Fascinating post. You made it understandable to the non-crypto experts. I used to cover energy markets, big liquid ones and smaller less liquid ones, physical markets and financial derivative markets, markets on formal exchanges like NYMEX and ICE and over-the-counter markets in which counter-parties dealt directly or via brokers. I thought those markets could get sort of complicated, but they are straightforward and transparent compared to the insider insanity of the daisy-chain crypto “markets.” Wow! I think the reason is that all these firms are trying to build out a financial services industry around pretend currencies that have no inherent value other than money-laundering. Thank you for such fine reporting.
Surely this is economic science fiction. Surely structure, conduct and performance of markets can be described in simple terms. Surely, these crypto dealings take place in a perfect market. Surely, I can understand some of this given my career in academic economics. I admire your comprehension of the crypto ecosystem, Molly, and thank you for dangling bits of grist for me to chew on. .... An article in the Salt Lake Tribune: Q: Why is it that Mormons get sucked into financial traps laid by fellow Mormons? A: People trust people with whom you have an affinity, shared values. Likewise, who sells us on fake currencies? People we admire, movie stars, a few politicians, ... The structure, conduct and performance of crypto markets is too challenging for me. More power to Molly. Power and patience. PS: Who among our bureaucrats is able to devise regulation of crypto? If no one, or if we can't avoid corruption, my preference is to simply ban crypto.
Is it very likely that vulnerabilities are purpose built backdoors? I hadn’t considered that before. Have any of these hacking incidents been exposed as inside jobs? I usually just see the initial reports and don’t follow the stories to see who if anyone is identified as the doer of the deed. Actually, now I’m curious how frequent it is that crypto-hackers are actually caught 🤔. Not asking because I plan on becoming a hacker - I barely know how to turn my computer on. Just curious what happens to all the stolen crypto. A guy that I work with told me they don’t usually cash it out. I didn’t ask him to elaborate but now I’m even more curious. If that’s true, why don’t they cash it out? Is that even the case that they don’t? I guess this wormhole person didn’t. They must feel pretty foolish for not tucking at least some of that away for retirement.
Thank you for an interesting essay! Even as an outsider, not familiar with the crypto lingo, this was enlightening account on how the balance between practicality and ideology is always tilted by greed
Maybe as crypto grows, they will create a large scale DAO where people select board members who decide about contract upgrade rules, and crypto arbitrators who can press undo on transactions, and oh did we just reinvent democracy and society?
Actually, that would be an improvement over the current trajectory, which is more like the anarcho-capitalist oligarchy found in the kind of cyberpunk fiction that I suspect a significant group of crypto people wish they lived in.
Wait, so you're telling us that the main premise of crypto is no longer really the main premise, and that it is a lot more like traditional finance than the purists espouse?
When counting the coins recovered by Jump, it should be noted that to exit the positions in the Oasis vaults, they repaid the loans with about 78.3M DAI, worth ~$78.3M. This is technically easier than breaking the vault and also gives Oasis back the coins they lent to the hacker. Without that, they wouldn't have been so willing to cooperate with Jump. So, Jump got about $140M worth back.
Crypto ethos is dead. The top players want to preserve their privilege and avoid prison. Take Charles for example. Recently he proactively volunteered to insert KYC into the heart of the Cardano system. He enjoys the ladies and sunny Colorado and just wants to stay safe. His Twitter feed is mostly meditation stats so nobody can accuse him of promoting unregistered securities.
The comparison of mutable smart contracts to the Bitcoin code base in this article is faulty. Like any piece of code, anyone can take a copy and modify it, including the core Bitcoin developers. Bitcoin's decentralization comes not from "control" over the code base (because there is no such thing as control over any codebase) rather the decentralization arises from the fact that a majority of the bitcoin mining hash power must *deploy* the revised code. This is how we got Bitcoin Cash and friends. We can come full circle and say that there is an analogy to someone economically large controlling the majority of the bitcoin hash power to controlling a multi-sig, but decentralization (or the illusion thereof) is necessarily turtles all the way down.
Great article, thank you for pulling curtain back a little bit further!
