Headline is misleading: the founder has threatened to doxx and report them to the IRS if they don't return funds which according to the Compound protocol, they rightfully own anyway.
> which according to the Compound protocol, they rightfully own
And that is one of the biggest misconceptions of crypto stuff.
Law and contracts (1) determine who owns what, not who happens to currently hold it.
That's why the founder can threaten them with the IRS, because they (likely(1)) do not rightfully (as defined per law) own it.
This is also why NFTs are kinds stupid, because you totally can sell someone a NFT which "claims ownership rights" without selling them any ownership rights legally seen. Sure it's most likely fraud as you deceived people, but only if. So telling people you sell them the NFT but not the think behind the NFT would make that pretty legal. Like you can sell a certificate about the correctness/quality of a picture without selling (or even having) that picture.
(1): Smart contracts are not contracts, they are computer programs. They might also contain contracts, but that doesn't mean that just because something is done in a certain way in a smart contract it is legally binding, legal, or anything (Well, that's also true for contracts themself).
> That's why the founder can threaten them with the IRS, because they (likely(1)) do not rightfully (as defined per law) own it.
This statement is nonsensical - the IRS has no enforcement mandate for theft/fraud, nor does it have any authority to return stolen property. All the IRS would do is say "Hey, I heard you got an extra $NN last year - please pay your taxes on it".
It could even be argued that by reporting people the the IRS, the founder is implicitly admitting that the current possessors actually do own said crypto, otherwise they wouldn't owe any tax on it.
> This is also why NFTs are kinds stupid, because you totally can sell someone a NFT which "claims ownership rights" without selling them any ownership rights legally seen.
It seems that the only thing you own when you purchase an NFT is the NFT itself. Not a little jpeg that it points to; just the bit of code on the blockchain.
It's kind of tautologically stupid. You buy a receipt that states you own that very receipt.
> That's why the founder can threaten them with the IRS, because they (likely(1)) do not rightfully (as defined per law) own it.
This seems wrong. Here's the quote from the founder:
> Otherwise, it's being reported as income to the IRS, and most of you are doxxed.
It seems to be "return it or else it will count as your income," which seems... weird. Do most crypto people just not pay taxes on crypto? How is this a threat?
This puts to words the uneasy feeling I've had towards NFTs.
The thought experiment that made this concrete was a sort of reductio ad absurdem:
Let's say for a moment that NFTs win worldwide support and begin to be used as proof of ownership for everything. As part of this movement, the Louvre registers an NFT signature for each item in their collection.
Now, let's say a nefarious actor manages to use social engineering and convince a naive Louvre curator to transfer the NFT ownership of the Mona Lisa.
This bad actor promptly goes to Sotheby's and asks them to list "his" Mona Lisa for sale.
---
Of course, the Mona Lisa would not go anywhere. The French government would never allow it. This is an extreme example but can be walked back to less and less valuable items: would this work for an NFT of a house, a car, a computer, etc?
Unless the state decided to universally and with no exceptions enforce ownership of NFTs, they are ultimately worthless.
Compound protocol is not a legal person thus has no rights. The VC governance voters (Polychain Capital) should be responsible for pulling the trigger and sending the tokens to random people around the world. More here, plus the actual bug post mortem
That's why the community is talked about so much with regards to NFTs, because if you get the right community leaders, like Snowfro from Artblocks, you know you're in good hands with an ethical player. But to buy stuff from some random creators no one's heard of, can get you into sticky situations. And photo NFT's are even more troublesome.
It’s not, but “give us our money back or we’ll report you to the IRS” strongly implies that they were willfully assisting in tax avoidance before. It might even legally be blackmail, if they’re aware of any crimes their customers have committed.
> Paying taxes on free money isn't the end of the world.
Playing devil's advocate: it's not exactly "free money", it's free "tokens" of some kind, which might not be convertible to money at the same rate which was used to estimate the tax. If the tax amount was assessed at the value the tokens were supposed to have today (based on what they recently traded for at some exchange somewhere), but you were too slow and only traded the next day and the price paid for these tokens has fallen heavily, you might have to pay more in tax than the money you can get from these "free tokens". So yes, it's not hard to imagine a situation in which paying tax on that "free money" can be "the end of the world" for some.
It might even be the best way to legitimize (legally launder?) the money.
