NBER Report on El Salvador Bitcoin Experiment

Whatever you say about the controversial El Salvador Bitcoin experiment, it is certainly a real live natural experiment.  Success, failure, or in between, we’re going to see what happens.

There are many interesting aspects of this experiment, including the attempt to assert sovereignty and restructure state financing.  The geopolitical provocation has certainly generated predictable reactions, but it is too soon to know how the chips will fall as El Salvador enters a potential debt crunch.

But one of the most interesting parts of the experiment is the attempt to boot up Bitcoin as a real, functioning currency throughout El Salvador.  With a wallet available and businesses required to accept Bitcoin, the stage is set for the people of El Salvador to use Bitcoin as currency.

So how’s that going?

This spring researchers at the US National Bureau of Economic Research report on a survey of Bitcoin use in El Salvador before and after the Bitcoin experiment [1].  Overall, it seems clear that El Salvadorans have not adopted Bitcoin.  And adoption is not growing, and may be shrinking.

There are many points of interest in the survey data.  One thing that struck me is that a large number of Salvadorans do not have smart phones connected to the Internet—a prerequisite for actually using Bitcoin via the Chivo wallet.  And, naturally, the poor and “unbanked” are more likely to not have access to the internet.  Similarly, knowledge about and downloading the Chivo wallet is much higher among wealthier, better educated people, and also among younger and male individuals. 

However, the most critical factor is that the Chivo wallet is competing with cash and other digital payment methods.  The survey shows that many people have not downloaded the Chivo wallet yet, and many who did download it have not used it except to get the $30 incentive.  Basically, the Chivo has not gained much popularity against cash and other options.  We may note that, despite the law, most businesses do not accept Bitcoin—most business in El Salvador was, and remains, cash.

The most surprising finding to me is that Bitcoin is not being used for remittances from overseas, even though this is a natural use case, and Bitcoin should be economically competitive in this role because of the government subsidies that reduce transaction costs.

“Overall, we document that bitcoin is not being widely used as a medium of exchange. The later stands despite the big push exerted by the government, which involved endowing bitcoin with legal tender status through the Bitcoin Law, the $30 bonus, gas discounts, and no transaction or withdrawal fees; and despite the incentive to use touchless payment methods in the midst of the COVID-19 pandemic.”

([1], p. 19)

The survey hints at reasons for the relatively low uptake.  Aside from the lack of access to the internet or other infrastructure, the Chivo app and Bitcoin have not successfully competed with the alternatives, cash and cards.  This seems to be a combination of preference for the familiar and distrust of the new.

This isn’t exactly a shocking finding.  Most people are pretty conservative about money. The El Salvador experiment took many steps to address these concerns, but it has not yet made much progress on this front in a few short months.  And even with enviably high public support, the government has not yet established sufficient trust in their innovative currency project to overcome natural inertia.

My own view is that the main asset of Bitcoin is psychological, i.e., that it “disrupts” conventional money and finance.  This is certainly the central thrust of the government’s push for financial sovereignty.

However, to the degree that Bitcoin “disrupts” conventional money, that is not necessarily a psychological plus for many ordinary people and ordinary commerce.  So, the thing that makes Bitcoin attractive for state finance is probably a negative for uptake as a regular currency.

It also seems to me that, even if Bitcoin isn’t widely used, El Salvador can still potentially gain sovereignty and financial benefits. “Legal tender” is sort of a separate experiment from financial sovereignty. Something like the “Bitcoin bond” might work, and attracting Bitcoin mining and other crypto businesses could succeed, regardless of how many people buy milk with Bitcoin.  For that matter, I would think that people might well start using Bitcoin for remittances, even if they just convert to cash and never use it a a local currency.

Do I think El Salvador will achieve greater financial sovereignty? I doubt it. The powers-that-be don’t want to be “disrupted”, and they probably can make sure they get their way. But adoption of Bitcoin as legal tender isn’t crucial to the success or failure of that effort.

