Crypto Influencing Gone Wrong??, Uniswap Scams??, Terrorists ?? Crypto

The big talk ??

I got a lot of positive feedback last week about my harpooning of the NFT meltdown. So I’m climbing back on my high horse and turning my steely gaze to the ‘crypto influencer economy’, and how utterly terrible it is for the ecosystem as a whole.?

Before I do that, it’s important to clarify what I mean by influencers, as there are a lot of different types in the crypto space.?

• Influential types with their own money and incredible power and influence - these are your Elon Musk’s, your Changpeng Zhao’s (the Binance CEO), and other big swinging dongs that utilize their power to further their own businesses or causes they believe in. Or chastise those that they see as rivals.?
• Engineers, VCs, Developers, and clever types with big followings - these are typically a tech/crypto-specific bunch. These are typically attached to blockchains or projects, and just like to muse out loud on social media.?
• Your good old-fashioned social media influencers - these have built their followings typically through education, entertainment, and of course, speculation. They are essentially marketers for hire. That’s not a bad thing, but as I’ll later explain, it puts them in a dangerous position with law makers.

Over the last few weeks, these three groups have been in and out of the press, with varying degrees of scrutiny. First up, Mr. Musk, who uses his gargantuan following - and now his ownership of Twitter - to softly push his love of DOGE, the meme coin that exists because people think it’s funny.?

Whenever he mentions the coin, the price goes up, as can be seen here.?

Most of the community thinks this is fine because it creates a bump in prices making people wealthier at a time when holding crypto is doing anything but. People don’t seem that interested in knowing how much of the coin he holds, and how much he profits from the promotion.??

What the community isn’t so fine about is when traditional influencers do the same. Earlier this week, the Art Gobblers NFT collection went on sale. Crypto was all abuzz because one of the creators of the popular TV show Rick & Morty was attached.?

Within 24 hours of going live, millions of dollars had changed hands and Twitter was awash with cries that influencers had been given the NFTs for free and were now profiting off the hype they had been paid to create.?

This isn’t a new thing in the crypto space. But people don’t like it as it creates a sense of unfairness. I think it's far worse than that. It tarnishes the industry as a whole, and it sends people to jail.?

If you remember my rant last week about NFTs, you might remember that proponents of the technology wanted to integrate blockchain into gaming. But gaming said, ‘non’ because they saw the technology as one big, giant grift. It wasn’t in the spirit of collecting, it was just a way of people speculating.??

That same perception has also been applied to tokens, too, and is widely discussed inside the community. Crypto’s inherent value for many is hollow. Influencing compounds that problem to the point where it has become endemic. This week, researchers said 98% of tokens on Uniswap are scams. They were nothing more than vehicles for their creators to sell a promise of something great - and often used influencers - in order to steal people’s money. This is a terrible thing for the industry, and a terrible thing for influencers too.

Why? Companies paying people to drive up the price of their product for financial gain means that in a lot of jurisdictions, companies are paying people to do something illegal that can land them in jail. And no one knows what to do about it.?

Kim Kardashian paid a massive fine for doing that, and other influencers are now facing legal battles with the SEC for promoting securities. What’s a security??

They are financial instruments that hold some type of monetary value that can be bought and sold, and usually, come with a condition that the person buying them expects to make money out of them.??

Most people think of them as stocks in a company, but historically things like Whiskey, land, and even bloody chinchillas have all fallen under this definition. More recently crypto has been included in this round-up, too. Meaning influencers are peddling securities. Which is illegal in the US and the EU.?

Which leads to this weird existential question that no one wants to try and answer: how does something new get noticed if it can’t pay people to promote it? Want my two cents? Find a really hard problem and try to solve it.?

What people are shouting about: ???

