New Year, Same Stories 🌷
The best crypto and blockchain stories of January 2023
FTX wasn’t a small droplet, but their actions are having an outsized impact on the industry
Like a drop of water on a still lake, the ripples from FTX/Alameda’s collapse (itself largely a second order effect of LUNA’s implosion) expand ever outward. Legal action, investigations, Department of Justice probes, fugitives on the run, networks of fake identities, time travel — the last month in crypto can easily sound like the worst season of the worst sci-fi show. The reality is that, as we collectively learn as an industry on a monthly basis, the truth is even stranger than fiction. January’s headlines were full of familiar faces as we saw major stories from the end of 2022 continue to play out.
But before we dive in…..
Our next Off the Record takes place on February 23, 11am EST — and you don’t want to miss it. AI in the Newsroom: Friend or Foe? Moderated by yours truly (Molly Jane), with panelists Nik De (Coindesk) and Sarah Kopit (The Block)
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Top crypto journalism in January
The Only People Having Any Fun in Crypto Right Now by Nitish Pahwa, Slate
A different take on the collapse of FTX and fall of Sam Bankman-Fried, Nitish makes a compelling case that we're witnessing the “golden age” of crypto journalism. Using the CoinDesk investigation and analysis from independent publication Dirty Bubble Media , Nitish shows how crypto native media outlets have been driving significant change in the industry. That said, with traditional media covering crypto more, the future of how the industry is covered remains open ended.
DCG’s Crypto Broker Genesis Owes Creditors More Than $3Bn by Nikou Asgari, Financial Times
Fallout from the FTX collapse continues to mount as Genesis, the crypto brokerage firm owned by Barry Silbert’s Digital Currency Group, reportedly owes over $3bn. Despite cost-cutting measures at Genesis, the parent company seems to be exploring selling assets from its portfolio to help cover the costs.
CNET Is Quietly Publishing Entire Articles Generated by AI by Frank Landymore, Futurism
An interesting perspective on AI assisted writing in professional journalism, Frank looks at examples of artificial intelligence in action at two high profile media outlets, CNET and AP. Though how the groups are using tools differs, they’re non-trivial data points in what the author posits has the potential to be a slippery slope.
SEC Charges Gemini and Genesis With Selling Unregistered Securities by Owen Fernau, The Defiant
As tensions between the Winklevii and Barry Silbert were coming to a head on Twitter, the SEC swooped in and charged their companies (Gemini and Genesis, respectively) with selling unregistered securities. The agency specifically named Earn, a Gemini product which leveraged Genesis, as running afoul of securities law.
CoinDesk Broke Big News About FTX. Now the News Is Closer to Home. by Isabella Simonetti, New York Times
What some people are (probably) calling The Article Heard ‘Round the World, the CoinDesk article from Nov. 2, 2022, alleging Alameda Research was in financial trouble, proved to be prescient reporting and the beginning of the collapse of a house of cards bitterly mirroring what happened with Terra and LUNA. This piece touches on how CoinDesk, in pushing the first domino, is now in a position where the outlet’s coverage includes parent company, DCG. While other pieces on this topic take the perspective of the company owners or users, Isabella takes the journalists’ POV in this unenviable situation.
The Winklevii Are the Latest Crypto Founders to Blame Everybody But Themselves by Max Chafkin, Bloomberg
Max takes a (rightfully) sardonic view of how Cameron and Tyler Winklevoss are handling the situation between themselves and former partner Barry Silbert, CEO of Digital Currency Group. By following the same deflective playbook as other crypto executives in hot water, the twins, Max suggests, are doing more harm to their “embrace regulation” image than is necessary — which could blow back on the industry.
Congress' FTX Problem: 1 in 3 Members Got Cash From Crypto Exchange's Bosses by Jesse Hamilton, Cheyenne Ligon, Elizabeth Napolitano, CoinDesk
Sam Bankman-Fried and many of the FTX top executives known for being generous politically. That generosity is blowing back on Congress — CoinDesk identified nearly 200 representatives who received funds directly from SBF or another FTX executive — amounting to nearly 1 in 3 members of congress. CoinDesk reached out to each member for comment and broke down the replies from those that cared to respond.
