The Aftermath of the Ronin Exploit & True Blockchain Necessity

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🌴⛓ Chainletter

Our weekly newsletter covers Chainforest - a recap of our latest happenings, our members’ accomplishments, the conversations in our Discord, and an in-depth dive on a project or issue our community is focused on.

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TL:DR

• Can Tom Brady’s NFT platform Autograph blossom into a true competitor?

• In the aftermath of the Ronin exploit, we ask do see similar hacks in the traditional web2 world?

• Chainforest debuts its new logo.

• ~tirrel Corporation’s Christian Langalis on where blockchain necessity truly lies and the power of p2p.

In the past week, 6 new Rainmakers have joined the forest.

The top three channels were: 🎨│nfts-general, 🟡│bitcoin, and 💸│defi.

Autograph: All Hype or a Legitimate NFT Platform?

By Elijah Keaton @bigshot_Bigsby

Autograph is a NFT platform, co-founded by NFL superstar Tom Brady, that specializes in creating personalized NFTs for some of the biggest stars in sports and entertainment. The site launched in August of 2021 and already boasts collections from the likes of Tom Brady, Tiger Woods, Tony Hawk, and The Weeknd. The Board of Directors boasts an equally impressive staff in their own right, including GPs Arianna Simpson and Chris Dixon from a16z, GP Ilya Fushman from Kleiner Perkins, Eddy Cue from Apple, and Sam Bankman-Fried from FTX, amongst others.

With a cast like this people are bound to get excited about the project. This led to a Series B funding round valued at $170 million, less than 5 months after its initial launch. In many aspects the hype makes sense. Autograph distinguishes itself from other celebrity web2/web3 sites simply by its star studded cast. This isn’t like Cameo, where you can get personalized messages from washed up celebrities and Tik-Tok stars. Autograph features the best of sports. In addition to the names already mentioned, there is also Derek Jeter, Wayne Gretzky, Naomi Osaka, Simone Biles, and more. Clearly the goal is quality over quantity.

But will the hype last? There are several aspects that make me skeptical of the project. Where does the hype originate from? Is it from the product that Autograph is creating, or from the names attached to the project? We have seen plenty of big names launch products only to fail months later because the hype fizzled out.

The celebrities incentive is also likely cash, and not a passion for the project. Just check out Tom Brady’s cringe tweet to Vitalik. In addition, we have to look at the long list of failed celebrity NFT drops, some of which border on scams. I could list out dozens of failed celebrity NFT losses, but for those interested in a more detailed list and history I highly recommend checking out Coffeezilla (Youtube Page) on Youtube. He regularly exposes the NFT scams from the likes of Jake and Logan Paul, Floyd Mayweather, Melania Trump, and Tai Lopez.

The other concerning factor to me is the price of the NFTs. This signed Ruby edition of Tom Brady NFT is on the market for $750,000. For reference Tom Brady’s ‘final touchdown ball’ (before he un-retired) sold for $518,000. An authentic Tom Brady signed jersey sells for $2K-$3K on sports memorabilia sites. Without sounding too much like a boomer, a game thrown football or a signed jersey in which Tom Brady had to sit down and physically sign, has more value than a ‘signed’ JPEG designed by a graphic designer with likely little input by the actual sports star.

However, markxu brings up a good point, that the success of a NFT project isn’t always based solely off the product being sold:

Feels like a big boost from Tom Brady and the other athletes/famous people. Though at the same time, in the NFT space hype, community, and fandom are key drivers of success so that could also be viewed as a tailwind because of free marketing from people with huge fanbases.

There is additional support for the possible success of Autograph by looking at Dapper Labs ‘Topshot’ marketplace. NBA Topshot amassed over $700 million of sales in its first year and regularly makes headlines for its moments of Lebron James that sell for over $200,000. By all accounts NBA Topshot is still a successful NFT marketplace, although it definitely peaked in its early stages when the hype was at its max. In my opinion, Autograph will follow a similar path, incredible hype in the project’s beginning stage leading to ridiculous prices and over time it will settle down to more reasonable prices and sales.

Ronin Network Suffers Largest Crypto Hack To Date, Is This a Problem With Crypto?

By Elijah Keaton @bigshot_Bigsby

The Ronin Network suffered what may be the largest hack in crypto history. According to Ronin, the attacker “used hacked private keys in order to forge fake withdrawals”, which resulted in over $625 million worth of assets being stolen. Axie remains “committed” to reimbursing their players as soon as possible but did not offer a guarantee that funds will be returned to those who were hacked. This could have long standing financial implications, especially to those in the Philippines who have made a career out of play-to-earn games like Axie Infinity. For reference, Axie Infinity recently valued at 3 billion dollars, so naturally a hack that stole 1/5 of your assets is bound to crash the price of your underlying asset, right?

