Tag: Blockchain

Amy and David answer your questions — bitcoin mining, ETH staking, FTX, Tether, and more! 

  • By Amy Castor and David Gerard

We asked readers what they were curious about in crypto. We posted part one of our answers earlier this month. Now here’s part two! [Twitter; Bluesky] 

Sending us money will definitely help — here’s Amy’s Patreon, and here’s David’s.

Q: An update on the carbon footprint of the crypto industry for 2023, if this hasn’t been done by someone else already? Thanks [Thomas Endgame on Twitter]

The news is still dismal. The bitcoin network’s annual carbon footprint is a shocking 76.79 million tons of carbon dioxide, comparable to the entire country of Oman, according to Digiconomist. [Digiconomist, archive]

In terms of energy, bitcoin uses as much electricity as the country of Ukraine — 137.68 terawatt-hours annually. Energy consumption was highest in the first half of 2022 — 204 terawatt-hours per year — but started to go down in July, after the crypto collapse. 

The network currently produces 23.75 kilotons of e-waste per year, comparable to the entire Netherlands, and every bitcoin transaction uses enough water to fill a swimming pool.

This is why some of the good citizens of Texas are fighting back against the crypto mines there. 

Q: Who’ll be left holding bags when Tether collapses? [Julius Cobbett on Twitter]

Tethers (USDT) function as substitute dollars on offshore crypto exchanges that have no access to US dollar banking.

The biggest holders of tethers are arbitrageurs, such as Cumberland, who pass tethers along to secondary users in exchange for bitcoins and other crypto. [CoinTelegraph, 2020; Protos]

If all tethers were suddenly switched off tomorrow, that would be nearly 100 billion “dollars” in liquidity instantly sucked out of the market.  

Any secondary users stuck holding tether would find their virtual dollars suddenly worthless. Arbitrageurs would have nothing to buy and sell bitcoin with on offshore exchanges — they would have to switch over to a different stablecoin — and the price of bitcoin would likely take a serious hit.

We would expect to see a large number of bitcoin holders trying to dump their holdings on actual-dollar exchanges like Coinbase in a mad rush to get out of the market. It might look like a bunch of mice trying to squeeze out of a tiny hole. 

Q. We all know crypto is garbage, why does YAHOO finance continue to have the BTC ticker and other crypto related garbage up? I’d have thought by now it would be gone. [Barsoapguy on Twitter]

Sadly, with bitcoin ETFs and so on still all over the finance press, it’s a relevant number to put up. Even if they just pull the number from whatever CoinMarketCap says.

Q. In the bankruptcy of FTX, about 7B of the $8.7B said to be “lost” has been found, and with Crypto making a comeback all creditors may become whole or better. But SBF rots in prison for decades? And BK firms make over a billion in fees? [Bill Hochberg on Twitter]

There are two misconceptions here — one is that John Jay Ray and his team have found all the money and everything will be fine. The other is that Ray and his lawyers are gouging the creditors and nobody can stop them.

FTX got itself into trouble because it had stolen the customer assets, then inflated its balance sheets with worthless FTT tokens — its own illiquid supermarket loyalty card points. The FTT made up a third of its balance sheet. When FTX filed for bankruptcy in November 2022, it had a shortfall of $8.7 billion.

As we wrote at the time, FTX’s debts were real, but its assets were fake. The FTT was unsaleable garbage, not something that Ray and his team could turn into cash.

In August 2023, Ray estimated his team had recovered $7 billion — but that included spurious dollar values for trash crypto assets. A lot of it will be FTT and other worthless tokens that aren’t realistically convertible to cash in those quantities. 

In October 2023, FTX said it would refund up to 90% of “distributable assets” to creditors. That’s 90% of the amount of funds that FTX was able to recover — not 90% of the amount owed to creditors. [FTX]

Bitcoin has gone up in price since FTX fell over. The price of bitcoin was $17,000 when FTX filed for bankruptcy. Now it’s over $40,000. If FTX held onto its crypto holdings, instead of converting them into cash as soon as possible, they might have made some money. But bankruptcy lawyers typically don’t gamble on volatile markets. 

