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Terra’s Crypto Meltdown Was Inevitable

Terra’s Crypto Meltdown Was Inevitable

At a Mexican restaurant in North London a few weeks ago, a handful of small-time but remarkably discerning retail cryptocurrency investors predicted that terra and luna would crash. Several of them were scoffing at terra, or UST, a stablecoin whose price equivalence to the dollar is underpinned by algorithms and game theory rather than cash or collaterals, and at the notion that it would maintain its peg in the long run.

The “Ponzinomics” of the project, they informed me, were just too risky. Only one of the investors seemed optimistic, out of nihilism rather than trust in terra’s solidity: He said that at some point UST’s price would grow well above one dollar per unit, and the coin’s promoters would decide to just keep it there and rebrand the stablecoin as an “inflation-resistant cryptocurrency dollar.” Another shrugged but conceded that all bets were off. “So far,” he said, “this story has always followed the most humorous timeline.”

You can bet a lot of people do not feel like laughing today. UST has lost its peg to the dollar (at the time of writing, you can buy it on cryptocurrency exchanges for $0.58), and its sister asset luna has plummeted from $82 last week to $0.02. A big chunk of the investment of around $60 billion in these cryptocurrencies was pulverized overnight, and more of it will follow as people scramble to get rid of their diminished coins.

Meanwhile this week, the wider crypto market is in turmoil as bitcoin fell to $27,000 after bleeding 8 percent of its value in 24 hours, and many other cryptocurrencies are trailing its descent. Tether, the world’s largest stablecoin, dropped under $1 on Thursday.

With terra, we are witnessing the crumbling of a project predicated on the notion that you can create money—and assign it a specific value—if people are willing to go along with the pretense that money has the value that crypto companies assign it, akin to role-playing in a video game.

A small subsection of hardline crypto believers would retort that in the age of post-gold-standard fiat money, most currencies are indeed just a collective delusion. But the fact is that there is no government, central bank, economy, or actual usage underpinning terra matters. As Frank Muci, a policy fellow at the London School of Economics’ Growth Lab Research Collaboration, puts it, “It is similar to a bank run, except it’s a run on nothing.”

UST was marketed to the public as a stablecoin, a type of cryptocurrency whose value supposedly remains steady over time, creating a convenient edge against the wild price fluctuations of other cryptocurrencies like bitcoin or ether. With most stablecoins, that stability is guaranteed by currency reserves—whoever creates a stablecoin pegged against the dollar should theoretically keep an equivalent amount of dollars in a vault somewhere—or other collateral, including crypto. Except UST is an “algorithmic stablecoin” and has none of that. It is fully shielded from the real world, and takes pride in it.

Wikipedia Editors Are Ready to Stop Accepting Crypto Donations

Wikipedia Editors Are Ready to Stop Accepting Crypto Donations

More than 200 longtime Wikipedia editors have requested that the Wikimedia Foundation stop accepting cryptocurrency donations. The foundation received crypto donations worth about $130,000 in the most recent fiscal year—less than 0.1 percent of the foundation’s revenue, which topped $150 million last year.

Debate on the proposal has raged over the last three months.

“Cryptocurrencies are extremely risky investments that have only been gaining popularity among retail investors,” wrote Wikipedia user GorillaWarfare, the original author of the proposal, back in January. “I do not think we should be endorsing their use in this way.”

GorillaWarfare is Molly White, a Wikipedian who has become something of an anti-cryptocurrency activist. She also runs the Twitter account “Web3 is going just great,”which highlights “some of the many disasters happening in crypto, defi, NFTs, and other web3 projects,” the account profile says.

In her proposal for the Wikimedia Foundation, GorillaWarfare added that “Bitcoin and Ethereum are the two most highly used cryptocurrencies, and are both proof-of-work, using an enormous amount of energy.”

According to one widely cited estimate, the Bitcoin network consumes around 200 terrawatt-hours of energy per year. That’s about as much energy as is consumed by 70 million people in Thailand. And it works out to around 2,000 kilowatt-hours per Bitcoin transaction.

Bitcoin defenders countered that the currency’s energy usage is driven by its mining process, which consumes about the same amount of energy regardless of the number of transactions. So accepting a given donation in bitcoin won’t necessarily increase carbon emissions.

But critics argued that Wikimedia’s de facto endorsement of cryptocurrencies may help to push up their price. And the higher the value, the more energy miners will devote to creating new coins.

Crypto skeptics pointed out that people can easily convert their bitcoins to dollars before donating. But US tax law gives advantages to those who donate an asset directly to a charity.

Cryptocurrency defenders also pointed out that some people can’t easily access conventional banking services.

“Bank transfers, credit cards, and PayPal are inaccessible for millions of people who don’t have government ID and therefore can’t open an account,” wrote Wikipedia user AnarkioC. “They don’t allow anonymous or pseudonymous donations (could be risky depending on your personal situation); and they can easily be surveilled and censored.”

