Crypto is a technology, but for many it’s also a religion. If you doubt it, consider the prophet-like status accorded to Satoshi, the memes and iconography surrounding every blockchain, or the sectarian-style rivalry between hardcore devotees of Bitcoin and Ethereum. And like every religion, crypto has sacred values—the highest of which is decentralization.
I bring all this up in light of venture capital investor Jump Capital’s successful bid to steal back $140 million of Ethereum from a hacker who, in one of the biggest heists in crypto history, last year robbed a flimsy piece of software called the Wormhole Bridge. There is much more to the story but the long and short of it is Jump used blockchain to trace the stolen funds to Oasis, a provider of DeFi wallet software, and then leaned on Oasis to tamper with its smart contracts in order to snatch back the funds. The episode was hailed as a brilliant “reverse hack” on the part of Jump, but also raises awkward questions about decentralization—or rather the lack of it in the realm of DeFi, a field that’s supposed to embody crypto’s highest value.
As Web3 skeptic Molly White explained in a thoughtful essay (cited in yesterday’s news roundup), the “reverse hack” entailed a wealthy and connected investment firm leaning on another corporate entity to modify a smart contract. Such contracts are viewed by many in crypto as unchangeable and immutable—a system that reflects the “code is law” ethos that forms another touchstone of crypto theology. But as White points out, many smart contracts are actually built with escape hatches that can be invoked by people with the right connections.
The practical outcome of the Jump episode, it should be noted, is a good one. The Wormhole hacker is a criminal and a thief and, even if you have scant sympathy for venture firms, it’s a good thing for crypto and investors that Jump stole the money back. But the outcome also underscores how crypto’s most sacred value often exists more as dogma than as a reality. As White correctly observes, Jump’s power play is hardly the only example. She points out that even the most decentralized projects—Bitcoin and Ethereum—are subject to outsize influence by charismatic founders and elite cliques of coders.
All of this, however, is not cause for disillusionment. Crypto is hardly the only religion whose high priests regularly violate the same moral codes they preach. Religions of all sorts are inspired by divine ideals but are nonetheless run by people subject to the same temptations and moral failings as everyone else. But that doesn’t stop people from trying to adhere to sacred values—decentralization in the case of crypto—as best they can.
Jeff John Roberts
Reddit has rebranded NFTs as “digital collectibles” amid a broader push by branding experts to avoid “toxic” terms associated with the last crypto crash. (Decrypt)
Bitcoin is poised to eke out a 2% gain for February following its 39% surge in January. (Bloomberg)
Crypto conglomerate DCG lost $1.1 billion in 2022 as a result of falling asset prices and exposure to bankrupt Three Arrows Capital. (Coindesk)
NFT powerhouse Yuga Labs released TwelveFod, its first batch of collectibles minted to the Bitcoin blockchain. (The Block)
Robinhood disclosed it received a Securities and Exchange Commission subpoena related to its crypto business last December. (Fortune)
MEME O’ THE MOMENT
Gary Gensler, crypto meme machine:
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