The crypto thread

[Samson]

DAOs are people now

Ooki DAO was sued in September of last year for allowing illegal trading of digital assets, engaging in activities only allowed by registered futures commission merchants, and not performing proper KYC. It was a potentially landmark case, as one of the first actions to be taken against a DAO and an opportunity to test various DAOs' claims that by decentralizing governance, they can skirt regulatory enforcement.

Now, a judge has awarded default judgment in the case, requiring the DAO to pay a more than $640,000 penalty, close down its website, and stop trading.

The court held that the Ooki DAO was a "person" under the Commodity Exchange Act and thus could be held liable for violations of the law.

 

[Samson]

IBM quantum computer passes calculation milestone
‘Benchmark’ experiment suggests quantum computers could have useful real-world applications within two years.

Four years ago, physicists at Google claimed their quantum computer could outperform classical machines — although only at a niche calculation with no practical applications. Now their counterparts at IBM say they have evidence that quantum computers will soon beat ordinary ones at useful tasks, such as calculating properties of materials or the interactions of elementary particles.​

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In a proof-of-principle experiment described in Nature on 14 June, the researchers simulated the behaviour of a magnetic material on IBM’s Eagle quantum processor. Crucially, they managed to work around quantum noise — the main obstacle for this technology because it introduces errors in calculations — to get reliable results.​

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Their ‘error-mitigating’ techniques enabled the team to do quantum calculation “at a scale where classical computers will struggle”, says Katie Pizzolato, who heads IBM’s quantum theory group in Yorktown Heights, New York.​

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Physicists have been experimenting with a range of hardware for building quantum computers, including traps for individual ions or neutral atoms. IBM’s approach — which is also used by Google and other companies — encodes each qubit in a tiny superconducting circuit. For quantum computers to be effective, the qubits have to keep their quantum state for long enough for a calculation to be carried out. So a crucial engineering effort went into increasing the lifetime of the qubits, the IBM team says.​

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In the latest paper, IBM physicist Abhinav Kandala and his collaborators conducted precise measurements of the noise in each of their qubits, which can follow relatively predictable patterns determined by their position inside the device, microscopic imperfections in their fabrication and other factors. Using this knowledge, the researchers extrapolated back to what their measurements — in this case, of the full state of magnetization of a two-dimensional solid — would look like in the absence of noise. They were then able to run calculations involving all of Eagle’s 127 qubits and up to 60 processing steps — more than any other reported quantum-computing experiment.​

Although the problem they attacked uses a much-simplified, unrealistic model of a material, “It makes you optimistic that this will work in other systems and more complicated algorithms,” says John Martinis, a physicist at the University of California, Santa Barbara, who led the Google team to their 2019 milestone.​

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Sabrina Maniscalco, chief executive of quantum-computing start-up Algorithmiq in Helsinki, says that the experiment provides a benchmark for the state-of-the-art in quantum computers. “These machines are coming,” she says. Maniscalco's company is developing algorithms for quantum-chemistry calculations that use error mitigation.​

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The Eagle has 127 qubits — but IBM expects to unveil its most powerful processor yet, the 1,121-qubit Condor chip, later this year. The company also has “utility-scale processors” with up to 4,158 qubits in its development pipeline, says Jay Gambetta, head of IBM’s quantum-technology efforts. He adds that to achieve the longer-term goal of building 100,000-qubit machines that can do fully error-corrected algorithms by 2033, researchers will need to solve substantial engineering problems.​

I have not figured it out, but if you have 4,158 effective qubits that breaks bitcoin, right?

Spoiler Youtube of how they break encryption that I do not really understand :

 

[Broken_Erika]

Why do i still think of Qbert when i think of Qubits?
It's like "Meet Qubit, Qberts less known brother."

 

[uppi]

I have not figured it out, but if you have 4,158 effective qubits that breaks bitcoin, right?

Yes, but "effective" is the key word here. If you do quantum error correction you need a group of physical qubits for one logical (or effective) qubit. The ratio depends on how much error correction you need to do. I don't have the numbers (and since it is a not yet realized device, there will only be projections, anyway), but I suspect that 4158 physical qubits will not be enough to break current cryptography algorithms. The 100000-qubit device might be a serious threat to cryptography, though.

 

[Samson]

Some of these just seem too incompetent to be scams...

