Crypto Pirates

Social tokens are reshaping the way wealth is created. Rather than borrowing money to pursue their dreams, artists and entrepreneurs are investing in themselves.

Alex Masmej idolised Steve Jobs; his favourite shirt featured Apples that changed the world: Adam's, Isaac's, and Steve's. Masmej aspired to move to Silicon Valley and found himself unable to do so due to a lack of funds. In April 2020, as the world struggled to recover from the coronavirus pandemic, he found himself trapped in his native Paris.

As a result, Masmej did something that few 23-year-olds consider: he tokenised himself. That is, he created a financial instrument called a social token, a type of cryptocurrency whose value is determined by the person who created it, in order to sell shares in himself.

$ALEX holders would receive 15% of Masmej's income for the next three years, up to a maximum of $US100,000 ($142,000) per year, and would be able to exchange tokens for special privileges: 10,000 $ALEX purchased a retweet from Masmej on Twitter; 20,000 $ALEX purchased a one-on-one conversation with him; and 30,000 $ALEX purchased an introduction to someone in Masmej's network. Masmej raised $US20,092 in five days, enough money to fly him across the Atlantic to San Francisco to launch his start-up.

I work in Silicon Valley as a venture capitalist and met Masmej in San Francisco. When he shared his story with me, I was struck by the significance of his journey to California. Rather than seeking financing from investors, friends, or family, Masmej made the investment himself.

This may strike some as dystopian, like the plot of a Black Mirror episode. However, social tokens are a subset of a larger and fundamentally beneficial trend: everyone is becoming an investor. Wealth has accrued to a select few – the investing class – over time, while the majority rents time as salaried and hourly workers.

Only about one in every two Americans has any exposure to the stock market, and that exposure is income-related: Only 15% of families in the bottom 20% of income earners own stock, compared to 92% of families in the top 10%.

However, Masmej's and others' actions indicate a shift. The world is becoming increasingly financialised, allowing individuals to invest not only in businesses or government bonds, but also in art, collectibles, and celebrities.

Parallel cultural and technological shifts are establishing a new paradigm. The rules governing how we create and capture economic value are being rewritten, paving the way for previously unattainable forms of wealth creation.

Today's youth are leading this transformation by challenging long-held beliefs: that you should work for a corporation until you are ready to retire; that you should spend your 9 to 5 hours chained to your desk; and that you should work for anyone at all.

Nearly 80% of teenagers aspire to be their own boss, while 40% wish to start their own business. During the Great Recession and again during the pandemic, young people witnessed their parents and grandparents being burned. They are cynical. Why work within a "system" where your upside is limited when you can leverage your hustle and savvy to control your own destiny?

This cultural shift is evident in the 23 million people who use Robinhood to buy stocks and the 46 million Americans who own cryptocurrency. We see it in the NFT craze, in Elon Musk's deification, and in the GameStop phenomenon of last winter. If we broaden the definition of "everyone is an investor" to "everyone is an owner," we see ripple effects in the record-breaking 4.4 million businesses launched in 2020, as well as the 68 million Americans who freelance.

Even this generation's superstars question established conventions. Josh Richards, 19, a TikTok star, had flirted with becoming a Red Bull brand ambassador. When I inquired as to why he passed, he looked at me puzzled – why, he reasoned, should he be the conduit for another's wealth creation? That was the game plan for celebrities of yore. Rather than that, Richards used his 25 million TikTok followers to launch his own energy drink brand, Ani Energy. Ani is now available in over 400 Walmart locations a year later.

A shift in cultural attitudes towards ownership is colliding with emerging technology. We are on the cusp of the web's third era. The early days of the web were about information freely flowing – think of Google providing access to the world's knowledge. In this era, the majority of us were passive consumers.

The second era was characterised by the rise of the social web – Facebook, Instagram, and Twitter. Individuals began creating their own content, which became the lifeblood of the major platforms. We became active participants, but the platforms sucked up all the revenue.

The internet's promise was to eliminate gatekeepers. Rather than waiting to be signed to a record label, you could share your music on Spotify. Rather than requesting that a publication share your words, you could tweet them. Rather than being approached by a studio executive, you could pursue a career as a YouTuber. However, these platforms became the new gatekeepers.

Web 3.0

The web's third era is about righting the ship. Social capital is transformed into economic capital. Brokers and intermediaries no longer accrue value.

In practise, what does this mean? Take the music industry as an example. Record labels now control the lion's share of revenue generated by music. Artists walk away with a meagre stipend, and fans receive none. However, in this new era of the internet, anyone can benefit from culture.

We've all had that (slightly annoying) friend who insisted on knowing about so-and-so before they became famous. I am that friend when it comes to Taylor Swift – and I am more than slightly obnoxious about it. I was a Taylor fan years before Kanye interrupted her onstage at the VMAs during her pre-Fearless, full-on country days. However, in our current fandom structure, I am treated the same as the fan who discovered Swift on Saturday Night Live a few weeks ago.

