[Ashton Kemerling](http://ashtonkemerling.com/blog/2018/02/21/no-you-probably-dont-need-a-blockchain/) (2018) No, You Probably Don't Need a Blockchain On Bitcoins and Blockchains [Joseph Lubin](https://blockgeeks.com/news/blockchain-voting/) (2016) Is Blockchain Technology Going To Disrupt Our Political System: We Hope So [Lucca Runger-Field](https://bitshouts.com/blockchain-in-politics/) (2018) Blockchain In: Politics [Nathaniel Whittemore](https://medium.com/@nlw/we-talk-about-blockchain-governance-so-why-not-blockchain-politics-28f787bc9ff6) (2018) We Talk About Blockchain Governance, So Why Not Blockchain Politics? [David Ernst](https://blog.liquid.us/2016/09/21/what-is-liquid-democracy/) (2016) What is Liquid Democracy? [Danny Crichton](https://techcrunch.com/2018/02/24/liquid-democracy-uses-blockchain/) (2018) Liquid democracy uses blockchain to fix politics, and now you can vote for it [State of the DApps](https://www.stateofthedapps.com/) Blockchain App Index [GitHub - advaita-saha/blockchain-resources: A complied list of different resources for learning blockchain](https://github.com/advaita-saha/blockchain-resources) [GitHub - yjjnls/awesome-blockchain: Curated list of resources for the development and applications of blockchain.](https://github.com/yjjnls/awesome-blockchain) [GitHub - spirosbax/BlockchainResources: Curated list of blockchain and general cryptocurrency resources](https://github.com/spirosbax/BlockchainResources) [GitHub - selcux/blockchain-resources: Courses, guides, training and certification programs about blockchain.](https://github.com/selcux/blockchain-resources) [GitHub - imbaniac/awesome-blockchain: Curated list of blockchain services and exchanges](https://github.com/imbaniac/awesome-blockchain) [BlockchainBooks/blockchainbooks.github.io: Blockchain Books](https://github.com/BlockchainBooks/blockchainbooks.github.io) [GitHub - blokspot/blockchain-collection: Crypto currency and blockchain project and resource collection](https://github.com/blokspot/blockchain-collection) [GitHub - coinpride/CryptoList: Curated collection of blockchain & cryptocurrency resources.](https://github.com/coinpride/CryptoList) Curated collection of blockchain & cryptocurrency resources. [sourcecrypto/sourcecrypto.github.io: Collaborative Commons for Blockchain and Cryptocurrency Curation](https://github.com/sourcecrypto/sourcecrypto.github.io) [Blockchain communities for educational purposes?: CryptoTechnology](https://www.reddit.com/r/CryptoTechnology/comments/10wwcly/blockchain_communities_for_educational_purposes) [GitHub - OpenZeppelin/awesome-openzeppelin: Blockchain educational resources curated by the OpenZeppelin team](https://github.com/OpenZeppelin/awesome-openzeppelin) [GitHub](https://github.com/dcbuild3r/blockchain-development-guide) [Cryptopedia](https://www.gemini.com/cryptopedia) [Crypto Canon](https://a16z.com/2018/02/10/crypto-readings-resources/) [OffcierCia/Crypto-OpSec-SelfGuard-RoadMap: Here we collect and discuss the best DeFi, Blockchain and crypto-related OpSec researches and data terminals - contributions are welcome.](https://github.com/OffcierCia/Crypto-OpSec-SelfGuard-RoadMap) [sgoedecke](https://sgoedecke.github.io/blockchain-for-beginners/) A dead simple introduction to the blockchain (with ~90 line JavaScript demo) ## cryptocurrency There was a time when people thought that crypto might be a new asset class that was uncorrelated to other assets, but that seems like mostly a mistake. Crypto is a volatile infinite-duration asset; it goes up when risk appetite goes up or when interest rates go down, and down when risk appetite goes down or rates go up. [GitHub - Zheaoli/awesome-coins: ₿ A guide (for humans!) to cryto-currencies and their algos.](https://github.com/Zheaoli/awesome-coins) [The Edited Latecomer's Guide to Crypto | Hacker News](https://news.ycombinator.com/item?id=30804984) [The (Edited) Latecomer's Guide to Crypto](https://www.mollywhite.net/annotations/latecomers-guide-to-crypto/) [Cryptocurrency Investment Framework](https://cryptoengineer.notion.site/Cryptocurrency-Investment-Framework-c9977a4d9715467183e1f4b875d72977) [she256](https://she256.org/guide/) [Linda Xie](https://medium.com/@linda.xie/tips-for-crypto-newcomers-2ee5ab2d85c1) (2018) Tips for crypto newcomers [GitHub - nongiach/awesome-cryptocurrency-security: 😎 Curated list about cryptocurrency security (reverse / exploit / fuzz..)](https://github.com/nongiach/awesome-cryptocurrency-security) ## secondary_effects There is a LOT of [torrent/piracy] and [hacking] connected to cryptocurrency, as well as the [dark web](mayneedrefonwebdev?) - this doesn't mean it's BAD, but that bad people are more keen on using it ## usgovt_crypto_regulation [Just Say No to Central Bank Digital Currencies | Hacker News](https://news.ycombinator.com/item?id=30634245) [Just Say No to CBDCs - by N.S. Lyons - The Upheaval](https://theupheaval.substack.com/p/just-say-no-to-cbdcs) - it's not unreasonable to assume that governments may adopt blockchain for the purpose of currency regulation - this will happen when debt-based reserve currency crashes - it's a commodity that can technically be infinitely made, unlike any other commodity ever in the world before ## blockchain community [Going the distance](https://jeiwan.net/) [Home - Alin Tomescu](https://alinush.github.io/) [Posts | Zefram's Blog](https://zefram.xyz/posts/) [Block.one - High Performance Blockchain Solutions](https://b1.com/) ## blockchain networks [archway-network/awesome-archway: A curated list of awesome Archway Network resources.](https://github.com/archway-network/awesome-archway) [The multi-chain launchpad for your dapp | Archway Network](https://archway.io/) [So you want to be a blockchain developer? :: tr3y.io](https://tr3y.io/articles/crypto/how2bloccchain.html) ## crimes and shady business [Crypto CEOs' and Founders' 'Sudden Deaths'-What We Do Know, What We Don't](https://www.newsweek.com/crypto-ceos-founders-sudden-deathswhat-we-do-know-what-we-dont-1763586) [US sentences crypto expert to 5 years after North Korea blockchain presentation | Hacker News](https://news.ycombinator.com/item?id=31015652) [US Crypto Expert Jailed for Presenting Research to North Korea](https://markets.businessinsider.com/news/currencies/crypto-expert-jailed-north-korea-blockchain-research-justice-department-2022-4) [Crypto crime hits record $20 bln in 2022, report says | Reuters](https://www.reuters.com/business/finance/crypto-crime-hits-record-20-bln-2022-report-says-2023-01-12) [Do Kwon arrested in Montenegro: Interior Minister | Hacker News](https://news.ycombinator.com/item?id=35275658) [Do Kwon Arrested in Montenegro: Interior Minister](https://www.coindesk.com/business/2023/03/23/do-kwon-arrested-in-montenegro-interior-minister/) [Do kwon sent $80M a month to secret wallets? | Hacker News](https://news.ycombinator.com/item?id=31685545) [Do Kwon Sent $80 Million a Month to Secret Wallets?](https://watcher.guru/news/do-kwon-sent-80-million-a-month-to-secret-wallets) ## cryptocurrency - binance and issues [Binance](https://www.binance.com/) Anonymous Hong Kong-based exchange. [Binance sees $2B in outflows as troubles compound | Hacker News](https://news.ycombinator.com/item?id=35351805) [Binance Sees $2 Billion in Outflows as Troubles Compound - WSJ](https://www.wsj.com/articles/binance-sees-2-billion-in-outflows-as-troubles-compound-9a136e21) [Temporary pause of Bitcoin withdrawals on Binance | Hacker News](https://news.ycombinator.com/item?id=31724351) [CZ 🔶 BNB on X: "Temporary pause of $BTC withdrawals on #Binance due to a stuck transaction causing a backlog. Should be fixed in ~30 minutes. Will update. Funds are SAFU." / X](https://twitter.com/cz_binance/status/1536317704990208000) [Binance's books are a black box, filings show, as it tries to rally confidence | Hacker News](https://news.ycombinator.com/item?id=34055058) [Binance's books are a black box, filings show, as it tries to rally confidence | Reuters](https://www.reuters.com/technology/binances-books-are-black-box-filings-show-crypto-giant-tries-rally-confidence-2022-12-19/) [Binance is trying to calm investors, but its finances remain a mystery | Hacker News](https://news.ycombinator.com/item?id=33949162) [Binance Is Trying to Calm Investors, but Its Finances Remain a Mystery - WSJ](https://www.wsj.com/articles/binance-is-trying-to-calm-investors-but-its-finances-remain-a-mystery-11670679351) ## cryptocurrency - binance - legal issues [CFTC sues Binance and CEO Changpeng Zhao [pdf] | Hacker News](https://news.ycombinator.com/item?id=35327996) [CFTC BINANCE.pdf | DocDroid](https://www.docdroid.net/60YAbCz/cftc-binance-pdf) [Binance freezes withdrawals of stablecoin USDC as investors pull $2B | Hacker News](https://news.ycombinator.com/item?id=33970201) [Binance Freezes USDC Withdrawals As Rattled Traders Pull $2bn in Funds](https://markets.businessinsider.com/news/currencies/crypto-binance-freeze-usdc-withdrawals-changpeng-zhao-cz-ftx-collapse-2022-12) [SEC Sues Binance and CEO Zhao for Breaking US Securities Rules | Hacker News](https://news.ycombinator.com/item?id=36197353) [SEC Sues Binance and CEO Zhao for Breaking US Securities Rules - Bloomberg](https://www.bloomberg.com/news/articles/2023-06-05/sec-sues-binance-and-ceo-zhao-for-breaking-us-securities-rules) [Proposed SEC order to freeze, repatriate Binance.US assets | Hacker News](https://news.ycombinator.com/item?id=36235143) [SEC granted emergency restraining order to freeze, repatriate Binance.US assets | Kitco News](https://web.archive.org/web/20231002052210/https://www.kitco.com/news/2023-06-07/SEC-granted-emergency-restraining-order-to-freeze-repatriate-Binance-US-assets.html) [Binance founder Changpeng Zhao agrees to step down, plead guilty | Hacker News](https://news.ycombinator.com/item?id=38366729) [Binance Founder Changpeng Zhao Steps Down, Pleads Guilty - WSJ](https://www.wsj.com/finance/currencies/binance-ceo-changpeng-zhao-step-down-plead-guilty-01f72a40) ## cryptocurrency_Binance - Matt Levine ### Binance Broadly speaking the US government has two objections to Binance Holdings Ltd.: 1. Binance is a crypto exchange, and the US Securities and Exchange Commission thinks that crypto exchanges are more or less illegal under US law. 2. Binance, as a crypto exchange, provides a way for people to move money internationally, and the US Department of Justice thinks that Binance lets _bad_ people move _bad_ money to and from bad countries. We have [talked about](https://www.bloomberg.com/opinion/articles/2023-06-06/the-sec-comes-for-crypto) the first objection before, because the SEC has actually sued Binance and laid out its objections. But it is, I think, _by far_ the less serious objection, for several reasons: 1. The SEC might be wrong on the law? There is very much a live controversy about whether US securities regulation applies to crypto as broadly as the SEC thinks it does, and other crypto firms have fought the SEC in court and [sometimes even won](https://www.bloomberg.com/opinion/articles/2023-07-14/ripple-is-a-security-and-it-isn-t). Whereas if the Justice Department is like "you laundered money for criminals and violated US sanctions," look, they _might_ be wrong, but you are going to have a much harder time fighting that in court. 2. Even if the SEC is right, there is a fairly simple solution: Stop letting US customers trade on Binance. It is broadly illegal to do securities stuff with US customers without following SEC rules, but it cannot actually be illegal under US law for a foreign company to allow foreign customers to trade foreign securities. Whereas it _kind of is illegal under US law for a foreign company to allow foreign customers to send money to Iran_. If you operate a crypto exchange with absolutely no US customers at all, but you let terrorist organizations move money on it, the US is going to care. You can ring-fence yourself from the US and solve your securities-law problems, but that doesn't work for your money-laundering or sanctions problems. 3. The SEC can't put you in jail, but the Justice Department can. Now, I don't know exactly what the Justice Department's concerns with Binance are, because I have not yet seen its complaint. But just as a structural matter you can tell that (1) they're serious and (2) Binance is taking them seriously. So Bloomberg's Chris Strohm, Allyson Versprille and Olga Kharif [reported yesterday](https://www.bloomberg.com/news/articles/2023-11-20/us-seeks-more-than-4-billion-from-binance-to-end-criminal-case): > The US Justice Department is seeking more than $4 billion from Binance Holdings Ltd. as part of a proposed resolution of a years-long investigation into the world's largest cryptocurrency exchange. > > Negotiations between the Justice Department and Binance include the possibility that its founder Changpeng Zhao would face criminal charges in the US under an agreement to resolve the probe into alleged money laundering, bank fraud and sanctions violations, according to people familiar with the discussions. > > Zhao, also known as "CZ," is residing in the United Arab Emirates, which doesn't have an extradition treaty with the US, but that doesn't prevent him from coming voluntarily. … > > With respect to possible sanctions violations, the Justice Department has been investigating Binance for allegedly aiding in the evasion of US sanctions against Iran and Russia, one of the people said. Binance has also been under scrutiny for whether it allowed transactions that helped finance Hamas. I don't give legal advice around here but my general view is that if you are a foreigner living abroad and the US government is like "why don't you voluntarily come over here so we can put you in prison for money laundering" you should maybe _not_ volunteer for that? But what do I know; the Wall Street Journal [just reported](https://www.wsj.com/finance/currencies/binance-ceo-changpeng-zhao-step-down-plead-guilty-01f72a40): > The chief executive of Binance, the largest global cryptocurrency exchange, plans to step down and plead guilty to violating criminal U.S. anti-money-laundering requirements, in a deal that may preserve the company's ability to continue operating, according to people familiar with the matter. > > Changpeng Zhao is scheduled to appear in Seattle federal court Tuesday afternoon and enter his plea, the people said. Binance, which Zhao owns, will also plead guilty to a criminal charge and agree to pay fines totaling $4.3 billion, which includes amounts to settle civil allegations made by regulators, the people said. ... > > The deal would allow Zhao to retain his majority ownership of Binance, although he won't be able to have an executive role at the company. He would face sentencing at a later date. ### More Binance Here are two possible theories of what Binance _is:_ 1. Binance is the world's leading crypto exchange, a large financial institution that allows investors, speculators, hedgers and other users to transact in the trillion-dollar cryptocurrency sector. It is in many ways the leading financial institution in crypto, but it is fairly young and aggressive, and it has not always been very careful about compliance. In particular, it has not been careful about anti-money-laundering and know-your-customer checks, and so has allowed a certain number of bad people to do bad transactions using crypto. 2. Binance is a place for laundering money. These theories differ in degree; they start from similar facts but emphasize them differently. Nobody disputes that a lot of criminals have laundered money on Binance. "For example," the US Department of Justice pointed out in a [criminal information](https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rxHkd6CQjOgQ/v0) against Binance last week, "in a February 2019 chat conversation, one compliance employee wrote, 'we need a banner "is washing drug money too hard these days - come to binance we got cake for you."'" If your _compliance employees_ are suggesting that you _advertise your drug money laundering business_, that seems bad. And yet last week's US federal charges against Binance struck me as fairly gentle. The US Securities and Exchange Commission, in practice though not in so many words, takes the position that _crypto exchanges are fundamentally illegal_; the practical goal of [its crypto enforcement actions (including against Binance)](https://www.bloomberg.com/opinion/articles/2023-06-06/the-sec-comes-for-crypto) is to shut them down, or at least shut them out of the US. The US Department of Justice does _not_ take that position; its basic theory of Binance is that Binance messed up, a lot, and has to pay a huge fine and change its practices, but that it can go ahead and do that. It's a basically legitimate business with a money laundering problem, the Justice Department thinks. Which is a pretty good outcome? Anyway here are the Justice Department [press release](https://www.justice.gov/opa/pr/binance-and-ceo-plead-guilty-federal-charges-4b-resolution) from last Tuesday, the [charging document](https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rxHkd6CQjOgQ/v0) and Attorney General [Merrick Garland's remarks](https://www.justice.gov/opa/speech/attorney-general-merrick-b-garland-delivers-remarks-announcing-binance-and-ceo-guilty). Binance will pay about $4.3 billion and "retain an independent compliance monitor for three years and remediate and enhance their anti-money laundering and sanctions compliance programs." There was a time, not so long ago, when people thought that it was a death blow to a financial institution to make it plead guilty to criminal charges. But [that time ended](https://www.bloomberg.com/opinion/articles/2015-05-11/nobody-s-worried-about-too-big-to-jail-any-more), and now it is … not routine, maybe, but kind of acceptable for a big bank or other financial institution to plead guilty to crimes. Binance is in some sense just a financial institution like any other, and paying $4.3 billion to settle compliance problems is … almost a step toward the mainstreaming of crypto? Maybe that is too glib. Binance founder Changpeng "CZ" Zhao pleaded guilty to his own federal crimes and agreed to step down as chief executive officer; he faces prison time, which is pretty unusual for the CEO of a financial institution. [Patrick McKenzie argues](https://www.bitsaboutmoney.com/archive/bond-villain-compliance-strategy/) that this is the beginning of the end for Binance, that it "is going to be slowly ground into a very fine paste." But my impression is that US prosecutors can make varying amounts of hay out of "this company sent money to terrorists," and in this case they are [making an average amount of hay](https://www.bloomberg.com/news/articles/2023-11-21/hamas-use-of-binance-cited-in-4-3-billion-settlement-with-us). This reads, to me, like the guilty plea of a troubled financial institution, not the guilty plea of a criminal conspiracy that the government wants to end. To be clear, though, Binance's compliance [was very bad](https://www.justice.gov/opa/pr/binance-and-ceo-plead-guilty-federal-charges-4b-resolution): > Binance also did not implement the core components of an effective AML program: Binance did not implement comprehensive know-your-customer (KYC) protocols or systematically monitor transactions, and Binance never filed a suspicious activity report (SAR) with FinCEN. For years, Binance allowed users to open accounts and trade without submitting any identifying information beyond an email address. Binance began requiring all users to provide KYC information in August 2021 but allowed users who had not provided KYC to continue trading on the exchange until May 2022. ... > > As Binance's internal communications showed, Binance's compliance employees recognized that Binance did not have protocols to flag or report transactions for money laundering risks, which employees recognized would attract criminals to the exchange. As one compliance employee wrote, "we need a banner 'is washing drug money too hard these days - come to binance we got cake for you.'" Due in part to Binance's failure to implement an effective AML program, illicit actors used Binance's exchange in various ways, including conducting transactions for mixing services that obfuscated the source and ownership of cryptocurrency; transferring illicit proceeds from ransomware variants; and moving proceeds of darknet market transactions, exchange hacks, and various internet-related scams. One other point. I [wrote last week](https://www.bloomberg.com/opinion/articles/2023-11-21/openai-is-a-strange-nonprofit) that a problem, for Binance, is that "you can ring-fence yourself from the US and solve your securities-law problems, but that doesn't work for your money-laundering or sanctions problems": US authorities don't like big financial institutions laundering money for terrorists even if they _don't_ have US customers. I _kind_ of still think that's true, but I must say that last week's charges suggest that just blocking US users is a possible option for Binance. From the [charging document](https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rxHkd6CQjOgQ/v0): > Defendant understood that the Company would violate U.S. laws by matching U.S. users with users in comprehensively sanctioned jurisdictions, but it did not implement sufficiently effective controls to prevent such sanctions violations from occurring. For example, Defendant could have removed from Binance's platform all accounts associated with either (i) U.S. users or (ii) users in comprehensively sanctioned jurisdictions. Or Defendant could have implemented controls in its matching engine to prevent U.S. users from violating sanctions by preventing them from transacting with users in comprehensively sanctioned jurisdictions. What an amazing suggestion. The Justice Department is saying that, if Binance (1) had North Korean customers, (2) had US customers, (3) did not allow them to trade directly with each other (by programming its matching engine to reject trades between US and North Korean customers), but (4) allowed third-country market makers to intermediate trades between them, _that would be fine and the US government would not object_. I don't think I believe that but it is an interesting idea. Elsewhere, the Wall Street Journal reports on "[Sam Bankman-Fried's Life Behind Bars: Crypto Tips and Paying With Fish](https://www.wsj.com/finance/currencies/sam-bankman-frieds-life-behind-bars-crypto-tips-and-paying-with-fish-858097c6)." Back when Bankman-Fried, [Alex Mashinsky](https://www.nytimes.com/2023/07/13/business/celsius-cryptocurrency-founder-arrested.html), the [Three Arrows guys](https://www.nytimes.com/2023/09/29/technology/su-zhu-founder-crypto-three-arrows-capital-arrested.html), [Do Kwon](https://www.reuters.com/world/europe/montenegro-court-approves-extradition-cryptocurrency-king-do-kwon-2023-11-24/) and other tarnished crypto luminaries were in their various legal limbos, I liked to imagine them all living in a group house in a non-extradition country, filming a reality television show, grousing about whose manipulative trading destroyed whose project. Now they're all in jail though. But if CZ _does_ get sent to prison in the US I suppose there is still a possibility that he and Bankman-Fried will be roommates? ### Binance is law-abiding now Crypto is mature enough by now that there are some good running bits, some callbacks to old jokes. Tether has spent years telling anyone who will listen that it is just months away from releasing an audit, and everyone has a good laugh each time. And Binance has spent years [claiming that it was located nowhere](https://www.bitsaboutmoney.com/archive/bond-villain-compliance-strategy/), to the point that when [Chinese police reportedly raided its Shanghai office](https://www.theblock.co/post/48112/setting-the-record-straight-on-our-binance-reporting), Binance [replied that](https://cointelegraph.com/news/binance-denies-police-raids-very-existence-of-shanghai-offices) it "has no fixed offices in Shanghai or China, so it makes no sense that police raided on any offices and shut them down." Classic. But then Binance [pleaded guilty](hhttps://www.justice.gov/opa/pr/binance-and-ceo-plead-guilty-federal-charges-4b-resolution) to a bunch of money laundering charges in US federal court, agreeing to pay $4.3 billion in penalties and install a compliance monitor to be generally more law-abiding. Its founder and chief executive officer, Changpeng "CZ" Zhao, also pleaded guilty and stepped down as CEO. You might think this would put an end to the "no location" bit but, no, it's too good. The [Financial Times reports on the new CEO](https://www.justice.gov/opa/pr/binance-and-ceo-plead-guilty-federal-charges-4b-resolution), Richard Teng: > Teng on Tuesday declined to reveal where the exchange was based. He also said Binance has undergone audits in jurisdictions where it is regulated, but declined to name the audit firms involved. > > "Why do you feel so entitled to those answers?" Teng asked at the FT Crypto and Digital Assets Summit in London, adding that the company provides the necessary information to regulators. "Is there a need for us to share all of this information publicly? No." I guess not, no, I guess it's fine for a financial institution trusted with billions of dollars of customer money not to be located in any particular jurisdiction? Binance's [plea agreement](https://www.justice.gov/opa/media/1326901/dl?inline) requires it to hire a monitor to write reports on its anti-money-laundering compliance and share them with the US Department of Justice, and requires Binance to "provide the Monitor with access to all … facilities, and employees, as reasonably requested by the Monitor, that fall within the scope of the Mandate of the Monitor," so I suppose the Justice Department can find out where Binance is located, but maybe not? Maybe the monitor will be like "hey can I visit headquarters" and Binance will say "why do you feel entitled to that"? ## cryptocurrency_Bitcoin - Matt Levine ### Bitcoin accounting For a while, US generally accepted accounting principles treated Bitcoin in kind of a strange way. If a company bought some Bitcoin, it would hold that Bitcoin on its balance sheet at cost, reporting that it was worth what it paid. If the price of Bitcoin went up, the company would not increase the value on its balance sheet, or report any income: GAAP disregarded the mark-to-market move. But if the price went _down_, the company _would_ reduce the value on its balance sheet, and report a loss in its income statement: GAAP did reflect "impairment" of the Bitcoin holdings. We have [talked](https://www.bloomberg.com/opinion/articles/2021-02-08/elon-musk-works-his-magic-on-dogecoin-and-bitcoin) about this [before](https://www.bloomberg.com/opinion/articles/2021-04-28/elon-musk-made-tesla-some-money-on-bitcoin), and companies sometimes complained about it, because it was illogical and rather punitive: For accounting purposes, you could lose money on Bitcoin, but [never make money](https://www.bloomberg.com/news/newsletters/2021-08-03/money-stuff-your-auditor-is-not-your-friend). There was however another feature of this situation, which is: 1. It can't really _last:_ If Bitcoin is going to become a mainstream holding of big companies, eventually the accounting has to get rationalized. And in fact, last year, the US Financial Accounting Standards Board voted to [approve a new standard](https://www.bloomberg.com/opinion/articles/2023-09-07/matt-levine-s-money-stuff-don-t-let-robots-do-earnings-calls) requiring fair-value accounting for Bitcoin. 2. When the accounting _is_ rationalized, companies with Bitcoins will probably get big one-time gains, because they will get to mark all their Bitcoins to market all at once. And so [Bloomberg News reports](https://www.bloomberg.com/news/articles/2024-02-06/saylor-s-bitcoin-bet-has-microstrategy-mstr-on-verge-of-accounting-windfall): > MicroStrategy Inc. may be at an inflection point when it comes to Michael Saylor's controversial decision almost four years ago to bet the enterprise-software maker's future on Bitcoin. > > Quarterly results will likely get more volatile under a recently approved accounting rule change that requires valuing the digital asset at market prices. Before the revision, MicroStrategy had to take impairment charges to write down the value of its Bitcoin when prices fell but couldn't recognize any increases. It has until 2025 to implement the change. > > If Tysons Corner, Virginia-based MicroStrategy decides to adopt the revision for the fourth quarter, the Bitcoin on the company's balance sheet will surge by billions of dollars on the back of recent purchases and Bitcoin's almost 60% rally in the period. I don't really know what that gets you. If MicroStrategy's shareholders weren't paying attention to the market value of its Bitcoin holdings, what _were_ they paying attention to? My general view is that investors are smart enough to look past GAAP accounting when, as here, GAAP accounting is misleading. But at least now the GAAP accounting will be correct. ### American Bitcoin Academy Look, I'm sorry, but if you asked me to design an educational course about Bitcoin, it would have the following curriculum: 1. You send me a bunch of Bitcoins. 2. I steal your Bitcoins. 