I know hardly anything about cryptocurrencies or the underlying blockchain structure but was under the impression that it was supposed to be very secure because the ‘ledger’ was widely distributed over many computers and thus hard to hack. But now we hear of yet another heist of cryptocurrency, this time for a whopping $1.5 billion.
North Korea was behind the theft of approximately $1.5bn in virtual assets from a cryptocurrency exchange, the FBI has said, in what is being described as the biggest heist in history.
…Describing this particular form of North Korean malicious cyber activity as “TraderTraitor”, the FBI on Wednesday warned that the virtual assets, stolen from ByBit, a Dubai-based crypto trading platform, would eventually be turned into currency.
“TraderTraitor actors are proceeding rapidly and have converted some of the stolen assets to bitcoin and other virtual assets dispersed across thousands of addresses on multiple blockchains,” said an FBI statement.
The bureau added that it expected the assets would be further laundered and eventually converted to fiat currency – a normal, government-backed currency that is not tied to commodities such as gold.
…Hackers linked to North Korea stole more than US$1.3bn in cryptocurrency in 2024 – then a record amount – according to a report published in late December. The thefts were spread out over 47 incidents, the blockchain analysis firm Chainalysis said, adding that the total was a dramatic jump from the $660m seized in 2023.
Why anyone would put money into this system beats me, unless it is a means of laundering money obtained illegally. In that case, the thieves are stealing from other thieves.
Of course, many of these cryptocurrencies advertised widely to ordinary people, especially during 2022 Super Bowl. But that quickly went south, with the collapse of FTX being the most spectacular. The following year saw no ads at all.
Cryptocurrency companies grabbed the spotlight during the 2022 Super Bowl, with commercials from a handful of newcomers to advertising’s biggest stage: FTX, Coinbase, Crypto.com and eToro. Some marketing experts dubbed it the “Crypto Bowl.”
A year later, the industry has been humbled by a massive downturn in crypto prices, as well as the bankruptcy of several well-known companies.
…Within 10 months of the Super Bowl, FTX was bankrupt. The Bahamas-based company collapsed after investors started pulling their deposits on concerns about the company’s balance sheet. The company filed for Chapter 11 bankruptcy protection on November 11 [2022].
FTX’s founder and CEO Sam Bankman-Fried was arrested and charged with defrauding customers out of billions of dollars.
And what about that other craze, NFTs? That too seems to have fizzled.
The allure of owning a piece of the internet took the world by storm in the early 2020s, with tech enthusiasts, celebrities, and even normal people spending real money to buy into the idea.
But with concerns about market saturation and copyright issues looming, some question whether the NFT craze has reached its peak. Is it time to reality time to hit pause on these pixel investments and think about their future?
…NFTs took the world by storm in 2021 following the success of NFTs like Bored Ape and Cyrptopunk, which at one point were selling for millions.
…In March 2021, digital artist Beeple (real name Mike Winkelmann) made history with the sale of his digital artwork titled “Everydays: The First 5000 Days” for a whopping $69.3 million at Christie’s auction house.
…The NFT hype cycle has well and truly died as of April 2024. The initial buying spree in 2021 was driven more by the potential for quick profits than by the actual value of the NFTs themselves. As the market became more crowded, the value of NFTs plummeted.
The value of NFTs is often tied to the value of cryptocurrency, especially Ethereum. As the crypto marketplace went through a downturn, so did the buying power for NFTs. This, paired with the decline of digital spaces like the metaverse, have meant that people simply are no longer interested in the digital token business.
Many NFTs purchased for high prices in 2021 are now worth a fraction of what they were originally sold for, with reports suggest that a large percentage of NFTs have become virtually worthless.
…While the initial frenzy surrounding NFTs has subsided, it would be wrong to declare them totally dead. Still, NFT sales have significantly dropped since their 2021 peak and many speculate that oversaturation may have killed off the non-fungible token business for good.
Although some NFTs have lost value, however, others continue to be valuable – particularly those with historical significance or strong communities. This suggests the underlying concept of digital ownership with NFTs might still hold weight.
According to the NFTEvening, in 2024, the NFT market has faced alarming trends, with 98% of 2024 NFT drops being dead, showing minimal market activity. Despite a surge in new NFT collections, only 0.2% of 2024 NFT drops generate investor profits. A staggering 64% of 2024 NFT drops have fewer than 10 minutes, and 98% see fewer than 10 trades in the first week, signalling poor liquidity.
Furthermore, 98% of 2024 NFT drops experience a price decline of at least 50% within the first three days, while 84% of drops reach an ATH price equal to the mint price, failing to sustain value over time.