This would all be different, however, if Taylor had followed Masmej's lead and invested in herself. She might have chosen to issue a social token. While non-fungible tokens, or NFTs, are named for their uniqueness, social tokens are fungible. In other words, each $ALEX token can be traded for any other $ALEX token, just as a dollar bill can be exchanged for any other dollar bill. (However, if Barack Obama signs the dollar bill, it ceases to be fungible.)

Taylor Swift's micro-economy

Assume Taylor created her own cryptocurrency – let's call it $SWIFT – and sold it to her biggest fans. Assume I was one of these fans. $SWIFT's value would have appreciated over time as Taylor's popularity increased. As an early supporter, I would have reaped the financial benefits of her growing celebrity. The $100 $SWIFT I purchased in 2007 may be worth $100,000 today.

Taylor Swift's mini-economy would benefit both the singer and her early fans, such as myself. Taylor could have funded her work as an artist by selling $SWIFT. She may not have needed to sell her masters, and she may not have been compelled to rerecord her albums in order to reclaim control of her art.

Taylor's fans, on the other hand, would have been compensated for a decade of support: we are all evangelists for our favourite artists, yet we receive little of the value we contribute. Social tokens are the only type of currency that combines patronage (support for the artist), fandom (a stronger connection to the artist), and investment (financial upside from the appreciation of the digital asset).

We could apply this example to any artist: what if you discovered Billie Eilish on SoundCloud in 2016, or Lil Nas X prior to the viral success of "Old Town Road"? What if you'd been a fan of the Beatles prior to their appearance on The Ed Sullivan Show?

This is not a far-fetched fantasy; enterprising artists are already establishing their own digital economies. $RAC was launched last year by Grammy-winning artist RAC with the caveat that fans cannot purchase it; they must earn it through their fandom. RAC distributed $RAC retroactively to fans based on their support, such as whether they were a Patreon subscriber or had previously purchased merchandise. Fans could then exchange their $RAC for access to the artist.

The shadowy side

You can imagine this concept becoming more mainstream over time: what if the best seats at a Taylor Swift concert went to the fan who earned the most $SWIFT through Spotify streams?

To be clear, financialisation of everything is not without drawbacks. The phenomenon is not without its dark side. If everyone becomes an investor, the converse is also true: Everything – and everyone – becomes an investment candidate. Alex Masmej created a "Control My Life" component for $ALEX. Token holders could vote on his life choices, such as whether he should run 5 kilometres daily, abstain from red meat, and wake up at 6 a.m. Masmej obeyed their commands because token holders had a financial stake in his success. (To be fair, he acknowledges that this was merely a "fun experiment.")

We'll need to address two critical questions. To begin, when does human agency cede to financial obligation? Second, when does a relationship devolve into a transaction? Between investment and speculation, as well as between speculation and gambling, there is a fine line. What occurs when an individual loses money on $ALEX or $SWIFT? Financialising life and culture may result in a more equitable distribution of economic value, but the system must include safeguards to prevent us from sacrificing our humanity.

These are challenges, but all innovation entails risks; these risks should not obstruct opportunity. Investing used to be limited to the stock market, which was considered arcane and inaccessible to the majority of people. Almost everything is now investable. Masterworks enables you to invest in fine art by purchasing a portion of a Banksy. Royal enables you to purchase a portion of a song and earn royalties – you could own a piece of the next Bohemian Rhapsody or Hey Jude. Otis bills itself as "the stock market for culture," offering investors the opportunity to invest in LeBron James basketball cards and Air Jordan sneakers.

This new era of cultural liquidity alters the way capital is accessed. The last decade has been about social capital transfer: likes, shares, and retweets. Our social capital fueled Facebook, Google, and Twitter's profit engines.

We are now entering a web-based economic era, one in which everyone is an investor. This is not to say that regulation should be avoided or that businesses and institutions should not exercise caution in determining which safeguards to implement. This does not imply the establishment of a human stock market in which we can buy and sell our friends.

However, this economic era enables everyone to invest – in fine art, iconic songs, and public figures in whom they believe. This era implies that it will be the many who dictate culture, not the few. Finally, popular culture will live up to its moniker.

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Of course, as a business owner, you have the option of storing the cryptocurrencies indefinitely, especially given their daily price increases.

Numerous businesses now accept cryptocurrency as a form of payment. While it's easy to see how this could be a beneficial change for customers, it's critical to understand how business owners can benefit. Of course, as a business owner, you have the option of storing the cryptocurrencies indefinitely, especially given their daily price increases. However, the crypto market remains volatile, making it difficult for business owners to predict whether their cryptocurrencies will appreciate in value in the future or not.

