BlackRock Plans to Offer Crypto Trading

The biggest crypto news and ideas of the day

Feb. 10, 2022

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Welcome to The Node.

In today's newsletter: Fitch has downgraded El Salvador's credit rating. BlackRock will offer investor clients crypto. And ransomware pay outs hit an all-time high in 2021.

Questions? Feedback? We'd love to hear from you – simply reply to this email.

–Daniel Kuhn

Today's must-reads

Top Shelf

INSTITUTIONS ARE COMING: BlackRock, the world's largest asset manager, is preparing to offer a cryptocurrency trading service to its institutional investor clients, according to three knowledgeable but unnamed sources. The New York-based company, which manages over $10 trillion in assets, would allow clients to borrow from BlackRock by pledging crypto assets as collateral. The company also has plans to launch the iShares Blockchain and Tech ETF, an exchange-traded fund, and owns 16.3% of MicroStrategy, the bitcoin-holding software firm.

BUYING INFLUENCE: Binance invested $200 million in Forbes, as the legacy publisher looks to go public on the New York Stock Exchange through a merger with Magnum Opus. Patrick Hillmann, chief communications officer at Binance, and Bill Chin, head of Binance Labs, will join the Forbes board upon the closure of the combined transaction, which is expected in the first quarter. In 2020, Binance sued Forbes for defamation but ultimately dropped the suit.

NFT GAMING: Zynga, the gaming company that achieved massive success through Facebook-based social games like Farmville, is building out its blockchain team and readying the launch of its first NFT games. The move is a bit of "future proofing," and may also lead to "alliances, partnerships and potential acquisitions" this quarter, a Zynga vice president said.

DOWNGRADED: Ratings agency Fitch has downgraded El Salvador's long-term foreign currency issuer default rating (IDR) to CCC from B- weeks before the country starts issuing its bitcoin bond. The $1.2 billion bond, which would pay a 6.5% coupon (compared to the 13% benchmark 10-year yield on El Salvador's existing bonds) is essentially a "long" position on bitcoin. Fitch's downgrade reflects "heightened risk stemming from increased reliance on short-term debt, limited scope for additional local market financing, uncertain access to additional multilateral funding and external market financing given high borrowing costs."

HIGH RANSOM: The average size of ransomware payments hit an all-time high in 2021, according to a new report by blockchain research firm Chainalysis. The average ransomware payment size reached $118,000 in crypto, up from $88,000 in 2020. In 2019, the average ransomware payment was only $25,000. Chainalysis research lead Kim Grauer attributes this jump to the growing sophistication of ransomware groups, the growth of "ransomware as a service" (RaaS) and potentially state-sanctioned attacks.

LEGAL THREAT: The EOS Network Foundation, the organization set up to support the development of the EOS ecosystem, is considering legal action against estranged parent Block.one, seeking $4.1 billion in damages – the amount it raised in its 2018 initial coin offering. The foundation has hired a Canadian law firm to investigate Block.one, which critics allege has failed to deliver on promises of building out blockchain and since refocused its attention on a Peter Thiel-backed crypto exchange.

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What others are writing...

Off-Chain Signals

Trevor McFedries Tells Jordan Wolfson About a New Kind of Internet (Interview Magazine – Andy Worhal's old joint!)
Satoshibles Is First NFT Collection to Bridge Between Ethereum and Bitcoin via Stacks (Decrypt)
Twitter's newly minted CEO had praise for the Web3 and broader crypto community on Twitter's Q4 earnings call (Decrypt)
YouTube sees 'incredible potential' in Web3 and NFTs (The Block)
New Hampshire governor establishes new commission to study crypto (The Block)
Elliptic Analysis: Russia Seizes Four Major Dark Web Carding Sites with $263 Million in Crypto Sales (Elliptic)
Gnosis Votes on Whether to Spin Out DeFi Infrastructure Project as Independent DAO (The Defiant)
Wealthy NFT Owners Are Taking Out Loans Backed by Bored Apes, CryptoPunks (Blockworks)
Tennessee lawmaker introduces bill which would allow state to invest in crypto (Cointelegraph)

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Putting the news in perspective

The Takeaway

The Hard Truth About Being an 'Anon'

Here's one take on formerly anonymous figures in the crypto world being publicly revealed: The two founders of the Bored Ape Yacht Club (BAYC) weren't "doxxed" by BuzzFeed News. In fact, they doxed themselves.

Last week, the crypto community was embroiled in a debate about journalistic ethics and the right to remain anonymous online. This came after BuzzFeed News senior technology reporter Katie Notopoulos published the real names, along with some publicly available information, of "Gordon Goner" and "Gargamel," two pseudonymous co-founders of arguably the most successful NFT (non-fungible token) project to date.

Notopoulos reportedly first identified Greg Solano through publicly available documents related to Yuga Labs, the company behind BAYC, which is incorporated in Delaware. Solano has chosen the name "Gargamel." Additional documents linked Solano to Wylie Aronow, aka "Gordon Goner."