Multichain shuts down amidst $130 million suspected hack

Blockchain watchers observed $130 million in various assets flowing out of the Multichain blockchain bridge, questioning whether there had been an exploit. Multichain tweeted, "The team is not sure what happened and is currently investigating," and recommended users stop using the service and revoke contract approvals.
Several hours later, Multichain wrote that they had stopped service, and that "all bridge transactions will be stuck on the source chains. There is no confirmed resume time."

In May, Multichain suffered a bizarre slew of issues, culminating in the project team admitting that their CEO had gone missing and could not be contacted. So far, they have not reported his return.

This is also not the first hack suffered by Multichain. In January 2022, the project, bafflingly, publicly announced a security vulnerability that was affecting their tokens, without first instructing users to safeguard their tokens. Attackers quickly followed the instruction manual provided to them by Multichain, making off with around $3 million in assets.

 

[innonimatu]

Amazing as the phony economy of trading representations of bits as representations of bits (no longer tied to anything tangible) just keeps going.
Good for the GDP too. How wealthy "we" are for the blockchain and cryptocrap...

 

[Samson]

Some of these just seem too incompetent to be scams...

Multichain shuts down amidst $130 million suspected hack

Blockchain watchers observed $130 million in various assets flowing out of the Multichain blockchain bridge, questioning whether there had been an exploit. Multichain tweeted, "The team is not sure what happened and is currently investigating," and recommended users stop using the service and revoke contract approvals.
Several hours later, Multichain wrote that they had stopped service, and that "all bridge transactions will be stuck on the source chains. There is no confirmed resume time."

In May, Multichain suffered a bizarre slew of issues, culminating in the project team admitting that their CEO had gone missing and could not be contacted. So far, they have not reported his return.

This is also not the first hack suffered by Multichain. In January 2022, the project, bafflingly, publicly announced a security vulnerability that was affecting their tokens, without first instructing users to safeguard their tokens. Attackers quickly followed the instruction manual provided to them by Multichain, making off with around $3 million in assets.

OK, perhaps they are scammers after all

Multichain drained of another $107 million days after previous theft

Only five days after $130 million was emptied from the Multichain blockchain bridge, another $107 million in a wide range of assets has been taken. After the first theft, Multichain urged users to stop using the project and revoke contract approvals, but a large quantity of assets remained on the service.

People are becoming increasingly suspicious that the Multichain thefts may be an inside job, not least because Multichain's CEO suddenly disappeared in late May and hasn't been located since.

 

[Kaitzilla]

So much money...

Former Celsius CEO arrested; company agrees to pay $4.7 billion settlement

The SEC and the CFTC charged the exchange with scheming to defraud investors out of billions. New York prosecutors accused CEO Alex Mashinsky this year of orchestrating a $20 billion fraud against investors.

www.nbcnews.com

Former Celsius CEO Alex Mashinsky was arrested Thursday on federal securities fraud charges, a source told CNBC, as the bankrupt crypto exchange agreed to pay a $4.7 billion settlement with government regulators

$4.7 billion used to be a lot of money.

Now it's just a tiny headline.

I wonder if the CEO will actually face jail time?

 

[Samson]

SEC, CFTC, and FTC sue Celsius; CEO Alex Mashinsky arrested

A multi-agency hammer came down on the bankrupt cryptocurrency lender and alleged Ponzi scheme that was Celsius. The co-founder and former CEO of the company, Alex Mashinsky, was arrested and charged with seven counts including securities and commodities fraud, wire fraud, and conspiracy to manipulate the price of Celsius' CEL token. The indictment also named Roni Cohen-Pavon, Celsius' former Chief Revenue Officer.

Alongside the indictment from the DOJ, the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC) each filed their own separate lawsuits against Mashinsky and Celsius.

These latest lawsuits join an existing lawsuit, filed in January 2023, against Mashinsky by the New York Attorney General.

 

[Samson]

OK, perhaps they are scammers after all

Multichain drained of another $107 million days after previous theft

Only five days after $130 million was emptied from the Multichain blockchain bridge, another $107 million in a wide range of assets has been taken. After the first theft, Multichain urged users to stop using the project and revoke contract approvals, but a large quantity of assets remained on the service.

People are becoming increasingly suspicious that the Multichain thefts may be an inside job, not least because Multichain's CEO suddenly disappeared in late May and hasn't been located since.