3. Then someone hacks _my_ Bitcoin wallet and steals the Bitcoins from me. 4. You come to me and say "what the heck, man?" 5. I say "now you understand Bitcoin." This service would be well worth the price you paid me (all your Bitcoins), though I would not get rich off of it (because I would lose all the Bitcoins). Anyway here is a very funny [US Securities and Exchange Commission enforcement action](https://www.sec.gov/news/press-release/2024-13) against the founder of the American Bitcoin Academy, who did a spectacularly good job of educating his students about Bitcoin: > The Securities and Exchange Commission [Friday] announced that Brian Sewell and his company, Rockwell Capital Management, agreed to settle fraud charges in connection with a scheme that targeted students taking Sewell's online crypto trading course known as the American Bitcoin Academy. The SEC alleges that the fraudulent scheme cost 15 students $1.2 million. > > According to the SEC's complaint, from at least early 2018 to mid-2019, Sewell encouraged hundreds of his online students to invest in the Rockwell Fund, a hedge fund that he claimed he would launch, and which would use cutting-edge technologies like artificial intelligence and trading strategies involving crypto assets to generate returns for investors. The complaint alleges that Sewell, who resided in Hurricane, Utah, before relocating to Puerto Rico, received approximately $1.2 million from 15 students but never launched the fund nor executed the trading strategies he advertised to investors, instead holding on to the invested money in bitcoin. The complaint further alleges that the bitcoin was eventually stolen when Sewell's digital wallet was hacked and looted. A Bitcoin hack was their Yale College and their Harvard. ## cryptocurrency - bitcoin [The Bitcoin whitepaper is hidden in every copy of macOS | Hacker News](https://news.ycombinator.com/item?id=35461011) [The Bitcoin Whitepaper Is Hidden in Every Modern Copy of macOS - Waxy.org](https://waxy.org/2023/04/the-bitcoin-whitepaper-is-hidden-in-every-modern-copy-of-macos/) [All Bitcoin private keys are on this website | Hacker News](https://news.ycombinator.com/item?id=29635907) [All Bitcoin private keys is on this website with automatic balance checker | Playxo.com](https://playxo.com/) [ETF approval for bitcoin - the naked emperor's new clothes](https://www.ecb.europa.eu/press/blog/date/2024/html/ecb.blog20240222~0929f86e23.en.html) [Bitcoin Regret Club](https://bitcoinregret.club/) satirical site for people who want to calculate all the money they you could’ve made. [Bitcoin Is Dead](https://www.bitcoinisdead.org/) The #1 Database of Notable Bitcoin Skeptics. > In fact, Bitcoin is very much alive. See the activity on the Bitcoin network - market price, average block size, transactions per day, mempool size, total circulation, market capitalization, exchange trade volume, blockchain size, average transaction per block, average payments per block, confirmation times, etc. - here. [Bitcoin Obituaries](https://99bitcoins.com/bitcoin-obituaries/) "Bitcoin is Dead" Declared 400+ Times (2022) [Hacker Noon](https://hackernoon.com/bitcoin/home) Bitcoin related news [Anne Gaviola](http://www.cbc.ca/beta/news/business/bitcoin-s-gender-divide-could-be-a-bad-sign-experts-say-1.4458884) (2018) Bitcoin's gender divide could be a bad sign, experts say [Coin and Crypto](https://hackernoon.com/bitcoin-is-outdated-tech-these-3-alternatives-should-be-on-your-radar-57cf806d34df) (2018) Bitcoin is outdated tech. These 3 alternatives should be on your radar. [Satoshi - Sirius emails 2009-2011 | Hacker News](https://news.ycombinator.com/item?id=39480407) [Satoshi - Sirius emails 2009-2011](https://mmalmi.github.io/satoshi/) [Mastering Bitcoin: Programming the Open Blockchain - Andreas M. Antonopoulos - Google Books](https://books.google.ro/books/about/Mastering_Bitcoin.html?id=tponDwAAQBAJ&printsec=frontcover&hl=en&redir_esc=y#v=onepage&q&f=false) [10x Security Bitcoin Guide](https://btcguide.github.io/) [Bitcoin Information & Educational Resources](https://www.lopp.net/bitcoin-information.html) [A from-scratch tour of Bitcoin in Python | Hacker News](https://news.ycombinator.com/item?id=27593772) [A from-scratch tour of Bitcoin in Python](https://karpathy.github.io/2021/06/21/blockchain/) [Bitcoin Forum - Index](https://bitcointalk.org/) [Getting Started - MobileCoin](https://mobilecoin.com/learn/explain-like-im-five/) [Use MobileCoin - MobileCoin](https://mobilecoin.com/ecosystem) ## cryptocurrency_Blockchain - Matt Levine [When Is a Token Not a Security? - Bloomberg](https://www.bloomberg.com/opinion/articles/2023-06-07/when-is-a-token-not-a-security) At a high level, the blockchain solution is to confirm transactions by letting everyone keep a copy of the transaction ledger. And then the official ledger is based on consensus among people who have some demonstrated stake in the system. What that has often meant in practice - [what it means in Bitcoin](https://bitcoin.org/bitcoin.pdf) and what it [originally meant in Ethereum](https://ethereum.org/en/whitepaper/) - is "proof of work." What you do is, you buy a bunch of computers, and you set them to work solving meaningless math problems, and whoever solves the most math problems the fastest gets to confirm a block of Bitcoin transactions, and they are rewarded with some newly minted Bitcoins and then everyone starts over solving more math problems to confirm more transactions. Buying the computers, and paying for the electricity to run them to solve the math problems, demonstrates your commitment to Bitcoin: It would be crazy to spend all that money on computers and electricity to confirm _fake_ transactions, which would undermine the value of Bitcoin and thus of your investment. This is called "mining": You spend money on computers and electricity, and then you are rewarded with newly created Bitcoins. And there are people, and publicly traded companies, who are in the business of Bitcoin mining and thus of maintaining the Bitcoin network. The inputs are electricity and the outputs are Bitcoin. This was a clever innovation and has some important benefits. It lets you have a ledger that is maintained by people with incentives to do the right thing - people you can trust - without knowing who they are. There is no pre-approved list of people who are allowed to maintain the Bitcoin ledger; anyone who buys enough computers and electricity can participate. It is [permissionless](https://www.bloomberg.com/opinion/articles/2022-09-13/crypto-wants-some-sec-rules). But because they have to buy all those computers and electricity, they have good incentives to maintain the ledger in a good way. But there are some problems. The biggest is that it uses a ton of electricity solving pointless math problems, which seems wasteful both in environmental terms (you're emitting a lot of carbon to generate all that electricity) and [also in economic terms](https://vitalik.ca/general/2020/11/06/pos2020.html) (the Bitcoin system is effectively paying utility companies a lot of money to maintain its ledger). Developers of later blockchains realized that, if the point here is to have transactions confirmed by people with a demonstrated stake in the system, there are easier ways to demonstrate a stake in the system. (https://www.bloomberg.com/opinion/articles/2022-09-14/ethereum-is-merging#footnote-2) Most simply: If you have a lot of Bitcoins, you will want Bitcoin to be valuable, and so you will want to confirm transactions honestly in order to keep Bitcoin valuable. Instead of proving that you have an economic stake in the system by spending a lot of money on computers and electricity, you could prove that you have an economic stake in the system by spending a lot of money _on Bitcoin_. If you have a lot of Bitcoin, that proves that you care about Bitcoin, so you get to participate in confirming transactions. Ethereum's new process, instead of Bitcoin, will rely instead on what's called proof of stake. It consumes very little power, because it doesn't depend on miners. It does require entities called validators to put some skin in the game in the form of Ether coins. Staking, or putting coins in the pot, gives large Ether owners the right to add a block of transactions to the ledger; they're rewarded with new Ether when they do so. All Ether tokens will now pay interest when placed into staking wallets. The software upgrade is called the Merge because the existing Ethereum blockchain will combine with a parallel network that's been running for almost two years to test the proof-of-stake concept. ### Do Kwon: not atoning - Matt Levine Do Kwon, the founder of the Terra blockchain, which vaporized tens of billions of dollars of investor money when its TerraUSD algorithmic stablecoin death-spiraled, remains "[obviously on the run](https://www.bloomberg.com/news/articles/2022-09-17/luna-and-terra-s-do-kwon-not-in-singapore-local-police-say)" (in the words of South Korean authorities) or "not on the run" (in his words), but he is committed to tweeting through it. Yesterday he [tweeted](https://twitter.com/stablekwon/status/1577639160692854784) some [mean things](https://twitter.com/stablekwon/status/1577644770859491328) about the South Korean government, [including](https://twitter.com/stablekwon/status/1577645322662076417): > It's no surprise that crypto is most popular in countries that weaponize state institutions against their own people for political gain. > > Reap what you sow - revolutions start from within. There was a time when this sort of rhetoric - about how crypto was a revolution, about how states and laws were obsolete, about how crypto was a force for freedom against the oppression of the state, about how crypto moguls like Kwon are the future and politicians are the past - was pretty common and triumphalist. And then Terra incinerated tens of billions of dollars that ordinary people entrusted to it! Come on! If you lost all your money on Terra and are nonetheless planning to take up arms in Do Kwon's revolution, I would love to know why. ### Crypto custody - Matt Levine I [used](https://www.bloomberg.com/opinion/articles/2019-05-08/uber-is-already-a-little-public) to [say](https://www.bloomberg.com/opinion/articles/2021-02-25/gamestop-is-happening-again) that the fate of all crypto exchanges was to be hacked, but in fairness that has stopped being true. Big modern crypto exchanges tend to be serious professional companies that care a lot about information security, and when one is hacked and [loses $570 million of crypto](https://www.cnbc.com/2022/10/07/more-than-100-million-worth-of-binances-bnb-token-stolen-in-another-major-crypto-hack.html), that is _news_, as opposed to just, you know, Thursday. It still happens though. There is some combination of factors that makes exchanges' pots of customer crypto just irresistible to hackers, something like: - Cryptocurrencies are more or less bearer instruments, so if you steal a bunch of Bitcoin you can use them more easily than if you steal a bunch of Treasury bonds or whatever. - Computer hackers tend to be intellectually and aesthetically interested in crypto, so they focus their hacking energies on crypto exchanges rather than banks. - Crypto is pretty thinly regulated, so you are somewhat less likely to attract law-enforcement attention for hacking a crypto exchange than for hacking a bank. - Crypto is all pretty new, so there is less in the way of best practices around information security. - Crypto exchanges mostly aren't just one guy with a laptop anymore, but they are still _more_ likely to be _closer_ to "one guy with a laptop" than the average bankis. I say "crypto exchanges" because, historically, crypto exchanges have been leaders in the business of keeping custody of crypto assets. But now crypto custody is increasingly the business of traditional financial institutions. And I guess the question is: Wouldn't it be very, very funny if Bank of New York Mellon Corp. gets hacked and loses [its customers' Bitcoin](https://www.wsj.com/articles/americas-oldest-bank-bny-mellon-will-hold-that-crypto-now-11665460354)? > The nation's oldest bank said it would begin receiving clients' cryptocurrencies on Tuesday, becoming the first large U.S. bank to safeguard digital assets alongside traditional investments on the same platform. > > BNY Mellon won the approval of New York's financial regulator earlier this fall to begin receiving select customers' bitcoin and ether starting this week. The bank will store the keys required to access and transfer those assets, and provide the same bookkeeping services on those digital currencies that it offers to fund managers for their portfolios of stocks, bonds, commodities and other assets. … > > Money managers have long relied on BNY Mellon and other custody banks for an array of vital, if humdrum, back-office functions such as tracking changes to the value of their assets. Founded by Alexander Hamilton more than two centuries ago, BNY Mellon is the world's biggest custody bank. > > Until now, fund managers would have had to custody their digital currencies with a crypto specialist. BNY Mellon said it is the first of the eight systemically important U.S. banks to store digital currencies and allow customers to use one custody platform for both its traditional and crypto holdings. > > "We are excited to help drive the financial industry forward," Robin Vince, BNY Mellon's president and chief executive, said in a statement. It probably won't happen, right? The point of doing crypto custody with BNY Mellon, as opposed to "a crypto specialist," is that you are expecting the security, regulation, and not-being-hacked-too-much of traditional finance. Still you might worry: BNY Mellon's pot of crypto will be as attractive to hackers as any crypto exchange's pot of crypto, and it might have _less_ experience and expertise in securing crypto than "a crypto specialist" would. The question is whether being hacked constantly is a feature of crypto _exchanges_, or just a feature of _crypto_. Elsewhere in [crypto custody](https://www.theguardian.com/technology/2022/oct/11/crypto-com-accidental-transfer-10-5-million-trial-australia-couple-cryptocurrency): > A Victorian woman accused of theft over a $10.5m mistaken cryptocurrency refund has been released on bail as she awaits trial, despite claims she allegedly tried to flee the country. > > Thevamanogari Manivel and her partner, Jatinder Singh, appeared by video link from prison in Melbourne magistrates court on Tuesday when they were committed to stand trial on theft and other charges. > > In May 2021, Crypto.com intended to refund Manivel $100 but she was erroneously transferred $10.47m. The company did not notice the mistake until an audit was conducted in December. > > A worker in Bulgaria, who processed the refund, had entered the wrong numbers into an Excel spreadsheet, Michi Chan Fores, a Crypto.com compliance officer, told the court. It would be funny if "the blockchain" was just a euphemism for "an Excel spreadsheet." ### NFT Stuff - Matt Levine I guess you have three options: 1. Pay Damien Hirst £2,000 and get one of his dot paintings; 2. Pay Damien Hirst £2,000 and _not_ get one of his dot paintings; or 3. Don't pay Damien Hirst £2,000 at all. I know what I would choose (what I have chosen), but the market seems [pretty evenly divided between Options 1 and 2](https://web.archive.org/web/20221012050322/https://www.msn.com/en-gb/money/other/damien-hirst-to-burn-thousands-of-his-paintings-after-owners-refuse-to-switch-to-nfts/ar-AA12NM6t): > Damien Hirst will burn thousands of his artworks on Tuesday after owners refused to exchange their paintings for a non-fungible token (NFT). > > The British artist and art collector created 10,000 unique dot paintings in 2016 which corresponded with a collection of 10,000 NFTs, a unique digital token that can be traded online. > > In "The Currency", Hirst's first NFT collection, he gave his buyers the choice to exchange their NFT version - worth £2,000 - for the physical artwork. > > After the exchange period closed in July it was revealed that just over half the collectors chose to exchange for the real artwork, created by enamel paint on handmade paper, while 4,851 decided to keep the NFT version. > > Hirst, reportedly the UK's wealthiest living artist, pledged to destroy all the original artworks that people decided not to exchange their virtual token for. > > As a result, he will torch thousands of paintings - collectively worth almost £10 million - starting on Tuesday afternoon at the Newport Street Gallery in London. The advantages of not exchanging your NFT for the physical artwork are (1) this way you don't have to find a place to hang a Damien Hirst dot painting in your house and (2) the image of Damien Hirst lighting thousands of his paintings on fire because nobody wants them is in fact very funny, and you have contributed to that act of comedy. The disadvantages are (1) you paid him £2,000 and (2) now you have nothing. Oh you have an NFT, you have an NFT, you have an NFT. Anyway the conflagration is today; [here's how it's going](https://www.bbc.com/news/entertainment-arts-63218704): > Asked how he felt to be burning the works, Hirst said: "It feels good, better than I expected." > > The artist was dressed in silver metallic boiler-suit trousers and matching fire safety gloves as he collected each piece and burned it in a contained fire box. … > > Livestreaming the event, the Turner Prize winner and assistants used tongs to deposit individual pieces stacked in piles into fireplaces in the gallery as onlookers watched. > > "A lot of people think I'm burning millions of dollars of art but I'm not," Hirst said. "I'm completing the transformation of these physical artworks into NFTs by burning the physical versions." The market for NFTs [has collapsed](https://www.reuters.com/technology/nft-sales-plunge-q3-down-by-60-q2-2022-10-03/), but in the bull market of 2021 thousands of artists and hucksters had this exact same idea, which was "I will make or acquire some art object, light it on fire, and sell an NFT 'of' the incinerated object to crypto people." Hirst, being an art industrialist, introduced mass production into the mix, but his basic idea was an exact copy of everyone else's. The "object-fire-token-money NFT cycle," [I have called it](https://www.bloomberg.com/opinion/articles/2021-05-24/merrill-lynch-puts-down-the-phone). As a matter of finance, I cannot fault this: If you can identify a bubble, and you have some free time, the right move is to sell into the bubble. But as art I hate it. [It's so stupid](https://www.bloomberg.com/news/newsletters/2021-09-10/money-stuff-fungible-slices-of-non-fungible-tokens)! Everyone involved should be incredibly embarrassed! What an absolute lack of creativity! Everything about this is the opposite of art! If you find yourself lighting thousands of your paintings on fire because nobody wants them, the obvious conclusion to take from that is that you are a bad artist, and that conclusion is correct! --- There are three classic problems that you might encounter if you try to use Bitcoin to pay for goods and services. The first problem is that your Bitcoins might go astray: Bitcoin transactions are irreversible and involve sending money to long complicated addresses, and people are constantly trying to steal them. So if you send someone Bitcoin to pay for something, there will probably be a typo in the address and the person won't get it and you'll have to send it again and your first payment will just be permanently lost. The second problem is that Bitcoin is very volatile, and even people who accept payment in Bitcoin tend not to _denominate_ it in Bitcoin. So if you send someone $100 worth of Bitcoin to buy a $100 thing, the price of Bitcoin might drop 10% while you're sending it, and then they'll say "you only sent me $90" and you'll have to top them up with more Bitcoin. The third classic problem is that, if you are using Bitcoin to pay for goods and services, there is a good chance that you are paying for something illegal, and Bitcoin payments are traceable. So if you send someone $16,000 worth of Bitcoin to buy a $16,000 thing, (1) some of your money will go missing in transit, (2) the Bitcoins you send won't be worth $16,000 and you'll have to send some more, and (3) the $16,000 thing was a murder and now you are in prison. ### Grayscale premia - Matt Levine A lot of people, it turns out, want exposure to crypto _prices_ without exposure to crypto _infrastructure_. Like: Bitcoin was created as sort of an alternative financial infrastructure, a new kind of money that dispenses with the need for banks and other intermediaries. But in fact Bitcoin is not a particularly good form of money (its value is volatile, it is not widely used for payments in a lot of places), but it is a very good sort of financial asset (its value has gone up a lot over the last 14 years, and also recently). So a lot of people want to _own Bitcoin_ (because they think the price will go up) without believing in, or caring about, its underlying philosophy of decentralization and disintermediation. So they go to their (traditional) bank or (traditional) brokerage and say "buy me some Bitcoin." And there are lots of products designed to satisfy that desire: Bitcoin futures and, soon, probably, [spot Bitcoin exchange-traded funds](https://www.bloomberg.com/opinion/articles/2023-08-29/grayscale-can-be-a-bitcoin-etf) that let you buy exposure to Bitcoin without ever leaving the traditional financial system. Someone else will do the arbitrage for you, buying Bitcoins to sell you Bitcoin futures or ETFs, and you'll just have a thing in your regular brokerage account that moves up and down with the price of Bitcoin. I have [written](https://www.bloomberg.com/view/articles/2017-12-19/bitcoin-futures-are-a-great-way-to-not-own-bitcoin) about this [before](https://www.bloomberg.com/opinion/articles/2023-11-01/trade-the-news-then-publish-it) and it seems fine to me? If the _only_ possible thesis for buying Bitcoin was "this is the future of money and the entire traditional financial system will be replaced by crypto," then buying Bitcoin in an ETF would be a little contradictory. But in the actual world of 2023 it's fine. I don't really get the case for a Filecoin ETF? The Financial Times reports: > Some cryptocurrency funds run by the world's largest crypto manager are trading at as much as eight times their underlying value amid an unprecedented buying frenzy. ... > > The mania has spread to a host of private trusts operated by Grayscale. The company's Filecoin Trust is trading at $34.25, 721 per cent above its net asset value of $4.17, having hit a premium of more than 1,000 per cent in November. > > Its trust tracking solana, the third-largest cryptocurrency after bitcoin and ether, is at a premium of 302 per cent, while those investing in chainlink, livepeer, lumens and Decentraland's mana token are priced at between twice and four times their NAV. > > "It's absurd. I feel the investor doesn't really understand what they are getting into," said Bradley Duke, chief strategist of ETC Group, which runs more than $1bn in European-listed crypto exchange traded products. > > "I wouldn't know what [investors] could be thinking buying at these prices," said Bryan Armour, director of passive strategies research, North America, at Morningstar. "A lack of understanding can easily be part of it." > > The funds can only be traded via the over-the-counter "pink sheets" market, where secondary trading in pre-existing shares takes place. Shares cannot be redeemed, while new shares can only be created if Grayscale carries out a private placement exercise, meaning there is no arbitrage mechanism to bring prices back in line with the underlying holdings. To be clear, these Grayscale trusts are _not_ ETFs, because you can't create or redeem them; if they were ETFs they probably wouldn't trade at those crazy premiums. (You'd go buy a ton of Filecoins and give them to Grayscale to get back trust shares, etc.) But Grayscale's biggest trust is the one tracking Bitcoin; it has traded at a discount for a long time, but that discount has closed significantly now that everyone expects the trust to convert into an ETF (and thus allow redemptions). That optimism has been good for the price of Bitcoin too, and for the prices of crypto generally, and also apparently for the prices of Grayscale altcoin trusts. Bitcoin is a popular financial asset, "digital gold," a possible diversifier for retail and institutional investors. Filecoin is … the payment currency for a [peer-to-peer file storage system](https://docs.filecoin.io/basics/what-is-filecoin)? Why would you buy it in a pink-sheet wrapper? The [Grayscale Filecoin Trust](https://www.grayscale.com/crypto-products/grayscale-filecoin-trust) is tiny (half a million dollars under management), but owning Filecoin that way is (1) less useful and (2) vastly more expensive than owning it directly. One possible answer is of course "a lack of understanding"; again, this stuff is very small. I suppose another answer is, like, "crypto projects like Filecoin are good and valuable, and their tokens are sort of like stock in those projects, but the _stock exchange for trading those stocks_ will be the regular stock exchange, not decentralized finance." Last year it was almost plausible to think that the crypto financial system might consume the regular financial system, that in the future all the stocks will be tokenized. Now it's more plausible to think the reverse, that the regular financial system will consume the crypto one, that in the future all tokens will be stock-ized. ### Spot Bitcoin ETFs - Matt Levine One claim that you sometimes hear about crypto is that it gets rid of middlemen: Instead of relying on a bank to hold your money for you, you can hold it directly on the blockchain. But one reason that crypto is _actually popular_ - a reason that it has gotten a lot of attention, and that a lot of people from the financial and tech industries have gotten into crypto - is that it is [insanely lucrative for middlemen](https://www.bloomberg.com/opinion/articles/2021-02-25/gamestop-is-happening-again). A lot (not all) of the basic products of traditional finance are old and well understood and heavily regulated and fiercely competitive; margins are low and bid/ask spreads are slim. Whereas crypto is relatively new and poorly understood and complicated and illiquid and you can charge 2% on every trade. Sam Bankman-Fried did not briefly become the world's richest young person because crypto _got rid of middlemen_. Quite the opposite. Meanwhile it is probably a positive for crypto if it becomes mainstream, if it is widely adopted by ordinary investors and traditional institutions. That would lead to a lot of money flowing into crypto, which is probably good for the crypto middlemen. On the other hand it would probably lead to a collapse in _margins_ for crypto middlemen: They got fat by charging 2% on every trade, but you can't do that forever if the product becomes mainstream. Some middlemen may have trouble adapting. So [Bloomberg's Katie Greifeld reports](https://www.bloomberg.com/news/articles/2024-01-08/grayscale-s-1-5-fee-for-gbtc-would-be-highest-among-proposed-spot-bitcoin-etfs): > As spot Bitcoin ETF hopefuls rush to file their final documents with US regulators, a key difference is emerging among the applicants in their proposed fee structures. > > At the top end: The Grayscale Bitcoin Trust, which would carry a 1.5% fee if the US Securities and Exchange Commission approves its conversion into an exchange-traded fund. While that would be lower than GBTC's current 2% fee, it comes well above its competitors. > > The race-to-the-bottom on fees is a feature of the highly competitive $8 trillion US ETF industry, where even a couple of basis points of difference can translate into millions of dollars worth of inflows. > > While GBTC has an enormous advantage in existing assets - it boasts $27 billion in assets as a trust since its 2013 inception - its competitors will charge a fraction of its proposed expense ratio. … BlackRock intends to charge 0.2% for the first year or until it reaches $5 billion in assets, with 0.3% as its eventual fee. Yeah look the fees for [keeping Bitcoins in a pot](https://www.bloomberg.com/opinion/articles/2024-01-04/put-the-bitcoins-in-the-box) can be decomposed into: 1. There is a cost to actually keeping the Bitcoins in a pot. You gotta worry about custody and security, and set up the trading mechanics for Bitcoins to come in and out of the pot. This costs real money; a spot Bitcoin exchange-traded fund won't have the near-zero fees of an S&P 500 index fund. 2. If you are the first person to offer "Bitcoins in a pot" as a product, you can charge a huge premium. But eventually, like, BlackRock will catch up, and then you probably can't. ### SEC Bitcoin ETF hack - Matt Levine I kind of don't understand [the trade here](https://www.bloomberg.com/news/articles/2024-01-09/sec-says-has-not-yet-granted-approval-of-spot-bitcoin-etfs)? > A highly anticipated decision by the US Securities and Exchange Commission on whether to approve a spot-Bitcoin exchange-traded fund quickly morphed into a major cybersecurity incident on Tuesday. > > The SEC's X account was compromised and a fake post claiming that the agency had green lit plans for the products fueled a brief surge in the price of the world's biggest cryptocurrency. It also has sparked an investigation by US authorities into how a social media account at Wall Street's main regulator was compromised. … > > The breach gave fodder to crypto faithful who have long viewed the commission's chair, Gary Gensler, as an enemy due to his zeal to rein in the industry. The irony of a cybersecurity incident befalling a regulator that's repeatedly warned of crypto's online vulnerabilities was not lost on critics who have spent years waiting for the SEC to approve a Bitcoin ETF. Traders have been speculating for weeks that the agency could approve several of the products as soon as Wednesday. > > In statements late Tuesday, the regulator said that it would work with law enforcement to investigate the incident, the unauthorized access had been terminated, and that the post wasn't made by the SEC or its staff. In a separate statement, Gensler clarified that no decision on ETFs had been made. Look, I have no inside information, but most of the reporting I have read about spot Bitcoin ETFs has said that 1. the SEC is going to approve them, 2. by the end of today, and 3. this is public knowledge that everyone believes. So you would think it would be pretty priced in? It just does not seem to me like there would be a ton of alpha in (1) constantly refreshing the SEC's Twitter account, (2) looking for a tweet saying "okay spot Bitcoin ETFs are cool now," and (3) buying Bitcoin on the news. Which implies there would not be a ton of alpha in (1) buying a bunch of Bitcoin, (2) _hacking_ the SEC's Twitter account, (3) _tweeting_ "okay spot Bitcoin ETFs are cool now" and (4) selling your Bitcoin into the resulting enthusiasm. [There was a little though](https://www.bloomberg.com/news/articles/2024-01-09/bitcoin-fluctuates-after-debunked-post-claimed-etfs-won-approval): > The false post on the SEC's X account was up for a number of minutes before the agency clarified that it was inaccurate. In that period, Bitcoin posted a relatively modest jump to almost $48,000 from about $46,700 before falling back toward $45,000. Eh? If you bought Bitcoin at $48,000 upon seeing that tweet, and then sold it at $45,000 after realizing that the tweet was fake, I would love to hear from you. Why? Why not just wait? If you think Bitcoin is worth $48,000 when the SEC approves spot Bitcoin ETFs, then … I mean … the tweet was fake, but if the contents of the tweet turn out to be true _today_, won't you regret selling yesterday? Fine, yes, probably someone hacked the SEC's Twitter to do some market manipulation here: They wanted to bet on, what, a 2.5% short-term move in Bitcoin prices, and they made that bet pay off with a fake SEC tweet. But I have [suggested before](https://www.bloomberg.com/opinion/articles/2023-11-15/wework-s-rescue-wasn-t-real) that there are two possible reasons to issue fake announcements that move asset prices: 1. Market manipulation: You buy the asset, you issue the fake announcement, the price moves, you sell it at a profit; or 2. General trolling and hijinks: You don't buy the asset, you issue the fake announcement, the price moves, you have a laugh and high-five your online friends. Doesn't it seem at least _possible_ that this hack was just trolling? It didn't move Bitcoin prices that much, and it _shouldn't have:_ The fake announcement was something that everyone expects to actually be true today. But it is very funny? The key element of online trolling is irony, and there is plenty of irony here. Like: 1. The crypto community and the SEC do not particularly like each other: Gensler's SEC has launched a [broad](https://www.bloomberg.com/opinion/articles/2023-06-06/the-sec-comes-for-crypto) and [aggressive](https://www.bloomberg.com/opinion/articles/2023-07-14/ripple-is-a-security-and-it-isn-t) crackdown on crypto, and it is only going to (probably!) approve spot Bitcoin ETFs today because [a court forced it to](https://www.bloomberg.com/opinion/articles/2023-08-29/grayscale-can-be-a-bitcoin-etf). If you're a Bitcoin enthusiast with the skills to hack the SEC's Twitter, you might want to manipulate the price of Bitcoin, but you might also just want to make the SEC look bad. 2. Having the SEC (1) announce that Bitcoin ETFS are approved, (2) walk back that announcement, and then (3) announce it again, for real this time, _the next day_, really is quite embarrassing. Like if the hacker made the SEC say something outlandish and false, that would be a little funny. But making the SEC _say something true a day early_ is extremely funny. 3. In addition to cracking down on crypto, one of the SEC's big regulatory priorities under Gensler has been [punishing companies](https://www.bloomberg.com/opinion/articles/2023-11-16/hackers-know-everything-is-securities-fraud) for [cybersecurity incidents](https://www.sec.gov/news/press-release/2023-139). The SEC once [sued a company for using weak passwords](https://www.bloomberg.com/opinion/articles/2023-10-31/bad-passwords-are-securities-fraud), and its enforcement director said that the case "underscores our message to issuers: implement strong controls calibrated to your risk environments." But apparently the SEC's Twitter was compromised because it [didn't turn on two-factor authentication](https://www.ft.com/content/60efd3f4-62c9-42e5-8b32-4761eaa19b5a). Nyah nyah nyah nyah nyah! I don't know, the whole thing works better as trolling than as market manipulation. A few further ironies. First, it does bear mentioning that X, formerly Twitter, is owned by Elon Musk, who (1) [loves trolling](https://www.bloomberg.com/opinion/articles/2021-05-17/elon-musk-controls-bitcoin-and-dogecoin-prices-with-pure-magic) and (2) hates the SEC. "I want to be clear. I do not respect the SEC. I do not respect them," is one of the nicer things Musk has [said in public](https://www.bloomberg.com/opinion/articles/2019-02-26/elon-musk-keeps-tweeting) about the SEC. It is … convenient and funny … that Musk's Twitter was used yesterday to make the SEC look stupid. I mean, it's not necessarily great for Twitter/X/Musk [as a business matter](https://www.bloomberg.com/news/articles/2024-01-10/sec-s-compromised-account-amplifies-x-trust-security-concerns): > The high-profile breach comes at a time when X and billionaire owner Elon Musk are seeking to win back trust from both users and advertisers, many of which have been dismayed by Musk's free-for-all style of leadership since his 2022 takeover. Musk has pivoted away from some of the prior regime's efforts to rein in offensive or harmful content, and has severely scaled back staff to save on costs. Those cuts have led to regular bugs and outages. > > "This has to be the most sophisticated use of a stolen Twitter account ever," said Alex Stamos, chief trust officer at SentinelOne and former security chief at Meta Platforms Inc. "At a minimum, this indicates that the hollowed-out X team can't keep up with advances in account takeover techniques." But it's definitely a point for Musk in his long dumb game of trolling the SEC. To be clear, I am not saying it is _likely_ that Elon Musk, who controls Twitter, took over the SEC's account in order to tweet a fake announcement to troll the SEC. I think the likelihood of that is close to zero. I am just saying that it would be the absolute funniest Money Stuff story of all time. Just all of my interests, right there. Another irony: I like to say around here that "everything is securities fraud," and so of course when this story came out people emailed me to say "is this securities fraud yuk yuk yuk." But: no? I mean, nothing here is legal advice, and everything is securities fraud, but let's say that someone hacked the SEC to manipulate the price of Bitcoin. Bitcoin is not a security? The SEC [thinks that almost every crypto asset is a security](https://www.bloomberg.com/opinion/articles/2023-06-07/when-is-a-token-not-a-security), but it really does make a single explicit exception for Bitcoin. So if the SEC figures out who hacked its Twitter account, and if it figures out that that person did it to make a quick profit on Bitcoin by manipulating the market and deceiving investors, that's still not securities fraud. It's regular fraud, it's wire fraud, maybe it's commodities fraud, but whatever it is is not under the SEC's jurisdiction. The SEC "said that it would work with law enforcement to investigate the incident," but it has no power _itself_ to bring charges against anyone for manipulating Bitcoin. Still, there are securities that are tied to the price of Bitcoin, and whose prices would be influenced by news about Bitcoin ETFs, and which were arguably manipulated by this fake tweet. The most obvious examples would be … spot Bitcoin ETFs? Those don't trade yet. Because the SEC hasn't approved them. So the fake tweet couldn't have manipulated them. But Bitcoin _futures_ ETFs _do_ trade, as does the Grayscale Bitcoin Trust (GBTC), a pot of Bitcoins that hopes to convert into an ETF. I suppose you could have manipulated their prices with this tweet. The tweet went out after 4 p.m. so the stock market was closed, but the price of the ProShares Bitcoin Strategy ETF did in fact bounce around a bit in after-hours trading yesterday; it closed at $22.72 and spiked as high as $23.50 at 4:12 p.m., after the tweet. So, sure, securities fraud, fine. Anyway, the great counter-troll here would be for the SEC to [announce today](https://www.wsj.com/finance/regulation/secs-decision-on-spot-bitcoin-etfs-could-go-a-few-different-ways-96d76589) "you know what, all the Bitcoin ETF applications are rejected, we'll see you in court again. We _were_ going to approve them, but it turns out that the Bitcoin market is still too vulnerable to manipulation, as you can tell by the fact that someone hacked our Twitter to manipulate Bitcoin." ### Elsewhere in Bitcoin ETFs - Matt Levine One rude but not entirely inaccurate way to describe the business model of Grayscale Investments LLC is: 1. Grayscale operates a pot, the Grayscale Bitcoin Trust (GBTC), into which people can put Bitcoins. 