Today in a televised press conference President Nicolas Maduro confirmed the government is using cryptocurrencies as a “method for free national and international payments,”
Maduro said “The finance minister and Venezuela’s central bank have new instruments which we will activate very soon so that everyone can do banking transactions, as well as national and international payments through the central bank’s accounts,” he then added, “Venezuela is working within the cryptocurrency world.”.
Last week we heard that Venezuela’s central bank is conducting tests to hold cryptocurrency reserves. With the state-owned Petroleos de Venezuela SA (PDVSA) looking to make payments to suppliers with crypto due to economic sanctions
Maduro said “Donald Trump and his sanctions are blocking Venezuela from carrying out transaction in any of the world’s banks,”. He then went on to comment “There’s other formulas to pay, and it’s what we’re using, because our payment system works perfectly in China and Russia.” It’s not all popular in the country as the opposition’s leader Juan Guaido“ said The regime’s use of cryptocurrency shows desperation,”. The man who is recognised by 50 countries as Venezuela’s rightful leader then said: “To resort to that kind of subterfuge emphasizes the economic crisis the regime is going through.”.It’s not all popular in the country as the opposition’s leader Juan Guaido“ said The regime’s use of cryptocurrency shows desperation,”. The man who is recognised by 50 countries as Venezuela’s rightful leader then said: “To resort to that kind of subterfuge emphasizes the economic crisis the regime is going through.”.
All of this is good news for the crypto industry as if this experiment works out it could be the framework for other countries.
All of this is good news for the crypto industry as if this experiment works out it could be the framework for other countries.
The Year in Crypto Journalism: Truth Will Always Be Human
This post is part of CoinDesk’s 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world. David Z. Morris is a staff writer covering A.I., blockchain, and other technology for Fortune Magazine. He was formerly a staff writer at BreakerMag, and is the author of the book Bitcoin is Magic, about the role of communication in crypto.
Despite continuing doldrums in the token markets, 2019 saw solid progress for many parts of the blockchain/crypto ecosystem – including for crypto media, research, and journalism. We saw Michael Casey bring his Wall Street Journal credibility to leadership of this publication. Messari accomplished great things with its transparency initiative for crypto projects. The Block transitioned from unknown startup to regular newsbreaker, and Decrypt Media continues to build credibility and expertise.
2019 also, sadly, saw the end of Breaker Magazine, an attempt to bring thoughtful cultural reporting to the space. I’m biased, since I worked there, but many people felt we succeeded on the quality front. We ultimately fell short on the business side (for reasons that aren’t the fault of any former Breaker staff) – a reminder that making quality journalism economically viable is pretty difficult in 2019.
Both these successes and failures make it all the more disheartening that so many in the crypto-sphere have so little respect for journalism, either in general, or as a part of this industry. This disdain manifests in dismissals of reported news as “FUD,” and even in attacks on journalists personally. This was on particularly clear display in a recent fight between The Block and Binance over reporting about the closure of an office in China, when one of the most prominent leaders in the space joined hands with one of its most brazen hucksters to fund public attacks on critical journalists.
There are a lot of reasons for this hostility, some of them legitimate. A number of “crypto news” sites are in fact corrupt, crappy, or both (a fact that is much clearer thanks to intrepid work by Corin Faife for Breaker). The bagholders of the world would rather no one highlighted the shortcomings of projects they’re invested in – in crypto, or in the stock market. And of course, the U.S. President has normalized the idea that news you don’t like can simply be dismissed as biased “fake news.”
But there are also some flawed ways of thinking that are specific to crypto. If you, like me, want to see crypto’s high-minded rhetoric turn into transformative products and services someday, I think it’s worth reflecting on a couple of those errors as we head into 2020.
You’re a Founder, Not a God
One particularly notable element of the Binance/The Block debate was the question of anonymous sourcing. When The Block published a followup detailing their reporting process, they revealed that they had learned details about the office closure linked to Binance from suppliers, partners, and other sources who chose to remain anonymous.