If I receive $XX, would happily pay %Y of that to stay above board. If the IRS wanted to audit me, my personal war chest is now $XX-%Y greater than it was before and more than adequate to cover whatever past (accidental) tax errors I may have had in the past.
Can’t the people who have the money just pay the tax themselves? Seems like the easiest way to keep the money and stay on the right side of the threat?
EDIT: Also profitable, taxes should be less then 90%. Just out of curiosity, isn't DeFi motivating users to defraud the IRS by promising 10% without reporting it as income?
EDIT: Come to think of it, if they are offering 10% without reporting to the IRS, which is obviously less than after taxes, would it be reasonable to assume all revenue / profits have not yet been reported to IRS as revenue?
Yep, nothing stopping anyone from keeping the funds. But we've seen other shenanigans in the past (forks, CEX involvement, etc) to paper over these mistakes.
This is an interesting case because presumably they would want to write this off as a loss (in a theoretical world where they were paying US taxes) so it’s not a gift.
Technically the profits are a result of the computer code of the system, though. If they want to stick to their arguments that smart contracts are the law, then it’s just a regular payout from the system according to the rules of the system. Business as usual.
However, I suspect when the losses are in the tens of millions they’ll drop the pretense of “code is the contract” and start pursuing other legal avenues. The loss was about 1% of the total money locked in Compound.
You can make erroneous money transfers and it doesn't automatically count as a gift, the receiver can be liable if the amount makes it obvious it's an error for example and she won't return it. I'm sure this differs between jurisdictions in the details though..
* it was paid under the terms of a valid contract and need not be returned, and therefore is income (as this rests on the existence of a contract embodied by the protocol, it is not a gift, but an exchange for value.)
* it was an error and must be returned.
This seems to be an offer to settle for the former treatment if the recipients refuse the offerers claim that the latter is correct.
This is nowhere near the first time that this has happened. There have been numerous folks to find bugs in smart contracts around the DeFi/ETH contract space, millions taken "by the code" and owners threatening and throwing various forms of shade, and even offering the exploiters job positions, reneging on said positions, etc.
But isn't the whole point of crypto to throw off all these inconvenient and unjust regulatory shackles? That technology has perfectly solved transacting in a trustless way, so that we no longer need or want agents of the state threatening citizens with violence in order to compel actions from them?
Usually, yes. But banks have a process for reclaiming funds that have been incorrectly wired so it’s pretty unusual for the “legality” of it to be litigated.[1] Blockchain has no such process. By design.
No one knows for sure. This question is still not answered in the judiciary (of any country afaik) when it comes to cripto contracts and protocols. It is not as simple as "money wired to a wrong account", those protocols are based on smart contracts, and the concept that the code is the contract (something that also is not tested in court). So a bug in the smart contract code would be akin to signing a contract without properly reading it, and it ends up having a clause you didn't originally want (but you did sign), that kind of "buggy" contract may be 100% enforceable or not depending on the country and the situation.
Other analogy that may be relevant are cases where casinos had slot machines with bugs awarding more prizes than the casino intended. In some cases/jurisdictions the courts ruled in favor of casinos, that the money was awarded incorrectly and should be returned; but in other cases/jurisdictions favored the winner, saying that the winner did everything right according to the rules of the game and should keep the winnings.
Also the Pepsi 349 Scandal in the Philippines in 1992 comes to mind [1]. In that case courts side with Pepsi, but I suspect that money has some inertia in Judges minds, so it was easy to side with Pepsi when it haven't paid yet. I suspect that if all that money had actually been automatically transfered to the many winners, then Pepsi would have a much harder task to convince the judges to make everyone transfer the money back.
But in this case the Compound contract specified this was intended to happen, therefore it's not an accident nor was the money transferred to the wrong account. The whole point of the contract is that it's a perfect, unambiguous, clear representation of intent.
A wire transfer involves a money transmitter, who provides a service according to some terms & conditions. In case of a dispute, a court will have the final word. None of this applies to cryptocurrencies, because cryptocurrency transactions are final. They can't be overridden by a judge. If they could, they wouldn't be censorship resistant. You can have censorship resistance or rule of law, choose one.
Yes. In 99% of cases it is illegal. There are some cases when it ok to keep it (like if one pays off their loan too early [1]) but you will be criminally prosecuted if you do not return money you have no reason to believe it should be yours [2].
