Lecturer Argues Cryptocurrency Should ‘Die in a Fire’, Predicts Implosion

Nicholas Weaver is a senior staff researcher at the International Computer Science Institute and lecturer in the computer science department at UC Berkeley. But he’s also a raging cryptocurrency skeptic, arguing that cryptocurrency is useless and destructive, and should “die in a fire.”

In a recent interview in Current Affairs he promulgates what he calls Weaver’s Iron Law of Blockchain. “When somebody says you can solve X with blockchain, they don’t understand X, and you can ignore them.” So for those pushing cryptocurrency for “Banking the unbanked,” Weaver points to M-Pesa, a payment system Vodafone started in Kenya in 2007 “about the same time as Bitcoin…”
It has eaten the Third World. It’s huge. Because it just basically attaches a balance to your phone account. And you can text to somebody else to transfer money that way…. So even with the most basic dumb phone you have easy-to-use electronic money. And this has taken over multiple countries and become a huge primary payment system. [Whereas] the cryptocurrency doesn’t work.”
Weaver also contends that when companies say they accept payments in Bitcoin, “They’re lying.” (They’re using a service which pays them in “actual money” after performing conversions on any Bitcoin proferred-up by a customer.) He believes cryptocurrency is only seriously used for payments for ransomware and drug deals — the things that non-decentralized currencies are legally obligated to block.

The reason I’ve gotten so sour on the cryptocurrency space is the ransomware. It’s doing tens to hundreds of billions of dollars worth of damage to the global economy. And it only exists because people can pay in Bitcoin.

Weaver also believes cryptocurrency lets venture capitalists “carry out securities fraud as a business model” when they sell one of their startup’s tokens to retail investors.
This is blatantly an unlicensed security. This is blatant securities fraud, but they didn’t commit the securities fraud. It was just the companies they invested in that did the securities fraud, and the SEC has not been proactively enforcing this. They only retroactively enforce against the initial coin offerings after they fail…. and when things fail, the only people to prosecute are the companies, not Andreessen Horowitz itself. So they’ve been able to make securities fraud a business in such a way that they are legally remote, so you will not be able to throw them in jail….
The SEC has the authority to stop those proactively rather than reactively. They choose not to…. Basically, there’s a fear among regulators — that I think started in the ’80s — of being accused of “stifling innovation.” There’s no innovation to stifle. So regulate away.

He’s also skeptical of cryptocurrency’s other supposed advantages. Weaver argues cryptocurrency incentivizes green power “the same way that a whole bunch of random shootings would incentivize bulletproof vests.” And even as an investment vehicle, Weaver sees it as “a self-created pyramid scheme.”
[Y]ou have to keep getting new suckers in. As soon as the number of suckers dries up, it collapses. And because it’s not zero-sum, but deeply negative-sum, there are actually a lot of mechanisms that can cause it to collapse suddenly to zero. We saw this just the other day with the Terra stablecoin and the Luna side token.
So when asked for the future of cryptocurrency, Weaver predicts “It will implode spectacularly.” (By which he means it will “collapse greatly.”)

The only question is when. I thought it would have actually imploded a year ago. But basically, what we saw with Terra and Luna, where it collapsed suddenly due to these downward positive feedback loops — situations where basically the system is designed to collapse utterly and quickly — those will happen to the larger cryptocurrency space….
[T]he Washington Nationals just the other day started doing a lot of tweets for their business relationship with Terra. That was $5 million for five years prepaid in advance in cash. So for the next five years, the Washington Nationals are obliged to hype a cryptocurrency that failed spectacularly already.

Thanks to Slashdot reader sdinfoserv for sharing the article…

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Avoiding Sanctions with Cryptocurrency? US Govt Files First Criminal Charges

Last week America’s Justice Department “launched its first criminal prosecution involving the alleged use of cryptocurrency to evade U.S. economic sanctions,” reports the Washington Post. They cite a nine-page opinion from a federal judge approving the government’s criminal complaint against an American “accused of transmitting more than $10 million worth of bitcoin to a virtual currency exchange in one of a handful of countries comprehensively sanctioned by the U.S. government: Cuba, Iran, North Korea, Syria or Russia.