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1. Fernando E. Alvarez, David Argente, and Diana Van Patten, Are Cryptocurrencies Currencies? Bitcoin as Legal Tender in El Salvador. National Bureau of Economic Research Working Paper Series, No. 29968   2022. http://www.nber.org/papers/w29968

Cryptocurrency Thursday

Maple Wing Inspired UAV

It is a golden age for robots, including flying robots. Robot designers are able to try everything these days.

While the field is dominated by the uber annoying quadcopter, other designs are being explored.  (E.g., this, this, this, this, this, this, this, this, this to list a few)

This summer researchers in Hong Kong report yet another variation, taking the Samara idea to another level, maching it up with the monocopter design, adding propulsion and guidance! [2].

It’s not a fixed wing aircraft, it’s not a rotary wing aircraft.  It’s a rotary flying wing!  (Not quite as crazy as a monocopter, but pretty close.)

It should be apparent that stability and control are going to be a challenge.  The report demonstrates surprisingly good results on these fronts.  In addition, such a light weight craft might potentially hover for hours on a single charge.

What would you use this for?  As Evan Ackerman suggests, there are sensors that don’t mind rotating, and some that work by rotating [1].  So those are candidate payloads. (Though, at the scale of this demo, this is hardly stealthy surveillance!)

Cameras, on the other hand have to be seriously adjusted to get much of anything.  The researchers demonstrate some not-too-bad stabilized video.  So it can be done, at least a little.

Still, it’s hard to see why you would chose this technology over more conventional UAVs.  Even if you need multiple quadcopters to get hours of coverage, that seems like a better approach than this madly whirling dervish. Or mini-blimps!

We’ll have to see if anything interesting or useful comes from this design.

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1. Evan Ackerman, Maple Seeds Inspire Efficient Spinning Microdrone in IEEE Spectrum – Robotics, May 13, 2022. https://spectrum.ieee.org/spinning-drone
2. Songnan Bai, Qingning He, and Pakpong Chirarattananon, A bioinspired revolving-wing drone with passive attitude stability and efficient hovering flight. Science Robotics, 7 (66):eabg5913,  https://doi.org/10.1126/scirobotics.abg5913

Robot Wednesday

Reproducibility With A Robot Lab

One of the great challenges of our era is the reproducibility of scientific result, or rather, the lack thereof.  There is a vast sea of research results published every year, but most of them are not replicated, and some are found to be wrong in one way or another.  What is the value of published research if it isn’t checked and corrected if necessary?

There are many efforts to improve “reproducibility”, improving what is published, generating machine readable documentation and workflows, among other techniques.  Many of these ideas aim to make the published record more complete and unambiguous, in order to be reproducible. These efforts also aim to make the research record more machine readable, so be more amenable to meta analysis and machine understanding.

At the same time, many processes are being automated, up to the point of complete “robot labs”.

This summer researchers from the UK and Sweden report something I’ve imagined for a long time:  an AI system that reads research papers, and then attempts to replicate the results with a robot lab!  [2] .

Cool!

This was actually hard to do.

For one thing, the text analysis had to be able to find potentially reproducible results, i.e., a significant and concrete finding.  Not every “result” is interesting, and many claimed results are about the implications of research results, not the results themselves.  In addition, the potential target had to be within the capabilities of the robot lab they are using. 

In this study, they focused on research about gene expression for a small set of widely studied genes related to breast cancer. 

The study also tested two different teams, each used the same lab but independently ran the replications.

The results managed to reproduce the results in half the test cases, and substantially supported another quarter of them. 

Neat.

Now, it is important to note that this process was actually a hybrid human-AI-robot effort.  The text processing was primitive and checked by humans.  The robot lab is only semi-automatic, requiring human participation.

For that matter, the interpretation of the replication studies was not automatic.  I.e., human scientists had to judge how the results from the robot lab related to the original published claims.  (For one thing, the robot lab does not have a sophisticated text generation capability to write up the results and make claims about them.)

“To fully achieve the vision of automated literature testingwill require technical advances in laboratory robotics, in textmining and in AI.”

([2], p. 9)

But, I agree that “this work shows that automated and semi-automated techniques could be an important tool to help address the reproducibility crisis” [1].