2. They cannot take them out. 3. Grayscale pays itself 2% of the value of the pot every year in fees. This is not a good business model, when you describe it that way - who would put Bitcoins into the pot? - but it is an _extremely_ good business model if you _don't_ describe it that way. There's like [$29 billion in the pot](https://etfs.grayscale.com/gbtc). The fees are good. Meanwhile people whose Bitcoins are in the pot sometimes [sue to get them out](https://www.bloomberg.com/opinion/articles/2023-03-07/ftx-wants-its-bitcoins-back-from-grayscale), or at least to cut the fees, but that doesn't work. This description is very rude because Grayscale does _want_ people to be able to get their Bitcoins out: It has [filed to convert GBTC into an exchange-traded fund](https://www.sec.gov/Archives/edgar/data/1588489/000119312524003901/d144925ds3a.htm), which would allow for efficient creations (putting more Bitcoins in) and redemptions (taking Bitcoins out). And Grayscale sued SEC to force it to allow this conversion, and [last year it won](https://www.bloomberg.com/opinion/articles/2023-08-29/grayscale-can-be-a-bitcoin-etf), and everyone expects the SEC to approve Grayscale's application to turn GBTC into an ETF [by today](https://www.bloomberg.com/news/articles/2024-01-09/bitcoin-btc-rally-cools-near-47-000-in-countdown-to-sec-etf-decision). And a bunch of other issuers have filed to launch Bitcoin ETFs, and the SEC will probably approve them too, and GBTC will have competition. We [talked a bit on Monday](https://www.bloomberg.com/opinion/articles/2024-01-08/elon-musk-isn-t-getting-enough-sleep) about how this will affect Grayscale's business model. One problem is: The ETF structure will allow investors to take Bitcoins out of GBTC. Another problem is: All those _other_ Bitcoin ETFs will charge _[much lower fees](hhttps://www.bloomberg.com/news/articles/2024-01-09/four-bitcoin-etf-hopefuls-slash-fees-before-funds-even-launch)_ than Grayscale. Grayscale has already said that its fees will go down to 1.5% once it converts into an ETF, which is less than the current 2%, but still way more than the 0.3% that BlackRock plans to charge. I wrote: > If you are the first person to offer "Bitcoins in a pot" as a product, you can charge a huge premium. > > But eventually, like, BlackRock will catch up, and then you probably can't. A reader emailed to point out that this isn't necessarily the whole story. If you are the first person to offer "Bitcoins in a pot," people will put Bitcoins in your pot, and GBTC does have $29 billion of Bitcoins. And those Bitcoins have appreciated in value: Most of them were put in the pot at considerably lower Bitcoin prices than today's $46,000-ish, and Grayscale [stopped putting new Bitcoins in](https://www.coindesk.com/markets/2021/03/10/grayscale-halts-new-investments-in-gbtc/) the pot [in 2021](https://fintel.io/fg/us/gbtc/CommonSharesOutstanding). If you bought GBTC shares in 2019, or most of 2022 or 2023 for that matter, your shares are worth much more than you paid for them. This is good for you, generally, but it is a tax problem: If you _sell_ your GBTC shares, you'll have a big gain and have to pay taxes on it. If you just keep those shares, you don't pay taxes (yet). That is a reason not to sell. Soon, probably, you will have your choice of Bitcoin ETFs. They will all be about the same, and you might prefer to buy one with 0.2% fees rather than one with 1.5% fees. But if you _already own_ shares in Grayscale's Bitcoin trust when it converts to an ETF, the math isn't so simple. If you _sell_ the Grayscale ETF and _buy_ a cheap one, you will save on annual fees - but you'll probably pay a lot of taxes on your gains. Paying 15% or 20% capital gains taxes on 50% or 80% gains on your GBTC shares might look a lot more expensive than paying an extra 1.3% per year in fees. ### Bitcoin ETF - Matt Levine Taking a step back here, there is something really cool about what Bitcoin has accomplished, in some ways much cooler than [Satoshi Nakamoto's original vision](https://bitcoin.org/bitcoin.pdf) for it. The original vision of Bitcoin was that it would be "electronic cash," a way for people to send payments to each other without involving a bank or other intermediary. Fifteen years later, I mean, there has been _some_ progress along those lines; _some_ people sometimes do pay for some goods and services using Bitcoin. But it has not exactly taken over the world of payments. El Salvador made Bitcoin legal tender and required all businesses to accept it, and even there it is [not that widely used](https://www.nber.org/digest/202207/el-salvadors-experiment-bitcoin-legal-tender). In big developed economies, despite years of crypto proselytizing, people still much prefer fiat currency and traditional banks. And yet the price of Bitcoin has gone from zero in 2009 to $46,000-ish today, not on widespread adoption as a _payments_ mechanism, but because people - lots of people, crypto evangelists but also regular retail investors and quite traditional investment strategists at big institutional investment firms - view it as a "store of value." Which means that they think its price will go up, or at least not go down, robustly and for the long term. They buy Bitcoin at $46,000 not because they plan to use it as digital cash, but because they think other people will buy it at $47,000, or $470,000 or whatever. Which is why people buy Apple Inc. stock, or Treasury bonds or oil futures or whatever: They think other people will buy them, so the price will go up. You know [what Keynes said](https://en.wikipedia.org/wiki/Keynesian_beauty_contest). But those things have cash flows or industrial uses; those things are claims on economic activity. Bitcoin is just a thing a guy made up 15 years ago. Its function as a store of value is almost purely self-referential: Not "this is worth $X because other people will buy it for $X because other people will buy it for $X because … [etc.] … other people think its cash flows have a present value of $X," but "this is worth $X because other people will buy it for $X because other people will buy it for $X" all the way down. Bitcoin is an astonishing _social technology._ It would, in the abstract, be useful for the world if there was just an entry in a computer database that we all agreed was valuable _just because_, with no reference to any underlying commodity or series of cash flows or industrial activity. Just a number that was valuable. And so someone invented it. Traditionally _currency_ works sort of like that: The US dollar is this sort of social technology; it has value because it has value, not because it has cash flows. But there's a whole ton of complex and long-standing social technology that goes into that; the US has a government and an army and an income tax and a debt stock and a trade balance, which help to preserve the value of the dollar. Bitcoin expresses the thesis that it would be good to have a valuable database entry _without_ that, just something was valuable because people on the internet voluntarily agreed it was valuable, with no government or army or taxes or anything else. And it worked! That did happen. It has value due to a broad voluntary market consensus based almost entirely on itself. In some sense that consensus is fragile - if a thing is valuable only because people think that it is valuable, it could stop being valuable when they stop thinking that - but in another sense that is true of any social fact: The dollar is valuable, the King of England is the King of England, the US is a liberal democracy, etc., exactly as long as those facts command social consensus. Bitcoin got to what seems like a pretty robust consensus in 15 years. That's just neat. Anyway, [as expected](https://www.bloomberg.com/news/articles/2024-01-10/spot-bitcoin-etfs-approved-to-launch-in-us-by-gensler-s-sec): > US regulators for the first time approved exchange-traded funds that invest directly in Bitcoin, a move heralded as a landmark event for the roughly $1.7 trillion digital-asset sector that will broaden access to the largest cryptocurrency on Wall Street and beyond. > > The Securities and Exchange Commission, whose three-part mandate includes investor protection, authorized funds from industry heavyweights BlackRock, Invesco and Fidelity to smaller competitors including Valkyrie to begin trading Thursday. > > The approvals mark a rare capitulation by the SEC following opposition that lasted for more than a decade, ever since Tyler and Cameron Winklevoss first proposed a Bitcoin ETF in 2013. BlackRock Inc.'s surprise application last June, followed by an appeals court ruling that called the denial of a different application "arbitrary and capricious," triggered a blistering rally in the cryptocurrency amid speculation that US regulators would finally give their blessing to the structure. There is something pure about this, as Bitcoin news. A Bitcoin ETF is vastly _less_ useful, as a payments mechanism or a way to supplant the traditional financial system, than just buying Bitcoin: Instead of an alternative peer-to-peer payments system in which everyone can hold their Bitcoins directly and transfer them to each other without middlemen, this is a crypto thing that you can hold in your traditional brokerage account and not use for payments at all. But it is _more_ useful as a store of value: You can hold it in your brokerage account, where you hold your stores of value. You don't have to mess around with an alternative financial system; you can just isolate the store-of-value component of Bitcoin and hold it directly. And so the price of Bitcoin ran up in anticipation of the ETF approvals, because everyone expected that the ETFs would lead to more people holding Bitcoin as a store of value. Which is the best reason for Bitcoin to go up. ### Sell the news - Matt Levine The SEC approved the spot Bitcoin ETFs a little after the close yesterday (Wednesday) afternoon. A little after the close on _Tuesday_ afternoon, the SEC's account on X (formerly Twitter) tweeted that it had approved spot Bitcoin ETFs. That turned out to be fake; the SEC's Twitter got hacked. The SEC had to walk back that statement on Tuesday, and then walk it forward again on Wednesday. We [talked about this yesterday](https://www.bloomberg.com/opinion/articles/2024-01-10/the-sec-got-trolled-on-bitcoin-etfs). "Nyah nyah nyah nyah nyah," I wrote. When the Bitcoin ETFs got fake-approved on Tuesday, the [price of Bitcoin](https://www.bloomberg.com/opinion/articles/2024-01-10/the-sec-got-trolled-on-bitcoin-etfs) "posted a relatively modest jump to almost $48,000 from about $46,700 before falling back toward $45,000" when it turned out to be fake. I was a little perplexed - everyone expected the ETFs to be approved by today, so the fake tweet didn't add much fake information, and the retraction didn't add much real information - but whatever. The fun fact is that, when Bitcoin ETFs got approved for real on Wednesday, the price of Bitcoin … jumped to a bit more than $49,000, from a bit more than $46,000, [before falling back](https://www.bloomberg.com/news/articles/2024-01-11/bitcoin-btc-volume-jumps-as-first-us-spot-etfs-begin-trading): > Bitcoin pared gains after surging past $49,000 for the first time since December 2021 with trading commencing for the first US exchange-traded funds that invest directly in the biggest cryptocurrency. > > The token had advanced as much as 6.7% to $49,021, buoyed by the approval of spot Bitcoin ETFs by the US Securities and Exchange Commission after markets closed on Wednesday. It was recently trading at around $46,000. Most smaller tokens, such as Ether, Cardano and Polkadot were higher. > > All of the 11 ETFs are trading, and over $2.6 billion has changed hands in just the first few hours of trading. The market reaction to the SEC's fake approval of Bitcoin ETFs - a quick modest spike followed by a disappointed modest fall - is remarkably similar to the market reaction to the SEC's _real_ approval of Bitcoin ETFs. Also, I wrote yesterday that, while it is possible that someone hacked the SEC's Twitter to make money by manipulating the price of Bitcoin, it was also possible that whoever did the hack was just trolling for fun, and did _not_ make any money by manipulating Bitcoin. Several readers emailed to point out the strongest argument for that possibility: If you wanted to manipulate the market, you would _short_ Bitcoin and then hack the SEC to tweet "we're once again _declining_ to approve Bitcoin ETFs, too many problems, we're confident we'll win in court this time." The market really expected the SEC to approve the ETFs, so there was not a ton of information in Tuesday's fake tweet, and it didn't move the price of Bitcoin that much. But if the fake tweet had _confounded_ expectations, _that_ would have moved the market. If you were a ruthless hacker/manipulator looking to maximize profits, that's what you'd do. If you were a crypto enthusiast looking to troll the SEC for fun, though, you'd fake-tweet that the ETFs were approved. Also, by the way, the SEC's approval is hilariously grudging. Here's SEC Chair [Gary Gensler's statement](https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023): > Though we're merit neutral, I'd note that ... bitcoin is primarily a speculative, volatile asset that's also used for illicit activity including ransomware, money laundering, sanction evasion, and terrorist financing. > > While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto. And here is Commissioner [Caroline Crenshaw's dissent from the approval](https://www.sec.gov/news/statement/crenshaw-statement-spot-bitcoin-011023): > Spot bitcoin markets are subject to fraud and manipulation. One form of manipulation that appears to be pervasive in the crypto markets (and specifically bitcoin markets), is wash trading, a practice whereby traders seek to increase the appearance of high trading interest by both selling and buying the same products at the same time, often driving up prices, and then selling to unwitting third party market participants at inflated values. Wash trading distorts price and volume, causes volatility, reduces investor confidence and participation in financial markets, and of course, results in investor harm. One analysis of 29 major crypto exchanges found that wash trading was, on average, as high as 77.5% of the total trading volume on unregulated exchanges. ... > > Specifically with regard to bitcoin, an analysis of 157 crypto exchanges found that 51% of the reported daily bitcoin trading volume was likely bogus. In fact, though reporting regarding bitcoin frequently discusses the enormous size of the market, one market participant who now seeks to sponsor a spot bitcoin ETP has admitted that "approximately 95%" of the data used by many participants are "fake and/or non-economic." … In short, prices and demand for bitcoin may not actually be what they appear to be. I joked yesterday that the SEC should deny all of these applications, saying "We _were_ going to approve them, but it turns out that the Bitcoin market is still too vulnerable to manipulation, as you can tell by the fact that someone hacked our Twitter to manipulate Bitcoin." Crenshaw makes that argument! > Indeed, just yesterday, prior to the issuance of our approval Order, one of the SEC's social media accounts was compromised, and an unauthorized post falsely indicated that we had approved spot bitcoin ETFs. Unsurprisingly, the price of spot bitcoin suffered "whiplash" in the minutes and hours following the false tweet. While the facts underlying this misconduct hopefully will be uncovered by law enforcement in the future, I will be monitoring what may be yet another attempt to profit from wrongdoing in this market. ### Interest - Matt Levine You could imagine, I suppose, a "physical dollar ETF" that worked like this: 1. You send money to the ETF issuer. 2. The issuer uses your money to buy crisp $100 bills. 3. The issuer keeps the $100 bills in a nice safe vault. 4. The issuer charges fees to cover things like its marketing cost, its cost of renting the vault, etc. In some rough sense that's how a physical gold ETF works, and it's how a spot Bitcoin ETF works: There's some stuff, the stuff is a store of value, and the ETF keeps the stuff in a physical or cryptographic vault, not doing anything with it. But in fact there'd be something a bit crazy about doing that with dollars. There are ["cash" ETFs](https://www.ishares.com/us/products/258806/ishares-liquidity-income-etf?cid=ppc:ish_us:ish_us_nb_fixed_income_product_exact:google:nonbrand_prod:ei), in some sense. But everyone understands that these ETFs don't hold _crisp $100 bills_. They hold extremely safe interest-bearing short-term debt instruments. If you invest your money in one of those ETFs, it will "hold" your "cash" for you in roughly the sense that a bank would: It will lend out your cash, as safely as possible, give it back to you on demand, and _pay you interest_. This is the natural way of the world, in finance. Even a _stock_ ETF will probably do this: Stock ETFs often take their investors' money, use it to buy stocks, and then _lend out some of those stocks to earn a bit of extra interest_. Modern finance is very interested in efficiency, and abhors the idea of buying anything, putting it in a box, and _doing nothing with it_. You've got some stuff in a box, you take it out of the box, you _lend_ it to someone who wants to do something with it, and you earn interest. The Satoshi Nakamoto vision of crypto was very different: This idea of building opaque leverage into every part of the system, of constructing everything on webs of debt, is part of what Bitcoin was reacting against. But the modern vision of crypto, or at least the 2022 vision of crypto, was like everything else in finance. You could hold Bitcoins in your digital wallet, like holding $100 bills in your regular wallet, but the action was in depositing your Bitcoins with some quasi-bank that would lend them out, earn interest, and pay some of the interest to you. This led to various terrible problems, chiefly: 1. Those quasi-banks were [very highly leveraged](https://www.bloomberg.com/opinion/articles/2022-12-05/crypto-had-a-credit-bubble), and when crypto prices fell many of them collapsed and took their quasi-depositors' money with them. 2. The _lending_ done by these platforms was pretty much all in support of speculative trading rather than real-world economic activity: People didn't borrow Bitcoins to buy houses; they borrowed Bitcoins to make bets on Bitcoin prices. So the collapse was pretty sharp. 3. Also a fair amount of fraud. 4. The US Securities and Exchange Commission is [quite convinced](https://www.bloomberg.com/opinion/articles/2021-09-08/lending-bitcoins-is-tricky), for fairly good reasons, that all of those crypto lending platforms were _securities_, subject to securities regulation, and that everyone running those platforms was doing so illegally. Still, in the long run, if you have a giant pot full of electronic financial assets, and if there is demand to borrow those assets, won't you want to lend them? Ten years from now, if Bitcoin ETFs are still around, is it more likely that they will be "physical" ETFs, just holding inert Bitcoins in a pot, or that they will be money-market-ish ETFs, lending out their Bitcoins to earn interest and passing it along to their investors? Of course _today_ the answer is "physical"; the prospectuses for today's Bitcoin ETFs say that they will hold the Bitcoins in custody, not that they will lend them. (Here is [Grayscale's](https://www.sec.gov/Archives/edgar/data/1588489/000119312524006300/d264170d424b3.htm), and here's [BlackRock's](https://www.sec.gov/Archives/edgar/data/1980994/000143774924001125/bit20240109_424b3.htm).) And [SEC Chair Gary Gensler's statement](https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023) on the Bitcoin ETF approvals says: "Importantly, today's Commission action is cabined to ETPs holding one non-security commodity, bitcoin. It should in no way signal the Commission's willingness to approve listing standards for crypto asset securities." Bitcoin lending is a security, in Gensler's view, and not something he wants to approve at this point. ### Cash vs. in-kind - Matt Levine One other what-will-the-future-bring sort of point about Bitcoin ETFs. The normal way that, say, a stock index ETF works is: 1. Normal people buy and sell shares of the ETF on the exchange: They don't actually give any money to the ETF issuer; they just trade in the secondary market. 2. Arbitrageurs make sure that the price of the ETF and the price of the index stay in line: If the price of ETF shares gets too high, arbs will sell ETF shares and buy the underlying index. 3. To complete the arbitrage, a few big banks or trading firms, called "authorized participants," can _exchange_ the ETF shares for the underlying index: They can collect a basket of all the stocks in the index, deliver them to the ETF issuer, and get back some new ETF shares (this is called "creation), or they can collect some ETF shares, deliver them to the ETF issuer for retirement, and get back a basket of the underlying stocks (this is called "redemption"). ETFs work this way in part for price efficiency reasons (in-kind creation and redemption makes it easier to arbitrage the ETF against its underlying index), in part for operational efficiency reasons (it means the ETF doesn't have to do much trading for itself), and in large part for tax efficiency reasons (it means that the ETF [doesn't have taxable gains](https://www.bloomberg.com/opinion/articles/2019-03-29/deals-on-the-train-are-everyone-s-business) from selling its underlying stocks). Similarly with a spot Bitcoin ETF, the straightforward mechanism would be to have authorized participants hand Bitcoins to the ETF issuer to get back ETF shares, or hand ETF shares to the issuer to get back Bitcoins. But in fact none of the ETFs approved yesterday work that way. They all use only [cash creation and redemptions](https://www.bloomberg.com/news/articles/2024-01-03/bitcoin-spot-market-still-little-weird-proshares-strategist-says): Authorized participants give the ETF issuer _dollars_ and get back shares, and then the ETF goes and buys new Bitcoins with those dollars. (The main authorized participant for the Bitcoin ETFs [is Jane Street Capital](https://www.bloomberg.com/news/articles/2023-12-29/blackrock-names-jane-street-jpmorgan-as-bitcoin-etf-authorized-participants), though there are a few others.) The reason for this [seems to be](https://davidgerard.co.uk/blockchain/2023/12/22/bitcoin-etfs-coming-soon-but-in-cash-only/) that [the SEC doesn't like](https://www.reuters.com/business/finance/blackrock-updates-spot-bitcoin-etf-proposal-allow-cash-redemptions-2023-12-19/) in-kind creation/redemption for Bitcoin ETFs. Grayscale Bitcoin Trust, [in its ETF prospectus](https://www.sec.gov/Archives/edgar/data/1588489/000119312524006300/d264170d424b3.htm), says: > in common with other spot Bitcoin exchange-traded products, the Trust is not at this time able to create and redeem shares via in-kind transactions with Authorized Participants, and there has yet to be definitive regulatory guidance on whether and how registered broker-dealers can hold and deal in Bitcoin in compliance with the federal securities laws. To the extent further regulatory clarity emerges, the Sponsor expects NYSE Arca to seek the necessary regulatory approval to amend its listing rules to permit the Trust to do so (the "In-Kind Regulatory Approval"). Subject to NYSE Arca seeking and obtaining In-Kind Regulatory Approval, in the future the Trust may also create and redeem Shares via in-kind transactions with Authorized Participants or their designees (any such designee, an "AP Designee") in exchange for Bitcoin. There can be no assurance as to when such regulatory clarity will emerge, or when NYSE Arca will seek or obtain such regulatory approval, if at all. The problem is that, to be an authorized participant in the ETF, you have to be an SEC-registered broker-dealer, since you are effectively distributing the ETF shares. And the SEC is very skeptical of registered broker-dealers trading in Bitcoin. From an SEC perspective, you can trade ETF shares (as a broker-dealer), or you can trade the underlying Bitcoins (as an unregistered Bitcoin-y trader), but it's tricky to do both. That makes the Bitcoin ETF arbitrage - where you trade the ETF shares _against_ the Bitcoins - tricky. ### BTFP carry trade - Matt Levine Last year the Federal Reserve [created a program](https://www.bloomberg.com/opinion/articles/2023-03-13/svb-couldn-t-ignore-its-losses-but-the-fed-can) to allow banks to borrow short-term at long-term rates? I mean, sort of. What it did was create the [Bank Term Funding Program](https://www.federalreserve.gov/financial-stability/bank-term-funding-program.htm), which has [the following features](https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20230312a1.pdf): 1. Banks can borrow "for a term of up to one year," prepayable without penalty. 2. The interest rate is the one-year overnight index swap rate plus 10 basis points, fixed at the time of borrowing. So you could borrow for a term of one day to one year, in any case at the one-year interest rate (plus 10 basis points). Ordinarily, longer-term interest rates are higher than shorter-term interest rates: It is usually cheaper to borrow money overnight than it is to borrow it for a year. And so this program was, arguably, very mildly punitive, a classic lender-of-last-resort program along the lines of "lend freely against good collateral at penalty rates," or at least not _subsidized_ rates. But right now, the reverse is true: The overnight rate is fairly high, because the Fed has raised rates a lot over the past few years, but the one-year rate is lower, because the market expects the Fed to lower rates over the next year. And so the BTFP creates a weird carry trade: Banks can borrow at the BTFP's low one-year rate ([4.87%, today](https://www.frbdiscountwindow.org/)), lend at the higher overnight rate, and match the maturities. You can even match the counterparties: You borrow _from_ the Fed (using BTFP) and lend _to_ the Fed (as reserves, [at 5.40%, today](https://www.federalreserve.gov/monetarypolicy/reserve-balances.htm)) and just get free money. The [Wall Street Journal reports](https://www.wsj.com/finance/banking/the-fed-launched-a-bank-rescue-program-last-year-now-banks-are-gaming-it-43e9cee3): > Borrowing from the Fed's bank term funding program has increased to new highs in recent weeks, a strange consequence of the market's flip to forecasting multiple Fed rate cuts over the coming 12 months. > > The rate banks pay to use the program, BTFP for short, is tied to future interest-rate expectations. Now that investors have priced in a series of rate cuts later this year, banks are able to pocket the difference between what they pay to borrow the funds and what they can earn from parking the funds at the central bank as overnight deposits. … > > While the Fed offers financing below 5% through its rescue program, it is currently paying banks 5.4% on parked reserve balances. > > Lending in the program hit $141.2 billion this past Wednesday, a new high, up 4% from the prior week and up 25% since the middle of November when forecasts started changing. Most of the volume is still loans from the crisis, and the number didn't move much from July to November. > > The increases don't seem to be a sign of new stress on banks, especially since deposits have ticked up at banks over the same period. It appears more likely the banks are just taking the easy money. > > "We think banks are exploiting a positive arbitrage," Janney Montgomery Scott analyst Christopher Marinac wrote in a note this week. > > The benefit will eventually shrink, if not evaporate completely. The program is set to expire on March 11, barring an extension. On Tuesday, Michael Barr, the Fed's vice chairman for banking supervision, suggested the facility wouldn't be extended. Good trade! ### Beanie Babies - Matt Levine Let's say you want to start an internet business, and you need money. Here are two ways to raise the money: 1. You incorporate your business and sell stock. This is a pretty traditional way to raise money, and people know how it works. It has some downsides, for you. The main one is that you are giving up some control and ownership of your business: If you sell stock to outsiders, then you will have fiduciary duties to them, you will have to manage the company with their best interests in mind, they might get voting shares and board seats, and they will own a portion of the value of the business. Another downside is that you will be subject to securities regulation. If you sell stock to the public, in the US, the US Securities and Exchange Commission will make you register your offering and disclose a lot of stuff about your business. Even if you only sell stock to sophisticated venture capitalists, and thus avoid registration, you will still be subject to securities _fraud_ rules: If you lie to investors to get them to buy your stock, the investors can sue you, or the SEC can. 2. You can sell _crypto tokens_ that are in some way linked to your business. This is a pretty new way to raise money for a business, one that [had a vogue](https://www.bloomberg.com/opinion/articles/2019-10-14/the-sec-really-doesn-t-like-icos) in the late 2010s and early 2020s. But it is much less standardized than stock, and it is not even obvious what I mean by "crypto tokens that are in some way linked to your business." Perhaps you start some internet business, you issue some crypto tokens, and you promise to use a portion of the revenue from your business to _buy back_ some of those tokens and retire them, to "buy and burn" the tokens. Then if you make a lot of profits, you will buy a lot of tokens, so there will be demand for the tokens and they will be valuable. People buy the tokens today to speculate on your future profitability. This is a common approach taken by actual crypto companies; we have [talked](https://www.bloomberg.com/opinion/articles/2022-11-09/bankman-fried-s-ftx-had-a-death-spiral-before-binance-deal) a few [times](https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad) about FTT, the stock-like token that FTX Trading Ltd. issued in connection with its crypto exchange. But you could imagine other approaches. You could make the link between your business and the token quite tenuous; you could just start a business called Gloobzorp Inc. and issue tokens with the _name_ Gloobzorp and not promise anything, just hoping that people will buy the tokens to bet, incoherently, on the success of your business. Which approach should you choose? Well, in, like, 2021, the crypto token approach had some really powerful things to recommend it: - The rules and norms around fiduciary duties, ownership sharing, etc., were much less developed in crypto than they are in stocks. You could issue Gloobzorp tokens to investors, and raise money, and _not_ give up much in the way of control or profits or ownership interests or anything else. You could sell shares in the business without selling shares in the business - or rather, you could raise money by selling things that looked a little bit like shares in the business, without selling shares in the business. - Relatedly, the _securities laws_ … arguably? … did not apply to this sort of thing. I mean! There is a lot of argument about that, and we'll discuss some of it. But you could at least _imagine_ that these tokens were not securities, which meant things like (1) you could sell them, broadly, to the public, to raise money to build your business, without registering with the SEC or providing much disclosure, and (2) if you were doing fraud maybe the SEC wouldn't come after you. - There was a huge boom in crypto, money was pouring in, people weren't asking too many questions, and there was a lot of willingness to believe that every business with "crypto" in the description would revolutionize economics and make all of its investors rich. So you could raise a lot of money on pretty good terms, without much disclosure, without giving up much control or ownership. If you had the _free choice_ between (1) raising money subject to a lot of rules about disclosure and honesty and fiduciary duties and (2) raising _more_ money with _no_ rules or obligations, wouldn't you take the second option? But of course, of course, of course, this is not a long-term equilibrium. All the downsides of stock - the fiduciary duties, the sharing of the value of the business, the disclosure obligations - are not _incidental_; they are not just arbitrary punishments visited on entrepreneurs who issue stock. _They're the point_. The _reason_ that entrepreneurs can raise money by issuing stock - they can get real dollars in exchange for pieces of paper saying "this is a share of a business that doesn't exist yet" - is that there is a highly developed system of obligations that reassures investors that those pieces of paper have value. The investors get some rights, some control, some economic ownership, some legal and regulatory protections, in exchange for their money. And that is why they are willing to part with their money. And the particular set of rights that exist in the US - Delaware corporate law, SEC disclosure regulation, etc. - generally works pretty well, to the point that lots of foreign companies come to the US to raise money, because subjecting themselves to the burdens of US regulation makes them attractive to investors. Investors trust the US capital markets, because they have a long tradition of being pretty well regulated, which means that they are an attractive place for companies to raise money. Meanwhile, in _2024_, my description of raising money for a business by issuing a crypto token sounds fake and embarrassing. "What on earth," you probably said as you read it, "nobody does this, this is not a thing." I can only say: It really was, in 2021! But now nobody believes that every business with the word "crypto" in its description will revolutionize economics, people who invested in the earlier crypto offerings [got burned](https://www.bloomberg.com/opinion/articles/2023-06-07/when-is-a-token-not-a-security) when crypto crashed, and crypto fund-raising is a fraction of what it was a few years ago. If people are willing to give your business money in exchange for _nothing_ then, by all means, take it! But they won't be willing to do that for long. Meanwhile, these days, the SEC is _quite sure_ that US securities laws _do_, and always did, apply to this sort of thing. If you issued a crypto token to fund a business, with vague promises that the token would participate in the upside of the business, the SEC thinks that that's just the same as issuing stock, and you should be held to the same standards (of disclosure, of not doing fraud) as stock issuers. I [think](https://www.bloomberg.com/opinion/articles/2023-07-14/ripple-is-a-security-and-it-isn-t) they're [right](https://www.bloomberg.com/opinion/articles/2023-08-03/terra-is-usually-a-security) but that's not important right now. The SEC is effecting its crackdown on crypto mostly by going after crypto exchanges. The [thinking is roughly](https://www.bloomberg.com/opinion/articles/2023-06-07/when-is-a-token-not-a-security): 1. If all of these crypto tokens are securities, then not only were they all _issued_ illegally (by issuers that didn't register them with the SEC), but they all _trade_ illegally (on crypto exchanges that have not registered with the SEC as national securities exchanges). 