Kind of. Ronin ($RON) token did drop approximately 20% when news of the hack came out, but evened out around the $1.83 price point (from about $2.23 prior to the incident). Axie ($AXS) saw very little price action, as pointed out by Amit:

Though Axie ( $AXS ) is down ~10% since the news of the Ronin exploit came out, it’s still up 20%+ over the past 7 days. Similar trend with $SLP.

In fact Axie is back up to pre-hack prices. But why? Perhaps it’s because Axie could easily raise VC funds still as pointed out by Amit. Perhaps it’s because the funds will likely be recovered. As of early April the majority of the stolen funds are sitting in a fresh ethereum wallet that will likely be the most watched wallet over the next few months. Blockchain analyzing companies such as Chainalysis, as well as several authorities are actively working to recover the funds and identify the hacker. The fact that all activity on the blockchain is open for anyone to view means the hacker will have to be creative in how they launder the stolen funds, likely using a scrambler of some sort. One slip up and the hacker will be exposed instantly.

Other implications resulted from the hack. Chainforest member wilsonhauntsyou attended an Axie event after the hack and describes the vibe:

So I went to the Axie meetup in LA last night, the team made it seem like they were still planning on moving forward with origins. Strange vibes all around and there was a CNN reporter interviewing drunk Axie stans left and right.

Axie would later go on to announce the delay of the “Origin” upgrade, in order to investigate the breach to ensure the security of the upgrade. Crypto hacks have been a constant problem in the industry, with the wormhole hack also resulting in $325 million stolen funds in February of 2022. Personally, I see this as growing pains (albeit expensive growing pains) of a new and emerging industry.

I also don’t see this hack as a crypto specific problem. Fortune 500 companies have had several hacks of private consumer data that could include credit card numbers, social security numbers, etc. Just for reference Equifax was hacked and over 143 million peoples’ personal information was compromised. They reached a deal to pay up to $700 million to regulators to settle probes related to the incident. So when regulators and politicians eventually use the Ronin hack as reason crypto is evil, consider the fact that crypto has been around for under 15 years, while these public companies have thousands of employees and are facing the same issues as new crypto projects with a tenth of the staffing.

Around the Fire: Community Updates

Chainforest debuted a draft of its new logo this week:

Personal Servers, Scene, & Blockchain Necessity: the Christian Langalis Interview

by David Feld @dchristrf

Two issues back, we chatted with dcSpark and ~tirrel to hear about what they were building for the Urbit ecosystem.

We expand on those conversations in this issue, diving deeper with Christian Langalis, ~tirrel’s founder, to discuss the relationship between Bitcoin and Urbit, consensus thresholds for DAOs, and where there is true necessity for blockchains.

David: How did you first get interested in Bitcoin and Urbit?

Christian: My original interest in this space was, and is, Bitcoin. I came out to San Francisco in 2017 after I graduated to work at Pantera Capital, one of the first Bitcoin funds. Urbit actually became my social circle when I when I came out here. After leaving Pantera, it became obvious that Bitcoin and Urbit were these complementary systems: Urbit solving a lot of off chain coordination problems that crypto has in general. As a result, I felt compelled to join Tlon for two years to help them build a Bitcoin wallet that released last year, bringing commercial capability on Urbit from zero to one. Now, I have a new independent Urbit company called the ~tirrel Corporation, devoted to extending Urbit’s commercial capabilities even farther. Primarily, that means integrating US dollar payments into different Urbit applications, alongside developing other general purpose, commercial applications.

David: Would you say more about how Urbit was your social circle?

Yeah, so, the thing is Urbit actually has a scene. It’s really one of the few crypto projects that isn’t primarily composed of speculators — deterritorialized Crypto bros who trade shitcoins — but rather is this beautiful, culturally adept community. It actually has the ambition of being a larger, broader cultural force that emerged out of people who were interested in crypto and crypto anarchy.

2017 was still a year where the crypto anarchy ideology was burning very brightly. It’s since been watered down a bit as we’ve gone making the necessary bargains for scalability. That being said, I think there’s still that spark, which is what my core interest with Urbit is — that people (maybe not all) want completely undesignated and dis-intermediated ways of relating. To really put my crypto anarchist hat on, that’s really the core of I think what Urbit and Bitcoin are both going for. Can we have a a digital society, a digital economy that isn’t minimized by its exposure to a third party or state interest?

David: What is the relationship between Bitcoin and Urbit?

