Every year before Christmas, children around the world become extra obedient, hoping to make a last ditch effort to make it onto Santa’s “nice” list and receive the gift of their dreams. Though Santa’s existence grows less compelling with age, the philosophical polarities of good and bad still persist in every sphere of our lives.
The blockchain space is no exception, though the moral bent and philosophical underpinnings of the technology can be argued to no end. Is decentralization inherently good? What about globalization, which blockchain furthers? But how technology is used usually give rise to a clearer sense of right and wrong. Providing wider and equal access to financial services is commendable. Stealing from others, using cryptocurrency for illegal transactions or exploiting children? Not so much.
Here are some of the blockchain and cryptocurrency world’s most praiseworthy and reprehensible behavior for Santa’s consideration this year. Can you guess who might get only $hitcoin under the tree?
The nicest of nice
- Binance Charity Foundation and other donors in fight against Covid
Though charities have existed since the dawn of time, they have in recent years — thanks in part to tax law loopholes — become plagued by transparency and accountability problems, with the rich turning to charity fraud to cheat the state.
Binance’s Blockchain Charity Foundation (BCF), in collaboration with the United Nations Industrial Development Organization, confronts these problems by leveraging blockchain’s transparent and accessible nature to ensure the security and validity of philanthropy donations.
In 2020, BCF launched a number of successful campaigns to address social issues, the biggest of which is Crypto Against Covid, the global successor of its Binance for Wuhan project, which provided RMB10 million, or about US$1.5 million worth of medical equipment to hospitals in China following the December outbreak. Crypto Against Covid has raised almost US$5 million to date in cryptocurrency towards pandemic relief efforts in Japan, India, Spain, Ukraine, and more, with every transaction — both donation and allocation — logged on the blockchain.
Binance has pledged to match every donation 2:1, and is continuing to accept contributions, if you yourself feel inclined to make your own last-ditch attempt to get onto Santa’s nice list.
Aside from combatting the coronavirus pandemic, Binance Charity’s projects have included Beirut Explosion Relief, fighting Australian bushfires, and providing nutritious lunches for children in Africa.
It’s not just BCF that is making waves in the charity pool. More and more charities are accepting donations in cryptocurrency, and some are also utilizing blockchain to both ensure that their donors’ information is kept secure and to make it so that the paths of their donations are traceable. For example, instead of pressing “Donate” on a webpage and consigning your money to a charity organization’s murky internal structure, in donating through BCF and similar organizations, you can see the allocation records of your chosen campaign, complete with information about each transaction to each beneficiary (including transaction ID, timestamp, status, value, sender/receiver addresses, and more) visible for all to see. One of the most notable among these is Give.org’s sibling site GiveSafely.io, a donation platform built on the Ardor blockchain that “aims to restore trust in the online donation model.”
Another current campaign is Bitcoin Tuesday 2020, having occurred on December 1st, hot on the heels of Cyber Monday and Black Friday. Spearheaded by The Giving Block, another crypto donation company, it saw 120 nonprofits take part, a 1,000% increase from last year’s 12.
- Ripple: committing to a more sustainable future
Notwithstanding the enforcement plans that Ripple says the U.S. Securities and Exchange Commission has for the company, another much-needed good deed of 2020 is Ripple’s acknowledgement of the cryptocurrency industry’s enormous carbon footprint and commitment to addressing the global climate crisis.
Earlier this year, the company pledged to achieve carbon neutrality by 2030. It prioritized decarbonizing XRP Ledger in the hopes that other public blockchains would also follow suit. In addition, Ripple embarked on “new research with leading universities that evaluates energy consumption across digital assets, credit card networks and cash.”
Such regard for environmental impact is long overdue, considering the devastating burdens of crypto mining. The electricity consumption of bitcoin mining alone in 2018 was enough to rival that of Ireland, and is only projected to grow exponentially in coming years, not to mention the numerous other cryptocurrencies emerging in the marketplace.
Outside of mining, blockchain itself poses a problem to conservation, as it necessitates an increasing reliance on servers that take up massive amounts of both physical space and power. As an industry heavyweight, Ripple’s dedication to minimizing its own carbon footprint can set an example for the rest of the industry — and the world at large — to consider the future of the planet in every corporate and personal action.
- Everledger: promoting ethical labor
One of blockchain’s most popular and promising applications — supply chain management — carries the potential for addressing another global challenge: ensuring that the labor involved in production meets human rights standards.
For example, the notorious issue of “blood diamonds” has plagued the gemstone industry for years; the mining process that delivers the coveted stones into consumer hands is susceptible to human rights abuses at the very least, and implicit in war crimes at worst. Though the Kimberley Process attempted to put an end to the funding of crimes against humanity through diamond sales, its success was quite limited. In addition to the continued opacity in diamond sourcing, various other immoralities still plague the market, including child labour and violence against its workers.