The limitations in this study are all things that can be addressed, if there are sufficient resources.  AI models can be trained to extract important research claims and information required for reproducing them.  Robot labs can be further automated.  And AI models can be trained to both generate human readable results and to compare the results from a robot lab with research reports.

Could this technology replace scientists?  No, but it could change how they spend time, and make them more productive. 

The human experts would spend more time cross checking the automated findings, and less time on detailed mechanical tasks.  Humans would also constantly review and update the text analysis, to detect published claims that evade or confuse the AI to make sure the AI’s interpretation is correct and complete.  And so on.

If these processes become common, they might lead to more standardization of research  processes. I could imagine some sponsors might demand automated replication of sponsored research. If you were investing in a new technology, wouldn’t you like to require it to be submitted to a third party reproducibility lab?

If most labs are using the same system to replicate each other’s results, there will be less idiomatic variation. This kind of standardization is both good and bad.  It should mean consistent results and quality, and might make results easier to understand. 

But it also could be a fragile “monocrop” situation.  If everyone makes the same mistakes, it is hard to discover the mistakes!  Worse, machine learning models can be opaque, and may be biases or just wrong, so the whole thing could go off the rails and the Carbon-based units would never know.

And worst of all, the automated replication will only know how to replicate what it knows how to replicate. Truly new discoveries—the things we would really like to find!—might be rejected (i.e., fail replication) because they are too different for the robot.

Clearly, we will want multiple, independent versions of this technology, cross validated but not identical. I’m seeing a whole industry in the maintenance and continuous validation of robot reproducibility labs!

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1. Ross King, Robot Scientist ’Eve’ Illuminates Reproducibility in Breast Cancer Research, in Wallenberg AI, Autonomous Systems and Software Program – News, April 27th, 2022. https://wasp-sweden.org/robot-scientist-eve-illuminates-reproducibility-in-breast-cancer-research/
2. Katherine Roper, Rehim A. Abdel, Sonya Hubbard, Martin Carpenter, Andrey Rzhetsky, Larisa Soldatova, and Ross King, Testing the reproducibility and robustness of the cancer biology literature by robot. Journal of the Royal Society Interface, 19 (189):20210821, April 6 2022. http://doi.org/10.1098/rsif.2021.0821

Yet Another Solar Thermal Storage Chip

How do you make solar energy even better?  By saving up when the sun shines, and drawing down at night and when it’s cloudy.

Solar Energy with storage systems are definitely the coming thing. (e.g., this, this, this, and so on)  

This spring researchers in Sweden and China report on yet another variation on this theme, with a “microelectromechanical ultrathin thermoelectric chip” [2].  This technology combines a chemical thermal storage system with a thermal electric generator, all on a single, thin, chip. 

Sunlight (up into UV) triggers a photochemical reaction, transitioning the shape of the molecules into “an energy-rich isomer” [1].  I.e.,these chemicals are “switches” that change shape when excited, and then back to release stored energy.  The chemicals are liquid at room temperature, and can hold energy for a decade or more!

Cool.

The other half of the equation is a thermal electric generating material (TEM) which produces electricity when heated.  The TEM is attached to the photocollector, so when the accumulated energy is released as heat, the chip emits electricity.  This technology is also being combined with PV chips to boost power by capturing otherwise waste heat.

If I read this correctly, the demonstration generates something less than 1% as much as conventional PV chip per area, so the big news is that this is continuous energy, potentially stored for long periods before use.

The researchers note that even this initial level of production would be useful for powering small devices, such as networked sensors or mobile devices.  The Swedish researchers also imagine that the thermal storage might be incorporated in heated clothing.

This is the same idea as liquid salt storage, with different materials and physics.  From the research paper, I gather that there are a lot of variations on this theme under development.  So it’s not so much that we don’t know how to do this kind of hybrid thermal electric generation, it’s that we are exploring the best ways to do it.  So we should stay tuned for yet more developments in the coming decade.

