16 minute read
The UK Man Who Lost 7,500 Bitcoins
James Howells is notoriously famous in the crypto sector. The reason for his notoriety is an unfortunate situation, but he has a new plan.
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In 2013, UK resident James Howells accidentally threw away a hard drive that contained 7,500 Bitcoins he had earned from mining Bitcoin. At the time of writing the cache was worth $175 million and has seen a value of over half a billion during the November peak. Howells has presented multiple proposals to the Newport City Council to search the landfill in which he believes the hard drive is located.
The city council contests environmental risks and funding issues are too high to allow Howells to search for the drive, even after his proposal to offer the city 25% of the value to a “Covid Relief Fund” once the drive is recovered. Howells is certain that even though the outer shell of the hard drive may be damaged and rusty, the “platter”, which contains the data needed to recover the valuable Bitcoins, may still be intact.
Now, James has a new plan.
His latest proposal would utilize artificial intelligence to scour through the filth to find his lost treasure. Not only has he secured the A.I. tech, but has also secured venture capitalist funding, and an entire environmental team to help mitigate the risks of digging up the landfill.
Howells believes it could take about 9 to 12 months to recover the hard drive, but his plans for after recovery would last much further into the future. If found, he plans to use the money on the drive for a power generation facility, as well as wind turbines. “We want to set up a community-owned mining facility which is using that clean electricity to create Bitcoin for the people of Newport,” Howells told CNBC.
The Newport City Council stated, “We have statutory duties which we must carry out in managing the landfill site. Part of this is managing the ecological risk to the site and the wider area. Mr. Howells’ proposals pose a significant ecological risk which we cannot accept, and indeed are prevented from considering by the terms of our permit.”
Only time will tell what happens to the lost hard drive with James Howell’s fortune, but if luck is on his side, the city council will approve his requests when Bitcoin is at a new all-time high.
How to DYOR & Really Win: Confessions of a Crypto Insider - Part 2
By Nicole Grinstead
Last month, I wrote about how bad actors who don’t have retail investors’ best interests at heart manipulate cryptocurrency. Then, I explained how I know. Now, I’ll share the insights I’ve gleaned from years inside the crypto industry. Hopefully, this will help teach you how to do your own research so you can minimize your vulnerability and maximize your profits.
In April, Covduk - a popular Crypto-Twitter persona - tweeted a thread claiming to help readers get 10x better at evaluating projects and making gains. When I read it, I had to laugh.
It’s not that all of his tips are garbage. It’s just that most of them are.
If I didn’t work in this industry, I would have thought Covduck’s points were valid. In fact, a little over 2 years ago, my friend Seth Estrada and I wrote a guide detailing 12 steps to spot a crypto scam, and now, I cringe at how wrong we had it. I’m telling you this, so you’ll understand I’m not picking on Covduck. Instead, I’m going to use some of the terrible tips that people espouse to show you that they don’t work the way people think they do and highlight best practices to follow while you DYOR. I usually start by breaking it into 9 critical components: team, expert endorsements, exchange listings, centralization, marketing, product-market fit, functionality, legality, and community.
1. Team
Covduk is right when he says that you have to properly evaluate the team, its founders, and their record of accomplishments. However, I would say he falters by relying on information that the projects and people provide themselves. People tend to put their best foot forward, so I take everything with a grain of salt.
Experience & Background
When researching founders and team members, you’ll inevitably find yourself looking at their
LinkedIns or other professional profiles. Remember, these resources are designed to help people sell and promote themselves. As such, people control the information that’s published about them there, and it may or may not be true.
Depending on how deep you want to investigate, you should consider verifying any outstanding claims and/or looking for information that isn’t as tightly controlled as someone’s own resume. For example, when Seth and I were evaluating a potential scam project a couple of years ago, the project’s lead developer claimed that he worked on Matic (now Polygon) in 2013. That’s a significant assertion, so we verified with Matic’s core team instead of taking his word for it. As it turns out, they had never even heard of him.
This isn’t an isolated incident. Lots of people are not who they say they are. Even big crypto names have fabricated their credentials. When you DYOR, take time to evaluate your sources. If their claims seem too good to be true, you better ensure they aren’t before you invest.
Watch and/or listen to interviews
Doxxed teams often appear on podcasts and YouTube channels to promote their products. Suppose you’re considering investing substantial funds into one of them. In that case, you should probably watch or
listen to at least a couple of their interviews. This is where it gets kinda tricky. Because many popular crypto media outlets do undisclosed paid promotions, it can be difficult to tell the difference between what’s real and what’s staged. One thing to look for is live interaction with the audience because that’s the kind of thing that isn’t easy to fake.
I tend to prefer founders who aren’t trying too hard and make time to interact with their communities, but you might like the cold and distant type. If all of their answers seem rehearsed, I lose interest because it often means they have something to hide.
How much money do the founders have outside of their coin or tokens’ value?
This might seem like a weird question, but it’s actually essential. No matter which way you slice it, money affects human interaction. Moreover, when people who have never had much money suddenly acquire wealth, it can cause significant stress and anxiety, leading to poor decision-making.