Who knows how much incompetence and criminality there was going on, but it seems all the big movements happened after the CCP got their hands on the keys

Multichain finally confirms their CEO was arrested in China

After a months-long saga involving "stuck" transactions, Multichain announcing they couldn't get in contact with their CEO, rumors that the whole team was arrested, and several suspicious transactions of more than $100 million each, Multichain has finally announced that their CEO — known only as Zhaojun — was arrested on May 21. According to the project, all of his devices, hardware wallets, and mnemonic phrases were taken by Chinese police during the arrest. "Since the inception of the project, all operational funds and investments from investors have been under Zhaojun's control. This also means that all the team's funds and access to the servers are with Zhaojun and the police," they wrote.

The Multichain project claimed in a lengthy Twitter thread that the team attempted to keep the project running by using stored credentials on Zhaojun's home computer, thanks to access provided by his sister. However, they say that the July 6–7 movement of $130 million out of the project was an "abnormal" transfer by an unknown party. They claim that the July 9–10 transfer of around $107 million was his sister attempting to preserve assets by moving them into wallets she controlled. According to the team, his sister also was arrested on July 13, and "the status of the assets she has preserved is uncertain".

"Due to the lack of alternative sources of information and corresponding operational funds, the team is forced to cease operations," they wrote. They also claimed that they don't have control over the domain pointing to the frontend of the project, and so are unable to take the project offline, and resorted to pleading with GoDaddy for help in doing so.

"Honestly he deserves jail for this level of cryptography incompetence alone," wrote crypto personality 0xfoobar on Twitter.

 

[Moriarte]

I'm trying to align "crypto-project" with current and historical economic-political school of thought. As a thought exercise, trying to gauge in which field such idea could emerge, or, rather, with which ideological field it better fits, as a concept. And it seems to me, that crypto best aligns with libertarian school of thought. Let me explain.

Communists. They don't want money. I mean, they want Your money, until they can pile all the money in one place and get rid of it, like Joker did. They want money-less satisfaction of everyone's needs, while employing everyone's natural ability, whatever all that can mean in practice. Well, those old school communists anyway. The ultimate goal of communism is... or should I rather say: communism begins where money ends. So, no perfect crypto-alignment with communism. That is readily confirmed by contemporary communist-aligned government of China, which squashed crypto folk wherever they could find them in favour of digital and centralised Yuan.

Anarchists. They don't want hierarchies. They hate centralisation. Which makes the outcome complex. Obviously, crypto brings decentralisation along with it, a thing an anarchist can appreciate. However, decentralisation easily polarises into centralisation, if and when crypto becomes large enough (Bitcoin, Ethereum). Creation and subsequent operation of such a currency reinforces the current hierarchy of capital, giving it, the capital, another venue where strong can exert influence over the weak. So, here I am not sure, perhaps someone more versed on the subject of anarchist ideologies can provide a nuanced view. So far I am leaning "likely no" from the point of view of anarchist, but I can see some fringe cases, where anarchist could employ locally-focused crypto to suit their needs.

Libertarians. From a libertarian standpoint, the decentralization of currency is a significant departure from government-controlled fiat currencies and central banks. Libertarians argue for minimal government intervention in personal lives and financial matters, and a decentralized cryptocurrency offers a system wherein individuals can exercise more direct control over their finances. A perfect match, yes? This viewpoint emphasizes personal freedom and responsibility, and in the context of a global decentralized currency, it aligns with the libertarian principles of free-market capitalism. Cryptocurrencies are deflationary by design (while not being so in practice) and operate on a decentralised ledger technology like blockchain, allowing for transparent, peer-to-peer transactions. This could satisfy libertarian desires for an open and competitive monetary system free from government interference and manipulation?

So it seems to me it best fits with libertarian ethos. Or does it? If you have thoughts, let me know.

 

[innonimatu]

SEC, CFTC, and FTC sue Celsius; CEO Alex Mashinsky arrested

A multi-agency hammer came down on the bankrupt cryptocurrency lender and alleged Ponzi scheme that was Celsius. The co-founder and former CEO of the company, Alex Mashinsky, was arrested and charged with seven counts including securities and commodities fraud, wire fraud, and conspiracy to manipulate the price of Celsius' CEL token. The indictment also named Roni Cohen-Pavon, Celsius' former Chief Revenue Officer.

Alongside the indictment from the DOJ, the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Trade Commission (FTC) each filed their own separate lawsuits against Mashinsky and Celsius.

These latest lawsuits join an existing lawsuit, filed in January 2023, against Mashinsky by the New York Attorney General.