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1. Mauro Mereu, Capture, store, and use solar energy whenever you need it, in Innovation Origins, May 16, 2022. https://innovationorigins.com/en/capture-store-and-use-solar-energy-whenever-you-need-it/
2. Zhihang Wang, Zhenhua Wu, Zhiyu Hu, Jessica Orrego-Hernández, Erzhen Mu, Zhao-Yang Zhang, Martyn Jevric, Yang Liu, Xuecheng Fu, Fengdan Wang, Tao Li, and Kasper Moth-Poulsen, Chip-scale solar thermal electrical power generation. Cell Reports Physical Science, 3 (3):100789, 2022/03/16/ 2022. https://www.sciencedirect.com/science/article/pii/S266638642200056X

Book Review: “Siren Queen” by Nghi Vo

Siren Queen by Nghi Vo

I liked Vo’s earlier book (The Chosen and the Beautiful (2021)), despite an ignorance (and indifference) to the original Gatsby story.  So, I was eager to read her new book.

This is not a sequel, but there are many Vo-ian elements:  interwar years of the twentieth century America, menacing and erotic magic, race and queerness.

The setting is Hollywood of the studio period.  The camera can literally steal your soul, and the infernal studio contracts are not a metaphor.  If there is dark and menacing magic power behind movies, stardom has its own magical power, too.

Like thousands of kids, young Asian American Ms. Wei is drawn to movies, to be a star.  It’s a very dangerous road to travel, even more so for a non-white girl with a bad attitude.  Plucky Wei makes bad decisions, takes some chances, and gets some breaks.

It becomes clear that she has something magic about her, she could be a star. In Jim Crow America she just can’t be cast in conventional roles, so she is cast as a Monster, as the Siren Queen.  Fine. She’ll make the most of it.

Along the way, Wei discovers her own sexuality (which at the time is Monstrous).  She falls in love, falls out of love. Learns what it means to be a friend—and a sister.

There seems to be a minor industry in this ‘interwar years of the twentieth century America, menacing and erotic magic, race and queerness’ genre  (e.g., this, this, this, this.) , and Vo certainly holds her own in the field.

I look forward to seeing where she goes next.

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1. Nghi Vo, Siren Queen, New York, TOR, 2022.

Sunday Book Reviews

Book Review: “Origin” by Jennifer Raff

Origin by Jennifer Raff

Long, long ago, I was an undergraduate Anthropology major.  Which means that my understanding of prehistory and the population of the Americas is, ahem, dated.  Reading Raff helped my catch up on the last decades of research.

There have been many intriguing archaeological finds, of course.  But most of all, we can do DNA now, including DNA from “ancient” remains, thousands of years old.  Wow!

Sensei Raff is an expert on extracting ancient DNA (as she explains in the book), and is here to tell you what has been learned about the earliest humans in America.

It’s complicated.  Archaeological remains are difficult to interpret, especially when they are sparse.  And genetic information is difficult to interpret, even more so when it is sparse and very old.  Other evidence, including linguistics and oral traditions of living peoples are difficult to interpret.

So, multiple sources of data, all difficult to interpret.  What could possibly go wrong?

We’re shocked, shocked!, to hear that the genomic data doesn’t agree with the archeology.

The thrust of Origin is a careful walk-through alternative interpretations and attempts to reconcile different data. Overall, it seems clear that people came from Siberia to the Americas, likely following the coast in boats.  There were surely more than one group moving through, displacing or merging with each other.  The details aren’t clear, and, depending on how you evaluate the various evidence, you can imagine different scenarios.

The timing of all this is up in the air, too.  There are some archaeological sites that might date to 30,000 years ago—before the end of the last glaciation in North America.  There are sites in South and Central America that may be 10.000 years old—indicating people must have started from Siberia long before that. But the earliest sites are sparse and possibly ambiguous, so this is still disputed.

The genetic evidence supports the possibility of migrations more than 10,000 years ago, though the evidence indicates multiple populations, some that didn’t survive down to the present except as remnants.  These data are sparse and the dating may be iffy.

So there is a lot of uncertainty.

But honestly, the details aren’t all that important for a non-specialist. 