Other gemstones aren’t immune either. Their mining and production occur in 47 countries as of 2014, and face identical problems to the mining and production of diamonds, in no small scale and at a devastating human cost.
Everledger is one company that aims to minimize these problems through the use of blockchain, which allows traceability all along the supply chain to provide proof of products’ authenticity and ethical production.
Speaking to Forkast.News earlier in the year, Everledger CEO Leanne Kemp — who also co-chairs the World Economic Forum’s Global Future Council on the Future of Manufacturing and serves as regional ambassador of Australia for the Global Blockchain Business Council — explained how her company seeks to authenticate and ensure the ethics of supply chains across industries.
“We started with diamonds, and made an obvious transition into gemstones. Both industries have historically been plagued with unethical and unsustainable practices that have serious consequences for stakeholders throughout the supply chain,” Kemp said. “We believe that the next most potentially conflicted supply chain will be rare earths and electric vehicle batteries, [that] rely on minerals such as cobalt and lithium. The mining of both is plagued with environmental problems and health risks to workers.”
- ATCC: fighting against human trafficking
In January of this year, the Anti-Human Trafficking Intelligence Initiative (ATII) was formed. A mere three months later, the non-profit organization birthed an Anti-Human Trafficking Cryptocurrency Consortium (ATCC) intended to facilitate the sharing of information to apprehend and punish perpetrators of modern-day slavery. In the months since, industry giants such as Coinbase, Gemini, Paxful, and Bitfinex have joined the effort.
Due to cryptocurrency’s reputation for anonymity, criminals often turn to it as a means for money laundering. Though these bad actors are believed to take up only a very small portion of the crypto space (and are a blight on the overwhelming majority of law-abiding individuals in it), their human impact is considerable. According to a report by Chainalysis, in 2019, US$930,000 worth of Bitcoin (BTC) and Ethereum (ETH) were sent to addresses associated with child sexual abuse material.
“It’s no secret that criminals often take advantage of perceived Bitcoin anonymity, but it’s actually not that anonymous at all,” said Lana Schwartzman, chief compliance officer at Paxful, in a statement announcing the company’s participation. “Bitcoin transactions are fully traceable, but whether law enforcement is able to catch bad actors depends on the technology and cooperation of parties involved.”
“As a global cryptocurrency marketplace, it is our responsibility to help organizations like ATCC fight bad actors looking to use Bitcoin to fund illicit activities,” Schwartzman added.
While human trafficking is one of the only fields that hasn’t suffered a blow from the pandemic (in fact, the coronavirus has likely exacerbated the crime), the traceability of cryptocurrency may go far toward catching these heinous criminals. Anonymous as transactions may be, one relinquishes one’s right to privacy upon the perpetration of a crime, particularly one as vile as this. The major exchanges of ATCC’s dedication to monitoring transactions, sharing information, and reporting illegal activity to authorities is another step towards ensuring no criminals can exploit the benefits of blockchain.
- Tron Foundation’s money grab
Not exactly a beloved personality, Justin Sun has been embroiled in many a controversy since his ascension to public recognition. This year, his company Tron Foundation came under particular fire for reportedly exploiting the U.S. pandemic relief Paycheck Protection Program meant to provide relief for small American businesses that are struggling during the pandemic economy
Tron’s Chinese subsidiary posted on social media that its parent company had received RMB17 million (or about US$2.6 million) worth of U.S. federal funds. For one of the most prominent cryptocurrencies (a business that likely is not suffering as much in a pandemic economy as others industries, as by nature it requires virtually no in-person conduct) — and one that has shown active growth, passing Ethereum in transaction volume recently — to take advantage of the program is poor optics at best, and rather unsavory behavior by any measure.
- Crypto scammers
According to blockchain tracker and analytics system Whale Alert, in just the first quarter of 2020, scammers stole US$24 million from their victims, nearly five times the amount of the entirety of 2017.
Among the most prominent was con artist behind the June YouTube scam using Elon Musk and SpaceX’s name and likeness, which defrauded victims out of more than US$150,000 in just a single day. Celebrity scams have been increasingly common this year, with Twitter suffering a security breach that saw accounts of public figures the likes of Barack Obama, Bill Gates, Joe Biden, and Jeff Bezos being used to tweet out a crypto scam.
- BitMEX and money laundering
In direct contrast to the crypto exchanges on our nice list that pledged to combat human trafficking with transparency, one of the industry’s largest exchanges, BitMEX, was denounced by federal prosecutors this year as “a vehicle for money laundering and sanctions violations” in an indictment brought against BitMEX CEO Arthur Hayes and its other co-owners (of whom two out of three remain at large).
The indictment alleges that even after being informed that the exchange was being used to launder stolen money as well as by countries under sanction such as Iran, it took no action to address these transgressions. It also asserts that Hayes incorporated his company in Seychelles rather than the United States because it cost less — “just a coconut” — to bribe local authorities.