They took their sweet time nailing one of these, and waited for it to go bankrupt. But all of it is fraud, pyramid schemes.

 

[Samson]

DOJ charges two founders of Tornado Cash, arrests one

A year after the Department of Treasury added Tornado Cash to the OFAC sanctions list, the DOJ has come in to charge the service's two founders with conspiracy charges involving money laundering, sanctions violations, and operating an unlicensed money transmitter. The Feds arrested Roman Storm, a U.S. national; Russian co-founder Roman Semenov is "at large".
The Feds claim that the two founders knew Tornado Cash was widely being used to launder hundreds of millions of dollars by North Korea, but "turned a blind eye" and claimed to be complaint with sanctions laws. They also state that they refused to implement anti-money laundering and KYC programs, as is required of money transmitting services.

These charges are likely to be controversial — as has been the sanctioning of Tornado Cash — among crypto advocates and others, as they run up against thorny First Amendment questions and conflicting ideas about who, if anyone, is liable for running decentralized services.

 

[Samson]

I do not understand how people who are really "in" the crypto space (employees of reputable crypto orgs, venture capitalists, people who built DeFi protocols, deploy contracts, run full nodes) can both trust third parties to hold their keys and not move their coins to new wallets when said thrid party gets hacked? Do they not know they should? Do they not care about their monies? Do they not know how? Are they unwilling to pay the trivial transaction costs of moving their coins? What is going on?

Experts Fear Crooks are Cracking Keys Stolen in LastPass Breach

In November 2022, the password manager service LastPass disclosed a breach in which hackers stole password vaults containing both encrypted and plaintext data for more than 25 million users. Since then, a steady trickle of six-figure cryptocurrency heists targeting security-conscious people throughout the tech industry has led some security experts to conclude that crooks likely have succeeded at cracking open some of the stolen LastPass vaults.

Taylor Monahan is lead product manager of MetaMask, a popular software cryptocurrency wallet used to interact with the Ethereum blockchain. Since late December 2022, Monahan and other researchers have identified a highly reliable set of clues that they say connect recent thefts targeting more than 150 people, Collectively, these individuals have been robbed of more than $35 million worth of crypto.

Monahan said virtually all of the victims she has assisted were longtime cryptocurrency investors, and security-minded individuals. Importantly, none appeared to have suffered the sorts of attacks that typically preface a high-dollar crypto heist, such as the compromise of one’s email and/or mobile phone accounts.

“The victim profile remains the most striking thing,” Monahan wrote. “They truly all are reasonably secure. They are also deeply integrated into this ecosystem, [including] employees of reputable crypto orgs, VCs [venture capitalists], people who built DeFi protocols, deploy contracts, run full nodes.”

Monahan has been documenting the crypto thefts via Twitter/X since March 2023, frequently expressing frustration in the search for a common cause among the victims. Then on Aug. 28, Monahan said she’d concluded that the common thread among nearly every victim was that they’d previously used LastPass to store their “seed phrase,” the private key needed to unlock access to their cryptocurrency investments.

Bax, Monahan and others interviewed for this story say they’ve identified a unique signature that links the theft of more than $35 million in crypto from more than 150 confirmed victims, with roughly two to five high-dollar heists happening each month since December 2022.

KrebsOnSecurity has reviewed this signature but is not publishing it at the request of Monahan and other researchers, who say doing so could cause the attackers to alter their operations in ways that make their criminal activity more difficult to track.

But the researchers have published findings about the dramatic similarities in the ways that victim funds were stolen and laundered through specific cryptocurrency exchanges. They also learned the attackers frequently grouped together victims by sending their cryptocurrencies to the same destination crypto wallet.

By identifying points of overlap in these destination addresses, the researchers were then able to track down and interview new victims. For example, the researchers said their methodology identified a recent multi-million dollar crypto heist victim as an employee at Chainalysis, a blockchain analysis firm that works closely with law enforcement agencies to help track down cybercriminals and money launderers.

Chainalysis confirmed that the employee had suffered a high-dollar cryptocurrency heist late last month, but otherwise declined to comment for this story.

Bax said the only obvious commonality between the victims who agreed to be interviewed was that they had stored the seed phrases for their cryptocurrency wallets in LastPass.

LastPass declined to answer questions about the research highlighted in this story, citing an ongoing law enforcement investigation and pending litigation against the company in response to its 2022 data breach.