“In the ruling, the judge called cryptocurrency’s reputation for providing anonymity to users a myth.”
He added that while some legal experts argue that virtual moneys such as bitcoin, ethereum or Tether are not subject to U.S. sanctions laws because they are created and move outside the traditional financial system, recent action taken by the Treasury Department’s Office of Foreign Assets Control [OFAC] require federal courts to find otherwise.

“Issue One: virtual currency is untraceable? WRONG … Issue Two: sanctions do not apply to virtual currency? WRONG,” Faruqui wrote…

“The Department of Justice can and will criminally prosecute individuals and entities for failure to comply with OFAC’s regulations, including as to virtual currency,” Faruqui said. In the opinion, Faruqui wrote that he adopted guidance issued in October by OFAC, which stated that sanctions regulations apply equally to transactions involving virtual currencies as those involving the U.S. dollar or other traditional fiat currencies.

Ari Redbord, who served in 2019 and 2020 as a senior adviser to the Treasury Department’s undersecretary for terrorism and financial intelligence, called the case the first U.S. criminal prosecution targeting solely the use of cryptocurrency in a sanctions case. He said the ruling made clear such conduct is traceable and “immutable — in other words, transactions using cryptocurrency are forever…. What we are seeing is that the Department of Justice is going to actively go after actors that attempt to use cryptocurrency, but also that it is hard to use cryptocurrency to evade sanctions,” Redbord said. “It shows, in many respects, cryptocurrency is not a good tool for sanctions evasion or money laundering.”

In this case, The Register reports, “An unnamed American citizen allegedly used a US-based IP address to run an online payments platform” in a sanctioned country.

The service advertised itself as being “designed to evade US sanctions” and claimed its transactions were untraceable, it was alleged. We’re told the defendant bought and sold Bitcoin using a US-based online currency exchange using fiat currency from a US bank account.

The Post argues that this prosecution represents “a new U.S. criminal sanctions enforcement push targeting cryptocurrency transactions at a time of rising concern over the extent to which illicit actors can use or are using such methods to launder money or do business with countries the United States has cut off from the dollar…”

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Luna Cryptocurrency’s Collapse Led to Multi-Million-Dollar Exploits, Closure of a Crypto Money Market

The Record reports that the decentralized money market Venus Protocol “announced on Thursday evening about $11 million had been lost due to people exploiting the historic collapse of the Luna cryptocurrency and its sister stablecoin UST.”
Venus Protocol and several other platforms use Chainlink to provide its users with real-time price estimations of the tokens on its platform that are available for lending and borrowing. But the tool began having issues with Luna on Thursday as the price continued to fall precipitously. “As a result, it was possible to deposit UST and LUNA as collateral and borrow other tokens, with an underpriced collateral valuation….” decentralized finance researcher Vali Dyor explained.
Venus Protocol says they became “aware of errant price behavior for LUNA,” and “Upon investigation, it was learned that the price feed had been paused by Chainlink due to extreme market conditions.”

“The price on Venus was last listed at about $0.107 while the market price was $0.01. In order to de-risk this situation, the protocol was paused using PauseGuardian via multisig. Upon this desyncing event, it was discovered that 2 accounts had suspiciously deposited a sum of 230,000,000 LUNA valued at over $24,000,000. Assets were borrowed totalling around $13,500,000.”

Venus Protocol has a “Risk Fund” that will be used to cover the shortfall, the Record reports. But they added that Venus Protocol wasn’t the only one having problems:

As the price of Luna cratered overnight, exchanges and markets were forced to make difficult choices on how to approach the cryptocurrency. Binance stopped all trading of Luna and UST on its platform but the moves have done little to stop all cryptocurrency values from being depressed across the board.

