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“Restaking” involves reusing staked Ether to earn fees and rewards. The restaked tokens can then help secure and validate other protocols. But many fear restaking could disrupt Ethereum’s chain itself.

Ethereum restaking proposed by middleware protocol EigenLayer is a controversial innovation over the past year that has some of the brightest minds worried about the potential ramifications.

Restaking involves reusing staked or locked-up Ether tokens to earn fees and rewards. The restaked tokens can then help secure and validate other protocols. 

Proponents believe restaking can squeeze additional security and rewards from already staked ETH and grow the crypto ecosystem in a healthier way based on Ethereums existing trust mechanisms. Restaking could serve as a security primitive for exporting Ethereums trust generated by its validators to other projects.

Yet Ethereum co-founder Vitalik Buterin and a number of key devs worry that restaking is a house of cards that will inevitably tumble. Some of those Ethereum devs have even proposed a fork to head off restaking platform EigenLayer. 

Why the projects founders promote trust as a service from Ethereum without the Ethereum founder and others willingness to participate is still to play out. Will the whole concept result in an Ethereum fork to protect the network from catastrophic failure? 

Staking and restaking

Staking is a crypto-native concept. On Ethereum, it means putting up a security bond in ETH so that the validator (validators of new transactions who maintain the security of the blockchain) will behave honestly in verifying transactions rather than lose their staked tokens. Stakers are then paid rewards for locking up this ETH. 

In essence, stakers lock up their tokens to commit to producing Ethereum blocks  an on-chain way of supporting development, regardless of fluctuations in highly volatile token prices. 

So what is restaking?

In short, restaking works in that already staked Ethereum tokens can be rehypothecated (when a lender re-uses collateral posted from one loan to take out a new loan) to secure a wider variety of applications and accrue additional rewards.

But restakers also get penalized or slashed for non-performance of their staking tasks. (More on that below).

So restaking is a crypto primitive for generating economic security from Ethereums nine years of concerted developer activity and project track record. 

Its an extension protocol to extend what Ethereum can do, scaling out Ethereum stakers beyond Ethereum to other bridges and oracles that need to be secured, EigenLayer founder Sreeram Kannan tells Magazine.

He says EigenLayer is commoditizing ETH staking to make it more general purpose, as, in crypto parlance, staking is the root of trust. 

Kannan is an academic on leave from the University of Washington, and EigenLayer began as academic research into exported trust as a consensus protocol. Basically, he sought to piggyback the trust generated by Ethereum to other ecosystems. 

Kannan essentially seeks to export the trust generated by Ethereum for other projects across the ecosystem and other chains. In crypto, mechanisms for trust mean that investors need skin in the game. The pseudonymous world needs carrots and sticks whereby validators are distributed. He calls it permissionless innovation. 

The best each chain has to offer

The big idea for EigenLayer is to bridge blockchains and create super applications, taking the best each chain has to offer. Kannan says every ecosystem is better in some dimension, but not all dimensions, and EigenLayer enhancing decentralized tech stacks will actually benefit the industry. 

Kannan said that what can be built with EigenLayer fits roughly into two categories.

Firstly, EigenLayer allows for the construction of bridges from chain to chain, say Ethereum to Avalanche. EigenLayer acts as a marketplace for decentralized trust, connecting stakers seeking yields, projects built on EigenLayer offering risk-reward structures for yields, and operators acting as bridges between stakers and projects.

Secondly, a set of smart contracts on Ethereums chain lets ETH stakers opt to run other software. EigenLayer could, for example, improve Ethereum transaction finality speeds. ETH stakers can now take the layer-1 blockchain Fantom chain (for better transaction finality times) and fork it on EigenLayer, thereby running a layer as a super fast finalization layer with an EigenLayer trust layer.

But its all still theoretical.  

The idea of restaking makes sense theoretically, helping projects build off Ethereums security layer but the problems worry many. 

In theory, its like the NATO security alliance; each country is still a sovereign country, but their mutual defense pact is secured by the sum of their military power, Sunny Aggarwal, co-founder of Osmosis Labs and creator of a similar restaking system Mesh, on Cosmos chain told Magazine. 

In practice, EigenLayer provides two ways to restake: whitelisted liquid staking derivatives can be restaked with EigenLayer or an EigenPod (a smart contract can be created to run a validator while restaking). But most restakers wont run their own validator, so new networks can build projects without their own communities of validators. 

EigenLayer isnt live yet, and its impact is still highly speculative, according to Anthony 0xSassal Sassano, a full-time Ethereuem educator, founder of YouTube channel The Daily Gwei and an early investor in EigenLayer.

To date, theres only a smart contract for staked ETH to bootstrap the EigenLayer network, and perhaps given EigenLayers hype, people are depositing their ETH into that network, expecting to farm an unconfirmed airdrop of native EigenLayer tokens. 

A force for good or evil?

To be successful, new consensus protocols need a balanced alignment of incentives. Trust is like a scale weighing competing interests. And trying to export Ethereum security layers to different blockchain ecosystems worries some. Many are still trying to understand if its a force for good or evil or both.

There are two camps: those excited by broadening the use case of ETH staking, and then there are those that worry about potential attack vectors on Ethereum and potential negative consequences for Ethereum if something goes wrong with EigenLayer. My view is in the middle; I understand the concerns and the excitement. Sassano says.

Inherently, all of this is complex; it depends which rabbit hole you want to go down. The simple answer is that Ethereum, as a network, currently has over 25 million ETH at stake thats tens of billions of dollars. So restaking is asking, what if we could harness that economic security for other purposes than just securing the Ethereum chain?

Sassano continues: Thats exactly what EigenLayer is trying to do, to generalize the security that Ethereum has with its stakers and expand that to other things like an oracle network or a data availability network. Its inherently more technical and complex than that, but thats the gist of it. 

There are two types of danger that restaking could pose: first for restakers and then for Ethereum itself. 

Restaking creates too much leverage

Restaking is controversial as it is akin to leveraged investing through borrowing. Some argue that the danger here is that the hunger for real yields or actual revenue that emerged in crypto in 2022 leads to unsavory developments, like restaking. 

Jae Sik Choi, portfolio manager at Greythorn Asset Management, told Magazine that securing networks through restaking could work, but restaking is akin to leverage:

Just like how Terras over-leveraged safe collateralization of Luna was, there would always be a risk of participants over-leveraging into this new concept, and such a risk wont be quantifiable until we see more data sets throughout the emergence of this new restaking narrative.

Dan Bar, chief investment officer at Bitfwd Capital a boutique crypto assets hedge fund agreed that restaking amounts to leverage, telling Magazine: While moderate schemes of restaking could be beneficial for capital efficiency purposes, any crypto assets manager and finance professional worth their salt knows too well how easily and quickly leverage can turn into a slew of synthetic toxic financial instruments that bring disasters into even the most healthy of ecosystems.

And maybe thats the first major problem. Investors will only see restaking as quick, easily leveraged financial products. EigenLayer building an open-source, decentralized network security may fail to convince doubters.

Risks to Ethereum itself

One fear is that slashing on EigenLayer will affect Ethereum itself.

Ethereums proof-of-stake trust system keeps everyone in check with slashing conditions essentially non-performance penalties. Programmable slashing means restakers have additional computational responsibilities and face consequences for non-execution.

Ethereum co-founder Vitalik Buterin fears an overload of the chains consensus, basically, computational overloads, if the blockchains computational power is suddenly redirected elsewhere. 

Kannan admits that Vitaliks concerns are valid. We dont want to shard Ethereums trust layer, and we dont want contagion of nefarious actors leveraging Ethereums trust system.

Sassano also notes that the functionality of Ethereum proof-of-stake was designed to make sure that there wont be a sudden influx or outflux of validators, which would affect the core properties of Ethereums consensus mechanism. 

The issue is that EigenLayer will decide where to take ETH from, but they cant slash a validator on Ethereum.

In Ethereum, theres also a queue for validators to enter or exit each day. So lets say, in an extreme example, 30% of all staked ETH begins staking with EigenLayer and say that all 30% gets slashed by EigenLayer. While it depends on what the slashing condition was, lets say all this ETH was lost because they tried to do something really bad. Even if all 30% had to be exited, theres a limit on how much can exit per day. It would take literally years to exit 30% of ETH stake. So I understand peoples concerns, but at the same time, other things built on top cannot dictate what happens on Ethereum.