If the trend of one of the currencies indicates that its price will increase in the coming months, you can buy it. On the other hand, if the news indicates that the money is not performing well and may experience a price slump, you can sell it without earning a high profit margin. However, the most critical point is to stay current with the cryptocurrency market.

Crypto Pirates is one of the best sources for up-to-date news and analysis on the cryptocurrency industry. By providing real-time information on various currencies and regularly reviewing new money on the market, businesses can stay informed and make informed decisions about what to do with the coins they receive from their customers.

Updates in real time

If your business relies on cryptocurrency payments, it's prudent to stay informed about the crypto market in real time. You must stay informed about cryptocurrency prices in order to make informed decisions about whether to hold on to your digital assets or convert them to fiat. Anyone new to the industry should seek out helpful guides on crypto trading, market analysis, and the efficient use of exchanges and hardware wallets.

Inform yourself about cryptocurrency exchanges

According to some business owners, implementing cryptocurrency as a payment method would be beneficial because it would foster a positive image among their customers. True. However, it is critical to understand the crypto exchanges with which you must transact in order to obtain cryptocurrencies. Without the necessary knowledge, you risk connecting your business account to an exchange where hackers wait for their prey.

By exercising due diligence, you can eliminate that risk. Look for websites that provide comprehensive information about the various types of exchanges that the majority of businesses use, discuss their advantages and disadvantages in detail, detail their fees, and advise you on which deals to avoid.

All of this takes time, but it is the only way to ensure that you do not make a costly error that results in significant business losses.

Any business owner seeking to remain competitive and relevant should consider accepting cryptocurrency payments. This is a significant shift, one that requires careful planning and flawless execution. Maintaining current knowledge of cryptocurrency news can assist you in getting started in the right direction.

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Six cryptocurrency executives will tell Congress on Wednesday to tread carefully when imposing new rules on digital assets – or risk driving activity underground or outside the United States.

Ahead of a House Financial Services Committee hearing scheduled to begin at 10:00 a.m. EST, executives from some of the world's largest cryptocurrency companies indicated in prepared testimony that they will generally support clearer rules. However, they will emphasise that excessive restrictions would not stifle activity, but would simply push it out of reach of the United States.

"Without tailored legislative solutions that are openly debated with public participation, the United States risks unnecessarily onerous and chilling laws and regulations," Alesia Haas, CEO of Coinbase Inc, warned in Tuesday's testimony. "This has the potential to effectively drive cryptocurrency activity underground or to offshore exchanges with lax or non-existent compliance programmes."

The panel's testimony, which was published ahead of the hearing, sets the stage for what is expected to be a closely watched and high-stakes event, as US lawmakers publicly press cryptocurrency executives to defend their business and flesh out ideas for regulation.

Several executives, on the other hand, argued for a softer approach.

"There are numerous examples of US regulatory decisions driving legitimate activity offshore, thereby harming US investors, innovators, and workers," Bitfury CEO Brian Brooks explained. "There is a reason why crypto talent has shifted away from Silicon Valley, the birthplace of the original commercial Internet."

The rapid growth of cryptocurrency, particularly "stablecoins," which are digital assets whose value is pegged to traditional currencies, has attracted regulators' attention, who fear they could jeopardise the financial system if not properly regulated. Certain policymakers, including Senator Elizabeth Warren and Securities and Exchange Commission Chairman Gary Gensler, are also concerned that the products could be used illicitly or to defraud unsuspecting consumers.

In November, a working group led by the US Treasury recommended that Congress pass legislation requiring stablecoins to be issued only by firms that have their deposits insured, such as banks. According to analysts, Wednesday's hearing could provide insight into the likelihood that Congress will take up any such digital currency legislation.

Executives expressed a desire for regulatory clarity, but cautioned that excessively restrictive rules could be counterproductive.

"Stablecoins and internet-native capital markets are not too big to fail, but they have grown too big to ignore," Circle Internet Financial CEO Jeremy Allaire said. "Policy frameworks must promote an open and competitive playing field and foster the growth of new technologies."

Stablecoins, proponents argue, have the potential to revolutionise payments by providing a secure, low-cost, and instant method of transferring funds across borders. The executives argue that the United States should take a lead role in fostering that technology, just as it did during the Internet's early years in the 1990s due to US regulations.

"Let us work together to ensure that US policymakers lay the groundwork for a productive, prudent, global regulatory roadmap for this technology," Denelle Dixon, executive director of the Stellar Development Foundation, stated in her prepared testimony. "I hope we can all agree that cryptocurrency and stablecoin should not be used as buzzwords to arouse fear of the unknown."

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The Internal Revenue Service will no longer rely on an honour system when it comes to reporting cryptocurrency trades. Beginning in tax year 2023, any transactions involving potentially taxable digital assets will be reported to the agency by a third party.

If you've ever worked or invested in stocks, you're well aware that your earnings are reported to the federal government. This is because both you and the IRS receive a W-2 form from your employer, which details your annual earnings, and a Form 1099 from your broker, which details your stock transactions.

