum Merge seems like it’s actually going to happen, for real this time. The upgrade, called “Bellatrix”, was deployed on September 6. It wasn’t the smoothest thing in the world, causing high block misses because 5% of validators experienced problems introduced by the hard fork and dropped offline. Despite this, the Ethereum network marches steadily on towards the Terminal Total Difficulty (TTD) threshold of 58750000000000000000000, at which point the Ethereum main chain will cut over to the proof-of-stake system. This is estimated to happen sometime between September 13 and 15, so hold on to your butts.
The Web3 is Going Just Great recap
There were 25 new entries between August 27 and September 8, averaging 1.9 posts a day.
Who watches the watchdogs?
Rug Pull Finder is a watchdog group that tries to both preemptively identify likely NFT rug pulls and investigate rug pulls after the fact. They also offer auditing services and sign off on some projects who they believe are likely to be trustworthy and unlikely to be either outright scams or vulnerable to attack. The group decided to launch its own NFT project, called Bad Guys, with a storyline involving a group of criminals who steal NFTs.
Ironically, the project’s flawed smart contract allowed some holders to mint far more NFTs than intended, with two people scooping up more than 450 NFTs. Angry individuals who weren’t able to mint the NFTs they were promised accused the mass-minters of exploiting the project, though people who interpret “code is law” a little more literally would argue they were doing precisely what they were allowed. Either way, Rug Pull Finder apologized profusely for not catching the error—even though they were informed of the exploit before the mint and “after reviewing it with 3 different dev teams, we did not believe the credibility of the information sent to us”—and bought back most of the ill-gotten NFTs to redistribute.
Binance plans a stablecoin switcheroo
Binance users who hold USDC, USDP (Pax Dollar), or TUSD (True USD)—the second, fifth, and sixth largest stablecoins respectively—have until September 29 to withdraw them, or they’ll be converted into Binance’s USD-pegged stablecoin, BUSD. This seems like a move by Binance to increase its stablecoin’s strength against its rivals, and is certainly unconventional compared to traditional markets, where you normally wouldn’t see one asset suddenly swapped out for another in this way.
Although these stablecoins are all pegged to the US dollar, their individual ability to maintain that peg is something that each holder must evaluate. Throughout the year we’ve seen a number of both algorithmic and asset-backed stablecoins wobble or completely lose their pegs—HUSD, Acala Dollar, NIRV, USDD, MIM, USDN, BEAN, and of course Terra.
Bill Murray’s NFT charity auction goes awry
Bill Murray has gotten into NFTs, and as a part of that decided to auction off one NFT from his collection to benefit Chive Charities, a veteran- and first responder-focused non-profit. In addition to the NFT representing a piece of artwork, the auction also granted the buyer the privilege of drinking a beer with Murray, and getting their picture painted while doing so. The auction ultimately raised 119.2 ETH (~$185,000), but shortly after it ended, an attacker compromised Murray’s wallet and stole the proceeds before they could be transferred to the charity. Do you think they wore a clown suit?
Helium ditches its blockchain
[link] Helium, the poster child for a real-world web3 use case, seems to have encountered that pesky real-world issue: that blockchains aren’t actually very good for a lot of the things people try to use them for. The project had been using its Helium Blockchain to process “proof-of-coverage” and keep track of data transfer, but announced that it would be moving those to a “more traditional large data pipeline” due to inefficiency and reliability problems. The remainder of Helium’s blockchain usage, the tokens it pays as rewards, will be transitioned from its bespoke blockchain over to Solana—a bit of an odd choice for a project seeking reliability.
sudo rm -rf
[link] On the topic of Solana unreliability: Solana network congestion caused a command run by developer of the OptiFi defi project to fail halfway through, leaving the system in a bad state. The developer then ran a command to try to clean up from this, not realizing that it would irreversibly close the primary smart contract that was used by the whole system. The entire fund for the project, amounting to $661,000, was suddenly made permanently inaccessible as a result of this one command, which can’t be undone.
- Company begins selling Celsius-themed Monopoly game… three months after Celsius suspends withdrawals [link]
- Investors face $11 million loss in VBit Technologies/Advanced Mining Group, an alleged crypto Ponzi scheme [link]
- Flash loan attack nets attacker $370,000 from several sources [link]
- Poolin suspends withdrawals from their wallet service [link]
- Bitcoiner gets 6–15 months in prison, warns others about making peer-to-peer Bitcoin trades [link]
- Islamic State tests out NFTs [link]
- Georgian Coinbase customers take advantage of 100x price bug [link]
- Attacker exploits bug in ShadowFi to empty $300,000 liquidity pool [link]
- Holding company for Mercado cuts 15% of employees [link]
- dYdX infuriates users by requesting “liveness checks” via webcam, cancels campaign due to “overwhelming demand” [link]
- Attackers steal around $265,000 of user funds from KyberSwap exchange [link]
- Snapchat abandons its web3 plans [link]
- Unable to recover from the April Rari exploit, Babylon Finance shuts down [link]
- Lawyer Kyle Roche withdraws from several crypto class-action lawsuits after allegations that he was involved in “gangster-style” schemes to hurt competitor projects [link]
- DC Attorney General sues Michael Saylor and MicroStrategy for tax evasion [link]
- Compound Finance breaks their cETH market for a week [link]
- Thodex CEO arrested over a year after fleeing Turkey in the wake of the exchange’s collapse [link]
- Thai SEC punishes Bitkub CTO for trading Bitkub Coin on insider information [link]
- Crypto.com wants back the $7.2 million they accidentally sent a customer last year [link]
- Hacktivists make NFTs out of the stolen passports of Belarusian officials [link]
- OptiFi developer accidentally closes the project contract, irretrievably locking $661,000 [link]
- Whistleblower website alleges that the creators of the Avalanche blockchain paid lawyers to attack competitors [link]
Week in review
It’s been a busy one! I made a handful of tweaks to W3IGG, including fixing some issues with animation settings. You might also notice that I’ve removed the link functionality from entry titles—although it was handy when you wanted the link, it made it really difficult to select and copy/paste the entry title. You can still get a permalink from the little link icon in the top right.