Justice Department Probing Saber Labs Founders Over Solana-Based Projects: Sources by Danny Nelson, CoinDesk
These wacky brothers just seem to keep making headlines. Ian and Dylan Macalinao, who used a network of anonymous identities they controlled to spoof an ecosystem around Solana-based Saber, are in the Justice Department’s sights. Investigators are looking for more evidence detailing the activities of the two brothers and their various identities.
Crypto Media Outlet CoinDesk Taps Bankers for Potential Sale by Lauren Thomas and Vicky Ge Huang, WSJ
Amid the back and forth between the leaders of Gemini and Digital Currency Group, DCG-owned CoinDesk is apparently exploring its options beyond its parent organization. CoinDesk CEO Kevin Worth said the company has received substantial inbound interest, and has retained Lazard Ltd. to help it explore options including a partial or full sale.
Heather Morgan, Crypto Rapper ‘Razzlekhan,’ Lands NYC Tech Job While Under House Arrest for Bitcoin Heist by Ariel Zilber, New York Post
Infamous crypto rapper Razzlekhan (Heather Morgan) is tenaciously in headlines again as the accused alleged thief has landed a job with an NYC tech company. While under house arrest pending the outcome of allegations that Morgan and her husband were involved with the Bitfinex hack in 2016, a federal judge approved the terms of her confinement to allow her to work in the unnamed company’s office three days per week.
The 2018 Meeting That Kicked off a Lending Relationship Between Alameda and Genesis by Vicky Ge Huang and Caitlin Ostroff, WSJ
As more information comes out about the convoluted relationships between companies caught up in FTX’s collapse, this WSJ piece looks at the longstanding history between FTX/Alameda founder Sam Bankman-Fried and DCG’s Genesis. A great summary of how the two companies worked together (and how that got them in trouble).
Citizen Marc: Why the Andreessen Horowitz Founder Can’t Stop Chasing Dreams of a New Media by Abram Brown, The Information
Investment firm Andreessen Horowitz, aka a16z, has firmly established itself as a major player in the crypto space — not surprising, given founder Marc Andreessen’s history of past investments. As their influence in crypto grows, the VC firm is also quietly trying to build out its media arm — despite not finding the same success there as in other verticals.
Hot DAO Time Machine: A Ukrainian Entrepreneur Is Trying to Use a DAO to Fund a Thai Professor’s Design for a Time Machine by Ben Munster, Decrypt
Because of course. The newly created DAO is aiming to raise funds to support the Thai researcher’s efforts to build a time machine, with a prototype able to send information to the future or past first on the roadmap (and with a $3M price tag). The entrepreneur and professor both hope to offer time travel tourism, but have strict ethical policies about what kind of adventures they would allow.
The US Government Wants You To Know It's Cracking Down on Crypto by Daniel Roberts, Decrypt
In what seemed to be a misguided action to many within the crypto industry, the U.S. Department of Justice held a press conference to announce it was taking action against Bitzlato, a basically unknown crypto protocol. Though many within the industry celebrated the apparently weak enforcement as a win, the U.S. government’s message that it will be taking a strict enforcement stance on crypto projects going forward was heard loud and clear.
Binance Acknowledges Storing User Funds With Collateral in Error by Emily Nicolle, Bloomberg
Binance exchange’s parent company Binance Holdings recently acknowledged that it held collateral for some of the tokens it issues in the same wallet as exchange-customer funds. The intermingling of exchange funds with customer funds is one of the behaviors FTX and other now collapsed crypto platforms commonly used to maximize their yield on crypto assets, and which also caused problems as the market turned. Binance was working to correct the error, citing it as a mistake, and has taken steps to move the funds.