So, restakers should have to play by Ethereums rules. 

Yet Sassanos biggest concern is around the calculus of ETH staking, which may one day become a question of whether stakers get more from staking on EigenLayer than Ethereum itself. This could erode the Ethereum staking model in time.

He is confident, though, that Ethereums tech offsets those systemic risks: Its not a critical risk to Ethereum if you are slashed on EigenLayer. You are not slashed on Ethereum. EigenLayer cannot cause you to be slashed on Ethereum because Ethereum has its own slashing conditions built into the protocol. And EigenLayer has its own separate slashing conditions built into its protocol as well.

Anything built on top of Ethereum introduces additional complexity and risk. Juan David Mendieta Villegas, co-founder and chairman at crypto market maker Keyrock, tells Magazine:

EigenLayer is an interesting development but creates additional attack vectors without providing explicit benefits to the Ethereum ecosystem itself. If we take a step back, its important to note that ETH staking has introduced a base benchmark yield for the industry, and that is a good development. You can almost think of it as a risk-free rate. Any additional layers, such as liquid staking derivatives and re-staking mechanisms, of course, can carry more concerns such as concentration risk, security and smart contract.

But Villegas wishes EigenLayer well. Overall, were advocates of the innovations that are happening around staking and want to see multiple protocols win as this will assist in the decentralization and democratization of the network.

In other words, he wishes for competitors to EigenLayer to create similar products. 

Restaking could make or break new projects

Cosmos Aggarwal believes restaking will only benefit those blockchains with existing network effects for those with existing economic alliances or overlapping communities.

He also sees restaking protocols akin to a venture capital arm for layer 1s that might discourage solo stakers and further centralize networks. 

In the end, competing layer-1 blockchains probably wont engage in restaking across chains. For that reason, he feels that EigenLayers design could be improved. 

While EigenLayer is designed as a security system importing trust from Ethereum, builders will create their own tokens and revenue models. This has pluses and minuses. 

In some cases, dodgy new tokens may benefit from Ethereums trust layer. Choi thinks this trust layer benefit could potentially be moot due to the tokenomics that these alt layer 1s would want to try and attain (i.e., the use of their own token their own agendas) could be problematic and so any supposed trust exported from Ethereum is lost anyway.

On the other hand, experimental, well-meaning projects may now have a chance at success thanks to EigenLayer. Thats why Choi thinks the ultimate potential benefit EigenLayer is proposing is that other blockchains that do not want to spin up their own validator and staker sets have a chance at scaling to success. 

Aggarwal also notes that with appropriate checks, restaking should be set within parameters to control risk. Restaking primitives need cleverly programmed governance, such as discounted voting power to restaked tokens on another chain. For example, one restaker cant have more than 20% of the vote for another chain.  

So, is restaking a good thing for Ethereum?

The purists would say Ethereum should only be securing the Ethereum Beacon Chain and nothing else. [They] shouldnt be exporting Ethereum security to anything else. But I dont think that is necessarily a bad thing to get node operators to do other work, says Sassano. 

If it can happen on the Ethereum network, it will happen. If the network cant resist it and Ethreuems chain becomes insecure because of it, and there are adverse effects because of it, then Ethereum as a protocol was not designed correctly and needs to be improved.  

Well find out soon enough.

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An emerging cryptographic technology may provide help with two gaping 21st-century needs: Privacy and truth.

In a world increasingly anxious about privacy and exploitation of ones personal data by governments, corporations, social media platforms and banks, zero-knowledge proofs may offer some relief. 

Indeed, this emerging cryptographic protocol could partially remedy two rapidly growing global deficits: privacy and truth.

ZK-proofs have already found a home within the cryptocurrency and blockchain sector enabling scaling protocols to make Ethereum transactions faster and cheaper, for example. But this may just be the beginning. 

One day, ZK-proofs could help convince your bank that your income is above a certain threshold to qualify for a mortgage, for example without revealing your actual income. Or prove to the election authorities that you are a resident or citizen without giving them your name, drivers license or passport.

ZK-proofs open up a new world of potential applications, including anonymous voting, decentralized games, proving personal information without fully disclosing your personal information, and fighting against fake news by proving the source of the news, Polygon co-founder Jordi Baylina tells Magazine.

To this point, some in the cryptographic community already view ZK-proofs as a potential weapon in the looming struggle against false information, including AI-altered documents, images and identities. 

We may have a technological battle for truth coming up where ZK can play a critical part, prize-winning cryptographer Jens Groth tells Magazine. There is this idea of proof-carrying data, i.e., data that carries within itself proofs of correctness including origin and provenance data, so nirvana would be that all data we get are verified data.

In some industry sectors like finance, ZK-proofs may profoundly alter how business is conducted. We see this revolutionizing the audit industry, Proven co-founder and CEO Rich Dewey tells Magazine in connection with ZK-enabled proof-of-solvency protocols, like the one his tech firm has developed. The only question is the timeline. 

Requiring fewer resources

Even though ZK-proofs were first presented back in the 1980s by researchers Shafi Goldwasser, Silvio Micali and Charles Rackoff, only in the past decade have they had their big breakthrough, according to Baylina.

Now its possible to prove any generic statement. This statement sometimes called a circuit can be programmed with a specific language and can be anything, Baylina says. 

ZK-proofs are computationally complex, which has arguably slowed their development, but their core intuition seems simple enough. As described in a forthcoming paper by the Federal Reserve Bank of St. Louis: 

By using a zero-knowledge proof (ZKP), a party can prove to other parties that a computation was executed correctly. There is no need to replicate the computationonly the proof needs to be verified. Ideally, verifying a ZKP needs significantly less resources than re-executing the computation.

What follows are some of the promising ZK-proof use cases on the table today beyond the strict confines of the crypto sector that may or may not involve the use of blockchains.

Verifying digital voting 

Electronic voting has been slow to catch on globally, but if and when it does, the odds are that ZK-proofs will play a prominent part. ZK-proofs are already being used in e-voting systems in trials in a number of Swiss towns and cantons, Dahlia Malkhi, distinguished scientist of Chainlink Labs, tells Magazine.

ZK-proofs can add verifiability to an online election, allowing anyone to check that the votes were counted correctly, explains Malkhi, without revealing how individuals voted a key concern with electronic voting, she says. 

Cryptographic electronic voting systems have been around for decades, Malkhi adds, but their adoption has been moderate. On the technical side, one of the challenges has been the compromise of end-user devices, which ZK-proofs dont protect against.

There are other obstacles, too, that are beyond ZK-proofs purview or ability to control which also may suggest their limitations. 

Electronic voting requires a credible digital identity system, i.e., a link to real world information that isnt always easy to secure. (Think of all those voting rolls on aged paper ledgers.) ZK by itself cannot bootstrap e-voting, Malkhi says. 

Cryptographer Groth, like Malkhi, cites the need for some sort of trust anchor to make ZK-proofs impactful in everyday life. Zero-knowledge proofs often need a hook to reality.  

Maybe one day, thanks to ZK-proofs, someone will be able to prove that they are older than 18 years of age or a United Kingdom citizen without having to pull out a drivers license or passport, Groth tells Magazine, but you cannot prove youre over 18 out of thin air. You need the trust anchor that establishes your age, he says, i.e., some authority that verifies your citizenship or birth year, adding:

In the future, organizations may issue ZK-friendly trust anchors, but right now, it is not common practice, so you have a bit of a chicken-and-egg problem.

Privacy safeguards for CBDCs

Today, the world seems awash with central bank digital currency projects. According to the Atlantic Council, 130 countries representing 98% of global GDP are now exploring state-issued digital money. 

But CBDCs come freighted with privacy questions, and some fear they could be misused by governments to surveil their own populations, for instance.

That is why high privacy guarantees are at the core of most CBDC projects today, Jonas Gross, chairman of the Digital Euro Association, tells Magazine. 

ZK-proofs can be part of the solution, he adds, and it is for this reason that various central banks are studying [ZK-proof] applications for example, in the U.K., Japan and South Korea. 

If privacy is a top priority, ZK-proofs should be considered, Remo Nyffenegger, a co-author of the St. Louis Fed paper cited above and research assistant at the Center for Innovative Finance at the University of Basel, tells Magazine. 

