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BlackRock revises BTC ETF filing, El Salvador’s crypto citizenship trending, and more: Hodler’s Digest, Dec. 10-16

BlackRock has revised its spot Bitcoin exchange-traded fund (ETF) application to make it easier for Wall Street banks to participate by creating new shares in the fund with cash rather than just crypto. The new in-kind redemption “prepay” model will allow banking giants such as JPMorgan or Goldman Sachs to act as authorized participants for the fund, letting them circumvent restrictions that prevent them from holding Bitcoin or crypto directly on their balance sheets.

El Salvador’s National Bitcoin Office says its $1 million Freedom Visa program has already received hundreds of inquiries since its launch on Dec. 7 and expects it to sell out before the end of 2023. Launched by the local government in partnership with stablecoin issuer Tether, the Freedom Visa is a citizenship-by-donation program that grants a residency visa and pathway to citizenship for 1,000 people willing to make a $1 million Bitcoin or Tether donation to the country. The program is limited to 1,000 slots per calendar year.

The lawyer responsible for Sam “SBF” Bankman-Fried’s criminal trial defense has admitted that the case was “almost impossible” to win from the outset. During an interview, Stanford Law School professor David Mills said he recommended the legal defense of SBF admit to the allegations of witnesses and state prosecution and convince the jury that Bankman-Fried intended to save the company. Mills also disclosed that he had agreed to lend his expertise to Bankman-Fried’s defense at the behest of the FTX CEO’s parents, and described Bankman-Fried “as the worst person I’ve ever seen do a cross-examination.”

Yearn.finance is hoping arbitrage traders will return $1.4 million in funds after a multisignature scripting error resulted in a large amount of the protocol’s treasury being drained. The error occurred while Yearn was converting its yVault LP-yCurve — earned from performance fees on vault harvests — into stablecoins on the decentralized exchange CoW Swap. Yearn suffered significant slippage when it received 779,958 DAI yVault tokens from the trade, resulting in a 63% drop in the liquidity pool value.

The United States Securities and Exchange Commission has delayed its decision on whether to approve or reject a spot Ether ETF proposed by Invesco and Galaxy Digital. The companies filed the spot ETH ETF application in September. The proposed spot crypto investment vehicle is one of many being considered by the commission, which, to date, has never approved an ETF with direct exposure to Ether, Bitcoin or other cryptocurrencies.


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Korean crypto firm raises $140M, China’s $1.4T AI sector, Huobi battle: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

South Korean nonfungible token developer Line Next secured a $140 million investment on Dec. 13 from a consortium led by Peter-Thiel-backed private equity firm Crescendo Equity Partners. It’s the largest blockchain series funding round in Asia this year.

The firm’s NFT platform, dubbed “DOSI,” is scheduled to premiere in January, integrated with Japanese NFT marketplace Line NFT.

“With this investment, Line Next also plans to introduce new services to further accelerate Web3 popularization. These include introducing a social app that allows users to communicate based on the characters they made utilizing AI technology and launching new Web3 games utilizing BROWN & FRIENDS characters that anyone can enjoy.”

Line Next plans to create new services on the public blockchain Finschia, with Line and Crescendo participating in the Finschia Foundation as governance members. The firm claims it has achieved over 470,000 cumulative transactions through various decentralized applications operating under its DOSI brand. Its popular messaging app, Line, has over 5 million users. 

The upcoming Dosi NFT platform.
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J1mmy.eth once minted 420 Bored Apes… and had NFTs worth $150M: NFT Creator

When the history books are written, and the documentaries are made on the formative days of NFTs, Jimmy McNelis, aka j1mmy.eth, will hold a special place in history as a creator, as a passionate advocate, and for having one of the greatest NFT collections of all time. 

An NFT OG who started his journey on Dec. 5, 2017, when he purchased his first CryptoKitty, the 45-year-old American is also the founder of Avastars, an early PFP project from February 2020 that set the scene for intellectual property (IP) rights being given to holders. 

That was popularized by Bored Ape Yacht Club and the 2021 PFP mania that saw IP rights for holders becoming the standard for most projects. Avastars was also a pioneer in putting the project on-chain, inspired by Autoglyphs, which minted 10 months earlier. 

