The Week: stolen apes, coin frauds and streamer leaks
It's flimflam week on The Terminal
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NFT dislikers were provided with a wonderful bounty this week, with news that the latest project to shamelessly rip off Bored Ape Yacht Club had turned into a multimillion dollar heist on a bunch of rubes:
A week after the project launch, the anonymous developer known as Evil Ape who promised that game vanished along with the project’s official Twitter account and website. But they left traces behind on the blockchain that shows they siphoned 798 ether ($2.7 million) out of the project’s funds in multiple transfers. The funds, derived from the initial public sale of NFTs and commissions on the secondary market, were meant for project-related expenses like marketing.
This is what’s known as a ‘rug pull’ in the crypto world — describing the increasingly common phenomenon of someone ginning up a bunch of hype and craze for a new token before vanishing into the ether with the initial investment.
Now, I’m on the record saying in this very newsletter that there are interesting principles at play in some of the NFT world, and that this stuff is going to have a longer tail and bigger economic and cultural influence than many might expect. (This is despite the fact that almost all NFT art looks like complete shit, but I digress.)
But c’mon. When you have a very frothy, totally unregulated market that is largely driven by people who are in it for massive speculative gains, scams are inevitable — and become the backbone of the whole enterprise. Poke your head into the Discord servers1 for a given NFT project and you’ll see something that looks like a Herbalife meeting for the terminally online.
While we’re on that…
Streaming platform Twitch was hacked this week, with the anonymous ne’er-do-wells describing their goal in leaking everything from the source code to unannounced projects as an attempt to “foster more disruption and competition in the online video streaming space” because Twitch and its community is “a disgusting toxic cesspool.” Right.
But the headline story everyone seems to be fixating on is a list of the highest-paid channels and how much they were paid over a 24 month period. This has been how the issue has penetrated the mainstream press, with this ABC headline more or less capturing the timbre of the coverage: “Twitch hack reveals multi-million-dollar sums top streamers earn from playing computer games”.
And yes, the money seems substantial if you frame it that way. The top ten streamers on the platform all grossed between two and ten million bucks over that two-year period. Sure, that’s a lot for playing computer games. But as an entertainment product with a vast (and growing) audience, it’s actually not that much for those at the top of their game.
Compare them to television actors — which is not a bad comparison2 — and it looks like peanuts. There are plenty of factors at play here, but it goes to show that among all the stories of people hitting the jackpot in the creator economy, individual creators are mostly pretty disempowered dealing with the mammoth platforms they are forced to negotiate with. This tweet puts one aspect of it well:
Back when Vine was starting to face user attrition and a creator exodus, there were reports that the top creators tried to band together to make more concrete financial demands of the platform in exchange for their participation. It wasn’t quite unionisation, but it was in the ballpark. Well, we know how that went.
If you haven’t paid much attention to the Tether/stablecoin story over the past few years, this Bloomberg writeup is a great way in.
Here’s the short version. Tether (also called USDT) is a stablecoin whose value is pegged to the US dollar. It’s crucial to the crypto economy because it provides liquidity in a time when many banks and financial institutions still don’t want to touch cryptocurrency. Traders use it to buy and sell crypto and move their holdings between exchanges. (Also money laundering, but let’s put that aside for a moment.) Imagine it as a gateway between the crypto economy and the ‘normal’ world of finance. It’s also helpful to think of it less as a coin and more as a shadow bank, where every purchase of Tether is a deposit.
Theoretically, it’s supposed to be fully backed, meaning that for every one of the 69 billion Tethers in circulation there should be a corresponding US dollar in the company’s bank account. At any point, no matter what, you should be able to exchange your Tether for the same amount of US dollars without hassle. The company behind Tether has long insisted that is the case, and has said no one who has tried to make such an exchange has ever been turned away.
But, as has been reported plenty of times over the past few years and investigated by US authorities, the truth is much more complicated. For example, plenty of Tether’s holdings appear to be tied up in commercial paper, which is a relatively safe kind of short-term debt. Bloomberg reports that the company has also made billions of dollars through crypto lending — which it insists is safe, because it’s collateralised with higher-value bitcoin. Put together with the fact the reserves are being speculatively invested for profit, as is alleged in the piece, and it looks less like a coin or a bank and more like a barely-regulated hedge fund.