However, there have been no comparable third-party reporting requirements for cryptocurrency transactions and transfers – or for any other digital asset, such as NFTs – until now.

However, the recently passed infrastructure bill includes provisions requiring crypto industry participants who broker digital asset transactions to issue 1099-Bs for their customers' accounts, which you will begin receiving in early 2024 for transactions occurring in 2023.

Additionally, in an effort to make money laundering more difficult, the new law requires businesses to report to the IRS whenever they receive more than $10,000 in cryptocurrency in a single transaction (or in two or more related transactions), just as they must when they receive more than $10,000 in cash. Wilful failure to comply with this requirement may be prosecuted as a federal felony.

These new reporting requirements will have a number of implications for investors who trade digital assets.

You cannot maintain your anonymity.

The new reporting requirements benefit crypto investors in two ways. First, they demonstrate that crypto is here to stay. Additionally, given the difficulty of keeping track of all your transactions, obtaining a 1099 may be beneficial.

However, the disadvantage will be a loss of anonymity for those who wish to keep their transactions private for personal reasons or who have not complied with their tax obligations.

When you open a bank or brokerage account, you are required to provide a large amount of personal information that is cross-checked to ensure you are who you claim to be. Among other things, you must provide your legal name, address, phone number, and Social Security or other taxpayer identification number.

However, when creating cryptocurrency-related accounts, the information requested varies by platform.

"Until this year, it was fairly common to open [a cryptocurrency account or digital wallet] with just your name and email," Erin Fennimore, head of information reporting at TaxBit, a cryptocurrency tax software provider, explained.

That will change in a number of instances by 2023. "You will be asked for personal information that you have most likely never been asked for previously," Fennimore explained.

And the platforms that are required to report on your transactions must verify that you are who you claim to be.

Additionally, when a digital asset is transferred from one broker to another, the transferring broker must provide the receiving broker with a statement that includes the transferred asset's basis and holding period information in order for the receiving broker to comply with its 1099 reporting requirements.

What constitutes reportable events?

Not all cryptocurrency transactions will require third-party reporting, as not all cryptocurrency transactions will result in a taxable event.

"Simply purchasing cryptocurrency is not taxed or reportable under the law. You must take action with it, such as selling or exchanging it "According to Fennimore.

However, because a reporting entity may not have all of the information necessary to complete a transaction, "it will be a practical challenge to always have the tax basis for each trade or transfer," according to Christopher Murrer, an associate in Baker McKenzie Zurich's Fintech group.

For instance, you could send bitcoin from one of your non-custodial digital wallets to a reputable cryptocurrency exchange and then sell it from that account. The cost basis for the sale may be zero or the price on the day you transferred the currency, not the price on the day you purchased it.

As a result, you'll need to explain to the IRS why the data on your 1099 is incorrect. "Ultimately, it is the taxpayer's responsibility to report the correct tax basis on their personal tax returns," Murrer said.

Who is responsible for reporting?

According to some in the cryptocurrency industry, the law is written in such a broad manner that various players, such as miners and software providers, could be defined as "brokers" even if they are not involved in the brokering of a taxable transaction.

If that is the case, those who may have been incorrectly classified may face "massive reporting obligations," as Coinbase CEO Brian Armstrong stated on Twitter.

Similarly, there is a lack of clarity regarding what constitutes a business for the purposes of reporting large single transactions. "Because this is a new industry, it's difficult to predict what regulators will consider to be a business," Murrer said, noting that it's unclear how decentralised finance (DeFi) activities, staking pools, and non-fungible tokens (NFTs) may be classified.

However, greater clarity is expected when the Treasury Department issues regulations outlining how the law's reporting requirements should be interpreted and implemented.

A senior Treasury official stated that the department has been in discussions with industry participants to clarify which types of entities should be classified as brokers, traders, and businesses for reporting purposes, noting that it is highly improbable that miners would ever be considered brokers.

The department is prioritising the development of those regulations, which will be issued in the coming months, the official said.

When they are, a public notice and comment period will be held prior to the rules being finalised.

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This weekend's crypto flash crash served to highlight the recent cooling of decentralised finance, which was once one of the most exciting sectors of the digital asset world.

While Bitcoin and other rival coins have mostly stabilised or increased from Saturday's lows of about 20%, many DeFi tokens fell even further and have since failed to recover. The DeFi Pulse Index, which measures the performance of tokens such as Aave, Balancer, Compound, Sushi, Synthetix, Uniswap, Yearn, and Badger, fell as much as 24%.

The slide follows a period of poor performance for tokens associated with decentralised finance applications — services that enable individuals to lend, borrow, and trade directly, without the use of intermediaries such as banks. Over the last seven months, the DeFi Pulse Index has fallen 62.5 percent. By contrast, Bitcoin is still higher than it was in mid-May, despite the recent slump.