Fascinating post. You made it understandable to the non-crypto experts. I used to cover energy markets, big liquid ones and smaller less liquid ones, physical markets and financial derivative markets, markets on formal exchanges like NYMEX and ICE and over-the-counter markets in which counter-parties dealt directly or via brokers. I thought those markets could get sort of complicated, but they are straightforward and transparent compared to the insider insanity of the daisy-chain crypto “markets.” Wow! I think the reason is that all these firms are trying to build out a financial services industry around pretend currencies that have no inherent value other than money-laundering. Thank you for such fine reporting.
Surely this is economic science fiction. Surely structure, conduct and performance of markets can be described in simple terms. Surely, these crypto dealings take place in a perfect market. Surely, I can understand some of this given my career in academic economics. I admire your comprehension of the crypto ecosystem, Molly, and thank you for dangling bits of grist for me to chew on. .... An article in the Salt Lake Tribune: Q: Why is it that Mormons get sucked into financial traps laid by fellow Mormons? A: People trust people with whom you have an affinity, shared values. Likewise, who sells us on fake currencies? People we admire, movie stars, a few politicians, ... The structure, conduct and performance of crypto markets is too challenging for me. More power to Molly. Power and patience. PS: Who among our bureaucrats is able to devise regulation of crypto? If no one, or if we can't avoid corruption, my preference is to simply ban crypto.
Is it very likely that vulnerabilities are purpose built backdoors? I hadn’t considered that before. Have any of these hacking incidents been exposed as inside jobs? I usually just see the initial reports and don’t follow the stories to see who if anyone is identified as the doer of the deed. Actually, now I’m curious how frequent it is that crypto-hackers are actually caught 🤔. Not asking because I plan on becoming a hacker - I barely know how to turn my computer on. Just curious what happens to all the stolen crypto. A guy that I work with told me they don’t usually cash it out. I didn’t ask him to elaborate but now I’m even more curious. If that’s true, why don’t they cash it out? Is that even the case that they don’t? I guess this wormhole person didn’t. They must feel pretty foolish for not tucking at least some of that away for retirement.
Thank you for an interesting essay! Even as an outsider, not familiar with the crypto lingo, this was enlightening account on how the balance between practicality and ideology is always tilted by greed
Nice mention in Matt Levine's newsletter yesterday on this, you are famous Molly!
So interesting!
Maybe as crypto grows, they will create a large scale DAO where people select board members who decide about contract upgrade rules, and crypto arbitrators who can press undo on transactions, and oh did we just reinvent democracy and society?
Actually, that would be an improvement over the current trajectory, which is more like the anarcho-capitalist oligarchy found in the kind of cyberpunk fiction that I suspect a significant group of crypto people wish they lived in.
Wait, so you're telling us that the main premise of crypto is no longer really the main premise, and that it is a lot more like traditional finance than the purists espouse?
Great post, thanks for the deeper dive
When counting the coins recovered by Jump, it should be noted that to exit the positions in the Oasis vaults, they repaid the loans with about 78.3M DAI, worth ~$78.3M. This is technically easier than breaking the vault and also gives Oasis back the coins they lent to the hacker. Without that, they wouldn't have been so willing to cooperate with Jump. So, Jump got about $140M worth back.
"Trustlessness" seems to have morphed into "Truthlessness."
Crypto ethos is dead. The top players want to preserve their privilege and avoid prison. Take Charles for example. Recently he proactively volunteered to insert KYC into the heart of the Cardano system. He enjoys the ladies and sunny Colorado and just wants to stay safe. His Twitter feed is mostly meditation stats so nobody can accuse him of promoting unregistered securities.
The comparison of mutable smart contracts to the Bitcoin code base in this article is faulty. Like any piece of code, anyone can take a copy and modify it, including the core Bitcoin developers. Bitcoin's decentralization comes not from "control" over the code base (because there is no such thing as control over any codebase) rather the decentralization arises from the fact that a majority of the bitcoin mining hash power must *deploy* the revised code. This is how we got Bitcoin Cash and friends. We can come full circle and say that there is an analogy to someone economically large controlling the majority of the bitcoin hash power to controlling a multi-sig, but decentralization (or the illusion thereof) is necessarily turtles all the way down.