Shares of the world’s largest bitcoin fund, Grayscale Bitcoin Trust (GBTC), hit a record-high discount rate of nearly 50% relative to the price of BTC on Thursday. Bearish sentiment surrounding the trust deepened over the last few weeks as fears surfaced that crypto trading firm Genesis Global Trading, which, like Grayscale, is owned by CoinDesk’s parent company, Digital Currency Group (DCG), could file for bankruptcy. This comes as Grayscale launches a new decentralized finance-focused fund under the symbol “DEFG.” Meanwhile, analysts at Bernstein said DCG may be forced to liquidate GBTC’s bitcoin in a “nuclear option” to save its investments.
Testify!
Sam Bankman-Fried tweeted he’ll testify at a Dec. 13 hearing of the House Financial Services Committee looking into the implosion of his FTX crypto exchange. Current FTX CEO John J. Ray III has said repeatedly that SBF does not represent the firm. Perhaps that’s for the best because on Thursday SBF supported a hairbrained idea to resurrect FTX and issue a new FTT token to make investors whole, proposed by crypto influencer Ran Neuner. FTT jumped 47% after his comments. Finally, FTX has reportedly hired forensic investigators from AlixPartners to trace billions of dollars that have gone missing.
USDC Conversions
Coinbase is waiving the conversion fees for users to convert USDT to USD coin (USDC), a USD-pegged stablecoin issued by Circle and co-founded with Coinbase in 2018. The exchange is also offering a USDC giveaway program if people buy $100 worth of the stablecoin, perhaps to capture market share. USDC is the fifth-largest crypto by market cap. In September, Binance stopped supporting USDC and converted customer holdings into its own stablecoin, BUSD. Meanwhile, Mizuho downgraded Coinbase stock to “underperform,” estimating depressed crypto trading volumes will lead to lower revenue.
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“We want to have a network run by – in a way – its users.”
– Gnosis co-founder Martin Köppelmann, discussing the blockchain’s proof-of-stake upgrade, on CoinDesk TV’s “First Mover”
The Takeaway
(Photo by Jeremy Moeller/Getty Images)
On Wednesday, Apple Inc. made an announcement that might sound minor: It will now offer end-to-end encryption for most material its users backup on its iCloud storage service.
That means only a user with an authorized device will be able to access the contents of their cloud storage, in much the same way only the holder of a private key can control a bitcoin wallet. The new feature will protect photos, notes and other files for users who choose to activate it. Email, calendar and contacts material aren’t included, however, because they need to interact with multiple services. In an announcement that also outlines impressive new high-security messaging features, Apple said encrypted iCloud storage will begin rolling out worldwide in early 2023.
This change is, in fact, a huge deal.
Apple emphasizes the benefits of the new system for defending against hackers. But the privacy implications are arguably more profound. Until now, most materials on iCloud could be accessed by Apple under duress, such as when a search warrant or other court order forced them.
Apple has tried to stand up to those demands, for instance in its inconclusive 2015 court battle with the FBI. But the new encrypted storage system will render the legal debate moot: law enforcement and intelligence agencies will not be able to subpoena or otherwise compel Apple to hand over user data, because Apple will simply not have the technological ability to comply.
That’s why governments and intelligence agencies have reportedly pressured Apple for years not to release the feature. Apple’s defiance of that pressure is admirable, and has potentially immense benefits for public perception of digital privacy.
The most influential digital hardware and software maker on the planet, in short, is making a strong stand for the idea that real digital privacy should be allowed to exist. That Apple regards this as important enough that it is pushing back against the U.S. government puts the lie to one of the most shallow and cowardly arguments against privacy: the idea that “if you haven’t done anything wrong, you shouldn’t care about privacy.” Clearly, Tim Cook disagrees.
The move towards end-to-end encryption should in turn help normalize online financial privacy, a major agenda item for the cryptocurrency industry. Crypto privacy has been under mounting attack in cases like the sanctioning of Tornado Cash.
The new Apple systems will benefit crypto more directly in two other ways. First, they will have some direct impact on the security of things like crypto keys and wallets. Whether through negligence or truly bad judgment, some crypto users have been known to store their security keys in iCloud backups. That makes them vulnerable to both hackers and, in one notorious instance, the FBI – but with Apple’s new encryption, that risk will be massively reduced.
The final notable upside for crypto is that Apple’s new system will introduce a huge new userbase to security practices and interface features also widespread in crypto. It will be the first time many users are asked to manage their own personal encryption keys, without a centralized recovery process. It’s not dissimilar to how non-custodial crypto apps and protocols require users to keep track of private keys to “be their own bank.”
Apple’s software chief Craig Federighi has called this a major responsibility, because, much as with blockchain systems, Apple won’t be able to simply reset and send a new password when a user loses theirs. Though technical details are scarce, this is likely impossible to do without effectively giving Apple a backdoor to user files.
To mitigate this downside, Apple will also introduce a process known as “social recovery” to a mass audience, according to the Washington Post. An encrypted iCloud user can name another person who will have to participate if they ever lose their encryption key. Social recovery or other “multi-signature” backup schemes are becoming more widespread in crypto as a solution to the risk of key loss.
We haven’t gotten a look at the interface or workflow yet, but you can bet Apple has designed something elegant and intuitive. Hundreds of thousands of users are about to be introduced to private key management by the most respected name in computing. From there, crypto is just a hop and a skip away.
