Blockchain

Cryptocurrency and the Kafkaesque | Opinion

Published

6 months ago

4 June, 2024

Cryptocurrency and the Kafkaesque | Opinion

Disclosure: The views and opinions expressed herein are solely those of the author and do not represent the views and opinions of the crypto.news editorial.

In this week’s #hearsay column, Dorian Batycka celebrates the centenary of the death of the Bohemian writer Franz Kafka on June 3, 1924, taking you on a literary journey through the most “Kafkaesque” moments of all cryptocurrencies.

Imagine a world where you are trapped in a web of baffling and illogical situations, helpless against faceless bureaucracies that wield omnipotent and indifferent authority. This nightmarish distortion of reality is the essence of the term “Kafkaesque,” derived from the German-speaking Bohemian writer Franz Kafka. Through seminal works such as The Trial (1914), The Castle (1922), and The Metamorphosis (1912), Kafka’s narratives have become foundational texts in modern literature, depicting protagonists trapped in existential anxiety and futility. Surprisingly, these Kafkaesque themes find resonance in the chaotic and often dystopian world of cryptocurrencies, where the promise of financial liberation is often fortuitously overshadowed by paradox and disillusionment.

Wojak, cryptocurrency and Kafkaesque

Franz Kafka wrote A Hunger Artist in 1922 and published it in 1924, the same year he died from a brutal condition that left him starving due to complications related to the disease. laryngeal tuberculosis. Kafka’s final story centers on a professional hunger artist who fasts for long periods as an art form, drawing audiences captivated by his self-imposed suffering. Despite this dedication, the Hunger Artist becomes increasingly marginalized and forgotten as public interest wanes, leading to his death.

It’s a situation that mirrors the experience of the most titular figure in the crypto sector: the wojak. The proverbial McDonald’s night manager, whose relentless pursuit of quick riches becomes an unhealthy, gambling-like obsession. With wojak consumed by the volatile and often isolating and paralyzing failure of cryptocurrency trading and investing, he constantly finds himself in deep loss and disillusionment. What hunger was to Kafka’s artist, cheap packets of ramen are to the plodding wage earner who hopes to get rich with a Solana meme coin. What could be more totally Kafkaesque?

Cryptocurrency and the Kafkaesque | Opinion - 2

Satoshi Nakamoto as Josef K.

Self-revelations aside, let’s switch gears to invoke the term “Kafkaesque” not with the wojak loser, but with the OG of cryptocurrencies himself, Satoshi Nakamoto. In Kafka’s The Castle (1922), the protagonist K. struggles against an opaque and inaccessible bureaucratic authority; similar to Satoshi himself, Kafka speculates on the often ambiguous nature of governments, remarking, “You must not believe everything the officials say,” adding, “I have my rights and I will do them.” Darkly surreal, K.’s story in the story centers on a “legal right to live in the village” which the authorities claim “was not valid, however, taking into account some auxiliary circumstances, he was allowed to live and work there. “Through an endless feedback loop of misunderstandings and bureaucratic nightmares, Kafka finished the book mid-sentence, stating in a letter to his publisher and friend Max Brod that the work would remain unfinished.

In The Trial Kafka describes the arrest of the protagonist, Josef K., a respectable bank employee who is suddenly and inexplicably arrested and must defend himself against an accusation about which he is unable to obtain any information. “Someone must have lied about Josef K., he knew he had done nothing wrong but, one morning, he was arrested.”

Once again, we are confronted with the brutal reality of a system that brings consequences to those who were born to change it, namely Satoshi, or even CZ, for that matter. You need look no further than the current lack of regulatory clarity on cryptocurrencies, from proposed legislation in the EU, Not, which has only created widespread confusion on the continent, right down to the confusing legislative situation in the United States, where things haven’t gotten much better, with Joe Biden and Donald Trump recently making a U-turn on the cryptocurrency bandwagon. It seems that, all things considered, the current regulatory climate around cryptocurrencies is Kafkaesque to the core.