If I’m holding large bags of an asset, I want to know that the person or people who are making decisions that most impact its value have clear heads. This means they should have enough funds outside of the asset to cover their living costs for some time, so they aren’t overly concerned about its price. While numerous academic studies link wealth with low emotional intelligence and lack of empathy, stress adversely impacts decision-making. People in leadership roles must be able to think clearly and make good decisions.
What about an anon team?
If the team isn’t doxxed, this goes out of the window. How to DYOR on an anon project is outside the scope of this article, but I will cover it in an upcoming issue, so subscribe and keep reading!
2. Expert
Endorsements
Venture Capital
Covduck continues (and once upon a time, I would have agreed), “Who is backing them? Investors & VCs have way more information than us. If they’ve got some big names like Sequoia or A16z backing them, that’s a good sign. These guys do their research & their backing is a stamp of approval.”
I can’t say this loudly enough, but NOOOOOOOOOOOO!
If you base your decisions on VCs, you relegate responsibility for your financial future to someone else. You assume that they’ve done more than adequate due diligence. After all, they’re VCs; they must be good at this, right? Wrong!
VCs take huge risks because they have enough funds to not have to worry. Out of 30 projects an average VC invests in, only one has to perform well (or even survive) for the VC to profit. That’s because VCs only purchase assets they can buy for a discount. I know because I’ve sat in numerous meetings with them. If the asset already exists, VCs get a minimum 15% discount on the token’s price at the time of investment. If the asset is new and the VC provides seed capital, they buy with the knowledge that the asset will list for significantly more than they paid. As far as investors go, if VCs know more than ordinary people, they leverage that information to manipulate the public, not to benefit it.
If you don’t believe me, that’s fine. Just look at who invested in the Nomad bridge.
Days before the Nomad bridge was exploited for almost $200 million, numerous high-profile crypto investors - including Coinbase Ventures, OpenSea, Polygon, and Crypto.com Capital - participated in Nomad’s $22 million seed round. I’m not saying they shorted Nomad or participated in the sociallyengineered bridge hack, but they might have. And even if they didn’t, this incident and many others should prove that following the money isn’t always the best strategy. From my perspective, you want to get in before the money to maximize your profit, so the real move is not to follow the money but to get the money to follow you. By and large, I prefer investing in projects that didn’t take VC capital because it usually means fewer big players to dump the price later. But VCs aren’t all bad. If you’re going to invest in a project that accepted VC funds, here are the questions that you’ll need to find the answers to:
How much capital was obtained?
At what price(s) did the VCs buy?
What do the vesting contracts look like?
When are the token unlocks?
Which VC(s) invested?
Do the VCs have a history of dumping?
Strategic Advisors
Covduck - “Are they able to get big people as advisors? Are they able to partner with key strategic partners?” - SMH - This clearly represents a fundamental misunderstanding of how the crypto market works.
The more people and companies that get involved, the higher the probability of corruption. Look at how many projects partnered with Luna, Celsius, Voyager, 3 Arrows Capital, Curve, and more to see for yourself. Advisors are usually compensated with a percentage of the token’s supply. They exchange their credibility and/ or influence for funds they may or may not dump later. For those reasons, I pass when I see big names listed as partners or advisors.
Just because “experts” don’t endorse something doesn’t mean it isn’t a good product. Cryptocurrency is in its infancy. Few (if any) real experts exist. Solid projects with strong tokenomics don’t need to
compromise their assets by giving away large amounts.
Exchange listings
Is the coin/token listed on centralized exchanges? If so, which ones? And why?
CEXs profit from assets’ trading volume, so it follows that they list those with high volume and those that their user bases demand. But these days, so many tokens with minuscule volume and next-tozero holders are listed on big centralized exchanges.
Have you ever wondered why that is?
If a token has low volume and little adoption, someone probably paid for its listing, which calls into question the legitimacy of CEXs.
The problem is that many still believe centralized exchanges conduct extensive due diligence reports on any asset they list, but that’s not true. If it were, Coinbase, Binance, and others wouldn’t have listed so many assets that got rug pulled or exploited. I suppose some CEXs probably still have standards, but not many. A majority require only an audit and “co-marketing fee,” which they say will be used for giveaways and trading competitions but isn’t. Really it’s just a cover for a listing fee, a majority of which the CEX recoups through wash-trading (which they call market making) and fake giveaways, and then dumps on the market.
I’ll write more about CEXs’ egregiously offensive practices
in an upcoming issue. For now, the point is that you cannot trust assets because they’re listed on a CEX. In fact, the opposite might be closer to accurate.
Projects that pay for CEX listings relinquish control of their coin/ token to the CEX by paying for the listing in their native token. CEXs may keep those tokens for a certain period, but they won’t hold them forever.