Anonymous sourcing is a common practice in business journalism – in fact, developing source relationships outside of official channels is how the very best journalists in the game create valuable knowledge. Those sources understandably want to protect their relationships by remaining anonymous.
But former Coinbase executive Balaji Srinivasan raised a concern in response to the followup –that if someone is concealing their identity to reveal delicate information, can they be trusted?
I have immense respect for Srinivasan’s intellect. In this case, he went well beyond most skeptics by clearly spelling out his thought process. I do think this specific argument is based on some flawed premises – but even then, I only draw attention to it because those premises seem to be widely shared, and are productive fodder for reflection, not because I think Balaji is a bad guy. Far from it.
To address his first point, relying on a single anonymous source for a story is indeed bad journalism, and ripe for abuse. That’s why good journalists don’t do it – stories like The Block’s use multiple sources to independently confirm findings.
Of course, trusting such a report also requires trust in the outlet and reporter relaying the information, and when it comes to a young organization like The Block, some skepticism is natural. And The Block does seem to have made a mistake in its original reporting, describing a “police raid” based on a source’s description, then revising it to a “visit.” Such missteps must be learning opportunities – but they’re also an inevitable risk of sniffing out information that someone doesn’t want you to know.
Srinivasan’s second point is more troubling. He argues, in essence, that being part of an organization requires unwavering loyalty to the official positions of its leadership. Breaking an NDA isn’t just a legal matter here, it’s a moral failure that undermines the speaker’s credibility.
But this assumes that the leaders of organizations are themselves infallible, that their judgments and positions should not be challenged by their underlings. In fact, many anonymous sources speak to the media because they are loyal – because they care deeply about the organizations and missions they signed up for, but believe their leaders are making dangerous errors. Often, sources speak to the media only after they have tried to raise issues internally, and found no one willing to listen.
In this light, anonymous sourcing is deeply aligned with the broader ethos of crypto. By giving people freedom from the control of major banks and governments – including through anonymity – cryptocurrency upholds a broad moral principle of freedom, but to unleash individual creative forces that have been quashed by the excesses of authority. Similarly, by going outside the chain of command, anonymous sources are often attempting to get their individual insights into the public eye and save their leaders from themselves.
Binance even defended itself in this incident by arguing that it couldn’t have an office in Shanghai because its workers are “decentralized.” But this is a sad diminution of the concept of decentralization. It’s not about geography – it’s about power. If Binance shares the principles that drove the creation of bitcoin, being an employee there shouldn’t entail unwavering personal loyalty to Changpeng Zhao, or anyone else.
Starting a company is very hard, and the people who do it successfully are extraordinary, but being extraordinary isn’t the same thing as being perfect (there are also, it should be noted, a lot of ways of being extraordinary that don’t involve starting a company, or even making a lot of money). Leaders who don’t listen to critical or independent voices – who engage in blanket denialism of anything that conflicts with their internal narrative – wind up like Travis Kalanick, Elizabeth Holmes, or most recently, disgraced WeWork CEO Adam Neumann. All three indulged some variation of the “fake news” maneuver to rebuff criticism, and eventually saw their companies taken from them because of the very problems they refused to confront.
Neumann and Kalanick, at least, are still rich – as are a shocking number of crypto ‘leaders’ who have produced even less of real value than those men. But Kalanick and especially Neumann will be walking punchlines for the rest of their natural lives, and then they’ll be taught as cautionary tales in business school for perhaps decades more.
That is the bitter harvest of yelling “FUD” when you should be confronting inconvenient truths.
Math Can’t Solve for Truth
I think there’s something even deeper than deference to authority embedded in skepticism towards journalists. To people reared on the abstract rationality and self-contained logic of computers, the process of uncovering real-world truth can seem mysterious, and even intimidating. Dismissing journalists as simply malicious liars is a way to calm that anxiety.
You can see this manifested in several blockchain projects aimed at building a new model for discovering the truth through so-called ‘crypto-economics.’ Broadly, these projects aim to fix problems in journalism by reducing the role of individuals in making judgments about the truth. Instead, they want to distribute that authority to the many.
