One big idea in cryptocurrencies is attempting to achieve decentralization through "governance tokens" whose HODLers can control a Decentralized Autonomous Organization (DAO) by voting upon proposed actions. Of course, this makes it blindingly obvious that the "governance tokens" are securities and thus regulated by the SEC. But even apart from that problem recent events, culminating in "little local difficulties" for Tornado Cash, demonstrate that there are several others.
Below the fold I look at these problems.
I'm David Rosenthal, and this is a place to discuss the work I'm doing in Digital Preservation.
Tuesday, May 30, 2023
Tuesday, May 23, 2023
Fractional Reserve Crypto-Banking
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Nakamoto's goal for Bitcoin was:
What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.Below the fold I examine how this earliest cryptocurrency story changed.
Thursday, May 18, 2023
Lies, Damned Lies, & A16Z's Statistics
This post is a quick shout-out to two excellent pieces documenting the corruption of the venture capital industry:
- Molly White's Narrative over numbers: Andreessen Horowitz's State of Crypto report
- Matt Levine's Crypto Had Its Bank Runs Too
Thursday, May 11, 2023
Flooding The Zone With Shit
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Tom Cowap CC-BY-SA 4.0 |
My immediate reaction to the news of ChatGPT was to tell friends "at last, we have solved the Fermi Paradox"[1]. It wasn't that I feared being told "This mission is too important for me to allow you to jeopardize it", but rather that I assumed that civilizations across the galaxy evolved to be able to implement ChatGPT-like systems, which proceeded to irretrievably pollute their information environment, preventing any further progress.
Below the fold I explain why my on-line experience, starting from Usenet in the early 80s, leads me to believe that humanity's existential threat from these AIs comes from Steve Bannon and his ilk flooding the zone with shit[2].
Thursday, May 4, 2023
The Cryptocurrency Use Case
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Paul Le Roux By Farantgh - Own work |
One of the (many) times I have been heckled during a panel on crypto was when I argued that it shouldn’t be thought of as money. The only reason to use it other than for speculation, I said, was to buy drugs on the internet. This was a preposterous idea, the heckler retorted; crypto is used for so much more than that.and ends:
So in a funny way, my heckler was right: crypto isn’t just used for speculating on and buying drugs on the internet: it’s used for much murkier criminal activities, too.Below the fold I discuss the details of the "murkier criminal activities".
Thursday, April 27, 2023
Crypto: My Part In Its Downfall

Below the fold is the text, with links to the sources.
Labels:
bitcoin,
copyright,
intellectual property,
metastablecoins,
personal
Thursday, April 20, 2023
Red Team Blues