Indeed, the European Central Bank published a regulatory proposal for the digital euro in late June and states therein that zero-knowledge proofs should be considered in the CBDC tech stack, he adds.

Again, there may be limits on what exactly ZK-proofs can do by themselves. I dont see using ZK-proofs [alone] as sufficient because ongoing political discussions show that not all CBDC-related data will be obfuscated if ZK-proofs are used, Gross comments. High privacy also needs to be supported by regulation and educational efforts around the actual degree of privacy of a CBDC.

Exposing an altered photo

AI apps are now so powerful that distinguishing between machine-generated images or documents and those created by human beings is already problematic. Things will only get worse, but ZK-proofs may offer at least a partial remedy.

Blockchain tech and ZK-proofs could be used as built-in safeguards in these systems to verify the origin, authenticity, and ownership of AI-generated files and manage some of the risks associated with AI-generated content, says Malkhi, while Groth adds:

There is interesting new research showing applications of ZK-proofs to demonstrate, for example, youve not altered a photo too much i.e., combating fake news.

High-end cameras that digitally sign photos along with metadata like location and timestamp are already on the market and can establish authenticity, continues Malkhi. The current problem is that these digital files are often enormous much too large to post on a news services website, for instance. 

But with ZK-proofs, their file size can be substantially reduced, making them practical to use online while preserving critical verification elements. It could prove that the recording or image has not been altered, maybe [including] even the date, without revealing identity or location or whatever, adds Baylina. 

Proof-of-solvency with ZK-proofs?

Many believe that finance will be the first major business sector to be impacted by ZK-proofs. Indeed, 41% of respondents in Mina Foundations State of Zero-knowledge Report 2022 agreed that finance was the industry most in need of ZKPs, far ahead of healthcare (12%), social media (5%) and e-commerce (3%).   

In March, Mexican cryptocurrency exchange Bitso announced a partnership with tech firm Proven to implement a proof of solvency solution that relies on ZK-proofs. This protocol will soon enable investors, regulators and others to know whether the exchange is solvent i.e., its obligations are less than its assets based on daily reports. 

One of the more ingenious aspects of Provens protocol is that it involves the exchanges customers in the process of keeping the exchange honest. Its a sort of crowd-sourcing version of auditing.

Co-founders Dewey and Agustin Lebron tell Magazine that every day, an exchange (e.g., Bitso) publishes a cryptographic proof-of-solvency attestation. And when it does, each individual client/user of the exchange is issued a receipt that reflects that individuals unique holdings. Millions of digital receipts might be issued on a daily basis. 

What if one day a customer doesnt receive a daily receipt, or its wrong? That user might take to Twitter or some other social media venue and complain or ask questions. Have others experienced something similar? A thread might grow.

This protocol relies on the law of big numbers. Bitso, for instance, has some five million users, and the presumption is that a critical mass of complainants might surface quickly, collectively waving a red flag that might prompt further investigation. 

This ZK-proofs-based protocol has another advantage, too, according to Bitso. It provides a proof-of-solvency that can be confirmed without revealing all of that information to a third party. All an auditor needs to do is run the zk-SNARK protocol to come to the conclusion that the proof is true. 

According to Groth, the use of ZK-proofs to demonstrate financial solvency gained more traction after the FTX implosion. Indeed, if such a protocol had been available last year, the Bahamas-based exchanges meltdown might have been avoided, some say or at least its wrongdoing would have come to light sooner. 

Interestingly, FTX Japan, now rebranded as Liquid Japan, has been using Provens proof-of-solvency technology since its recent re-launch in early September. With the adoption of Proof of Solvency, we can now prove it [solvency] in a cryptographic manner that is verifiable by 3rd parties, notes the company, adding:

We are starting to work on increasing the frequency of publishing the Proof of Solvency to 1x day by the end of 2023.

Immutable tracking of goods

ZK-proofs can become very relevant in the context of digital identities, whether they are issued by the government or private entities, adds Nyffenegger. They could prove that you are not included on some government sanctions list without revealing who you are, for instance.

ZK-proofs potential use in supply chains is also frequently cited. But the difficulty here, as with e-voting, is that this requires connecting to a trustworthy real-world information source, which can authenticate the date an order was shipped from the factory, for instance. 

ZK-proof-based supply chain tracking systems havent been battle-tested long enough in live environments, notes Malkhi, adding that that could soon change:

The potential of ZK-proofs here is vast helping to improve transparency and reduce the potential impact of fraud by enabling the immutable, real-time tracking of goods.

It should be added that while blockchains provide some of ZK-proof’s first exciting use cases, the technology does not require blockchain technology to work but they are surely helpful.

They are just a very suitable tool for blockchains because they provide proofs of correct computation which aligns well with the need for verifiability on blockchains while hiding as much information as possible, Johannes Sedlmeir,  a researcher at the University of Luxembourgs Interdisciplinary Centre for Security, Reliability and Trust, tells Magazine.

With a blockchain platform, a verifier can check if a certain hash appears somewhere on the blockchain and hence binds me as a prover, he adds. 

Blockchains arent required for Provens proof-of-solvency protocol to work, Lebron tells Magazine, though its always useful to have validators on-chain. It appears to be more of a like to have than a need to have circumstance. 

Obstacles remain

What obstacles still need to be overcome before ZK-proofs become commonplace? Malkhi has already cited the challenges with bridging to the real world, and this would well prove the biggest hurdle to surmount before ZK technology becomes mainstream, in her view. 

However, other barriers remain that might require laws and regulations to overcome. Will ZK claims be accepted in court, for instance? 

Scaling also remains a challenge in many use cases given that there is, at present, no standardized way to program, says Malkhi, making it difficult for developers to integrate proofs into their apps.

To this last point, Provens protocol with Bitso requires some five million unique receipts to be issued monthly (though soon daily) to Bitso users, but Proven says this isnt an issue. We figured out how to scale, co-founder Lebron says.

Complexity is another potential sticking point. For small- to medium-size assertions, we already have a good ZK system, cryptographer Groth tells Magazine. For large assertions, we still need to improve efficiency. ZK-proofs like SNARKs can be cheap to verify, but the prover pays a large performance overhead compared to native computation, he adds.

Becoming magnitudes cheaper

The user experience needs to improve, too. Using a technology secured by ZK-proofs for an everyday activity like buying groceries should be so seamless that the user doesnt even know, says Baylina. 

The other thing we need is time, Baylina says. Protocols like Polygons zk-Ethereum Virtual Machine are still new but are becoming more usable all the time. As Polygon zkEVM matures, over the next year, we anticipate it will become orders of magnitudes cheaper.

Given these potential roadblocks, how long might it take before the technology becomes commonplace? 

I believe five years is too short of a time frame owing to the current TRLs [technology readiness levels] of ZK-proofs, says Sedlmeir, referencing the finance sector specifically. While ZK-proofs have matured rapidly in recent years, they are still complex to implement and prover performance is still a significant bottleneck. 

There might be a transition period as ZK-proof works in tandem with traditional protocols, as in financial auditing. Provens Dewey envisioned working hand in glove with traditional Big Four audit firms for a time. 

Vast potential

In sum, ZK-proofs still face challenges. They cant work in isolation. They still need to be attached to a truth source or oracle. Doubts about computational complexity, usability and scalability remain as well. 

But if these hurdles are surmounted, ZK-proofs could offer a 21st-century solution to not only the fake news challenge but also the privacy quandary as with CBDCs, providing just enough anonymity for users to comfortably use state-issued digital money but enough accountability so governments can be assured fraudsters or money launderers arent infiltrating their networks. 

As the technology and the underlying infrastructure improve, summarizes Malkhi, ZK-proofs have vast potential to enable an internet where the majority of contracts are underpinned by cryptographic guarantees.

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Cointelegraph goes to Cuba to see how some Cubans use Bitcoin to secure a better economic future.

In Cubas capital, Havana, a Bitcoin community has emerged from an economically antagonistic environment.

Satoshi didnt create Bitcoin for Cubans, but it really comes in handy for us, Forte, co-founder of the aptly named local Bitcoin organization Cuba Bitcoin, tells Magazine.

