Centralization Strikes Again - February 2022 Edition
“There are almost 200 currencies of the world, but there’s only one international currency. There are almost 200 currencies controlled by central banks and governments, but there is only one mathematical currency today, and that is bitcoin. We are going to build more of them. Cryptographic currencies are going to be a mainstay of our financial future. They are going to be a part of the future of this planet because they have been invented. It’s as simple as that. You cannot un-invent this technology. You cannot turn this omelette back into eggs.” — Andreas Antonopoulos, The Internet of Money
Timeline
Feb 2 - Github goes down, preventing users from accessing the website, issuing commits, cloning projects, or performing pull requests. Source
Feb 4 - GoFundMe removes a donation page for the Freedom Convoy protests in Canada, after receiving evidence from the police of “violence” and “unlawful activity”. Source
Feb 8 - US DoJ reveals they were able to trace hacked BitFinex funds by obtaining a search warrant for Ilya Lichtenstein and Heather Morgan’s cloud storage account, which contained hundreds of associated wallets and private keys. Source
Feb 9 - Messaging app Telegram blocks multiple channels in Germany at the request of German authorities on allegations of “violating local laws”. Source
Feb 10 - Medium goes down. Source
Feb 11 - Twitter experiences an outage in the US and internationally, with reports from users not being able to tweet nor load up the timeline feed. Source
Feb 14 - Canadian Prime Minister Justin Trudeau orders banks to freeze assets and cancel insurance policies for those involved with the Freedom Convoy protests in an attempt to choke off protests. Source
Feb 16 - Canadian federal police attempt to bar firms registered with FinTrac — Canada’s AML authority — from interacting with 34 crypto wallet addresses associated with the Freedom Convoy protests. Source Source 2
Feb 16 - Rumours of bank runs circulate on social media after the Canadian government announced it was freezing the assets of people supporting the Freedom Convoy protest. Source Source 2
Feb 19 - Ontario’s Superior Court of Justice requests Nunchuk — a self-custodial Bitcoin wallet solution — to freeze, prevent movement of, or otherwise disclose of the existence of user assets. Their response:
Feb 20 - Ethereum Beacon Chain community health consultant superphiz.eth reveals that 78k out of 296k validators are run by Coinbase and Kraken, and all currently run the Prysm client with no published plans for switching to a non-majority client. Source
Feb 20 - Canadian Finance Minister Chrystia Freeland hints at measures on a more permanenet basis for financial weaponization through FinTrac, citing some digital assets and funding mechanisms that weren’t captured by the government’s pre-existing surveillance powers. Source
Feb 22 - Slack goes down. Source
Feb 22 - Seattle-based logistics giant Expeditors International reports having shut most of its operating systems due to an ongoing cyberattack. Source
Feb 22 - Regulators in Canada warn crypto exchanges like Coinbase and Kraken not to promote self-custodial wallets; Ontario Securities Commission send tweets by aforementioned CEO’s to Canadian federal police citing they were offering advice on how to avoid sanctions. Source
Feb 23 - Twitter continues to arbitrarily delete tweets. Source
Feb 25 - Russia blocks Facebook in the country for fact-checking state-owned media, while the Russian government claims that it had “restricted” the accounts of four Russian media outlets. Source
Feb 26 - Wide-sweeping sanctions are levelled on the Russian economy, including the freezing of Russian central bank assets amidst the Russian-Ukraine conflict. Source
Feb 26 - YouTube moves to block Russian media channels from generating revenue over invasion of Ukraine. Source
Feb 27 - Russian central bank bans foreign investors in Russian capital markets from selling Russian securities. Source
Feb 27 - The EU, US, and allies move to cut off a number of Russian banks from international payment rails SWIFT. Source
Feb 28 - The US government asks crypto exchanges to ensure Russian individuals and organizations cannot use crypto to avoid sanctions. Source
Op-Ed
The following piece is (hopefully) the first in a series of thoughts by ChainSafe’s Dan Forbes on “Web3”. If you are interested in contributing to this OpEd, please reach out on Twitter @haochizzle, Telegram @haochizzle, or email tim.ho@chainsafe.io. We’d love to hear from you!
