Exploring the transformation of value in the digital age By Michael J. Casey, Chief Content Officer Was this newsletter forwarded to you? Sign up here. |
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The fallout over the Treasury Department’s sanctions against Tornado Cash continued this week as crypto services scrambled to comply with the order. In this week’s column, I explore how this unprecedented move could unleash a more intense battle over privacy. This week’s podcast episode of “Money Reimagined” is also, of sorts, an exploration of privacy. My co-host Sheila Warren and I talk to the influential Web3 theorist Punk 6529 about his choice to go with a pseudonymous identity and how it has affected his interactions with people. Have a listen after reading the newsletter. |
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Launched in September 2017, KuCoin is a global cryptocurrency exchange with its operational headquarters in Seychelles. As a user-oriented platform with focus on inclusiveness and community action reach, it offers over 700 digital assets, and currently provides spot trading, margin trading, P2P fiat trading, futures trading, staking, and lending to its 20 million users in 207 countries and regions. In 2022, KuCoin raised over $150 million in investments through a pre-Series B round, bringing total investments to $170 million with Round A combined, at a total valuation of $10 billion. KuCoin is currently one of the top 5 crypto exchanges according to CoinMarketCap. Forbes also named KuCoin one of the Best Crypto Exchanges in 2021. In 2022, The Ascent named KuCoin the Best Crypto App for enthusiasts. |
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(Rachel Sun/CoinDesk) Severe tensions have been unleashed in cryptoland since Ethereum-based mixing service Tornado Cash was added to the U.S. Office of Foreign Assets Control’s (OFAC) specially designated nationals (SDN) list last week. But this is just the beginning. The move, which was prompted by allegations of North Korean hackers using the service, could set regulators on a collision course with privacy-seeking crypto users and with developers of the tools they use. One can imagine an intensifying clash enveloping crypto natives and mainstream users alike. That’s because there are many reasons to expect a continued, growing demand for privacy – from an array of people far wider than the narrow subset of undesirables OFAC is aimed at. Let’s start with one that’s fundamental to currencies’ role as a medium of exchange: fungibility. It shouldn’t matter which actual dollar you hold in your hand; it should be assigned the same value as any other dollar. A recipient can’t care which explicit unit of a currency he or she is handed. If money isn’t fungible like that, it can’t function. Privacy makes money money Privacy is a prerequisite for fungibility. If distinct money units have a transparent, publicly known history, then there’s a risk they will be valued differently. If a particular bitcoin or stablecoin was at some point flagged for passing through the hands of some SDN-listed person, company or software service, then people will discount its value or simply refuse to accept it. Goodbye fungibility. Last week, entrepreneur Maya Zehavi pointed out how, following the OFAC announcement, providers of crypto services started using on-chain analysis to block not only wallets that transacted directly with Tornado Cash, but also second-hop and third-hop wallets further down the chain whose mix of tokens was “tainted” by that up-chain association. Differing histories were now making certain tokens less desirable than others as they were at risk of being blocked. How might users protect themselves from unintended tainting? Zehavi argued they will have to obfuscate all transaction history leading to their wallet. How? With a non-banned mixing service. So, we can see how banning one mixer can fuel even more demand for replacement services and incentivize developers to create them. We can also see how it might create an accelerating cycle of bans on mixers and new ones popping up to replace them. (It’s worth noting, as a counterpoint, my colleague Dan Kuhn’s argument that anyone seeking to clone Tornado Cash’s open-source code has the difficult task of winning the community’s trust and avoiding government crackdowns.) Continue reading... |
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Off the Charts: Bitcoin’s Inconsistent S&P Correlation
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A midweek crypto sell-off accompanied one in equities as the minutes of the last Federal Open Markets Committee meeting suggested the Federal Reserve’s inflation hawks had the upper hand over doves. The tandem move was a reminder that, even as a recovery in crypto outpaced traditional markets this past month, these markets remain trapped in a tight correlation. But as you can see from this eight-year chart of bitcoin’s 60-day correlation with the S&P 500 index from CoinDesk’s Sage Young, this current state of high correlation is the exception, not the rule, in bitcoin’s history. The question now is whether the modest recent decline from all-time highs earlier in the summer starts to bring us closer to the uncorrelated norm of bitcoin’s past. |
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The Conversation: Battle of the Pseudonyms
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Welcome to the revamped “Conversation” – perhaps now more conversation starter than conversation. |
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In honor of this week’s guest on “Money Reimagined,” Punk 6529, we bring you this tweet, from a follower of Cobie, who like 6529 is an influential pseudonymous commentator on all things crypto. The podcast episode gets into how pseudonymity has a powerful effect on how we perceive commentary. So, this, from someone whose @DepecheNode handle is especially enticing to a Gen-Xer like me, seemed apt… |
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Relevant Reads: The Tornado Cash Fallout |
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See your idea for the next big thing through – meet with leading investors, vet service providers and meet fellow visionaries. Apply to become a presenter at the Investing in Digital Enterprises and Assets Summit today! |
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