Growing Controversy Over Cryptocurrency

Ultimately, 232 longtime editors of Wikipedia voiced support for ending cryptocurrency donations, while 94 opposed the move.

Votes like this aren’t binding on the Wikimedia Foundation. Legally speaking, the foundation is independent of the Wikipedia community and doesn’t necessarily have to act on its requests.

In a January comment, foundation spokesman Greg Varnum said, “Our teams will continue to follow this discussion and listen to the feedback; we are already considering what has come up here as we determine our path forward.”

We’ve asked the Wikimedia Foundation to comment on the vote and will update this story if we get a response.

If the foundation complies with the community’s request, it wouldn’t be the first organization to stop using cryptocurrencies due to environmental concerns. Earlier this month, the Mozilla Foundation announced it would stop accepting cryptocurrencies that use the energy-intensive proof-of-work consensus process. These include bitcoin and ether—though the latter is expected to convert to a proof-of-stake model in the future.

Last year, Elon Musk announced that Tesla would no longer accept bitcoin payments to buy Tesla vehicles. The announcement came just two months after Tesla started accepting bitcoins for Teslas.

The gaming company Steam stopped accepting bitcoin in 2017, citing the network’s transaction fees, which were then near record highs.

This story originally appeared on Ars Technica.


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I Finally Reached Computing Nirvana. What Was It All For?

I Finally Reached Computing Nirvana. What Was It All For?

Like many nerds before me, I spent a goodly portion of my life searching for the perfect computing system. I wanted a single tool that would let me write prose or programs, that could search every email, tweet, or document in a few keystrokes, and that would work across all my devices. I yearned to summit the mythic Mt. Augment, to achieve the enlightenment of a properly orchestrated personal computer. Where the software industry offered notifications, little clicks and dings, messages jumping up and down on my screen like a dog begging for a treat, I wanted calm textuality. Seeking it, I tweaked. I configured.

The purpose of configuration is to make a thing work with some other thing—to make the to-do list work with the email client, say, or the calendar work with the other calendar. It’s an interdisciplinary study. Configuration can be as complex as programming or as simple as checking a box. Everyone talks about it, but it’s not taken that seriously, because there’s not much profit in it. And unfortunately, configuration is indistinguishable from procrastination. A little is fine but too much is embarrassing.

I spent almost three decades configuring my text editor, amassing 20 or so dotfiles that would make one acronym or nonsense word concordant with another. (For me: i3wm + emacs + org-mode + notmuch + tmux, bound together with ssh + git + Syncthing + Tailscale.) I’d start down a path, but then there’d be some blocker—some bug I didn’t understand, some page of errors I didn’t have time to deal with—and I’d give up.

A big problem I had was where to put my stuff. I tried different databases, folder structures, private websites, cloud drives, and desktop search tools. The key, finally, was to turn nearly everything in my life into emails. All my calendar entries, essay drafts, tweets—I wrote programs that turned them into gigs and gigs of emails. Emails are horrible, messy, swollen, decrepit forms of data, but they are understood by everything everywhere. You can lard them with attachments. You can tag them. You can add any amount of metadata to them and synchronize them with servers. They suck, but they work. No higher praise.

It took years to get all these emails into place, tag them, filter them just so. Little by little I could see more of the shape of my own data. And as I did this, software got better and computers got faster. Not only that, other people started sharing their config files on GitHub.

Then, one cold day—January 31, 2022—something bizarre happened. I was at home, writing a little glue function to make my emails searchable from anywhere inside my text editor. I evaluated that tiny program and ran it. It worked. Somewhere in my brain, I felt a distinct click. I was done. No longer configuring, but configured. The world had conspired to give me what I wanted. I stood up from the computer, suffused with a sort of European-classical-composer level of emotion, and went for a walk. Was this happiness? Freedom? Or would I find myself back tomorrow, with a whole new set of requirements?

What Crypto Can Expect From Twitter’s New CEO

What Crypto Can Expect From Twitter’s New CEO

Indeed, as recently as November 2019 Agrawal was still self-styling himself as “crypto-naive” during a fireside chat held on Twitter’s campus with cryptocurrency entrepreneur Joseph Lubin. Just over a week later, Agrawal joined Dorsey on a trip to Nigeria, where Agrawal met with the local Bitcoin community. Chris Maurice, CEO of the exchange YellowCard, who attended the meetups, recalls Agrawal—like Dorsey—being “extremely inquisitive” about the subject. “They had a heavy preference for listening and learning, as opposed to being the center of attention,” Maurice recalls.

A few months later, Agrawal was instrumental in spearheading bluesky, a Twitter-funded initiative to develop a protocol—potentially underpinned by a blockchain—to build decentralized social networks, with a view to replacing proprietary platforms such as Twitter and Facebook. The project was initially run out of a private server on Matrix, a secure communication platform, before moving to a public Discord channel. Evan Henshaw-Plath, a former lead developer at Odeo, the podcast publishing platform from which eventually Twitter was spun out, and who was also on the bluesky server, says Agrawal was not allowed to actively write on the server but was still there, “lurking, more observing, more listening than strongly pushing through his agenda.”