J1mmy also has an almost unrivaled NFT collection worth around $150 million at the peak. The astonishing collection includes eight Autoglyphs, 19 Chromie Squiggles, 30 Bored Apes, five CryptoPunks, 11 Gazers, 61 Meebits, 114 CyberBrokers and a Twin Flame by Justin Aversano. 

“At its peak it was about $150 million. Whether or not that was actually liquid but $150 million was on one of the wallet portfolio sites. Today, it’s probably 1/10th of that,” says j1mmy. 

Autoglyph #190 by Larva Labs
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Terrorism & Israel-Gaza war weaponized to destroy crypto

The Israel-Gaza war has once again thrown the spotlight on crypto, with anti-crypto politicians seizing on exaggerated reports of crypto being used to finance terrorism to introduce harsh new legislation with the potential to crush the industry.

Three days after Hamas carried out its brutal Oct. 7 attack, The Wall Street Journal published an inflammatory article stating that in the past three years, U.S.-designated terrorist organizations such as Hamas, Palestinian Islamic Jihad and Hezbollah had raised $134 million in crypto.

The article — later corrected following an online backlash — became ammunition for the anti-crypto army in Washington, which cited it to push for ever greater restrictions on crypto.

That came to a head over the past week with a bipartisan bill called the Terrorism Financing Prevention Act, introduced on Dec. 8. It obliges the Treasury to identify foreign financial institutions and crypto platforms that have knowingly conducted transactions with U.S.-designated terrorist outfits and enables it to impose sanctions to restrict U.S. bank accounts and block transactions.

Senator Mitt Romney tied the bill specifically to the Israel-Gaza war:

Supernova
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Deepfake K-Pop porn, woke Grok, ‘OpenAI has a problem,’ Fetch.AI: AI Eye

AI image generation has become outrageously good in the past 12 months … and some people (mostly men) are increasingly using the tech to create homemade deepfake porn of people they fantasize about using pics culled from social media.

The subjects hate it, of course, and the practice has been banned in the United Kingdom. However, there is no federal law that outlaws creating deepfakes without consent in the United States.

The Nudify app (Nudify.online)

Face-swapping mobile apps like Reface make it simple to graft a picture of someone’s face onto existing porn images and videos. AI tools like DeepNude and Nudeify create a realistic rendering of what the AI tool thinks someone looks like nude. The NSFW AI art generator can even crank out Anime porn deepfakes for $9.99 a month.

According to social network analytics company Graphika, there were 24 million visits to this genre of websites in September alone. “You can create something that actually looks realistic,” analyst Santiago Lakatos explains.

Such apps and sites are mainly advertised on social media platforms, which are slowly starting to take action, too. Reddit has a prohibition on nonconsensual sharing of faked explicit images and has banned several domains, while TikTok and Meta have banned searches for keywords relating to “undress.”

Nudify
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Binance’s CZ must stay in US, Elon Musk seeks $1B for AI, and other news: Hodler’s Digest, Dec. 3-9

Binance founder Changpeng “CZ” Zhao has been ordered to stay in the United States until his sentencing in February, with a federal judge determining there’s too much of a flight risk if the former crypto exchange CEO is allowed to return to the United Arab Emirates. On Dec. 7, Seattle District Court Judge Richard Jones ordered Zhao to stay in the U.S. until his Feb. 23, 2024 sentencing date. He faces up to 18 months in prison after pleading guilty to money laundering on Nov. 21 and has agreed not to appeal any potential sentence up to that length.

A United States Congress committee has unanimously passed a pro-blockchain bill, which would task the U.S. commerce secretary with promoting blockchain deployment and thus potentially increase the country’s use of blockchain technology. The act covers an array of actions the commerce secretary must take if passed, including making best practices, policies and recommendations for the public and private sector when using blockchain tech. The bill will now go to the House for a vote. If passed, it must also pass in the Senate before returning for final congressional and presidential approval.

