Elon Musk ❤️ Twitter
Earlier this week, Elon Musk made an offer to buy Twitter, a publicly-traded company, for $42B. The acquisition would effectively take it private, and allow Musk to “unlock” the social network’s true potential. Twitter’s stock price has been downtrending since founder Jack Dorsey’s surprise resignation in late 2021, down about 40% from its ATH of $77. Dogecoin creator Jackson Palmer referred to Musk’s offer as a “hostile takeover” and doesn’t believe it will result in any tangible kind of “freedom.” Interestingly, Palmer himself washed his hands of the Dogecoin project (and crypto in general) years before it became Musk’s favorite shill.
Ever the trend-jacker, Justin Sun of the Tron Foundation immediately called Musk’s bet, raising it to $46B. Not that the Twitter board would ever take crypto’s noisiest hype man seriously, of course. The Tron Foundation has had a dismal track record on its biggest acquisitions: Bittorent remains relatively inert, while Steem appears to have triggered an all-out war within the community. If they couldn’t keep the Steem Monsters in check, I doubt they would be able to cope with the BTSArmy.
Sam Bankman-Fried of FTX approached the Twitter acquisition conversation from a more practical standpoint, theorizing that you could turn Twitter into an on-chain platform where every tweet was recorded on the public blockchain. If you charged $0.01 per tweet for each of the 500M tweets posted daily, you would “replace half of Twitter's revenue,” according to SBF. He didn’t take the thought experiment far enough though, because if you’re thinking of charging users to post tweets, you also need to provide a way for them to generate income from the platform, i.e., by earning from followers, likes, and RTs. You’ll also need a way to airdrop tokens to them beforehand, otherwise no one would be able to use the platform. Lastly, you’d have to think of a way to model the tokenomics such that the costs and rewards of using the platform are not less than the value of just trading the tokens. In case anyone is wondering: this isn’t a thought experiment so much as an actual economic model that’s been operating since 2016. Steemit pioneered all of this stuff years ago, which partially explains Sun’s interest in their token. We’ve also had enough other high-profile attempts at the same problem (Cent.co comes to mind) to know that tokenizing social networks and user-generated content isn’t easy. One could argue that it might be as difficult as tokenizing an online PVP game.
Speaking of online PVP games! In the same week that Ethereum Foundation developer Virgil Griffith was sentenced to 5 years in prison for teaching North Korea how to use crypto to evade US sanctions, the US Treasury Department has tied the $600M Axie Infinity/Ronin hack to a North Korean state hacking group called Lazarus. The blockchain address associated with the hackers has been placed on a financial sanctions list, effectively making it illegal for businesses to deal with them or to accept funds from them. This is only useful if we expect Lazarus to use centralized exchanges like Binance to launder their funds, since those companies have to comply with policies like this if they want to continue doing business in the United States. As far as we can tell though, over 10% of the stolen ETH have already being anonymized using Tornado.cash, making it impossible to track their true destinations. (More on this later.)
Blockchain security firm Elliptic has a more detailed writeup here, in which they liken the hackers’ tactics used during the Ronin hack to some older Lazarus attacks against centralized exchanges. There is speculation that the proceeds from the hack are being used to fund Pyongyang’s nuclear and ballistic missile program. If this were true, 2022 has truly set the bar high for “worst uses of NFTs.”
The good news is that ETH holders within the Ronin ecosystem have all received their funds back. The bad news is that it's looking more and more likely that the hackers will get away with their prize. The hackers have moved about $100M in total value now from their original Ethereum address, most of it through Tornado.cash. If you don’t know what that is, it’s a really interesting tool for people who want total privacy on Ethereum. Because we can track on-chain transactions easily through the blockchain, Tornado was created to mix up the transactions in a way that will make them effectively anonymous. How does it do that? The simplest way to describe it is this: Tornado accepts your ETH and then mixes it up with everyone else’s ETH, and then sends it to a new address that you define.
Tornado (and most other mixers) work like this. Imagine throwing your 20-peso bill into a fishbowl with hundreds of other 20-peso bills and then shaking it hard. If the fishbowl is big enough and there are enough 20-peso bills in there, it’ll be impossible to tell which paper is yours. When you reach in and take back the 20 pesos you were owed, it could be anyone’s money. You’ve basically exchanged your original 20-peso bill with someone else’s, so your fingerprints will no longer be on it. Of course, in this case, we’re talking about over 173K ETH, which is why the hackers have been taking so long using Tornado to launder the funds. If you put in large amounts (like say, 10k ETH), it’ll be pretty easy to still match your transactions because the Tornado fishbowl isn’t all that big. So instead they need to break the amounts up and they need to wait for some time before withdrawing them, to make sure that no one can trace their transactions.
Hope you’re all having a great holiday so far, cryptofam! See you all next week!