People sure seem to have a lot of money to splurge on what seems to me to be highly speculative things that have all the signs of being bubbles.
…fiat currency – a normal, government-backed currency that is not tied to commodities such as gold.
Excuse me, but why is ANY sensible and honest person still calling normal Western floating-exchange-rate currency “fiat money?” That’s not what the word “fiat” means at all. We used to call Soviet-era commie-cash “fiat money” because official good prices and currency-exchange rates were literally set by state fiats. As soon as the USSR fell apart, libertarians and gold-buggers immediately started calling standard government-backed currencies “fiat money,” fully knowing they were using that word to mean almost the exact opposite of what it had meant before August 1991.
We should NEVER let known scammers and liars dictate how we use words.
Eh, current currencies are fiat currencies. The states may not set as much control over things as the USSR did, but the money still only has value because the state uses it and authorizes it’s use. The value only exists by state fiat
Anyway, we should know where all these stolen tokens went thanks to the blockchain so I’m sure they will be recovered and transferred back anytime now /s
Bullshit. That was never what the phrase “fiat money” was supposed to mean. “The state uses it and authorizes it’s use” is not even remotely close to “specific goods prices and exchange rates are officially set by the state.” (Just for starters, the first of those things is true of practically ALL forms of money, so calling such a wide variety of currencies “fiat money” makes the phrase meaningless.)
It’s not the state authorizing it’s use, it’s money that only has value because the state authorizes it’s use. As opposed to it deriving value from it’s precious metal content. And yeah it’s widely used currently, but that doesn’t make the category useless
It’s a usage in this sense seems to go back to the late 19th century as far as i can find (according to the oxford English dictionary)
Your usage is not remotely close to anything I can find. That’s price controls, central planning, ect
The blockchain itself is very secure. The problem, as with all cryptographic systems, is that it’s used by people, and people are not very secure. In fact, the entire crytpocurrency space seems to be infested with people who are really, really bad at cybersecurity. This particular hack appears to have been the result of a phishing attack which was able to take control of a machine hosting a wallet owned by the exchange. So the attack wasn’t against the ledger itself, just one of the endpoints using it.
However, the reason these attacks are so problematic comes down to other features of blockchains. By design, transactions are irrevocable -- which sounds great in theory, but in practice means that if a hacker is able to take control of your wallet and execute transactions using it, there is no way to reverse that. Also, blockchain transactions are pseudonymous, which can make them very difficult to trace, despite them being recorded on a public ledger.
Because it’s a highly volatile speculative asset. People look at the number today, and think “oh man, if only I’d bought some crypto last year, I could be rich by now!” And so they buy some crypto in the hope that the number will continue to go up. Lottery tickets, basically. Except it often turns out to be a lot harder to get your money out that it was to put it in, and there’s the ever-present risk of being hacked, scammed, or rug-pulled. (A rug-pull is where the founders or operators of a crytpo scheme or service run off with all the money.)
On the topic of NFTs:
The problem with this idea is that “the underlying concept of digital ownership with NFTs” is complete bullshit. It’s how NFTs were marketed, but it’s not actually what they do or how they work. When you buy an NFT, the only thing you own is the NFT itself -- i.e. a cryptotoken with an embedded link. Think of it as like the difference between actually owning the Mona Lisa, versus owning a cocktail napkin with the words “DaVinci’s Mona Lisa, @ The Lourve” written on it.
Whenever you see someone say something like this, you instantly know that they don’t actually understand what they’re talking about.
A few years ago I found NFTs being sold in a brick and mortar store. Seemed like a weird idea. There were pictures on the wall with QR codes attached. I wonder if you got to keep the physical picture as well?
OP:
Recently a whole load of podcast episodes from MSNBC (when I downloaded them here, anyway) had a “stablecoin” advert prefixed: one which is supposed to track the US dollar. Quite why NBC’s advertisers would think a UK person would be interested in buying a YewEss Dollerr for a little more than a US dollar, knowing that I could only sell it on for a little less than a US dollar… defeats me.
Ah, now I see. So my legit purchase of a stablecoin can be later transmuted to a volatile one and then another one and eventually I can spend it in North Korea and no-one will know or something.
I understand vaguely the basics of cryptcurrencies and block chains.
What I haven’t quite gotten is why they have any value.
At least with our national currency, the dollar, you can buy useful things like food and cars.
The ones I really don’t get are the meme coins like the Trump and Melania ones.
AFAICT, you don’t even get a real brass or copper coin shaped object to put somewhere.