I'm not sure about the 'wrong account' scenario, but there was a case last year where Citibank accidentally paid off 'too much' of an outstanding debt to one of their creditors, and tried to recoup the money in court. They lost. But of course, they legitimately owed the money.
I like crypto, and decentralized finance is interesting, but I find it quite telling that users are being threatened with having to pay taxes as retaliation.
The founder has declared that they are not reporting financial transactions to the IRS that would be of material interest to the IRS, and noted that they will consider providing that material to the IRS only if their conditions are met.
It seems likely the IRS will subpoena them for the data regardless, and potentially seek conviction of tax fraud.
While I ironically enjoy that he thought the best way to intimidate cryptocoin people was to threaten them with taxation, it does highlight cryptocoin's primacy as a way to acquire nation currency without paying taxes on it.
what a weak threat. he should threatened to report the funds to exchanges to be blacklisted, that would be far worse. Technically, they would not pay anything unless they sold it for cash anyway.
Doesn't blacklisting funds go against the main idea of a decentralised crypto currency? What's the point of replacing the traditional banking and monetary system with something where funds could be devalued by the decisions of a few individuals?
Doxing is publicly publishing private information. Reporting someone to legally bound authorities is not doxing. Relying on trigger words and sensationalistic language is a tell for a weak argument/stance.
> Headline is misleading: the founder has threatened to doxx and report them to the IRS if they don't return funds which according to the Compound protocol, they rightfully own anyway.
That has strong implications the company is not reporting properly to begin with.
Wouldnt be a first for the capitalist class, but using your legally required tax as blackmail is... well.. Interesting.
It's so weird to see these scams running in full view of the public and casually discussed as if they're not basically just criminal ponzi or mlm schemes dressed up with some jargon. Hopefully when this ends up collapsing, it will be public and clear enough that "tokens" etc will have the same credibility as a Nigerian prince asking to help transfer money, but in this case I feel like there is always more lingo to keep dressing up the scams as something new, e.g. NFTs.
I don't generally like government intervention, but I do hope the "real" financial system is sufficiently isolated from these scams so their collapse won't cause problems.
Tesla provides things people outside of the auto industry want to buy. You might quibble about details (FSD in particular) but there is no shortage of people wanting to buy Tesla’s cars to use, not resell.
Cryptocurrencies have failed to do the equivalent – that’s why the pitch is “buy in now or you’ll wish you had later” rather than talking about things you could actually do that you can’t do as well now.
Scams, criminals, ponzi schemes and MLMs. Usually when those are used to describe crypto there is no accompanying explanation of why those are relevant or apply in a particular case. There are many ways to genuinely critique crypto that don't use trite buzzwords.
Because they are a platform that promises users they will make money by investing, when in reality only the early adopters / extremely lucky have any chance at making money.
So code isn't the law? Why does anyone trust these systems that keep failing time after time? If they need to ask money back and really have poor recourse? Didn't current banking and legal system to develop just solve those issues?
And that is the crux of the issue. Modern banking has tons of fees and burdensome regulations, but it also has entrenched layers of protection that makes sure both the bank and the customer are not 100% nuked when there is a problem.
Bank runs like from the movie "Its a wonderful life" - they don't happen anymore. Currencies devaluating like an exploding balloon - not since the civil war. Sure, it costs you more, but it saves you more.
Lotta benefits to crypto, but lots of hurdles need to be overcome (power and security for a start).
> Bank runs like from the movie "Its a wonderful life" - they don't happen anymore.
Another example of a bank run is the bank run of Northern Rock on the 14th September
2007. This was the biggest banking problem in the United Kingdom since the banking crisis in
the seventies, this was also the first bank run in the United Kingdom in 150 years. Eventually,
this resulted in the nationalization of Northern Rock. It is interesting to analyze this bank run
because it is one of the most recent bank runs in Western Europe. Furthermore, the bank
run from Northern Rock is a special case because it was a ‘reversed bank run’. Normally
during a bank run, a lot of depositors first withdraw their money, due to lack of confidence
for example, and then the bank will as a result of the huge withdraws get into a liquidity
crisis. However, in the case of Northern Rock, the bank first got into a liquidity crisis and as a
result of that, depositors withdrew their money from the bank.