People came to the Americas.  Lot’s of people over thousands of years.  They interbred (usually), and eventually became the peoples of precontact America.  These people populated the whole hemisphere, adapting and innovating to exploit the diverse resources here.  Does it matter exactly when they came? Not to me.

Much of this book is a sketch of the ugly history of biological anthropology in the Americas; which fostered sick racial theories, exploited and abused native populations, and appropriated artifacts and human remains without permission or consultation of contemporary people. 

For native peoples, DNA studies have come to be considered “Vampire Science”, stealing the sacred remains of their people—not to mention, their own lifeblood—for the benefit of white men and the detriment of the native people.

These chickens have come home to roost, in the form of hostility and effective resistance from native people.

Raff explains the issues here, and reports on her own approach.  Here’s a news flash: it turns out that respectful consultation and collaboration work better than man-splaining and cultural denegration. Raff recounts her own successes in the process.

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You can read this book to learn about the current understanding of the early history of people in the Americas.  Or you can read this book to learn the right way to do genetic history.

Either way, it’s worth a read.

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1. Jennifer Raff, Origin: A Genetic History of the Americas, New York, Twelve, 2022.

Sunday Book Reviews

Dubious Advice About Freelancing

There is a lot of chatter about Freelancing these days, which is “the future of work” for many people.  Freelancing is challenging because you have to DIY everything.

The Freelancers Union* does a lot to make life better for Freelancers of all stripes.  Aside from advice and solidarity, the FU is developing creative systems to help Freelancers DIY a safety net that other workers might have. Check it out.

However, the FU does tend to promote Freelancing rather more uncritically than I’d like to see.  For instance, they routinely claim very high numbers of Freelancers, using debatably loose definitions.

This spring the FU blog feature a particularly annoying item, “How to Turn Your Hobby Into a Business” [1].   OK, I’ll bite.

The main point is, anyone can create a business and collect money, so why don’t you?   And, as the title suggests, you can turn something you already do for fun into a money-making business.

“If you really love your hobby and want to get paid to do it, then it may be time to monetize it. Start a blog sharing all about it, turn it into a product or service you can sell, or teach a course on how to do it. The possibilities are endless!”

Endless possibilities?   Give me some examples.

The article offers seven ideas.  It’s an absurd list.

1. Thrifting or Antiquing
2. Reading
3. Writing
4. Gardening
5. Cleaning
6. Baking
7. Dogs and pets

OK, antiquing is certainly something that there is a lot of buying and selling.  And, I guess, if you have already invested in collecting, refurbishing, etc. used stuff, then why not try to sell it.  Not that you are likely to cover your costs.

Now, making money from writing is hardly a novel idea.  It also is really, really hard to make money writing.  But, sure.  Go for it.

As a voluminous reader, I was intrigued by the idea of making a business from reading.  However, this turns out to be a variation on making money by writing, i.e., writing book reviews for small payments.  Assuming you actually read the assigned book, this probably pays less than 10 cents per hour—not enough to pay for the coffee consumed.

Gardening and cleaning and dog walking are things that high school kids do to make some pocket change.  So, not very original.  And, since you are competing with every teenager in town, pay rates are going to be very low.

If you are skilled and already have a kitchen, then baking or cooking might be a viable money maker—if you can do enough of it fast enough, and if you have some way to deliver it.  There’s a lot of competition, of course, and in a lot of places there are health and safety regulations to follow. Not an easy way to make money.

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My point is that these ideas are hardly new opportunities or novel ideas.  They’ve been around a long time, and they aren’t easy to monetize.  At least, not to monetize at a level to even cover costs.

I’m not seeing anything “endless” here except red ink.

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The worst thing about this article is that they are urging you to monetize something you do now for fun.

Why is this a good idea?

Turning a hobby into a business likely will destroy the fun.  The examples they list aren’t likely to generate enough money to cover costs, so you will ruin your hobby and lose money at the same time.

This is a very bad idea, IMO.

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So, who would think this is a good idea?

Well, as it happens the post is from “Lili”, which is a company that sells business services to Freelancers.  When they talk about “getting paid”, they are talking about “setting up a Lili account.” 

