$90 Million Down the Toilet - Unchained Podcast

+ Is Satoshi moving coins?

Before we begin, Happy 10-year anniversary of Bitcoin 🍕 Pizza 🍕 Day! Ten years ago today, Laszlo Hanyecz paid 10,000 BTC for two Papa John’s pizzas! At today’s prices, he paid the equivalent of $90 million for those two pizzas. Hope they were really, really, really good.

Speaking of Bitcoin from back in the day, 40 BTC mined in the first month of the Bitcoin network being live moved this week. What could it mean? Also, this week, BlockFi gets hacked via a SIM swap, there’s more Steem craziness, plus Crypto Muggle JK Rowling trolls Bitcoin with expert precision. And on the podcasts, be sure not to miss my interview with CZ in which he compares Binance to Bitcoin. (Say whaaa???) Plus, on Unconfirmed, Jeff Roberts, author of a recent book on Coinbase, reveals some juicy tidbits about the crypto unicorn’s history.

This Week’s Crypto News…

Did Satoshi Move 40 BTC This Week?

Whale Alert tweeted that 40 BTC ($391,055) mined in the first month that the Bitcoin network was live got moved this Wednesday. While there was some speculation that this could be anonymous creator Satoshi Nakamoto moving coins, a number of early Bitcoin blockchain analysts and sleuths have detected one miner from the early days that had a distinct fingerprint every time it mined blocks. They believe that was Satoshi — theorizing that perhaps Satoshi had optimized the client he, she or they were running, creating the distinct fingerprint — but also because the coins mined in this pattern have not been moved. And the recently moved coins do not come from the sets that were mined under that pattern — meaning that they are likely being spent by another early miner.

In a Periscope chat with Lawson Baker, Nic Carter gave a theory that these coins are being moved by someone in the Craig Wright case, perhaps to prove that Craig Wright did not mine those coins. We shall see.

I’ve included links in the show notes where you can read about this so-called Patoshi pattern, from Sergio Lerner, Bitmex and others, and why this is presumed to be Satoshi, and you can see that the 40 BTC that were moved were not mined under that Patoshi pattern.

BlockFi Employee Gets SIM Swapped 🤯; Hacker Gets Customer Data

This definitely deserves an exploding head emoji. A BlockFi employee must have been using 2FA via SMS because that employee was SIM swapped and then the hacker was able to use the hijacked phone number to get into BlockFi’s systems. The hacker obtained confidential data, such as names, dates of birth, postal addresses and activity histories. However, they did not access more sensitive data such as bank account details, social security and tax identification numbers, passport and driver’s license numbers or photo scans.

This reminds me of when an engineering lead at BitGo got SIM swapped and lost more than $100,000 in cryptocurrency. Please, people, if you are in any way, shape or form involved in cryptocurrency, you absolutely should not use second-factor authentication via your phone number. What this means is, for any service you use, if the extra security offered has the company text a code to your phone or call your phone, someone can steal your phone number, click “forgot password” on, say, your email or in this case, your company login, and get a code texted to them that lets them get in while locking you out.

I first wrote about this phenomenon in 2016. It is 2020, now, people. Get a grip — no 2FA using your phone number unless it is a Google Voice or Google Fi number since those don’t have customer service agents that can be tricked or bribed. And there is no excuse for every single crypto company out there to not be enforcing this rule on all its employees.

Bakkt Has More Than 70 Custody Clients and Insurance

Bakkt, with insurance broker Marsh, is now offering its customers more than $500 million worth of insurance coverage. When factoring in the existing $125 million in coverage at Bakkt, that brings the total coverage to more than $600 million. In a blog post this week, Bakkt president Adam White said the firm has more than 70 clients for its custody services, and the company has completed two types of exams — one for financial reporting, conducted by KPMG, and one for evaluating customer data protection practices, conducted by PricewaterhouseCooeprs. The company also says it is working toward the launch of its consumer app this summer. No word on a new CEO after Mike Blandina stepped down in April to take a job at JPMorgan Chase.

tBTC Is Over — for Now

An attempt to use Bitcoin as collateral in DeFi on Ethereum has failed, at least for now. As Matt Luongo described in a recent episode of Unchained, the system contained a single-use pause button that would enable users to withdraw funds, and on Monday, the tBTC team decided to push it. The bug was that the proof that the dapp was creating to show the Ethereum chain that a deposit on the Bitcoin blockchain had now been redeemed was incorrect. It was not actually proving that the BTC from the deposit had been sent to the correct redeemer address. Keep is still pursuing some already-planned audits and will be announcing how it plans to redeploy tBTC.