It certainly looks like a bank run - the scenes in London today fulfilled the dictionary definition.
And heading north to Nottingham, and Middlesbrough, the same extraordinary scenes. savers forming long queues to drain their life savings from Northern Rock.
Banking -- an industry built on credibility, confidence and trust. But the Rock looks wrecked even in its home town of Newcastle.
Deposit guarantees should prevent this. But even after an extraordinary unlimited lending facility granted by the Bank of England and agreed by the Chancellor, customers preferred the sight of real cash.
If the bank bears the losses, then the burden is indirectly distributed to all its customers/shareholders. If the government bears the losses, then its distributed to the whole economy.
> Bank runs like from the movie "Its a wonderful life" - they don't happen anymore.
In the Western developed countries. There are billions living in countries/systems where currencies are devaluating like hell and where banking regulations is looser than crypto.
> Bank runs like from the movie "Its a wonderful life" - they don't happen anymore.
There was one at the beginning of the coronavirus epidemic in the US. A friend of mine runs a branch of a major bank. Just as lockdown was announced, they were mobbed by people demanding cash. The branch ran out of cash and had to close early. It was a bit of a frightening experience for the bank staff. But not a disaster. The branch ordered more cash delivered from the bank's cash center, added extra guards, reopened the next day with the ATMs fully loaded, paid out cash all day, and were back to normal traffic levels by the end of the day.
Yes, let's turn the [financial|legal](delete as appropriate) system into an obfuscated C competition. Last place prize is: [lose your life savings|spend life in prison].
I don’t understand why anyone, even an enthusiast, would dare to touch cryptocurrency lending with a forty-nine-and-a-half-foot pole. There’s no technical measure that can force me to pay back the coins I borrowed if I don’t have them. If you wanted to enforce being paid back in the real world legal system you’d be much better served with normal lending systems, know your customers, and report them to credit authorities. And if it’s not one of those “stablecoins” you’re borrowing something that could conceivably be worth 10x more in a year; that sounds like financial suicide. What do you possibly gain from engaging with all this?
Maybe if I built a defi lending platform myself so I could take a lot of loans from my customers and then default. That’d work just fine. Otherwise, run for the hills.
If the code is the law how can it be incorrect? It can only be incorrect by comparison with some other law (like "the code writer's intentions"), in which case you are effectively making that the true authoritative law, rather than the code.
Not “anyway“ but because of the hack. TheDAO was done for after it was hacked. The code was too bad and trust was gone as well. That was clear pretty soon.
The only thing to decide was if they would let the hacker get away with at the time 15% of the whole supply. If they did that it would have endangered the decentralization of the eventual proof-of-stake switch.
Because 'code is law' is a terrible expression to begin with. Law can be expressed with code, but law is ultimately a construct of human consensus. In the case of the DAO hack, the human consensus forked away from the bugs in the code.
> So code isn't the law? Why does anyone trust these systems that keep failing time after time? If they need to ask money back and really have poor recourse? Didn't current banking and legal system to develop just solve those issues?
As far as the crypto itself is concerned, of course it is. The issue here is that the founder is using another system to blackmail users.
The fact that this founder had to resort to tactics like these (instead of reverting the mistake on his end) shows that these systems are working as advertised.
While I'm not into Ethereum itself, lots of the failures you see are happening because the infrastructure for (mostly) decentralized finance is moving at an incredible (and irresponsible) speed. We're witnessing the modern version of old bank robberies that helped create the regulations.
Man, it feels like this has been happening a lot. I guess this happens when you have what is essentially JavaScript code on the EVM handling vast sums of money.
As many people on this forum know first hand, it's very, very hard to write that's 'perfect'. I've had the chance to write some fairly technically complicated EVM code (on chain contract upgrades with some other admin features), even the simple lines need a plethora of testing and review. This was a few years ago, but it took myself and another engineer, start to finish a couple months of dedicated effort to write what amounted to something like 5 source files. You have to know how the code executes with extremely high confidence up and down the entire stack, this takes time even with seasoned people. We ended up going through a security review with a third-party team, this is big money to do, high five figures for what amounted to two weeks of code review and pen testing! The problem is, without this serious dedication ($$) to making sure it's as good as you can get, projects are doomed to blow up like this. Hell, who knows what happens in 6 months after release when some EVM level bug gets discovered and directly exposes a hole in your contact. This might be different now, but a lot of contracts back then didn't have anyway to upgrade from those security exploits!