2. There are fewer crypto exchanges than crypto issuers, and they are bigger, and shutting them down will shut down crypto much more efficiently than going after all the issuers one by one. One of the SEC's main targets is Coinbase Global Inc., the big US exchange. The SEC [sued Coinbase in June](https://www.bloomberg.com/opinion/articles/2023-06-06/the-sec-comes-for-crypto), and Coinbase is fighting the case hard. Yesterday a New York federal judge held a hearing on Coinbase's motion to dismiss the SEC's case, and it sounds like it went pretty well for Coinbase. [The Wall Street Journal reports](https://www.wsj.com/finance/regulation/judge-questions-secs-claim-to-regulate-coinbase-ae2f240c): > A federal judge on Wednesday questioned whether allowing the Securities and Exchange Commission to impose its regulations on Coinbase would give the agency sway over markets it doesn't have authority to supervise. > > "I want to understand how your standard does not sweep in the collectible market or commodities," U.S. District Judge Katherine Polk Failla told SEC lawyers in the courtroom. "It is a real fear that I have that your argument is just sweeping too broadly." > > Failla is considering Coinbase's request to dismiss the SEC's civil lawsuit against it filed in Manhattan federal court. She didn't rule at the end of Wednesday's five-hour hearing but is expected to decide in the coming months. But even if Coinbase wins, there's something a little hollow about the victory. [Bloomberg News reports](https://www.bloomberg.com/news/articles/2024-01-17/coinbase-argues-crypto-like-beanie-babies-in-sec-case-hearing): > William Savitt, a lawyer for Coinbase, told US District Judge Katherine Polk Failla that tokens trading on the exchange aren't securities subject to SEC jurisdiction because buyers don't gain any rights as a part of their purchases, as they do with stocks or bonds. > > "It's the difference between buying Beanie Babies Inc. and buying Beanie Babies," Savitt said. … > > Lawyers for the government responded that buying an item like a baseball card or a figurine doesn't mean that someone is buying a stake in the enterprise that makes such items. > > But they said that wasn't the case with tokens sold on Coinbase. > > "When they buy this token, they are investing into the network behind it," SEC lawyer Patrick Costello said. "One cannot be separated from the other." The SEC's argument here is that crypto tokens are an investment, promising some upside from some business building some network with some potential to do good things. Coinbase's argument _is that they aren't_, that it lists tokens that give investors no rights and that have no claim on any economic activity. Coinbase's argument is that crypto is a trillion-dollar market for Beanie Babies, that it is not a way to raise money to fund real business ideas but simply a way to gamble on collectibles. "No, see, if you buy a crypto token, you get nothing, so there's nothing for the SEC to regulate." A good legal argument! But weird _marketing_! The problem for crypto is that, to have a big attractive financial market in the long term, you need to have obligations. You need to have some system for ensuring that investors get what they pay for, that entrepreneurs have duties to the investors who give them money, that people deal honestly, that investors get disclosure. And Coinbase, to be clear, has called for those things: It _wants_ regulation of crypto, because in the long run that is good for its business; it has [begged the SEC](https://www.sec.gov/files/rules/petitions/2022/petn4-789.pdf) to write new rules for crypto. And I [have sympathized with its view](https://www.bloomberg.com/opinion/articles/2022-09-13/crypto-wants-some-sec-rules) that some new rules would be nice. But the SEC [rejected that request](https://www.sec.gov/news/statement/gensler-coinbase-petition-121523), saying, no, actually, the _existing_ rules apply to crypto, and are fine. But the crypto market mostly _doesn't_ want existing SEC regulations - the disclosure and anti-fraud rules that apply to stock - to apply to crypto, because they would be too restrictive. (That's why Coinbase is fighting the SEC in court, arguing that the SEC has no jurisdiction over crypto at all.) It would be good for crypto to have some rules to eliminate some frauds and make the market more trustworthy, but if you have too many rules and eliminate too many frauds … well, you might worry, what will be left? When Coinbase itself went public in 2021, its chief executive officer, Brian Armstrong, wrote [a letter to investors](https://www.sec.gov/Archives/edgar/data/1679788/000162828021006850/coinbaseglobalinc424b.htm#ieaae362603cf40bfa0bef8a383bacd66_31). It was full of big claims: > Coinbase is a company with an ambitious vision: to create more economic freedom for every person and business. Everyone deserves access to financial services that can help empower them to create a better life for themselves and their families, but today we are a long way from this vision. … > > What started with Bitcoin has spawned an entire industry with countless different blockchains and tokens. We now have stablecoins, privacy coins, security tokens, reward tokens, governance tokens, and smart contracts. We're seeing the digitization of all types of value in a new economy that we call the cryptoeconomy. > > Trading and speculation were the first major use cases to take off in cryptocurrency, just like people rushed to buy domain names in the early days of the internet. But we're now seeing cryptocurrency evolve into something much more important. People are using cryptocurrency to earn, spend, save, stake, borrow, lend, vote, and perform many other types of economic activity. Companies are being funded, getting early customers, and will eventually go public, all on the blockchain. The cryptoeconomy is just getting started. It is not intended to replace the traditional economy, but instead to be a complement to it, much like email was to paper mail. The cryptoeconomy offers a more global, free, and fair alternative to traditional economies that is native to the internet. Now it's Beanie Babies. ### BOXX - Matt Levine For a while now people have emailed me occasionally about [BOXX](https://etfsite.alphaarchitect.com/boxx/), the Alpha Architect 1-3 Month Box ETF, which is, loosely speaking, a money-market exchange-traded fund whose holders get paid Treasury bill interest rates but _don't pay taxes_. I mean, that's what it looks like on the outside. On the inside it's a pile of stock options. "Isn't this cool," is how these emails often go. Or, "what is going on here?" Today Bloomberg's Zachary Mider [has an article explaining BOXX's magic](https://www.bloomberg.com/news/articles/2024-02-22/this-exchange-traded-fund-mimics-t-bill-returns-without-tax-bills), and it is very fun, and very much up my alley, and if you are reading this column it's probably very much up your alley as well: > A year-old investment fund offers returns that closely track short-term Treasuries, with starkly lower tax bills. The fund, Alpha Architect 1-3 Month Box ETF, uses a complex options strategy and a longstanding tax loophole that favors exchange-traded funds. > > "We spent seven years figuring out how to do this," said Wesley Gray, the ex-Marine and chief executive officer of Alpha Architect. "My job is just to deliver all the value I possibly can to my shareholders, within the law." > > The fund, known by its ticker BOXX, surpassed $1 billion in assets this month. It is one of a number of efforts to use the ETF loophole in creative new ways, said Jeffrey Colon, a tax professor at Fordham University's School of Law in New York. He called BOXX "the poster child for tax arbitrage." I can't _not_ write about the poster child for tax arbitrage, can I? The goal is pretty simple. You want something close to a Treasury money-market fund: You want a place to park your money that pays roughly the current short-term Treasury interest rate, that is roughly as safe as short-term Treasury bills, and that will give you your money back whenever you need it. You want it to be in the form of an exchange-traded fund, so you can buy and sell shares on the stock exchange. And you want the tax treatment to be better than Treasury bills. Specifically, you want the tax treatment that you'd typically get from a stock ETF: You don't want to pay taxes until you sell your shares, and when you do, you want to pay capital gains taxes. So the first thing you want to do is turn interest income into capital gains. In the US, interest income - the interest you get paid on bonds or savings accounts or money market funds - is mostly taxed as ordinary income, at (federal) rates of [up to 37%](https://www.irs.gov/filing/federal-income-tax-rates-and-brackets). Long-term capital gains - your profits on selling assets that you've held for more than a year - are taxed at lower rates, [up to 20%](https://www.irs.gov/taxtopics/tc409). Turning interest income into capital gains is, therefore, good. In some sense this should be _easy_. Interest is what you get paid for giving up the present use of your money. If you put your money in a savings account, the bank pays you interest every month for the use of your money. But if you buy, like, Nvidia Corp. stock, or Bitcoin, nobody pays you any interest. Instead, you expect the value of those things to go up over time, to compensate you for the use of your money. If you put $100 into Nvidia today and sell it for $150 in a year, part of that $50 is in some rough sense "interest," compensation to you for giving up the use of your money for that year. Most of it, though, is "risk premium," compensation to you for taking the risk that Nvidia might go _down_ instead. But there's no actual division; it's just $50 of capital gains. But of course Nvidia really might go down instead. (Thus the risk premium.) So the job is to buy some asset that will appreciate, but only by the risk-free amount, and without risk: Instead of buying a stock that might go up 100% or down 50%, you want to buy an asset that will definitely go up exactly 5%. (I assume here that the short-term risk-free interest rate in the US is about 5%.) Here is the simplest way you might imagine turning interest into capital gains. You give me $100 today, I promise to pay you back $105 in a year and a day, and I _don't_ pay you any interest along the way. "No interest income," you say to the Internal Revenue Service. And then in a year I give you back $105 and you say, well, I bought a bond for $100 and sold it for $105 after a year and a day, so I have $5 of long-term capital gains. This doesn't work, though. It's too obvious, and [the US tax code specifically says](https://www.law.cornell.edu/uscode/text/26/1272) that this sort of substitute for interest - called "original issue discount" - gets counted as interest income, not capital gains. So you have to get away from debt. You can do this with stock, but stock doesn't have a guaranteed return. What you want is to (1) buy a stock today, (2) _hedge the risk of the stock price_ and (3) sell it in a year for 5% more than you paid for it. This can be done! Classically it is called a "forward contract." You buy a share of stock today for $100. You agree to sell it to me, for a fixed price (the "strike price" or "forward price"), in a year. In a year, I give you the cash and you give me the stock. How much should I pay you in a year? Well, I should pay you enough to compensate you for locking up your money for a year. If the risk-free interest rate is 5% and the stock doesn't pay a dividend, I should pay you $105. You put $100 into the stock today, I give you $105 in a year, you give me the stock. You have hedged out the stock-price risk - even if the stock goes up to $200 or down to $20, you're selling it for $105 in a year - so you don't need any compensation for risk. You just get paid a risk-free interest rate. But the transaction here is not "you put in $100 today and get back your money with $5 interest in a year"; it's "you buy stock today and sell it for a profit in a year." So, plausibly, capital gains. (Not tax or legal advice!) Stock forwards are not particularly usual contracts. But you can _build_ them. The way to build a stock forward is by buying a put option and selling a call option. So: 1. Today, you buy a share of stock for $100. 2. Today, you sell me a call option giving me the right (but not the obligation) to buy the stock from you for $105 in a year. 3. Today, you buy from me a put option giving you the right (but not the obligation) to sell me the stock for $105 in a year. 4. It is a convenient feature of financial markets - called "[put-call parity](https://en.wikipedia.org/wiki/Put%E2%80%93call_parity)" - that the price of the call option you sell equals the price of the put option you buy, making your net outlay in Steps 2 and 3 zero, or close to it. (The _reason_ for this is that the combination of the put and the call is equivalent to a forward contract, struck at the fair forward price, so the price of that forward - or the options that make it up - should be zero.) 5. In a year, if the stock is above $105, I exercise the call option and buy the stock from you for $105. If it's below $105, you exercise the put option and sell me the stock for $105. 6. In any case, you put in $100 today ($100 for the stock, plus the price of the put, minus the offsetting price of the call) and get back $105 in a year. 7. In other words, you got 5% interest on your $100. Buying the stock makes you long the stock. Buying the put and selling the call make you "synthetically short" the stock: Owning a put and selling a call is economically equivalent to selling the stock forward. If you are long the stock and short the forward, then you have no stock price risk. You're just locking up your money in a risk-free trade for a year, and you get paid the risk-free interest rate. Here's a variation that is more complicated visually but a bit simpler operationally: 1. You don't buy any stock. 2. You buy a put option and sell a call option, each with a strike price of $105. The net cost of these options is zero, just as it was above. 3. You sell a put option and buy a call option, each with a strike price of, say, $55. This gives you the right to buy the stock for $55 in a year, and it gives me the right to sell you the stock for $55 in a year. 4. The net cost of those options (the ones in Step 3) is, let's say, $47.60. 5. In a year, if the stock is above $105, then I exercise my $105 call option (and buy the stock from you at $105), and you exercise your call option (and buy the stock from me at $55), and the net result is that you get $50 (and no stock). 6. If the stock is below $55, then I exercise my put option (and sell you the stock at $55), and you exercise your put option (and sell me the stock at $105), and the net result is that you get $50 (and no stock). 7. If the stock is between $55 and $105, then you exercise your put option (and sell me the stock at $105) _and_ your call option (and buy the stock from me at $55), and the net result is that you get $50 (and no stock). 8. In any case, you paid $47.60 today (for the options in Step 3) and got back $50 in a year. 9. In other words, you got 5% interest on your $47.60. The actual prices don't matter much; the point is that you have put in some money today in exchange for a fixed amount of money in the future, using options. You get synthetically short (in Step 2), just like in the previous example. But instead of getting long by buying the stock, you get synthetically long by buying the call and selling the put (in Step 3). You are long _and_ short the stock using options. This is neater because rather than buying stock _and_ options, you do everything in one place, in the options market. This is called a "box spread." Does it turn interest income into capital gains? Sure, [more or less](https://www.morningstar.com/portfolios/tax-aware-alternative-cash). Not legal advice! [Alpha Architect says](https://alphaarchitect.com/2023/05/box-spreads-an-alternative-to-treasury-bills/): > The taxation of box spreads is complex; the tax rates (e.g., 25% or 40%) and tax character (e.g., income vs. capital gain) of options can differ from the taxation of treasury bills. The situation can get even more complex for index options, such as SPX, which are considered 1256 contracts, meaning 60% of their gains are taxed at long-term capital gains rates, and 40% are taxed at short-term capital gains rates. But let's just loosely say that, yes, this transmutes a thing called "interest" into capital gains on some equity derivatives. And in fact [derivatives traders](https://moontowermeta.com/boxx-access-options-funding-rates-in-an-etf/) think of box spreads as a way to lend money in the options market and get paid roughly the risk-free interest rate. And that's what BOXX does: It mostly buys box spreads on the S&P 500 index, earning Treasury-like interest through equity index derivatives. There is one other nice feature of box spreads using US listed options. I talked above about you trading options with me. But of course if you buy a put option from me today, and then in a year you exercise the option and demand that I pay you for the stock, there is some risk that I won't have the money. Trading US listed options solves this problem, because in listed options your counterparty is not me - some guy whose credit is risky - but rather the Options Clearing Corp., which backs all US listed options trades. The OCC is not actually an agency of the US government, and its credit is not exactly identical to that of US Treasury bills. But you might nonetheless feel pretty confident in its credit: It is a too-big-to-fail financial-markets utility with a strong credit rating and a lot of regulatory interest. "The OCC is a SIFMU, or systematically important financial market utility, which means the federal reserve will (most likely) get involved if something is amiss at the OCC," [Gray writes](https://alphaarchitect.com/2023/05/box-spreads-an-alternative-to-treasury-bills/) on Alpha Architect's blog. Lending money in the box spread market pays roughly Treasury-like interest, and has roughly Treasury-like credit risk. Which is what you wanted. So far, so good, you have turned interest income into capital gains. But that only does so much. If you know that you want to lock up your money for 18 months and get paid the risk-free interest rate on it, then, yes, you can buy an 18-month box spread and (perhaps) turn your interest income into long-term capital gains. But that's not a great _product_. What you want in a product is something more flexible: 1. The product lasts forever and is constantly earning the short-term risk-free interest rate on whatever money it holds. 2. Anyone can put money in or take money out at any time. 3. They pay taxes only when they take their money out, and only on their gains (the difference between what they take out and what they put in). For that you need some ETF technology. Mider writes: > ETFs' tax advantage stems from their ability to avoid capital gains. That's the kind of taxable event that happens when you sell something for more than you paid. A 1969 law allows a certain type of investment fund to avoid those events if it hands appreciated securities, rather than cash, to an investor withdrawing from the fund - a transaction known as in-kind redemption. The tax break was rarely used until ETFs were invented two decades later. > > Thanks to the tax treatment of in-kind redemptions, ETFs typically record no gains at all. That means the tax hit from winning stock bets is postponed until the investor sells the ETF, a perk holders of mutual funds, hedge funds and individual brokerage accounts don't typically enjoy. We have [talked about this treatment](https://www.bloomberg.com/opinion/articles/2019-03-29/deals-on-the-train-are-everyone-s-business) in the past: US exchange-traded funds ordinarily do not buy or sell stocks. Instead, when you want to buy shares of (say) an S&P 500 index ETF, you buy the shares from an arbitrageur, who buys them from an "authorized participant," a big bank or trading firm, who then _creates_ them with the ETF: The authorized participant buys all the stocks in the underlying index and delivers them to the ETF in exchange for some new shares of the ETF. And when you want to sell, you sell to an arbitrageur, who sells to an authorized participant, who _redeems_ the shares from the ETF: The authorized participant hands the shares back to the ETF and gets back the basket of underlying stocks, which it then sells. The key advantage of this is that those _in-kind redemptions_ - when the ETF takes back shares and gives out its underlying holdings - are not taxable events under US law. So a well-run stock index ETF might never have any taxable gains, which means that its holders never have any taxable income from holding the ETF. (Unlike a regular mutual fund, which will have gains whenever it sells appreciated stocks, and which will pass those gains on to its holders.) When the holders sell their ETF shares, that is a taxable transaction for them; if the ETF shares have gone up, then they pay capital gains taxes on their gains. But just _holding_ the ETF shouldn't generate taxes. I suppose in theory BOXX could work something like that: It could never buy or sell box spreads, but instead have an authorized participant buy the box spreads and exchange them for new ETF shares. In practice, that seems more challenging to pull off with index options than it is with stocks, and BOXX does something different. Mider: > Earning bond-like returns but recording them as capital gains from options bets, rather than interest, gives BOXX a chance to deploy the tax magic of ETFs. It does that by turning a single stock into a perpetual tax-loss-generating machine. > > The stock that BOXX uses for this task is usually Booking Holdings Inc., the owner of reservation websites like Priceline, OpenTable and Booking.com. In addition to placing box spreads on the S&P 500, from time to time BOXX will also buy one on Booking shares. Booking's unusually high price, which hasn't dipped below $3,000 this year, makes it an attractive stock for these trades, Gray said. > > Although Booking spreads typically represent less than 1% of BOXX's holdings, they play a key role in its tax planning. A box spread is akin to making two bets, one that a stock or index will go up, and one that it will go down. Since the bets are symmetrical, the overall value of the spread is unaffected by market movements. But the individual components are: If Booking rises, the long bet will gain in value, and the short one will lose. > > Whenever BOXX wants to cancel out some capital gains, it uses an in-kind redemption to hand off the winning leg of the Booking trade to a market maker, Gray said. It keeps the losing leg on its own books, generating a tax loss. ... > > A relatively small investment in Booking, combined with the ETF loophole, can easily generate large tax losses. Last May, BOXX bought a box spread on Booking for about $1 million. Three months later, the long side of the trade had gained more than $30 million and the short side had lost almost the same amount. > > Then BOXX shed the winning part of the trade through an in-kind redemption and kept the losing part on its books. The fund's daily holding reports show that the maneuver positioned BOXX to book a tax loss of about $32 million, even though its overall bets on Booking made a few thousand dollars. That loss is more than all the actual returns the fund earned last year. A box spread is a synthetic long position in a stock plus a synthetic short position in the stock. If the stock goes up, you make money on the long and lose money on the short; if it goes down, you lose money on the long and make money on the short. You sell the losing leg - generating a tax loss - and redeem the winning leg in-kind, avoiding a taxable gain. You do that with your weird little side trade in Booking, and you can generate enough tax losses to shield all of your actual (net) gains on your S&P 500 box spreads. And then you have a money-market fund whose interest is not taxable. Pretty good! ### Celsius - Matt Levine When I worked as a mergers-and-acquisitions lawyer and then as an investment banker, I thought that you could trade stocks in the US from 9:30 a.m. to 4 p.m. New York time, Monday through Friday. Was that completely accurate? No, of course not: There were, and still are, early morning and after-hours trading sessions, and I knew that. But it was close to true: There was, and still is, much more trading during normal market hours than in the extended sessions. And it was a very _useful_ approximation of the truth. In particular, here are two stylized facts that are sort of true and that work very nicely together: 1. "The market is closed evenings, early mornings and weekends." 2. "Public companies have an obligation to keep their investors informed about material stuff that is going on." For example: Public-company mergers and acquisitions tend to be intensively negotiated over the weekend, and are often announced on Monday mornings. Why? Well, because if a public company reaches an agreement to sell itself, that is an extremely material fact, and it should really announce that right away. You do not want people blithely buying and selling the stock at $35 when the company has already signed a merger agreement to sell itself for $50 per share. If you sign that deal at 11:46 a.m. on a Wednesday, first of all, every second that you spend drafting the press release is precious, and second, whenever that press release _does_ come out, it's going to be disruptive: The stock will spike up, people will make and lose fortunes, people who see the press release a millisecond before everyone else will have a huge advantage, and you will generally have disorderly and unpleasant trading. In fact, if you _do_ find yourself needing to announce a merger at 11:46 a.m. on a Wednesday, you will ordinarily ask the stock exchange to halt trading in the stock first, and reopen it only after the announcement has gone out and everyone has had a few minutes to read it. But that is stressful and disruptive too, and it's much better to just get everything buttoned up on Sunday evening, get the press release ready to go, and put it out first thing Monday morning, well before the market opens. [[5]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E3854#footnote-5) Give everyone plenty of nontrading time to digest and understand the news, so that when trading starts everyone is on a level playing field. Also, if for some reason there is a glitch in the system when you hit publish on the press release at 6 a.m., you have time to fix it: If it goes out at 6:20, that's fine too. (To be clear, this stylized fact is good and useful from the abstract perspective of the public company, but it was very bad from my perspective as a young M&A lawyer. Terrible hours!) Anyway, I mostly still think that - "market hours" are 9:30 to 4, Monday through Friday, - you are supposed to put out material news "outside of market hours," and - it doesn't matter all _that_ much exactly when you do that, as long as you leave plenty of time before the market opens. And I think a lot of other people still think that too, in part out of old habit, and in part because it is still sort of true, and in part because it remains very useful. But there [has been some creep]([Robinhood Will Stay Open Late - Bloomberg](https://www.bloomberg.com/opinion/articles/2022-03-30/robinhood-will-stay-open-late)) toward always-on financial markets - we [talked last week](https://www.bloomberg.com/opinion/articles/2024-02-28/trading-stock-takes-time) about a proposed 23-hour-a-day stock exchange - and I worry that this stylized fact is no longer true. We [talked a few weeks ago](https://www.bloomberg.com/opinion/articles/2024-02-14/lyft-had-a-typo) about a typo in Lyft Inc.'s earnings release. Lyft put out the release right after the market closed on a Tuesday, there was a material typo, Lyft did an earnings call at 4:30 p.m., it verbally corrected the typo, and it filed a corrected earnings release at 5:51 p.m. Absolutely no harm, no foul, on the traditional way of thinking: All of this happened after hours, and by 9:30 the next morning everyone had had plenty of time to digest it. But in fact $700 million worth of Lyft stock traded in the after-hours extended session that Tuesday, roughly three times as much as Lyft usually trades in the _regular_ trading session. And there were news stories about it, and readers emailed me to be like "is this securities fraud," and Lyft's CEO had to [go on television](https://www.bloomberg.com/news/articles/2024-02-14/lyft-s-risher-says-my-bad-on-margin-error-it-was-one-zero) to say he was sorry. I forgive him! I wrote: > It is customary to do these things after market hours for - well, not exactly for this reason, but kind of for this reason? You put out the press release just after the market's regular trading session closes at 4 p.m., and investors have 17.5 hours to think about it before the market opens again at 9:30 a.m. the next day. They can ponder the earnings release at their leisure, update their models, ask questions on the earnings call, and generally take their time to digest the new information and formulate a price view before the market opens and they have to trade on it. If there's anything ambiguous or surprising in the earnings release - or a typo! - the company and the investors have time to clarify it, and they can trade the next day with well informed views. … > > Lyft can't stop its shareholders from trading after hours, but in some rough sense that's not its responsibility. If you want to trade in the after-hours market the second the press release hits the tape, the risk of typos is on you. And then last week Celsius [did this](https://www.bloomberg.com/news/articles/2024-02-29/celsius-snafu-gave-a-sneak-peek-to-rally-fueling-earnings-report): > Celsius Holdings Inc.'s quarterly results were sitting online, waiting to give anyone who looked a sneak peek at the earnings that would set off a 20% rally in the energy-drink company's stock price. > > Not many people, it seems, knew they were there. > > The company, which has a market value of about $19 billion, was scheduled to release its fourth-quarter and full-year results at 6 a.m. New York time on Thursday. > > But they appeared on Celsius's website Wednesday night shortly after 7 p.m., with screenshots later circulating on X. The stock edged higher around that time, but on featherweight volumes. Trading picked up right at 6 a.m. Thursday, with shares falling more than 5% premarket before surging during the regular session by the most since August. They ended the day at an all-time high. … > > It appears to be the latest blunder of what's been a fairly gaffe-heavy earnings season, with notable clerical errors in reports from Lyft Inc., Planet Fitness Inc., Mister Car Wash Inc. and Rivian Automotive Inc. ... > > Of course, even if investors did see Celsius's report when it became available Wednesday night, they may not have been able to trade on it at the time and would've waited until Thursday's premarket session, said Kenneth Polcari, chief market strategist at Slatestone Wealth LLC. > > "I think it's just sloppy," Polcari said of the early release. "But I don't think anyone was disadvantaged." It's fine! This is how it's supposed to work! There are two sorts of time in the stock market: 1. From 9:30 a.m. to 4 p.m., people are trading and every millisecond counts. 