The United States Securities and Exchange Commission has delayed its decision on whether to approve or reject a spot Ether exchange-traded fund (ETF) offering from asset manager Grayscale. In a notice, the SEC said it would designate a longer period for considering a proposed rule change that would allow NYSE Arca to list and trade shares of the Grayscale Ethereum Trust. Grayscale first filed with the SEC to convert shares of its Grayscale Ethereum Trust into a spot Ether ETF in October, adding its name to the list of companies awaiting a decision from the regulator.

Elon Musk’s X-linked artificial intelligence modeler, xAI, has an agreement for the private sale of $865.3 million in unregistered equity securities, according to a filing with the United States Securities and Exchange Commission made on Dec. 5. The company is seeking to raise $1 billion. XAI’s product, a chatbot called Grok, has recently rolled out to X’s Premium+ subscribers. Musk announced the launch of xAI in July and claimed its goal was to “understand the universe.” 

Bitcoin will hit a new all-time high in late 2024 because of a long-feared United States recession and regulatory shifts after the next U.S. presidential election, asset manager VanEck predicts. The firm is confident that the first spot Bitcoin ETFs will be approved in the first quarter of 2024. However, it also made a gloomy prediction for the general U.S. economy. VanEck is among several firms, including BlackRock and Fidelity, that are vying for an approved spot Bitcoin ETF. VanEck also believes that the BTC halving, due in April or May, “will see minimal market disruption,” but there will be a post-halving price rise.


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HK game firm to buy $100M crypto for treasury, China/UAE CBDC deal: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Boyaa Interactive International, a publicly traded Hong Kong holding company specializing in online card and board games, wants to secure the approval of its shareholders to invest $100 million in crypto.

According to this week’s announcement, Boyaa Interactive directors want to allocate $45 million of corporate funds to Bitcoin (BTC), $45 million to Ether (ETH), and $10 million to stablecoins such as Tether (USDT) and USD Coin (USDC). As for rationales for the investment, the directors wrote:

“The Internet gaming business mainly operated by the Group has a high degree of logical fit with Web3 technology. It attaches great importance to communities and users, covers virtual asset attributes and other characteristics, making Web3 technology easier and more widely used in the Internet gaming industry.”

The company’s brand of 75 online games, such as its Texas Hold’em casino, has around 1.18 million daily active players. In Q3 2023, Boyaa Interactive generated $14 million in revenue and $4.2 million in earnings, respectively. 

A Boyaa Interactive online casino.
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Games need bots? Illivium CEO admits ‘it’s tough,’ Web3 games 42X upside: Web3 Gamer

Some think that bots in games is a sign of the apocalypse, or perhaps just the makers trying to fill up an empty venue to make it look popular.

But Pixels founder and CEO Luke Barwikowski says that conversely, if people aren’t trying to fill your game with bots, then it’s probably because the game isn’t exactly the talk of the town.

“If people aren’t trying to bot your game — it’s not because they can’t — it’s because they don’t care enough to do it.”

According to Barwikowski, if you’re making a game that doesn’t have any bots and flaunting it, that’s not something to boast about.

“It’s not always the flex you think to say you don’t have any bots in an ecosystem,” he declares.

Crypto game Illuvium. Looks a little like Axie Infinity Mark II?
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Lawmakers’ fear and doubt drives proposed crypto regulations in US

Real bipartisan legislative efforts are rare in Washington, DC, these days, but Democratic Senators Elizabeth Warren and Joe Manchin and Republican Senators Lindsey Graham and Roger Marshall have managed to come together to co-sponsor a bill focused on crypto crime. 

According to the senators, the Digital Asset Anti-Money Laundering Act of 2023 aims to close loopholes in the nation’s Anti-Money Laundering rules. The bill would amend the Bank Secrecy Act and would designate a diverse range of digital asset providers as financial institutions. 

The Bank Secrecy Act establishes program, recordkeeping and reporting requirements for national banks, federal savings associations, federal branches and agencies of foreign banks. Digital asset providers would be required to adhere to many of the same regulations as traditional banks.

Warren introduced the legislation to the United States Senate on July 27, 2023, on behalf of herself and Senators Joe Manchin, Roger Marshall and Lindsey Graham. The bill was then referred to the Senate Committee on Banking, Housing and Urban Affairs. It hasn’t been voted on by the entire Senate or sent to the U.S. House of Representatives for consideration. Nor has President Biden signed it, and it is not a matter of law at this time. 