And, to be clear, Lili benefits when you to set up a business that uses their service, regardless of whether you can make money, or whether it will destroy your hobby.

So this article is not only bad advice, it is a self-interested sales pitch.

Tsk.

Personally, if I were the editor of this blog, I’m not sure I would have accepted this commercial plug. Or at least label as “advertising”.

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1. Lili, How to Turn Your Hobby Into a Business, in Freelsncers Union Blog, May 12, 2022. https://blog.freelancersunion.org/2022/05/12/how-to-turn-your-hobby-into-a-business/

* Note:  I am a proud member of the FU.

How to Create and Sustain Open Source Communities

This spring, Reynold Xin, Wes McKinney, Alan Gates, and Chris McCubbin discuss current trends in open source software communities [1].

Possibly the most important overall point is how diverse open source software communities have become.

By definition, an open source software project is public code maintained by a group of (presumably) volunteers, AKA, “the community”. 

It has become easy and routine to create a code repository on Github or elsewhere. Of course, organizing the people and work still has to be done, and that certainly isn’t a solved problem.

One big part of the story is how for profit companies use open source.  (They call this “engagement with the community”.)   “Open source is not necessarily about free software” (Reynold Xin, quoted in [1], p. 50)  Companies are paying for “assurances” (i.e., of quality and security), and for maintenance of open source software.  The advantage of FLOSS to companies is primarily interoperability and preventing technical lock in, not the “F” part of FLOSS.

Unsurprisingly (at least to a social scientist), “governance” is a challenge.  For tiny one or two person projects, decision making is easy enough.  But as a project succeeds and grows, decision making becomes more complex.  And, as for profit companies take up a product, decision making becomes complicated or contentious.  We have seen this in spades in the cryptocurrency communities.

One of the key activities is communication among the contributors. Projects typically use a variety of testing and integration tools to review, test, and fold in contributed code. As the number of contributors grows, there needs to be decision making about what should be folded in, i.e., what work is actually included in the product and when to include it. 

As a project grows, it will tend to lose focus, or drift from the original goals.

“it’s very easy for a project to turn into a grab bag of jumbled objectives.”

(Xin in [1], p. 52)

Reviewing and approving changes is a key decision making process, and one that tends to become centralized,in practice.  (Anyone who has done software development understands why this happens.  In my career, I have probably spent as many hours arguing about what software to produce as actually producing it. Benevolent dictatorship is so much less aggravating.)

And then there are the programmers.

It is necessary to recruit, care for, and, when necessary, discipline participants.  But noone is hired, and noone can be fired, and the community is distributed over the internet anyway; so conventional “Human Resources” isn’t available.  This fact has forced the development of ad hoc strategies that generally replicate conventional work relationships.

One thing that is interesting (at least, for this once-an-Anthropology-major) has been the developed social roles, based on technical roles, but also forming a social hierarchy. This sort of hierarchy appears across many open source projects in one guise or another. 

There are two important distinctions that are common, reflecting an axis of power and gradations of status.

On distinction is “contributors” versus “committers”, where only “committers” have the technical authority to change the code.  They are literally “privileged” individuals, who rule over the product and work results.

There is also a distinction between “maintainers” and “core maintainers”.  The former fix bugs (subject to approval by committers), and the latter create bugs add new code.

Fortunate projects may be able to pay some participants, and it is going to be the high status “core maintainers” and “committers” who are compensated.

On a small project, the roles are generally simple, and may boil down to a small group of “insiders” and some more or less seriously commited “outside contributors”. 

But as a project grows larger, this simple structure cannot scale.  A handful of insiders cannot review every code update, let alone dictate every detail of the project.  Open source projects are starting to recognize the need for additional specialized roles, though it isn’t clear how to recruit and reward people for these activities.

Larger projects have developed the model of a not for profit foundation to manage it. A foundation helps manage finances and other resources, and provides a mechanism for relations with stakeholders such as for profit companies and governments.  A foundation defines additional roles similar to a corporate HQ, including strategic planning, finance, PR, and legal activities.