2. From 4 p.m. to 9:30 a.m., and all weekend, time stops mattering: That whole stretch of 17.5 or 65.5 hours is effectively a single point, and there is no meaningful difference between 7 in the evening and 6 the next morning. If you put your earnings up on your website at 7 p.m. and then put them out on a news wire at 6 a.m., that's fine! Those times are the same time! You did exactly what you are supposed to do; you got the information out there in the quiet time between when the market closed and when it opened again. Except the market was kind of open the whole time. ### Slerfed! - Matt Levine Here are some statistics from [Bloomberg's Olga Kharif](https://www.bloomberg.com/news/articles/2024-03-16/want-to-be-certified-crypto-expert-you-need-11-hours-and-229): > To pass the chartered financial analyst exams and put the "CFA" letters on your résumé, at least 900 hours of study are recommended. Hitting the books for 300 to 400 hours is advised for the certified public accountant exam, which is usually taken by prospective CPAs who have completed an undergraduate degree in the subject. > > However, to become a "Certified Cryptocurrency Expert," or CCE, all you need is $229 and time for 11 hours of online coursework offered by Blockchain Council. If that's too much of a time commitment, you can receive a "Cryptocurrency and Blockchain Certificate" elsewhere by taking just four hours of coursework, passing a 20-question test and shelling out $795. Well. Sure. Look, I myself have spent at least [11 hours online](https://www.bloomberg.com/features/2022-the-crypto-story/) learning about crypto, and I do not want to be _too_ skeptical about crypto education. But these numbers strike me as reasonable. Of course the CFA program should be harder than the crypto program. One model that you could have for crypto is that it is _finance_ without the _content_. So: A share of stock is an electronic token that you can buy or sell for money. Sometimes a lot of people want to buy a stock, and its price goes up. Other times, people want to sell it, and its price goes down. Why do they want to buy or sell it? Various reasons: Perhaps they got tax refunds or stimulus checks, perhaps the chief executive officer of the company that issued the stock did something interesting or got arrested, perhaps the company announced good earnings or bad earnings or a new product or a computer hack. But the _traditional_ reason is that a share of stock represents a partial ownership interest in a company, and the long-term value of the stock is the present value of its future cash flows. You can estimate that value by projecting those future cash flows and performing math to compute their present value. Different people will have different estimates, so there will be trades, and those estimates will change over time - with the company's prospects, with discount rates, with macroeconomic conditions - so there will be volatility. And if you want to make money trading stocks, traditionally, you go and learn about companies and products and business models and accounting and discounted cash flow modeling and all the other things that go into estimating the values of stocks, either because you want to get good at estimating values or because you want to know what _other_ people, the ones you are trading against, are up to. A crypto token is also an electronic token that you can buy or sell for money, but in a purified form. There's no company, no product, no earnings, no cash flow. Sometimes a lot of people want to buy the token, and its price goes up; other times, they want to sell, and its price goes down. You have the most salient feature of finance - a volatile electronic token that you can trade - without any of the other features. There is less to learn! Oh this is unfair and oversimplified, _your_ crypto project is different, _your_ crypto project is empowering communities with real products and not just an empty vessel for financial speculation. But Bloomberg's Muyao Shen [reported last week](https://www.bloomberg.com/news/articles/2024-03-13/memecoin-trading-volume-rises-to-levels-last-seen-before-crypto-bubble-burst): > The memecoin frenzy in the digital-asset market shows no signs of stopping, with trading volumes now at levels last seen just before the burst of the last crypto bubble more than two years ago. > > Considered as some of the most speculative and volatile cryptocurrencies, memecoins such as Dogwifhat and Pepe are far outstripping the gains registered by market bellwether Bitcoin that has dominated the headlines. Trading volume for the top memecoins, which often trade for a fraction of a cent, reached nearly $80 billion in the past week, according to data compiled by blockchain data firm Kaiko. That's the highest since October 2021. … > > Memecoins have been a long-existing phenomenon in crypto, as small investors and promoters see the microscopic prices of memecoins as an opportunity to quick post huge returns despite the lack of traditional fundamentals. ... > > A group of dogwifhat token holders announced last week a public fundraising campaign to put the dogwifhat meme on the Las Vegas Sphere. The group has already reached its target goal of $650,000 in the USDC stablecoin, based on the transaction history of the digital wallet for the fundraise. But it's unclear whether and when the fund will be used to promote the meme in Las Vegas. What are dogwifhat's fundamentals? Well: 1. Its logo is a dog, with a hat. 2. If people kick in enough money, maybe they can put a picture of the dog with the hat on the Las Vegas Sphere, which might encourage more people to kick in more money. What does the multiple-choice exam question about this look like? Or [today we got the story of Slerf](https://www.theblock.co/post/283025/solana-memecoin-slerf-burn): > A new Solana-based memecoin, Slerf, has faced significant challenges after the project's developer accidentally burnt a major portion of the token supply - effectively losing $10 million, or the entirety, of presale participants' money. > > "Guys I f-ed up," the project's official X account wrote. "I burned the LP and the tokens that were set aside for the airdrop. Mint authority is already revoked so I can not mint them. There is nothing I can do to fix this. I am so f-ing sorry." > > The Slerf team later went to an X Spaces to elaborate further on the situation. "I'm sick to my stomach," team member Slorg said in a Space on X. "I'm literally about to throw up." > > "I'm lost for words," they added. "I don't know what to do." Poor Slorg. Basically the way crypto works is that a guy named Slorg [makes up a token named Slerf](https://www.slerf.wtf/#about), which is distinguished from other tokens by having a cartoon sloth logo. You send $10 million of Solana crypto tokens to Slorg, and he makes a note to himself that he owes you some Slerfs. Then he accidentally flushes that note down the toilet and, due to the irreversible nature of the blockchain, you get no Slerfs and your money is permanently gone, though Slorg is very sorry. If this were a _company_, and Slerf was a _stock_, this would all be _bad:_ It is bad for a company to lose all of the money it raises in a stock offering. (Also, though, it would probably be _reversible._ If a company just lost its list of shareholders, it could probably, like, go back through its emails and reconstruct the list.) But Slerf is not a company or a stock: It is a crypto token, so absolutely nothing matters. Except that this is all sort of _funny_, and attention-grabbing, so of course Slerf went _up_. [Arnold](https://twitter.com/jdotarnold/status/1769698114603008382): "This mistake was very good for attention, and attention is the true value of any memecoin. So the obvious thing happened and the new tokens that were released shot up around 5,000%." You could spend another 10 hours and 55 minutes pondering this but I do not recommend it. ## cryptocurrency - Celsius [Founder of crypto lender Celsius Network arrested, charged with fraud | Hacker News](https://news.ycombinator.com/item?id=36710558) [Founder of crypto lender Celsius Network pleads not guilty to fraud charges | Reuters](https://www.reuters.com/markets/us-sec-sues-celsius-network-its-founder-2023-07-13/) [Major crypto lender Celsius freezes withdrawals as markets tumble | Hacker News](https://news.ycombinator.com/item?id=31723286) [Crypto contagion fears spread after Celsius Network freezes withdrawals | Reuters](https://www.reuters.com/technology/crypto-firm-celsius-pauses-all-transfers-withdrawals-between-accounts-2022-06-13/) [Celsius Execs Cashed Out $40M in Crypto Before Halting Withdrawals for Customers | Hacker News](https://news.ycombinator.com/item?id=33109070) [Celsius Execs Cashed out $17 Million Before Halting Withdrawals](https://gizmodo.com/celsius-execs-cashed-out-bitcoin-price-crypto-ponzi-1849623526) ## cryptocurrency - chia [Chia Network](https://chia.network/) blockchain based on proofs of space and time to make a cryptocurrency which is less wasteful, more decentralized, and more secure. ## cryptocurrency - coinbase - issues - data harvesting [Tell HN: Coinbase now requires physical address of recipient in crypto transfers | Hacker News](https://news.ycombinator.com/item?id=31858460) [Coinbase is reportedly selling geolocation data to ICE | Hacker News](https://news.ycombinator.com/item?id=31932349) [Cryptocurrency Titan Coinbase Providing "Geo Tracking Data" to ICE](https://theintercept.com/2022/06/29/crypto-coinbase-tracer-ice/) ## cryptocurrency - coinbase - issues - employment [Coinbase employees petition to remove execs | Hacker News](https://news.ycombinator.com/item?id=31690452) [Operation Revive COIN - 0x58E3…eae56b](https://web.archive.org/web/20220609202836/https://mirror.xyz/0x58E3a8Bc8CBFC10AC2972Fb9d0cF359E21eae56b/ZIO--5ywx1z-aKs0KCQ2PeTNutVKune7zhA1D09R0q0) [Coinbase lays off around 1,100 employees | Hacker News](https://news.ycombinator.com/item?id=31742590) [Coinbase Lays Off Around 1,100 Employees](https://www.coindesk.com/business/2022/06/14/coinbase-will-layoff-around-1100-employees/) [Coinbase Announces 18% Layoffs | Hacker News](https://news.ycombinator.com/item?id=31738029) [A message from Coinbase CEO and Cofounder, Brian Armstrong](https://www.coinbase.com/blog/a-message-from-coinbase-ceo-and-cofounder-brian-armstrong) [Coinbase cuts staff by a further 20% | Hacker News](https://news.ycombinator.com/item?id=34323336) [A message from CEO and Co-Founder, Brian Armstrong, to Coinbase employees](https://www.coinbase.com/blog/a-message-from-ceo-and-co-founder-brian-armstrong-to-coinbase-employees) [Coinbase is rescinding already-accepted job offers | Hacker News](https://news.ycombinator.com/item?id=31620765) [Coinbase is rescinding accepted job offers by email](https://www.sfgate.com/bayarea/article/Coinbase-rescinds-accepted-job-offers-17217989.php) [Update on Hiring Plans | Hacker News](https://news.ycombinator.com/item?id=31600505) [Update on Hiring Plans](https://www.coinbase.com/blog/update-on-hiring-plans) ## cryptocurrency - coinbase - issues [Coinbase Blog - Blog](https://www.coinbase.com/blog) [Coinbase Cloud](https://www.coinbase.com/cloud) [Coinbase Cryptocurrency Market](https://www.coinbase.com/) [Coinbase announces proposed direct listing | Hacker News](https://news.ycombinator.com/item?id=25947467) [Coinbase announces proposed direct listing](https://www.coinbase.com/blog/coinbase-announces-proposed-direct-listing) [Coinbase Breach Notification | Hacker News](https://news.ycombinator.com/item?id=28719786) [Submitted Breach Notification Sample | State of California - Department of Justice - Office of the Attorney General](https://oag.ca.gov/ecrime/databreach/reports/sb24-545815) [Coinbase stock lost over 75% value | Hacker News](https://news.ycombinator.com/item?id=31321732) [coinbase stock - Google Search](https://www.google.com/search?q=coinbase+stock) [Coinbase warns that bankruptcy could wipe out user funds | Hacker News](https://news.ycombinator.com/item?id=31338355) [Coinbase admits users may lose crypto if exchange goes bankrupt | Fortune](https://web.archive.org/web/20220902012812/https://fortune.com/2022/05/11/coinbase-bankruptcy-crypto-assets-safe-private-key-earnings-stock/) [US SEC sues Coinbase, one day after suing Binance | Hacker News](https://news.ycombinator.com/item?id=36212120) [US tightens crackdown on crypto with lawsuits against Coinbase, Binance | Reuters](https://www.reuters.com/legal/us-sec-sues-coinbase-over-failure-register-2023-06-06/) ## cryptocurrency - ethereum - issues [Ethereum Has Issues | Hacker News](https://news.ycombinator.com/item?id=31029504) [DSHR's Blog: Ethereum Has Issues](https://blog.dshr.org/2022/04/ethereum-has-issues.html) [$625M worth of ETH drained on Axie Infinity's Ronin Network | Hacker News](https://news.ycombinator.com/item?id=30844334) ## cryptocurrency - ethereum [GitHub - CrownBonded/whetcwithdraw: The Withdraw Contract and related code for the funds retrieved by the Whitehat Group in the ETC chain.](https://github.com/CrownBonded/whetcwithdraw) [The EVM Handbook](https://noxx3xxon.notion.site/The-EVM-Handbook-bb38e175cc404111a391907c4975426d) [Understand EVM bytecode – Part 1](https://blog.trustlook.com/understand-evm-bytecode-part-1/) ## cryptocurrency - ethereum - merge [The Ethereum merge is done | Hacker News](https://news.ycombinator.com/item?id=32848010) [The Ethereum Merge Is Done, Opening a New Era for the Second-Biggest Blockchain](https://www.coindesk.com/tech/2022/09/15/the-ethereum-merge-is-done-did-it-work/) [GPU mining no longer profitable after Ethereum merge | Hacker News](https://news.ycombinator.com/item?id=32867584) [GPU Mining No Longer Profitable After Ethereum Merge | Tom's Hardware](https://www.tomshardware.com/news/gpu-mining-is-now-unprofitable) [Mainnet Merge Announcement | Hacker News](https://news.ycombinator.com/item?id=32578569) [Mainnet Merge Announcement | Ethereum Foundation Blog](https://blog.ethereum.org/2022/08/24/mainnet-merge-announcement) ## cryptocurrency exchanges [Crypto exchange AAX suspends withdrawals | Hacker News](https://news.ycombinator.com/item?id=33593646) [Important Update: Forward Through Adversity | AAX Trends](https://web.archive.org/web/20221113173013/https://trends.aax.com/important-update-forward-through-adversity) ## cryptocurrency - FTX and SBF - asset seizure [Feds seize almost $700 million of FTX assets in Sam Bankman-Fried case](https://www.cnbc.com/2023/01/20/feds-seize-almost-700-million-of-sam-bankman-frieds-assets-in-cash-and-equity.html) [FTX Seeks to Recoup Sam Bankman-Fried's Charitable Donations - WSJ](https://www.wsj.com/articles/ftx-seeks-to-recoup-sam-bankman-frieds-charitable-donations-11673049354) [The Boring Lobbyists Behind Sam Bankman-Fried](https://mattstoller.substack.com/p/the-boring-lobbyists-behind-sam-bankman) [$477M FTX 'hack' was a Bahamian government asset seizure | Hacker News](https://news.ycombinator.com/item?id=33665621) [Supposed $477 million FTX 'hack' was actually a Bahamian government asset seizure - MarketWatch](https://www.marketwatch.com/story/supposed-477-million-ftx-hack-was-actually-a-bahamian-government-asset-seizure-11668782216) [Government Entity That Seized FTX Crypto Assets Steps Forward | The Daily Wire](https://www.dailywire.com/news/government-entity-that-seized-ftx-crypto-assets-steps-forward) [FTX investors fear they may have lost everything in their accounts. : NPR](https://www.npr.org/2022/11/18/1137492483/ftx-investors-worry-they-lost-everything-and-wonder-if-theres-anything-they-can-) ## cryptocurrency - FTX and SBF - FTX organization [FTX to file for U.S. bankruptcy, CEO resigns | Hacker News](https://news.ycombinator.com/item?id=33561234) [FTX to file for U.S. bankruptcy protection, CEO Bankman-Fried resigns | Reuters](https://www.reuters.com/technology/ftx-says-will-file-us-bankruptcy-latest-blow-crypto-2022-11-11/) [Binance to acquire FTX | Hacker News](https://news.ycombinator.com/item?id=33520585) [Binance's Zhao SBF'ed FTX's Bankman-Fried - Bloomberg](https://www.bloomberg.com/opinion/articles/2022-11-08/binance-s-zhao-sbf-ed-ftx-s-bankman-fried) [We will not pursue the potential acquisition of FTX | Hacker News](https://news.ycombinator.com/item?id=33537821) [Binance on X: "As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f." / X](https://twitter.com/binance/status/1590449161069268992) - Binance was in trouble soon after/before that [FTX tapped into customer accounts to fund risky bets, setting up its downfall | Hacker News](https://news.ycombinator.com/item?id=33547863) [FTX Tapped Into Customer Accounts to Fund Risky Bets, Setting Up Its Downfall - WSJ](https://www.wsj.com/articles/ftx-tapped-into-customer-accounts-to-fund-risky-bets-setting-up-its-downfall-11668093732) [You need to understand the FTX debacle even if you have no investments in crypto - MarketWatch](https://www.marketwatch.com/story/you-need-to-understand-the-ftx-debacle-even-if-you-have-no-investments-in-crypto-11668184909) [FTX balance sheet, revealed | Hacker News](https://news.ycombinator.com/item?id=33577437) [FTX balance sheet, revealed](https://www.ft.com/content/0c2a55b6-d34c-4685-8a8d-3c9628f1f185) [Here Are The Democrats And Republicans Who Received Campaign Cash Linked To Bankrupt Crypto Empire FTX | The Daily Wire](https://www.dailywire.com/news/here-are-the-democrats-and-republicans-who-received-campaign-cash-linked-to-bankrupt-crypto-empire-ftx) [FTX was registered with and licensed by the CFTC, which failed to regulate FTX | Hacker News](https://news.ycombinator.com/item?id=33605945) [FTX Was Registered with and Licensed by the CFTC, Which Failed to Properly Regulate or Supervise It and Its Innumerable Former CFTC Officials | Better Markets](https://bettermarkets.org/newsroom/ftx-was-registered-with-and-licensed-by-the-cftc-which-failed-to-properly-regulate-or-supervise-it-and-its-innumerable-former-cftc-officials/) [What Happened at Alameda Research | Hacker News](https://news.ycombinator.com/item?id=33606740) [Milky Eggs » Blog Archive » What happened at Alameda Research](https://web.archive.org/web/20221115083332/https://milkyeggs.com/?p=175) [US Lawmakers Call Crypto Executive To Testify In FTX Collapse Hearing | AllSides](https://www.allsides.com/news/2022-11-16-1652/business-us-lawmakers-call-crypto-executive-testify-ftx-collapse-hearing) [FTX used corporate funds to purchase employee homes, new filing shows | Hacker News](https://news.ycombinator.com/item?id=33639103) [FTX used corporate funds to purchase employee homes, new filing shows](https://www.cnbc.com/2022/11/17/ftx-used-corporate-funds-to-purchase-employee-homes-new-filing-shows.html) [FTX Disclosed Related-Party Transactions but Didn't Name Names - WSJ](https://www.wsj.com/articles/ftx-disclosed-related-party-transactions-but-didnt-name-names-11668750387) [While crypto bro scammed clients, reporters scammed readers | Hacker News](https://news.ycombinator.com/item?id=33683037) [While Crypto Bro Scammed Clients, Reporters Scammed Readers - FAIR](https://fair.org/home/while-crypto-bro-scammed-clients-reporters-scammed-readers/) [Exec who cleaned up Enron calls FTX mess 'unprecedented' | Hacker News](https://news.ycombinator.com/item?id=33655925) [Exec who cleaned up Enron calls FTX mess 'unprecedented' | AP News](https://apnews.com/article/ftx-trading-former-ceo-d2c2b881dc0eb0ec37b454674f446b52) ## cryptocurrency - FTX and SBF - FTX system specifically [FTX faces potential hack, sees mysterious outflows totaling more than $600M | Hacker News](https://news.ycombinator.com/item?id=33570274) ['FTX Has Been Hacked': Crypto Disaster Worsens as Exchange Sees Mysterious Outflows Exceeding $600M](https://www.coindesk.com/business/2022/11/12/ftx-crypto-wallets-see-mysterious-late-night-outflows-totalling-more-than-380m/) [FTX's collapse was a crime, not an accident | Hacker News](https://news.ycombinator.com/item?id=33807257) [FTX's Collapse Was a Crime, Not an Accident](https://www.coindesk.com/layer2/2022/11/30/ftxs-collapse-was-a-crime-not-an-accident/) [A software change allowed FTX to use client money | Hacker News](https://news.ycombinator.com/item?id=33975926) [Exclusive: How a secret software change allowed FTX to use client money | Reuters](https://www.reuters.com/technology/how-secret-software-change-allowed-ftx-use-client-money-2022-12-13/) [Why FTX collapse doesn't mean an end for cryptocurrency - CSMonitor.com](https://www.csmonitor.com/Business/2022/1129/Why-FTX-collapse-doesn-t-mean-an-end-for-cryptocurrency) [The FTX Crypto Fiasco - WSJ](https://www.wsj.com/articles/the-ftx-crypto-fiasco-cryptocurrency-sam-bankman-fried-alameda-coindesk-binance-11668122004) [Collapsed crypto exchange FTX has about $1.24 billion of cash in total - but still owes at least $3.1 billion](https://www.cnbc.com/2022/11/22/collapsed-crypto-exchange-ftx-has-about-1point24-billion-of-cash-in-total-but-still-owes-at-least-3point1-billion-.html) [BlockFi files for bankruptcy as FTX fallout spreads | Hacker News](https://news.ycombinator.com/item?id=33774822) [BlockFi files for bankruptcy as FTX fallout spreads](https://www.cnbc.com/2022/11/28/blockfi-files-for-bankruptcy-as-ftx-fallout-spreads.html) ## cryptocurrency - FTX and SBF - SBF legal issues [Judge sends Sam Bankman-Fried to jail over witness tampering | Hacker News](https://news.ycombinator.com/item?id=37092861) [FTX's Sam Bankman-Fried sent to jail over witness tampering](https://www.cnbc.com/2023/08/11/us-judge-sends-sam-bankman-fried-to-jail-over-witness-tampering.html) [Caroline Ellison and Gary Wang are cooperating in the criminal case against SBF | Hacker News](https://news.ycombinator.com/item?id=34088840) [Two Executives in Sam Bankman-Fried's Crypto Empire Plead Guilty to Fraud - The New York Times](http://web.archive.org/web/20221222025052/https://www.nytimes.com/2022/12/21/technology/ftx-fraud-guilty-pleas.html) [Everything SBF is doing is in singular pursuit of not going to jail | Hacker News](https://news.ycombinator.com/item?id=33908577) [Everything Sam Bankman-Fried is doing is in singular pursuit of not going to jail](https://www.citationneeded.news/everything-sam-bankman-fried-is-doing/) [Why hasn't Sam Bankman-Fried been arrested yet? | Hacker News](https://news.ycombinator.com/item?id=33835212) [Why Hasn't Sam Bankman-Fried Been Arrested Yet?](https://nymag.com/intelligencer/2022/12/why-hasnt-sam-bankman-fried-been-arrested-yet.html) [Here's What SBF Would Have Told Lawmakers If He Hadn't Been Arrested](https://townhall.com/tipsheet/leahbarkoukis/2022/12/14/heres-what-sbf-would-have-told-lawmakers-if-he-hadnt-been-arrested-n2617116) [SBF Arrested by Bahamian Authorities | Hacker News](https://news.ycombinator.com/item?id=33962083) [db on X: "https://t.co/jkAuoYrx8N" / X](https://twitter.com/tier10k/status/1602446984090107905) [SEC Charges Samuel Bankman-Fried with Defrauding Investors in FTX [pdf] | Hacker News](https://news.ycombinator.com/item?id=33967386) [comp-pr2022-219.pdf](https://www.sec.gov/files/litigation/complaints/2022/comp-pr2022-219.pdf) [The United States of America vs. Samuel Bankman-Fried Indictment [pdf] | Hacker News](https://news.ycombinator.com/item?id=33969896) [u.s._v._bankman-fried_indictment_0.pdf](https://www.justice.gov/usao-sdny/press-release/file/1557571/download) [FTX founder Sam Bankman-Fried should testify on crypto exchange collapse: Sen. Sherrod Brown | Fox Business](https://www.foxbusiness.com/politics/ftx-founder-sam-bankman-fried-should-testify-crypto-exchange-collapse-sen-sherrod-brown) [Sam Bankman-Fried 'deeply sorry' for FTX collapse, blames bankruptcy](https://nypost.com/2022/11/23/sam-bankman-fried-deeply-sorry-for-ftx-collapse-blames-bankruptcy) [Crypto Firm FTX Landed in the Bahamas With a Bang, and Now the Bahamas Is Picking Up the Pieces - WSJ](https://www.wsj.com/articles/crypto-firm-ftx-landed-in-the-bahamas-with-a-bang-and-now-the-bahamas-is-picking-up-the-pieces-11669326455) [Sam Bankman-Fried of FTX lived life of luxury in Bahamas enclave - The Washington Post](https://www.washingtonpost.com/technology/2022/11/24/ftx-bahamas-albany-fried) [Sam Bankman-Fried Convicted | Hacker News](https://news.ycombinator.com/item?id=38122061) [Sam Bankman-Fried Trial: Fallen Crypto Mogul Convicted in Collapse That Cost Users Billions - The New York Times](https://www.nytimes.com/live/2023/11/02/business/sam-bankman-fried-trial) [Sam Bankman-Fried sentenced to 25 years in prison | Hacker News](https://news.ycombinator.com/item?id=39852953) [March 28 2024: Sam Bankman-Fried sentenced to 25 years in prison](https://www.cnn.com/business/live-news/sam-bankman-fried-sentencing-03-28-24/index.html) ## cryptocurrency - FTX and SBF - SVB [The Fed is set to report on what went wrong at Silicon Valley Bank : NPR](https://www.npr.org/2023/04/27/1171996094/silicon-valley-bank-signature-bank-failures-deposits-fdic) ## cryptocurrency_FTX - Matt Levine At some point in early 2022, crypto exchange FTX Trading Ltd. apparently had an equity value of $32 billion, based on the price it got in a [fundraising round](https://www.coindesk.com/business/2022/01/31/ftx-reaches-32b-valuation-with-400m-fundraise/). By November 2022, FTX founder Sam Bankman-Fried was shopping it around at an equity value of $0; he [_almost_ found a buyer](https://www.bloomberg.com/opinion/articles/2022-11-10/ftx-is-still-looking-for-money) at $0, but couldn't quite make it work. FTX had assets (a bunch of crypto tokens, some venture stakes, a surprising amount of Bahamas real estate), and it had liabilities (it owed its customers a lot of crypto tokens), and it had some sort of going-concern franchise value (if it kept operating a crypto exchange, it could keep charging fees and making money). In early 2022, the assets _seemed_ to be worth more than the liabilities, and the franchise value - FTX's large steady profits, and the prospect of more in the future as it expanded - was high, leading to a $32 billion equity valuation. In late 2022, [the assets turned out to be largely magic beans](https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad), the liabilities were high, and FTX's time as a trusted profitable crypto exchange seemed to be over. The result is that no one was willing to pay $0 to take on FTX's assets and liabilities and franchise: Any buyer would have to cash out FTX's customers, and there weren't enough assets to do that. Or, I mean, that's how it seemed. Sam Bankman-Fried, before he went to jail, consistently argued that that wasn't true, that if he had had another 24 hours he _could_ have found a buyer to acquire FTX for at least $0 and make all of the customers whole. That has always sounded extremely unlikely, given how carelessly FTX handled customer money and how hideous its balance sheet looked at the time of its implosion. But he kept saying it. In 2024, on the other hand, Bloomberg's Steven Church and Jonathan Randles [report](https://www.bloomberg.com/news/articles/2024-01-31/ftx-expects-to-repay-customers-in-full-bankruptcy-lawyer-says): > Customers and creditors of bankrupt crypto exchange FTX who can prove their losses will likely get back all of their money, the company told the judge overseeing the insolvency case. > > Restructuring advisers will need to examine the millions of claims that have been filed against FTX to weed out those that are not legitimate, lawyer Andrew Dietderich said during a Wednesday court hearing in Wilmington, Delaware. > > "I would like the court and stakeholders to understand this not as a guarantee, but as an objective," Dietderich said. "There is still a great amount of work, and risk, between us and that result. But we believe the objective is within reach and we have a strategy to achieve it." > > In addition, the team overseeing the company has dropped an effort to restart or sell the FTX crypto exchange after concluding it would cost too much, Dietderich said. Advisers ran an exhaustive process to find investors willing to restart FTX.com, but nobody would put up the cash needed to revive the exchange, he said. > > "The costs and risks of creating a viable exchange from what Mr. Bankman-Fried left in the dumpster were simply too high," Dietderich said, referencing founder Sam Bankman-Fried, who shut down the crypto firm and handed control to insolvency experts in late 2022. That last paragraph says that the franchise value is still $0. It turns out that, still, nobody wants to trade on the FTX exchange; its stream of trading fees is extinguished forever. But the pile of magic beans and real estate that FTX had at the end of 2022 turned out to be worth more than its liabilities? The roughly $8 billion hole that FTX's affiliated trading firm, Alameda Research, blew in its balance sheet got … filled up? The customer money all turned out to be there? FTX was worth less than $0 in November 2022, but has somehow become far more valuable in bankruptcy? It's weird. There are several explanations for what has changed between November 2022 and now. For one thing, crypto prices collapsed alongside FTX, and by the time Bankman-Fried was looking for buyers, the value of its crypto holdings was low. Now crypto prices are up, which helps on the asset side. It _should_ hurt _more_ on the liabilities side - if FTX owes customers Bitcoin, that debt is worth more now than it was in 2022 - except that that's not how the bankruptcy accounting works. FTX's [bankruptcy plan](file:///home/d/Downloads/c938fc63-d52f-493a-9ec4-cc5e97ec405c.pdf) provides for "the valuation of claims in U.S. dollars as of the Petition Date" (Nov. 11, 2022) and payment in cash. If FTX owed you one Bitcoin before it collapsed, now it owes you roughly $17,000 (the value of a Bitcoin on Nov. 11, 2022). If FTX _had_ one Bitcoin before it collapsed, now it has about $43,000 (the value of a Bitcoin today). If FTX had enough Bitcoins to pay off half of its customers' claims in 2022, now it has enough to pay off all of them. I'm not sure that's the main mechanism. By the time of its collapse FTX _didn't_ really have much Bitcoin; [its crypto holdings](https://www.bloomberg.com/opinion/articles/2023-09-13/yieldstreet-missed-a-boat) were largely "Samcoins" associated with Bankman-Fried that have not recovered nearly as much value. But a big chunk of FTX's holdings were [in Solana, which _has_ rallied a lot](https://www.bloomberg.com/news/articles/2023-12-20/ftx-claims-reach-73-cents-on-the-dollar-on-claims-market-platform). And FTX's bankruptcy estate [apparently dumped $1 billion](https://www.coindesk.com/business/2024/01/22/ftx-sold-about-1b-of-grayscales-bitcoin-etf-explaining-much-of-outflow-sources/) of the Grayscale Bitcoin exchange-traded fund this month, profiting from the rise in Bitcoin prices since 2022. So rising crypto prices have definitely helped. For another thing, FTX has, like, posthumously pivoted to AI? In April 2022, Bankman-Fried invested $500 million of FTX/Alameda's money into Anthropic, a somewhat obscure artificial intelligence startup. That was kind of a reckless thing to do with _customer demand deposits_, putting them into an illiquid speculative equity investment in futuristic technology. It did _work out_, however: AI is huge now, Anthropic is a big player, and FTX's stake is [probably worth billions of dollars](https://www.bloomberg.com/opinion/articles/2023-10-05/ftx-might-have-found-some-money). Bankman-Fried's [whole schtick](https://www.bloomberg.com/opinion/articles/2023-10-04/sbf-was-reckless-from-the-start), for most of his career, was about taking terrifying risks that somehow worked out. "Let's take our customers' money and secretly put it into venture investments in an AI startup" is a _terrifying_ risk, an insane thing to do, and yet it worked out! Not for Bankman-Fried, though; he's in jail. Also there's the real estate? Generally speaking, FTX seems to have siphoned off a ton of money into fancy apartments for its executives, big [vanity investments](https://www.bloomberg.com/opinion/articles/2023-06-26/ftx-spent-big-on-celebrity) in their friends' companies, inflated endorsement deals with celebrities, and other reckless spending. When Bankman-Fried was shopping FTX to buyers in 2022, he didn't count this stuff as FTX assets, because it mostly wasn't: The money had been paid out to realtors and friends and celebrities. But the bankruptcy team generally argues that this stuff _does_ belong to FTX, that it ended up in the hands of FTX's executives and friends and family illegitimately, and they are trying to get it back. They might succeed with some of it. If your model of FTX is "Sam Bankman-Fried stole a lot of customer money and used it to buy luxury apartments," that's actually pretty good news for customers, because you can seize the apartments and sell them and give the money back to the customers. Whereas "Sam Bankman-Fried lost customer money gambling on crypto" would mean it's probably gone. Also there is just a due diligence layer here that probably matters for valuation. The bankruptcy executives who currently control FTX are humorless types who [care a lot about careful accounting](https://www.bloomberg.com/opinion/articles/2022-11-17/matt-levine-s-money-stuff-ftx-was-not-very-careful) and who report regularly to a court. When they say things like "we found $300 million of assets under a couch cushion," people are inclined to believe it. When they want to sell stuff, they run a slow and heavily lawyered sales process that lets multiple buyers kick the tires, and the buyers can have some confidence in what they are buying. When Sam Bankman-Fried tried to sell FTX for $0, he had a [slapdash and terrifying spreadsheet](https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad) that emphasized the "Hidden, poorly internally labeled 'fiat@' account" with a balance of negative $8 billion. If you are a potential buyer, and you get that spreadsheet along with a text message like "hey FYI I need your final binding bid in two hours or it's off to jail with me," you might not be inclined to make an aggressive bid? You might think "hmm negative $8 billion is a suspiciously round number, what if there are _other_ hidden liabilities here that I don't know about and can't find out about in two hours?" You might just pass. It's possible that FTX really _was_ worth at least $0 the whole time, that even at its lowest point it had enough stuff lying around to pay back all its customers. It's just that Sam Bankman-Fried was in no position to make anyone believe that. ### FTXed Elsewhere in crypto founders who "[f-ed up](https://www.businessinsider.com/sam-bankman-fried-planned-testimony-full-text-ftx-2022-12)" and [went on social media to apologize](https://www.bloomberg.com/news/articles/2024-03-15/sbf-considered-coming-out-as-a-republican-amid-ftx-collapse): > Sam Bankman-Fried came up with a lot of ideas to rehabilitate his image and launch a new crypto exchange after FTX went into bankruptcy. > > Bankman-Fried thought he might "Go on Tucker Carlson, come out as a republican;" "Come out against the woke agenda;" tell people the team running his bankrupt former company "has no idea how to run FTX;" tell people he's "really glad" the bankruptcy team stepped in and "they're great." > > In a Google [document](https://storage.courtlistener.com/recap/gov.uscourts.nysd.590940/gov.uscourts.nysd.590940.410.3_1.pdf), which prosecutors attached to a court filing seeking to put Bankman-Fried behind bars for as long as 50 years, the fallen crypto king considered having author Michael Lewis interview him on TV, asking people what to do in a Twitter poll and leaking a document to the press. The [document](https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rKOhRSDBz.ps/v0) lists 19 numbered "random probably bad ideas that aren't vetted." No. 12 is "Go head to head with Matt Levine on Odd Lots, really lean in to arguments." I don't think anyone will be surprised to hear that we (I and Joe Weisenthal and Tracy Alloway of Bloomberg's Odd Lots) also wanted this. We had a [few](https://www.bloomberg.com/news/articles/2021-08-06/transcript-sam-bankman-fried-and-matt-levine-on-crypto-market-structure) good [chats](https://www.bloomberg.com/news/articles/2022-04-25/odd-lots-full-transcript-sam-bankman-fried-and-matt-levine-on-crypto) with Bankman-Fried back before FTX collapsed, and I would have cleared my schedule to do it again in, you know, [November 2022](https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad). Tremendous content that would have been. It never happened; I'm not sure if that's because Bankman-Fried decided it was a bad idea, or his lawyers stopped him, or he was arrested before he could do it. ### FTX claims One [story about crypto](https://link.mail.bloombergbusiness.com/click/35821175.281761/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9mZWF0dXJlcy8yMDIyLXRoZS1jcnlwdG8tc3RvcnkvP2NtcGlkPUJCRDA2MjQyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDYyNCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZiN0cnVzdA/60e87ce39a995a4b1a2deb96B06136f51) is that it does away with the need for trust. Code is law, everything happens on a public immutable blockchain, and you don’t need to trust any central intermediary: You can _prove_ that you own your Bitcoins by pointing to the blockchain. This was never quite true, as a practical matter. Some crypto investors do organize their lives around not having to trust anyone, but that is very inconvenient, and lots of crypto investors end up trusting people: You hold your crypto on a centralized exchange, not directly on a blockchain, and you trust the exchange to hold it for you. Or you _do_ hold your crypto on a blockchain, and use it in decentralized applications, and you trust that the smart contracts you use do what they say they will, without carefully auditing their code yourself.  