"For the majority of the last six months, DeFi has been out of favour and underperforming other sectors, and that trend continued over the weekend," said Jeff Dorman, chief investment officer at Arca. "However, other tokens recovered much more quickly, whereas DeFi remained depressed."

Slump of DeFi Tokens

The DeFi Pulse Index, which tracks key tokens, continues to decline.

To be sure, the total value of money invested in apps — a proxy for usage — has increased 12 percent since mid-May, to nearly $100 billion, according to tracker DeFi Pulse. The services are geared towards a portion of the world's unbanked population of 1.6 billion people who lack access to traditional, centralised financial services. However, many investors have shifted their focus to coins tied to non-fungible tokens – frequently digital art – or games.

DeFi has taken a beating in part because many of the tokens are held by a small number of people, according to Simon Judd, head of business development at Index Coop, which manages a Defi index fund.

"Numerous DeFi tokens have extremely low liquidity," Judd explained. "Thus, even a small amount of sell pressure has a sizable effect."

DeFi's injuries are also partially self-inflicted. Last week, BadgerDAO, which allows users to earn interest on Bitcoin, was hacked. The precise extent of the damage is unknown. According to one researcher, it could be as much as $120 million. Meanwhile, at Sushi, developer infighting adds to the uncertainty.

Concerns about a possible regulatory crackdown are also dampening enthusiasm for DeFi. The Financial Action Task Force, which develops anti-money laundering standards that governments around the world follow, recently called for increased oversight of DeFi apps. While many claim to be run by their communities, the FATF warned that governments could hold developers responsible for failing to conduct customer identification checks and enforce anti-money laundering policies.

Today, the majority of DeFi apps allow customers to remain anonymous. While not a DeFi platform, state and federal regulators in the United States have recently taken action against companies such as BlockFi, alleging that their savings-account-like products violate federal and state laws.

"Non-bank financial intermediaries (NBFIs) can improve the efficiency of the financial system but also increase its instability," the BIS, which serves as the central bank's bank, stated in a December report released Monday. Additionally, this instability affects token valuations.

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Craig Wright, an Australian computer scientist who claims to be the inventor of Bitcoin, won a US civil trial verdict Monday against the family of a deceased business partner who claimed it was owed half of a tens of billions-dollar cryptocurrency fortune.

A Florida jury determined that Dr Wright did not owe the family of David Kleiman half of 1.1 million Bitcoin. The jury did award US$100 million ($142 million) in intellectual property rights to a joint venture between the two men, a pittance of the amount sought by Mr Kleiman's lawyers during the trial.

"This was a tremendous victory for our side," said Dr Wright's lead attorney, Andres Rivero of Rivero Mestre LLP.

The trial revolved around 1.1 million Bitcoin, which are currently worth approximately US$50 billion at Monday's prices.

These were some of the first Bitcoins created through mining and could only be owned by a person or entity that had been involved with the digital currency since its inception, such as Satoshi Nakamoto, its creator.

The cryptocurrency community is now watching to see if Dr Wright keeps his promise to prove he owns the Bitcoin in question. This would lend credence to Dr Wright's 2016 claim that he is Nakamoto.

The case was highly technical, with the jury hearing explanations of the intricate workings of cryptocurrencies as well as the murky origins of Bitcoin.

Jurors deliberated for an entire week, repeatedly questioning lawyers on both sides as well as the judge about how cryptocurrencies work and the two men's business relationship. At one point, the jurors indicated to the judge that they had reached a stalemate.

Bitcoin's origins have always been a bit mysterious, which is why this trial has garnered so much outside attention. 

A few months later, mining for the currency began, which involves computers solving mathematical equations.

The name Nakamoto, which loosely translates as "at the heart of," was never considered to be the true identity of Bitcoin's creator. Some members of the cryptocurrency community do not believe Nakamoto was even a single person.

The claim by Dr Wright that he is Nakamoto has been met with scepticism by a sizeable portion of the cryptocurrency community. Bitcoin's structure ensures that all transactions are public, and the 1.1 million Bitcoins in question have remained unaltered since their inception.

Members of the Bitcoin community have repeatedly urged Dr Wright to move a small fraction of the coins into a separate account to establish ownership and demonstrate that he is truly wealthy.

Dr Wright and other cryptocurrency experts testified under oath during the trial that Dr Wright owns the Bitcoins in question. Dr Wright stated that if he were to prevail at trial, he would establish his ownership.

David Kleiman, 46, died in April 2013. His family, led by his brother Ira Kleiman, has asserted that David Kleiman and Dr Wright were close friends and collaborated to create Bitcoin.

Mr Kleiman's estate sought half of the Bitcoins at issue, as well as intellectual property rights.

The attorneys for W&K Information Defence Research LLC, the two men's joint venture, expressed "gratification" that the jury awarded the company the US$100 million in intellectual property rights for developing software that laid the groundwork for early blockchain and cryptocurrency technologies.