Christian: So Bitcoin and Urbit agree on one really important thing. They agree a personal server or a personal node is an implementation of sovereignty, of personal sovereignty online. If you’re not running your own computer, if you’re not running your own Bitcoin node, you’re relying on some third party that could ultimately have undue influence on your interactions. Thus, Urbit is sort of the not your keys, not your coins, but not your data, not your not your digital experience, so to speak.

And ultimately, you need both. If it were just data, then Urbit or a personal web would have already existed on top of Dropbox. Simple storage as a commodity is not enough. You really need a persistent digital agent to be acting on your behalf, rather than expropriating your data, shipping interfaces designed to hold you captive, and subject to their own economics: basically, to serve you ads. Obviously, we don’t want a digital subjectivity, we want to escape that. And so Urbit is really I believe, along with several other projects, like Umbrel, an honest attempt at successfully ending the era of digital subjectivity.

David: Obviously there are scaling problems to personal servers. How do you think about addressing these? Do you think certain companies will move over to a personal server paradigm and smooth this out?

Christian: Really it may come down to which web2 companies want to attempt to transition to the personal server world? There’s a degree to which I am loathe to use Silicon Valley speak, but it really boils down to self disruption. The first book that people tell you to read, once you arrive in the Bay Area is, “Oh, you got to read the innovators dilemma: a core tenant of which is no one wants to disrupt themselves.“ We’ve seen talk about Twitter’s Blue Sky, but I’m frankly skeptical of whether these companies are really going to be able to do it.

1. I think that one of the main shifts is once you have an Urbit, you actually have to explicitly acquire the computing hardware to run it. There is this new generation of Urbit hosting companies and service providers basically bridging the gap until we all have a hardware Node running on our modem, or something like that. Companies like Tlon, Urbit Host, and Third Earth will be the ones to really scale Urbit as a physical network.

2. The second part of scaling is educating users about the necessary shift in economics arising from personal servers: the explicit, formals costs of access to that hardware.

3. What is most confusing about web2 are all these free services, which no one really understands how they monetize, except to vaguely know, in the back of your head, okay, they’re probably just reading what I’m writing, selling that data, building a model, etc.

David: Do you see a future where Urbit integrates with multiple chains?

To be frank, because I’m a Bitcoin maximalist, while Uqbar is interesting to me, it pales in comparison to just the use case of money. I think general smart contract execution is a smaller market and will be a much smaller addressable market than money itself. It remains to be seen, Bitcoin is already very much working on evolving through the expressiveness of its own smart contracts.

I don’t think it has to be Urbit’s battle to bring that up. It’s certainly possible to do it one day. But I really hope there’s a Bitcoin implementation on Urbit. I really came to Urbit from the standpoint of almost a Bitcoin colonist. I wanted to see Bitcoin have the benefit of all of this off chain coordination that can be provided by a network of personal servers. You can actually accomplish a ton of stuff without a blockchain.

While it is in everyone’s interest to develop use cases for personal servers — Shout out to projects like Umbrel — they don’t necessarily need to be on chain. I think blockchains, as became obvious in 2017, can be this solution in search of a problem. There are limited cases where a global, consistent state for everything is needed. Making a large settlement payment between two financial institutions, that absolutely warrants a blockchain. But if I’m just saying, hey to my Drainer friends on Urbit, showing them the latest blade track, I absolutely don’t need a blockchain for that. Urbit already has cryptographic authentication for its messaging. This goes back to just the speculative mania. When you have a hammer — or a blockchain — everything looks like a nail. Everyone just wanted to make a quick buck. You’re trying to say, oh, yeah, we’re doing this blockchain social media network. But it’s massively costly to do that and doesn’t make sense to the point where you couldn’t fairly doubt the earnestly of someone trying to sell you that solution.

For example, in the case of DAOs, a federation of Urbit servers that represent a DAO could come to a sufficiently strong consensus on the actions of a DAO — managing assets, signing multi-sig transaction, a lot of that can happen off chain and just peer to peer.

There are definitely places where it needs to be improved. That’s why we built the bitcoin wallet on orbit because, well when was the last time you dm’d yourself a bitcoin address? It’s this one half of the computer talking to the other. Obviously, you want to unify your digital life to the point where that’s not needed. And while a sovereign, unified platform is paramount, it doesn’t necessarily need to be on chain.

Courtesy of Christian, Timothy C. May's email signature

The Chainletter is written to promote the projects and discussions within this community. Do you have a topic or a project you find interesting? Reach out to David (David C R Feld#4743) or Elijah (Ric_Astley (∞)#4612) on Discord.

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