SBF, Bored Ape Yacht Club, and the Spectacular Hangover After the Art World’s NFT Gold Rush by Nate Freeman, Vanity Fair
Nate Freeman offers a sobering perspective on the rise and fall of the NFT phenomenon outside of the crypto industry, speaking to experts from the art world. As the NFT craze continued to heat up, respected institutions like Christies and Sotheby’s launched their own NFT initiatives. Now with the NFT space seemingly hit harder than the rest of crypto in the bear market, Nate looks to see if there is room for NFTs in the future in the fallout of the Web3 bubble.
Ordinals Protocol Sparks Debate Over the Place for NFTs in the Bitcoin Ecosystem by Brayden Lindrea, Cointelegraph
Software engineer Casey Rodarmor created the Ordinals protocol, a platform which allows including “digital artifacts” within Bitcoin blocks like JPEGs, audio or video files. Ordinals essentially opens up NFTs on the Bitcoin blockchain — an idea receiving mixed reviews from the community.
Ukraine War Proved Crypto Can Hedge Against Currency Devaluation by David Canellis, Blockworks
David uses the recent example of Russia invading Ukraine to show how crypto can truly function as a hedge against a rapidly devaluing local currency. Blockworks analyzed volume for Ukrainian hryvnia (UAH) and Russian ruble (RUB) backed crypto trading pairs; David presents their findings along with the necessary context to show the impact the war had on these markets.
A New Crypto Threat to Government Launches by Ben Schreckinger, Politico
A new project called DarkFi has emerged as the latest privacy-focused crypto platform with lofty ambitions to “permit more secrecy than commercially-minded projects that can’t afford to buck government pressure to ensure legal compliance.” Ben spoke with several crypto and computer science experts who reviewed the project and its code to find out if DarkFi and its ilk are as big a threat to governments as they hope to be.
The Hunt for Crypto Fugitive Do Kwon Led South Korean Officials to Serbia Last Week by Sangmi Cha, Bloomberg
Checking in on another crypto-founder-turned-criminal, Terra’s Do Kwon remains on the run evading capture by South Korean authorities. Their latest maneuver led a Prosecutor and Justice Ministry official to Serbia to seek aid in finding the rogue founder. Sangmi Cha reports for Bloomberg.
Crypto News Outlet The Block Lays Off 27 Staff by Jon Rice, Blockworks
What’s next for The Block was up in the air after it was discovered former CEO Michael McCaffrey secretly received significant payments from Sam Bankman-Fried’s Alameda Research. As part of the ongoing transition at the company, 27 staff members were laid off across multiple functions.
And now — on to some research!
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Top crypto research in January
Streaming Zero-Knowledge Proofs by Graham Cormode, Marcel Dall'Agnol, Tom Gur, University of Warwick; Chris Hickey, University of Manchester
This paper explores applying zero-knowledge proofs for data streams. The authors describe a novel method for using zero-knowledge techniques on streaming interactive proofs, allowing them to generate zk-SIPs for data streaming problems like index, frequency moments, and inner product (per the abstract).
State of the USDC Economy by Circle
This in-depth report from Circle (issuers of USDC) offers a retrospective on how the coin grew and was used in 2022 and offers some initial thoughts on the future of one of the most popular stablecoins in the world. This report highlights the growing importance of stablecoins in the crypto industry as well as their role as an adhesive between the worlds of crypto and traditional finance.
What is MEV Anyway? by Alex Mead, Coin Metrics
Thorough primer of maximal extractable value (formerly known as miner extractable value) by technical researcher Alex Mead with Coin Metrics. This report provides a general introduction to MEV and then explains examples of different MEV patterns.
Gauntlet’s View on the Shanghai Upgrade by Gauntlet team
Shanghai is the next major upgrade planned for the Ethereum network, currently estimated to take place in March or April of this year. This is the first network upgrade after the Merge took place in September ‘22 and would enable staked ETH to be withdrawn from validators.