"Wright refused to give the Kleimans a fair share of the assets that (David Kleinman) helped create and instead kept them for himself," Vel Freedman and Kyle Roche of Roche Freedman LLP and Andrew Brenner, a partner at Boies Schiller Flexner, said in a joint statement.

Dr Wright's attorneys have stated repeatedly that while David Kleiman and Dr Wright were friends and collaborated on projects, their collaboration had nothing to do with the creation or early operation of Bitcoin.

Dr Wright has stated that if he is found not guilty, he intends to donate a large portion of his Bitcoin fortune to charity.

Mr Rivero, Dr Wright's lawyer, confirmed in an interview that Dr Wright intends to donate a large portion of his Bitcoin fortune.

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Vitalik Buterin has updated his blog with a new post on the future of rollups. He asserts that as rollups gain traction, block production is likely to remain centralised and that it may take years for users to adopt rollups as a means of storing their assets.

The co-founder of Ethereum is optimistic about the future of rollups.

Vitalik Buterin Discusses the Rollup's Future

Vitalik Buterin has updated his blog with a new post on rollups and blockchain scalability.

The 1,500-word essay, titled "Endgame," discusses how the technology can be used to decentralise block production. According to Buterin, the average "big block chain" today has a high block frequency, block size, and transaction speed, but also becomes highly centralised as a result of the high node running costs associated with creating large blocks. Numerous Ethereum competitors, such as Solana, tout lightning-fast transaction times but require expensive hardware to run nodes, prompting concerns about the degree of decentralisation.

Buterin continues by stating that while rollups improve block validation, they still result in centralised block production, and that there are two likely outcomes of a rollup-centric world: one in which "everyone migrates" to a single highly scalable rollup, or one in which network activity is distributed across multiple solutions.

However, Buterin notes that block production will remain centralised in both cases due to "the network effects within rollups or the network effects of cross-domain MEV." He does, however, note that techniques such as committee validation, data availability sampling, and bypass channels can be used to regulate the market for block production.

The post makes a direct reference to Ethereum, noting that the network is "extremely well-positioned" to adapt to a rollup-centric environment due to its explicit roadmap commitment to rollup integration. "Ethereum is open to all possible futures and is not required to take a position on which one will win," an excerpt reads, referring to the two scenarios in which one or more rollups thrive.

Other "big block chains," Buterin writes, will have to decide whether to pursue decentralised block production and resistance to censorship.

Buterin has previously stated that Layer 2 rollup solutions will be a critical component of Ethereum's path to scalability. Today's rollups are classified as optimistic or zero-knowledge. Optimistic Rollups, such as Optimism and Arbitrum, bundle transactions and send data off-chain to reduce transaction times and gas fees, though withdrawals are subject to a seven-day dispute period. Meanwhile, ZK-Rollups such as Starkware's StarkNet generate cryptographic proofs to demonstrate the legitimacy of transactions when they are sent back to the base chain.

Ethereum's Layer 2 rollup solutions have gained traction in recent weeks as the network continues to struggle with persistent gas fee issues. Numerous Ethereum-native DeFi projects have begun launching on Optimistic Rollups, while StarkWare's StarkNet launched last week on mainnet. However, Buterin notes that it will take "years of refinement and audits" before people feel comfortable storing their crypto assets in EVM-compatible ZK-Rollups.

Buterin's post comes at a time when Ethereum and other Layer 1 blockchains are experiencing extreme volatility. ETH fell 17% below $4,000 on Friday as part of a market-wide selloff, while other smaller-cap coins suffered even greater losses. It has since recovered and was trading at $4,207 at press time. At the moment, it controls approximately 20.73 percent of the global cryptocurrency market.

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Wyre's blockchain-based solutions are currently being used in over 100 countries. Over 15 million users have been on-boarded and over $10 billion in payments have been processed. Mobilum Technologies Inc. announced today that it has entered into an agreement with Wyre to gain access to the US market. Wyre, a fiat-to-crypto and payment infrastructure company, provides developers with simple-to-integrate APIs that make crypto more accessible.

Mobilum also upgraded its on-ramp payment processing platform in addition to collaborating with Wyre. The company integrated its on-ramp solution with over 200 acquirers and banking rules in order to improve fraud detection and approval rates.

Mobilum will connect to Wyre's automated clearing house (ACH) payment rails under the terms of the agreement. Mobilum's on- and off-ramping platform will be used to process ACJ transactions.

The President of Poland, Wojciech Kaszycki, commented on the upgrade. "We're extremely pleased with our most recent platform upgrade. This will assist us in addressing some of the most significant challenges currently confronting cryptocurrency companies. We will be able to significantly increase transaction approval rates, combat fraud, and minimise chargebacks."

Mobilum previously launched an updated Over-the-Counter (OTC) trading desk website for high-net-worth individuals looking to execute large volumes of Bitcoin or other cryptocurrency transactions exceeding $50,000.