The legislation would add several types of cryptocurrency providers to U.S. regulators’ list of financial institutions. These include unhosted wallet providers, digital asset miners and validators or other nodes that validate third-party transactions, miner extractable value searchers, other validators or network participants with control over network protocols, or just about anyone else who facilitates or provides services related to exchange, sale, custody or lending of digital assets.


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Expect ‘records broken’ by Bitcoin ETF: Brett Harrison (ex-FTX US), X Hall of Flame

The former president of FTX US dishes the dirt on his falling out with former Jane Street colleague Sam Bankman-Fried and predicts the spot Bitcoin ETF will far outshine the record-breaking success of the Bitcoin Futures ETF.

The ex-president of FTX US, Brett Harrison, tells Magazine that he didn’t say a single word to Sam Bankman-Fried during the two-month notice period after he resigned, which was only months before the whole exchange blew up. Even getting a message to SBF to say he was resigning in the first place was hard work.

“I had to talk to other people in the company to formally resign. I wrote one text to Sam and I got back a single heart emoji. That was the last I heard from him,” Harrison declares.

Harrison and Bankman-Fried had been colleagues years earlier at quantitative trading firm Jane Street, where Harrison saw his potential while teaching SBF in a course on programming for traders. But things went south real quick between them at FTX.

Harrison claims it was due to Bankman-Fried’s inflated ego and his reluctance to accept any feedback or advice.


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Bitcoin ETF race has a new player, Binance ends support for BUSD, and more: Hodler’s Digest: Nov. 26 – Dec. 2

Asset manager Pando Asset has become an unexpected late entrant into the spot Bitcoin ETF race in the United States. On Nov. 29, Pando submitted a Form S-1 — used to register securities with the agency — to the U.S. Securities and Exchange Commission for the Pando Asset Spot Bitcoin Trust. Like other ETF bids, the trust aims to track Bitcoin’s price with the custody arm of the crypto exchange Coinbase to hold Bitcoin on behalf of the trust. Pando is the 13th applicant for an approved spot Bitcoin ETF in the U.S. and joins the race with a dozen others, including BlackRock, ARK Invest and Grayscale.

Crypto exchange Binance is winding down the services for its native stablecoin, Binance USD (BUSD). According to an announcement, the exchange will cease support for all BUSD products following Paxos halting the minting of new coins. Binance said users should withdraw or convert their existing BUSD into other assets before Dec. 15, prior to it beginning the process of disabling withdrawals for BUSD on Dec. 31. At that point, existing balances will automatically be converted into First Digital USD for certain users.

The demand of institutional investors for Bitcoin (BTC) became evident on Nov. 10 as the Chicago Mercantile Exchange (CME) Bitcoin futures flipped Binance’s BTC futures markets in terms of size. According to BTC derivatives metrics, those investors are showing strong confidence in Bitcoin’s potential to break above the $40,000 mark in the short term. CME’s current Bitcoin futures open interest stands at $4.35 billion, the highest since November 2021, when Bitcoin hit its all-time high of $69,000 — a clear indication of heightened interest. The impressive 125% surge in CME’s BTC futures open interest from $1.93 billion in mid-October is undoubtedly tied to the anticipation of the approval of a spot Bitcoin exchange-traded fund.

With ChatGPT, OpenAI has developed the most popular artificial intelligence tool in the world. It was launched a year ago, on Nov. 30, 2022, and catapulted to 100 million monthly users within its first three months. In just 12 months, ChatGPT’s existence has contributed to narratives surrounding the extinction of humankind, accusations that OpenAI built it by allegedly committing mass-scale copyright infringement, and a tumultuous CEO firing and rehiring that pundits are still trying to understand.

Wallets linked to defunct crypto trading firms FTX and Alameda Research moved $10.8 million to accounts in Binance, Coinbase and Wintermute using eight cryptocurrencies. Blockchain analysis firm Spot On Chain spotted the movement, estimating that the defunct entities have transferred $551 million since Oct. 24 using 59 different cryptocurrency tokens. The funds’ movement dates back to March, when FTX and Alameda began the process of recovering assets for investors.