So from my point of view, you have this massive upfront cost, that I suspect the vast majority of teams are not paying, and you also have the chance of success being very low. Where have we seen this before, home automation seems to ring a bell and we've seen the security horror show with that. I don't mean to be such a downer on these projects, but they're really difficult to get right and audit. And when we're talking about putting millions(90!) of dollars into a thing, I don't really want to rely on the goodwill of some hackers to give me my money back. I wish the general public understood the security aspects of these contracts more, but people seem to see these hacks, shrug to themselves thinking they'll get debugged and fixed like normal software, and then continue on in life.
Unfortunately people are going to get burned in crypto by lack of experience, lack of review, lack of investment, and pure and simple scams.
If you look at the associated pull request, it added over 2K lines of code, and removed almost 1K, spread across 20 different files. 5 files have changed so much, GitHub doesn't even show their diff by default.
Sounds like introducing some formal methods would be a good way to reduce costs auditing and verification costs. I know there's some work in that area in the Ethereum ecosystem, but I'm surprising it isn't prioritized more.
I see Solidity as statically-typed JS flavour. Knowing all the gotchas, I think it deserves to be called the JS of DeFi. When you write code in it, it feels like walking on a minefield. Except when things go wrong, your frontend won't crash, but you'll lose yours or someone else's money.
Not to mention, you have all sorts of people trying to exploit your code - draining smart contracts from money is a great incentive for black hats.
So it's even worse than JS in some aspects (not just the language itself, but the platform it is tied to).
It's almost like there are rules and laws and people in the loop to prevent these kinds of things, and crypto is an expression of naive libertarianism that has no path to implementation without all the same things we decry about fiat - because in the real world those things are useful.
Any code that controls money needs to be super solid, but I wonder if Chia's smart contracts[1] would help? Their VM is functional and doesn't have stateful side effects like Solidity/EVM. The Chia team claims this is more secure/efficient/auditable than arbitrary Solidity code because state changes are often the hardest things to reason about in programs. It's an interesting claim — one that seems like it could be true and is worth seeing if it plays out in reality.
It has nothing to do with the language. It's all about software architecture and logic. Modern JavaScript is one of the best programming languages in existence.
Wouldn't a language with built-in support for proving properties of the code be better? My understanding was that compared to most of the typed functional programming languages, idiomatic JavaScript code is terribly more difficult to prove things about, by hand or machine.
Ahem: "Wells Fargo clients began to notice the fraud after being charged unanticipated fees and receiving unexpected credit or debit cards or lines of credit."
Nobody except the 'bank' in this case lost money. In fact, Compound also has a treasury that can and has been used to pay out users affected by bugs. Some small percentage of every loan on compound goes to fund the treasury. It's quite a good system.
Yeah totally. My credit limit on my Chase Freedom card is $90M, and this one time I bought something for $90M when I thought it was $90, and I was totally unable to reverse it.
"Tradition is a set of solutions for which we have forgotten the problems. Throw away the solution and you get the problem back. Sometimes the problem has mutated or disappeared. Often it is still there as strong as it ever was"
Substitute tradition for "regulations" and you have "Uber of X" or "hot start up industry disruptor" in a nutshell.
I'd like to add nuance: tradition seems to oftentimes be a mix between actual solutions to problems, and legacy cruft that can be safely removed without undoing the fix to the problem. Large, active codebases have to be occasionally refactored to keep them understandable, and this refactoring can often be done without a loss of functionality - why would the law (or tradition) be different?
In particular, it feels like much of the legal system is a bunch of hacks grafted onto existing (oftentimes much older) laws, and that there's an opportunity to rewrite the laws and merge the hacks in to form a cohesive whole.
While that's true, often times tradition and regulation are not the best solutions to the problemx certainly not as technology has evolve.
Not to mention much of the time regulation is not a solution at all but rather just means to protect incumbents.
Edit: To be clear, I agree there is tons of bullshit going on in crypto and DeFi, but I also believe that the existing players are ripe for disruption if they weren't regulatory protected.
There's no reason why I shouldn't be able to do a bank transfer instantly, or why I can't pay a a small business electronically without a large fee going to Visa.