I had the opportunity this week to have a few one-on-one conversations with some folks who are actively building web3 projects and companies, which were both fascinating and enormously helpful to my understanding. It is always really interesting to me to hear from people who share similar hopes for the web as I do, and who believe blockchains could be the solution.
The Crypto Policy Symposium went wonderfully, and I spent most of Monday watching all of that day’s presentations live. I missed most of the Tuesday sessions because I was in introductory programming for my [Berkman Klein Center affiliateship, but once I finish catching up on the remaining panels I’m planning to do a special edition of this newsletter that will give a brief overview and some thoughts on the panels. The ones I have seen have been wonderful, and I’m really delighted. Stephen, Martin, and Darren deserve huge kudos for pulling that all together.
As I mentioned, I’ve also been doing some introductory programming with the Berkman Klein Center, which has mostly served to make me really excited about the upcoming year. It’s a super cool group of people, and a lot of them are working on the same types of issues I care and think a lot about. There are also a lot of Wikimedians among them, which I suppose makes sense given the number of people at the BKC who generally care about open access and free knowledge.
Speaking of Wikipedia, I got more editing in this week than I have in most recent weeks, albeit for a sad reason. Peter Eckersley, a longtime fixture at the Electronic Frontier Foundation who was more recently dedicating his research and activism towards AI ethics, passed away suddenly on Friday (September 2), and so a group of folks collaborated to put together a much-deserved biography that somehow had never been written previously. Even if you don’t realize it, you’ve almost certainly encountered his work: he started projects including Let’s Encrypt and HTTPS Everywhere. He will be missed, and I send my best to those who knew him well.
Cooking-wise, it’s been a busy week here. While listening to the conference on Monday I also made a whole bunch of tomato sauce out of the tomato explosion that’s been happening in the garden. I also cooked two blueberry pies for two different late-summer barbecues. If you’ve never had Maine blueberries, I highly recommend trying to get your hands on some. I know they make it to markets at least as far afield as Massachusetts, but I’m not sure how far beyond that they’re easily available.
Worth a read
Cal Paterson, “There aren’t that many uses for blockchains”
Paterson dissects some of the proposed use cases for blockchains, and explains why blockchains are actually a fairly poor solution for most of them.
Wonderful news: Cloudflare booted Kiwi Farms, and the site has been flickering on and offline since as it struggles to find a service provider that a) will host them and b) actually has the infrastructure to reliably do so. Less wonderful news: a lot of people have come out of the woodwork to argue that those people who sent repeated bomb threats to a trans activist and who have posted my home address on the internet really ought to be tolerated more.
there sure are a lot of people who've never been targeted by kiwi farms telling me how i ought to be more supportive of their "free speech"— Molly White (@molly0xFFF) September 4, 2022
Some more phenomenal crypto reporting from Rest of World, who describe the downfall of a Minecraft-based play-to-earn game called Critterz. Make sure to read to the end to catch the guy who thinks that maybe in the future, games companies can exploit the poor by making them work as NPCs.
The Washington Post, “Treasury will warn White House that crypto needs major regulations”
Some of the reports resulting from Biden’s March executive order on cryptocurrencies are beginning to come out.
Dungeons & Daddies, season 2
Some of you may already know that I’m a huge fan of actual play Dungeons & Dragons podcasts. I’ve mostly been listening to campaign 3 of Critical Role lately, but earlier this week I finally got around to starting season 2 of Dungeons & Daddies. It’s an absolute riot. If you like funny podcasts and you aren’t annoyed when people don’t stick closely to D&D rules, you should check it out (but you’ll want to listen to season 1 first if you haven’t already).
Did you know…
While trying to remember the word portcullis, I learned that the similar latticed iron gate that’s hinged on the side is called a yett. Now you know, too.
why don't more houses have portcullises— Molly White (@molly0xFFF) August 27, 2022
Thank you so much to Brandon at Diceweaver, Matt Ivaliotes, and Saul Tannenbaum for supporting me on Patreon at the “accomplice” tier or above. You are the wind beneath my wings.
That’s all for now folks. Until next time,