Assets listed only on DEXs may be harder to attain. Still, they’re less likely to be manipulated by bad actors. Decentralized exchanges rely on token holders and teams to supply the liquidity needed for trading. Few understand how liquidity works, but it’s not how you might think, which lends to the next section…
(De)centralization
This is yet another topic on which the crypto community is divided. Depending on who you ask, an asset might be considered centralized or decentralized based on the token percentage
held by the founder or team. Many believe that a team shouldn’t control a majority of their token, but in reality, the more decentralized an asset’s ownership is, the harder it tends to dump. Founders and teams often put a premium on their assets and reputations, meaning they’re less likely to take actions that would cause the price to drop than average holders.
Understanding liquidity
No More Words
I’m out of words for today, so if you’re enjoying this series, please remember to subscribe or pick up next month’s issue of CryptoMag, and follow me on Twitter @NrdGrl007
Centralized ownership of an asset is critical in its infancy because of the advent of decentralized exchanges where anyone can create their own trading pair. Assets rise and fall with the value of the asset that their primary liquidity is bonded to. I will go into greater detail about how liquidity works in a future issue. For now, consider this: If someone other than the founder or team controls the majority of an asset, that person or people can supply liquidity for a pair that bonds the asset to something that could result in disaster. For instance, many Cosmos assets were bonded to UST when Luna was exploited. They all lost value along with it. If the founders or team holds the majority of an asset, they can ensure what that asset is bonded to and further protect its price.
With everything I know, I’m more likely to buy an asset whose founder or team holds a large portion of the token’s supply than I am to buy one that is more evenly distributed. But, of course, this goes back to point one about carefully evaluating the team.
NFT Interoperability is Imperative for a Decentralized Metaverse
By Dan Valez
The Nomad bridge recently joined the ranks of hacked interchain protocols when $200 million was stolen in a sociallyengineered exploit. While Nomad is the most recent (at the time of writing) bridge to be exploited, it’s far from the only one. Bridges, which allow users to transfer their assets from one blockchain for use on another, are the most common vectors of attack in DeFi. In 2022 alone, hackers have gained over $3 billion from bridge attacks. This problem isn’t easily remedied, and it isn’t an issue for DeFi users alone. Metaverse adoption might also be hindered by siloed NFTs that can’t be transferred from one chain to another. Some projects have been relentlessly working to resolve this issue, and maybe we’ll even see some critical breakthroughs soon.
Ethereum’s NFT Gold Standard
Because NFTs emerged on Ethereum, it’s natural that they set the standard. The two most popular and widely accepted NFT standards are:
ERC-721
ERC-1155
Both can be freely transferred between EVM-compatible blockchains with a chain bridge enabled; however, using a crosschain bridge is a significant security risk.
Ethereum’s Dilemma – High Liquidity; No Interoperability
As the reigning king of smart contracts, Ethereum is the most popular blockchain for NFTs. This popularity allows creators to access a high amount of liquidity for their collections and ensure their NFT creations reach their respective niches.
However, this supremacy comes with a caveat. As more people adopt Ethereum, blockspace demand increases, making mint fees prohibitive. What’s more, NFTs created on Ethereum stay there, forcing these assets to evolve in a contained ecosystem that only works on EVM chains.
For a genuinely open metaverse, users should be able to transfer their assets onto whichever blockchain or dApp they want. A closed environment where a single chain handles NFTs is neither sustainable nor decentralized.
Can New Layer 1 Chains Solve the Dilemma?
Up-and-coming blockchains like Avalanche, Solana, and Polygon, among others, have picked up the slack. Successful collections are starting to appear on these chains, providing more versatility for creators and users. However, while these chains’ scalability solves the high gas fees, the interoperability problem remains. Moreover, cross-chain and layer2 bridges are only a partial solution. Bridges compromise security to provide interoperability, which can be a considerable risk with high-value NFTs that may be worth millions.
This brings us to the pressing issue of a new NFT standard that will provide interoperability for assets across multiple chains.
Out-of-the-Box Interoperable NFTs on Cosmos
Interoperable blockchains like Cosmos provide the transfer of fungible assets between multiple sovereign blockchains. AssetMantle, a project built on the Cosmos SDK, is spearheading an interNFT standard that will expand interoperability to NFTs.
Unlike other NFT standards where the metadata is at the application level, interNFT standardizes metadata at the protocol level. This allows NFTs to be used across blockchains and metaverses without bridges. The interNFT standard provides two key components:
A chain-agnostic wallet that will allow users to store NFTs across different blockchains.
Natively swap NFTs across chains through interchain communication protocols without requiring permissioned bridges or token wrapping.
Moreover, the interNFT standard will eventually go beyond the Cosmos network. AssetMantle is already collaborating with natively interoperable projects like Polkadot and Interchain to push the adoption of this new standard even further.
Concluding Thoughts
All the signs indicate that NFTs are still gaining popularity, and their adoption will continue to rise as we discover new use cases. Artists and creators are pushing the boundaries of what’s possible, releasing intriguing artworks, collectibles, domain names, music, and NFTs tied to gaming & metaverses.
The concentration of NFTs on Ethereum hindered the medium’s evolution because NFTs that aren’t created with interoperability in mind are trapped on a single blockchain. This prevents users from transferring their assets freely across chains. Cross-chain bridges are not the solution to this problem, but AssetMantle’s interNFT standard could be, and it’s worth paying attention to.