Open source projects are internet based collaborations, almost by definition.  This has positive features, especially the possibility for real openness, such as initiatives driven by users, not by inside stake holders.  It also has familiar negative features, not least the likelyhood of conflict, and the usual toxic internet culture.  Considering the way the internet works, it is a miracle that open source projects have succeeded as well as they have, considering how shaky internet culture is!

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Overall, open source software projects are an extremely interesting sociotechnical development.  As I have said many times, there is much of interest here for academic social scientists. 

First of all, these groups have basically self-organized, developing social structures and conventions without grownups or teachers or bosses or even permission.  To the degree that open source communities work at all, it is a fascinating case study in the development, evolution, and growth of social groups.

Second, the activity of these groups is copiously documented in the form of digital discussions, code repositories, and logs of activity.  In general, decision making is recorded in some detail, as are the actions that stem from decisions.  It is a common convention that any change to the code must reference documentation that explains and justifies the change. I.e., actions are often traceable to decisions.  And, most important, there are detailed logs of who did what. 

And third, there are a lot of open source projects, offering opportunities for broad comparative studies.  It isn’t clear just how much variability there actually is, or what common threads can be found.  Though, of course, open source projects are interrelated, and individuals participate in more than one community.

And more.  What is the life cycle of an open source project?  How do people contribute?  How do cultural and political differences show up? 

The possibilities for academic research are amazing, and there has been very little done.  This is a blue ocean for anthropologists and social psychologists.

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1. Reynold Xin, Wes McKinney, Alan Gates, and Chris McCubbin, It takes a community—: the open source challenge. Communications of the ACM, 65 (5)]48–55, May 2022. https://cacm.acm.org/magazines/2022/5/260353-it-takes-a-community/fulltext

A Taxonomy of NFT Scams

“[R]apid growth in the NFT market has offered a wide variety of opportunities for scammers, fraudsters, and cybercriminals.

([1], p. 60)

Non Fungible Tokens (NFTs) are the flavor of the month this year in Nakamoto’s happy kingdom.  Indeed, this year NFTs officially jumped the shark.

Combining the irrationality of ‘collectibles’ with the exuberance of crypto fanboys, this technology and social phenomenon is a strong candidate for Crypto Tulip of the Year again this year.  (This year, NFTs were nosed out for the award by El Salvador.)

NFTs are an extension of Nakamotoan cryptocurrencies, which store cryptographically signed certificates on a blockchain, where they can be owned and traded digitally, by humans and by algorithms.  You can buy and sell NFTs with cryptocurrencies, and they can represent ownership of anything.

NFT technology is implemented with secure cryptographic protocols that are very difficult to hack or subvert.  So…problem solved!

Of course not.

This spring Nir Kshetri lays out a taxonomy of NFT “Scams, Frauds, and Crimes” [1].

How can something so technically secure have so many different pathologies?

For starters, he’s talking about NFT markets, not the digital records themselves.  Basically, you can do anything with NFTs that you can do with any other way to record and trade ownership; so  the NFT world has recreated every kind of financial crime ever invented, plus some new ones.

Kewl!

First, no matter how theoretically secure the cryptographic technology, actually using them involves real software, which means bugs.  And wherever humans act, humans make errors.

“Cyberattacks targeting NFTs mainly include actions against NFT exchanges and wallets.”

([1], p.61)

It is important to note that Nakamotoan blockchains are secure through the use of cryptography and decentralization.  But NFTs are implemented on top of this tech by non-Nakamotoan technology, including “centralized” services and, of course, user operated systems.  Cryptography is only as secure as the cryptographic keys, some of which must be in the possession of Carbon-based units.

Kshetri’s survey is summarized in a 2×2 table.  The columns are “who is attacked” (producers/owners or consumers), the rows are “the method of attack” (technological vs. social engineering).  There are multiple examples of each case, amounting millions of losses.