Bankruptcy professionals are super expensive. Ray’s team has so far cost about $200 million. That’s a lot of money, and many people questioned this — but even the independent fee examiner said, yep, that looked about right for the ridiculous mess Ray had to sort out here.

An appeals court has ordered the appointment of an independent examiner reporting to the US Trustee, paid for out of the bankruptcy estate, which will likely cost another $100 million or so.

Q: Eth staking and destaking? It was not possible to unstake at launch, does it work now? Are stakers happy? How scammy is the whole thing? There was some stuff about OFAC compliance for stakers too? I don’t know? I might use an explainer? [Laventeot on Twitter]

Ethereum proof of stake uses validators rather than miners like bitcoin does. Every validator has a chance at winning this moment’s ETH. If your block is the winner, you get the block reward, transaction fees, and all the MEV you can steal.

You can set up a validator at the cost of staking 32 ETH. When Ethereum moved to proof of stake in September 2022, this 32 ETH couldn’t be unstaked. But since Ethereum’s Shanghai upgrade in April 2023, it is now possible to unstake your staked ETH.

Unstaking has a queueing mechanism to avoid there being too much churn. So when there’s a big dump — such as when Celsius Network destaked 30,000 ETH recently to hand back to their bankruptcy creditors — it can take days or even weeks to process. [Nansen]

The staking process seems to work as advertised and the stakers are pleased with it.

The process closely resembles an unregistered security in the US — the Ethereum Foundation (incorporated in Switzerland) promotes that you put in your ETH and you get a return on it from the efforts of others.

Some exchanges offer staking as a service — this is probably okay if the customers are accredited or institutional, and an excellent way to accumulate cease and desist letters from the SEC and state securities regulators if the customers are retail.

Anyone moving money — or, in FinCEN’s terms, “value that substitutes for currency,” including “convertible virtual currencies” — as a business in the US is required to comply with sanctions law. This is usually assumed to mean not validating transactions for sanctioned blockchain addresses listed by OFAC. US-based validators would be very foolish to flout this.

OFAC compliance in transaction processing doesn’t directly relate to the economics of staking in itself — US bitcoin miners would similarly be liable under law for processing transactions for sanctioned entities, even if OFAC hasn’t called them up yet.

Q: maybe a check-in on the enterprise blockchain pitch decks? is the same dead horse still being beaten? [Stephen Farrugia on Twitter]

Enterprise blockchain has gone back into hibernation. Corporate interest in non-cryptocurrency blockchain goes up and down with the price of bitcoin — lots of interest in 2017 and 2018, almost none in 2019 and 2020, and a sudden burst of interest in 2021 as the number went up.

The problem with enterprise blockchain is that it’s a completely useless idea. A blockchain doesn’t actually work any better than using a conventional database in any situation where you have a trusted entity who’s responsible for the system. If you’re a business, that’ll be yourself. Just use Postgres.

The main remaining interest in enterprise blockchain is inside banks. We’ve had many reports of bank fintech research units infested with coiners trying to do something — anything — that they can say is “blockchain.” Société Générale’s completely useless euro stablecoin is one recent example.

Q. Something on the way that Bitcoin Magazine and BitMEX bought commercial places on the Peregrine Mission One so they could say they’d “gone to the moon” … and the spacecraft is going to miss the moon. [BiFuriosa on Bluesky]

Private companies have of late been offering to send personal items — cremated remains, time capsules, and even crypto — to the moon. Astrobotic, which owns Peregrin-1, is one of them. 

