My Second Appearance on the Blockchain Debate Podcast with Sam Kazemian

Motion: Algo and fractional stablecoins are flawed (Bennett Tomlin vs. Sam Kazemian) The Blockchain Debate Podcast

Guests:Bennett Tomlin (twitter.com/bennetttomlin)Sam Kazemian (twitter.com/samkazemian)Host:Richard Yan (twitter.com/gentso09)Today’s motion is “Algo and fraction stablecoins are flawed.”A good stablecoin can sustainably hold its peg, and recover quickly from a premium or discount. This is a basic requirement for stablecoins. An obvious design is the bank coin model, where coins are backed 1-to-1 by fiat. But this creates a single point of failure and incurs compliance overhead. Hence MakerDAO, which made a smart contract driven stablecoin, and is de-coupled from the banking system. But it requires over-collateralization. So new designs popped up and tried to make the next capital-efficient stablecoin to allow under-collateralization, with innovative collateral adjustment mechanisms. We call these algorithmic and fractional stablecoins. Historically, most of these coins failed to hold their pegs. Is there a fundamental problem? Or can these challenges be overcome?The two debaters today include the founder of an algo/fractional stablecoin that has been holding its peg relatively well since launch, that is about half a year, as well as a well-known critic of various stablecoins.If you’re into crypto and like to hear two sides of the story, be sure to also check out our previous episodes. We’ve featured some of the best known thinkers in the crypto space.If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.Please note that nothing in our podcast should be construed as financial advice.Source of select items discussed in the debate (and supplemental material):Dragonfly research on FRAX stablecoin: https://medium.com/dragonfly-research/a-visual-explanation-of-frax-bcce72c1730fBennett Tomlin article on FEI stablecoin: https://bennettftomlin.substack.com/p/fei-protocol-analysis-last-reminderFrax stablecoin: https://frax.finance/Bennett Tomlin blog (mostly crypto): https://bennettftomlin.substack.com/Maker DAO's Black Thursday: https://medium.com/@whiterabbit_hq/black-thursday-for-makerdao-8-32-million-was-liquidated-for-0-dai-36b83cac56b6Guest bios:Bennett Tomlin regularly publishes articles about fraud in the crypto space via his blog. His dayjob is data scientist and fraud investigator in the pharmacy benefits area.Sam Kazemian is cofounder and CEO of Frax Finance, a stablecoin project that brands itself as the world's first "fractional-algorithmic" stablecoin. Sam also started Everipedia, the first decentralized online encyclopedia on the blockchain.

I returned to the Blockchain Debate podcast and in this episode I debated whether or algorithmic stablecoins are a valuable idea. I reference several different pieces of my work, so will drop the links to them below.

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A History of Tether and Bitfinex’s Audits, Attestations, Memos, and Letters: Both Promised and Actual

A History of Tether and Bitfinex’s Audits, Attestations, Memos, and Letters: Both Promised and Actual Bennett's Articles

https://bennettftomlin.com/2021/07/17/a-history-of-tether-and-bitfinexs-audits-attestations-memos-and-letters-both-promised-and-actual/ Amidst all the confusion surrounding Tether and Bitfinex it can be difficult to keep track of what they have actually provided in terms of audits, attestations, and other documents to support their contentions. Here I will summarize, but the important note that needs to be included at the top is that both Bitfinex and Tether once hired an auditor, but neither ever completed the audit. Ever since Tether was founded they have promised to provide a full financial audit. It feature prominently in their whitepaper and on their website for years. They have never provided this audit, but have provided a variety of other documents meant to convince the public that they had sufficient backing for the tethers in circulation. In March of 2015 Tether and Factom announced (archive) they had formed a partnership to provide greater transparency into Tether’s holdings. The partnership never provided any additional transparency into Tether or its operations. In August of 2016 Bitfinex promised (archive) to provide a full financial and security audit after they were hacked. They initially announced that Ledger Labs was hired to perform both. No audit from Ledger Labs was ever released. This was likely in part due to the fact that Ledger Labs was not able to provide financial audits. In May of 2017 Bitfinex announced (archive) they had engaged Friedman LLP out of New York to audit them. As of today in 2021 we have yet to get an update from Bitfinex on the status of this audit. In September of 2017 Tether announced (archive) that they had engaged Friedman LLP out of New York to audit them. This audit would never occur, we would eventually get an update from a Tether spokesperson saying the relationship dissolved, citing the “excruciatingly detailed procedures”(archive) that the auditor wanted to undertake. Also in September of 2017 Tether released from previous attestations from a small accounting firm in Taiwan called TOPSUN. These were monthly attestations attesting to Tether having sufficient backing for the end of the month from December 2016 through March 2017. Strangely these were not completed at the end of the respective months but were all completed on May 23rd 2017. (Strangely approximately two weeks after they announced that Friedman had been brought on to audit Bitfinex) Read more… https://bennettftomlin.com/2021/07/17/a-history-of-tether-and-bitfinexs-audits-attestations-memos-and-letters-both-promised-and-actual/