> Compound is the world’s fifth-largest DeFi protocol with a total value locked of $9.65 billion, according to DeFi Llama, which provides ranking and metrics for DeFi protocols.
So they lost 1% of the total funds due to a bug.
And their solution was to threaten to dox the users.
Readit News
Notch it up to another first for crypto.
And that is one of the biggest misconceptions of crypto stuff.
Law and contracts (1) determine who owns what, not who happens to currently hold it.
That's why the founder can threaten them with the IRS, because they (likely(1)) do not rightfully (as defined per law) own it.
This is also why NFTs are kinds stupid, because you totally can sell someone a NFT which "claims ownership rights" without selling them any ownership rights legally seen. Sure it's most likely fraud as you deceived people, but only if. So telling people you sell them the NFT but not the think behind the NFT would make that pretty legal. Like you can sell a certificate about the correctness/quality of a picture without selling (or even having) that picture.
(1): Smart contracts are not contracts, they are computer programs. They might also contain contracts, but that doesn't mean that just because something is done in a certain way in a smart contract it is legally binding, legal, or anything (Well, that's also true for contracts themself).
This statement is nonsensical - the IRS has no enforcement mandate for theft/fraud, nor does it have any authority to return stolen property. All the IRS would do is say "Hey, I heard you got an extra $NN last year - please pay your taxes on it".
It could even be argued that by reporting people the the IRS, the founder is implicitly admitting that the current possessors actually do own said crypto, otherwise they wouldn't owe any tax on it.
It seems that the only thing you own when you purchase an NFT is the NFT itself. Not a little jpeg that it points to; just the bit of code on the blockchain.
It's kind of tautologically stupid. You buy a receipt that states you own that very receipt.
This seems wrong. Here's the quote from the founder:
> Otherwise, it's being reported as income to the IRS, and most of you are doxxed.
It seems to be "return it or else it will count as your income," which seems... weird. Do most crypto people just not pay taxes on crypto? How is this a threat?
The thought experiment that made this concrete was a sort of reductio ad absurdem:
Let's say for a moment that NFTs win worldwide support and begin to be used as proof of ownership for everything. As part of this movement, the Louvre registers an NFT signature for each item in their collection.
Now, let's say a nefarious actor manages to use social engineering and convince a naive Louvre curator to transfer the NFT ownership of the Mona Lisa.
This bad actor promptly goes to Sotheby's and asks them to list "his" Mona Lisa for sale.
---
Of course, the Mona Lisa would not go anywhere. The French government would never allow it. This is an extreme example but can be walked back to less and less valuable items: would this work for an NFT of a house, a car, a computer, etc?
Unless the state decided to universally and with no exceptions enforce ownership of NFTs, they are ultimately worthless.
https://mobile.twitter.com/moo9000/status/144389383001774899...
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Playing devil's advocate: it's not exactly "free money", it's free "tokens" of some kind, which might not be convertible to money at the same rate which was used to estimate the tax. If the tax amount was assessed at the value the tokens were supposed to have today (based on what they recently traded for at some exchange somewhere), but you were too slow and only traded the next day and the price paid for these tokens has fallen heavily, you might have to pay more in tax than the money you can get from these "free tokens". So yes, it's not hard to imagine a situation in which paying tax on that "free money" can be "the end of the world" for some.
If I receive $XX, would happily pay %Y of that to stay above board. If the IRS wanted to audit me, my personal war chest is now $XX-%Y greater than it was before and more than adequate to cover whatever past (accidental) tax errors I may have had in the past.
EDIT: Also profitable, taxes should be less then 90%. Just out of curiosity, isn't DeFi motivating users to defraud the IRS by promising 10% without reporting it as income?
EDIT: Come to think of it, if they are offering 10% without reporting to the IRS, which is obviously less than after taxes, would it be reasonable to assume all revenue / profits have not yet been reported to IRS as revenue?
And taxes on gifts are presumptively payable by the donor, not the recipient.
Disclaimer: not tax advice, YMMV etc.
Technically the profits are a result of the computer code of the system, though. If they want to stick to their arguments that smart contracts are the law, then it’s just a regular payout from the system according to the rules of the system. Business as usual.
