October 10, 2022

The biggest crypto news and ideas of the day

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Hello and welcome to The Node. I'm Daniel Kuhn, here to take you through the latest in crypto news and why it matters. In today's newsletter: Crypto exchange Huobi Global will be acquired by About Capital, crypto investment firm Blockwater Technologies defaulted on a DeFi loan and Dapper Labs restricted services to Russia amid EU sanctions.

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– D.K.

Today's must-reads

Top Shelf

It's Lonely in the Metaverse: According to data from DappRadar, the Ethereum-based virtual world Decentraland had 38 active users in one 24-hour period last week, while competitor The Sandbox boasted 522 in that same time amid a period of growing interest in "the metaverse." Both Decentraland and The Sandbox are worth around $1.3 billion.

Sam Hamilton, creative director at Decentraland, told CoinDesk that while they report 8,000 users on average per day, this accounts for any individual who passively interacts with the metaverse.

Crypto Exchange Huobi Global to Be Acquired by About Capital: Hong Kong-based investment company About Capital Management's M&A fund is buying Huobi Global, a top-10 crypto exchange by trading volume.

The international fund popular in Asia said it will receive an "injection of sufficient capital" to stay above water in the crypto winter and potentially continue expansion plans.

Crypto Investment Firm Blockwater Technologies Defaults on DeFi Loan: South Korea-based crypto investment firm Blockwater Technologies missed a payment on a $3.4 million loan to decentralized lending protocol TrueFi, raising fears about potential insolvency.

Separately, the market cap for USDC, the dollar-pegged stablecoin issued by Circle, dropped below $50 billion for the first time since Terra's collapse.

Dapper Labs Restricts Services to Russia Amid EU Sanctions: NFT powerhouse Dapper Labs has cut off payment services for non-fungible token owners with links to Russia, citing European Union sanctions. Impacted users can still look at their NFTs but cannot move funds or cash out, the firm said.

Last week, the European Union confirmed it will tighten sanctions on Russian crypto use, while crypto exchange OKX cut off its services in the country.

Crypto and Payments Firm MobileCoin Launches 'Electronic Dollars' Stablecoin: MobileCoin, the privacy project with ties to Signal's founder Moxie Marlinspike, launched a stablecoin in collaboration with stablecoin platform Reserve. Dubbed "Electronic Dollars" (eUSD), the asset is backed by a basket of other stablecoins, including USDC, Pax dollar (USDP) and trueUSD (TUSD).

The company says eUSD is fully collateralized and is uniquely designed to protect users' private transactional data.

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Putting the news into perspective

The Takeaway

Celsius Doxxed Hundreds of Thousands of Users by Court Order

Celsius Network, the bankrupt crypto lender, accidentally doxxed all of its users. Last week, more than 29,000 pages of court documents hit the servers, revealing the financial details of hundreds of thousands of users that kept money on the "neobank" Celsius.

The information appears to have been released as part of standard bankruptcy procedure as Celsius winds its way through the Chapter 11 restructuring process after freezing customer accounts in July. About 600,000 customer accounts are affected by the disclosure, revealing their wallet addresses, transaction histories, crypto holdings, recent transactions and other information.

The incident has raised serious concerns about financial transparency and fears that this public information could make Celsius users targets for harassment or theft. It does not appear to be a data breach or hack, as many initially suggested.

According to court documents, Celsius fought to prevent much of this information from getting out. In the end, users' emails and home addresses were allowed to be redacted. One of the company's arguments was that publishing this personal information would "reduce" the list's resale value.

(Getty Images)

Chief Bankruptcy Judge Martin Glenn, who's overseeing the case and compelled Celsius to release this data trove, cited court precedent and inadequate proof that doxxing users would put them at risk.

"Sealing information such as that sought by the Debtors [Celsius] from public disclosure risks transforming the open and transparent bankruptcy process into something very different, which the Court is loath to do without a strong showing of real and not speculative risks," Judge Glenn wrote in a September court filing.

Still, due to the default transparency of the blockchain, even the partially redacted information can be pieced together to "dox" Celsius users' other on-chain activities, Henry de Valence, founder of Web3 startup Penumbra Labs, noted on Twitter.

It's also arguable that the court's demands here far exceed the norm. Typically, companies going through the bankruptcy process will have to expose a full accounting of their assets, which Judge Glenn here took to include Celsius' custody books going back to July.

All of this has led to the usual bromides often heard on Crypto Twitter: the dangers of trusting centralized intermediaries, the importance of practicing good "op-sec" when using public chains and the need for crypto-specific laws and regulations that meet the industry where it is.

People are already scanning through the list for names they recognize, and sending reminders that there might be more than one Neeraj Agrawal in the world. There's been at least one example of wrongful public shaming so far, where one bitcoiner erroneously called out another for apparently using Celsius.

I'd expect more of this now that a website launched making the data publicly searchable by name. That website, called Celsiusnetworth.com, also includes a ranking of doxxed Celsius users by the amount they lost – for easy schadenfreude.

The site itself appears to be conflating different individuals and aggregating data, meaning its accuracy is questionable at best.

It's worth noting the irony that Celsius has not been exactly forthcoming throughout the bankruptcy process, and that its executives not only misled the public in the lead up to freezing its services but withdrew millions of dollars from custody accounts.

Whether Celsius creditors (read: users) will receive any payout after the firm restructures is an open question. They could have been doxxed for nothing.

– D.K.

Overheard on CoinDesk TV...

Sound Bite

"As we see more of these attacks on bridges, the communities that rally around these blockchains are getting much better at shutting them down."

– Patrick Hillmann, chief communications officer at Binance, discussing the platform's $100 million exploit, on CoinDesk TV's "First Mover"

IDEAS Week is a series of features and interviews previewing CoinDesk's newest event taking place Oct. 18-19 in New York City: Investing in Digital Enterprises and Assets Summit – I.D.E.A.S., which brings together leaders in traditional finance to meet and learn directly from blockchain, Web3 and digital assets founders and developers. Read IDEAS Week here.

What others are writing

Off-Chain Signals

Justin Sun denies being 'real buyer' of Huobi stake sale: Exclusive (The Block)
Bitcoin Mining Difficulty Jumps 14%, Hitting All-Time High (Decrypt)
The supply of Ethereum will be 100M by 2027… or 2061 (Protos)
Shutting Off Fed 'Money Printer' Leaves Bitcoiners Out of Sorts (Bloomberg - paywalled)

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The Chaser...