Amidst all the confusion surrounding Tether and Bitfinex it can be difficult to keep track of what they have actually provided in terms of audits, attestations, and other documents to support their contentions. Here I will summarize, but the important note that needs to be included at the top is that both Bitfinex and Tether once hired an auditor, but neither ever completed the audit.

Continue reading “A History of Tether and Bitfinex’s Audits, Attestations, Memos, and Letters: Both Promised and Actual”

Sunday Reads – Things I Found Interesting 2021-05-30

Ethereum

Vitalik breaks down the limits to scaling.

Hard Forks

Eric Wall shares a flowchart from the Segwit2X Bitcoin scaling debate that can serve as a useful model for understanding contentious hard forks.

Steve Bannon’s Italian Gladiator School for Western Culture

Ben Munster breaks down the absurdity of the above phrase.

ICYMI

In this article I try to summarize what I see as the difference between the trader perspective and skeptic perspective on Tether and Bitfinex, plus it’s like a greatest hits of their fuck-ups.

In this podcast episode Cas and I discuss Crypto Capital Corp, the shadow bank to the cartels and to Bitfinex and Tether.

In this article I try to work through my thoughts on why Coinbase listed Tether.

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Episode 6 – Crypto Capital Corp: the quiet billion dollar cryptocurrency scam — Crypto Critics’ Corner

In this episode Cas and I take a look at the payments processor for Bitfinex, Tether, Kraken, Quadriga, and Bitmex. They’re implicated in money laundering for the cartels, wire fraud, bank fraud, embezzlement, and more.

Episode 6 – Crypto Capital Corp: the quiet billion dollar cryptocurrency scam — Crypto Critics’ Corner

Crypto Capital Corp: the quiet billion dollar cryptocurrency scam Crypto Critics' Corner

Cas and BT discuss Crypto Capital Corp, a defunct, fake, Panamanian money services transmitter that helped service almost every important cryptocurrency exchange, owned and operated by Reginald Fowler, Ivan Manuel Molina Lee, and Oz and Ravid Yosef. 

In this episode Cas and I take a look at the payments processor for Bitfinex, Tether, Kraken, Quadriga, and Bitmex. They’re implicated in money laundering for the cartels, wire fraud, bank fraud, embezzlement, and more.

I covered it here:

Cas discusses tracking Ravid Josef using her Google reviews here

He also discusses Crypto Capital Corp and the web around it more broadly here.

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Sunday Reads – Things I Found Interesting 2021-05-23

Stu claims many things, all on his personal Medium

Stu felt he had to respond to posts like mine here:

SafeMoon the US Based, Ponzi-like, FBI Related Token

SafeMoon is a popular cryptocurrency (especially on places that prey on unsophisticated investors like TikTok) and based on reporting by Protos Media it seems to be a shit-show. Founders are US based, apply for government contracts, and may even be paying people to shill it.

USOCC Signals Caution

As the former agency head departs for Binance US, the new head signals caution and review of crypto guidance. From Nikhilesh De at CoinDesk.