KafkaCrypto: Towards a new theory of technology and disaster

Finally, let’s think about the very idea of paradox, perhaps the pinnacle of all Kafkaesque situations. It is based on the assumption that two seemingly different realities can be true at the same time. While cryptocurrency was designed to bypass traditional financial systems and related regulatory frameworks, as the market has grown, so has the demand for regulation to prevent fraud, protect consumers and ensure market stability, often under the guise of anti-money laundering (AML). ) initiatives that exist in stark contrast to privacy-focused tools like Monero or Tornado Cash.

However, beyond this reality, a paradoxical situation has emerged: the ethics of the decentralized crypto world have increasingly clashed with the centralized systems that cryptocurrencies claimed to disrupt. Look no further than what China or Russia recently said would embrace central bank digital currencies (CBDC). Coupled with omnipresent state surveillance and control, the paradoxical reality of having cryptocurrencies in the hands of a tyrannical government, while simultaneously enabling encrypted financial freedom, is truly Kafkaesque.

“It is only because of their stupidity that they manage to be so sure of themselves,” Kafka concludes in The Trial, perhaps his most fundamental work on the illusory nature of justice. Perhaps it is somehow related to the notion of effective altruism prevalent in modern levels of cryptocurrency theory, and famously central to the worldview of convinced conman Sam Bankman Fried, i.e. the scam for the common good of cryptocapitalism theory.

Fundamentally, cryptocurrency supports financial autonomy and individual control over one’s economic identity. However, as we celebrate the centenary of Kafka’s death, it is clear that the cryptocurrency industry has taken on many Kafkaesque qualities. From the mysterious figure of Satoshi Nakamoto to the humble wojak, to the disturbing reality of crypto scams and the paradox of decentralization and regulation, the illusory sense of autonomy is a notable indicator of how deeply problematic cryptocurrencies are and continue to be. As Kafka once wrote:

“Every revolution evaporates and leaves behind only the slime of a new bureaucracy.”

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Blockchain

Bitcoin (BTC) Price Crashes as Donald Trump’s Win Odds Dip

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Markets received nominally good news on Thursday morning, with the US ISM manufacturing PMI for July falling much more than economists expected, sending interest rates to multi-month lows across the board. Additionally, initial jobless claims in the US jumped to their highest level in about a year. Taken together, the data adds to the sentiment that the US is on the verge of a cycle of monetary easing by the Federal Reserve, which is typically seen as bullish for risk assets, including bitcoin.

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Blockchain

Terra Blockchain Reboots After Reentry Attack Leads to $4M Exploit

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Terra Blockchain Reboots After Reentry Attack Leads to $4M Exploit

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CoinDesk is a awarded press agency that deals with the cryptocurrency sector. Its journalists respect a rigorous set of editorial policiesIn November 2023, CoinDesk has been acquired from the Bullish group, owner of Bullisha regulated digital asset exchange. Bullish Group is majority owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant digital asset holdings, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial board to protect journalistic independence. CoinDesk employees, including journalists, are eligible to receive options in the Bullish group as part of their compensation.

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Blockchain

$6.8M Stolen, ASTRO Collapses 60%

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

In the latest news in the blockchain industry, there has been a turn of events that has severely affected Terra and its users and investors, with the company losing $6.8 million. The attack, which exploited a reentry vulnerability in the network’s IBC hooks, raises questions about the security measures of the once celebrated blockchain protocol.

A web3 security company, Cyvers Alerts reported that the exploit occurred on July 31st and caused the company to lose 60 million ASTRO, 3.5 million USDC500,000 USDTand 2. 7 BitcoinThe flaw was discovered in April and allows cybercriminals to make payments non-stop by withdrawing money from the network.

Earth’s response

Subsequently, to the hack employed on the Terra blockchain, its official X platform declared the Suspension network operations for a few hours to apply the emergency measure. Finally in its sendTerra’s official account agreed, sharing that its operations are back online: the core transactions that make up the platform are now possible again.

However, the overall value of the various assets lost in the event was unclear.

Market Impact: ASTRO Crashes!

The hack had an immediate impact on the price of ASTRO, which dropped nearly 60% to $0.0206 following the network shutdown. This sharp decline highlights the vulnerability of token prices to security breaches and the resulting market volatility.