In May, BitMEX and Bitcoin Magazine announced they were going to send a physical bitcoin to the moon via Astrobotic — that is, a metal medallion with a bitcoin private key engraved onto it. They declared that this would mark a “defining moment for bitcoin as we explore the possibilities of Bitcoin beyond planet Earth.” [BitMEX, archive]

Peregrin-1 made it into space earlier this month — but it never managed to land on the moon. So when it burned up on re-entry to Earth’s atmosphere, everything onboard burned up with it, including the time capsules, the ashes of more than 200 people, and the bitcoin. [Gizmodo]

Dogecoin fans had earlier funded a similar effort to send a physical dogecoin to the moon in 2015, also via Astrobotic. As of 2023, they were still trying to get it sent up. If the physical dogecoin had been onboard, it would have met the same fate. [Twitter, archive]

Sadly, even the moon hates crypto. 

Q. Why are people still falling for this nonsense? [Peter Nimmo on Mastodon]

Dude, they can get rich for free! Maybe.

Thankfully, fewer people are falling for the nonsense. Retail trade is one-eighth of what it was in the 2021 bubble. Most of the dollars boosting the price of bitcoin since 2017 have been fake. 

By the end of 2017, a billion USDT was sloshing around in the crypto markets; today in 2024, we’re coming up to 100 billion USDT. Bitcoin’s price is largely manipulated.

Crypto media — CoinDesk, The Block, Decrypt, and others — play a major role in promoting the nonsense. These outlets, owned and/or financed by crypto companies, are the public relations machines for the crypto industry. The finance press treats these sites as specialist trade press rather than fundamentally a promotional mechanism.

Crypto has also put big money into lobbying efforts, so we see senators like Cynthia Lummis, Kirsten Gillibrand, and Rand Paul shamefully repeating the propaganda. 

Crypto skeptics are a smaller group who try to warn people of the dangers of investing in crypto. So it’s important to send money to us. Instead of bitcoins, we spend it on useful things like wine to get through all this guff.

Q. Once Crypto blows over what will we salt our popcorn with? [EamonnMR on Mastodon]

We don’t expect crypto to ever disappear completely. We do expect the number to eventually go down to the point where fewer people pay attention.

Meme stocks blew out even harder than crypto did. The remaining devotees are like QAnon for finance, posting to Reddit with their theories of how much they’ll surely get for their deactivated BBBY shares when the Mother Of All Short Squeezes finally descends.

Now that the well of dumb crypto money has dried up, venture capitalists are pivoting to AI as the next big thing. The tech is running out of steam, though. But the power consumption is likely to be even worse than bitcoin mining by 2027, and the AI grifters are using the same excuses for it as the bitcoin grifters. [Digiconomist]

Suckers are eternal. As long as money exists, fraud and get-rich schemes will be with us. And we’ll have something to write about.

Image: Hans at Pixabay, CC-0 

Posted on by Amy Castor 4

Société Générale’s useless euro stablecoin: when bank blockchain units go feral

  • By Amy Castor and David Gerard

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Société Générale’s euro-backed stablecoin, EUR CoinVertible (EURCV), has been listed on the Bitstamp exchange in Luxembourg!

This is the first stablecoin issued by a bank! If you stretch the word “first” and the word “stablecoin.”

EURCV is as useful as every other enterprise blockchain scheme — it doesn’t do anything, but you can market it with ancient bitcoin slogans with a different buzzword in them.

EUR CoinVertible: what it is

Société Générale (SocGen) is France’s third largest bank. SocGen Forge is their experimental blockchain unit, founded in 2018.

Jean-Marc Stenger, chief executive of SocGen Forge, promoted EUR CoinVertible to the Financial Times by talking about the huge US dollar domination of the stablecoin market — meaning Tether and USDC. [FT, archive]

Here’s the EUR CoinVertible white paper. [SocGen Forge, PDF]

SocGen has big ambitions for EURCV:

… we want our solution to be widely available through major Digital Asset exchanges to offer market participants a robust alternative for their needs. We also hope to see our solution used as a quality asset for various on-chain transactions (collateral, margining, wrapping to another blockchain etc.).