Cubans are turning to Bitcoin because their money is increasingly worthless. Zimbabwe, Venezuela and Lebanon often compete for media coverage about runaway inflation levels, but the Cuban peso is not far behind.

The Cuban peso has devalued so much over the last few years that carrying bags of cash is increasingly common among the rich and the poor.
In practice, even if someone bought Bitcoin at the top of the 2021 bull run at $69,000, their money is worth much less in Cuban pesos. Whereas Bitcoin dropped 80% to its bear market low, it has since recovered 100%, and the peso has devalued by 90%.

The realization that someone should swap local currency for the Bitcoin top, knowing that it will crash and theyll still retain more purchasing power, is one of the many financial wake-up calls received while working on Cointelegraphs new documentary, The Truth Behind Cubas Bitcoin Revolution. 

In 2021, I came across the article Inside Cubas Bitcoin Revolution by Human Rights Foundation chief strategy officer Alex Gladstein, in which he explains how and why Cubans were utilizing Bitcoins stateless and low-fee properties to save money and escape financial oppression. 
In line with the Bitcoin mantra of Dont trust, Verify, I went to see with my own eyes what Gladstein described.

Camera in hand with my trusty travel partner Paco de la India by my side, I network my way into the Cuba Bitcoin community, which now counts thousands of enthusiasts and advocates.

La Cultura Cubana

Following one of the largest financial conferences in the world, Bitcoin Miami, in arguably the worlds most capitalist arena, the United States of America, I hop across the Caribbean to Cuba, one of the few extant socialist states. The contrast hits me harder than the Cuban tropical heat. 

From the moment I landed at Havana Jose Marti International Airport, I noticed some funny quirks: doors open manually (forget automatic sensors), check-in and immigration are done on pen and paper, and the taxis are 1950s Chevrolets. 

Its common to describe visiting Cuba as a time warp. Its not hyperbole; Cuba cannot access world markets, financial institutions or trade. The United States has subjected Cuba to a trade embargo the longest in modern history since the island nation nationalized U.S. oil refineries in 1960.

As a result, Cuban industry, economic output and commerce lag far behind the modern world.

The embargo, coupled with more than half a century of communism, has resulted in a highly educated, extraordinarily literate but desperately poor and hungry population, many of whom possess a heartbreaking desire to leave the island, or in Spanish, to find a salida an exit. 

Why stay in a country where a taxi driver earns more than an atomic engineer and the emaciated engineer struggles to feed their family? 

Adopting Bitcoin

In such an environment, its a wonder why Cubas dont flock to Bitcoin as money that exists outside of state control. However, many Cubans are learning about and slowly turning to Bitcoin. 

Catrya, one of the main characters in Cointelegraphs new documentary and one of the founders of Cuba Bitcoin, explains that there could be around 5,000 Bitcoiners in Cuba, and if you include crypto enthusiasts generally, the number is higher still. 

Cubans do not have easy on-ramps into crypto. Firstly, those with internet connections cannot sign up for Binance, Coinbase or Gemini due to their nationality. For Cuban Americans on the island, Cubas government restricts access to American websites. Cubans buy Bitcoin peer-to-peer through Telegram or WhatsApp groups and at in-person meetups. 

What amazes me is the tiny amounts of money Cubans put aside to save money or stack sats. Saving 1,000 satoshis (less than $1 a week) is meaningful to a Cuban on $40 monthly. The Cuban peso may not be here in 10 years, but Bitcoin certainly will be.
The peer-to-peer process is straightforward, but its not beginner-friendly, and these hurdles can hamper adoption although they do have a silver lining, as Catrya explains:

Since were denied [access to exchanges] by default for being Cuban, we can never do KYC [Know Your Customer], so thats a good thing for us, at least in terms of privacy.

Buying Bitcoin peer-to-peer and storing Bitcoin by taking ownership of the private keys is safer. Customers who trusted custodians such as FTX, BlockFi, Celsius and Vauld with their crypto were wiped out. Cubans dont have that option, and while it takes longer, its more secure. 

Erich Garcia Cruz, the founder of QvaPay and BitRemesas a currency remitter using Bitcoin that boasts tens of thousands of Cuban users says that the small but growing number of Bitcoin customers somewhat represents Cubas fledgling internet culture.

Connectivity and freedom of information

Cubans could get online in earnest from 2013. So, while the rest of the world was enjoying the iPhone 5C and 4G, a few lucky Cubans fortunate to access a computer could get online that year, albeit with an awful internet connection. 

Now, Cubans can access 3G and sometimes 4G connectivity on their phones. The tech-savvy and younger Cubans use VPNs to circumnavigate online restrictions.

Generally, the lag in internet infrastructure combined with the cost and difficulty of buying a smartphone on a frighteningly low salary means Cuba is way behind in IT. 

In 2021, the World Bank reported that three-quarters of Cuba has access to the internet. But while the issue is improving, internet censorship is rife, and Cubans are repeatedly told to trust the government through state-sponsored TV, newspapers and media.

Independent media publications are classified as enemy propaganda, which is something I was made aware of a few times during my investigation. I wont share those stories here, but its safe to say reciting such stories wouldve landed me in trouble had I stayed in Cuba. 

Two exiled Cuban journalists have since advised me to avoid returning to the island for some time, especially if the Cointelegraph documentary gets a lot of attention. 

A funny caveat to the state-run media is that some Cubans were orange-pilled by Bitcoin proponent Max Keiser. His appearances on the Russia Today news channel were approved for broadcast in Cuba. Some of Catryas peers watched the show where Keiser bashes fiat currencies and promotes Bitcoin. 

And yet, Bitcoin is magic internet money; it lives on the web. If Cubans arent online or watching Russia Today how can they know about it? 

Orange pill Cuba

Bitalion, one of the Cuba Bitcoin founders, works in telecommunications for the government. He explains that as a privileged public sector worker, he benefits from better internet connection speeds and lower online censorship levels. 

Bitalion stumbled across the Bitcoin white paper in 2014 and became infatuated with the idea of an independent, borderless currency. He rhetorically poses the question: For those fortunate Cubans who are able to travel abroad, what can they bring to the new country? The peso in their pocket, or Bitcoin in a mobile wallet? 

As with the other Bitcoin advocates on the island, Bitalion volunteers his time to educate people and support Bitcoin adoption. Hes also one of the handful of Cubans running a Bitcoin node. At Cubas first-ever Bitcoin-only meetup, he demonstrates to dozens of Cubans how to pay for goods and services directly to his Lightning Network node.

Cruz, Forte and countless business owners explain that Bitcoin is an easy orange pill to swallow, particularly for the digitally capable Cubans. You merely explain to them that nobody controls it; its stateless money. 

At face value, Bitcoin is a useful tool for a country that has been financially and economically handicapped for generations. But for Forte, Catrya and Bitalion, the ideology of Bitcoin resonates strongly.

Forte jokes, Satoshi didnt create Bitcoin for Cubans, but it really comes in handy for us.

In the hope of encouraging more Cubans to explore Bitcoin, the trio and the Cuba Bitcoin community host monthly educational meetups in which they explain the principles of Bitcoin and delve into its philosophy.

They recently introduced the popular Mi Primer Bitcoin (My First Bitcoin) program in the country, which is already picking up speed in El Salvador and will soon be instructed in schools nationwide. 

Por qu aceptas Bitcoin? Why do you accept Bitcoin?

QvaPays Cruz explains that Bitcoin is the financial tool that allows the small but growing number of Cuban business owners to access foreign products.

Recent U.S. presidential administrations had fluctuating policies on the Cuban embargo, relaxing and tightening different aspects based on political expediency.

Cruz orange-pills suppliers in an attempt to open up the Cuban economy to international markets where possible:

You are accepting Bitcoin because youre dealing with a private [independent] coin. The government doesnt have access to the transactions you and you have the freedom to do whatever you want.

The term freedom, or libertad, popped up frequently as I mingled and met with Cuban Bitcoiners, crypto enthusiasts and entrepreneurs. The fact that citizens can hold money in a wallet, outside of government overreach, appealed to many Cubans whom the government has consistently let down.

The ability to store wealth on a mobile phone in a Bitcoin Lightning wallet instead of in pesos at a bank is also an efficiency gain. It means no more queues at banks to cash in money that could devalue by a few pesos over a bank holiday weekend. 