But it is possible that the philosophical trustlessness of crypto is somehow corrosive to actual trustworthiness. A lot of crypto exchanges turned out _not_ to be all that trustworthy. If a stock exchange collapsed and took customer money with it, people would go around saying “where were the regulators” and “we need better rules to prevent that.” When a crypto exchange collapses, some people go around saying those things, but other people go around saying things like “not your keys not your coins” or “if you didn’t know that that exchange was shady then really it’s your fault.” Or when Avi Eisenberg spotted a profitable opportunity to [manipulate the Mango Markets token](https://link.mail.bloombergbusiness.com/click/35821175.281761/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjItMTAtMTIvZGVmaS1kaXNjb3ZlcnMtbmV3LW1hcmtldC1tYW5pcHVsYXRpb25zP2NtcGlkPUJCRDA2MjQyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDYyNCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B5d5466e3), he did that, because he was philosophically committed to an ethos of code-is-law and trustlessness, though [now he’s in jail](https://link.mail.bloombergbusiness.com/click/35821175.281761/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDQtMjIvdGhlLXNlY3JldC10cmFkZS13YXMtb3B0aW9ucy1pbi1pbmRpYT9jbXBpZD1CQkQwNjI0MjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA2MjQmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96Bf706d22b). Similarly, if you are used to anonymous, trustless international transactions, and if you think of those transactions as being subject not to any nation’s laws but to “code is law,” and if you are used to transactions settling instantly on the blockchain, might you become … untrustworthy? Might you agree to a trade, and then renege on the trade when prices move in your favor, and say “well, that’s not a real trade, it wasn’t even on the blockchain”? I don’t know. The [Wall Street Journal reports](https://link.mail.bloombergbusiness.com/click/35821175.281761/aHR0cHM6Ly93d3cud3NqLmNvbS9maW5hbmNlL2N1cnJlbmNpZXMvaGVkZ2UtZnVuZHMtZnR4LTIxMGI3ZjczP21vZD1ocF9sZWFkX3BvczM/60e87ce39a995a4b1a2deb96B778fee9e): > Since FTX’s 2022 implosion, hedge funds had scooped up the rights to customers’ frozen accounts for pennies on the dollar, with five firms alone buying claims with a combined face value of about $2.4 billion. That meant a huge payday was in store. > > But collecting these winnings won’t be straightforward. Investors are mired in legal battles with some of the original owners of the claims. They allege those former FTX customers abruptly reneged on trades and are suffering from an age-old affliction: seller’s remorse. > > The FTX case has thrust investment firms, some for the first time, into the Wild West of crypto. Compared to typical bankruptcy cases—where investors buy claims from relatively staid corporate creditors—firms this time are instead cutting deals with crypto traders. > > “We have sellers from all over the world that are interfacing with buyers and the bankruptcy court for the first time and have never experienced a U.S. Chapter 11 case,” said Andrew Glantz, chief strategy officer of Xclaim, a platform that has facilitated more than $200 million of FTX claims transactions. ... > > Many sellers, including some sophisticated crypto players, are now demanding bigger payouts, according to court documents and people familiar with the matter. Others have tried to back out entirely, or have tried to find other buyers to take their claims. FTX claims were trading at close to zero cents on the dollar when FTX first went bankrupt, and are now likely to pay back [at least 118 cents on the dollar](https://link.mail.bloombergbusiness.com/click/35821175.281761/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDUtMDgvZnR4LWZvdW5kLXRoZS1tb25leT9jbXBpZD1CQkQwNjI0MjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA2MjQmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96Bf7cbbc50). If you agreed to sell your claim at 30 cents on the dollar, but there was a long delay between the verbal agreement and finalizing the paperwork, then _arguably_ you had a free option: If the claim’s value fell to 20 cents, you’d close the deal and sell it for the 30 cents you agreed to, but if it rose to 50 cents, you’d find a problem with the paperwork and get out of the deal. [[3]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E6631#footnote-3)  And in fact it rose to 118 cents, and a lot of sellers seem to be trying to get out of their deals. Also: > Tom Braziel, a claims broker, sold tens of millions of dollars of FTX claims to big investment firms like Oaktree Capital, Attestor and Silver Point Capital. > > He said many of the sellers don’t have lawyers and “don’t realize that a verbal contract to sell a claim is binding under New York law, where most of these hedge funds are based.”  Yes, right. One is tempted to say “if only these trades took place on the blockchain, then there would be no dispute about who owned them: Settlement would be instantaneous, and the claims would be tradeable tokens whose ownership could be proven based on an open, tamper-proof blockchain.” But of course people _have_ tried to build tokenized platforms for trading crypto bankruptcy claims. Most notably, the guys from Three Arrows Capital, the [famously imploded](https://link.mail.bloombergbusiness.com/click/35821175.281761/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDYtMTIvdGhyZWUtYXJyb3dzLWhhZC1hLWZ1bi1idWJibGU_Y21waWQ9QkJEMDYyNDI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNjI0JnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96B69285800) crypto hedge fund, [were building one](https://link.mail.bloombergbusiness.com/click/35821175.281761/aHR0cHM6Ly93d3cud2lyZWQuY29tL3N0b3J5L2NyeXB0by1iYW5rcnVwdGN5LW1hcmtldHMtdGhyaXZpbmctZnR4LWNvbGxhcHNlLw/60e87ce39a995a4b1a2deb96B37f7d61b)! Surely you trust them, right? ## cryptocurrency hacks - bitcoin [Hackers drain bitcoin ATMs of $1.5 million by exploiting 0-day bug : cybersecurity](https://old.reddit.com/r/cybersecurity/comments/11ygn2f/hackers_drain_bitcoin_atms_of_15_million_by) [DarkSide ransomware gang quits after servers, Bitcoin stash seized | Hacker News](https://news.ycombinator.com/item?id=27155497) [DarkSide Ransomware Gang Quits After Servers, Bitcoin Stash Seized - Krebs on Security](https://krebsonsecurity.com/2021/05/darkside-ransomware-gang-quits-after-servers-bitcoin-stash-seized/) [How we recovered $300k of Bitcoin | Hacker News](https://news.ycombinator.com/item?id=22774057) [How we recovered over $300K of Bitcoin | reperiendi](https://reperiendi.wordpress.com/2020/04/03/how-i-recovered-over-300k-of-bitcoin/) ## cryptocurrency hacks [Crypto Investors Buy 40 Acres of Land in Wyoming to Build Blockchain City](https://www.vice.com/en/article/93b5ve/crypto-investors-buy-40-acres-of-land-in-wyoming-to-build-blockchain-city) [After 'Stealing' $16M, This Teen Hacker Seems Intent on Testing 'Code Is Law' in the Courts](https://www.coindesk.com/tech/2021/10/22/after-stealing-16m-this-teen-hacker-seems-intent-on-testing-code-is-law-in-the-courts) [DeFi bug accidentally gives $90M to users | Hacker News](https://news.ycombinator.com/item?id=28716979) [DeFi protocol Compound mistakenly gives away $90 million to users](https://www.cnbc.com/2021/10/01/defi-protocol-compound-mistakenly-gives-away-millions-to-users.html) [The Block: At least $611 million stolen in massive cross-chain hack](https://www.theblock.co/post/114045/at-least-611-million-stolen-in-massive-cross-chain-hack) [Blockchain project Ronin hit by $615 million crypto heist | Reuters](https://www.reuters.com/technology/blockchain-company-ronin-hit-by-615-million-crypto-heist-2022-03-29) [Hackers steal more than $600 million from maker of Axie Infinity](https://www.nbcnews.com/tech/tech-news/hackers-steal-600-million-maker-axie-infinity-rcna22031) [In second largest DeFi hack, Blockchain Bridge loses $320M Ether | Hacker News](https://news.ycombinator.com/item?id=30186894) [In Second Largest DeFi Hack Ever, Blockchain Bridge Loses $320M Ether - Blockworks](https://blockworks.co/news/in-second-largest-defi-hack-ever-blockchain-bridge-loses-320m-ether) [Web-n-Composite/crypto-hacks-list: Cryptocurrency hacks list](https://github.com/Web-n-Composite/crypto-hacks-list) [Web-n-Composite/crypto-risk-scoring: Cryptocurrency risk scoring services list](https://github.com/Web-n-Composite/crypto-risk-scoring) [Why are there so many blockchain hacks? : CryptoTechnology](https://old.reddit.com/r/CryptoTechnology/comments/zn9obm/why_are_there_so_many_blockchain_hacks) ## cryptocurrency markets [Opinion | Why the crypto bubble has finally imploded - The Washington Post](https://www.washingtonpost.com/opinions/2022/11/11/crypto-bubble-implode-ftx-bitcoin-ethereum) [The FTX Scam Is Indicative of a MUCH Larger Problem - America's Elite Have Been Using the Same Schemes to Fleece the Middle Class for 100+ Years - This Subreddit Has Proof : Superstonk](https://old.reddit.com/r/Superstonk/comments/yuxcay/the_ftx_scam_is_indicative_of_a_much_larger) [Bruce Hunt](https://hackernoon.com/the-art-of-hodling-crypto-cant-make-this-sh-t-up-713149eb9a21) (2018) The Art Of Hodling Crypto: Can’t Make this Sh*t Up > If you took 5 of the cryptocurrencies and if you invested $1,000 in each on Jan 1st 2017… you would have : $655,527 for $5,000 invested. - HIGHLY VOLATILE CRAZINESS [Bruce Hunt](https://hackernoon.com/how-crypto-market-behaves-its-a-damn-cycle-bffe47a01831) (2017) How Cryptocurrency Market Behaves, It’s a Damn Cycle. [Bruce Hunt](https://hackernoon.com/due-diligence-checklist-for-investing-in-cryptocurrency-7b952b8b038e) (2017) Due Diligence Checklist for Investing in Cryptocurrency ## cryptocurrency [CSVShare](https://csvshare.com/view/Vk_tfwlTX) Blockchain & Crypto Slack Communities [Slofile](https://slofile.com/category/Crypto) Slack channels on cryptocurrency [Tyler Winklevoss on X: "The Biden-Harris Administration wages all-out war on the crypto industry for 4 years. Despite all of this, Kamala is still invited to the @TheBitcoinConf in Nashville and given a chance to speak to our industry and reset the relationship. What does she do? She declines. She can’t" / X](https://x.com/tyler/status/1816195372760666444) ## cryptocurrency mining - bitcoin [Bitcoin mining becomes unprofitable as BTC price falls to average cost of mining | Hacker News](https://news.ycombinator.com/item?id=31796239) [Bitcoin mining becomes unprofitable as BTC price falls to the average cost of mining](https://finbold.com/bitcoin-mining-becomes-unprofitable-as-btc-price-falls-to-the-average-cost-of-mining/) [The problem with Bitcoin miners | Hacker News](https://news.ycombinator.com/item?id=31389647) [Paul Butler - The problem with bitcoin miners](https://paulbutler.org/2022/the-problem-with-bitcoin-miners/) ## cryptocurrency mining [GPU prices are falling below MSRP due to the crypto crash | Digital Trends](https://www.digitaltrends.com/computing/gpu-prices-are-falling-below-msrp-due-to-the-crypto-crash) [Microsoft bans mining cryptocurrency on its online services : windows](https://old.reddit.com/r/windows/comments/znccv3/microsoft_bans_mining_cryptocurrency_on_its) ## cryptocurrency payment processors [Stripe Crypto | Hacker News](https://news.ycombinator.com/item?id=30628677) [Global payment solutions for Web3](https://stripe.com/en-ca/use-cases/crypto) - CRYPTO CAN BASICALLY LATCH ONTO ANY OTHER PAYMENT PROCESSING, AS SOON AS IT'S [ADOPTED] BY THE MASSES ## cryptocurrency scams - coinbase [Insider Trading at Coinbase | Hacker News](https://news.ycombinator.com/item?id=31012462) [Cobie on Twitter: "Found an ETH address that bought hundreds of thousands of dollars of tokens exclusively featured in the Coinbase Asset Listing post about 24 hours before it was published, rofl https://t.co/5QlVTjl0Jp" / Twitter](https://web.archive.org/web/20220420010823/https://twitter.com/cobie/status/1513874972552355846) [Former Coinbase PM charged in cryptocurrency insider trading tipping scheme | Hacker News](https://news.ycombinator.com/item?id=32180428) [Southern District of New York | Three Charged In First Ever Cryptocurrency Insider Trading Tipping Scheme | United States Department of Justice](https://www.justice.gov/usao-sdny/pr/three-charged-first-ever-cryptocurrency-insider-trading-tipping-scheme) ## cryptocurrency scams [The Bond villain compliance strategy | Hacker News](https://news.ycombinator.com/item?id=38411005) [The Bond villain compliance strategy](https://www.bitsaboutmoney.com/archive/bond-villain-compliance-strategy/) [Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each..](https://old.reddit.com/r/Jokes/comments/157ji5w/once_upon_a_time_in_a_village_a_man_appeared_and/) [Lets talk about blockchains | Hacker News](https://news.ycombinator.com/item?id=31195445) [You Don't Need a Fucking Blockchain](https://cmdli.dev/blog/blockchain/) [Big Banks Haven't Warmed to Crypto. Here's Why. - MarketWatch](https://www.marketwatch.com/articles/big-banks-crypto-report-51664558416) [Crypto is an unproductive bubble | Hacker News](https://news.ycombinator.com/item?id=30728856) [Crypto is an Unproductive Bubble - Alex Kolchinski](https://alexkolchinski.com/2022/03/18/crypto-is-an-unproductive-bubble/) [Ask HN: Is anyone else glad the crypto market is crashing? | Hacker News](https://news.ycombinator.com/item?id=31356579) [Cryptocurrencies add nothing useful to society, says chip-maker Nvidia | Hacker News](https://news.ycombinator.com/item?id=35317464) [Cryptocurrencies add nothing useful to society, says chip-maker Nvidia | Cryptocurrencies | The Guardian](https://www.theguardian.com/technology/2023/mar/26/cryptocurrencies-add-nothing-useful-to-society-nvidia-chatbots-processing-crypto-mining) [Algorithmic stablecoins are provably impossible without continuous funding | Hacker News](https://news.ycombinator.com/item?id=31553704) [Algorithmic stablecoins are provably impossible without continuous funding](https://fragileequilibrium.substack.com/p/algorithmic-stablecoins-are-provably) [Does Blockchain Have Any Actual Useful Application?: computerscience](https://www.reddit.com/r/computerscience/comments/10z1j05/does_blockchain_have_any_actual_useful_application) [Bruce Hunt](https://hackernoon.com/how-to-crush-the-crypto-market-quit-your-job-move-to-paradise-and-do-whatever-you-want-the-rest-27a4a3cc2bb1) (2018) How to Crush the Crypto Market, Quit Your Job, Move to Paradise and Do Whatever You Want the Rest of Your Life ## cryptocurrency scams - pumping and dumping [Swift Ends Cryptocurrency Access to Global Marketplace | Armstrong Economics](https://www.armstrongeconomics.com/world-news/cryptocurrency/swift-ends-cryptocurrency-access-to-global-marketplace) [The $109 Billion Bank Hustle - BIG by Matt Stoller](https://mattstoller.substack.com/p/the-109-billion-bank-hustle) [Fed says its own supervisors share blame for Silicon Valley Bank's collapse | Semafor](https://www.semafor.com/article/04/28/2023/fed-partly-blames-its-own-supervisors-for-silicon-valley-banks-collapse) [The collapse of cryptokitties, the first big blockchain game | Hacker News](https://news.ycombinator.com/item?id=32856333) [The Spectacular Collapse of CryptoKitties, the First Big Blockchain Game - IEEE Spectrum](https://spectrum.ieee.org/cryptokitties) [We're discontinuing the Stablegains service | Hacker News](https://news.ycombinator.com/item?id=31461634) [We're discontinuing the Stablegains service. Please withdraw your remaining funds. | by Stablegains | Stablegains](https://blog.stablegains.com/were-discontinuing-the-stablegains-service-please-withdraw-your-remaining-funds-405e6bfb89c4) [YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers | Hacker News](https://news.ycombinator.com/item?id=31431224) [FatMan on X: "Yikes. @stablegains took USDC and USD via wire from customers promising them 15%, put it all into Anchor without telling them, and skimmed 4% off the top. They have now changed the denominations in their app from USD to UST and are nuking the landing page & old terms. (1/2) https://t.co/D6sVOI2bRG" / X](https://twitter.com/FatManTerra/status/1527153694218797058) ## cryptocurrency scams - pumping binance [I watched a friend of mine pump a shitcoin on Binance by buying billboards | Hacker News](https://news.ycombinator.com/item?id=32068164) [FatMan on X: "Thought it would be fun to share a story from last year where I watched a friend of mine pump a sh*tcoin on Binance by buying billboards and a BitBoy Crypto video. Nothing we don't already know, but I found it fascinating to watch in real time. (1/9)" / X](https://twitter.com/FatManTerra/status/1546791981032030208) ## cryptocurrency - terra [Terra Is Usually a Security](https://www.bloomberg.com/opinion/articles/2023-08-03/terra-is-usually-a-security) ## Cryptocurrency - Tether [Tether is starting to depeg from USD again | Hacker News](https://news.ycombinator.com/item?id=31723438) [UST Stablecoin Loses Dollar Peg | Hacker News](https://news.ycombinator.com/item?id=31321021) [UST Stablecoin Loses Dollar Peg for Second Time in 48 Hours, LUNA Market Cap Falls Below UST's](https://www.coindesk.com/business/2022/05/09/ust-stablecoin-falls-below-dollar-peg-for-second-time-in-48-hours/) [Luna Cryptocurrency Collapse: How UST Broke | Hacker News](https://news.ycombinator.com/item?id=31371900) [Luna Crypto Crash: How UST Broke and What's Next for Terra - CNET](https://www.cnet.com/personal-finance/crypto/luna-crypto-crash-how-ust-broke-and-whats-next-for-terra/) [Tether starting to lose its peg too, after Terra did | Hacker News](https://news.ycombinator.com/item?id=31349988) [What backs a currency? Terra Luna drops nearly 100% - Economics - Intercoin](https://community.intercoin.app/t/what-backs-a-currency-terra-luna-drops-nearly-100/2518) [Tether ordered to produce documents showing backing of USDT [pdf] | Hacker News](https://news.ycombinator.com/item?id=32926201) [May 30, 2001 - gov.uscourts.nysd.524076.247.0.pdf](https://storage.courtlistener.com/recap/gov.uscourts.nysd.524076/gov.uscourts.nysd.524076.247.0.pdf) [$1M bounty for details on Tether's backing | Hacker News](https://news.ycombinator.com/item?id=28923536) [Hindenburg Research Announces $1,000,000 Bounty For Details On Tether's Backing - Hindenburg Research](https://hindenburgresearch.com/tether/) [$3B in Bitcoin was sold in a last-ditch attempt to save UST from collapse | Hacker News](https://news.ycombinator.com/item?id=31398261) [What happened to the bitcoin reserve behind Terra's UST stablecoin?](https://www.cnbc.com/2022/05/16/what-happened-to-the-bitcoin-reserve-behind-terras-ust-stablecoin.html) [Bitfinex and Tether required to end all trading activity with New Yorkers | Hacker News](https://news.ycombinator.com/item?id=26236739) [Attorney General James Ends Virtual Currency Trading Platform Bitfinex's Illegal Activities in New York](https://ag.ny.gov/press-release/2021/attorney-general-james-ends-virtual-currency-trading-platform-bitfinexs-illegal?ref) [Home - Tether](https://tetheredtocorruption.com/) ## cryptocurrency - tornado cash [Tornado](https://tornado.cash/) Anonymous (_Beta!_) Audit but still in beta! [Republishing a fork of the sanctioned Tornado Cash repositories | Hacker News](https://news.ycombinator.com/item?id=32558012) [Matthew Green on X: "I made a GitHub organization to republish a fork of the Tornado Cash repositories that were banned following the Treasury's sanction order the other week. https://t.co/D1ba52JfPB" / X](https://twitter.com/matthew_d_green/status/1561813046338748417) [@matthew_d_green](https://twitter.com/matthew_d_green) a cryptographer and professor at Johns Hopkins University. [Arrest of suspected developer of Tornado Cash | Hacker News](https://news.ycombinator.com/item?id=32436413) [Arrest of suspected developer of Tornado Cash | FIOD](https://www.fiod.nl/arrest-of-suspected-developer-of-tornado-cash/) [GitHub deleted accounts of people who contributed to Tornado Cash repos | Hacker News](https://news.ycombinator.com/item?id=32395971) [banteg on X: "github accounts of people who contributed to tornado repos just got deleted" / X](https://twitter.com/bantg/status/1556721709931175937) ### MEV spoof Sometimes there are profitable trades, but not that often. Sometimes someone is looking to sell 100 widgets at $20 on the American Widget Exchange, and someone else is looking to buy 100 widgets for $21 on the National Widget Exchange. And so you can buy on the AWE and sell on the NWE and make an instant $100 profit. But only _one_ person can do that. Once you buy on the AWE and sell on the NWE, the window is closed. Who gets to do the trade? The most intuitive answer, in most cases, is “whoever does it first.” If you see the same thing trading for two different prices on two different exchanges, and I don’t, and you send in the orders to the exchanges before me, then you do the trade and I don’t. For most human-scale trades, this makes sense and is easy to administer and feels basically fair. The US stock market mostly does not operate at human time scales, and there [these intuitions break down](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS92aWV3L2FydGljbGVzLzIwMTgtMDctMDIvd2FsbC1zdHJlZXQtaXMtc2hhcnBlbmluZy1vdXItbmFub3NlY29uZHM_Y21waWQ9QkJEMDUxNjI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTE2JnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96B591d1ce4). In the stock market, often, one algorithm spots trade opportunities a microsecond before another algorithm, and people get mad about that. They worry that this microsecond-scale competition between algorithms is socially wasteful, and [they worry](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9lbi53aWtpcGVkaWEub3JnL3dpa2kvRmxhc2hfQm95cw/60e87ce39a995a4b1a2deb96B07e8cb71) that it is unfair to people with worse algorithms. They think “yes, fine, the first person to see a trade should get to do it, _within reason_, but there’s no social benefit to slicing it that fine.” They propose things like “[frequent batch auctions](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9hY2FkZW1pYy5vdXAuY29tL3FqZS9hcnRpY2xlLzEzMC80LzE1NDcvMTkxNjE0Ng/60e87ce39a995a4b1a2deb96B13c3142a),” where everyone who sees the same trade within (say) a second of each other gets to compete _on price_ to do it, rather than competing on _time_ down to the microsecond.  Crypto, however, has a different problem. Time in electronic stock markets is maybe _too_ continuous; the timeline of a stock exchange can be sliced much more finely than the human brain can comprehend. But time in crypto is oddly discrete. Time in crypto is measured in _blocks_. Intuitively, people submit orders to do transactions on a crypto blockchain, and then periodically a batch of those transactions is enshrined in the official ledger of that blockchain. In [Bitcoin](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvY2tjaGFpbi5jb20vZXhwbG9yZXI/60e87ce39a995a4b1a2deb96B0fa1755c), a block contains roughly 10 minutes’ worth of transactions; in [Ethereum](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9ldGhlcmV1bS5vcmcvZW4vZGV2ZWxvcGVycy9kb2NzL2Jsb2Nrcy8/60e87ce39a995a4b1a2deb96B67d3e976), it’s seconds. So intuitively, Ethereum transactions happen in big simultaneous bunches every 12 seconds. But the bunches can’t really be simultaneous: If there is one rare nonfungible token for sale, and two people want to buy it, only one of them can. One transaction has to be first. So the transactions within a block are _ordered_; they happen in sequence. But they are not necessarily ordered by _time._ How does the blockchain decide which transactions to record, and in what order? In Ethereum, the answer is: with money. People who want to do transactions on the Ethereum network [pay fees to execute the transactions](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9ldGhlcmV1bS5vcmcvZW4vZGV2ZWxvcGVycy9kb2NzL2dhcy8/60e87ce39a995a4b1a2deb96B6377dacc); there is a flat base fee, but people can also bid more — a “priority fee” or “tip” — to get their transactions executed quickly. Every 12 seconds, some computer on the Ethereum network is selected to record the transactions in a block. This computer used to be called a “miner,” but in current proof-of-stake Ethereum blocks are recorded by computers called “validators.” Each block is compiled by one validator, [selected](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9ldGhlcmV1bS5vcmcvZW4vZGV2ZWxvcGVycy9kb2NzL2NvbnNlbnN1cy1tZWNoYW5pc21zL3Bvcy9ibG9jay1wcm9wb3NhbC8/60e87ce39a995a4b1a2deb96Bdd338ae0) more or less at random, called a “proposer”; the other validators vote to accept the block. The validators [share the transaction fees](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9ldGhlcmV1bS5vcmcvZW4vZGV2ZWxvcGVycy9kb2NzL2NvbnNlbnN1cy1tZWNoYW5pc21zL3Bvcy9yZXdhcmRzLWFuZC1wZW5hbHRpZXMv/60e87ce39a995a4b1a2deb96B46aa51c3), with the block proposer getting more than the other validators. The block proposer will naturally prioritize the transactions that pay more fees, because then it will get more money. And, again, the validators are all computers; they will be _programmed_ to select the transactions that pay them the most money. And in fact there is a [division of labor](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9ldGhyZXNlYXIuY2gvdC9wcm9wb3Nlci1ibG9jay1idWlsZGVyLXNlcGFyYXRpb24tZnJpZW5kbHktZmVlLW1hcmtldC1kZXNpZ25zLzk3MjU/60e87ce39a995a4b1a2deb96B650aa3a9) in modern Ethereum, where a computer called a “[block builder](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9kb2NzLmZsYXNoYm90cy5uZXQvZmxhc2hib3RzLW1ldi1ib29zdC9ibG9jay1idWlsZGVycw/60e87ce39a995a4b1a2deb96B787c7b75)” puts together a list of transactions that will pay the most money to the validators, and then the block proposer proposes a block with that list so it can get paid. And so if you see 100 widget tokens trading for $20 on one Ethereum decentralized exchange, and 100 widget tokens trading for $21 on another Ethereum decentralized exchange, you can buy them at $20 each and sell them for $21 each and make $100. But if I _also_ see that arbitrage, I will _also_ put in those orders. Which of our trades will execute first? Whoever pays more in execution fees. How much should I offer to pay? Oh, you know, it’s a competitive auction. So roughly $99. The validators should get most of the money from the arbitrage. This is [called “MEV,”](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuY29pbmRlc2suY29tL2xlYXJuL3doYXQtaXMtbWV2LWFrYS1tYXhpbWFsLWV4dHJhY3RhYmxlLXZhbHVlLz9fZ2w9MSoxbG1qM3FkKl91cCpNUS4uKl9nYSpNemt4TURNeE1EazVMakUzTVRVM09Ua3dOekkuKl9nYV9WTTNTVFJZVk44Kk1UY3hOVGM1T1RBM01TNHhMakF1TVRjeE5UYzVPVEEzTVM0d0xqQXVNemN3TmpjeU9UZy4/60e87ce39a995a4b1a2deb96Ba6e1a52d) for “miner extractable value,” though now Ethereum doesn’t have miners and the acronym stands much less informatively for “maximal extractable value.” What are the chances that both of us discovered the same arbitrage within 12 seconds of each other? Well, pretty good, in a competitive market with a lot of arbitrageurs. But also, traditionally, when we want to do these transactions, we submit our orders _publicly_ to the Ethereum network. (To the “[mempool](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9leHBsb3Jlci5ibG9ja25hdGl2ZS5jb20vP3Y9MS40MS4wJjA9ZXRoZXJldW0mMT1tYWlu/60e87ce39a995a4b1a2deb96B811b3044),” the name given to the place where orders reside before they are included in a block.) Everyone can see the mempool. So if you are a clever speedy arbitrageur, watching a bunch of decentralized exchanges for mispricings, you might see a mispricing and submit your arbitrage orders. And if _I_ am a clever speedy _front-runner_, watching the mempool for arbitrage trades, I would submit the same trades a second or two after you, and pay more to execute them. And then I get to do the arbitrage and you don’t. But if I am a clever speedy front-runner, I don’t even have to wait for arbitrage trades. Let’s say you are not a clever arbitrageur, but just a person who really likes the [Shiba Inu token](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9jb2lubWFya2V0Y2FwLmNvbS9jdXJyZW5jaWVzL3NoaWJhLWludS8_dXBkYXRlPTE3MTU4MDQxNTMxMDU/60e87ce39a995a4b1a2deb96B45c36c21) on the Ethereum blockchain. You submit a huge order to buy SHIB on a decentralized exchange. That will, quite predictably, push up the price of SHIB. [[1]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E5707#footnote-1)  If I see that order, I can just jump ahead of it: I can pay a bit more in transaction fees to get my trades to execute first, and then I can buy the SHIB tokens ahead of you and then _sell_ them to you for a profit, all within the same block. That seems kind of rough on you? This sort of trade is sometimes called a “[sandwich attack](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9tZWRpdW0uY29tL0BrYWxleG90c3UvbWV2LXNhbmR3aWNoLWF0dGFjay1leGFtcGxlLXdpdGgtbGl2ZS10cmFuc2FjdGlvbnMtYmQwMmNiY2IzYjlh/60e87ce39a995a4b1a2deb96B30f3a6ff)”: I see your order to buy SHIB, and I sandwich it between my order to buy SHIB (before you do, at a lower price) and my order to sell SHIB (after you do, at a higher price). And people talk about [“generalized front running” as a strategy](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9hc3NldHMuZXkuY29tL2NvbnRlbnQvZGFtL2V5LXNpdGVzL2V5LWNvbS9lbl91cy90b3BpY3MvZmluYW5jaWFsLXNlcnZpY2VzL2V5LWFuLWludHJvZHVjdGlvbi10by1tYXhpbWFsLWV4dHJhY3RhYmxlLXZhbHVlLW9uLWV0aGVyZXVtLnBkZg/60e87ce39a995a4b1a2deb96B1077fa3c): > A generalized front-runner bot will search the mempool for profitable transactions, then copy the transaction and replace the sender address with their own, then increase their bid (gas price) to price + x to be included in a block first front running the original searcher. I am giving a simplistic and somewhat old-fashioned description of MEV, and modern Ethereum has a whole, like, institutional structure around it. There are [private mempools](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuY29pbmRlc2suY29tL3RlY2gvMjAyNC8wMS8zMS9pbnNpZGUtdGhlLXByaXZhdGUtbWVtcG9vbHMtd2hlcmUtZXRoZXJldW0tdHJhZGVycy1oaWRlLWZyb20tZnJvbnQtcnVubmluZy1ib3RzLw/60e87ce39a995a4b1a2deb96Bc1aa5b60), where you can hide transactions from bots. There is [Flashbots](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9kb2NzLmZsYXNoYm90cy5uZXQv/60e87ce39a995a4b1a2deb96B77f1d0d6), “a research and development organization formed to mitigate the negative externalities posed by Maximal Extractable Value (MEV) to stateful blockchains, starting with Ethereum,” which has things like [MEV-Boost](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9kb2NzLmZsYXNoYm90cy5uZXQvZmxhc2hib3RzLW1ldi1ib29zdC9pbnRyb2R1Y3Rpb24/60e87ce39a995a4b1a2deb96Bc109dc57), which creates “a competitive block-building market” where validators can “maximize their staking reward by selling their blockspace to an open market,” and [MEV-Share](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9kb2NzLmZsYXNoYm90cy5uZXQvZmxhc2hib3RzLW1ldi1zaGFyZS9pbnRyb2R1Y3Rpb24/60e87ce39a995a4b1a2deb96B82109c0f), “an open-source protocol for users, wallets, and applications to internalize the MEV that their transactions create,” letting them “selectively share data about their transactions with searchers who bid to include the transactions in bundles” and get paid.  Basically, transaction data on Ethereum is informative, and the value of that information (in making profitable trades) is quantifiable, and there are cutthroat auctions among people who want to use that data to make their own trades, and the people doing the transactions that create the data can themselves get paid for their data.  