Summing up 2022 with the most important Events of the year
Tornado Cash and US Sanctions
Tornado Cash, a crypto mixing service, was targeted by US sanctions due to its use by North Korean hackers in major hacks on Ronin Bridge and Horizon Bridge. As a decentralized autonomous organization (DAO) with no developer master keys, it is governed purely by code, leading to a legal precedent on the constitutional protection of code as speech. The Electronic Freedom Foundation and Coin Center joined the case, and Coinbase announced plans to fund a legal challenge.
At the same time, Tornado Cash developer Alexey Pertsev was arrested in the Netherlands on charges of facilitating money laundering, causing concern among DeFi developers. The arrest sparked debate on whether developing a code can be considered a criminal act. Celebrities who received small amounts of ETH from Tornado Cash were absolved of any wrongdoing by the Treasury Department.
In September, the US Treasury Department announced that it would not press charges against a group of celebrities who had received small amounts of cryptocurrency as part of a protest against sanctions imposed on the Tornado Cash mixing service. The sanctions were intended to make it difficult to trace cryptocurrencies, which had been used by North Korean hackers to fund nuclear weapons programs. The protest was organized by sending small amounts of cryptocurrency, known as “dusting,” to a group of crypto celebrities with known addresses, including Logan Paul, Beeple, Randi Zuckerberg, and Jimmy Fallon.
The dusting attack drew attention to the sanctions, which were the first to be imposed on computer code rather than a person or business, and led to a legal challenge. The recipients were required to block transactions from sanctioned sources, but the Treasury stated that it would not prioritize enforcement of delays in filing reports by those who had been dusted.
Several crypto companies, including Coinbase, Crypto.com, Gemini, Kraken, Blockchain.com, Bybit, BitMEX, 2TM, Bitso, WazirX, metaverse-focused Meta, and Twitter, have undergone layoffs in the recent past. These layoffs have occurred amid a tough market for the crypto industry, with many companies looking for ways to cut costs and remain financially stable.
The Ethereum network officially switched over to proof-of-stake from the initial proof-of-work as a result of the Ethereum Merge (PoS). The Beacon Chain’s consensus layer and the Ethereum Mainnet execution layer were merged on September 15 at 06:42:42 UTC at block 15537393, resulting in the long-awaited Merge. As a result, the network will no longer rely on a proof-of-work consensus method. The Merge, according to the Ethereum Foundation, would increase the Ethereum network’s energy efficiency by around 99.95% and pave the way for the next scaling options like sharding.
Coinbase, a crypto exchange and the first pure crypto company to hold a direct stock listing on Nasdaq, faced several challenges throughout the year. At the beginning of the year, the company planned to hire 2,000 more employees, but by June, it had cut 1,100 jobs, which is 18% of the workforce. The company also faced backlash for rescinding accepted job offers to new hires, which negatively impacted employee morale and future recruitment efforts.
Despite some positive developments, the company faced setbacks, such as its minimally used NFT marketplace. The company’s CEO, Brian Armstrong, acknowledged that the company had grown too fast and this was reflected in the share price, which decreased by 85% as the year came to a close.
Is El Salvador’s Bitcoin adoption going well?
El Salvador’s experiment with using Bitcoin as a legal tender has been largely unsuccessful. The country has incurred significant paper losses on its national Bitcoin purchases and the majority of Salvadorans want the policy reversed. Despite the potential for transaction fee savings, less than 2% of remittances have been sent using BTC and overall usage has been minimal.
The government’s Bitcoin bond has also been put on hold due to market turmoil, and the International Monetary Fund has refused to make a loan to prevent default due in part to the Bitcoin experiment. While El Salvador has remained committed to the policy, only the Central African Republic has followed suit.
Tesla’s Liquidity Testing
Elon Musk, the CEO of Tesla, has previously shown the ability to influence the Bitcoin market with his tweets. In the past, he has expressed support for Dogecoin, a cryptocurrency that started as a joke. However, in July, Tesla’s decision to sell its $1.5 billion worth of Bitcoin for $936 million was seen as a negative vote of confidence in the cryptocurrency market, particularly during a time when the market was experiencing a downturn, known as “crypto winter.” The decision was criticized by other corporate Bitcoin investors, such as Michael Saylor of MicroStrategy. Musk explained the decision was due to a need for liquidity as the COVID-19 pandemic hit China.
Growing NFT Theft
In 2022, the theft of non-fungible tokens (NFTs) became a major problem in the crypto world, with over $100 million worth of collectibles being stolen by the end of August. These thefts often involved the use of Discord accounts and celebrity Twitter hacks, as well as insider trading by ex-OpenSea NFT marketplace executives. One high-profile example of an NFT theft was the theft of actor Seth Green’s Bored Ape Yacht Club (BAYC) profile picture (PFP) collectible, which he had to buy back for over $300,000. In addition to these thefts, there were also costly selling errors and instances of poor taste in some NFT collections.
Bitcoin Ban Campaign
There has been a push by Green lawmakers in the European Union to ban Bitcoin due to its large environmental impact. This effort has not been successful, but the European Central Bank has stated that Bitcoin is on the path to irrelevance. In addition, there have been increasing calls for mining bans, including one that was recently implemented in New York. Even a White House report has addressed the environmental concerns surrounding Bitcoin.
While the transition to a proof-of-stake consensus algorithm has eliminated the environmental impact of Ethereum, it is uncertain if a similar solution can be implemented for Bitcoin. On the private side, Wikipedia and Mozilla have stopped accepting cryptocurrency donations due to backlash, Greenpeace has launched an anti-Bitcoin campaign, and the World Wildlife Fund canceled an NFT sale due to concerns about the environmental impact of the Ethereum blockchain.
FTX & Sam Bankman-Fried eventually got fried
In November 2022, the collapse of FTX, a cryptocurrency exchange led by CEO Sam Bankman-Fried, sent shockwaves through the industry. It was discovered that FTX had transferred $10 billion of its customers’ funds to Bankman-Fried’s private trading firm, Alameda Research, with $8 billion of those funds reportedly lost in trading. The two companies were effectively run as one entity, leading to accusations that Bankman-Fried was running a “personal fiefdom.” The revelation of these transactions led to a loss of trust in the company, causing a surge in withdrawal requests and a decline in the value of FTT tokens, the exchange’s token. Binance, another major cryptocurrency exchange, attempted to purchase FTX, but ultimately backed out due to “way too many issues” found during due diligence. Bankman-Fried resigned as CEO and filed for bankruptcy, and the company was later hacked for almost $500 million. In the aftermath of the collapse, numerous additional allegations emerged, including secret backdoors to avoid detection, frontrunning of cryptocurrency listings, and an ongoing anti-money-laundering investigation. Bankman-Fried was eventually arrested in The Bahamas on fraud charges at the request of U.S. prosecutors.