Why do many hacks and rugpulls coincide with overall market downturns?
Same reason crime explodes in an economic depression.
People stop seeing the market as a long-term positive-sum game. Instead, they switch into survival mode, taking with force what the market „owes“ them.
For most people, this means making self-destructive moves, like using high leverage to „make it all back in one trade“.
Others are willing to take from other people - by force.
There are two important takeaways from this:
1) In theory, smart contracts allow us to build applications that require no trust in the developers.
In practice, there‘s a near endless number of governance apologists, telling you that this or that loophole is necessary.
But the reality is that opportunity makes the thief, and most hacks and rug pulls are insider jobs.
It doesn‘t matter if you can trust a founder today. Can you trust them at their lowest moment, when they see their project & future revenue swimming away?
In summary, today is a good day as any to join the club and start looking at any form of governance as an attack vector. Also, start looking at *complexity* as an attack vector.
2) The second point is about both yourself & the people you work with. Days like yesterday are extremely useful in one way:
They pull away the curtain and reveal how people react in a (perceived) crisis situation.
The stronger the crisis, the more you will learn about their ability to deal with high stress, and where they put their moral values/friendships/business agreements in relation to their own survival.
It‘s cliche, but you should play long-term games with long-term people.
If you can see yourself in any of these tweets, use the time to reflect. Allow the market to teach you a valuable lesson. Days like today are where you can compound weeks to months of wisdom in a single day, and grow all the stronger from it.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
My workflow: 1) Establish an encrypted channel between Argent and a Defi app via Walletconnect. This only needs to be done once for each app. 2) Make all my txns on desktop 3) Review and sign the txn on the Argent mobile app, which acts as a 2FA
A smart-contract wallet, as the name suggests, is an on-chain contract. It has one signer key and several guardians (think of those as an on-demand multi-sig setup).
The signer key is generated in the Secure Enclave of your phone, and it can never leave from there.
@AviFelman, who is Head of Trading at BlockTower. Avi is not just a great trader, he also wrote the terrific CryptoAM turned TowerWatch newsletter (discontinued in 2020). For Deribit Insights, Avi will pick up the pen once again. blocktower.substack.com
@benjaminsimon97, who does research and investment analysis for Mechanism Capital, one of the most successful Defi funds. Ben is a strong writer with two guest articles on Deribit Insights already under his belt.
One of the most common questions we get around EIP-1559 is how predictable the price of getting into the next block will be. Or in other words, how often will you able to pay the current basefee + minimum tip compared to the system degrading to today’s first-price auction (FPA)?
First, a quick excursion: Why do blockchains need to put a price on scarce resources anyway? 1) To maximize user welfare (allocate resources to those who gets the most utility from them) 2) To minimize the social cost txns have on other nodes
To cap the social cost, Ethereum currently puts a hard gas limit of 12.5m on blocks. As of right now, the marginal price of each unit of gas is around 120 Gwei. In other words, at a marginal price of 120 Gwei, there is 12.5m gas worth of demand to transact.
It is absolutely mental how many famous Bitcoin evangelists reject coordination problems as a concept. Why? If they admitted that coordination problems exist, they'd also validate their possible solutions, e.g. a central government, or above that, an international order.
However, that thinking is incredibly short-sighted. It's possible to admit that coordination problems exist AND that we need better solutions than central parties. Bitcoin itself is such a solution. But that opens another can of worms...
If they admitted that a rule-based system, enforced by cryptography and economic incentives, are a useful to solution to anything else than digital gold, they'd risk also validating Defi and at least a few other altcoins... oops
"It seems to me that Bitcoin has succeeded in crossing the line from being a highly speculative idea that could well not be around in short order to probably being around and probably having some value in the future." (p1)
Dalio challenges the idea that Bitcoin is as scarce as people think, since there is an unlimited number of "Bitcoin-like assets". More innovative coins can probably carve out their own demand, and arguably we are already seeing that today. (p1)
Though Dalio knows about the ability to hold coins in cold storage, he's still concerned about the ability to shield them against cyber attacks and hold them securely. He warns that increasing digitization also increases systemic risk. (p2)