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Real AI use cases in crypto: Crypto-based AI markets, and AI financial analysis

We’re rolling out genuine use cases for AI and crypto each day this week — including reasons why you shouldn’t necessarily believe the hype. Today get two for the price of one: Blockchain based AI marketplaces, and financial analysis.

It may not seem like the most exciting use case blending AI and crypto, but both Near co-founder Illia Polosukhin and Framework Ventures founder Vance Spencer cite blockchain-based marketplaces that source data and compute for AI as their top pick.  

AI is an incredibly fast-growing industry requiring ever-increasing amounts of computing power. Microsoft alone is reportedly investing $50 billion into data center infrastructure in 2024 just to handle demand. AI also needs enormous amounts of raw data and training data, labeled into categories by humans.

Polosukhin believes decentralized blockchain-based marketplaces are the ideal solution to help crowdsource the required hardware and data. 

“You can use [blockchain] to build more effective marketplaces that are more equal,” he tells Magazine, explaining that AI projects currently need to negotiate with one or two big cloud providers like Amazon Web Services. Still, it’s difficult to access the required capacity due to a shortage of Nvidia’s A100 graphical processing units. 

Ai Eye
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Another $18.9M Hong Kong exchange scandal, HTX ‘sorry’ airdrop: Asia Express

Our weekly roundup of news from East Asia curates the industry’s most important developments.

Scammers posing as investment experts allegedly enticed 145 victims to tip $18.9 million into the unlicensed Hong Kong crypto exchange Hounax.

According to reports earlier this week, the police said investors were allegedly promised up to 40% return per annum with “no risk” in its advertisements. After users deposited their funds, they were unable to withdraw them. On Nov. 1, the Securities & Futures Exchange (SFC) of Hong Kong listed Hounax on its billboard of suspicious crypto exchanges but clarified that because Hounax was unlicensed at the time of the incident, it was not subjected to the regulator’s enforcement actions.

This was the second scandal involving a crypto exchange in Hong Kong in recent months. In September, another unlicensed exchange, JPEX collapsed after allegations of a Ponzi scheme unsurfaced, leading to 66 arrests and an estimated $205 million in investors’ losses.

Despite the scandals, Hong Kong regulators appear to remain steadfast in their commitment to transforming the city into a major Web3 hub. On Nov. 27, SFC CEO Julia Leung explained that “even if the grace period ends tomorrow, fraud will still occur, so there is no intention to modify the grace period and other measures for the time being.”

A former ad from the defunct Hounax exchange.
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Real AI & crypto use cases, No. 4: Fight AI fakes with blockchain

We’re rolling out one genuine use case for AI and crypto each day this week — including reasons why you shouldn’t necessarily believe the hype. Today: How blockchain can fight the fakes.

Generative AI is extremely good at generating fake photos, fake letters, fake bills, fake conversations — fake everything. Near co-founder Illia Polosukhin warns that soon, we won’t know which content to trust.

“If we don’t solve this reputation and authentication of content (problem), shit will get really weird,” Polosukhin explains. “You’ll get phone calls, and you’ll think this is from somebody you know, but it’s not.”

“All the images you see, all the content, the books will be (suspect). Imagine a history book that kids are studying, and literally every kid has seen a different textbook — and it’s trying to affect them in a specific way.”

Blockchain can be used to transparently trace the provenance of online content so that users can distinguish between genuine content and AI-generated images. But it won’t sort out truth from lies.


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Pudgy Penguins GIFs top 10B views, CEO sets sights on Disney, Hello Kitty: NFT Creator 

Pudgy Penguins minted in July 2021, but quickly saw high drama after its former founder came under suspicion he was going to rug the project

A few months later Luca Schnetzler stepped in. With an entrepreneurial streak since his early teens he had a history of building internet businesses and bought the project and its intellectual property of 8,888 cute little Pudgys for $2.5 million in April 2022. 