All you have is a few 0s and 1s in a database somewhere.
I saw somewhere that meme coins are a good way to legally bribe people like…Donald Trump.
Shrug. These days it is a lot easier than that.
The head of the US Department of Justice is one of his partisan employees and he could fire her in a second and no one important would care.
dangerousbeans@4:
It’s not the state authorizing it’s use, it’s money that only has value because the state authorizes it’s use. As opposed to it deriving value from it’s precious metal content.
Yep — just as I suspected, a libertarian/goldbugger scam that portrays precious-metal-based money as the only “real money” and all other present-day currencies as “fiat money” — that tag being used as an epithet to imply that non-precious-metal-based currencies are “totalitarian,” “communist” or somehow “not real money,” even though everyone can see that they all serve quite well as such.
There are multiple layers of malicious deception going on in this sort of debate, and it’s been entrenched in people’s thinking for some time; so I understand how most people could be easily manipulated and misled.
First, precious-metal-based money does not automagically “derive value from it’s precious metal content.” That sounds like pure airheaded essentialism. In reality, coins are minted, and bills are printed, by order of a government, which/who legally declare “this is the coin of the realm” and decide how much metal to put in their coins, how much metal each paper bill is worth, and how many of each to mint/print each year. Which means that, by your usage of the phrase, precious-metal-based currencies are no less “fiat money” than today’s dollars, yen, euros, etc.
So, yes, the way you (and the libertarians and goldbuggers) are using that phrase, it is indeed meaningless at best, manipulative and dishonest at worst.
And second, states do not explicitly set the value of their currencies — even with state backing, their value (as expressed in goods prices and currency-exchange rates) can fluctuate a lot. So again, that’s not “fiat money.”
There can, of course, be situations where large numbers of people use bits of gold or silver, rather than state-minted money, to do business — but again, the value of such bits doesn’t objectively “derive” from the metal itself, but can vary a lot due to all manner of circumstances (starting with the supply of metal bits in circulation). And the lack of state backing does not necessarily make such bits more “real” or better as media of exchange.
And the libertarian deception continues with their blithering praise of crypto (which comes from the same people who had earlier insisted that gold-based currency was the only “real money” with “real value” — just another indicator of how willfully stupid libertarians are). In the new narrative, crypto is “real” because it’s created independent of any big-gummint interference or regulation — as opposed to ordinary state-backed currencies, which are now labelled “fiat money” to pretend — contrary to obvious and verifiable reality — they they are worthless, useless, and tools of evil big gummint to take away our libbidy.
Your usage is not remotely close to anything I can find.
What, you never read anything about Soviet economic issues in the ’70s and ’80s? Or was that before your time? There were huge differences between how Western “hard currencies” worked and how commie-cash worked; those differences derived from the literal state fiats that Soviet-bloc countries set for their market prices and exchange rates, which did not happen with Western currencies. And that is why Soviet-bloc currencies were called “fiat money” and Western currencies were not. The usage of the phrase was based on the actual meaning of the word “fiat,” and the distinction reflects a REAL difference that was widely known and discussed (including the very lucrative (and violent) black markets that flourished between official (fiat) exchange rates and unofficial rates).
Your misuse of the phrase “fiat money” is deceptive and manipulative, whether or not you so intend. We all need to do our part to call out and stop the relentless distortion of our language by manipulative pond-scum. Newspeak is always bad, whether it comes from the private or public sector.
I understand vaguely the basics of cryptcurrencies and block chains. What I haven’t quite gotten is why they have any value.
I hear they can be useful as actual currency, especially for international business, to avoid having to convert from one national currency to another. Then again, I also hear that many of the international businesses using crypto are illegal.
The ones I really don’t get are the meme coins like the Trump and Melania ones.
Those are neither useful currencies nor investment/speculation vehicles. They’re just a new and sorta-fancy way to solicit and receive bribes. If you buy one of those things, chances are you’re doing it to give Trump money without it looking like a bribe. (And that’s why it would be a crappy investment: you can’t resell it to someone else, because he’d be buying it to give money to Trump too, and you’re not Trump.)
The value in crypto is easy to see but the answer isn’t pretty. Bubbles have value until they pop. It’s a slow burn pump and dump, and This Is Fine. At least if you buy into the hype.
If you actually look at how it’s supposed to work you can easily realize that at no point in the entire process is there ever any real value injected into the thing. The entire value is simply “some other rube will buy this from me for more money than I put into getting it.” In a very real way, children selling mud pies to each other and paying with dandelions has more inherent value than any crypto could ever have. Much like NFTs, crypto is trying to copy the way collectibles work but there’s no actual collectible. Not even a cheap token.