DeFi platform Blizz Finance announced that it was attacked in the same way Venus Protocol was, but they did not release an estimate on the losses incurred. But they said the protocol was “drained” before it could stop the process.

And then Blizz Finance posted a post-mortem early Sunday morning:

Large amounts of LUNA were deposited and used to drain all available lendable assets… Prior to the incident the Chainlink team did attempt to notify us that the oracle would pause, however we did not receive the message in time. We were unaware of Chainlink’s minimum price circuit breaker. This behaviour is not mentioned anywhere within Chainlink’s documentation…

Blizz has no treasury or development fund and a significant portion of the stolen assets belonged to our team. As such we regret to announce the protocol has been paused and we do not intend to resume operations. We will be shutting down the front-end and closing official communication channels in the coming days….

We are very sorry for the losses incurred by our users. We thank the community for their support on this journey and deeply regret that this is how it came to an end.

They posted one additional detail on Twitter. “We are reaching out to a Chinese community who is believed to have doxxed individuals who participated in the attacks.”

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El Salvador’s ‘Bitcoin President’ Pressured, Accused of Attacking Civil Liberties

The International Monetary Fund “has indicated it will not give El Salvador a much-needed loan unless it drops bitcoin” as one of the country’s legal tenders, reports the Los Angeles Times. And meanwhile the “bitcoin bond” proposed by El Salvador has been “delayed indefinitely.”

But the government has taken other actions:

After a dramatic spike in killings here over a single weekend last month, Salvadoran President Nayib Bukele’s reaction was swift — and extreme. He sent soldiers into poor neighborhoods to round up thousands of people who he claimed were gang members, then paraded them in front of news cameras in their underwear and handcuffs.
He tweeted pictures of detainees who had been bruised and bloodied by security forces, suggesting they “maybe fell” or “were eating fries with ketchup.” And he started feeding the nation’s prisoners two meals a day instead of three, warning that if violence continued, “I swear to God that they won’t eat a single grain of rice.”

It is a distinct look for Bukele, who has been focused in recent months on presenting himself to the world as a modern tech innovator on a quest to turn El Salvador into a cryptocurrency paradise. Not only is Bukele now embracing the mano duro techniques of past Latin American leaders, he is going much further, using the homicide spree — which left 87 people dead in three days — as a pretext for suspending civil liberties and attacking the press.

In recent days, Bukele and his loyalists in the Legislative Assembly ordered a state of emergency that restricts freedom of association, suspends the norm that detainees be informed of their rights at the moment of arrest and denies prisoners access to lawyers….

That Bukele would use the spate of homicides as a pretext to further consolidate power is no surprise to many of his critics, who believe he may be preparing to stay in office past 2024, when he is supposed to step down, even though El Salvador’s constitution bans consecutive presidential terms.

But they also say that there may be another motive for his new tough-on-crime stance: diverting attention from the deepening failure of his cryptocurrency experiment.

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Crypto Use Is More Prevalent in Corrupt Countries, IMF Study Finds

“According to a new International Money Fund (IMF) report, cryptocurrency is much more popular in countries with insecure currencies and corrupt governments…” reports The Street, adding that the report concludes “the best way forward is not fight, but to learn how to better regulate cryptocurrency.”

The IMF surveyed more than 110,000 respondents in over 55 countries, polling between 2,000 and 12,000 people in each country, about their cryptocurrency use….
“Crypto usage is empirically associated with higher perceived corruption and more intensive capital controls,” the study’s authors write. “[…] This evidence adds to the case for regulating crypto usage — for example, by requiring intermediaries to implement know-your-customer procedures.”

Bloomberg adds:
The report shows why countries might want to require intermediaries, such as digital currency exchanges, to implement know-your-customer procedures — ID verification standards that are designed to prevent fraud, money laundering and terrorism financing, the organization said. Some countries, like the U.S., have already instituted those kinds of controls.