Cruz and three other business owners also share that accepting Bitcoin benefits holidaymakers. Adan, a nightclub, bar and restaurant owner, explains that tourists bring a lot of cash to Cuba for vacation and thats risky. 

Having Bitcoin on a mobile phone in a wallet is a safer way to travel than flashing wads of dollar bills that end up on the black market in Cuba, inadvertently supporting the illicit and sometimes dangerous black market activity of exchanging notes in public. 

Adan accepts Bitcoin because of the international branding the Bitcoin logo brings. It opens up his bars doors to another potential market. Similar to El Salvador, where Bitcoin tourism has become a trend, bars and restaurants in Cuba could also attract holidaymakers to spend satoshis instead of pesos at the till. 

Finally, there are myriad ways in which adopting Bitcoin can lead to positive and unexpected outcomes. Mister Navis bar and restaurant, run by Mr. Navi and his son Julian, recently began accepting Bitcoin. Following a conversation with Forte, Catrya and Bitalion, the Cuba Bitcoin group now hosts educational Bitcoin meetups at the venue.

I tipped one of the service staff in Bitcoin at Mr. Navis the first day we visited. Five days later, I saw her again when we went out for dinner with Mr. Navi and Julian. She seems different I ask her if she is OK. She confesses that she was mugged a few days ago, and the attacker stole her purse, cash and phone. 

To her surprise, when she downloaded the Bitcoin Lightning app where Id tipped her, the funds magically reappeared on her new phone. On seeing her wide-eyed reaction, I tipped her again.

It’s clear that, for Cubans, Bitcoin could represent a critical instrument for securing their financial future in the face of runaway inflation and government interference, or as a way of opening up to embargoed markets and the international financial world.  

Disclaimer: The views, opinions and perspectives expressed in this article are those of the author and are not necessarily those of Cointelegraph.

Many see music as the next frontier of blockchain adoption, and musician Vérité reveals what a fan-first approach to Web3 looks like.

Carving out a sustainable career as an independent musician is no easy feat. The competition is fierce, support can be hard to find, and earning a living without the financial help of a major record label is an uphill battle. Yet, for those who are able to build a loyal fanbase, the freedom of complete creative control can be liberating.

Technology has long proven to be a potential friend to those musicians willing to embrace it, and nonfungible tokens are the latest innovation that many tech-savvy artists have begun incorporating into their careers. But NFTs remain both controversial and experimental, especially among the mainstream, and music NFTs are still relatively niche.

One artist who has cracked the code to maintaining a successful career as an independent musician is American singer Vrit, who has racked up hundreds of millions of streams without the support of a record label since releasing her first single, Strange Enough, in 2014. 

After finding success and touring internationally, Vrit became one of the earliest musicians to experiment with NFTs in February 2021. Since then, she has built a strong Web3 community and had several successful high-profile drops, including releasing 1/1 NFTs, selling the master rights to her music, fractionalizing song royalties on the blockchain and giving NFTs to concert attendees. She has done all this while still retaining her dedicated non-Web3 fans, many of whom have little to no interest in crypto.

How does one walk this fine line and successfully integrate Web3 into their career without alienating their existing, perhaps skeptical, fans? Magazine sits down with Vrit to find out. 

Dont over-rely on Web3

For many musicians, Web3 is an exciting frontier filled with new possibilities for fan engagement and revenue generation. However, Vrit believes it is important that artists have diversified revenue streams and marketing strategies and dont fall into the trap of assuming that the hype surrounding anything, especially NFTs, will last forever.

Building a music career in Web3 is a bit of a double-edged sword, Vrit tells Magazine. While it can help bring people together, it becomes a negative when maybe artists limit themselves to only utilizing those tools and only existing within those communities, not really having the foresight that there was a hype cycle that then broke and these paths to monetization closed.

My focus is How do I build a career that can withstand trend cycles, that can refocus on the foundation of my career while trying to push forward to build better? because we recognize that a lot of these systems are extremely broken.

Protect and respect fans

Not every fan wants to join their favorite artist on their Web3 journey, and thats fine, according to Vrit. When she first started releasing NFTs, she heavily emphasized that she was simply experimenting with the technology. I was very, very clear that I dont care if you come with me on this experiment this is an experiment for me, she states.

Vrit actually took it one step further, actively encouraging fans not to join her. A lot of my communication with them was, Dont buy this. Dont participate unless you are fully educated and willing to fully educate yourself and take on the risks. Even now, she still tells her fans that they should never feel pressured to participate in anything Web3-related.

More than monetizing, its really protecting the people who have supported my career for the last eight years, Vrit emphasizes.

Frame Web3 as a set of useful tools

Its clear that not everyone is sold on the power and potential of blockchain. The bear market certainly hasnt helped the spaces reputation either, with the collapse of crypto exchange FTX making mainstream media headlines and the prices of even blue-chip NFTs crashing 95% from their bull market peaks. 

If you go on my Discord and I do tag everyone and say, What do you think about crypto and NFTs? people are not jazzed. Most of them, honestly. Its just general disinterest, Vrit explains. But its not necessarily that her fans actively hate crypto. Im finding that people dont have a desire to do something new because they dont see a problem, right?

According to the singer, NFTs, Web3, how its been marketed out to the masses is also wholly unpalatable really to non-tech-native fans. Instead, she offers the following advice: 

I would more so recommend people to frame it as utilizing tools because its a weird market, and its hard to justify some of the scams and the negative aspects that can cause real harm to someone who isnt knowledgeable or educated on those things.

Offer an option, not a requirement

Instead of forcing fans to join her on-chain, Vrit instead focuses on building experiences with a Web3 element that is present but optional. She describes her approach as offering a door for fans to enter, one where blockchain functionalities can be unlocked to further enhance the fan experience but where fans will still enjoy the experience regardless of whether they open the door:

Do you need to jump the technological hurdle in order to have the experience, right? Or is it just a door? If its a door, you can talk about it because its not a burden.

For me, its really trying to consider, What is the experience that were offering, what are the actual viable use cases of blockchain technology that we can tack on that arent burdensome? she says.

One example is The Vrit Crewneck, a tech-enabled sweatshirt the singer dropped in late 2022 in collaboration with IYK, a company working with brands, artists and creators to develop phygital experiences. The sweatshirt has a near-field communication, or NFC, chip embedded in the sleeve, which can be scanned to access exclusive content and unlock an NFT representing a certificate of authenticity.

Vrit explains that fans who bought the sweatshirt received premier access to the next era of my records. Buyers could scan the chip with their phones and get early access to music and perks such as behind-the-scenes content. That was the main value proposition not a Web3 activation, right?

But the landing page also features an option to verify the garment, through which curious fans can receive their NFT.

Fans are at the center of it all

Between straight-up telling fans not to purchase her NFTs to offering them experiences where the Web3 option is an added bonus, Vrits fan-centric approach has undoubtedly played a significant role in her ability to push boundaries and see success in Web3 while still maintaining a loyal non-Web3 fanbase. Or, in her words, My fans come first, and I dont have fans just so that I can sell them shit all the time.

Regarding her long-term hope for the future of blockchain and music, Vrit says her vision is that we can demystify the black box of data that exists between artists and their fans, that is held by social platforms, ticketing companies, etc., and that blockchain actually does have the ability to make that information transparent so that artists can communicate directly to the people who support them and reward them in long-term scenarios.

If the hype is to be believed, this dream may one day come true. But based on Vrits experience at the forefront of it all, it seems the only way the music-Web3 revolution will be truly successful is if fans are placed at the center of it.

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From solving Mt. Gox to tracing crypto used by child abuse syndicates in Korea, Chainalysis has a long but sometimes controversial history.

Its been more than a decade since 850,000 BTC went missing from Mt. Gox, yet the collapse of the former exchange remains one of the most infamous black swan events of the cryptocurrency ecosystem.

While creditors of the defunct exchange are edging closer to some form of restitution, Mt. Goxs demise ended up playing an important role in the development of tools to identify, track and tackle the illicit movements of funds through the wider cryptocurrency industry.

The search for answers and funds played a key role in the birth of cryptos best-known blockchain analytics and tracing firm, Chainalysis, explains co-founder Michael Gronager.