In Henshaw-Plath’s opinion, the choice of appointing Agrawal as CEO signals that Twitter is going to work seriously on decentralization and crypto. “I suspect Twitter will continue to experiment with various blockchain stuff, even if I have no idea what that would look like,” he says. He describes Twitter’s internal politics as a constant duel between technologists like Dorsey pushing for a more open, decentralized structure and businesspeople focused on monetization. “Parag is definitely among the people who think that Twitter is a fundamental infrastructure, and who are driven by enabling interesting technology.”

But some people in crypto do not see Agrawal’s involvement in bluesky as a badge of merit. Carter says the project has a reputation for being slow-moving. “It is kind of stagnant,” he says. More generally, he is skeptical about the chances that a company like Twitter—especially after Dorsey’s departure—could genuinely bring about the decentralization of social networks. “I would expect to see some sort of crypto-based social media platforms developed at some point, but I think it would happen externally, not from within an established Silicon Valley company,” Carter says.

Mati Greenspan, founder and CEO of cryptocurrency investment consultancy Quantum Economics, is similarly dismissive. “We can assume either that bluesky is building its protocol very, very quietly, and it’s a massive project—or we can assume that it’s kind of on the backburner and not a priority,” he says.

Henshaw-Plath counters that the creation of a blockchain protocol needs to be slow, for its own good. “It is a process; it involves a lot of people. Bluesky could be faster; there could be more stuff to be done with it. But it’s also a mistake to rush it too quickly,” he says. He believes that Agrawal’s own temperament, which he describes as that of a “thoughtful consensus-builder,” means he will be able to make Twitter a powerful force in developing such technologies.

You Can Get This Free Crypto—If the ‘Orb’ Scans Your Eye

You Can Get This Free Crypto—If the ‘Orb’ Scans Your Eye

Altman, however, says that the system is secure and that the company will not be storing user data. Every picture of an iris will be converted into a digital code, called IrisHash, which will be stored in Worldcoin’s database to check against future IrisHashes and deny coins to known users; the pictures themselves will be erased from the database. “We take a picture of your irises, we don’t even store it, we calculate a code from it, the code is uploaded, but the the image never is,” Altman says. “We don’t know any more information about you than that image.” 

Right now, in fact, Worldcoin is running a pilot, involving about 30 Orbs in various countries, and storing a lot of data, including images of peoples’ eyes, bodies, and faces and their three-dimensional scans, according to the company’s own promotion material. “Without it, we wouldn’t be able to fairly and inclusively give a share of Worldcoin to everyone on Earth. But we can’t wait to stop collecting it and we want to make it clear that it will never be our business to sell your personal data,” reads a blogpost titled “Privacy During Field Testing.” In what Worldcoin calls its “field testing phase,” these images are being collected in order to improve the fraud-detection algorithms powering the Orbs. This phase will likely continue until early 2022; the data collected up to that point will be deleted once the algorithms “are fully trained.”

Alex Blania, who cofounded the company alongside Altman and Max Novendstern, explains that  the Orb system allows for beneficial “incentive-alignments.” Not only will people be enticed by the prospect of getting something for free, but an army of Orb Operators will be actively recruiting them in order to get their rewards. (And in turn, Worldcoin has been hiring people to recruit the Orb Operators, according to an ad posted on a Kenyan job bulletin). 

Worldcoin itself will remain in charge of distributing the Orbs, and also of kicking out any operators that try to tamper with the devices in order to extract unwarranted rewards (for instance, by scanning someone twice). Could Orb Operators get their rewards by surreptitiously scanning the irises of clueless people who never heard about Worldcoin? Blania says the company is testing fraud detection systems, adding that he cannot be “extremely specific.” But, in theory, the company could use metrics such as whether the user has actually claimed the Worldcoin or carried out any transaction, in order to spot untoward behavior and root out sneaky Orb-ers.  

Over the course of the pilot, more than 130,000 users have claimed their Worldcoins—60,000 in the past month. To date, the project has used 30 Orbs run by 25 entrepreneurs in various countries, including Chile, Kenya, Indonesia, Sudan, and France. Blania reckons that the production of new Orbs will be increased to 50,000 devices a year, a number on which the 1 billion users projection is based.

A launch date for the actual coin, which will be released as an ERC-20 token on the Ethereum blockchain, has not been released yet. A person familiar with the matter says a launch should happen in early 2022. For Altman, this will be just the start of a “wonderful, grand social experiment” about the power of networks, and also a dress rehearsal for future UBI ambitions. “One thing I believe is that you do an experiment, you do a first thing, and then you learn and you’ll discover all sorts of things about what works here and what we can improve,” he says. “There will be many answers to how something like this could become closer to a UBI.”