Nations around the world are struggling over the best way to regulate the $2 trillion crypto market, with the level of oversight varying greatly from one country to another. The findings suggest that crypto assets “may be used to transfer corruption proceeds or circumvent capital controls,” the organization said, without singling out individual countries.

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Better.com Employees Learned of Layoffs When Severance Checks Appeared In Payroll App

The mass layoffs at digital mortgage lender Better.com have reportedly started, according to employees and other sources at the company, and affected workers are finding out by seeing a severance check in their Workday account — the company’s payroll app. TechCrunch’s Mary Ann Azevedo reports: The layoffs were meant to be announced by the company on March 9, but one employee — who wishes to remain anonymous due to fear of repercussions — told TechCrunch that “they accidentally rolled out the severance payslips too early.” Better.com execs reportedly planned the layoffs for March 8 but moved the date to March 9 when news of the initial date leaked. Apparently, when execs realized their mistake, they deleted the checks from some people’s Workday accounts. According to the employee, the severance checks arrived without any additional communication from the company.

The employee told me: “Better Layoffs have started. Severance showing in our Workday app (which is payroll) as of 12 AM respective time zones. No email, no call, nothing. This was handled disgustingly.” The employee — who had an inkling that the cuts were coming — added: “Leadership remained absolutely silent, never acknowledged anything in regards to layoffs. They still haven’t.” An estimated 3,000 of the company’s 8,000 employees in the U.S. and India are being let go.

It is notable that the missive came from [CFO Kevin Ryan] and not CEO Vishal Garg, who suffered severe backlash after laying off 900 employees during a Zoom meeting in early December in what many considered to be a cold and callous manner. The video went viral globally and Garg was vilified not only for the way he notified employees, but for what employees described as verbally abusive behavior. […] Ryan wrote that the company “had to adjust to volatility in the interest rate environment and refinancing market.” He added: “Unfortunately, that means we must take the difficult step of streamlining our operations further and reducing our workforce in both the U.S. and India in a substantial way. This has not been an easy few months, and I want to express my sincere thanks to every member of the Better team for your hard work and focus,” he added. “Our strongest days lie ahead.”

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Ukraine Receives $42M in Cryptocurrency Donations – Plus 180 NFTs They Didn’t Ask For

Thursday the Washington Post reported the Ukrainian government had already received more than $42 million in cryptocurrency donations since last Saturday — “plus digital artwork including a limited edition worth roughly $200,000,” according to blockchain analytics firm Elliptic.

Some of the crypto donations have already been converted into traditional currency, primarily euros, according to Kuna.io, the Kyiv-based cryptocurrency exchange that helped the government set up and manage its crypto wallets for donations. The money was then used to buy critical supplies like drones, bulletproof vests, heat-sensitive goggles and gasoline, from both state actors and the private sector.

None of the more than 180 donated digital artworks — known as non-fungible tokens, or NFTs — have been sold, according to data from blockchains, which store information in an immutable, public digital ledger…. Ukraine, which hadn’t asked for NFTs, received a map of the Donetsk area of eastern Ukraine, parts of which have been controlled by Russian-backed separatists, in the colors of the Ukrainian flag, plus photos of blue-and-yellow peace signs and an animated “fire dragon.” NFT donations also included images from the Shibelon collection, which is “based on a mythology in which Elon Musk was granted genius powers by an alien, who also created bitcoin,” wrote journalist

In addition to well-established cryptocurrencies, Ukraine received donations denominated in almost 100 obscure digital currencies, according to a Post analysis of data from Etherscan. They included a new one named Save Ukraine, another with a racially abusive name, and several themed after crypto community in-jokes focused on dogs and Musk, the Tesla CEO. The government’s strategy has been to convert less popular cryptocurrencies into traditional money first and hold bitcoin and ether in reserves because they are more stable and liquid, Chobanian said. Donations were still streaming in as new efforts to raise crypto for the Ukrainian government cropped up.