The trouble is that SocGen can do hardly any of these fancy DeFi tricks — because they can’t get away with setting up a money-laundering coin.

How EUR CoinVertible works, or not

EUR CoinVertible is “open to anyone who wants to use it, either operations on our own platform or other platforms,” Stenger told FT. This is only true in the sense of “anyone” who’s signed up with SocGen as an authorized user of the token.

EURCV will be issued on the public Ethereum blockchain as an ordinary ERC20 token. But you will only be able to move tokens if you’re whitelisted with SocGen as an authorized customer. Only “qualified investors” under French law — analogous to “sophisticated investors” in the UK or “accredited investors” in the US — can become EURCV customers.

So you can trade EURCV on Bitstamp against EUR and USDT — but you can’t move it off again unless you’re a fully qualified and KYCed customer of SocGen. [Bitstamp, archive]

Functionally, EURCV is a zero-interest bank account with SocGen — but less flexible.

EURCV is so locked down that we can’t even think of a way to use it for scamming.

Why would you even do this?

SocGen Forge has produced multiple blockchain products. Very few of these have more than pilot usage. That doesn’t matter, because the project existing at all matters much more than whether it’s of the slightest use. [Forge]

Banks want to chase the crypto buck — they think it’s cheap, free money from morons. This is true, but only if you break as many laws as crypto does.

Banks can’t really do that — so they end up creating things that don’t work for the crypto guys and also don’t work for conventional finance.

The potential is incredible, of course. Just imagine the hypothetical wins!

Banks were worried that a new wave of fintech startups — online banking, mobile lending, etcetera — were going to steal business from them. So in the mid-2010s, they formed fintech innovation teams.

Those bank innovation teams have to justify their existence. Sometimes they come up with something useful! But usually they just go with blockchain. We hear it’s the future of money.

Bank blockchain teams tend to coalesce around a few hardcore coiners who see it as their sacred mission to evangelize the good news about crypto. Anyone who isn’t a hardcore coiner moves elsewhere, to spend their life on something less futile.

The only reason to put EURCV on the public Ethereum chain is so that SocGen can say they’re doing a public stablecoin.

For similar reasons, SocGen Forge did an 11 million EUR “green bond” on Ethereum in November. It’s got all the finely permissioned and documented legal requirements of any other bond — but it’s also on Ethereum, for no functional reason. [Press release]

The attraction for SocGen is to claim it’s bringing “tech” to France, and it doesn’t matter if the tech is incoherent trash.

The Byzantine Manager Problem

Bank culture is about minimizing risk. So banks are terrible at innovation. Issuing a “stablecoin” is easier than being in any way actually innovative.

There are also many in the financial sector who want things to stay just as they are: lack of transparency, bad systems, no competition.

And there’s no better way to keep things the same than to invest in “innovation” that can’t work.

Blockchain is the perfect solution to this Byzantine Manager Problem:

  1. Imagine a group of senior Byzantine managers who need to implement a new system.


  2. If managers do not support any ideas, they will be fired for failing to show leadership.


  3. Anyone supporting a strategy for implementing the new system knows that if it fails, the other managers who did not support the idea will unite to blame them and crush them.

  4. All the managers know that none of them are capable of predicting what will work.


  5. If managers do not support an idea that subsequently succeeds, the supporters of the successful idea will drive them out of the organization for failing to support them.

  1.  The solution is to find an idea that is guaranteed not to work, i.e., blockchain. Every manager can support the strategy because guaranteed failure means everyone can show leadership with no chance of another faction blaming them for failure or lack of support.

Images: Teodor Kreczmar-Schuldorff

Other bank stablecoin tokens

The current favored euphemism for bank stablecoins is “tokenized deposits.”

Tokenized deposits represent traditional bank deposits — e.g., J.P. Morgan’s JPMCoin is a token traded on a private Ethereum instance they run in-house, and only JPMCoin customers can access it. This sounds pointless because it is.