Web3, Wtf?
a practical primer for programmers
There’s been a lot of talk about “web3” lately - I’m honestly surprised I haven’t seen more people compare it to the “cloud” buzz of the 2000-aughts. During that time I was attending cooking school and working in the wine industry. In 2011, I went back to school, and in 2014, I graduated with my computer science degree. I remember going into the computer science program as someone who was pretty non-technical and being really confused by all this talk about “cloud” computing. People don’t really seem to talk about cloud computing anymore, and probably for a good reason - catchy buzzwords like that are very effective at getting people’s attention, but they’re necessarily reductionist and not particularly effective at communicating the nuances of a technology, and (most importantly) why a person would want to use that technology.
After working as a software engineer for about 5 years, I chanced into a developer relations role in the web3 space, which is where I have been working for about 2 years. I’ve spent quite a bit of time learning the nuances behind the term “web3”, and I also have a fair amount of experience communicating complex subject matter to people of all experience levels, so I figured I would throw my hat into the web3 hot-take ring and try to break down the problems that these technologies are designed to solve, and why people may want to use them. In particular, I’m going to focus on the types of use cases in which a developer may find web3 technologies, or as I prefer to think of them “technologies for decentralization”, useful in creating a compelling software product.
I really enjoyed researching for this piece, and one of the “hot-takes” I enjoyed the most was the one written by Tim O’Reilly. O’Reilly, the originator of the term “Web 2.0”, understandably views blockchain technologies through the hype and funding cycles that he is familiar with. Web3 technologies certainly seem to be surrounded by a lot of hype these days, and this is no doubt due, at least in part, to the tremendous amounts of funds that are flowing around the space. However, I believe that the association between the web3 space and monetary systems has made it especially difficult for developers to understand why these technologies exist and the types of problems they are designed to solve.
Fundamentally, web3 technologies are designed to create systems that facilitate global-scale interactions without relying on privileged or trusted authorities - “DeFi” means “decentralized finance”, and it’s a term that is applied to monetary systems that use web3 technologies to replace financial authorities and brokers. This is a natural application of technologies for decentralization for two reasons.
Firstly, as the long-term drawbacks of centralized financial authority become more clear, it’s natural for people to imagine improving these systems by decentralizing them. Secondly, there is a natural connection between financial systems and web3 technologies, which typically include cryptocurrencies as native value stores that are used to incentivize good behavior among network participants, a la game theory.
Although the presence of native cryptocurrencies makes it straightforward to create decentralized implementations of existing financial systems, I don’t think it’s the best way to demonstrate the unique types of problems that web3 technologies are meant to solve.
In fact, as many people have pointed out (my favorite being Moxie Marlinspike), many of the systems for which web3 technologies are most well known are actually quite centralized. Much of Moxie’s analysis of the web3 space revolves around “wallets”, which is a ubiquitous term in the web3 space that reinforces the connection with traditional financial systems, and one that I have personally always been rather puzzled by. In general, I would describe “wallet” apps as password managers that provide user interfaces in order to fill gaps left by incomplete platforms.
In short, decentralized financial systems could be a compelling use of web3 technologies, but in reality many existing “DeFi” systems are simply unimaginative emulations of existing, centralized systems. At best, this makes it difficult to understand the disruptive types of systems that web3 technologies are designed to build; at worst, it serves as a platform for scams, which do real harm to real people, and repel good, well intentioned developers from the web3 space.
In the future, I hope that web3 technologies can be used to meaningfully disrupt centralized financial systems, but I think there are other ways that these technologies can be used that are more viable in the near term, and make it easier to understand the power of web3.
For more from Dan, stay tuned to future newsletters! <3
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