Close to a decade later, Chainalysis analytics tools are being used by myriad private and public enterprises and institutions. From data analytics to pure law enforcement use cases, the firms services continue to prove influential and sometimes controversial across the industry.

Kraken the Mt Gox case

Gronager is a crypto OG, having previously co-founded cryptocurrency exchange Kraken. He got involved in blockchain analysis after Kraken went looking for a steady banking partner and met a wall of wariness over the lack of visibility in the cryptocurrency ecosystem along with KYC and money laundering concerns.

These conversations with the banks, they all end in the same way. How do you do transaction monitoring? How do you track the funds you receive from someone that you are onboarding online? Gronager tells Magazine.

The collapse of Mt. Gox around the same time presented another unique challenge for Gronager, who was tasked with figuring out what happened to the funds that Kraken and some of its clients had in the defunct exchange.

As explored in the book Tracers in the Dark, Gronager developed the tools that would lay the foundation for Chainalysis, with the nascent firm eventually appointed as the investigative team by Mt. Goxs bankruptcy trustee in 2014. From there, Gronager and his team wasted no time putting the proverbial bits together to trace the missing funds.

Jonathan Levin, the second of three Chainalysis co-founders, also spoke with Magazine at the companys Links conference in the Netherlands earlier this year. The Oxford economics masters graduate highlights the investigation as the starting point of Chainalysis wider service.

We were given the Mt. Gox investigation, which was the largest bankruptcy case in crypto history, and that really was about following the money. If its all on the blockchain, how is it that no one can find it? And so, you know, we worked it out and cracked that case.

Two Russian nationals would eventually be indicted in June 2023 by the United States Justice Department for allegedly hacking and laundering some 647,000 BTC from Mt. Gox. The Internal Revenue Service Criminal Investigations unit, which makes use of Chainalysis tools, is assisting in ongoing investigations.

Helping trace the movements of Bitcoin held by Mt. Gox proved that Chainalyis had the tools to solve complex cryptocurrency movements. Gronager also realized this was a service the worlds top crime-fighting institutions were crying out for.

I realized in conversation with other people from the industry that worked with law enforcement that they had no clue. They didnt know how to solve these things.

The customer base grew rapidly after onboarding both private and public sector users, including exchanges and law enforcement agencies. As of September 2023, Chainalysis has 1,200 customers from the private sector and over 250 from public sector institutions.

The go-to service for law enforcement 

Chainalysis has become the go-to tracing solution for some of the best-known law enforcement organizations worldwide and has helped the IRS seize an estimated $10 billion worth of cryptocurrency related to criminal investigations. IRS Criminal Investigations (IRS-CI) Chief Jim Lee says the tools it offers are invaluable to trace cryptocurrency and interrogate data in myriad settings, from blockchains to darknet marketplaces.

Think about all the data that I have working for the IRS. It may not be the most, but its the richest. Now I can take all this other data we have and then match it up against the records that I have. I mean, its just incredibly powerful, but it takes time, energy and money. 

Lee was also at the Links conference, participating in open and closed-door conversations with various governmental agencies and businesses in Amsterdam.

Gronager was reluctant to single out a stand-out investigation made possible with Chainalysis blockchain analytics, considering that its services have helped solve a litany of high-profile cases from tracing cryptocurrencies that help bust child abuse material syndicates in South Korea to using its tools to help solve headline-grabbing Twitter hacks in 2020 that led to close to $1 million being stolen.

In that high-profile case, Chainalysis tools helped investigators link a Bitcoin scam being promulgated by various hacked Twitter accounts to three perpetrators accused of orchestrating the scheme. The mastermind of the scheme is a juvenile whose identity has not yet been revealed.

12 days after, the case was solved, and thats again showing that you can actually do things really, really fast by following the funds in crypto.

Another highlight was assisting in the recovery of $30 million of the $650-million Axie Infinity hack in 2022, which Gronager believes made a statement to North Korean-linked hackers that crypto-related thefts might not be the cash cow they once were.

Controversy over Bitcoin Fog case

The ability to tie cryptocurrency wallets or funds to a specific person is hugely valuable in criminal investigations.

But the firm is not without its detractors, with critics suggesting that reliance on heuristics or assumptions about unidentifiable wallets can lead to inaccurate tracing and unlawful arrests.

A sizable contingent of Bitcoiners online has argued that this is the case in a legal battle involving the U.S. government and Roman Sterlingov, 35, who stands accused of operating Bitcoin mixer Bitcoin Fog. 

Chainalysis tools were used to identify Sterlingov as the alleged orchestrator of the infamous and now defunct cryptocurrency mixer that the Justice Department claims moved over 1.2 million BTC worth $335 million over a decade.

Detractors argue that the DOJs case made certain assumptions about wallets and credentials allegedly linked to the early Bitcoin adopter and the eventual registration of the Bitcoin Fog domain that was tied to Sterlingov.

Sterlingov attorney Tor Ekeland claims the firms Reactor software is unscientific and unreliable, and flawed assumptions have falsely implicated Sterlingov. He argues that Chainalysis cant identify its error rate. This is junk science that doesnt belong in a federal court, Ekeland told a Sept. 7 court hearing.

Elizabeth Bisbee, head of investigations at Chainalysis Government Solutions, reportedly told the court she was unaware of any peer reviewed scientific papers attesting to the accuracy of Chainalysis Reactor.

The courts will ultimately decide whether there is enough reasonable doubt about Chainalysis methods in the case to convict. Chainalysis would not be drawn in our interviews to comment on any ongoing investigations or cases.

Investigations 90% focused on public blockchains

Despite the controversy, Chainalysis has a lot of happy customers and has played a big role in the recovery of hacked funds. Erin Plante, VP of investigations at Chainalysis, manages a growing team of more than 120 investigators across 11 countries.

Plante, who has a wealth of experience working in cybercrime and financial investigation as a U.S. government contractor, says that 90% of their investigators are tasked with probes into incidents involving public blockchains like Bitcoin and Ethereum. 

The Ronin Bridge investigation was a primary driver for the creation of her team, highlighting the importance of allocating human capital to trace funds in the immediate aftermath of a major hack.

Getting in early and tracing funds early is so important and getting law enforcement involved early is how youre most able to have successful recoveries.

There has also been an evolution in the theme of investigations, with Plante recalling a plethora of darknet investigations around 2019 demanding a lot of their attention. Investigative efforts are now more focused on cybercrimes involving ransomware, national security threats from entities associated with North Korea and sanctions screening of entities involved in Russias invasion of Ukraine.

A key talking point in the conversations in Amsterdam was the inherent traceability of blockchain-based cryptocurrencies despite the advent of token mixing protocols, such as sanctioned Tornado Cash.

Plante notes that it is fairly straightforward to trace stolen funds through cross-chain bridges, with criminals typically converting tokens to ETH and then BTC, which is sent to mixers in an effort to obfuscate funds.

She says that mixers require significant amounts of liquidity to properly obfuscate funds, which has predominantly left Bitcoin mixers as the main option for criminals to launder money.

Chainalysis has a dedicated data intelligence team using specific tools to identify mixers using an algorithm that clusters wallets that are associated with the mixer service. An example of the algorithm at work was helping cluster some 50,000 addresses that were linked to the now sanctioned Sinbad mixer.

Between December 2022 and January 2023, North Korea-linked hackers sent 1,429 BTC worth $24.2 million to the mixer.

Plante reveals that Chainalysis had its clustering algorithm independently confirmed by a separate, covert FBI investigation that had been making use of dusting to trace how funds were being obfuscated by Chipmixer, another service that is widely believed to be the direct predecessor of Sinbad and its funds. Chipmixer was shut down in March 2023 over allegations that it had facilitated $3 billion in money laundering.

We didnt know the FBI was doing that, but it was picked up in our clustering, which verified the cluster. That verification, thats very cool. That one will probably go to court, which is why we dont talk about it.

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If you’re not transforming your business to take advantage of AI now, you’ll be left behind, says Easy Translate boss Frederik Pedersen.

The launch of generative AI products over the past nine months has the world talking about how it will change the future. Many are frightened. Others are excited about the opportunity.

A report last month from Next Move Strategy Consulting predicts the AI industry will grow 20x in the next seven years, creating a $2 trillion business, up from its current value of $100 billion. It might sound like wild hype, but other analysts from McKinsey, Morgan Stanley and BlackRock all map out a similar trajectory. AI is here to stay, and a lot of human lives will be upended. But its also the chance of a lifetime.