This incident is not the first time Terra has faced serious challenges. Earlier this year, the blockchain encountered significant problems that called into question its long-term viability. These repeated incidents underscore the need for stronger security measures to protect users’ assets and maintain trust in the network.

The recent Terra hack serves as a stark reminder of the ongoing security challenges in the blockchain space. As the platform works to regain stability, the broader crypto community will be watching closely.

This is a major setback for Terra. How do you think this will impact the blockchain industry?

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Blockchain

Luxembourg proposes updates to blockchain laws | Insights and resources

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Luxembourg proposes updates to blockchain laws | Insights and resources

On July 24, 2024, the Ministry of Finance proposed Blockchain Bill IVwhich will provide greater flexibility and legal certainty for issuers using Distributed Ledger Technology (DLT). The bill will update three of Luxembourg’s financial laws, the Law of 6 April 2013 on dematerialised securitiesTHE Law of 5 April 1993 on the financial sector and the Law of 23 December 1998 establishing a financial sector supervisory commissionThis bill includes the additional option of a supervisory agent role and the inclusion of equity securities in dematerialized form.

DLT and Luxembourg

DLT is increasingly used in the financial and fund management sector in Luxembourg, offering numerous benefits and transforming various aspects of the industry.

Here are some examples:

Digital Bonds: Luxembourg has seen multiple digital bond issuances via DLT. For example, the European Investment Bank has issued bonds that are registered, transferred and stored via DLT processes. These bonds are governed by Luxembourg law and registered on proprietary DLT platforms.
Fund Administration: DLT can streamline fund administration processes, offering new opportunities and efficiencies for intermediaries, and can do the following:
- Automate capital calls and distributions using smart contracts,
- Simplify audits and ensure reporting accuracy through transparent and immutable transaction records.
Warranty Management: Luxembourg-based DLT platforms allow clients to swap ownership of baskets of securities between different collateral pools at precise times.
Tokenization: DLT is used to tokenize various assets, including real estate and luxury goods, by representing them in a tokenized and fractionalized format on the blockchain. This process can improve the liquidity and accessibility of traditionally illiquid assets.
Tokenization of investment funds: DLT is being explored for the tokenization of investment funds, which can streamline the supply chain, reduce costs, and enable faster transactions. DLT can automate various elements of the supply chain, reducing the need for reconciliations between entities such as custodians, administrators, and investment managers.
Issuance, settlement and payment platforms:Market participants are developing trusted networks using DLT technology to serve as a single source of shared truth among participants in financial instrument investment ecosystems.
Legal framework: Luxembourg has adapted its legal framework to accommodate DLT, recognising the validity and enforceability of DLT-based financial instruments. This includes the following:
- Allow the use of DLT for the issuance of dematerialized securities,
- Recognize DLT for the circulation of securities,
- Enabling financial collateral arrangements on DLT financial instruments.
Regulatory compliance: DLT can improve transparency in fund share ownership and regulatory compliance, providing fund managers with new opportunities for liquidity management and operational efficiency.
Financial inclusion: By leveraging DLT, Luxembourg aims to promote greater financial inclusion and participation, potentially creating a more diverse and resilient financial system.
Governance and ethics:The implementation of DLT can promote higher standards of governance and ethics, contributing to a more sustainable and responsible financial sector.

Luxembourg’s approach to DLT in finance and fund management is characterised by a principle of technology neutrality, recognising that innovative processes and technologies can contribute to improving financial services. This is exemplified by its commitment to creating a compatible legal and regulatory framework.

Short story

Luxembourg has already enacted three major blockchain-related laws, often referred to as Blockchain I, II and III.

Blockchain Law I (2019): This law, passed on March 1, 2019, was one of the first in the EU to recognize blockchain as equivalent to traditional transactions. It allowed the use of DLT for account registration, transfer, and materialization of securities.

Blockchain Law II (2021): Enacted on 22 January 2021, this law strengthened the Luxembourg legal framework on dematerialised securities. It recognised the possibility of using secure electronic registration mechanisms to issue such securities and expanded access for all credit institutions and investment firms.