The individuals named are charged with having violated the Bank Secrecy Act. Wherever they are, it is safe to assume that their priorities are not ensuring their place on Santa’s nice list at the moment.
- Nth Room organizers and users, who exploited women and children
While most of the misdeeds on this list have been on the part of industry insiders, criminality on the consumer end cannot be neglected. Individuals of the ilk that the anti-human-trafficking consortium pledged to pursue came to attention in the Nth Room scandal that shook South Korea earlier this year.
A sickening sex crime that ensnared even notable K-pop stars, the Nth Rooms in question were vile, exploitative chatrooms on Telegram, the encrypted messaging app. The Telegram chat rooms required payment in cryptocurrency to enter as well as further payments to view material that included pornographic images and videos of minors as well as those of at least 74 women and girls who had been tricked, coerced or blackmailed into creating degrading pornographic content of themselves. The content also included real-life videos depicting sexual violence and rape. “Let’s rape” was used by chatroom participants as a greeting in lieu of “hello.”
At the time of their exposure, the Nth Room had over 260,000 users — almost all male — in 56 chat rooms. South Korean investigators identified 221 individuals for prosecution, including one Cho Ju-Bin, the alleged ringleader of the whole operation.
Following the public outcry in response to the crimes, a South Korean court froze 15 crypto wallets belonging to Cho. Authorities also raided 20 of the biggest cryptocurrency exchanges in South Korea to follow the digital traces of an estimated 26,000 people who sent payments to Cho.
It trivializes the severity of the crime to say that each and every one of these supporters of child porn belong on Santa’s naughty list. May a judge take Santa’s place in determining and appropriately punishing the depravity of their conduct.
- The SUSHI that caused mass DeFi indigestion
Riding high on the growing success of DeFi, UniSwap has been one of the most successful projects on Ethereum. Starting the year at a total value locked of not even US$12 million, it has steadily clocked in at around US$1.3 billion over the past 2 weeks; a decrease from its peak of US$3 billion shortly before its liquidity mining rewards program ended, but a substantial growth nonetheless.
As the world’s largest decentralized exchange (DEX), it comprises 38.07% market share as of the time of writing, more than doubling the next largest. Its success grew exponentially following its mid-May launch of Uniswap V2, an upgrade from its predecessor that dramatically reduced gas fees, extended support to non-standard ERC-20 tokens, and instituted flash swaps.
On Aug. 27, Twitter user @NomiChef announced SushiSwap, a fork of Uniswap, and encouraged users to stake Uniswap LP tokens to mine SUSHI, the project’s governance token. SushiSwap was an overnight sensation and quickly grew, in less than two weeks, from a US$600,000 market cap to a high of US$285 million. In the week following SushiSwap’s launch, Uniswap saw a 6x growth in liquidity, with 71% taking the form of LP tokens staked on SushiSwap — numbers that prompted a reevaluation of Uniswap’s own future.
But a mere 10 days later, Chef Nomi tweeted that he had traded in all of his SUSHI for some 38,000 ETH, netting him around US$12 million in just a couple of transactions. Public outcry followed, accusing Chef Nomi of an exit scam as SUSHI prices plunged more than 300%.
The chef himself defended his actions in a series of tweets claiming that he had only sold his tokens in order to “make sure the LP migrations go as smoothly as possible” and “stop caring about price and… focus on the technicality of the migration,” comparing himself to Charlie Lee of Litecoin fame.
Despite Chef Nomi’s assertions, the community responded with anger and disappointment. Vitalik Buterin weighed in, depicting SUSHI’s meteoric rise and the fallout from Chef Nomi’s actions as a gauge of credibility in the industry. SUSHI’s price continued to drop, dragging UniSwap down with it.
It took the intervention of Sam Bankman-Fried, Founder of cryptocurrency derivatives exchange FTX, to save SushiSwap. In a Twitter thread beginning with “First of all, @NomiChef sucks.” and continuing by offering to take over the project if “Nomi [gave] up all control, keys, etc.”, Bankman-Fried laid out “a way forward for Sushi.”
Chef Nomi acquiesced, and SUSHI’s value recovered to US$3.38 from its low of US$1.18 within hours. Since then, SushiSwap has shown a steady recovery, and is poised to merge with Yearn Finance, another rapidly-growing DeFi leader.
In the wake of the Sushi debacle, Chef Nomi stepped back from his position, vowing to “continue to participate in the discussion and technical implementation of SushiSwap in the background” but not have any control or governance.
“I would like to apologize to everyone who I have caused troubles to. I was emotional, I was greedy, I was afraid. I made bad controversial decisions under pressure. And it hurt everyone. I failed your expectation and I am sorry,” the creator of SushiSwap tweeted.
Regardless of his intentions, Chef Nomi’s actions set off a chain of less-than-optimal events. While SUSHI lives on, its creator has been collectively judged by the community to have been rather naughty this year.