The first thing to catch my eye was the dedication to the late, great Dan Kaminsky, a fellow attendee of the Asilomar Microcomputer Workshop and someone I admired.
It is an engrossing read. The action moves swiftly, the plot requires little suspension of disbelief and has plenty of twists to keep you thinking. The interesting parts are the details about how people and their money can be tracked, and how people with a lot can prevent it being tracked. Doctorow gets to cover many of his favorite themes in a fast-moving story about a character approaching retirement. I'm well past that stage, but I understand some of those issues.
The story ends happily because all the bodies that pile up are bad guys. This is necessary since this is apparently the first in a series. I'll definitely read the next one.
You don't need to understand blockchains and cryptocurrencies to enjoy the story, but I do so, below the fold, I can't resist picking some nits with the technical details.
Thursday, April 13, 2023
Compute In Storage
Tobias Mann's Los Alamos Taps Seagate To Put Compute On Spinning Rust describes progress in the concept of computational storage. I first discussed this in my 2010 JCDL keynote, based on 2009's FAWN, the Fast Array of Wimpy Nodes by David Anderson et al from Carnegie-Mellon. Their work started from the observation that moving data from storage to memory for processing by a CPU takes time and energy, and the faster you do it the more energy it takes. So the less of it you do, the better. Below the fold I start from FAWN and end up with the work under way at Los Alamos.
Tuesday, April 4, 2023
How Bubbles Are Blown
Last October I wrote Non-Fungible Token Bubble Lasted 10 Months. The NFT market is still dead, a fossil relic of a massive wave of typical cryptocurrency pump-and-dump schemes and wash trading. But the great thing is that this all happened on a public blockchain, so data palaeontologists have an unrivalled dataset with which to unearth the inner workings of a speculative bubble.
Bryce Elder's What NFT mania can tell us about market bubbles points us to NFT Bubbles in which Andrea Barbon and Angelo Ranaldo do just that. Their abstract states:
Bryce Elder's What NFT mania can tell us about market bubbles points us to NFT Bubbles in which Andrea Barbon and Angelo Ranaldo do just that. Their abstract states:
Our study reveals that agent-level variables, such as investor sophistication, heterogeneity, and wash trading, in addition to aggregate variables, such as volatility, price acceleration, and turnover, significantly predict bubble formation and price crashes. We find that sophisticated investors consistently outperform others and exhibit characteristics consistent with superior information and skills, supporting the narrative surrounding asset pricing bubbles.Below the fold I discuss the details.
Tuesday, March 28, 2023
Two Great Reads
This post is to flag two great posts by authors always worth reading, both related to the sad state of the venture capital industry upon which I have pontificated several times:
- Molly White's The venture capitalist's dilemma.
- Fais Khan's Zero Knowledge Influencer: Are ZKPs Worth the Hype?.
Thursday, March 16, 2023
More Cryptocurrency Gaslighting
Ignacio de Gregorio is a "crypto expert" with 8.5K followers on Medium and he's worried. In The one word that can kill Crypto is back he discusses the New York Attorney General's suit agains KuCoin and, once again, demonstrates how gaslighting is central to the arguments supporting cryptocurrencies. Below the fold I point out the flaws in his argument.
Thursday, March 9, 2023
C720 Linux Update
- 2014's A Note of Thanks,
- 2017's Travels with a Chromebook,
- and 2021's Chromebook Linux Update
I was becoming a little concerned by the fact that the 5.0-series kernel I was stuck with was getting long in the tooth. So as an experiment I wiped C720 #3 and:
- Installed Mint 21.1 from scratch with LVM and full-disk encryption.
- Installed Mint 21.1 from scratch without full-disk encryption and with encrypted home directory, and updated to the current 5.15.0-67 kernel.
Tuesday, March 7, 2023
On Trusting Trustlessness
Nearly five years ago some bad guys used "administrative backdoors" in a "smart contract" to steal $23.5M from Bancor. In response I wrote DINO and IINO pointing out a fundamental problem with "smart contracts" built on blockchains. The technology was sold as "trustless":
Now, in response to some good guys using an "unknown vulnerability" in a smart contract to recover $140M in coins looted in the Wormhole exploit, Molly White wrote The Oasis "counter-hack" and the centralization of defi on the same topic. Below the fold, I comment on her much better, much more detailed discussion of the implications of "smart contracts" that can beupgraded arbitrarily changed by their owners.
A major misconception about blockchains is that they provide a basis of trust. A better perspective is that blockchains eliminate the need for trust.But the "smart contracts" could either be:
- immutable, implying that you are trusting the developers to write perfect code, which frequently turns out to be a mistake,
- or upgradable, implying that you are trusting those with the keys to the contract, which frequently turns out to be a mistake.
Now, in response to some good guys using an "unknown vulnerability" in a smart contract to recover $140M in coins looted in the Wormhole exploit, Molly White wrote The Oasis "counter-hack" and the centralization of defi on the same topic. Below the fold, I comment on her much better, much more detailed discussion of the implications of "smart contracts" that can be
Tuesday, February 28, 2023
The Center For Gaslighting About Blockchains
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A year later I am laughing as I read Francesca Maglione’s Princeton Says Crypto Chaos Helps Justify Its Blockchain Center describing their desperate attempts to spin this as a good move. Below the fold I pour scorn on this outbreak of "blockchain is the answer, now what was the question?".
Tuesday, February 14, 2023
Sybil Defense
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- It ignores the fact that decentralization isn't binary, it is a spectrum. Systems claiming decentralization can be characterized by their "Nakamoto coefficient":
The number of entities sufficient to disrupt a blockchain is relatively low: four for Bitcoin, two for Ethereum, and less than a dozen for most PoS networks.
This number varies through time, but for both is almost always between two and five, which is not very "decentralized". Given that the "entities" in question are known to coordinate their behavior off-chain, this number doesn't tell you anything useful about the system. - What calling a system "decentralized" even though it actually isn't does usefully do is to inhibit regulation. It creates the false impression that responsibility for the state and actions of the system is so diffuse that regulators lack a viable traget.
There is a much more useful, completely objective criterion. Participation in a system either is, or is not subject to permission from some authority, and this can be confirmed by the experiment of trying to participate without asking permission.
Permissionless systems can claim some advantages, but they suffer from some serious disadvantages. Chief among them is the need to defend against "Sybil attacks". Below the fold I discuss Sybil attacks, the defense against them, and the implications for the systems that adopt this defense.
Tuesday, February 7, 2023
Economic Incentives

Permissionless systems are less efficient, slower, and vastly more expensive to set up and operate than permissioned systems performing exactly the same task. One would think that the permissioned systems would out-compete them, but in the cryptosphere they don't. Below the fold I attempt to answer the following obvious questions:
- Why are permissionless systems more expensive?
- How large is the investment in avoiding the need for permission?
- Where does the return on this investment come from?
- How large is the return on this investment?
the common meaning of ‘decentralized’ as applied to blockchain systems functions as a veil that covers over and prevents many from seeing the actions of key actors within the system.
Thursday, January 26, 2023
Regulatory Capture In Action
On January 20th, SEC Commissioner Hester Peirce gave a long speech at Duke University entited Outdated: Remarks before the Digital Assets at Duke Conference essentially arguing against doing her job by regulating cryptocurrencies.
Below the fold I point out how she is shilling for the cryptosphere, with a long list of excuses for inaction.
Below the fold I point out how she is shilling for the cryptosphere, with a long list of excuses for inaction.
Tuesday, January 10, 2023
Binance's Time In The Barrel
The bulk of last month's Dominoes was about Binance, the dominant unregulated cryptocurrency exchange, and the risk that in the wake of FTX's collapse it might be the next victim of cryptocurrency contagion. Just as happened with FTX, once the media picked up on reports of problems, further stories came thick and fast. So below the fold are updates on two of the problems facing Binance.
Thursday, January 5, 2023
Matt Levine's "The Crypto Story": Postscript
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