Food

Helen Rosner wrote a brilliant piece at the New Yorker about the nature of exclusivity for restaurants.

Books I Read

Perennial Seller by Ryan Holiday – This was an excellent book that summarized creating and marketing ‘long-tail’ projects. Art and creations that you want to continue generating forever. I also highly enjoyed Trust Me, I’m Lying by Ryan as well.

Tabletop Roleplaying Games

Mustangsart showed off some prosthetics they were working on for a Witcher RPG, but they are a brilliant inspiration item for any other game masters.

TBM Games has a really cool homebrew for a time-traveling rogue.

Programming

Miguel Grinberg has a new Flask library I am really excited about thanks to its potential to keep me from having to write Javascript.

ICYMI

I appeared on the COINTELPRO podcast:

Note: This posts contain affiliate links, if you purchase after following them I will make a small amount.

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My Appearance on COINTELPRO

Cointelpro is a new podcast that I went on, quite different from other ones I’ve done. Much broader in scope and much less focused on crypto. My interview starts a little after the 15 minute mark. We discuss what is crypto, why is crypto, and how does crypto inherit from classic American con men.

Episode Links:

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Sunday Reads – Links I Found Interesting 2021-05-16

https://tether.to/wp-content/uploads/2016/06/TetherWhitePaper.pdf

Tether Releases Asset Breakdown

I wrote up my thoughts on it here.

Cas Piancey and I also did a podcast episode on it:

David Gerard wrote up his and seems to have trouble determining what a ‘reverse repo note’ might be:

http://web.archive.org/web/20210513214721/https://davidgerard.co.uk/blockchain/2021/05/13/tether-publishes-two-pie-charts-of-its-reserves/

Amy Castor (archive) also wrote up her thoughts on this not particularly valuable breakdown.

The Financial Times did some coverage as well and got some great quotes.

Nikhilesh De at Coindesk had some of the best ‘breaking’ coverage of it the morning it came out.

Protos also had some excellent coverage which helped dissect the backing.

Crypto Capital Corp and Backpage

Kyle Gibson discusses some of the links between Crypto Capital (who I covered here) and Backpage.

Zhao Dong Tried and Sentenced

Protos Media covers the sentencing and the trial 

http://web.archive.org/web/20210511061038/https://protos.com/china-crypto-otc-king-zhao-dong-criminal-charges-court-docs-show/

http://web.archive.org/web/20210514141136/https://protos.com/renrenbit-zhao-dong-bitcoin-billionaire-pleaded-guilty-money-laundering/

My co-author Cas Piancey did a summary podcast.

Cas has been one of the most proactive in covering Zhao Dong.

Zhao Dong Still Matters: Here’s Why

Zhao Dong: The Final Word

Another Usecase Bites the Dust

Elon Musk Finally Learns About Bitcoin

Dungeons and Dragons Combat Wheelchair 2.1 Released

This is a really cool item and ruleset if you have players at your table who want to play with a wheelchair.

ICYMI

Protos Media revealed that one of the top Brexit donors Christopher Harborne is a Bitfinex shareholder. It is currently unclear if he is related to Will Harborne, former leader of EthFinex.

I compared Tether to wildcat banks and Liberty Reserve and gave away how I think the story ends.

I spent some time detailing troubling links between the 2015 Bitstamp Hack, the 2015 Bitfinex hack, and the 2017 Tether hack.

This old podcast is worth a listen. Larry Cermak (Director of Research at the Block) and I discuss whether or not Tether is a good actor. He says he would be shocked to find out that Tether was less than 98-99% backed.

I finally got to give this homebrew item to a player in my campaign and they seemed quite excited.

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New Episode of ‘Tether: A Stable Discussion’ with Cas Piancey: Tether’s Pie Charts

Episode One

Episode Two

Episode Three

My co-author and friend Cas Piancey and I got together to discuss the recent pie charts released by Tether. You can find the discussion of it here:

You can find my article on this topic here:

And Cas’ here:

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