Blockchain Act III (2023): Also known as Bill 8055, this is the most recent law in the blockchain field and was passed on March 14, 2023. This law has integrated the Luxembourg DLT framework in the following way:

Update of the Act of 5 August 2005 on provisions relating to financial collateral to enable the use of electronic DLT as collateral on financial instruments registered in securities accounts,
Implementation of EU Regulation 2022/858 on a pilot scheme for DLT-based market infrastructures (DLT Pilot Regulation),
Redefining the notion of financial instruments in Law of 5 April 1993 on the financial sector and the Law of 30 May 2018 on financial instruments markets to align with the corresponding European regulations, including MiFID.

The Blockchain III Act strengthened the collateral rules for digital assets and aimed to increase legal certainty by allowing securities accounts on DLT to be pledged, while maintaining the efficient system of the 2005 Act on Financial Collateral Arrangements.

With the Blockchain IV bill, Luxembourg will build on the foundations laid by previous Blockchain laws and aims to consolidate Luxembourg’s position as a leading hub for financial innovation in Europe.

Blockchain Bill IV

The key provisions of the Blockchain IV bill include the following:

Expanded scope: The bill expands the Luxembourg DLT legal framework to include equity securities in addition to debt securities. This expansion will allow the fund industry and transfer agents to use DLT to manage registers of shares and units, as well as to process fund shares.
New role of the control agent: The bill introduces the role of a control agent as an alternative to the central account custodian for the issuance of dematerialised securities via DLT. This control agent can be an EU investment firm or a credit institution chosen by the issuer. This new role does not replace the current central account custodian, but, like all other roles, it must be notified to the Commission de Surveillance du Secteur Financier (CSSF), which is designated as the competent supervisory authority. The notification must be submitted two months after the control agent starts its activities.
Responsibilities of the control agent: The control agent will manage the securities issuance account, verify the consistency between the securities issued and those registered on the DLT network, and supervise the chain of custody of the securities at the account holder and investor level.
Simplified payment processesThe bill allows issuers to meet payment obligations under securities (such as interest, dividends or repayments) as soon as they have paid the relevant amounts to the paying agent, settlement agent or central account custodian.
Simplified issuance and reconciliationThe bill simplifies the process of issuing, holding and reconciling dematerialized securities through DLT, eliminating the need for a central custodian to have a second level of custody and allowing securities to be credited directly to the accounts of investors or their delegates.
Smart Contract Integration:The new processes can be executed using smart contracts with the assistance of the control agent, potentially increasing efficiency and reducing intermediation.

These changes are expected to bring several benefits to the Luxembourg financial sector, including:

Fund Operations: Greater efficiency and reduced costs by leveraging DLT for the issuance and transfer of fund shares.
Financial transactions: Greater transparency and security.
Transparency of the regulatory environment: Increased attractiveness and competitiveness of the Luxembourg financial centre through greater legal clarity and flexibility for issuers and investors using DLT.
Smart Contracts: Potential for automation of contractual terms, reduction of intermediaries and improvement of transaction traceability through smart contracts.

Blockchain Bill IV is part of Luxembourg’s ongoing strategy to develop a strong digital ecosystem as part of its economy and maintain its status as a leading hub for financial innovation. Luxembourg is positioning itself at the forefront of Europe’s growing digital financial landscape by constantly updating its regulatory framework.

Local regulations, such as Luxembourg law, complement European regulations by providing a more specific legal framework, adapted to local specificities. These local laws, together with European initiatives, aim to improve both the use and the security of projects involving new technologies. They help establish clear standards and promote consumer trust, while promoting innovation and ensuring better protection against potential risks associated with these emerging technologies. Check out our latest posts on these topics and, for more information on this law, blockchain technology and the tokenization mechanism, do not hesitate to contact us.

We are available to discuss any project related to digital finance, cryptocurrencies and disruptive technologies.

This informational piece, which may be considered advertising under the ethics rules of some jurisdictions, is provided with the understanding that it does not constitute the rendering of legal or other professional advice by Goodwin or its attorneys. Past results do not guarantee a similar outcome.

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