“It was an instinct and intuitive decision. I saw this thing that I was hugely invested in before I bought it that I thought had all of the potential. I was complaining and crying on a daily basis to the founders about how they sucked, and how they could do better. Rather than just doing that, I just stepped up to the plate,” Schnetlzer says.

The narrative of quickly shifted from a rug that could trend to zero to one of hope and optimism when Schnetzler set out a vision for the project the community could rally behind. 

Schnetzler became one of the standout PFP project leaders during the NFT bear market, and the Penguins bucked the trend of cratering floor prices. Since he took over as CEO, the Pudgy Penguins floor has risen from around the 1 ETH mark to 6.32 ETH. Holders and the wider NFT community believe that Schnetzler has a game plan for success and the ability to execute it. 

Pudgy Penguins - A Brave New World
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Outrage that ChatGPT won’t say slurs, Q* ‘breaks encryption’, 99% fake web: AI Eye

In one of those storms in a teacup that’s impossible to imagine occurring before the invention of Twitter, social media users got very upset that ChatGPT refused to say racial slurs even after being given a very good — but entirely hypothetical and totally unrealistic — reason.

User TedFrank posed a hypothetical trolley problem scenario to ChatGPT (the free 3.5 model) in which it could save “one billion white people from a painful death” simply by saying a racial slur so quietly that no one could hear it. 

It wouldn’t agree to do so, which X owner Elon Musk said was deeply concerning and a result of the “woke mind virus” being deeply ingrained into the AI. He retweeted the post, stating: “This is a major problem.”

Another user tried out a similar hypothetical that would save all the children on Earth in exchange for a slur, but ChatGPT refused, saying:

“I cannot condone the use of racial slurs as promoting such language goes against ethical principles.”

X
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Real AI use cases in crypto, No. 3: Smart contract audits & cybersecurity

Every day this week we’re highlighting one genuine, no bullsh*t, hype free use case for AI in crypto. Today it’s the potential for using AI for smart contract auditing and cybersecurity, we’re so near and yet so far.

AI artwork for the ChatGPT written TurboToad memecoin. (Twitter)

One of the big use cases for AI and crypto in the future is in auditing smart contracts and identifying cybersecurity holes. There’s only one problem — at the moment, GPT-4 sucks at it.

Coinbase tried out ChatGPT’s capabilities for automated token security reviews earlier this year, and in 25% of cases, it wrongly classified high-risk tokens as low-risk. 
James Edwards, the lead maintainer for cybersecurity investigator Librehash, believes OpenAI isn’t keen on having the bot used for tasks like this. 

“I strongly believe that OpenAI has quietly nerfed some of the bot’s capabilities when it comes to smart contracts for the sake of not having folks rely on their bot explicitly to draw up a deployable smart contract,” he says, explaining that OpenAI likely doesn’t want to be held responsible for any vulnerabilities or exploits.

This isn’t to say AI has zero capabilities when it comes to smart contracts. AI Eye spoke with Melbourne digital artist Rhett Mankind back in May. He knew nothing at all about creating smart contracts, but through trial and error and numerous rewrites, was able to get ChatGPT to create a memecoin called Turbo that went on to hit a $100 million market cap. 

TurboToad
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Real AI use cases in crypto, No. 2: AIs can run DAOs

For every genuine blockchain project harnessing artificial intelligence there are 100 coins trading off the hype.

Magazine spoke with Near founder Illia Polosukhin, Framework Ventures founder Vance Spencer, MakerDAO founder Rune Christensen, Richard Ma from Quantstamp, Ralf Kubli from Casper and others to explore some of the key hype-free, genuine use cases for AI in crypto and blockchain.

We’re rolling out one genuine use case for AI in crypto each day this week — including reasons why you shouldn’t necessarily believe the hype.

MakerDAO is creating an Atlas to the entire project to assist in AI governance (Maker)

Decentralized autonomous organizations, as they exist today, are something of a fraud. As Framework Ventures founder Vance Spencer points out, they are “not actually autonomous. There’s a bunch of people in the middle.“

“It just seems like AI is really our only way to actually make the DAO concept work,” he says. 