Steem Blockchain Attempts to Confiscate Some Community Members’ Tokens, Is Blocked

The original Steem community’s war with Tron, which recently acquired Steemit, continues. On Tuesday, the Tron-controlled Steem hard forked to create New Steem, cutting out some former Steem so-called “witnesses,” who serve as block validators, as well as others who had created another, anti-Tron, fork of Steem called Hive. The Steem blog post announced the move Monday, saying it would “seize some user accounts that participated in criminal activities by actively contributing to the threat against the Steem blockchain and/or to the theft of STEEM holders’ assets.” Sixty-four accounts would have their tokens seized, for 23.6 million Steem tokens, which is about $5 million as of press time. Someone known as community321 who had control of a Steem wallet was able to divert those tokens to Bittrex in hopes they could be returned to their original owners. The coins will be returned to that wallet, though whoever is behind the community321 wallet will have to declare their identity to Bittrex.

Also, btw, what I’ve described so far isn’t even the full extent of the fiasco: Justin Sun says he is working with law enforcement to pursue witnesses on the Hive fork.

A16z on How Crypto Has Grown Exponentially Across Hype Cycles

A16z wrote up a great analysis on the growth of the crypto industry since the birth of Bitcoin. It says, “Anecdotally, of the hundreds of conversations with crypto founders we’ve had, we often hear stories like: ‘I heard about crypto in [2011, 2013, 2017] when the prices spiked and everyone was talking about it. At first, I thought it was just about money, but then I started reading white papers and blog posts, learned more about the potential of the technology, and eventually fell in love with it.’” I would agree — I hear similar stories from founders, and probably some of you listeners as well fall into that category.

Through clear and simple graphs, the post lays out how price, social media mentions, and developer and startup activity have risen and fallen across each bubble, but over time, increased at a compound annual growth rate of more than 200% for social media mentions and more than 50% for startup activity. It’s worth taking a look to get a sense of how the hype cycles result in long-term growth.

JK Rowling Fits Right In on Crypto Twitter

It all started Friday night, with JK Rowling replying to CoinDesk writer Leigh Cuen on Twitter: “I don’t understand bitcoin. Please explain it to me.” The full insanity of Crypto Twitter was unleashed on the author of the Harry Potter series over the next few days, with Vitalik Buterin, CZ and many other members of the crypto community, including myself, trying to explain it to the author. However, Rowling later tweeted, “People are now explaining Bitcoin to me, and honestly, it’s blah blah blah collectibles (My Little Pony?) blah blah blah computers (got one of those) blah blah blah crypto (sounds creepy) blah blah blah understand the risk (I don’t, though.)” Then she wrote, “I know you mean to help, but full disclosure: … I’m on my fourth very strong Old Fashioned and honestly, you might as well send me a scroll written in Sanskrit.” Somewhere in this mess, an impostor JK Rowling account tweeted that it had bought Bitcoin, and Coinbase CEO Brian Armstrong responded to it, inviting it to also buy non-Bitcoin coins.

So after a weekend of ferocious tweeting, the Magic Internet Money crowd’s love affair with Rowling was winding down, and she still seemed not to understand what Bitcoin was. It seemed the effort had failed. Then on Monday morning, Rowling tweeted this, “This is getting silly. I’m not joining the Bitcoin community. It should be perfectly obvious by now that I’ve been trolling Bitcoin in the hope of boosting my significant Ethereum holdings.” Which goes to show — she understands Bitcoin perfectly after all.