Civil remains the highest-profile example, though its initial plan to use a kind of betting market to measure the reliability of news sources has fallen by the wayside. TruStory and a variety of ‘token curated registries’ (TCRs) use token incentives to both solicit and evaluate arguments or speakers, again through betting markets with, in theory, many users.
(Side note: I’m not talking here about prediction markets like Augur. The bets made there generally resolve based on concrete events, not judgments on the ‘truth’ of a particular statement or argument. Oh, and the concrete events are – wait for it – reported by reputable journalists.)
This desire makes sense in light of crypto’s overall ethos, particularly its healthy (if sadly waning) antipathy towards concentrated authority and power. But, at least when it comes to the pursuit of the truth, it’s an absolute fool’s errand. Voting, betting, or information markets will never replace professional journalism and other forms of refined critical thinking – and ironically, math and economics show us why.
First, projects like Civil, TruStory or TCRs are always at risk of becoming what’s known as a Keynesian Beauty Contest. To take TruStory as an example: the system asks users to stake tokens to write a persuasive argument, then let other users vote on the argument. If their argument attracts positive votes, the original staker wins a bonus. If it is downvoted, they are heavily penalized.
If you haven’t noticed already, this system incentivizes users to write arguments that other users already agree with. It parallels Keynes’ original thought experiment, which was that judges rewarded for accurately predicting the most popular faces in a beauty contest are motivated to follow the crowd, not to use their own judgment. The same goes for TCRs and the (hypothetical) Civil system. Once you know who holds the tokens in any such system, you’re strongly motivated to simply go with the flow.
TruStory’s founder described the project’s intended dynamics as using “‘skin in the game’ to incentivize people to vote on the veracity of claims and not deviate from the profitable-truth-seeking majority.” But the idea that the majority have, or even seek, the truth is questionable at best.
The long historical process of truth-finding that created the advanced society we live in now didn’t rely on mass opinion. If Copernicus or Pasteur had put their revolutionary ideas up to a vote, we might still be drawing insane spirals to explain the sun’s path around the earth, and cursing the “miasmas” causing disease in poor neighborhoods. Instead, heliocentrism and the germ theory of disease became conventional wisdom through the much slower process of convincing one person at a time, using substantive argument, fact-based evidence, and the reputation of the individual speaker.
That may be why, roughly a year after its founding, TruStory dramatically changed its mission from leveraging economic games in “the pursuit of truth” to, more modestly, “creating a safe space to debate.”
But This is Wondrous Strange
There’s a second reason the way we seek the truth isn’t going to change. Before crypto-economics existed, there was formal logic. The goal of formal logic is to reduce linguistic statements to mathematical formulas, whose internal consistency can then be tested. Its creation was motivated by much the same goals as crypto-economic truth models: to make reason itself simpler, more streamlined, and more definitive. Formal logic thrived in the late 19th century, and some might have thought it heralded a new age of clear, simple truth.
Then along came this kid named Kurt Gödel.
In 1931 (when Gödel was in his mid-twenties) he presented a pair of equations known as the Incompleteness Theorems. These were mathematical formulas that indisputably proved something completely terrifying: that no self-contained system of formal logic can prove its own internal consistency.
To oversimplify the implications of this mathematical fact: there is always something outside what you think you know. There is always new information, a new interpretation. Or as Jurassic Park’s Dr. Ian Malcolm put it: Nature finds a way.
Ultimately, the project of formal logic has not given humans a simplified, rational understanding of the world, because the real world, including the human world, never stops moving, changing, and growing. Truths important to human society are discovered and propagated through a complex, subtle, and radically individualized process.
And only those who are willing to brave the flawed, forever imperfect nature of what we call “the truth” – instead of rejecting it in favor of an illusion of mathematical clarity – can ever hope to thrive. The market has its own verdict on this: after raising $3 million in 2018, TruStory shut down last week, though it will continue as an open-source project.
