Q: Is blockchain tech the answer to AI-generated fake news?
It's a timely question because you have to think that the vast majority of information on the internet will soon be AI-generated: There's a tsunami of fake news, deep fakes, and pirated entertainment coming our way.
Blockchain tech may offer some decentralized solutions: You could, for example, put a private key into digital cameras so that every photo is time-stamped on a blockchain. And maybe proof of humanity could be a way to verify that text wasn't written by a robot.
But blockchains are still slow, expensive, immutable databases — you can't put every photo and blog post on them (Just imagine all that information trash living forever, because things from a blockchain can't be deleted.)
And even if you did, I doubt people would start checking the validity of everything they click on by searching its origins on etherscan.
Instead, I expect we will simply assume that everything we see or read is fake unless it's come from a handful of trusted gatekeepers: Long-tenured media brands for, say, daily newsletters, and Big Tech for everything else.
Only the likes of YouTube and Spotify will have the capacity to constantly process terabytes of data, so that is where we'll go for verified human content.
The answer to the coming tsunami of AI fake news will be more centralization, not less.
Unfortunately.
Q: What's the silliest thing that happened in crypto this week?
PEPE, a meme coin created just a few days ago, is now worth $130 million after surging 3,000,000%.
(If anyone has a scientific calculator handy, please let me know what that annualizes to.)
Here's someone who bought nearly six trillion PEPE tokens (for $250!) and is now sitting on a $1.5 million profit.
And which they somehow think is not enough, considering they haven't yet sold.
Wild.
Perhaps even better: One MEV arbitrageur made nearly $2 million sandwich attacking (aka, frontrunning) frantic PEPE buyers … most of whom must have still managed to make a killing.
Having lifted off like a SpaceX rocket, I can only assume PEPE will end in a similar ball of flames (not financial advice).
But Mark Twain would approve, nonetheless: Crypto remains a magical place where just the right amount of confidence and ignorance can make you a sure success.
Q: How do you keep up with degen stuff like that?
I don't, but my research colleagues do, so you should definitely subscribe to their newsletter.
(Or spend your nights and weekends scouring block explorers, Telegram chats, and Discord rooms. Whatever works for you.)
Q: Gensler thinks DEXes should be registered exchanges now?
He does, yes, which means he's found a way to get even more crypto-hostile.
But we should recognize that he's not the only one in government that thinks DeFi is riskier than a ride on a SpaceX rocket: Regulators are sincere in their desire to protect us from the financial equivalent of rapid unscheduled disassembly (of which we've admittedly had plenty in crypto).
We all like to cite Hester Pierce's dissenting opinions whenever Gensler reiterates his anti-crypto stance, but, amongst regulators, her opinion is a distinctly minority one.
In fact, based on a report released the other week, the Treasury Department's view of DeFi may be even anti-crypto than Gensler's:
"DeFi services engaged in covered activity under the Bank Secrecy Act have AML/CFT obligations regardless of whether the services claim that they currently are or plan to be decentralized."
This suggests the Treasury expects fully decentralized DEXes like Uniswap to run AML compliance checks on its "customers" — which would be difficult. Seeing as Uniswap is just software. And that software has no customers.
In this, the Treasury Department has gone even further than Gensler's SEC. The report implies that a transaction cannot be considered peer-to-peer if smart contracts are involved: I can send crypto from my wallet to yours (or, preferably, the other way around), but if there's a smart contract in between our wallets, the Treasury thinks that smart contract should be registered as an exchange.
So what are they going to do about it?
Software can't come to SEC and register itself, which re-raises the idea of regulating DeFi via its front-end user interfaces: The proposal we thought had died along with FTX is likely to make a comeback.
And I'll admit it has some logic to it: Regulation is about protecting consumers and the vast majority of consumers are going to access DeFi via a website.
A US crackdown on DeFi websites would leave decentralized finance to those who are tech savvy enough to access DeFi directly (through IPFS, I think?) — and if you're clever enough to access DeFi directly, you don't need regulators to protect you, so maybe they'll just let you get on with it.
Or you could just move — maybe to Europe.
The EU's MiCA legislation, approved today, does not claim jurisdiction over DeFi: So long as a protocol's services are provided in a fully decentralized manner, they are deemed to be peer-to-peer and therefore not subject to regulation.
Sounds pretty good!
So what happens when a US resident trades an EU-approved crypto token on a decentralized platform?
Rapid unscheduled disassembly, I'm sure.
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