Generating Secure Randomness on Ethereum Using SNARKs by amangottumukkala, sinasabet, Georgios Konstantopoulos, Paradigm
Paradigm researchers present design and reference implementations for generating secure random numbers on Ethereum using SNARKs, a zero knowledge proof technique. The majority of decentralized applications on Ethereum (like NFT mints) require randomness in order to be fair. This research proposes a secure, fair way to ensure true randomness for Ethereum projects.
Surviving the Perfect Storm – 2022 End of Year Mining Report by Brandon Bailey, Simrit Dhinsa, Guillaume Gerard, Galaxy Digital
A comprehensive look at the Bitcoin mining industry in 2022 and the events that had the most significant impact. Thorough analysis coupled with thoughtful projections for mining in 2023.
Optimism & Arbitrum (Glass Half Full Series) by Charles Yu, Galaxy Digital
Part one in a four part series on the two most popular optimistic rollups on Ethereum, Optimism and Arbitrum), this report provides a high level background on each protocol and its associated ecosystem. Also included is a comparative data analysis looking at metrics like active users and total value locked.
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We finally have an op-ed! If you didn’t know, this ACJR newsletter has an op-ed section that we’re always trying to fill. Without further ado, here is our first op-ed of 2023!
Crypto x Credibility
by Christina Pantin, Head of Communications, Bullish
(The views expressed are my own)
The crypto calamities of 2022 have made a number of things clear, but one in my mind stands out — We’re NOT All Going to Make It. Sorry, WAGMI fans, your buoyant cheer has bitten the dust.
What lies ahead is a lot of rebuilding and restoration, chiefly, the shoring up of credibility and trustworthiness. Not a very snappy slogan, I’m afraid.
But the hard lesson learned from the litany of crypto crashes has surely been this — ordinary, widely accepted corporate rules were violated, and the alleged crimes committed were plain vanilla, old-fashioned fraud.
Regretfully, cryptocurrencies and digital assets have become the new villains in our young industry’s downturn. Warren Buffett’s investing partner Charlie Munger, who (in)famously warned about the perils of “liquor, ladies and leverage”, recently inveighed against cryptocurrencies, urging America to ban these “gambling contracts.”
Becoming credible (again) isn’t only for the surviving and upcoming crypto exchanges, post-FTX and its ilk. For the crypto industry to regain its footing, trust-building has to be the new mission of every participant. Those who are proven trustworthy are deserving of being trusted. For everyone else, it’s perhaps prudent to follow that old maxim – trust, but verify, and insist on rigorous disclosure rules.
We know now that the industry would be better off if there had been more probing, questioning and challenging of assumptions. And I’m not just putting this on journalists and researchers, but as the duty of everyone who seeks truth and accuracy.
That includes crypto companies, who need to behave responsibly, treat OPM (Other People’s Money) like their own with care and respect, and to earn the trust of all parties.
Collabs are a big thing for many brands (I’m looking at you, Nike x Tiffany). The crypto industry needs broad and deep collabs across the board to make it.
Reach out to Molly Jane or Anthony on Telegram if you have some ideas for our next op-ed of 2023.
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Top crypto video in January
From Bars to Bitcoin by Compass Mining
From Bars To Bitcoin tells the story of Justin Rhedrick, a former convict turned Bitcoin entrepreneur, who is on-boarding the global Black community to Bitcoin.
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Top crypto unhinged tweet(s) in January
Not unhinged in the traditional sense, this epic thread is worth a read.
We can’t wait to see you all next year for our first newsletter of 2023 — until then, find us on Telegram and Twitter!
Subscribe now! It’s never too late — in crypto, you’re always early.
Join the ACJR
If your New Year’s resolution has anything to do with learning more about cryptocurrency in these wild times — then maybe you should add joining the ACJR to your list. Beyond this lovely newsletter and our open Telegram chat, dues-paying ACJR members get access to our members’ only chat, various discounts and event invites plus much, much more in the new year.
If you want to become an official member of the ACJR, please reach out to any of the current board members on Telegram, or Joyce Pavia Hanson: @JPHanson.