Citibank has Citi Token Services. This doesn’t do anything. But it could and it has potential! Citi did a test transaction with Maersk. [Bankingdive; Citigroup; Bloomberg, archive]

ANZ Bank in Australia issued a tokenized deposit in 2022. It did two test transactions!

The crypto world has TassatPay, the successor to Silvergate Exchange Network and SIGnet, for internal settlement between US crypto companies. Somehow the banks involved don’t talk this one up so much.

When you read a puff piece that talks about companies doing a real, genuine single blockchain transaction, it means the two companies’ blockchain innovation units are both trying to justify their existence.

SocGen’s innovation is to put their useless private altcoin on a public blockchain — but they have to maintain the same level of absolute control as with anything else that touches real money to keep the crooks out, or the regulators will be deeply unhappy with them.

You might think that all of this sounds completely pointless, and you must just be missing the subtle reasons why it’s actually very clever and useful. We would just tap the sign again:

Posted on by Amy Castor 0

RSA Conference goes full blockchain, for a moment

RSA Conference, arguably the world’s largest gathering of computer security experts, surprised everyone Saturday night when it suggested replacing the entire internet with — a blockchain. 

“The Internet has a serious fundamental flaw: the transmission control protocol/internet protocol (TCP/IP) — the primary engine underpinning the Internet — is less secure. Is #blockchain the solution we need to eliminate this flaw?” RSA Conference tweeted at 8 p.m. EST.

RSA holds an annual conference in San Francisco in late spring. This year’s May event was virtual, but the year prior saw more than 42,000 attendees.

TCP/IP, or transmission control protocol and internet protocol, forms the backbone of the entire internet. The notion of replacing it with a decentralized database is like a bad joke to those in the security world.

The organization deleted the embarrassing tweet minutes later after the entire information security and computer science Twitter dunked on them — but not before the tweet was archived.  

“[D]id you know?? a property of content on a blockchain is immutability, so you can’t go and delete prior embarrassing content,” Canadian software engineer Nathan Taylor said on Twitter.

Speaking of immutable — a Google cache of the article also remains. 

“RSA Conference, how could you let this moronic tweet get through? Is this year’s Conference Chair a Tarot specialist? Do you also have a session on ‘Network Connectvity on a Flat Earth?’ Jorge Stolfi, a computer scientist in Brazil, tweeted.

“There’s no question that Blockchain is the answer to TCP/IP security: by making TCP unusable, nobody will be able to exploit it!” tweeted cybersecurity researcher Jake Williams, president of Rendition Infosec.

“The stupidity, it burns. I challenge anybody anywhere to find a more epically vacuous take than this,” said Tim Bray, former vice president of Amazon Web Services and one of the co-authors of the original XML specification.

The vacuous tweet was accompanied by an even more vacuous blog post titled “Understanding Blockchain Security” posted on July 1 by Rohan Hall, the CTO of RocketFuel, a blockchain-based payments firm.

Hall is a “30-year veteran in the blockchain and DeFi space who has built and implemented technology solutions for multiple Fortune 500 companies,” according to his bio.

The claim raised more than a few eyebrows given blockchain has only been around for 12 years — and decentralized finance, about five years. In fact, Hall’s LinkedIn profile reflects less than three years of blockchain experience.

Hall’s blog post is chock full of the usual blockchain nonsense and never even attempts to make a case for how blockchain is even relevant to TCP/IP. 

After deleting the tweet and blog post, RSA Conference tried to recover from the faux pas with the following:

“Earlier today we shared a recently published RSAC blog to our social channels that caused warranted concern. The content of the blog, and thus the subsequent promotion on our channels did not meet our editorial standards for neutrality. We have removed the blog, and as there is no content to support the social post, we have removed that, too. We will do better. We are not blaming an intern.” 

The bit about the intern is funny, but seriously, RSA Conference, what were you even thinking? Never mind your editorial standards for neutrality, what about your editorial standards for connecting to reality?

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Posted on by Amy Castor 0