However, I suspect when the losses are in the tens of millions they’ll drop the pretense of “code is the contract” and start pursuing other legal avenues. The loss was about 1% of the total money locked in Compound.
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* it was paid under the terms of a valid contract and need not be returned, and therefore is income (as this rests on the existence of a contract embodied by the protocol, it is not a gift, but an exchange for value.)
* it was an error and must be returned.
This seems to be an offer to settle for the former treatment if the recipients refuse the offerers claim that the latter is correct.
[1] A recent high-profile example where the facts and circumstances meant the wrongly wired funds were legally kept by the recipient: https://www.theregister.com/2021/02/19/citibank_money_mistak...
Other analogy that may be relevant are cases where casinos had slot machines with bugs awarding more prizes than the casino intended. In some cases/jurisdictions the courts ruled in favor of casinos, that the money was awarded incorrectly and should be returned; but in other cases/jurisdictions favored the winner, saying that the winner did everything right according to the rules of the game and should keep the winnings.
Also the Pepsi 349 Scandal in the Philippines in 1992 comes to mind [1]. In that case courts side with Pepsi, but I suspect that money has some inertia in Judges minds, so it was easy to side with Pepsi when it haven't paid yet. I suspect that if all that money had actually been automatically transfered to the many winners, then Pepsi would have a much harder task to convince the judges to make everyone transfer the money back.
[1] https://en.wikipedia.org/wiki/Pepsi_Number_Fever
Right?
[1] https://www.cnn.com/2021/02/16/business/citibank-revlon-laws...
[2] https://www.ktvu.com/news/woman-jailed-after-refusing-to-ret...
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https://www.cnn.com/2021/02/16/business/citibank-revlon-laws...
Those users will be doxxed anyway, they should just keep the money since they are on the hook for it anyway now.
Also, I wouldn't mind paying taxes on some free money since I still get to keep 66% of it.
It seems likely the IRS will subpoena them for the data regardless, and potentially seek conviction of tax fraud.
While I ironically enjoy that he thought the best way to intimidate cryptocoin people was to threaten them with taxation, it does highlight cryptocoin's primacy as a way to acquire nation currency without paying taxes on it.
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That has strong implications the company is not reporting properly to begin with.
Wouldnt be a first for the capitalist class, but using your legally required tax as blackmail is... well.. Interesting.
I don't generally like government intervention, but I do hope the "real" financial system is sufficiently isolated from these scams so their collapse won't cause problems.
Cryptocurrencies have failed to do the equivalent – that’s why the pitch is “buy in now or you’ll wish you had later” rather than talking about things you could actually do that you can’t do as well now.
Crypto, and all other forex trading, is a zero-sum game.
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Bank runs like from the movie "Its a wonderful life" - they don't happen anymore. Currencies devaluating like an exploding balloon - not since the civil war. Sure, it costs you more, but it saves you more.
Lotta benefits to crypto, but lots of hurdles need to be overcome (power and security for a start).
Another example of a bank run is the bank run of Northern Rock on the 14th September 2007. This was the biggest banking problem in the United Kingdom since the banking crisis in the seventies, this was also the first bank run in the United Kingdom in 150 years. Eventually, this resulted in the nationalization of Northern Rock. It is interesting to analyze this bank run because it is one of the most recent bank runs in Western Europe. Furthermore, the bank run from Northern Rock is a special case because it was a ‘reversed bank run’. Normally during a bank run, a lot of depositors first withdraw their money, due to lack of confidence for example, and then the bank will as a result of the huge withdraws get into a liquidity crisis. However, in the case of Northern Rock, the bank first got into a liquidity crisis and as a result of that, depositors withdrew their money from the bank.
https://arno.uvt.nl/show.cgi?fid=116241
It certainly looks like a bank run - the scenes in London today fulfilled the dictionary definition.
And heading north to Nottingham, and Middlesbrough, the same extraordinary scenes. savers forming long queues to drain their life savings from Northern Rock.
Banking -- an industry built on credibility, confidence and trust. But the Rock looks wrecked even in its home town of Newcastle.
Deposit guarantees should prevent this. But even after an extraordinary unlimited lending facility granted by the Bank of England and agreed by the Chancellor, customers preferred the sight of real cash.
https://www.channel4.com/news/articles/business_money/the%2B...