 

[Samson]

Founder of the Thodex crypto exchange sentenced to 11,196 years in prison

As of writing, the April 2021 $2 billion Thodex exit scam is the second largest exit scam recorded in the Web3 is Going Great leaderboard. Thodex was one of the largest crypto exchanges in Turkey, until its CEO, Faruk Fatih Özer, disappeared along with $2 billion in customer funds.

He was arrested in August 2022 after a year on the run. Now, he and his brother and sister have all been sentenced to 11,196 years in prison – sentences so over the top that one has to wonder if perhaps Turkish prosecutors are worried the Özers are some kind of crypto-focused vampire crime family. They will also pay a 135 million lira fine (~$5 million).

 

[RobAnybody]

Quoting myself from February...

Interestingly, despite all the negative press, they continue to rise: Bitcoin is now at $27,042; Etherium is at $1,818. They both had been a bit higher a few weeks ago, but still... my Beanie Babies are on the upswing. I have no idea what that means, or why it's happening. It's just interesting to note how their value doesn't seem to reflect anything - like, really anything.

Checking this again today - Bitcoin: $25,898; Etherium: $1,635, so both down quite a bit since February [EDIT: above numbers were from May] (-5% for Bitcoin, -10% for Etherium). But oddly, still not gone *poof*. I still have no idea what any of this means. Still just holding, because, well... "why not?" seems as good a reason as any (I only really have a few Etherium, plus some minor not-even-relevant stuff like Shiba).

No point meant really, just trying to update this price tracking every ~3 months or so.

 

[Samson]

I would like to ask anyone who voted for a crypto other than privacy coins, why? The primary use of these is supposed to be a medium of exchange, right? So it acts a bit like a bank account? If I was a bank and I offered both public accounts, where everyone can see how much money you have and what you spend it on, and private ones where they cannot no one would go for the public ones. Why is it so different in crypto?

 

[EnglishEdward]

No, I think it is more about speculation, one convinces oneself one can make money out of the greater fool coming around the corner.

 

[RobAnybody]

@Samson: Just 'cause I'm here, I'll say: I can't answer any of your questions.

I'm one of those people who, from the start, only viewed it as a speculative asset (Beanie Babies!). So I guess factor people like me in to the much more legitimate answers you are likely to receive (I hope, 'cause I'd like to hear them as well) to your questions. I have money I can afford to lose that I can invest. I chose to sink some of into Crypto (as mentioned, mostly Etherium).

I also have an extensive collection of (graded by CGC) comic books. Many I have just collected & kept, some I have sold for a pretty big profit (like in the hundreds/few thousands of dollars realm, not getting super rich off it). I view these two speculative assets the exact same. It's just that I have a whole lot more knowledge about comic books. And that's probably why I have done much better in that realm.

Crypto? I just plunked some money into it hoping it would go up. I'm basically "up" on comics, "push" on Crypto at this point. As I believe I've mentioned upthread, I'm waaaay much more "up" on just putting as much as I can into my 401k, a much "smarter" decision.

So, just factor in that there are a lot of people like me who really don't know anything about Crypto, but are in the "market" for no good reason whatsoever.

 

[Moriarte]

I would like to ask anyone who voted for a crypto other than privacy coins, why? The primary use of these is supposed to be a medium of exchange, right? So it acts a bit like a bank account? If I was a bank and I offered both public accounts, where everyone can see how much money you have and what you spend it on, and private ones where they cannot no one would go for the public ones. Why is it so different in crypto?

Well, to start with, you're just about the only person in the world, who knows the difference between privacy coins and the other option. I agree with Edward and Rob that primary allure is value speculation, not privacy. Privacy would be nice if people could have it, but it's far from being a deciding factor. Most people don't do drugs for crypto, illegal racing, shopping in dark webs, greasing officials, tax evasion - so, for most, the kind of privacy on offer is more of a beauty concept, not really a functional advantage. Secret agents and drug lords violently disagree, but hey.

For me, idea of Ethereum is far more important - a building block for other crypto projects, malleable currency, the stuff from which other valuable stuff is made. A platform for digitalising value, eventually. This is something existing money can't do, so that's the future value I see.

If you can give me some privacy, sure I'll take privacy, but it's far from being a deal breaker. If I wanted real privacy in commerce I'd stick with proverbial gold bars, and other solid and well researched options that has long been and will remain in existence.