Ultimately, then, I see at least two big, unpleasant reasons for crypto’s hostility towards journalists. First, it reflects our broader culture’s disastrous belief that being successful in one pursuit means you should are an authority on all matters. And second, it reflects crypto’s particular bias towards a reductive, mathematical vision of the world.
But money can’t buy the truth. There is no power that can make the world align with your beliefs about it. And to risk paraphrasing the greatest delver of human mysteries the West has produced: If math is your philosophy, there are more things in heaven and earth than it can dream of.
Refusing to see them won’t make them go away.
Kraken: $75 Device Will Get You Into Crypto Hardware Wallet KeepKey
Kraken Security Labs said crypto hardware wallet KeepKey is not doing enough to protect customers from physical attacks, saying it was able to get into the system using a $75 device.
“All that is required is physical access to the wallet for about 15 minutes,” the firm said in a blog post on Tuesday.
Kraken Security Labs said KeepKey is already aware of similar physical attacks, but seems to be focusing more on protecting users’ keys from remote attacks, citing a statement from Keepkep’s parent Shapeshift on June 13.
The attacks can extract seeds that could help users restore and backup their wallets from a voltage glitching device costing roughly $75.
However, Michael Perklin, chief information security officer of Shapeshift, said Kraken Security’s statement is misleading, according to a statement received by CoinDesk. The crypto exchange acquired hardware wallet startup KeepKey for an undisclosed amount in August 2017 to develop its technology and security for its crypto holders.
“Not only does this attack require physical possession of the device, it would require significant preparation and expertise, as well as specialized equipment,” Perklin said.
“The cost is possible only if the person had an extremely sophisticated understanding of what was needed,” he added. “The average person would not have the education about hardware design or computer science to go pick out parts for $75 and successfully assemble a tool to use for this type of attack.”
Kraken Security Labs said in its blog post that while physical attacks are difficult to defend against, it found Keepkey’s focus on remote attacks “potentially out of line with the branding of [its] product.”
Perklin responded that KeepKey took measures to protect its users from potential physical attacks before Kraken notified it.
“We recommend our users use BIP39 passphrases that add an extra layer of security,” Perklin said. “The process is relatively easy and we provided step-by-step instructions on how to set up BIP39 in the June 13 statement.”
One of the reasons such physical attacks are difficult to prevent is KeepKey has to redesign its hardware. In particular, Kraken Securities Labs claims, the wallet needs to change the microcontroller because of “inherent flaws” that could be used by hackers.
“It is important to understand that if you physically lose your KeepKey, this vulnerability could be used to access your crypto,” according to the blog post.
“It’s much like a door lock analogy. You can change the locks on your door as often as you want, but someone with enough time and expertise can always pick the lock,” Perklin responded.
“Redesigning KeepKey, or using a different microcontroller, might slow down an attacker if they have the physical device, but it will not stop them if they are determined, skilled and have enough time to break in,” he added.
Kraken Security Labs said it disclosed the full details of this threat of attack to KeepKey on Sept. 11 and is going public now so the crypto community can protect itself. Shapeshift confirmed it received the information and had asked its users to use the BIP39 passphrase before that time.
MARKET DAILY: Nike and the ECB Are Thinking With Tokens
With markets continuing their slide, today we’re looking at Nike’s recent shoe patent and the ECB’s digital currency discussions. Later, we’re joined by CoinDesk analyst Galen Moore for some insight into exchange fees, token listings and more…
Having trouble with the embedded player? You can download the MP3 here.
Tune in as CoinDesk podcasts editor Adam B. Levine and senior markets reporter Brad Keoun run down recent action, track interesting longer-term trends, and highlight the best “thinking with tokens” and some of the most important crypto industry developments of the day.
Topics for December 11, 2019:
- Crypto and traditional markets update
- Alleged Mining Ponzi Arrests, Nike & the ECB are thinking with tokens
- Crypto Liquidity Takeaways from our recent conversation with Binance.us and FTX
- A bad week for MATIC
Join us again on Thursday, for the next Daily Markets from CoinDesk.
If you have any thoughts or comments on the Daily Markets show so far send an email to [email protected]