There is a sort of cool purity to this. In stock markets, some people are faster than others, and can make money by trading ahead of a big order, [[2]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E5707#footnote-2)  and people get mad about this and think it is unfair and propose solutions. And when money changes hands for speed advantages — “[payment for order flow](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjEtMDItMDUvcm9iaW5ob29kLWdhbWVzdG9wLXNhZ2EtcHJlc3N1cmVzLXBheW1lbnQtZm9yLW9yZGVyLWZsb3c_Y21waWQ9QkJEMDUxNjI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTE2JnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Bf7e3e519),” “[colocation](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cubWFya2V0c21lZGlhLmNvbS9yZXZpc2l0aW5nLWZsYXNoLWJveXMv/60e87ce39a995a4b1a2deb96B26d8791d)” — people complain about corruption. In crypto it’s like “let’s create an efficient market in trading ahead of big orders.” I once wrote: “Rather than _solve_ this concern about traditional markets, crypto _made it explicit_.” That feels almost like a general philosophy of crypto: Take the problems of traditional finance and make them, _worse_, sure, but more transparent and visible and explicit and subject to unbridled free markets. In traditional financial markets, people sometimes get in trouble for “spoofing,” for submitting trade orders designed to fool people (algorithms) about their true trading intent. Every so often, [the spoofer’s defense](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMTUtMDQtMjIvd2h5LWlzLXNwb29maW5nLWJhZC0_Y21waWQ9QkJEMDUxNjI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTE2JnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Bd3eb631f) will be “no, all these algorithms are trying to front-run me, they are trying to use my order information to make money by trading ahead of me. So I created fake order information to fool them. I’m the hero in this story; the bots trying to front-run me are the villains.” This tends not to work. Here, maybe, is the crypto version of that. Bloomberg’s [Ava Benny-Morrison reports](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9uZXdzL2FydGljbGVzLzIwMjQtMDUtMTUvbWl0LWJyb3RoZXJzLWFycmVzdGVkLW92ZXItbGlnaHRuaW5nLTI1LW1pbGxpb24tY3J5cHRvLWhlaXN0P2NtcGlkPUJCRDA1MTYyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUxNiZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B2c4c509c): > Two brothers who studied at MIT were charged with exploiting a weakness in the Ethereum blockchain and stealing $25 million in 12 seconds, in what prosecutors called a first-of-its-kind caper. > > Anton Peraire-Bueno, 24, and James Peraire-Bueno, 28, were charged by federal prosecutors in Manhattan with fraud and money laundering offenses. They are accused of carrying out the lightning-fast heist, plotted over the course of months, from their keyboards last year. > > “The brothers, who studied computer science and math at one of the most prestigious universities in the world, allegedly used their specialized skills and education to tamper with and manipulate the protocols relied upon by millions of Ethereum users across the globe,” Damian Williams, the US attorney for the Southern District of New York, said in a statement. Here are the Justice Department [press release](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuanVzdGljZS5nb3YvdXNhby1zZG55L3ByL3R3by1icm90aGVycy1hcnJlc3RlZC1hdHRhY2tpbmctZXRoZXJldW0tYmxvY2tjaGFpbi1hbmQtc3RlYWxpbmctMjUtbWlsbGlvbg/60e87ce39a995a4b1a2deb96B157936d0) and [the indictment](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuanVzdGljZS5nb3YvdXNhby1zZG55L21lZGlhLzEzNTE5MzEvZGw/60e87ce39a995a4b1a2deb96B84b4e70d). The gist of it is that, allegedly: 1. The brothers set up “a series of Ethereum validators” so they could build blocks on the Ethereum blockchain. 2. The “targeted three Victim Traders, … who are searchers who operate MEV Bots that specialize in cryptocurrency arbitrage trading.” They “tested a series of bait transactions” to see how the arbitrageurs operated. 3. Then, “after receiving notification that one of their 16 Validators had been selected to validate a new block,” they proposed “at least eight specific transactions (the ‘Lure Transactions’)” that they knew the arbitrageurs would like. 4. Specifically, transactions that the arbitrageurs would like to front-run: “The Victim Traders effectively bought substantial amounts of particular illiquid currencies (the frontrun trades), whose price the Victim Traders expected to increase as a result of the Lure Transactions, for approximately $25 million of various stablecoins … or other more liquid cryptocurrencies. The Victim Traders also included a sell transaction in each bundle, whereby the Victim Traders would sell their newly acquired cryptocurrency — immediately after the Lure Transaction — at a higher price than what they bought it for.” It was a sandwich trade: The arbitrageurs saw the Peraire-Bueno’s “lure” trades, which involved buying a bunch of illiquid crypto, and they front-ran them by buying the illiquid crypto before them and selling it after them. 5. But then they exploited a bug in Ethereum to get the full contents of the proposed block and to tamper with it by (1) “allow[ing] the Victim Traders to complete their buy transactions (i.e., their frontrun trades)” and (2) “replac[ing] the Lure Transactions with tampered transactions” in which they “sold the same illiquid cryptocurrencies that the Victim Traders had recently purchased,” and which they apparently already held. [[3]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E5707#footnote-3) 6. That is, they front-ran and spoofed the front-runners: They put in a big order saying “buy a ton of [some nonsense tokens],” front-running bots said “ooh, big bid for nonsense tokens, let’s get ahead of that,” and the front-running bots bought the nonsense tokens ahead of them. But then they tampered with the transactions to replace their own buy order with a _sell_ order, _selling_ the nonsense tokens — effectively, _to_ the front-runners — at inflated prices for $25 million. “In effect, the Tampered Transactions drained the particular liquidity pools of all the cryptocurrency that the Victim Traders had deposited based on their frontrun trades.” Now. Is this … bad? Sure, I guess. In Step 5, the Peraire-Buenos do seem to have exploited a real vulnerability in how Ethereum’s consensus mechanism worked. I do not pretend to fully understand the technical details, but here is a [Flashbots postmortem](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9jb2xsZWN0aXZlLmZsYXNoYm90cy5uZXQvdC9wb3N0LW1vcnRlbS1hcHJpbC0zcmQtMjAyMy1tZXYtYm9vc3QtcmVsYXktaW5jaWRlbnQtYW5kLXJlbGF0ZWQtdGltaW5nLWlzc3VlLzE1NDA/60e87ce39a995a4b1a2deb96B5c400aaf) of the exploit. (They sent a signed but invalid block header to the relay, which caused the relay to publish the contents of the proposed block, which they used to construct their own block exploiting those contents as the proposer of the block.) The Justice Department calls it “an alleged novel scheme by the defendants to exploit the very integrity of the Ethereum blockchain,” and that seems right: If people can reach in to alter the order of transactions to swipe $25 million, that does sort of undermine the integrity of the blockchain. Also they did some bad googling. Before they did the trade, Anton Peraire-Bueno allegedly “searched online for cryptocurrency exchanges with limited ‘know your customer’ protocols and ways to launder cryptocurrency, including searches for ‘how to wash crypto’ and ‘cefi exchanges with no kyc.’” [[4]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E5707#footnote-4) And after the trade, as they were allegedly “laundering the fraud proceeds from the Exploit,” James Peraire-Bueno allegedly “searched online for, among other things, ‘money laundering,’ ‘exploit,’ ‘computer fraud abuse act,’ [[5]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E5707#footnote-5) and ‘does the united states extradite to [foreign country].’” The Justice Department, reasonably, cites these searches as evidence of a guilty conscience. Also though I wonder how well they worked? Like, has anyone ever (1) acquired $25 million of ill-gotten money, (2) googled “money laundering” and (3) successfully used to results to launder the money? On the other hand I bet googling “cefi exchanges with no kyc” works great; really exchanges should pay a lot for those keywords. But to me what is wild about this case is that the Justice Department is bringing down the full weight of US federal criminal law to protect _Ethereum front-running bots_. The word “front-run” is right there in the indictment! The Justice Department has a [long](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuanVzdGljZS5nb3YvdXNhby1lZG55L3ByL2Zvcm1lci1nbG9iYWwtaGVhZC1oc2JjLXMtZm9yZWlnbi1leGNoYW5nZS1jYXNoLXRyYWRpbmctZm91bmQtZ3VpbHR5LW9yY2hlc3RyYXRpbmc/60e87ce39a995a4b1a2deb96Ba19df7a5) [history](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuanVzdGljZS5nb3YvdXNhby1zZG55L3ByL2Zvcm1lci1hbmFseXN0LWNoYXJnZWQtOC1taWxsaW9uLWluc2lkZXItdHJhZGluZy1zY2hlbWUtZnJvbnQtcnVubmluZy1lbXBsb3llci1z/60e87ce39a995a4b1a2deb96B5d27ba1b) of [prosecuting](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuanVzdGljZS5nb3YvdXNhby1zZG55L3ByL3RyYWRlci1sYXJnZS1jYW5hZGlhbi1hc3NldC1tYW5hZ2VtZW50LWZpcm0tY2hhcmdlZC1pbnNpZGVyLXRyYWRpbmctZW5nYWdpbmc/60e87ce39a995a4b1a2deb96Bd4ed21ec) people for front-running! Because it is traditionally a crime! In traditional finance, “front-running” is understood to mean violating a fiduciary duty to your customers (or employer, etc.) by trading ahead of their orders, and it is a crime. [[6]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E5707#footnote-6) But here the Justice Department is protecting the front-runners. And the trades that the Victim Traders were trying to do look, to the naked eye, bad? They were “we see you are trying to buy this illiquid cryptocurrency, so we’re going to buy it ahead of you so we can rip you off.” In Ethereum, that is pretty normal, and there is a large institutional structure to make it work in a predictable and fair-ish way. But in traditional markets it just seems bad. We have talked a few times [about Avi Eisenberg](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDQtMDkvYS1tZW1lLXN0b2NrLWZvci1wcml2YXRlLWNvbXBhbmllcz9jbXBpZD1CQkQwNTE2MjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA1MTYmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96B648092cd), the crypto trader arrested (and convicted) for fraud because he did some market manipulation on a decentralized crypto exchange. He absolutely did do that manipulation, but his defense — which did not work — was that the crypto exchange did not have any norms _against_ it. What he did was allowed by the exchange’s code, he argued, so it was allowed. External norms like “don’t do market manipulation” did not apply.  This is controversial, and a lot of people in and out of crypto have complaints of the form “look, if decentralized finance exchanges do not want to be subject to US regulation, why does the federal government need to protect them from market manipulators?” I am sympathetic to those complaints. But here! I mean! Ethereum and its decentralized exchanges have a market structure that is like “bots can look at your transactions and front-run them if that’s profitable.” And these guys, allegedly, front-ran the front-runners; they turned the market structure around so that _they_ could get an early look at the front-running bots’ front-running transactions and front-run them instead. By hacking, sure, sure, it’s bad. But it leaves the Justice Department in the odd position of saying that the integrity of crypto front-running is important and must be defended. [1] Especially because crypto DEXes generally [run mechanically](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9jaGFpbi5saW5rL2VkdWNhdGlvbi1odWIvd2hhdC1pcy1hbi1hdXRvbWF0ZWQtbWFya2V0LW1ha2VyLWFtbQ/60e87ce39a995a4b1a2deb96B3d01a23b) so the price impact of a transaction is quite knowable. [2] Do not email me about this, which is not the point. “Probabilistically make money by trading sort of in the middle of the execution of what they identify as a big order,” maybe. [3] “Which the defendants already held as a result of information gathered through the bait transactions,” says the indictment. Presumably the intuition is like: You buy some illiquid crypto slowly over time, not moving the price. Then you send a big order to buy a lot of it, which gets front-runners interested. Then you pull it away. [4] This trade relies on two sorts of exchanges, DeFi (decentralized finance) DEXes (decentralized exchanges) and CeFi (centralized finance) exchanges. The actual $25 million trade here has to happen *on the blockchain*, because that is where they are spoofing and tampering with transaction ordering; DEXes are where you trade crypto on the blockchain. But then getting the $25 million out requires a company that can wire money to your bank, and that is a centralized exchange. So he searched for CeFi exchanges to be the on -and off-ramp for the trade, which they did on decentralized exchanges. [5] In fact they are charged with wire fraud, not with hacking under the [CFAA](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9lbi53aWtpcGVkaWEub3JnL3dpa2kvQ29tcHV0ZXJfRnJhdWRfYW5kX0FidXNlX0FjdA/60e87ce39a995a4b1a2deb96B8afad1f0), but it was probably reasonable to worry about getting charged with hacking too. But the lesson is probably that wire fraud is more general than CFAA hacking — everything is wire fraud! — so it’s the easier thing to charge. [6] Of course, it is often used loosely to mean “using order book data to try to trade faster than someone else,” which is not traditional front-running and not a crime. And that’s mostly the meaning in the indictment here. ## ethereum - Matt Levine ### Staking See, to me, spot Ether exchange traded funds are the _obvious_ way to do Ethereum staking? But Bloomberg’s [Muyao Shen reports](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9uZXdzL2FydGljbGVzLzIwMjQtMDUtMjIvYS1ob3QtYnV0dG9uLWlzc3VlLWZvci1zZWMtdGhyZWF0ZW5zLXRvLWVyb2RlLWV0aGVyLWV0Zi1kZW1hbmQ_Y21waWQ9QkJEMDUyMzI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTIzJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Bb6a83674): > Many in the crypto market believe that a key change made to some applications for proposed spot-Ether exchange traded funds will be good for the Ethereum blockchain, while putting the prospective ETF products themselves at a disadvantage. > > Issuers including Fidelity Investments and Ark Investment Management have eliminated plans for “staking” the Ether they would purchase for the proposed funds if they’re approved. Staking is industry jargon for the mechanism that runs Ethereum and other so-called proof-of-stake blockchains. It involves locking up deposits of cryptocurrency in order to help validate transactions and secure the network in exchange for rewards paid for doing that work. > > Staking has been a hot-button issue for Ether since it allows holders to collect a yield, which raises questions about whether the token should be treated as a security that falls under the purview of US regulators. Some market participants believe that if ETFs don’t stake their tokens, the funds will be less appealing to investors than buying Ether directly in the crypto market, where they are free to stake the tokens. > > “There will be an immediate opportunity cost to holding Ether via a US ETF from forgone staking rewards,” said Brian Rudick, senior strategist at digital-asset firm GSR. Here’s how I think of it. First, staking. Ethereum [is a cryptocurrency network](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9mZWF0dXJlcy8yMDIyLXRoZS1jcnlwdG8tc3RvcnkvP2NtcGlkPUJCRDA1MjMyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUyMyZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZiNhLWRpc3RyaWJ1dGVkLWNvbXB1dGVy/60e87ce39a995a4b1a2deb96Bbff96961); people do transactions on Ethereum, but rather than some centralized agency (a bank, etc.) keeping the ledger of transactions, the ledger is kept in a decentralized way by lots of computers that run on the network. The way that this works is roughly that people broadcast their proposed transactions on the network, and every 10 seconds one computer on the network (the “proposer”) writes down a list of recent transactions in order, and the other computers on the network (the “validators”) vote to approve that list (a “block”), and if they all agree then the block is enshrined in the permanent ledger (the “blockchain”). We [talked about this system last week](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDUtMTYvY3J5cHRvLWJyb3RoZXJzLWZyb250LXJhbi10aGUtZnJvbnQtcnVubmVycz9jbXBpZD1CQkQwNTIzMjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA1MjMmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96B3ad54020), because some guys kind of hacked it. The computers that get a vote on this — the proposer and validators — are those with a stake in the network, those with an economic incentive to make sure that it works. Specifically, they are “stakers”: People deposit some Ether, the currency of Ethereum, with the network, to get these voting rights. And then if they do bad stuff — propose fake lists, forget to vote, etc. — they lose some of their deposit, which is called “slashing.” But if they do good stuff — if they reach consensus on their blocks — they get “[staking rewards](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly9ldGhlcmV1bS5vcmcvZW4vZGV2ZWxvcGVycy9kb2NzL2NvbnNlbnN1cy1tZWNoYW5pc21zL3Bvcy9yZXdhcmRzLWFuZC1wZW5hbHRpZXMv/60e87ce39a995a4b1a2deb96B8751cf4e),” in the form of additional Ether, which intuitively [come from transaction fees](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly9ldGhlcmV1bS5vcmcvZW4vZGV2ZWxvcGVycy9kb2NzL2dhcy8/60e87ce39a995a4b1a2deb96B7310b31b) paid by people who want to do transactions on Ether. These rewards are, crudely speaking, proportional to the amount of Ether that the stakers deposit; they tend to be expressed as an annual percentage yield. This morning [Coinbase tells me](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuY29pbmJhc2UuY29tL2Vhcm4vc3Rha2luZy9ldGhlcmV1bQ/60e87ce39a995a4b1a2deb96B0967e3a3) that the rate is about 2.54%.  All the stuff about keeping ledgers and voting sounds pretty active, but it doesn’t have to be. It is all algorithmic and done by computers. And so there is a marketplace in which, essentially, (1) I run computers to do the validating stuff, (2) you lend me your Ether to stake, (3) I collect the staking rewards from the validating and (4) I pass most of them on to you. You, here, are just a passive saver; you put your Ether into an account with me and get paid interest. The work of maintaining the Ethereum ledger is distributed among the holders of Ether, and the rewards of that work are also distributed among the holders, but those holders naturally delegate the work to people with more interest in doing it.  If you hold Ether you don’t _have_ to be involved in any of this — “about 27% of the all outstanding Ether is staked,” reports Shen — but it is kind of free money? If you hold dollars, you don’t _have_ to put them in a high-yield savings account or a money market fund, but for a lot people that would make sense. Ethereum staking rewards, to many Ether holders, look more or less like bank account interest. Next: “Questions about whether the token should be treated as a security that falls under the purview of US regulators.” There are a couple of levels of this. One is: If I run a staking _program_, in which I do the validating stuff and pay you a cut of the staking rewards, is _that offering_ a security? In practice, many of the people who run staking programs are _crypto exchanges_, for pretty natural reasons: Crypto exchanges have lots of retail customers who buy and hold Ether on their platforms. The exchanges are holding the customers’ Ether anyway. If they can put that Ether to work doing staking, they can earn an interest-like return on it, and then pass a lot of that interest on to their customers, making the customers happy. It’s a good product. But the US Securities and Exchange Commission unambiguously believes that that product is a _security_, that the customers who deposit their Ether with Coinbase or Kraken or whomever, with the promise of earning interest, are _buying a security from the exchange_. The argument is [a standard one](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDYtMDYvdGhlLXNlYy1jb21lcy1mb3ItY3J5cHRvP2NtcGlkPUJCRDA1MjMyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUyMyZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96Bb4c1a6d6) in US crypto regulation: The customers are pooling their money based on the promise of profits from someone else’s efforts, which is the definition of a security. So, if the exchange wants to offer that to the public, to retail investors, it needs to register the securities with the SEC. The exchanges do not do that, and so the SEC goes around [shutting down](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDItMTMvdGhlLXNlYy1jcmFja3MtZG93bi1vbi1jcnlwdG8_Y21waWQ9QkJEMDUyMzI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTIzJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Bd63e31af) exchanges’ staking-as-a-service programs. The other level of this is: If Ethereum, as a network, pays staking rewards, does that make staked Ether (or all Ether) _itself_ a security? This is a harder question, to which I think the rough answer is “in its heart of hearts the SEC absolutely thinks Ether is a security, but it won’t come out and say that, because Ether has been sort of [grandfathered in](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDYtMDcvd2hlbi1pcy1hLXRva2VuLW5vdC1hLXNlY3VyaXR5P2NtcGlkPUJCRDA1MjMyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUyMyZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96Bb480f24b) as not a security, and the SEC would get a lot of blowback if it said that Ether trading was illegal.” Finally: ETFs. The situation is roughly: 1. The SEC hates crypto and would like to block crypto spot ETFs, that is, ETFs that directly hold the underlying cryptocurrency. 2. But it [lost a court case over this](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDgtMjkvZ3JheXNjYWxlLWNhbi1iZS1hLWJpdGNvaW4tZXRmP2NtcGlkPUJCRDA1MjMyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUyMyZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B2b82a78f) and was forced to [approve spot Bitcoin ETFs](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDEtMTEvYml0Y29pbi1ldGZzLWFyZS1oZXJlLWZvci1yZWFsP2NtcGlkPUJCRDA1MjMyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUyMyZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96Bea45701f). (Bitcoin has no staking mechanism.) 3. Now, issuers are asking it to approve spot Ether ETFs, and since it approved Bitcoin ETFs it has no particularly principled reason to say no. 4. _But_ there is a distinction between Ether and Bitcoin, which is that Ether _can_ be staked. 5. Potential Ether ETF issuers would love to be able to stake their Ether: The staking rewards would make an Ether ETF more attractive, and might provide some revenue to the issuer. 6. And they originally proposed that, but then “eliminated plans” for staking from their filings, presumably because the SEC glared at them meaningfully. 7. So Ether ETFs will launch without staking, so they won’t pay “interest,” which will make them a bit less economically attractive than holding Ether directly and participating in staking. Fine. But. It seems to me that Ether ETFs have a crucial advantage here. _They are securities_. A spot Ether ETF just is a security. It is registered with the SEC. It is issued by a company — Fidelity, Ark — whose whole business is issuing SEC-registered securities. (Specifically, public _funds_, but [those are securities](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cubWZhYWx0cy5vcmcvd3AtY29udGVudC91cGxvYWRzLzIwMTMvMDkvQ2l0aS00MC1BY3QtRnVuZHMtV2hpdGUtUGFwZXItSnVseS0yMDEzLTIucGRm/60e87ce39a995a4b1a2deb96Bcfc111a9) too.)  We [talked last week](https://link.mail.bloombergbusiness.com/click/35478826.273787/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDUtMTUvYW1jLXJvZGUtdGhlLW1lbWUtcmFsbHk_Y21waWQ9QkJEMDUyMzI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTIzJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Be8296d5a) about BlackRock Inc.’s blockchain-based money market fund, BUIDL. I think BUIDL is really interesting. BUIDL, as far as I can tell, is  - a stablecoin, - that pays interest. There are other, bigger stablecoins. They tend to be issued by crypto-y companies (Circle, Tether). They don’t pay interest. Probably the issuers would like to pay interest, for customer-service and competitive reasons. But “a stablecoin that pays interest” is, in the view of the SEC, a security, and even if the crypto-y issuers _wanted_ to register their coins as securities they’d probably have a hard time with the SEC. Whereas BlackRock is BlackRock. It can just do that. BUIDL is institutional-only, not a public fund, but give it time. I wrote: > The _most natural_ issuer for a large-scale stablecoin that can operate legally in the US and attract institutional users is _a mutual fund company_, because the essential technology — “we take your dollar, promise to give it back, invest it in Treasury bills and pay you most of the interest” — _is_ a money market mutual fund. I think there is an analogy to spot Ether ETFs. Right now, those issuers are not going to be able to offer a public Ether ETF with staking rewards, because the whole Ether ETF thing is new and the SEC is glaring at them. The SEC is glaring, not issuing enforcement actions, so I don’t know exactly what the objection is. Presumably it has to do with the security of the staking system, the ETFs’ control of their assets, something like that. But those issues are probably solvable, and the spot Ether ETFs have already solved the harder US regulator issue, which is: _They are packaging Ether in an SEC-registered security._ Meanwhile every _other_ way to get staking rewards from Ether — staking with a crypto exchange or a decentralized platform, etc. — has _not_ solved that issue. If you hold Ether yourself and deposit them with a crypto exchange to earn staking rewards, the SEC might eventually go after the exchange for issuing unregistered securities. If the SEC has its way, ultimately, nobody will be able to offer Ethereum staking rewards outside of a security. But Ethers in an ETF are inside a security! Shen goes on: > At the same time, many industry advocates believe that the removal of staking plans among ETF issuers is actually a net positive for the industry, where the goal is a financial system that is decentralized rather than dependent on a small number of intermediaries. > > “Staked Ether being part of ETFs could have been a big centralizing force,” said Leo Mizuhara, founder of decentralized-finance institutional asset manager Hashnote. “For example, the amount of Bitcoin now in custody at Coinbase is enormous because of the ETF phenomenon. A similar thing could have happened with ETH staking.” ... > > The fact that ETF issuers won’t be staking Ether likely aligns with Ethereum’s goals and will help protect the second-largest cryptocurrency from a “long-term institutional takeover,” said GSR’s Rudick. Doesn’t that passage _mean_ “of course the SEC should approve staking in Ether ETFs”? Doesn’t the SEC _want_ Ether to be centralized and under the control of SEC-regulated securities issuers? ## HODL [The HODLer manifesto](https://hodlermanifesto.com) What is HODL? [Federico Gambarelli (fede93g)](https://steemit.com/bitcoin/@fede93g/the-hodler-manifesto-what-does-being-a-bitcoin-hodler-mean) (2018) The HODLer Manifesto: what does "being a Bitcoin HODLer" mean? ## nft - Matt Levine ### Rare sats Crudely speaking there are two sorts of crypto tokens. There are _fungible_ tokens, like Bitcoin and Ether and Tether and Solana, which have approximately cash-like properties: If a thing costs two Bitcoins, it doesn’t matter _which_ two Bitcoins you use to pay for it; any two Bitcoins are just as good as any other two Bitcoins. And there are _nonfungible_ tokens, NFTs, like Bored Ape Yacht Club, which have approximately art-object-like properties: Each Bored Ape is different, and some — based on their rarity or aesthetics or provenance — are worth much more than others. Intuitively, fungible tokens are indistinguishable coins, while NFTs are unique images. But _really_ neither of those things is true. Really they are both entries in detailed permanent transaction ledgers. An NFT, for example, _isn’t_ the little drawing of the monkey; the NFT is simply a numbered entry in a ledger that [points to the drawing of the monkey](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9tb3hpZS5vcmcvMjAyMi8wMS8wNy93ZWIzLWZpcnN0LWltcHJlc3Npb25zLmh0bWw/60e87ce39a995a4b1a2deb96Bcc92646f). I [once wrote](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9mZWF0dXJlcy8yMDIyLXRoZS1jcnlwdG8tc3RvcnkvP2NtcGlkPUJCRDA1MTYyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUxNiZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B61340118) that “an NFT consists of a series of numbered tokens, and the thing that makes it an NFT is that it has a different number in its tokenId field from the other tokens in its series.”  Meanwhile a fungible token like Bitcoin is _not_ a _numbered_ entry in a ledger; there is [such a thing as](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9vcGVuc2VhLmlvL2Fzc2V0cy9ldGhlcmV1bS8weGJjNGNhMGVkYTc2NDdhOGFiN2MyMDYxYzJlMTE4YTE4YTkzNmYxM2QvMw/60e87ce39a995a4b1a2deb96Bc622db60) “Bored Ape Number 3” but there is no such thing as “Bitcoin Number 3.” But there is a permanent immutable computer ledger containing every Bitcoin transaction, which means that you _could_, sort of, trace the ledger back to find what the third Bitcoin was and who holds it now. [[7]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E5707#footnote-7) More generally, you could, if you wanted to, treat Bitcoins as completely nonfungible. You could trace back the history of any Bitcoin, or fraction of a Bitcoin. And then you could say things like: - “I am willing to pay more for old Bitcoins, ones that were mined in like 2009, than I will for new Bitcoins, ones that were only mined in 2024.” - “I am willing to pay more for Bitcoins with cool provenance, like ones that were once [owned by Satoshi Nakamoto](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvY2tjaGFpbi5jb20vZXhwbG9yZXIvYmxvY2tzL2J0Yy8wMDAwMDAwMDAwMTlkNjY4OWMwODVhZTE2NTgzMWU5MzRmZjc2M2FlNDZhMmE2YzE3MmIzZjFiNjBhOGNlMjZm/60e87ce39a995a4b1a2deb96B86599764) or used to pay for the [2010 Bitcoin Pizza](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuY29pbmRlc2suY29tL2NvbnNlbnN1cy1tYWdhemluZS8yMDIzLzA1LzIyL2NlbGVicmF0aW5nLWJpdGNvaW4tcGl6emEtZGF5LXRoZS10aW1lLWEtYml0Y29pbi11c2VyLWJvdWdodC0yLXBpenphcy1mb3ItMTAwMDAtYnRjLw/60e87ce39a995a4b1a2deb96Ba3f3d853), than I will for regular old Bitcoins with no fun history.”  - “I am willing to pay _less_ for Bitcoins with a troubled regulatory history, like the ones that were [stolen in the Bitfinex hack](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjItMDItMDkvYnVzaW5lc3MtcmFwcGVyLXdhcy1iYWQtYXQtYml0Y29pbi1sYXVuZGVyaW5nP2NtcGlkPUJCRDA1MTYyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDUxNiZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B48ddeb97), than I will for Bitcoins with a clean regulatory history.” Bitcoins are fungible simply because it is standard convention among Bitcoin users to _treat_ them as fungible, but they _are_ distinguishable from one another, and if you wanted to discriminate among Bitcoins you _could_. People mostly don’t, but the last thing on that list — “try not to accept Bitcoins that have been stolen or are [otherwise of interest](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cudHJtbGFicy5jb20vcG9zdC91cy10cmVhc3VyeXMtb2ZhYy1zYW5jdGlvbmVkLXJ1c3NpYS1iYXNlZC1jcnlwdG8tZXhjaGFuZ2VzLWFuZC1maW50ZWNocy1mb3ItZmFjaWxpdGF0aW5nLXNhbmN0aW9ucy1ldmFzaW9u/60e87ce39a995a4b1a2deb96Ba1ca7d56) to US law enforcement” — _does_ have some traction. Some Bitcoins really _are_ less valuable than others. And some are more. Here is [a delightful story from Joel Khalili at Wired](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly9hcnN0ZWNobmljYS5jb20vaW5mb3JtYXRpb24tdGVjaG5vbG9neS8yMDI0LzA1L3RoZS1odW50LWZvci1yYXJlLWJpdGNvaW4taXMtbmVhcmluZy1hbi1lbmQv/60e87ce39a995a4b1a2deb96Bed00c94f): > In the same way a dollar is made up of 100 cents, one bitcoin is composed of 100 million satoshis—or sats, for short. But not all sats are made equal. Those produced in the year bitcoin was created are considered vintage, like a fine wine. Other coveted sats were part of transactions made by bitcoin’s inventor. Some correspond with a particular transaction milestone. These and various other properties make some sats more scarce than others—and therefore more valuable. The very rarest can sell for tens of millions of times their face value; in April, a single sat, normally worth $0.0006, sold for $2.1 million. There are two interesting points here. One is simply the existence of “rare sats”: To at least some … Bitcoin collectors? … some satoshis are worth more than others, due to their history or provenance.  