The OTC site includes features such as fast settlements, a diverse selection of crypto assets, no deposit or withdrawal fees, competitive trading rights, and personalised services, all of which contribute to a seamless and secure high-volume trading experience for customers. As of October 25, the website for the OTC trading desk had generated approximately C$20 million in transaction volume.

Businesses Make Significant Advances in the Fields of Digital Finance and Cryptocurrency

As highlighted in its shareholder letter, Coinbase had a strong third quarter of 2021. During the quarter, the company saw an increase in product adoption and engagement, as well as significant innovation. The company's subscription revenue increased 41% sequentially to $143 million in Q3 2021, indicating that the cryptocurrency has entered the utility phase, enabling users to earn interest on their holdings. Additionally, the company made significant progress in Q3, launching Coinbase Prime to institutional investors. Additionally, Coinbase enhanced its platform's security features to assist users in safeguarding their crypto assets.

SoFi Technologies Inc., a digital personal finance platform that enables users to borrow, spend, invest, and protect their money, today announced the Redemption of its outstanding warrants at their Fair Market Value. The Redemption is valued at $22.38 at fair market value. Outstanding warrant holders who exercise their warrants cashlessly will receive 0.361 shares per warrant. The redemption period continues until 5:00 p.m. New York City Time on December 6, 2021, at which point any unexecuted warrants will become null and void.

Square Inc. (SQ) published a white paper outlining plans to create a decentralised bitcoin exchange that will allow users to trade both bitcoin and fiat currencies. The company's white paper on tbDEX describes the exchange as a protocol aimed at establishing ubiquitous and accessible on- and off-ramps that will enable individuals to benefit from crypto innovations. The company made the whitepaper available on GitHub in order to encourage developer participation in the decentralised exchange. Mike Brock is in charge of the initiative.

Mogo diversified its strategic investment portfolio with a minority stake in Gemini's US$400 million financing. Additionally, the company invested in Coinsquare, Tetra Trust, Enthusiast Gaming, Eleven Gaming, and Tiidal Gaming, bringing the total value of its investments to $193 million in Q3 2021. Along with increasing its investment, the company has achieved significant milestones, as evidenced by the company's Q3 2021 financial results, in which the user base increased to approximately 1.8 million. Revenues increased by 58 percent year over year for the company as well.

As digital assets and cryptocurrencies gain popularity, businesses like Mobilum are uniquely positioned to benefit from the market through the solutions they provide users. These solutions enable users to trade, exchange, and profit from their digital assets in a frictionless manner.

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MonoX Finance, a blockchain startup, announced on Wednesday that a hacker stole $31 million by exploiting a flaw in the software it uses to create smart contracts.

The company utilises the MonoX decentralised finance protocol, which enables users to trade digital currency tokens without complying with certain requirements associated with traditional exchanges. "Without the burden of capital requirements, project owners can list their tokens and focus on developing the project rather than providing liquidity," MonoX company representatives wrote in November. "It operates by grouping deposited tokens into a virtual pair with vCASH, allowing for the creation of a single token pool."

An accounting error in the company's software enabled an attacker to inflate the MONO token's price and then use it to withdraw all other deposited tokens, MonoX Finance revealed in a post. The haul totalled $31 million in Ethereum or Polygon tokens, which are both supported by the MonoX protocol.

The hack specifically utilised the same token for both tokenIn and tokenOut, which are methods for exchanging the value of one token for another. MonoX calculates new prices for both tokens following each swap. When the swap is complete, the price of tokenIn—the token sent by the user—decreases, while the price of tokenOut—the token received by the user—increases.

By using the same token for both tokenIn and tokenOut, the hacker significantly inflated the MONO token's price, as updating the tokenOut overwrote the tokenIn's price update. The hacker then traded the token for $31 million in Ethereum and Polygon tokens.

There is no practical reason to exchange a token for another token, and thus the trading software should never have permitted such transactions. Unfortunately, it did, despite the fact that MonoX underwent three security audits this year.

The Smart Contracts Pitfalls

"These types of attacks are common in smart contracts because many developers fail to define security properties for their code," explained Dan Guido, an expert on securing smart contracts like the one hacked here. "They had audits, but if the audits simply state that a knowledgeable individual examined the code for a specified period of time, the results are of limited value. Smart contracts require testable evidence that they perform exactly as you intend. This includes both defined security properties and techniques for evaluating them."

Guido continued as the CEO of security consultancy Trail of Bits:

The majority of software is vulnerable and requires vulnerability mitigation. We look for vulnerabilities proactively, acknowledge that they may be insecure while being used, and develop systems to detect when they are exploited. Smart contracts necessitate the elimination of vulnerabilities. Software verification techniques are widely used to provide verifiable assurances that contracts function properly. The majority of security issues in smart contracts arise when developers take the former rather than the latter approach to security. Numerous large, complex, and highly valuable smart contracts and protocols have avoided incidents, in addition to the numerous ones that were immediately exploited upon their launch.