TABLE 1. A typology of NFT scams.  (adapted from []1], p.62)

Victim/target ➩ Main element of the victimization strategy	Creators/owners of NFTs or the actual assets that NFTs represent	Consumers/buyers of NFTs or investors in NFT projects
Technology attacks, such as malware and hacking (mostly in combination with social engineering)	Cell 1 ∙ Attacks targeting digital wallets of NFT creators/owners	Cell 2 ∙ Exploiting security flaws in NFT platforms ∙ Giveaway scams
Purely social engineering and other nontechnological attacks	Cell 3 ∙ Creating fake NFT customer service pages to lure NFT creators/owners ∙  Creating and selling NFTs without the knowledge and consent of the owner of the actual assets that NFTs represent ∙  Tricking artists into paying to mint NFTs of their assets	Cell 4 ∙ Investment scams ∙ Tricking consumers into buying fake NFTs

In short, every kind of attack, on every element of the system!

And, just for fun, remember that an NFT is a certificate of ownership of some digital or physical object. Even if the NFT is correctly managed and nothing bad happens, the object itself could be lost (assuming it even existed in the first place!), stolen, or it could be a fake.

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I will add a few points.

One thing that makes NFT scams (and crypto scams in general) so dangerous is that it is easy to get a false sense of confidence from the security underlying protocols. Nakamotoan blockchains are genuinely hard to hack, as are the cryptographic methods used in NFTs.  The base of the system is pretty solid.

But Kshetri’s table is all about the rest of the system, which is no more secure than any other digital system with Carbon-based users. Which ain’t all that secure or trustworthy.

Second, NFTs (and crypto in general) are designed to support algorithmic transactions.  This means that if there is a flaw, it can and will be exploited rapidly.  We have seen heists that sucked away millions in seconds.  The attack is over long before puny Carbon-based units could even notice.

In practice, this means that almost any of Kshetri’s breaches could result in an instant wipe out for users or producers or the whole system.  Everything could be gone in a flash.

Finally, it is very, very important to note that there is little or no regulation on these transactions.  Most of the scams Kshetri describes aren’t even necessarily illegal, because there is no legal framework. Somebody sells you a fake NFT?  The NFT you bought isn’t what they said it was? Somebody steals your NFT?  Too bad.

If you play with NFTs, you are playing without a referee, and without a net. 

And, thanks to Kshetri, we can talk about ‘Type 1’, ‘Type 2’, etc. scams.

Pretty soon now, we’ll elaborate this taxonomy, parsing each type into sub types.

Yessir. NFTs are great. They are a great lesson in how financial markets really shouldn’t be built.

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1. Nir Kshetri, Scams, Frauds, and Crimes in the Nonfungible Token Market. Computer, 55 (4):60-64,  2022. https://ieeexplore.ieee.org/document/9755212

Cryptocurrency Thursday

The Natural Robotics Contest

Just a short post about an interesting, if very, very nerdish, opportunity. (Nerd Strong!)

The Natural Robotics Contest is  “An opportunity for anyone to have their idea for a bioinspired robot be turned into a reality!”

That’s right nerds of all ages!  Submit a concept for a bio-inspired robot, and it may be chosen to be implemented.

You don’t need me to you why you want to enter this contest!  You know why you want to enter this contest!  : – )

Time is running down, so get organized and submit your best idea.*

* Just to be clear: I have no personal connection to this contest, the sponsors, or judges.

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If you are like me, the problem isn’t coming up with an idea, it is picking only one idea.

I’ve had plenty of thoughts on this topic for many years.   I’d really like a cuddly animatronic giraffe.  My cat would enjoy robot mice (though he is having plenty of fun with natural mice).  Who wouldn’t want to ride to work on a robot ibex?

But my favorite idea may be out of bounds.

The question is:  does it have to be a real organism?  A currently living organism? (The rules don’t say, but the flyer shows what seems to be a dinosaur, so….)

Because,–I would love to have a unicorn to ride to work.  Or a cuddly dragon.  (See Questland). I want Ents in my yard or guarding the city parks.

Or a personal flock of dinosaurs.

(REM, 2019)

As I have described in the past, I would love to have a gang of robot raptors that follow me around, carrying my phone, getting coffee, chasing away autograph seekers.  (The last has never been an actual problem for me.)

I don’t know if I’ll enter or not, but I hope a lot of people do.

Robot Wednesday