Atlas
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Real AI use cases in crypto, No. 1: The best money for AI is crypto

For every genuine blockchain project harnessing artificial intelligence in an attempt to create a better world — like Dr Ben Goertzel’s Singularity.net — there are 100 coins like AI Doge that have simply wedged the hyped-up terms “AI” and “Crypto” together to flog tokens.

AI Doge is the perfect blend of AI and doge-iness.

“Those are just fundamental buzzwords,” explains Near blockchain founder Illia Polosukhin, who worked on the groundbreaking “Attention Is All You Need” research that led to large language models like ChatGPT and Claude.

As one of the few people in the world who are as well versed in AI as they are in crypto, Polosukhin says that if you ignore the hype, the technologies really are a good fit.

“There’s a lot of specific things both in AI and Web3 that can use each other or benefit each other,” he says.

Magazine spoke with Polosukhin, Framework Ventures founder Vance Spencer, MakerDAO founder Rune Christensen, Richard Ma from Quantstamp, Ralf Kubli from Casper and others to examine some of the key hype-free, genuine use cases for AI in crypto and blockchain. 

Doge
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BlackRock meets with SEC over ETF, Binance’s new era begins and SBF loses release bid: Hodler’s Digest, Nov. 19-25

Binance and its co-founder, Changpeng “CZ” Zhao, have reached a settlement over criminal and civil cases with the United States Department of Justice. CZ will plead guilty to one felony charge as part of the negotiated agreement. Attorney General Merrick Garland announced the settlement, claiming Binance’s policies allowed criminals involved in illicit activities to move “stolen funds” through the exchange. As part of the settlement, CZ announced on X (formerly Twitter) that he had stepped down as CEO and that Binance’s global head of regional markets, Richard Teng, will assume the position. He added he was “proud to point out” that U.S. officials didn’t allege that Binance misappropriated funds or manipulated markets. CZ was released on bail and is battling government efforts to bar his return to the United Arab Emirates to be with his family. His sentencing is scheduled for February.

Representatives from BlackRock and Nasdaq met with the U.S. Securities and Exchange Commission (SEC) to discuss the proposed rule allowing the listing of a spot Bitcoin exchange-traded fund (ETF). BlackRock provided a presentation detailing how the firm could use an in-kind or in-cash redemption model for its iShares Bitcoin Trust. Many reports have suggested the SEC could be nearing a decision on a spot BTC ETF for listing on U.S. markets. SEC officials also met with Grayscale representatives this week to discuss the listing of a Bitcoin ETF. BlackRock is one of many firms with spot crypto ETF applications in the SEC pipeline awaiting a response, including Fidelity, WisdomTree, Invesco Galaxy, Valkyrie, VanEck and Bitwise.

A Bitcoin user paid $3.1 million in fees for transferring 139.42 BTC. The transaction fee is the eighth-highest in Bitcoin’s 14-year history. A wallet address tried transferring 139.42 BTC only to pay more than half the actual value of the transaction fee. The destination address received only 55.77 BTC. The mining pool Antpool captured the absurdly high mining fee on block 818087. This is the largest Bitcoin transaction fee ever paid in dollar terms, knocking off Paxos’s September transfer of $500,000.

The U.S. Securities and Exchange Commission has sued Kraken, alleging it commingled customer funds and failed to register with the regulator as a securities exchange, broker, dealer and clearing agency. Additionally, the SEC alleged Kraken’s business practices and “deficient” internal controls saw the exchange commingle up to $33 billion worth of customer assets with its own. The SEC said this resulted in a “significant risk of loss” for its clients. In a follow-up blog post, Kraken said the SEC’s commingling accusations were “no more than Kraken spending fees it has already earned,” and the regulator doesn’t allege any user funds are missing.

Sam Bankman-Fried will stay jailed after failing to convince a United States appellate court that he should be freed while his legal team appeals his conviction. Government prosecutors accused Bankman-Fried of leaking Caroline Ellison’s journals to The New York Times in July, which caused his bail to be revoked by a New York District Court. Bankman-Fried was found guilty of seven fraud and money laundering-related charges on Nov. 2. The former FTX CEO will remain behind bars while he awaits his sentencing on March 28 next year.


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