You can decide for yourself whether this is newsworthy information. Notopoulos reasoned that the public has the right to know the real men behind this cultural storm. BAYC has licensing deals, and it has a lot of rich and powerful members as well as a reported cash injection on the way from venture capital firm Andreessen Horowitz, according to Axios, valuing the firm at $5 billion.

The project may have a high valuation, but it's also just a social club built around crudely drawn cartoon apes. It's a side project of two unassuming writers that went faster and further than anyone expected it to. There's a good conversation to be had around doxing, especially in this instance.

Yet, as it stands, Solano doxed himself. He signed a document that was then made publicly available. He signed that document because he wanted to legitimize Yuga Lab's operations – and to do that, there are certain prerequisites in U.S. law.

Solano and Aronow could have chosen to keep BAYC as a widely successful NFT experiment, and their identities secure. But they signed incorporation documents because there was a fortune to be made. It was in that moment of choice that the BAYC founders doxed themselves, forfeiting their right to privacy and secrecy.

Now listen ye anons, I believe – along with my employer, which has a policy of respecting sources' pseudonyms – that your identities are valid. That there is a general right to remain unknown, that pseudonymous celebrities may be trustworthy (within reason) based solely on the reputations they build. But if you must remain unknown, then you must also do everything you can to ensure that. No one is assisting you here.

Crypto is an adversarial environment. Reporters are paid to bring private details to light. Competitors want your business secrets. The public has an unquenchable thirst for gossip. Scammers want to scam you, and knowing your secrets is leverage.

0xngmi, the pseudonymous founder of DefiLlama, a data aggregator, grasps this. Last weekend, in the midst of public debate about doxing, he put out a "bug bounty" on himself (though I don't know his gender). "If anyone DMs me with my real identity along with an explanation of how you found it I'll send you 1 ETH," he tweeted.

The goal was clear: to wrap up any loose ends related to his alter ego. DefiLlama has surged in popularity, and it's likely 0xngmi's reputation will become more valuable alongside it.

"The main reason for it was that I saw how BAYC founders got doxxed through company incorporation records," 0xngmi told CoinDesk in a direct message. The simple fact is, no matter how careful you think you are, you have likely made mistakes. So often in life we find that other people know us better than we know ourselves.

0xngmi said that 178 people took up his offer, claiming they found his identity. Most made erroneous assumptions – the closest someone got was "an approximation of my timezone," he claims. Someone else managed to dox another team member of DefiLlama and received the ETH bounty.

0xngmi has since closed the effort, because people started "spamming" his friends looking for useful information, which he said "bothers people." An important aspect of OPSEC, or operational security, is knowing where other people look. And even if there is no guarantee 0xngmi's identity is secure, it might bring a little peace of mind having 178 examples of how people think.

This is a problem 0xngmi has been considering for a long time. Last summer, he led an open-source effort to write "a guide on how to stay anon." It's a detailed document based on a lot of "trial and error," he said.

Interestingly, the first step is to think about the "online persona you'd want to be perceived, remembered and recognized] by," he said. His own fake name is a combination of 0x, which is the address prefix used by many other anons, and ngmi, which stands for not going to make it. It's "self-deprecating."

Obviously, 0xngmi has a desire to fit in – perhaps to blend in. It's easy to spin up an alter ego, harder to sustain it and even harder to build trust as an "anon." And if you want to have true influence, it'll be a difficult choice between protecting your identity and leveraging your real-life connections – even in crypto where the practice is normalized.

"For me going anon meant a reset to 0. I had been building in crypto for some time, and when I went anon, that meant I had to start from zero, losing all the work I had put into my reputation, relationships, past work and studies," Oxngmi said. "People will trust you less, since the cost of doing something bad is lower for anons and we might be hiding something (eg: ex-convicts or ex-scammers)," he added.

Difficult though it may be, 0xngmi suggested there is something of an ethical imperative to going dark. It ties into crypto's resistance to standards and practices like "know your customer" and anti-money-laundering regulations, which require users to identify themselves to perform basic financial tasks that would be wholly legal if using physical cash.

"Blockchains flip that [model] on its head. You have your money and you can use it any way you want, whether that be by putting it on straight up ponzis, buying worthless coins, or farming on some protocol with an anon founder that could rug the whole thing," Oxngmi wrote in a blog reflecting on BAYC.

To some extent, crypto is playing by a new set of rules. It stands opposed to corporate and government power in trying to give people the ability to interact directly in a peer-to-peer fashion. It's sold out a bit – giving an inch here and there for profits. It's embedded in existing power relations, surrounded by rule-makers. It's been forced to capitulate, sometimes.

Not everyone is playing by crypto's rules. Why would you expect otherwise? If you want to be anonymous, then you must cover your tracks. Rules were meant to be broken, afterall.

–Daniel Kuhn

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