Igor Igamberdiev, a blockchain researcher, took to Twitter to explain the composition of the drained tokens. Wrapped Ethereum was worth $18.2 million, MATIC tokens were worth $10.5 million, and WBTC was worth $2 million. Additionally, smaller amounts of Wrapped Bitcoin, Chainlink, Unit Protocol, Aavegotchi, and Immutable X tokens were included in the haul.

Only the Most Up-to-Date DeFi Hack

MonoX is not the only decentralised finance protocol to have been hacked for millions of dollars. Indexed Finance disclosed in October that it had lost approximately $16 million in a hack that took advantage of the way it rebalances index pools. Elliptic, a blockchain analysis company, reported earlier this month that so-called DeFi protocols have lost $12 billion to theft and fraud. Losses reached $10.5 billion in the first roughly ten months of this year, up from $1.5 billion in 2020.

"The relative immaturity of the underlying technology enabled hackers to steal users' funds, while the deep liquidity pools enabled criminals to launder the proceeds of ransomware and fraud," the Elliptic report stated. "This is part of a larger trend towards the illicit use of decentralised technologies, which Elliptic refers to as DeCrime."

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When Tony Richards, the Reserve Bank of Australia's (RBA) Head of Payments Policy, read the recent Finder's Crypto Report findings that nearly one in five Australians owned cryptocurrency, he was sceptical. However, the outcomes had already been widely distributed throughout the country, gracing features for an extended period of time. They even made it into the October report by the Senate Committee on Australia as a Technology and Financial Centre. Welcome to the statistically dubious world of digital currency reviews — an easy way for businesses to gain publicity by hawking study findings, but not a particularly effective method of staying informed.

Is the depiction credible?

Richards cast doubt on these figures in his Nov. 18 address to the Australia Corporate Treasury Association, calling them "somewhat implausible."

According to an August Finder survey, 17% of Australians own at least one cryptocurrency — 9 percent own Bitcoin, 8% own Ether, and 5% own Dogecoin.

"I can't help but wonder if the online surveys upon which they are based are representative of the population," he said.

His assertion echoes Dr. Chittaranjan Andrade's in his 2020 report for the Indian Journal of Psychological Medicine, in which he asserts that online survey samples are frequently unrepresentative, regardless of the subject.

He cited "critical segments of the population," such as the elderly, people living in rural areas, and those without reliable internet access, that online survey panels "do not adequately capture."

Online surveys are only completed by respondents who are "sufficiently prejudiced to be interested in the subject; otherwise, why would they take the time and trouble to respond?" he composed.

However, Graham Cooke, the Head of Consumer Research at Finder, defended the methodology, telling Cointelegraph:

"Respondents are chosen based on their age, gender, and geographic location in order to create a sample that accurately reflects the results of a full national survey." "We are confident that this results in a reliable sample that is representative of the population," he continued.

There are only a few lines at the end of the 15-page report summarising survey results that explain methodology. "Finder's Consumer Sentiment Tracker is an ongoing nationally representative survey of 1,000 Australians each month, with over 27,400 respondents between May 2019 and July 2021," the release states. Qualtrics, a Systems Applications and Products in Data Processing (SAP) company, conducted the survey. According to Qualtrics' website, "in just ten weeks, Finder increased brand awareness by 23 percent," but there was no additional information about the survey methodology, and the company declined to provide any upon request from Cointelegraph.

According to a Finder spokesperson, "Qualtrics collects respondents from various panels and can be rewarded in a variety of ways." Some are compensated a small fee for their participation, while others earn a charitable donation." Different surveys place the estimate of 2 million people at a different level.

This is not to disparage Finder's survey in particular: Every day, it appears as though a new survey is conducted, and their findings frequently contradict one another.

Consider the YouGov survey commissioned by Australian crypto exchange Swyftx, which discovered that the percentage of Australians who own cryptocurrency is closer to 25%. The July survey gathered responses from 2,768 adult Australians and weighted the figures using Australian Bureau of Statistics estimates. The Australian Polling Council determined that this survey complied with the Australian Polling Council Code. However, neither survey can be accurate. Australia has a population of 25.69 million. This equates to roughly 4.37 million people, or 17% of the Australian population. Meanwhile, Swyftx accounts for 25% of the population, or approximately 6.42 million people.

The difference between the two estimates is just over two million people — more than South Australia's entire population. Additionally, the figures do not appear to be reflected on local platforms. Binance Australia told Cointelegraph that it had 700,000 users, Easy Crypto Australia estimated that it had around 15,000 users, and Swyftx reported that it had 470,000 users (many from overseas). BTC Markets claims to have over 330 000 Australian users, while Independent Reserve claims 200,000.

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