The other is that, while some Bitcoin enthusiasts value rare sats highly and will pay a lot for them, others just cheerily assume that Bitcoin is a fungible currency. And so there is a trade: > [Bill] Restey is part of a small, tight-knit band of hunters trying to root out these rare sats, which are scattered across the bitcoin network. They do this by depositing batches of bitcoin with a crypto exchange, then withdrawing the same amount—a little like depositing cash with a bank teller and immediately taking it out again from the ATM outside. The coins they receive in return are not the same they deposited, giving them a fresh stash through which to sift. They rinse and repeat. If you deposit one Bitcoin on a crypto exchange and then withdraw it, you will get one Bitcoin. But you will not get the same Bitcoin you put in. The exchange will say “ehh Bitcoins are Bitcoins, it doesn’t matter.” But you might disagree. [7] In actual fact the first 50 Bitcoins were minted all at once, and that set of Bitcoins, [according to Blockchain.com](https://link.mail.bloombergbusiness.com/click/35403556.275801/aHR0cHM6Ly93d3cuYmxvY2tjaGFpbi5jb20vZXhwbG9yZXIvYmxvY2tzL2J0Yy8wMDAwMDAwMDAwMTlkNjY4OWMwODVhZTE2NTgzMWU5MzRmZjc2M2FlNDZhMmE2YzE3MmIzZjFiNjBhOGNlMjZm/60e87ce39a995a4b1a2deb96C86599764), “is unredeemable, as it was omitted from the transaction database. This means any attempt to spend it would be rejected by the network. Whether this was intentional or not still remains unknown.” Also I am being a little loose with terminology here; there is not such a thing as “a Bitcoin,” but rather any amount of Bitcoin that you get is the residue of various prior transactions that can be traced back in time to when batches of Bitcoin were mined. It’s not like individual coins have passed from hand to hand, but the Bitcoins in your account reflect the history of the transactions that brought them there. ### NFT backdating In 2021, Damien Hirst offered art collectors a proposition that was very 2021 and very Damien Hirst: 1. Hirst had made 10,000 paintings of “colourful hand-painted dots on A4 paper,” as [today’s story in the Guardian](https://link.mail.bloombergbusiness.com/click/35465286.278788/aHR0cHM6Ly93d3cudGhlZ3VhcmRpYW4uY29tL2FydGFuZGRlc2lnbi9hcnRpY2xlLzIwMjQvbWF5LzIyL2RhbWllbi1oaXJzdC1hcnR3b3Jrcy1wYWludGVkLXllYXJzLWxhdGVyLWN1cnJlbmN5LWFydGlzdA/60e87ce39a995a4b1a2deb96Bf2cabe34) puts it, and he was offering them for sale, but with a twist. 2. The twist was that you could buy a nonfungible token (NFT), on the blockchain, corresponding to one of those dot paintings. 3. Then Hirst would light your painting on fire, and you’d get to keep the NFT. 4. _Or_, or, or, you could keep the painting, but then you would lose the NFT. “In total, buyers chose to retain the physical versions of 5,149 paintings”; almost 4,000 buyers chose the fire and the NFT. (“Hirst kept 1,000 of the works, although he opted to hold them as the NFT versions,” says the Guardian.)  Anyway Hirst obviously did not bother putting all the dots on all 10,000 papers; there was a factory: > According to sources familiar with the production of The Currency series, dozens of artists were hired to assist with the factory-style production of the paintings in 2018 and 2019. Some worked eight-hour days for several months, wearing cumbersome masks to protect from the paint fumes. ... > > Lawyers for Hirst and Science said they always adhered to relevant health and safety rules and practices. Sure. But the news today is: > The initial sale brought in about $18m. At the time, Hirst said of the project: “It comprises of 10,000 NFTs, each corresponding to a unique physical artwork made in 2016.” > > The paintings were sold via a single authorised seller, Heni, run by Hirst’s business manager. It said at the time that the works were “created by hand in 2016”.  > > However, five sources familiar with the creation of the works, including some of the painters who put the dots to paper, told the Guardian many of them were mass-produced in 2018 and 2019. I gather that early-career Damien Hirst works are worth more than later-career Damien Hirst factory products, though I am not sure why the difference between 2016 and 2019 would matter all that much. Surely no one was expecting that Hirst himself put all the dots on all the papers; surely, when you pay for a Damien Hirst painting, part of what you are paying for is, like, the joke that Hirst is making about the mass production and commercialization of art.  But here specifically you were paying for the joke he was making about the blockchain! He was gonna burn the paintings! Imagine being angry that you paid Damien Hirst to burn a painting that his factory made in 2016, but then you found out that he actually burned a painting that his factory made in 2019. Honestly this makes me like Hirst more. I think this is the first good joke that I’ve ever seen in the [“object-fire-token-money” NFT genre](https://link.mail.bloombergbusiness.com/click/35465286.278788/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9uZXdzL25ld3NsZXR0ZXJzLzIwMjEtMDktMTAvbW9uZXktc3R1ZmYtZnVuZ2libGUtc2xpY2VzLW9mLW5vbi1mdW5naWJsZS10b2tlbnM_Y21waWQ9QkJEMDUyMjI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNTIyJnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96B53b400b9)? In particular, it is a sophisticated _blockchain_ joke. The blockchain, of course, is a tamper-proof record of provenance. Whatever bad things you can say about NFTs, one thing that is surely true of an NFT is that you can tell when it was created. The creation date of these NFTs — 2021, of course! — is permanently and immutably inscribed in the blockchain. The paintings’ creation date, man, who knows; he burned those. You _can’t_ backdate the creation of a crypto artwork; immutable provable time sequencing is in some deep sense the _point_ of crypto. But Hirst found a way to do it. ## nft [An NFT That Saves Lives](http://www.paulgraham.com/nft.html) [How to Make an NFT and Render it on the OpenSea Marketplace](https://www.freecodecamp.org/news/how-to-make-an-nft-and-render-on-opensea-marketplace) [How to Make an NFT in 14 Lines of Code](https://www.freecodecamp.org/news/how-to-make-an-nft) ## othergovt_crypto [Gibraltar poised to become first cryptocurrency hub - CNET](https://www.cnet.com/personal-finance/crypto/gibraltar-poised-to-become-first-cryptocurrency-hub) [Police raid Worldcoin warehouse in Nairobi | Hacker News](https://news.ycombinator.com/item?id=37036277) [Police raid WorldCoin cryptocurrency warehouse in Nairobi - Capital News](https://www.capitalfm.co.ke/news/2023/08/police-raid-worldcoin-cryptocurrency-warehouse-in-nairobi/) ## proof of reserves [Binance outflows hit $6B as Mazars halts 'proof of reserves' work | Hacker News](https://news.ycombinator.com/item?id=34028921) [Binance outflows hit $6bn as Mazars halts 'proof of reserves' work](https://www.ft.com/content/bb50a204-5239-4db0-9964-c3bf9339c594) ## secondary_effects [The bitcoin blockchain is helping keep a botnet from being taken down | Ars Technica](https://arstechnica.com/information-technology/2021/02/crooks-use-the-bitcoin-blockchain-to-protect-their-botnets-from-takedown) ## sec regulation - Matt Levine ### SEC v. crypto A pretty standard story in crypto is: 1. Crypto in general, and Crypto Project X in particular, are _building something._ Each crypto project is working to achieve some vision of the future of finance or communications or media or wireless networking or whatever, and crypto collectively — the aggregate of those projects — is moving toward some loosely shared vision of a future of decentralized ownership, censorship resistance, etc. 2. By buying tokens of Crypto Project X, you are betting on the success of whatever they are building: If the thing succeeds, the tokens will be worth more than you paid for them. 3. _Probably_ the people building Crypto Project X are _selling_ its tokens to raise money to build the thing, or doing something that rhymes with that. [[5]](imap://dave%40stucky%2Etech@mail.stucky.tech:993/fetch%3EUID%3E.INBOX%3E4839#footnote-5) This is not the only story in crypto; there is another common story that [goes like](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDMtMTgvc2xvcmctaXMtc29ycnktaGUtYnVybnQtc2xlcmY_Y21waWQ9QkJEMDQwODI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNDA4JnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96B42a7c411) "someone created some tokens as a joke and now they are worth billions of dollars." But the one I laid out above is important. For one thing, it describes a lot of big crypto projects. Also, though, it would be hard to _care_ about crypto if it _wasn't_ trying to build something. "Dogecoin is a joke and if you buy it it might go up" is, I think, a very interesting fact about modern finance, but you'd feel silly devoting your life to it. _[Read Write Own: Building the Next Era of the Internet](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly9yZWFkd3JpdGVvd24uY29tLw/60e87ce39a995a4b1a2deb96B91d5cd2c)_ is the name of venture capitalist Chris Dixon's book about crypto, and if you are a venture capitalist "the next era of the internet" is a better thing to back than "a joke about a dog." The problem with this story, though, is that Crypto Project X's tokens sure sound like they are _securities_ under US law. A [security is](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDctMTQvcmlwcGxlLWlzLWEtc2VjdXJpdHktYW5kLWl0LWlzbi10P2NtcGlkPUJCRDA0MDgyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQwOCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B22f66717) "an investment of money in a common enterprise with profits to come solely from the efforts of others," and what I laid out above — Crypto Project X is a group of people building a thing, they raise money by selling tokens, and you buy tokens hoping to make money if their thing succeeds — is that. US securities law exists mostly to prevent swindling in the sale of securities. This creates several problems for crypto: 1. Some crypto projects are in fact swindles, and securities law is bad for them. 2. The main way that the law prevents swindles is by requiring disclosure by securities issuers, and the disclosure rules are not well adapted to crypto, meaning that even a non-swindle crypto project will have a hard time registering its tokens and complying with US law. 3. The law empowers the US Securities and Exchange Commission to regulate securities, and [the SEC _hates_ crypto](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjItMDktMTMvY3J5cHRvLXdhbnRzLXNvbWUtc2VjLXJ1bGVzP2NtcGlkPUJCRDA0MDgyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQwOCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B9ecad56b) and does not do anything to make registration easy or even possible. 4. Most critically, perhaps, the law also regulates securities _exchanges_, and it is hard for a crypto exchange to register with the SEC as a securities exchange. So the SEC can [go after crypto exchanges](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDYtMDcvd2hlbi1pcy1hLXRva2VuLW5vdC1hLXNlY3VyaXR5P2NtcGlkPUJCRDA0MDgyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQwOCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B32ccf387) for illegally listing crypto tokens that are securities. And the SEC has done that, [suing Coinbase Global Inc.](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDYtMDYvdGhlLXNlYy1jb21lcy1mb3ItY3J5cHRvP2NtcGlkPUJCRDA0MDgyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQwOCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B0a9e393c) and other crypto exchanges for operating illegal securities exchanges. This really is an existential problem for crypto in the US, and the industry's response has been to argue that these crypto tokens are not securities. The leading form of this argument goes something like this: - A security is an "investment contract," and there is no _contract_ between you and Crypto Project X. Sure they say they will build the project, and you expect them to, and that's why you invested. But you never signed a contract; if they just run off with your money you can't sue. Therefore, not a security. - Even if there _is_ some sort of contractual arrangement between you and Crypto Project X, the _token_ is not a security. The security is something like "the token plus the other arrangements and expectations you have with Crypto Project X." But the token is not the contract; [the token is](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDctMTcvYnJhbmNoZXMtbWFrZS1iYW5rLXJ1bnMtaGFyZGVyP2NtcGlkPUJCRDA0MDgyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQwOCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96Bd76de150) "little more than [an] alphanumeric cryptographic sequence." Maybe Crypto Project X issued a security, but _secondary market_ trading in the token — people buying and selling it on an exchange — is not a securities transaction, so crypto exchanges are not securities exchanges. I have never found these arguments especially persuasive; to me, [these tokens are analogous to stock in companies](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDctMTQvcmlwcGxlLWlzLWEtc2VjdXJpdHktYW5kLWl0LWlzbi10P2NtcGlkPUJCRDA0MDgyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQwOCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96C22f66717), and secondary trading in Meta Platforms Inc. stock is obviously a securities transaction even though none of the money goes to Meta. (A share of stock is also, trivially, "little more than an alphanumeric cryptographic sequence," an entry in a computer database: It's what the database entry _represents_ that makes it a security.) But last July a federal judge in New York was persuaded, [issuing a puzzling ruling](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDctMTQvcmlwcGxlLWlzLWEtc2VjdXJpdHktYW5kLWl0LWlzbi10P2NtcGlkPUJCRDA0MDgyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQwOCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96D22f66717) in the SEC's case against Ripple Labs Inc. finding that Ripple's XRP token is mostly not a security. I thought that perhaps I had it all wrong, and crypto tokens really are a get-out-of-securities-law-free card: You can raise money for your business by selling quasi-stock and calling it a token, you can do as much fraud as you want, and the SEC can't do anything about it. Since then, though, the SEC has been on a winning streak against crypto. Shortly after the Ripple decision, another New York federal judge [issued a decision](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDgtMDMvdGVycmEtaXMtdXN1YWxseS1hLXNlY3VyaXR5P2NtcGlkPUJCRDA0MDgyNF9NT05FWVNUVUZGJnV0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1uZXdzbGV0dGVyJnV0bV90ZXJtPTI0MDQwOCZ1dG1fY2FtcGFpZ249bW9uZXlzdHVmZg/60e87ce39a995a4b1a2deb96B8dae385d) in the SEC's case against Terraform Labs and its founder Do Kwon, finding, no, of course Terra's tokens are securities. And last month, a different New York federal judge [ruled that the SEC's case against Coinbase](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9uZXdzL2FydGljbGVzLzIwMjQtMDMtMjcvc2VjLXN1aXQtYWdhaW5zdC1jb2luYmFzZS1jYW4tZ28tZm9yd2FyZC1qdWRnZS1ydWxlcz9jbXBpZD1CQkQwNDA4MjRfTU9ORVlTVFVGRiZ1dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9bmV3c2xldHRlciZ1dG1fdGVybT0yNDA0MDgmdXRtX2NhbXBhaWduPW1vbmV5c3R1ZmY/60e87ce39a995a4b1a2deb96Be3e4c147) can go forward: "The 'crypto' nomenclature may be of recent vintage," she wrote, "but the challenged transactions fall comfortably within the framework that courts have used to identify securities for nearly eighty years." Here is [her opinion](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly9hc3NldHMuYndieC5pby9kb2N1bWVudHMvdXNlcnMvaXFqV0hCRmRmeElVL3I3eDdIRjlrNTdpZy92MA/60e87ce39a995a4b1a2deb96B88f22687), which strikes me as thorough and straightforward, and which surveys several other cases reaching similar results, more or less ignoring the Ripple decision. Coinbase [had argued](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjQtMDEtMTgvY29pbmJhc2UtdHJhZGVzLWJlYW5pZS1iYWJpZXM_Y21waWQ9QkJEMDQwODI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNDA4JnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96B7d876f55) that crypto tokens were like Beanie Babies: speculative investments, but not speculative investments _in a business_. The judge rejected that argument, writing that "unlike in the transaction of commodities or collectibles (including the Beanie Babies discussed during the oral argument), which may be independently consumed or used, a crypto-asset is necessarily intermingled with its digital network — a network without which no token can exist." And then last week the SEC won its jury trial against Terra. The [Wall Street Journal reports](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cud3NqLmNvbS9maW5hbmNlL2N1cnJlbmNpZXMvZG8ta3dvbi1sb3N0LXRvLXRoZS1zZWMtdGhlLXUtcy1pcy1waWxpbmctdXAtb3RoZXItY3J5cHRvLXdpbnMtdG9vLTZjMTJiZGRlP21vZD1ocF9saXN0Y19wb3My/60e87ce39a995a4b1a2deb96B2b9e991d): > After a two-week civil trial, a New York jury agreed with the SEC's claims that Kwon and his firm, Terraform Labs, defrauded investors by misleading them about the stability of TerraUSD, a so-called stablecoin designed to maintain a value of $1. Kwon had claimed that TerraUSD would "self-heal" if its value ever dropped below the peg. > > The decision was the latest in a series of federal court wins bolstering regulators' efforts to force the freewheeling industry to comply with the same laws that govern the stock and bond markets.  In some sense, the Terra result was obvious once the judge allowed the case to go forward: If you think that Terra's tokens were _securities_, then _of course_ you are going to find that Terra did _securities fraud_. This is in part because there is a lot of evidence that Kwon and Terraform were lying to investors about important facts of the Terra ecosystem, but there is also the more straightforward fact that [Terra crashed](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjItMDUtMTEvdGVycmEtZmxvcHM_Y21waWQ9QkJEMDQwODI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNDA4JnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Bd7bfceaa) and incinerated a lot of investor money. If (1) you call a thing a "stablecoin," (2) its value drops to [$0.026](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuY29pbmRlc2suY29tL3ByaWNlL3RlcnJhdXNkLw/60e87ce39a995a4b1a2deb96B9f1ec489) and (3) it is a security, then (4) you're going to get sued for securities fraud and (5) you are going to lose. Or as SEC Enforcement Director Gurbir Grewal put it in [a statement after the verdict](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuc2VjLmdvdi9uZXdzL3N0YXRlbWVudC9ncmV3YWwtc3RhdGVtZW50LTA0MDQyNA/60e87ce39a995a4b1a2deb96B988cb4af): > Through these deceptions, the defendants caused devastating losses for investors and wiped out tens of billions of market value nearly overnight. For all of crypto's promises, the lack of registration and compliance have very real consequences for real people. Last year, as the SEC accelerated its crypto crackdown, I [wrote about its timing](https://link.mail.bloombergbusiness.com/click/34967840.279823/aHR0cHM6Ly93d3cuYmxvb21iZXJnLmNvbS9vcGluaW9uL2FydGljbGVzLzIwMjMtMDItMTMvdGhlLXNlYy1jcmFja3MtZG93bi1vbi1jcnlwdG8_Y21waWQ9QkJEMDQwODI0X01PTkVZU1RVRkYmdXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPW5ld3NsZXR0ZXImdXRtX3Rlcm09MjQwNDA4JnV0bV9jYW1wYWlnbj1tb25leXN0dWZm/60e87ce39a995a4b1a2deb96Bd1b5c01a). It seemed to me that cracking down on crypto in the wake of a crypto collapse was arguably bad regulation (better to prevent the collapse!) but good realpolitik: > In 2021, if the SEC thought your token was a security and you thought it wasn't, you could go to court to argue about it, and try to convince a judge that the SEC was wrong on the law. You might win, who knows. … But in 2023, the SEC can go to court and say to a judge "we need to protect investors from unregistered crypto securities offerings, because _look at how many of them are frauds that went bankrupt_," and while that _legal_ argument is no better than it was in 2021, it is much more _persuasive_ now. At some emotional level the debate is "we need to stop fraudsters" versus "we need to allow for innovation," and the fraud/innovation balance has shifted a lot in recent months. Well, now crypto is booming again, but the memory of all those frauds is still pretty fresh, and the SEC has notched some important wins. [5] E.g., they are building the thing on the cheap without raising money, but they *have* a lot of the tokens, and if the thing succeeds those tokens will make them rich. ## usgovt_crypto_bitcoin [Cryptoverse: As good as gold? Spot bitcoin ETFs aim to whip up US demand | Reuters](https://www.reuters.com/technology/cryptoverse-good-gold-spot-bitcoin-etfs-aim-whip-up-us-demand-2023-10-31/) [Spot Bitcoin ETF receives official approval from the SEC | Hacker News](https://news.ycombinator.com/item?id=38943291) [Spot Bitcoin ETF receives official approval from the SEC](https://cointelegraph.com/news/sec-spot-bitcoin-etf-approvals) [SEC approves first spot bitcoin ETFs in boost to crypto advocates](https://www.ft.com/content/443b2589-0a4a-48ef-872e-3cd52b1b297d) [US Government's Reported Bitcoin Holdings: Is $5B Figure Just The Tip Of The Iceberg? | Nasdaq](https://www.nasdaq.com/articles/us-governments-reported-bitcoin-holdings:-is-$5b-figure-just-the-tip-of-the-iceberg) ## usgovt_crypto_enforcement [IRS Criminal Chief Confirms Building 'Hundreds' Of Crypto-Related Cases](https://www.ibtimes.com/irs-criminal-chief-confirms-building-hundreds-crypto-related-cases-3632872) [Why Didn't the Government Stop the Crypto Scam?](https://mattstoller.substack.com/p/why-didnt-the-government-stop-the) [SEC brought its first non-fungible token enforcement action | Hacker News](https://news.ycombinator.com/item?id=37295817) [SEC.gov | SEC Charges LA-Based Media and Entertainment Co. Impact Theory for Unregistered Offering of NFTs](https://www.sec.gov/news/press-release/2023-163) [US Attorney Announces $3.36B Cryptocurrency Seizure in Connection with Silk Road | Hacker News](https://news.ycombinator.com/item?id=33506373) [Southern District of New York | U.S. Attorney Announces Historic $3.36 Billion Cryptocurrency Seizure And Conviction In Connection With Silk Road Dark Web Fraud | United States Department of Justice](https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction) ## usgovt_crypto_regulation [Elizabeth Warren And Kevin O'Leary Clash On Regulating Crypto | The Daily Wire](https://www.dailywire.com/news/elizabeth-warren-and-kevin-oleary-clash-on-regulating-crypto) [White House Report Bashes Crypto, Boosts Fed-Controlled 'Digital Currency' | The Daily Caller](https://dailycaller.com/2022/09/16/white-house-report-bashes-crypto-boosts-fed-controlled-digital-currency) [Here's what's in Biden framework to regulate crypto](https://www.cnbc.com/2022/09/16/heres-whats-in-biden-framework-to-regulate-crypto.html) [Former US SEC attorney: 'Get out of crypto platforms now' | Hacker News](https://news.ycombinator.com/item?id=36408367) [John Reed Stark on X: "Get out of crypto platforms now, I can't say it any plainer. Having worked as an attorney in the SEC Enforcement Division for almost 20 years (including 11 years as Chief of the SEC Office of Internet Enforcement), I believe that we now know for certain that crypto trading…" / X](https://twitter.com/johnreedstark/status/1666780985189433347) [White House says more crypto regulation needed to avoid 'harming' Americans | Fox Business](https://www.foxbusiness.com/politics/white-house-says-more-crypto-regulation-needed-avoid-harming-americans) [Chainalysis CTO said blockchain is easier to trace than paper money | Hacker News](https://news.ycombinator.com/item?id=33232921) [Why Blockchain's Operators Have Failed Satoshi | by Lance Ng | Medium](https://lancengym.medium.com/former-fbi-director-said-blockchain-is-easier-to-trace-than-paper-money-c3400f8d9596) ## web0 [web0 manifesto](https://web0.small-web.org/) web0 is the decentralised web In other words, web0 is web3 without all the corporate right-libertarian Silicon Valley bullshit. [Source code](https://github.com/small-tech/web0) [Small Technology Foundation Home](https://small-tech.org/) ## web3 [Web3 is centralized and inefficient | Hacker News](https://news.ycombinator.com/item?id=30774457) [Web3 is centralized (and inefficient!) - Neel Chauhan](https://web.archive.org/web/20220323031915/https://www.neelc.org/posts/web3-centralized/) [Web3 is centralized | Hacker News](https://news.ycombinator.com/item?id=29766497) [Wesley Aptekar-Cassels | web3 is Centralized](https://blog.wesleyac.com/posts/web3-centralized) [Web3 is expensive P2P | Hacker News](https://news.ycombinator.com/item?id=31396329) [Web3 is just expensive P2P - Netfuture: The future is networked](https://netfuture.ch/2022/05/web3-is-just-expensive-p2p/) [Keep the web free, say no to Web3 (2021) | Hacker News](https://news.ycombinator.com/item?id=31477446) [Keep the Web Free, Say No to Web3](https://yesterweb.org/no-to-web3/) [My First Impressions of Web3 | Hacker News](https://news.ycombinator.com/item?id=29845208) [Moxie Marlinspike >> Blog >> My first impressions of web3](https://moxie.org/2022/01/07/web3-first-impressions.html) [An engineer's observations on Web3 and its possibilities | Hacker News](https://news.ycombinator.com/item?id=29321987) [Feed](https://web.archive.org/web/20240122100530/https://www.psl.com/feed-posts/web3-engineer-take) [Bitcoin, Ethereum, and Web3 Are Already Reshaping the World](https://foreignpolicy.com/2021/12/11/bitcoin-ethereum-cryptocurrency-web3-great-protocol-politics) [Jobs in Web3 - How I Landed a Job In 4 Months](https://web3.hashnode.com/jobs-in-web3-how-i-landed-a-job-in-4-months) [Web3? I have my DAOts | Hacker News](https://news.ycombinator.com/item?id=29466024) [Web3? I have my DAOts - by Jay Pinho - networked](https://networked.substack.com/p/web3-i-have-my-daots) [Tim Berners-Lee: Web3 is not the web | Hacker News](https://news.ycombinator.com/item?id=33469978) [Web inventor Tim Berners-Lee wants us to 'ignore' Web3](https://www.cnbc.com/2022/11/04/web-inventor-tim-berners-lee-wants-us-to-ignore-web3.html) [It's not still the early days of blockchain | Hacker News](https://news.ycombinator.com/item?id=29943733) [It's not still the early days](https://blog.mollywhite.net/its-not-still-the-early-days/) [Ask HN: Am I going insane or is there genuinely no value in blockchain tech? | Hacker News](https://news.ycombinator.com/item?id=31132610) [GitHub - Shubham0850/awesome-web3-jobs: A curated list of job boards and resources for finding jobs in the Web3 industry.](https://github.com/Shubham0850/awesome-web3-jobs) [web3.career](https://web3.career/) Web3 Job Offers [based.builders](https://based.builders/) [joshcs](https://joshcs.notion.site/joshcs-4bf65c3a7a7d4846952a3a8fd4d0669c) ## web3_aws [AWS and Blockchain | Hacker News](https://news.ycombinator.com/item?id=33686168) [ongoing by Tim Bray · AWS and Blockchain](https://www.tbray.org/ongoing/When/202x/2022/11/19/AWS-Blockchain) ## whitepapers [Whitepaper.io - Search and find all whitepapers on whitepaper.io](https://whitepaper.io/) ## worldcoin [Worldcoin isn't as bad as it sounds: It's worse | Hacker News](https://news.ycombinator.com/item?id=36907248) [Worldcoin isn't as bad as it sounds: It's worse - Blockworks](https://blockworks.co/news/worldcoin-privacy-concerns) [Sam Altman's Worldcoin promised them free crypto for an eyeball scan | Hacker News](https://news.ycombinator.com/item?id=30931614) [Sam Altman's Worldcoin Promised Them Free Crypto For An Eyeball Scan. Now They Feel Robbed.](https://www.buzzfeednews.com/article/richardnieva/worldcoin-crypto-eyeball-scanning-orb-problems) ## blockchain ## beginner guides - cryptocurrency_bitcoin [Bitcoin: A Peer-to-Peer Electronic Cash System](https://bitcoin.org/en/bitcoin-paper) [Bitcoin Cash - Guide to Cryptocurrencies and Blockchain - WikiCryptoCoins](https://wikicryptocoins.com/currency/Bitcoin_Cash) ## blockchain protocol [GitHub - MichaelMacaulay/Awesome-The-Graph: A curated list of awesome resources related to The Graph](https://github.com/MichaelMacaulay/Awesome-The-Graph) [The Graph](https://thegraph.com/) ## cryptocurrency - defi [GitHub - 0xperp/defi-derivatives: A hopefully comprehensive guide to the defi derivative landscape](https://github.com/0xperp/defi-derivatives) [DeFi Education](https://defieducation.substack.com/) ## cryptocurrency - ethereum - account abstraction [4337Mafia/awesome-account-abstraction: A curated list of resources dedicated to Account Abstraction (EIP-4337)](https://github.com/4337Mafia/awesome-account-abstraction) ## cryptocurrency - FTX and SBF [Sam Bankman-Fried's arrest in the Bahamas and FTX's crypto collapse, explained - Vox](https://www.vox.com/the-goods/23451761/ftx-sam-bankman-fried-arrest-bankrupt-bitcoin-alameda) [FTX and Sam Bankman-Fried: Your Guide to the Crypto Crash - WSJ](https://www.wsj.com/articles/ftx-and-sam-bankman-fried-your-guide-to-the-crypto-crash-11669375609) ## cryptocurrency - minter [GitHub - minterdex/awesome-minter: A curated list of awesome things related to Minter Blockchain](https://github.com/minterdex/awesome-minter) ## cryptocurrency - solidity [Solidity Tutorial](https://cryptodevhub.io/blockchain-development-tutorial) [Zero To Hero: Web3.0 and Solidity Development Roadmap](https://vitto.cc/web3-and-solidity-smart-contracts-development-roadmap) ## cryptocurrency - tezos [GitHub - kevinelliott/awesome-tezos: A curated list of awesome things in the Tezos blockchain ecosystem!](https://github.com/kevinelliott/awesome-tezos) [GitHub - bonedaddy/Tezos-Developer-Resources: Resources for Tezos Developers](https://github.com/bonedaddy/Tezos-Developer-Resources) ## data contracts [GitHub - AltimateAI/awesome-data-contracts: A curated list of awesome blogs, videos, tools and resources about Data Contracts](https://github.com/AltimateAI/awesome-data-contracts) ## ICP [GitHub - dfinity/awesome-internet-computer: A curated list of awesome projects and resources relating to the Internet Computer Protocol](https://github.com/dfinity/awesome-internet-computer) ## nonfinancial [GitHub - machinomy/awesome-non-financial-blockchain: Curated list of projects that build non-financial applications of blockchain](https://github.com/machinomy/awesome-non-financial-blockchain) ## proof of stake [Proof of stake is incapable of producing a consensus | Hacker News](https://news.ycombinator.com/item?id=29366310) [Proof of stake is a scam and the people promoting it are scammers](https://yanmaani.github.io/proof-of-stake-is-a-scam-and-the-people-promoting-it-are-scammers/) [The best arguments for or against Proof of Stake : CryptoTechnology](https://old.reddit.com/r/CryptoTechnology/comments/uyd52y/the_best_arguments_for_or_against_proof_of_stake) ## smart contracts - erc20 [How to Create and Deploy an ERC20 Token - In 20 minutes](https://vitto.cc/how-to-create-and-deploy-an-erc20-token-in-20-minutes) [GitHub - sec-bit/awesome-buggy-erc20-tokens: A Collection of Vulnerabilities in ERC20 Smart Contracts With Tokens Affected](https://github.com/sec-bit/awesome-buggy-erc20-tokens) ## smart contracts - ethereum [Notonlyowner | Introduction to smart contract security and hacking in Ethereum](https://www.notonlyowner.com/learn/intro-security-hacking-smart-contracts-ethereum) ## smart contracts [GitHub - Overtorment/awesome-smart-contracts: List of awesome platforms for smart contracts](https://github.com/Overtorment/awesome-smart-contracts) [GitHub - saeidshirazi/Awesome-Smart-Contract-Security: A curated list of Smart Contract Security materials and resources For Researchers](https://github.com/saeidshirazi/Awesome-Smart-Contract-Security) [GitHub - tamjid0x01/SmartContracts-audit-checklist: A checklist of things to look for when auditing Solidity smart contracts.](https://github.com/tamjid0x01/SmartContracts-audit-checklist) ## smart contracts - solidity [GitHub - theunicorndev237/building-smart-contracts-with-solidity: Building smart contracts with solidity](https://github.com/theunicorndev237/building-smart-contracts-with-solidity) ## substrate [GitHub - cuteolaf/substrate-learning-resources: My self-learning course for mastering Substrate](https://github.com/cuteolaf/substrate-learning-resources) [GitHub - substrate-developer-hub/substrate-docs: Substrate Developer Hub. Substrate is powered by best in class cryptographic research and comes with peer to peer networking, consensus mechanisms, and much more.](https://github.com/substrate-developer-hub/substrate-docs) [GitHub - substrate-developer-hub/awesome-substrate: A curated list of awesome projects and resources related to the Substrate blockchain development framework.](https://github.com/substrate-developer-hub/awesome-substrate) ## web3_dev [The Complete Guide to Full Stack Web3 Development - DEV Community](https://dev.to/edge-and-node/the-complete-guide-to-full-stack-web3-development-4g74) [useWeb3.xyz · Learn Web3 development](https://www.useweb3.xyz/) [Nader's web3 Resources for Developers](https://naderdabit.notion.site/Nader-s-web3-Resources-for-Developers-a200ed2ef21c4d578dc158df2b882c63) [GitHub - yashdev9274/Web3-Developer-Path: Here you will get every thing a Blockchain developer will need to learn.](https://github.com/yashdev9274/Web3-Developer-Path) ## web3_dev_projects [GitHub - Kacper-Hernacki/100-days-of-web3-challenge-blockchain-free-materials: This is the repo which consists 100 topics about blockchain/ decentralisation/ web3. There are links to my articles, threads on twitter and practical projects.](https://github.com/Kacper-Hernacki/100-days-of-web3-challenge-blockchain-free-materials) [GitHub - Shubham0850/awesome-web3: Awesome Web3: Unleashing Blockchain Magic and Quirky Code Adventures! Our magical GitHub project aims to educate aspiring sorcerers (developers) about Web3 and empower them to harness the power of decentralized sorcery.](https://github.com/Shubham0850/awesome-web3) [Crypto design challenges - PaulStamatiou.com](https://paulstamatiou.com/crypto-design-challenges) ## web3 [Defining the web3 stack](https://edgeandnode.com/blog/defining-the-web3-stack) [What is Web3? The Decentralized Internet of the Future Explained](https://www.freecodecamp.org/news/what-is-web3) [The 411 on Web3 101s: a Collective List of Web3 Learning Experi… - alli](https://alli.mirror.xyz/wMk-VhWDBVq0Oq-DbmIe3AX4Sz6eYWuYbiDswXPHQJE) [GitHub - Shubham0850/awesome-web3-documentaries: A curated list of documentaries about Web3 and blockchain technology. Get ready to be inspired, educated, and amazed as we explore the revolutionary world of decentralized innovation!](https://github.com/Shubham0850/awesome-web3-documentaries) [GitHub - Gnosis-Builders/Resources: Explore a curated list of awesome resources to help you build on Gnosis Chain, created by Gnosis Builders around the world](https://github.com/Gnosis-Builders/Resources) [GitHub - Olanetsoft/web3terms: A bot explaining and simplifying web3 terms to everyone](https://github.com/Olanetsoft/web3terms) [GitHub - life-itself/web3: Making sense of web3 & crypto. Introduction to key concepts and ideas. Rigorous, constructive analysis of key claims pro and con. A look at the deeper hopes and aspirations.](https://github.com/life-itself/web3) /github.com/tarun-soni/web3-resources