Blockchain as a concept definitely has some value; think of it as a tamper-proof revision control system, where you can keep track of all the changes made. There are still issues, of course: either the blockchain itself has to have some form of authority controlling it, or it has to be so widespread and public that any attempts to ‘fork’ the blockchain by going back to a previous version and creating other changes instead will be caught out immediately. As an example of the latter, it was known from right back at the creation of BitCoin that if anybody had control of half the existing BitCoins they could essentially control the BitCoin economy because they’d have more copies of the blockchain than anybody else. (Later work downgraded that to only needing to control one third to at least throw the system into complete confusion.)
Cryptocurrencies in general are essentially a form of currency that isn’t really significantly less real than modern un-backed paper currency: they’re worth what people are willing to use them for. Without a central government, though, there’s nothing to even attempt to provide stability. This is not helped by the fact that the people who first got involved included a lot of gold-bugs, conspiracy theorists, criminals actively attempting to abuse the system, and tech-bros convinced they had found the key to riches and that they were smarter than everybody else, and so many of the people involved didn’t see any reason to want stability.
NFTs… well, the best simple description of NFTs I’ve heard is this. You’re familiar with DRM, Digital Rights Management? Basically a way of providing a lock on content to prevent unauthorized use. Most people prefer DRM-less content so they can do what they want with it. NFTs are content-less DRM. They’re a lock on a glass door standing in the middle of the room unconnected to any walls. They’re a receipt to prove you bought something even though you’ll never really have access to it.
Sure but it doesnt matter how secure say a Banks database is if you share your bank account password with the distressed Nigerian princess (or really click a link in their email). I think Dan Olson’s line goes up had an entire section on why crypto doesnt solve the problems that it claims it does and doesnt do the stuff people expect from any payment system at all . And Molly White keeps a running grift counter at https://www.web3isgoinggreat.com/ (currently 72.8 Billion!)
You nailed it. Crime is the main use case for crypto.
Cryptocurrencies in general are essentially a form of currency that isn’t really significantly less real than modern un-backed paper currency: they’re worth what people are willing to use them for. Without a central government, though, there’s nothing to even attempt to provide stability…
I once saw an article in the Economist about the possibility of “govcoins” — cryptocurrencies created and managed by national governments. That would, at least in theory, give you the benefits of crypto (whatever those are) with the (relative) stability of national-government backing and monetary policy. What I found really weird about this idea was the total lack of public reaction to it. Opponents of crypto probably hated it, and the crypto bros probably considered it HERESY and didn’t dare talk about it because they knew it was a better idea than what they want to sell us.
@Raging Bee
The one use case I’ve heard of where there might be some benefit to “govcoins” is for the un-banked. There are already supposed US Dollar backed “stablecoins”, but because the market is so unregulated, they generally don’t actually prove that their coins are fully backed by cash reserves. And most places still don’t accept it as payment. The government could probably solve both problems by guaranteeing its value, accepting it as payment, and providing incentives for others to accept it as payment. The question is whether the un-banked would really choose this as an option instead of cash, and outside of that application I just don’t see much benefit to anyone. Of course Crypto bros hate it because they’re a bunch of libertarian nutters, and it doesn’t help with any of their crypto grifts. I suspect the lack of public reaction is that the only people it might help are a rather small and marginalized group, who are probably unaware of the concept, and might not care about it anyway.
DrVanNostrand: What kind of people are un-banked, and why? IANAE, but I’m gonna guess offhand that they’re un-banked because they don’t have enough money, or access to money, to be able to open bank accounts. Or maybe that they’re victims of discrimination by banks. Either way, they have limited access to money, so they’re not likely to be able to afford whatever hardware and software they’d need to access govcoins, stablecoins, or any sort of crypto. (And how would I give crypto to a homeless person?) So yeah, a small and marginalized group (that no one who writes for the Economist is likely to care about).
PS to lanir @11: I’m totally stealing the second paragraph of your comment. Absolutely pure ECON 101 gold!
@Raging Bee
My understanding is the un-banked mostly fall into two groups. People who lack stable permanent addresses or proper identification documents. And people who have problematic financial history, e.g. history of overdrawn accounts, outstanding debts, extremely poor credit. It’s probably cheaper and easier for them to get a smart phone than actually fix deeper financial issues. But as I said, I still doubt most of the un-banked would prefer digital currency to their existing solution, which is simply cash.