More On Pig Butchering

Thankfully, pig butchering scams are getting attention. Three weeks after I posted Tracing The Pig Butchers, John M. Griffin and Kevin Mei posted How Do Crypto Flows Finance Slavery? The Economics of Pig Butchering:

Through blockchain addresses used by ‘‘pig butchering’’ victims, we trace crypto flows and uncover methods commonly used by scammers to obfuscate their activities, including multiple transactions, swapping between cryptocurrencies through DeFi smart contracts, and bridging across blockchains. The perpetrators interact freely with major crypto exchanges, sending over 104,000 small potential inducement payments to build trust with victims. Funds exit the crypto network in large quantities, mostly in Tether, through less transparent but large exchanges—Binance, Huobi, and OKX. These criminal enterprises pay approximately 87 basis points in transaction fees and appear to have recently moved at least $75.3 billion into suspicious exchange deposit accounts, including $15.2 billion from exchanges commonly used by U.S. investors. Our findings highlight how the ‘‘reputable’’ crypto industry provides the common gateways and exit points for massive amounts of criminal capital flows. We hope these findings will help shed light on and ultimately stop these heinous crimes.

Griffin & Wei Fig. 9

Their Figure 9 shows the flow of funds over time into the scammer's wallets at exchanges. This is how they estimated the $75.3B; their extremely conservative estimate is $35.1B, and their liberal estimate is $237.6B. Note the huge ~$45B increase from January 2021 to January 2023, partly driven by the cryptocurrency boom, and the slowing until January 2024. Presumably the ETF pump will accelerate the rate.

Below the fold, some commentary on this and other recent developments.

Petabit Optical Media?

Source

Sabine Hossenfelder does the good Dr. Pangloss proud in her report on A 3D nanoscale optical disk memory with petabit capacity by Miao Zhao et al. Their abstract claims that:

we increase the capacity of [optical data storage] to the petabit level by extending the planar recording architecture to three dimensions with hundreds of layers, meanwhile breaking the optical diffraction limit barrier of the recorded spots. We develop an optical recording medium based on a photoresist film doped with aggregation-induced emission dye, which can be optically stimulated by femtosecond laser beams. This film is highly transparent and uniform, and the aggregation-induced emission phenomenon provides the storage mechanism. It can also be inhibited by another deactivating beam, resulting in a recording spot with a super-resolution scale. This technology makes it possible to achieve exabit-level storage by stacking nanoscale disks into arrays, which is essential in big data centres with limited space.

Below the fold I discuss this technology.

Microsoft's Archival Storage Research

120

$38.7B

$0.320

693

$26.8B

$0.039

40

$0.65B

$0.016

Six years ago I wrote Archival Media: Not a Good Business and included this table. The argument went as follows:

• The value that can be extracted from data decays rapidly with time.
• Thus companies would rather invest in current than archival data.
• Thus archival media and systems are a niche market.
• Thus archival media and systems lack the manufacturing volume to drive down prices.
• Thus although quasi-immortal media have low opex (running cost), they have high capex (purchase cost).
• Especially now interest rates are non-zero, the high capex makes the net present value of their lifetime cost high.
• Archival media compete with legacy generic media, which have mass-market volumes and have already amortized their R&D, so have low capex but higher opex through their shorter service lives.
• Because they have much higher volumes and thus much more R&D, generic media have much higher Kryder rates, meaning that although they need to be replaced over time, each new unit at approximately equal cost replaces several old units, reducing opex.
• Especially now interest rates are non-zero, the net present value of the lower capex but higher opex is likely very competitive.

Below the fold I look into why, despite this, Microsoft has been pouring money into archival system R&D for about a decade.

Competition-proofing

Source

Apart from getting started in the midst of one of Silicon Valley's regular downturns, another great thing about the beginnings of Nvidia was that instead of insisting on the "minimum viable product" our VCs, Sutter Hill and Sequoia, gave us the time to develop a real architecture for a family of chips. It enabled us to get an amazing amount of functionality into a half-micron gate array; I/O virtualization, a DMA engine, a graphics processor that rendered curved surfaces directly, not by approximating them with triangles, a sound engine and support for game controllers. As I write, after a three decade-long history of bringing innovations to the market, Nvidia is America's third most valuable company.

I've written several times about how in pursuit of a quicker buck, VCs have largely discarded the slow process of building an IPO-ready company like Nvidia in favor of building one that will be acquired by one of the dominant monopolists. These VCs don't support innovation. Even if their acquisition-bound companies do innovate in their short lives, their innovations are rarely tested in the market after the acuisition.

Below the fold I discuss a new paper that presents a highly detailed look at the mechanisms the dominant companies use to neutralize the threats startups could pose to their dominance.

Clouds Over The Mines

In early December 2022 when I wrote skeptically about the economics of Bitcoin mining in Foolish Lenders the Bitcoin "price" was around $17K. It has now climbed 153% to around $43K and, below the fold, I am still posting skeptically about the economics of mining.

Tracing The Pig Butchers

"Vicky"

Chapter 18 of Zeke Faux's Number Go Up: Inside Crypto's Wild Rise and Staggering Fall is entitled "Pig Butchering". It starts when he receives a supposed wrong-number text from a "Vicky":

I showed my phone to my friend and explained that I was stringing Vicky along because I’d heard about a new kind of investment fraud that often started with a random text message. I had a hunch that this was why “Vicky” was texting me. The scam was called “pig butchering” because the scammers liked to build up the victim’s confidence with a pretend romantic relationship and made-up investment gains before stealing all their money in one fell swoop—like how hogs are fattened up before their slaughter.

This is a romance- and cryptocurrency-enabled version of the "Wee Forest Folk" scam we described in our 2003 SOSP paper.

Below the fold, I look into the details of pig-butchering scams, and how the tracing techniques I discussed in Criming On The Blockchain are being applied to identify the cryptocurrency companies facilitating it.

The Stanford Digital Library Project

The Stanford Digital Library Project stated its goal thus:

The Stanford Integrated Digital Library Project will develop enabling technologies for an integrated “virtual” library to provide an array of new services and uniform access to networked information collections. The Integrated Digital Library will create a shared environment linking everything from personal information collections, to collections of conventional libraries, to large data collections shared by scientists.

Stanford librarians Vicky Reich and Rebecca Wesley provided the "library" input for the research.

Wayback Machine, 11/11/98

In particular Vicky explained citation indices, the concept behind Page Rank, to Larry Page and Sergey Brin. Andy Bechtolsheim was famously instrumental in persuading them to turn their demo of a Page Rank search engine into Google, the company. In his fascinating interview in the Computer History Museum's oral history collection, Andy explains why the idea of ranking pages by their inbound links was so important.

Below the fold I have taken the liberty of transcribing and cleaning up the relevant section of Andy's stream of conciousness, both because it is important history and because it exactly reflects the Andy I was privileged to know in the early days of Sun Microsystems.