Early Tuesday morning Ukraine time, Ukraine’s 31-year-old deputy prime minister, Mykhailo Fedorov, announced AidForUkraine, a joint effort of his Digital Ministry, developers behind the Solana blockchain and Everstake. So far, AidForUkraine has raised $1.4 million, according to its website…. The speed with which the AidForUkraine fundraising effort came together was “magic,” said Everstake’s Vasylchuk, who fled Kyiv days before the invasion thanks to his pilot’s license and is in temporary housing in Florida…. Beyond the official government-led effort, Come Back Alive, an NGO benefiting Ukraine’s army, has also received millions in cryptocurrency donations — and is getting millions more from UkraineDAO, a group organized on the blockchain that held an auction to raise funds, according to blockchain data. The NGO organizers pivoted to crypto after their campaign was suspended from Patreon. But UkraineDAO is limiting spending to helping the victims of war, the New York Times reported. Patreon spokesperson Ellen Satterwhite said that would “absolutely be allowable under our guidelines.”

Elsewhere On GoFundMe, Mila Kunis and Ashton Kutcher have already raised over $15 million for refugee and humanitarian aid — in just one day.

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Sid Meier Warns the Games Industry About Monetization

Speaking to the BBC on the 30th anniversary of Civilization, American developer Sid Meier says if major companies continue to focus on monetization or other things that are not gameplay-focused, they risk losing the audience. From the report: “The real challenge and the real opportunity is keeping our focus on gameplay,” says American developer Sid Meier. “That is what is unique, special and appealing about games as a form of entertainment. When we forget that, and decide it’s monetization or other things that are not gameplay-focused, when we start to forget about making great games and start thinking about games as a vehicle or an opportunity for something else, that’s when we stray a little bit further from the path.”

The financial model that supports how games companies make their money has changed dramatically in the past decade or so. Now many developers and publishers rely on in-game purchases to help with their bottom line rather than solely on the up-front cost of buying a title to play. […] Some games companies are also exploring the introduction of non-fungible-tokens (NFTs) – a form of digital art that players can buy and own — into their games. […] Sid Meier says that if major companies continue to focus on ways like this to monetize gaming, they risk losing the audience: “People can assume that a game is going to be fun and what it needs for success are more cinematics or monetization or whatever — but if the core just is not there with good gameplay, then it won’t work. “In a sense gameplay is cheap… The game design part is critical and crucial but doesn’t require a cast of thousands in the way some of the other aspects do. So it’s perhaps easy to overlook how important the investment in game design and gameplay is.”

The global games market is reported to be worth around $175 billion and is forecast to almost double in five years. But Sid Meier says that continued growth isn’t guaranteed: “There are lots of other ways that people can spend their leisure time… I think the way the internet works, once a shift starts to happen, then everybody runs to that side of the ship. “I think we need to be sure that our games continue to be high quality and fun to play – there are so many forms of entertainment out there now. We’re in a good position… but we need to be sure we realize how critical gameplay is – and how that is the engine that really keeps players happy, engaged and having fun.”

Sid says he has no plans to retire just yet, and explains the most gratifying change he’s experienced during his more than 30 years in the industry, is the wider public’s shift in attitude when it comes to games. People were telling him back in 1991 that he was “wasting his time” working in games – now he smiles, as people say to him: “I wish I could get a job making games.”

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This Year’s Super Bowl Broadcast May Seem ‘Crypto-Happy’. But the NFL Isn’t

During today’s telecast of the Super Bowl, 100 million Americans will see at least three commercials promoting cryptocurrency, reports the Washington Post, “and though Tom Brady may be gone from the game, he hovers over it, hawking crypto exchange FTX.”

“Yet the hype belies a more complicated relationship. Unlike the National Basketball Association, the National Football League, the country’s most popular sports league, has essentially prohibited its teams from using crypto.”

