Crypto Newsletter 2/13: The Shadow of Mt. Got Rises Again
The questions surrounding crypto exchange QuadrigaCX continue to mount. In last week’s newsletter, I briefly discussed the death of QuadrigaCX’s founder, Gerald Cotten, and how that led to $190M being frozen in cold storage with no way for the exchange’s users to recover their money. It’s the inevitable consequence when the only person with the password dies.
However, what at first seemed like an accident, albeit one showcasing the risks of a single individual acting with no regulatory oversight, has now taken a more sinister turn. Internet murmurs now suggest the possibility that Gerald Cotten faked his own death. First, Bloomberg reported that Cotten filed a will just 12 days before his death, and then the Wall Street Journal cited researchers that stated they weren’t sure whether the funds are frozen or missing altogether. Lastly, there is the fact that Cotten died during a trip to India, far from his home in Canada.
Together, these points are enough to create a compelling, though not airtight, case for fraud. However, there’s no certainty as to what really happened, and there may never be. Yet the very theory of Cotten absconding with millions brings up an important part of crypto psychology: many users are suspicious and distrust everyone and everything, including death certificates.
Blockchain believers want “trustless” systems that don’t require them to trust someone like Cotten, but the tech isn’t developed enough to deliver trustless systems. Individuals still have to trust somebody at some point, and until those somebodies are regulated or the code becomes sophisticated enough to remove them, people will be taken advantage of. Money will be lost.
Such is life in the unregulated market.
What’s Happening In the News
In an interview with TechCrunch, crypto pundit Brock Pierce discussed his intention to not only see Mt Gox users repaid, but to revive the defamed crypto exchange and have it compete with the likes of Coinbase and Binance.
Dharma raised $7M in a Series A to build out its peer-to-peer lending smart contract, a decentralized alternative to services offered by Genesis Global Trading and BlockFi.
It may be winter, but many major crypto exchanges have started OTC trading desks in the past month. Turns out, they’re doing quite well.
CoinDesk’s Brady Dale explores the Consensys token issuance project Token Foundry to discover whether it’s dead or whether the recent activity on their website signals a rebrand.
Articles We Read (And You Should Too)
Speaking of trust issues, Harvard security technologist Bruce Schneier disputes the idea that there is anything trustworthy about blockchain in a contribution post for Wired. What’s the point of blockchain if it doesn’t remove trust, Schneier asks. A healthy dose of skepticism for an enthusiast’s industry.
Taking the other side, Edward Snowden drinks the crypto Kool-Aid and in a conversation that first appeared in McSweeney’s, explains the power of blockchain at a global level, from the use case of money to that of digital proof.
Both must-reads this week have themes of trust but take opposite sides in the argument of whether that trust is well-founded. Both articles are worthwhile reads, and who knows, maybe one of the two will change your mind.