Welcome to The Node, and happy Bitcoin Pizza Day! This is Daniel Kuhn, here to take you through the latest in crypto news and why it matters. In today’s newsletter:
Digital Currency Group (DCG) missed a $630 million payment owed to its crypto lending unit Genesis last week, crypto exchange Gemini said in a statement. If you don’t remember why DCG, which was once called the Standard Oil of crypto, owes a subsidiary money and why an unaffiliated firm announced the news, it’s because all three are entangled in a debt repayment crisis. Gemini is seeking the return of assets it loaned to Genesis, which cannot pay and is going through a Chapter 11 bankruptcy process – (the exchange’s loan was worth above $1 billion at one time, and would earn yield to pay customer returns on Gemini’s now defunct “Earn” lending program). DCG, which also owns CoinDesk, pledged capital to backstop losses Genesis following the collapse of FTX, and is reportedly looking to refinance its debt and raise capital. In other news, bankrupt crypto lender BlockFi has withdrawn statements relating to a wind-down plan, which Bankruptcy Court Judge Michael B. Kaplan said were published prematurely and without court approval on May 13.
Decentralized Exchange
Cryptocurrency trading platform Hotbit said it ended all centralized exchange (CEX) operations, citing deteriorating operating conditions and changes in the broader crypto landscape. The exchange’s five million users have until June 21 to withdraw their assets from the platform, which were originally frozen in August during a criminal investigation. The exchange also said the crypto industry will increasingly turn to decentralized offerings, in the wake of FTX. Meanwhile, the Securities Commission Malaysia (SC) ordered Huobi Global to stop all operations in the country because it is allegedly operating without registration. Finally, decentralized exchange (DEX) Mangrove is now live on a Polygon testnet. The project, which raised about $10 million from market makers Wintermute and Cumberland among other backers, uses “advanced limit order” systems it says are an improvement over existing DEXes by allowing users to propose price targets when selling assets without necessarily having to unstake from a native yield-paying lending platform.
Networked Communities
An attacker (or group) has infiltrated the decentralized autonomous organization (DAO) overseeing on-chain crypto mixer Tornado Cash, after earlier floating a proposal that hid a malicious code function that granted them effective control over governance decisions. “Now that they have all the votes, they can do whatever they want,” respected crypto researcher @samczsun tweeted on Sunday. “In this case, they simply withdrew 10,000 votes [worth ~$4 million] as TORN and sold it all.” Tornado Cash’s smart contracts are thought to be unaffected, and the protocol’s community is working on a plan to oust the bad actor. At first some thought the attack was a “gigatroll.” Elsewhere, the founder of the EOS Network Foundation, Yves La Rose, is goading EOS users to sue Block.one (B1) for “broken promises” to invest in the ecosystem. EOS raised a $4.1 billion initial coin offering (ICO) in 2018 but fell short of expectations, which La Rose has long blamed on B1.
On May 22, 2010 Laszlo Hanyecz paid Jeremy Sturdivant 10,000 bitcoins (BTC) for two Papa John’s pizzas which were delivered to Hanyecz’s home. This exchange is widely celebrated because it is viewed as the first use of bitcoin in a commercial transaction with bitcoin as the medium of exchange.
Of course, Bitcoin Pizza Day also invites one of the silliest and most disingenuous takes on bitcoin ever with: “Wow, that guy is dumb, if he held that bitcoin he’d have over $270 million! Instead he just got two pizzas.”
Well, would he?
Obviously 10,000 BTC is a lot of money now, but it wasn’t in 2010. In fact, 10,000 bitcoins in 2010 bought you about two pizzas. Bitcoin would have no value if no one ever used it for anything, hence why Bitcoin Pizza Day is so important.
This applies for a lot of things, but bitcoin’s parabolic rise happened in plain sight so it’s an easy thing to latch onto. Here’s another hypothetical example to outline how disingenuous the “this guy is dumb” take is.
Suppose a technology company with four co-founders hires its first employee. That employee is paid a $50,000 cash salary and is granted a 1% stake in the (worthless) company after their first year of service. That employee then decides to take a sabbatical to hike the Appalachian Trail and while there decides they don’t want to work for the company any more.
Suppose the hypothetical company is a technology company – perhaps a hot social media website – and after eight years of hyperbolic growth the company goes public at a $100 billion valuation. Employee #1 is suddenly immensely wealthy, but did this hypothetical social media company pay their first employee $1 billion for a year of work?
No, of course not. They paid them $50,000 cash and 1% of a company that was worthless at the time. In that same way, Hanyecz didn’t pay $270 million for two pizzas, he paid 10,000 bitcoins for two pizzas in 2010 because that’s how much two pizzas cost in 2010.
Bitcoin could have failed spectacularly. So could have that hot technology company – like many other failed companies. Without Bitcoin Pizza Day, perhaps no one would have stepped up to use what Bitcoin’s creator Satoshi Nakamoto called peer-to-peer digital cash as a medium of exchange and bitcoin is still floating around as a valueless, magic internet money for nerds (in concept alone).
So thank you to these pizza pioneers, Laszlo Hanyecz and Jeremy Sturdivant, for kicking off the bitcoin economy.
With their transaction, part of the foundation for bitcoin having real monetary value was established, to which all bitcoiners should be grateful.