With that much money outstanding, Tether— and stablecoins generally — become a serious risk to the financial sector. I’m just scratching the surface here, but hopefully that was somewhat illuminating. Also, I’m just going to leave this passage from the story here for you:
Tether still hasn’t disclosed where it’s keeping its money. The only financial institution I could find that was willing to say it’s currently working with the company was Deltec Bank & Trust in the Bahamas. I met the bank’s chairman, Jean Chalopin, in Deltec’s office, on the top floor of a six-story building ringed with palm trees in a nice part of Nassau. In a past life, Chalopin co-created the cartoon Inspector Gadget, and a painting of the 1980s trenchcoat-wearing cyborg policeman hung on his office door.
Something to chew on
This is the Zodiac speaking
I tend to be incredibly skeptical when a group of “law enforcement investigators, journalists and military intelligence officers” comes together to say they’ve solved a famous cold case, especially when its one with such deep psychic links to The Culture as the Zodiac killer. It seems the FBI is not convinced by the theory either. (Ditto for the guy who runs ZodiacKiller.com, who calls it “bullshit” — and surely he would know.)
But it’s been kind of interesting to see internet sleuths dig through now-suspect Gary Francis Poste’s online history to find possible links. It’s like the' ‘TikTok couch guy’ decentralised investigation effort, but for modern history’s most notorious crimes. First there was this:
Then they found what is allegedly Poste’s IMDB account:
Again, I’m not convinced by any of this. But it’s funny, and the idea that the Zodiac might have been alive long enough to post on Facebook is obviously a tantalising one.
Whistling through the graveyard
I wrote a bit about Facebook’s current dramas for subscribers this week. One thing I didn’t really touch on was the whistleblower, Francis Hagen.
The discourse around her testimony has been really interesting, because while she has exposed a lot of uncomfortable truths, she also doesn’t want the company broken up, which is an obvious solution to its accumulation of power and one of the core demands of activists. Instead, she wants a federal US agency with oversight over Facebook and other big tech companies.
In many ways, her tech solutionist approach, despite seeming at odds with Facebook, perfectly aligns with the company’s longterm goals. I liked antitruster Matt Stoller’s take on this:
Haugen is a trained designer of algorithms, and along with many naive Silicon Valley insiders turned critics, at heart does not see a danger with concentrated power. “I don’t hate Facebook,” she has said. “I love Facebook. I want to save it.” Her approach to social media is similar to what many left consumer oriented groups support, which is not to take apart a concentration of power, but to regulate it. It is, in many ways, a similar framework as Obamacare and the Dodd-Frank financial reform package, which, rather than making systemic changes to concentrated and bloated dysfunctional sectors, simply overlaid captured regulators on top of them.
Thought this was an interesting interview with HC 'Nugget' Coombs from back in 1992. He was the first Governor of the Reserve Bank of Australia and a committed Keynesian, and it’s interesting to compare his rhetoric to what we get now.
Somewhat relevant to the Twitch and streaming conversation above: “Don’t Let Amazon Eat the Film Industry”.
Who killed the mafia? Millennials, apparently.
To the point about most NFT art looking like shit, CoinSpot says there needs to be an “attitude shift” in the fine art market before digital tokens take off there.
Good explainer on the mechanisms of NFT money laundering, too.
Also on Facebook: a look at the company’s “brash and combative” PR guy, Andy Stone.
Rather than link you to the New York Times story about the insufferable book people and the kidney donation, which you have almost certainly read, I’m going to link you to this horrifyingly well written NYT feature on a botched circumcision. You’re welcome!
Defector, despite being audience-supported, released an annual financial report. There’s a bit of creator economy transparency for you.
Fascinating bit on the mismanagement of nuclear waste in the US.
China released “ethical guidelines” for AI, which the South China Morning Post contextualises as part of the state’s broader tech crackdown.
Humans should have full decision-making power, the guidelines state, and have the right to choose whether to accept AI services, exit an interaction with an AI system or discontinue its operation at any time.
Apple has basically become one of the biggest companies in gaming, the WSJ estimates, making more money from its gaming offering than titans like Microsoft, Sony, Nintendo or Activision-Blizzard despite not really being a gaming company.
Really interesting on what happened when India banned TikTok and Instagram Reels became dominant.
I wrote about the information disconnect enabled by these private forums in a subscribers post here.
Streamers, who seem to spend every waking moment playing for their audiences, probably work harder!