Here’s the beginning of a semi-weekly review of stuff that’s popped up on my radar this past week. Anything from podcasts, tweets, research papers, or developments on ABP operations side goes. Have something interesting to share? Tweet at me or American BitPower or send me an email at cbspears@americanbitpower.com.

 

Pricing ASICs

First we have a fantastic piece by Aviv Yaish& Aviv Zohar examining how the S9 has been priced and suggesting ASIC valuation models down the road. The simplistic $/Th price model is a great rule of thumb but as the financialization of Bitcoin mining matures, so must our models.

Key takeaway:

Contrary to the widespread belief that ASICs are worth less if the cryptocurrency is highly volatile, we show the opposite effect: volatility significantly increases value. Thus, if a coin’s volatility decreases, some miners may leave, affecting security. To prevent this, we suggest a new reward mechanism.

Coinbase Flight

Upon word that Coinbase is working with the Feds to sell surveillance tools, users withdrew around ~$200mm from the exchange. Also if you haven’t checked out the great tools Glassnode offers you should go ahead and swing by.

 

Let’s Circle Back on This – QuadrigaCX

Some great research on the more salient exchange debacles available this week. Most of this stuff we already knew, but now we have great data, followup on exactly what happened.

Ontario Securities Commission’s report describes how Gerald Cotten, QuadrigaCX, basically gambled away investor funds in a Ponzi scheme that eventually collapsed. So while he’s probably still alive after “disappearing on a honeymoon in India” the money is probably long gone.

“It has been widely speculated that the bulk of investor losses resulted from crypto assets
becoming lost or inaccessible as a result of Cotten’s death. In our assessment, this was not
the case. The evidence demonstrates that most of the $169 million asset shortfall resulted
from Cotten’s fraudulent conduct, which took several forms.
The bulk of the asset shortfall—approximately $115 million—arose from Cotten’s fraudulent
trading on the Quadriga platform. Cotten opened Quadriga accounts under aliases and
credited himself with fictitious currency and crypto asset balances which he traded with
unsuspecting Quadriga clients. He sustained real losses when the price of crypto assets
changed, thereby creating a shortfall in assets to satisfy client withdrawals. Cotten covered
this shortfall with other clients’ deposits. In effect, this meant that Quadriga operated like a
Ponzi scheme.
Cotten lost an additional $28 million while trading client assets on three external crypto
asset trading platforms without authorization from, or disclosure to, clients. He also
misappropriated millions in client assets to fund his lifestyle. In its final months, Quadriga had

almost no assets left and was operating like a revolving door—new client deposits were
immediately re-routed to fund other clients’ withdrawals.”

 

Let’s Circle Back on This – MtGox

We also have yet another great forensic account of the wallet trail left after the MtGox incident by Kim Nilsson at WizSec. The important takeaways being – Karpeles tried to cover the exchange hack and we probably won’t ever get our coins back.

 

Thanks for stopping by. See you next friday!

(Written ~6.19.20)