Blockchain Bites: Pornhub’s Privacy Predicament, Argentina’s Crypto Boom, Israel’s DeFi Darlings

Hi, all. Today we look at the global perspective: Latin America’s booming crypto sector, Israeli’s DeFi scene and how whales from around the world drive market changes. 

Top shelf

Capear el temporal
Argentinian crypto exchange operations are booming in a year of economic and political uncertainty, CoinDesk’s Sandali Handagama reports. (Lea el artículo en español. Es el primer trabajo de CoinDesk traducido a la segunda lengua más hablada del mundo.) It’s part of a general trend across the South American region, driven by bitcoin’s bull market, national inflation and the increasing need for digital remittances during a pandemic year. Last week, Mexico City-based Bitso raised $62 million to fund its expansion to Brazil, it certainly won’t be the last.

DeFi darlings
Israel’s crypto scene has pivoted to decentralized finance, the intrepid CoinDesk contributor Leigh Cuen concisely and conveniently considers. At an epicenter of 2017’s Ethereum-based ICO bubble, Israeli startups, and attendant venture capitalists, are now engineering ways to bring bitcoin into the emerging DeFi economy, also primarily based on Ethereum.

Carbon future
The World Economic Forum and seven major mining companies are trialing blockchain to track CO2 emissions from mine to the end of the supply chain. Maybe it’ll finally answer the question: How did oil get into everything?

Quick bites

• CRYPTO CAPITULATION? SEC Chairman Jay Clayton is stepping down this year. Modern Consensus provides an overview of his tenure and asks how he might be remembered.
• DRAWN DOWN: The amount of ether (ETH) on exchanges is at its lowest point in two years after some five million tokens were withdrawn since March. (Trustnodes)
• STRICT LAWS: Estonia is known as a bastion of digital experimentation. Still, about 1,000 cryptocurrency companies lost licenses to operate in the country this year. (Decrypt)
• INSTITUTIONAL FLOOD: JPMorgan analysts say MassMutual’s recent $100 million BTC buy could presage a wave of institutional demand. (CoinDesk)
• OLD MEETS NEW: SatoshiPay, a cypherpunk favorite, will be the first company to integrate a euro-backed stablecoin developed by Bankhaus von der Heydt, a bank founded in the 18th century. (CoinDesk)
• PRIVATE DEALINGS: Pornhub added monero payments after Mastercard and Visa cut ties with the adult content site. (The Block)

Market intel

Sell pressure
Bitcoin’s rally above $19,500 was clipped early on Tuesday, with significant sell pressure at $20,000 ahead, according to CoinDesk markets reporter Omkar Godbole. These sell walls are no joke. In fact, one analyst told Godbole this morning’s market dip could likely be attributed to profit taking by large Asia-based investors. CryptoQuant data shows whales taking a dip around $19,500, bringing the market with them. Big picture: Pondering Durian provides four reasons a modest bitcoin allocation might make sense.

At stake

There has been a lot of hyperventilating in the press and on Twitter this week over the fact that cryptocurrency is now, by default, the only form of payment Pornhub accepts. 

Far less attention has been paid to the related news that the adult entertainment site is about to adopt its own version of know-your-customer rules, or KYC. Call it “Know Your Coomer” after the internet meme of a disheveled porn addict with poor impulse control and a hypertrophied right arm. (For those unfamiliar with online argot, it’s one of many derivatives of the epithet “boomer,” like “consoomer” for spendthrifts, “floomer” for those who insist COVID-19 is just the flu, or “coofer” for people exhibiting symptoms of the virus.)

And, much like the know-your-customer policies of financial institutions including regulated crypto exchanges, Know Your Coomer raises difficult questions about privacy and data protection.

Rewinding the tape: In response to a harrowing New York Times article about the posting of child exploitation imagery on Pornhub, Visa and Mastercard booted the site from their card networks. This left crypto, which Pornhub has accepted for several years, as the sole remaining payment option for the site’s premium users.

Yes, I checked. 

No, I did not investigate further through this channel.

From the perspective of highlighting crypto’s value as a censorship-resistant form of money, this is all well and good. As disturbing as the revelations in the Times piece were, the use of financial infrastructure as an extrajudicial enforcement mechanism is creepy in its own way, just as it was in the Wikileaks banking blockade and Operation Choke Point.  

The Open Source Defense newsletter said it well:

“The second-order danger … is that you’re nearly certain to be able to find illegal content on any large platform for user-generated content. And no company at any level of technical expertise, from Google and Facebook on down, can fully prevent that. So when everybody’s guilty, getting shut down is only a matter of whether someone decides that it’s time to take a look at you. That’s not a world that’ll make anybody happy in the long run.”

An under-reported aspect of the story is the steps Pornhub is taking to prevent illegal content from being posted on this site. 

Last week, the site, owned by Canada-based MindGeek, disabled uploads by any users who were not verified through its revenue-generating programs. “In the new year, we will implement a verification process so that any user can upload content upon successful completion of identification protocol,” Pornhub said. (Content previously uploaded by unverified users was subsequently nuked.)

If this prevents monsters from using the site in abusive ways, all the better. But it will create risks for those who only post lawful content. The following remains to be seen:

• What information will be collected from users who want to upload content when the new protocol is implemented in 2021? 
• How will it be verified? 
• Will the information be stored with a third party or with MindGeek? 
• How long will the information be retained? 
• What steps will be taken to secure it? 
• Has MindGeek hired a vendor or vendors to handle ID collection, verification and/or storage? 
• Will the changes be limited to Pornhub or extended to other MindGeek adult sites as well.

I emailed these questions to MindGeek and its law firm last week but have not heard back (not surprising, given the company is managing a crisis situation). 

Five years ago, the Ashley Madison breach showed how a poorly guarded trove of data on people who do legal but embarrassing things online can easily become a blackmailer’s goldmine. Pornhub would do well to heed this lesson. Even coomers deserve privacy.

– Marc Hochstein

Who won #CryptoTwitter?