Frederik Pedersen, the co-founder of Danish AI company EasyTranslate and son of one of Denmarks most famous men, is approaching the future head-on.

I have been saying for a long time that translation is dead and AI has killed the industry as we know it, but that hasnt gone down particularly well with my competitors. Now, however, those same people are listening and are realising that they may be too late if they want to transform their business.

Son of Danish politician Klaus Riskr Pedersen

Its not easy to be the child of a powerful person, as has been recently and brilliantly illustrated by the TV series Succession. If theres a Logan Roy in the family, its difficult for the child to be their own person.

Some crash and burn; some, such as singers Justin Bieber and Miley Cyrus, try to shock their parents by being outlandish and independent. Its rarely a good look.

Others, however, do it in smarter ways and emerge from that parental shadow by adopting different mechanisms to build their own reputation. 

In the case of Pederson, now 35, it was technology that enabled him to do so. First, with translation software, and now, generative AI has overtaken it.

His dad, Klaus Riskr Pedersen, is a controversial Danish political party leader, entrepreneur, businessman and author. Everybody in Denmark knows his name.

His chequered career includes being a member of the European Parliament for the Liberal Party, writing books, developing, building and selling around 15 companies over three decades. He set up his own political party in 2018.

But there have been controversies. He has several convictions for fraud and has spent different spells in jail, as well as splitting Danish public opinion and having the social life that goes with such apparent conviviality. 

At first, (Frederik) Pedersen suffered. In and out of schools, he tried to find a way of acceptance and struggled. He didnt make it to university, but he did know about technology and became interested in its power and consequently found a way to plow his own furrow.

It took me some time to find a direction, but slowly I realized that the world was all about communication. I knew I was from a privileged family, but educators always seemed to have a lack of empathy and communication when I was a child. I was made to feel different, and it was a difficult place to be.

But I came through it, and those life lessons set me up for all the changes that life throws at you. So I set up a translation company, and now Im pivoting the company into generative AI because of the huge opportunity it offers humanity, not least the same elements of communication, says Pedersen.

Early access to OpenAIs ChatGPT

The AI light started to dawn on him back in 2020.

That year, Pedersen applied to the Danish Innovation Fund for a 65,000 euro grant to create a content generator engine that would enable him to create a new form of translation:

I realized that the biggest issue in e-commerce when it came to languages was not translation in itself, but creating localized content for retailers different products that customers could relate to, he explains, adding the company spent the money to train neural networks to create these product descriptions.

Also read: AI Eye Real uses for AI in crypto, Googles GPT-4 rival, AI edge for bad employees

A neural network is a type of machine learning process called deep learning that uses interconnected nodes or neurons in a layered structure that resembles the human brain.

We branded it content-as-a-service and couldnt believe we were one of the first companies to do it, he says, though it ended up proving the old adage that being early is the same as being wrong.

Ultimately we were ahead of the technology and while our technology could build sentences, it just wasnt good enough for our customers.

This first effort was not wasted time and money, however, as it meant the company was able to hit the ground running when large language models were released publicly. EasyTranslate obtained early access to ChatGPT because it already had an account with OpenAI and was able to adopt and execute the technology instantly.

From that point, EasyTranslate pivoted to a generative AI content future based on Pedersens thesis that traditional translation was indeed dead.

Translation meets technology

It was not the first change in direction for Pedersens company. Formed in 2010 without venture capital, the translation service grew quickly.

In 2016, it went after bigger fish and started offering interpretation services to the Danish government after realizing there was an opportunity with the launch of Apples FaceTime. According to Pedersen, interpreters were super-expensive, inefficient and slow, and travel for in-person events wasnt exactly climate change-friendly. 

Pedersen created a video interpretation app that streamlined costs and increased efficiency by offering a marketplace and matching service for interpreters as well as remote interpreter services. 

Danish municipalities signed up for the service, including the Danish Ministry of Justice, recognizing that bringing an interpreter to a court was a very expensive business, especially due to the often last-minute nature of such needs.

Danish operation a success, but the patient died

At its height, the company was running 1,000 interpretation meetings a day, and between 2017 and 2019, it was responsible for more than 70% of the Danish governments interpretation business.

However, Pedersen says the Danish government had never outsourced such business, and the relationship turned sour.

It was a very mutual and fruitful relationship for a long time, but we realized that working with governments was more difficult than we imagined. It was like the cliche of a heavy tanker not being able to turn around.

Again, it was the first learning curve for me. Yes, our data processing wasnt as good as it could have been and working with antiquated systems and reasoning was very difficult.

Eventually, the Danish government decided they didnt want to carry on with our relationship. It was hard at the time, but I still believe we succeeded, and we learned a lot, he says. 

Lets just say, the operation was a success, but the patient died. There was also a lot of opposition from the strong Danish trade unions who thought we were putting people out of jobs.

But it was not about putting people out of jobs, it was working with technology in the same way we work with AI now. Our interpreters who decided to join our community were extremely happy with our software. They said it was like having a PA that coordinated their calendar and ensured them productive days with the highest possible earnings they managed to increase those earnings.

Impact of AI on jobs

The impact of AI technology on employment is a source of great anxiety for many, with some predicting entire industries will be wiped out, while others suggest jobs will change and evolve rather than disappear.

A recent study by the International Labour Organization found that women will be disproportionately affected by automation, with around 7.8% of jobs held by women in high-income countries (or 21 million) likely to be automated, but only 2.9% of jobs held by men (9 million).

Translation is a highly gendered industry too, with women accounting for around 67% of translators.

Pedersens thinking about the essential human element in technology be that content generation or generative AI is now central to EasyTranslates business.

Also read: AI Eye Get better results being nice to ChatGPT, AI fake child porn debate, Amazons AI reviews

He believes that the combination of humans and AI is more powerful than just letting the AI do everything, using the example of a hard-working high school student who was angry at classmates for using AI to cheat.

Instead of cheating herself, she asked ChapGPT to mark her already-written essay. It sorted out the grammar and typos, and it gave her extra resources and links to improve her work beyond that of the cheater.

In business, everybody is looking for the magic of balance in the marketplace, that sweet spot where pricing, innovation and technology are aligned. We are also doing that when it comes to AI and humans; we want that magic balance there as well, he says.

Humans still required in the loop

He cites humans in the loop as the way forward for humans and machines. Generative AI can do the heavy lifting, and humans can finish and finesse the job. It creates content in any language generated by AI but enhanced by humans.

There are others in business, such as Reuters, who also profess the humans in the loop phrase. Again, Ive been saying for a long time that this is the way forward to make both technology and humans better.

By harnessing the power of both and increasing machine learning in the process, I believe that the current dominance of LLMs will be replaced by small language models that can be tailored exactly for the customer open source generative AI that will be the future.

Thats what were planning for and how the whole AI sector will play out. Those companies that are prepared for that will prosper; those who arent will fail, he says.

Since Pedersens pivot to AI at the end of 2022, there has been increased investor interest in EasyTranslate, and the company raised 2.75 million euros earlier this year

We think that weve been ahead of our time, and that thinking has led us to embrace AI and take us to the next level. AI itself is just the mirror of what humanity has already created; AI is really the technological history of human knowledge.

I think its obvious that the two are perfectly compatible, that magic balance, so as generative AI evolves, so will those humans in the loop. Nobody with a good and adaptive brain will lose their job; their jobs and roles will be better and more creative, he concludes.

His father should be proud.

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How Maker, The Sandbox and Near are using AI in crypto, plus terrible workers benefit most from AI and Google’s GPT-4 rival nears release.

AI and crypto isnt just a buzz phrase

AI Eye has been out and about at Korean Blockchain Week and Token2049 in Singapore over the past fortnight, trying to find out how crypto project leaders plan to use AI.

Probably the most well-known is Maker founder Rune Christensen, who essentially plans to relaunch his decade-old project as a bunch of sub-DAOs employing AI governance.

“People misunderstand what we mean with AI governance, right? We’re not talking about AI running a DAO,” he says, adding the AI wont be enforcing any rules. The AI cannot do that because it’s unreliable.” Instead the project is working on using AI for coordination and communication as an Atlas to the entire project, as theyre calling it.