• 98% of tokens on Uniswap are scams, says researchers - this one is causing quite a stir in the crypto community. A research paper - which you can find here - took a long hard look at the tokens being listed on Uniswap, one of the most popular decentralized exchanges in crypto, and found that most of them were what we in the crypto industry love to call “rug pulls”. Which is a coin deliberately designed to be pumped and dumped by its creators. Crypto Twitter isn’t happy.?
• Terrorists love using crypto to raise money - Terrorists have been embracing terrorism for years. Still, the UN has recently released a report suggesting that 20% of global terror attacks have been financed by donations using Web3 tech. But, says the report, cash is still king as it’s still the most anonymous way of fundraising for fighting. Who knew???
• Zuckerberg taps up Polygon for NFTs on Instagram - bit of a scoop for Polygon, the layer 2 blockchain built on top of Ethereum - as Instagram is using its platform as the blockchain component for its long touted NFT function on the social network. Once live, people will be able to buy NFTs directly from their faves inside the IG app. It’s in a kind of beta at the moment, and will only be rolled out to a few creators in the US, but it’s big for Polygon as it will create oodles of on-chain activity thanks to Insta’s 1.4 billion users.?
• Binance wants to build Twitter’s Web3 play - as discussed in the Big Talk, Twitter is now Elon’s, and all the investors he brought with him. One of those was Changpeng Zhao, Binance’s founder who sank $500 million into the purchase. As a result, Twitter has been all aflutter about CZ being super enthusiastic and wanting to help his new BFF make the social network profitable. As with most things on crypto Twitter, it’s just a bit of gossip for now, but it shows how when the markets turn to the most liquid diarrhea humanly possible, the crypto lot are reaching across the aisle to sell their wares to Web2 projects. And it appears to be working.??
• There’s a big expose burning through Twitter about how FTX helped Celsius manipulate its books - More scandal from the top this week. Sam Bankman Fried, SBF to you and me, widely considered a crypto saviour by some, and a bully to others (I’m in the latter camp), appears to have been complicit in helping Celisus - that big old bust CeFi lender - fudge its books to make it look like it was doing better than it was. Oh, and it appears he’s also in cahoots with Tether, which gave him a ton of money early on, while lying to investors about where its money was kept. SBF has yet to respond to allegations.?

The at first glance incredibly boring, but in reality, incredibly insightful and interesting thing you should read this week ??

How tokens shape behavior. This one is a hot topic at the moment in crypto land. Traditional marketing strategies are coming unstuck as they struggle to understand what motivates crypto customers. This long read by Mason Nystrom goes some way to explain what’s going on.?

Chart of the week ??

Bitcoin miners are having a terrible time. Thanks to low prices, low trading activity and soaring energy prices, the share prices of some of the biggest listed ones — Marathon Digital, Riot Blockchain and Core Scientific, have been dreadful. Via the FT.

Strange but true ??

• Boris Johnson is the keynote speaker at a crypto event - yep, the world’s worst PM is now a major draw in the crypto community. He is due to deliver the keynote address speech at the International Symposium on Blockchain Advancements on 2 December. For more details, please see this week’s Big Talk section on crypto’s influencer problem.?
• A crypto VC was a key player in the Storming Capitol plot - The New York Times has revealed that a small-time crypto VC was a key messenger in the plot to storm the capitol last year. Eryka Gemma, it is alleged, was responsible for giving the 1776 Returns document - detailed plans to storm government buildings on January 6 - to Enrique Tarrio, the leader of the far-right group the Proud Boys who has been indicted for seditious conspiracy. Gemma is a Miami cryptocurrency venture capitalist at Timelock Ventures, a smaller venture capital and advisory firm.?
• China holds billions in Bitcoin - Remember when the Chinese government banned all crypto because they believed it was undermining state sovereignty? Well, turns out what was good for the public wasn’t necessarily good for Beijing. The Chinese government holds $3.9 billion in Bitcoin, and about another $1.1 billion in other cryptocurrencies as a result of seizures it carried out against alleged perpetrators of the PlusToken scam - one of the largest crypto scams of all time. It’s not clear what the state plans to do with all that money, but some are worried it could push prices down if it tries to sell it.??
• Pharell has launched a high-end NFT art platform - if you haven’t spent all your money on NFTs yet, Mr Pharell, he of the music fame, is launching a high-end NFT platform next week. Called the Gallery of Digital Assets, or GODA for short, its first collection is a very exclusive bunch of artwork from a Swedish artist called Hilma af Klint. Fancy.?
• A prominent crypto founder was found dead in Puerto Rico - Nikolai Muchgian, the 29-year old founder of MakerDAO, the largest DeFi protocol, washed up on a beach in Puerto Rico under suspicious circumstances. While tragic, what’s got crypto spooked is the last thing he said on Twitter: “CIA and Mossad and pedo elite are running some kind of sex trafficking entrapment blackmail ring out of Puerto Rico and caribbean islands. They are going to frame me with a laptop planted by my ex gf who was a spy. They will torture me to death.” Make of that what you will.??

Another absolute rollercoaster of a newsletter. Thanks for tuning in and see you next week.?

I love you all.??????