I've witnessed and been (indirectly) affected by a bank run in the last decade[0].
0. https://en.wikipedia.org/wiki/Seizure_of_Bulgaria%27s_Corpba...
It would be a mistake to think of these two features as easily separable.
Here is $24bn of losses due to credit card fraud: https://shiftprocessing.com/credit-card-fraud-statistics/
If the bank bears the losses, then the burden is indirectly distributed to all its customers/shareholders. If the government bears the losses, then its distributed to the whole economy.
> Bank runs like from the movie "Its a wonderful life" - they don't happen anymore.
In the Western developed countries. There are billions living in countries/systems where currencies are devaluating like hell and where banking regulations is looser than crypto.
There was one at the beginning of the coronavirus epidemic in the US. A friend of mine runs a branch of a major bank. Just as lockdown was announced, they were mobbed by people demanding cash. The branch ran out of cash and had to close early. It was a bit of a frightening experience for the bank staff. But not a disaster. The branch ordered more cash delivered from the bank's cash center, added extra guards, reopened the next day with the ATMs fully loaded, paid out cash all day, and were back to normal traffic levels by the end of the day.
Code is law. This law was just written incorrectly. This is a known risk; it's the reason why defi interest rates are similar to junk bonds.
Maybe if I built a defi lending platform myself so I could take a lot of loans from my customers and then default. That’d work just fine. Otherwise, run for the hills.
The only thing to decide was if they would let the hacker get away with at the time 15% of the whole supply. If they did that it would have endangered the decentralization of the eventual proof-of-stake switch.
As far as the crypto itself is concerned, of course it is. The issue here is that the founder is using another system to blackmail users.
The fact that this founder had to resort to tactics like these (instead of reverting the mistake on his end) shows that these systems are working as advertised.
So from my point of view, you have this massive upfront cost, that I suspect the vast majority of teams are not paying, and you also have the chance of success being very low. Where have we seen this before, home automation seems to ring a bell and we've seen the security horror show with that. I don't mean to be such a downer on these projects, but they're really difficult to get right and audit. And when we're talking about putting millions(90!) of dollars into a thing, I don't really want to rely on the goodwill of some hackers to give me my money back. I wish the general public understood the security aspects of these contracts more, but people seem to see these hacks, shrug to themselves thinking they'll get debugged and fixed like normal software, and then continue on in life.
Unfortunately people are going to get burned in crypto by lack of experience, lack of review, lack of investment, and pure and simple scams.
https://github.com/openethereum/parity-ethereum/blame/4c3217...
https://blog.openzeppelin.com/on-the-parity-wallet-multisig-...
If you look at the associated pull request, it added over 2K lines of code, and removed almost 1K, spread across 20 different files. 5 files have changed so much, GitHub doesn't even show their diff by default.
It was reviewed by one person in a single day.
https://twitter.com/Mudit__Gupta/status/1443454935639609345
Not to mention, you have all sorts of people trying to exploit your code - draining smart contracts from money is a great incentive for black hats.
So it's even worse than JS in some aspects (not just the language itself, but the platform it is tied to).
EDIT: see https://ethernaut.openzeppelin.com/
The faster we ban all crypto nonsense the better.
[1] https://chialisp.com
Far too much trust and too little control in systems like DeFi. It all sounds wonderful in theory but we fail to see the big impacts of human errors.
https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scan...
As for bank glitches, here are some recent ones:
https://eu.freep.com/story/money/2020/06/30/scams-glitches-s...
https://www.verdict.co.uk/chase-bank-accidentally-makes-man-...
Substitute tradition for "regulations" and you have "Uber of X" or "hot start up industry disruptor" in a nutshell.
In particular, it feels like much of the legal system is a bunch of hacks grafted onto existing (oftentimes much older) laws, and that there's an opportunity to rewrite the laws and merge the hacks in to form a cohesive whole.
Not to mention much of the time regulation is not a solution at all but rather just means to protect incumbents.
Edit: To be clear, I agree there is tons of bullshit going on in crypto and DeFi, but I also believe that the existing players are ripe for disruption if they weren't regulatory protected.
There's no reason why I shouldn't be able to do a bank transfer instantly, or why I can't pay a a small business electronically without a large fee going to Visa.
So they lost 1% of the total funds due to a bug.
And their solution was to threaten to dox the users.