“Having that sort of central repository of data just makes it actually realistic to have hundreds of thousands of people from different backgrounds and different levels of understanding  meaningfully collaborate and interact because they’ve got this shared language.”

Near founder Illia Polosukhin may be better known in AI circles as his project began life as an AI startup before pivoting to blockchain. Polosukhin was one of the authors of the seminal 2017 Transformer paper (“Attention Is All You Need”) that laid the groundwork for the explosion of generative AI like ChatGPT over the past year.

Polosukhin has too many ideas about legitimate AI use cases in crypto to detail here, but one hes very keen on is using blockchain to prove the provenance of content so that users can distinguish between genuine content and AI-generated bullshit. Such a system would encompass provenance and reputation using cryptography.

“So cryptography becomes like an instrument to ensure consistency and traceability. And then you need reputation around this cryptography, which is on-chain accounts and record keeping to actually ensure that [X] posted this and [X] is working for Cointelegraph right now.”

Sebastien Borget from The Sandbox says the platform has been using AI for content moderation over the past year. “In-game conversation in any language is actually being filtered, so there is no more toxicity,” he explains. The project is also examining its use for music and avatar generation, as well as for more general user-generated content for world-building.

Meanwhile, Framework Ventures founder Vance Spencer outlined four main use cases for AI, with the most interesting by far training up AI models and then selling them as tokens on-chain. As luck would have it, Frameworks has invested in a game called AI Arena, in which players train AI models to compete in the game.

Keep an eye out for in-depth Magazine features outlining their thoughts in more detail.

AI is for communists?

Speaking of AI and crypto, are they pulling in opposite directions? Dynamo Daos Patrick Scott dug up PayPal founder Peter Thiels thoughts on AI and crypto in his forward to the re-release of the 1997 non-fiction book The Sovereign Individual, which predicted cryptocurrency, among other things. In it, Thiel argues AI is a technology of control, while crypto is one of liberation.

“AI could theoretically make it possible to centrally control an entire economy. It is no coincidence that AI is the favorite technology of the Communist Party of China. Strong cryptography, at the other pole, holds out the prospect of a decentralized and individualized world. If AI is communist, crypto is libertarian.”

From Peter Thiel’s new 2020 preface to The Sovereign Individual. pic.twitter.com/cWzfgyUqfY

Patrick Scott | Dynamo DeFi (@Dynamo_Patrick) September 17, 2023

Roblox lets users build with AI

Roblox has unveiled a new feature called Assistant, which will let users build virtual assets and write code using generative AI. In the demo, users write something like “make a game set in ancient ruins” and “add some trees,” and the AI does the rest. It’s still being developed and will be released at the end of this year or early next year. The plan is for Assistant to one day generate sophisticated gameplay or make 3D models from scratch.

Terrible workers benefit most from AI

The worst workers at your place of employment are likely to benefit the most from using AI tools, according to a new study by Boston Consulting Group. The output of below-average workers improved by 43% when using AI, while the output of above-average workers improved by just 17%.

Interestingly, workers who used AI for things beyond its current abilities performed 20% worse because the AI would present them with plausible but wrong responses.

Google Gemini gears up for release

Googles GPT-4 competitor is nearing release, with The Information reporting that a small group of companies has been given early access to Gemini. For those who came in late, Google was seen leading the AI race right up until OpenAI dumped ChatGPT on the market in November last year (arguably before it was ready) and leaped ahead.

Google hopes Gemini can best GPT-4 by offering not just text generation capabilities but also image generation, enabling the creation of contextual images (rumors suggest its being trained on YouTube content, among other data). There are plans in future for features like using it to control software with your voice or to analyze charts. Highlighting how important Gemini is, Google co-founder Sergey Brin is said to be playing an instrumental role in the evaluation and training of the models.

AI expert Brian Roemmele says hes been testing a version of Gemini and finds it “equivalent to ChatGPT-4 but with newly up to the second knowledge base. This saves it from some hallucinations.”

Google CEO Sundar Pichai told Wired this week he has no regrets about not launching its chatbot early to beat ChatGPT because the tech “needed to mature a bit more before we put it in our products.”

“It’s not fully clear to me that it might have worked out as well,” Pichai said. “The fact is, we could do more after people had seen how it works. It really won’t matter in the next five to 10 years.”

AI meets 15-minute cities

Researchers at Tsinghua University in China have built an AI system that plans out cities in line with current thinking about walkable 15-minute cities that have lots of green space (please direct conspiracy theories about the topic to X).

The researchers found the AI was better at tedious computation and repetitive tasks and was able to complete in seconds what human planners required 50 to 100 minutes to work through. Overall, they determined it was able to improve on human designs by 50% when assessed on access to services, green spaces and traffic levels.

The headline figure is a bit misleading, though, as the finished plans only increased access to basic services by 12% and to parks by 5%. In a blind judging process, 100 urban planners preferred some of the AI designs by a clear margin but expressed no preference for other designs. The researchers envisage their AI working as an assistant doing the boring stuff while humans focus on more challenging and creative aspects.

Stephen Fry is cloned

Blackadder and QI star and much-loved British comedy institution Stephen Fry says he has become a victim of AI voice cloning.

On September 14, Fry played a clip from a historical documentary he apparently narrated at the CogX Festival in London last week but revealed the voice wasnt him at all. I said not one word of that it was a machine, he said. They used my reading of the seven volumes of the Harry Potter books, and from that dataset an AI of my voice was created, and it made that new narration.

Training AI to rip off the work of actors and repurpose them elsewhere without payment is one of the key issues in the current actors and writers strike in Hollywood. Fry said the incident was just the tip of the iceberg, and AI will advance at a faster rate than any technology we have ever seen. One thing we can all agree on: its a fucking weird time to be alive.

How not to cheat using ChatGPT

The sort of academics drawn to cheating using ChatGPT appear to be the sort of people who make dumb mistakes giving that fact away. A paper published in the journal Physica Scripta was retracted after computer scientist Guillaume Cabanac noticed the regenerate response in the text, indicating it had been copied directly from ChatGPT.

Cabanac has helped uncover hundreds of AI-generated academic manuscripts since 2015, including a paper in the August edition of Resources Policy, which contained the tell-tale line: Please note that as an AI language model, I am unable to

All Killer No Filler AI News

Meta is also working on a new model to compete with GPT-4 that it aims to launch in 2024, according to The Wall Street Journal. It is intended to be many times more powerful than its existing Llama 2.

Microsoft has open-sourced a novel protein-generating AI called EvoDiff. It works like Stable Diffusion and Dall-E2, but instead of generating images, it designs proteins that can be used for specific medical purposes. This is expected to lead to new classes of drugs and therapies.

Defense contractor Palantir, along with Cohere, IBM, Nvidia, Salesforce, Scale AI and Stability, have signed up to the White Houses somewhat vague plans for responsible AI development. The administration is also developing an executive order on AI and plans to introduce bipartisan legislation.

Sixty U.S. senators attended a private briefing recently about the risks of AI from 20 Silicon Valley CEOs and wonks, including Sam Altman, Mark Zuckerberg and Bill Gates. Elon Musk told reporters afterward that the meeting “may go down in history as very important to the future of civilization.”

ChatGPT traffic has fallen for three months in a row, by roughly 10% in both June and July and a further 3.2% drop in August. The amount of time users spend on the site fell from 8.7 minutes on average in March to seven minutes last month.

Finnish prisoners are being paid $1.67 to help train AI models for a startup called Metroc. The AI is learning how to determine when construction projects are hiring. 

The U.S. is way out in front of the AI race, with 4,643 startups and $249 billion of investment since 2013, which is 1.9 times more startups than China and Europe combined.

Video of the week

Writer and storyteller Jon Finger tried out the HeyGen video app, which is able to not only translate his words but also clone his voice AND sync up his lip movements to the translated text.

Testing out @HeyGen_Official translation on French and German. I dont speak either language so let me know if it sounds natural if you do.
I hope if you pay you can turn off the color correction.
It didnt work on my phone so I had to upload on my pc.https://t.co/FMJp9sJEBI pic.twitter.com/iF5eONAQ3c

Jon Finger (@mrjonfinger) September 11, 2023

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