It’s a microcosm of the broader cultural battle between those touting the currency as the shiny future and others warning of its dangers…. [T]he headlines often come with a negative tint. New York Times columnist and economist Paul Krugman warned last month about crypto’s parallels to the subprime mortgage crisis. This week, the FBI arrested a New York couple for allegedly conspiring to launder billions in crypto. That can scare the large corporate entities of professional sports, particularly the NFL, whose love of fresh revenue sources is matched only by its fear of public relations disasters…. In September, a memo revealed by the Athletic showed the league’s restrictive attitude toward crypto… “Clubs are prohibited from selling, or otherwise allowing within club controlled media, advertisements for specific cryptocurrencies, initial coin offerings, other cryptocurrency sales or any other media category as it relates to blockchain, digital asset or as blockchain company, except as outlined in this policy,” it said.

The NFL has made some forays into NFTs, or non-fungible tokens, the digitally watermarked tools that are crypto’s less controversial cousin, signing up for a partnership with Ticketmaster for NFTs of Super Bowl tickets and an NFT video highlight program with Dapper Labs, one of the leaders in the space. And of course the Super Bowl is taking place at SoFi Stadium, named for the digitally minded financial firm. But sponsorships from crypto exchanges remain off-limits, and the idea of the NFL creating a cryptocurrency, which some enthusiasts have advocated, is the stuff of fantasy. Even the Super Bowl commercials going for as much as $7 million for 30 seconds — which the league authorizes — include only exchanges such as FTX and not currencies themselves….

The NFL has formed an internal working group to study the regulatory, brand and other consequences of partnering with crypto companies but has set no timetable for when its rules could be revised. Renie Anderson, the NFL’s chief revenue officer, said the league is moving slowly by design. “We don’t want to put everything and the kitchen sink into this,” she said by phone from the site of Super Bowl events in Los Angeles. “We don’t know where a lot of this is going, so what we’re trying to do is testing and learning so we can understand.” She cited regulatory and market forces that are still coming into focus. (The Treasury Department and other federal agencies have been ramping up their efforts to create a regulatory framework for crypto, but there remains a degree of murkiness around what the future limits might be.) The NFL, Anderson said, would rather act after there’s clarity. “It’s hard to unwind something like a naming rights deal,” she said, “and I’d rather not have to undo opportunities two years later because there are rules against advertising or marketing certain things.”

National Basketball Association executives, however, say they see a major opportunity right now.

The article also points out that one football star even says he converted his $750,000 salary to Bitcoin. Though one sports analyst calculates that if the purchase was made on November 12th, after federal and state taxes it’s now worth about $35,000.

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MIT/Federal Reserve Bank Release Research on a Possible Central Bank Digital Dollar

“The Federal Reserve Bank of Boston and the Massachusetts Institute of Technology’s Digital Currency Initiative have come up with an initial design for a central bank digital currency,” reports Yahoo Finance.

Reuters cautions that the newly-released research does not suggest that the U.S. central bank will move toward launching a CBDC, a step it has said it would not take without clear support from the White House and Congress….” Instead the team “developed technology that can be adjusted as more policy questions regarding the structure and purpose of a CBDC are addressed.”

The Washington Post describes it as “a system that can settle the vast majority of payments in less than two seconds, handles more than 1.7 million transactions per second and operates around-the-clock with no service outages in the case of a disruption in its network.”

The Boston Globe adds that “The team noted there’s a lot more work to do in the next phase, including researching various privacy features, and stressed the digital dollar remains hypothetical until the Fed decides whether to move forward with government-backed electronic cash.”

Some context from the Washington Post:
The ultimate product could help extend financial services to people who lack a bank account and make cross-border payments such as remittances safer and easier, said Neha Narula, director of the Digital Currency Initiative at MIT. Narula, in a conference call with reporters, noted that the Boston researchers “aren’t the ones making policy decision on how such a system might operate,” so they have aimed to “create a flexible system that can work with a variety of models.”
Along with a paper describing the team’s work to date, researchers on Thursday published open-source code for the platform that would support the digital currency. Jim Cunha, executive vice president of the Boston Fed, called that a first for the central bank, intended to encourage public input that improves the technology.

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