As I write this, Sam Bankman-Fried, once a crypto darling and the man in charge of FTX, has been extradited to the US. facing charges over the collapse of the crypto exchange (opens in new tab). The synonym for corporate scandal in America has been Enron for decades now and, funnily enough, the same attorney who handled that bankruptcy is now in charge of FTX: saying he “never seen such a complete failure (opens in new tab)“.
Cryptocurrency remains an emerging industry, but now that certain tokens like Bitcoin and Ethereum are well established, it feels like the wider landscape is fraught with little more than grifters and endless variants on the classic “pump n’ dump” scam: and this year there were many chickens at home to roost. There is even a collective name for the many smaller cryptocurrencies that are launched every month in the vain hope of naively attracting money: shitcoins.
PC Gamer isn’t a crypto website, but as the technologies continue to intersect with gaming and the wider PC ecosystem, it feels increasingly important to keep an eye on what the hell is going on there. I’m going to walk you through the things that hit our radar in 2022, but don’t think of this as a comprehensive guide to cryptos 2022, but a selective highlight of one of the grittiest, strangest, and most speculative areas of technology.
The year started with one comment that raises eyebrows: North Korea, it turns out stole an absolute boatload of crypto in 2021 (opens in new tab). The US government in particular is concerned about this trend, as cyber warfare in general is one of the major concerns of this regime, and it goes after anyone seen as helping, including jailing a former Ethereum employee who gave a talk there (opens in new tab).
The year would quickly bring an example of North Korean capabilities, with the FBI blaming the country’s ‘Lazarus Group’ of hackers for a $617 million heist of blockchain game Axie Infinity (opens in new tab). Later in the year it would appear that while this was going on, the CEO withdrew money before the feature was disabled for users (opens in new tab).
In February, hackers discovered a flaw in the code of cryptocurrency platform Wormhole and magicked away over $300 million in user crypto (opens in new tab).
Crypto hacks run the risk of appearing a bit abstract: a few million here, the collapse of a derivative product you’ve never heard of. But June brought a shocking example of where this can end, like the Costa Rican healthcare system hacked and held for ransom of $5 million in cryptocurrency (opens in new tab)forcing the country to shut down essential medical infrastructure.
Augustus saw an exploit found on Solana, which a hacker used to drain $5.2 million from over 8,000 crypto wallets (opens in new tab). Almost at the same time Nomad, a crypto bridge sold on its safety, suffered a “frenzied free-for-all” hack (opens in new tab) who claimed over $200 million worth of crypto.
September? Winter hat. A crypto ‘market maker’ that provided liquidity, it was done for $160 million (opens in new tab).
In July, there was a first in the authorities’ approach to crypto fraud. Became a former Coinbase employee and associates the first people indicted by the SEC for insider trading in cryptocurrencies (opens in new tab): expect to see a lot more of these cases in the future. As the lawsuits in this case said, “Fraud is fraud is fraud, whether it’s on the blockchain or on Wall Street.”
In that respect, it is time to talk about Turkey. Last year, an exchange called Thorex collapsed, costing investors $2.5 billion, and founder Faruk Fatih Özer fled. In August, the Albanian police arrested him, the Turkish authorities began to ask for his extradition, and he will be charged with a sentence of 40,564 years in prison (opens in new tab).
Some fraudsters stay there for the time being. Dr. Ruja Ignatova, known as the “Missing Cryptoqueen” since 2017, this year made the FBI’s ten most wanted list (opens in new tab).
TerraUSD founder Do Kwon was the subject of a red notice from Interpol in September (opens in new tab)and is currently believed to be in Serbia (opens in new tab) by the South Korean authorities.
Perhaps “the” crash is a misnomer, as what represented 2022 for crypto was an ongoing series of crashes where products previously believed to be reliable turned out to be less than solid.
Everything really started in May with a plunge in value across the entire ecosystem that even influenced Bitcoin (opens in new tab), and at that time the big villain was seen as TerraUSD. This is a so-called stablecoin, meaning its value must remain consistently pegged to the US dollar, and it turned out to be anything but a stablecoin: the collapse was so great that there were fears it could spread the contagion to other stablecoins, including the poster boy for these products, Tether (opens in new tab).
In July, the Celsius network collapsed an astonishing $1.19 billion black hole at the center of its balance sheet (opens in new tab).
The domino effects were everywhere. Crypto-based game Untamed Isles lost so much money during this period that it basically cost the game its funding, and it stopped without offering a refund (opens in new tab)because there was no more money.
The biggie, of course, was FTX. This was a huge crypto exchange estimated to handle over $700 billion in transactions per year, and it looks like someone was cooking the books (opens in new tab). It collapsed into bankruptcy and former employees now appear to have turned CEO Sam Bankman-Fried.
Funnily enough, FTX sponsored Riot, among many other companies: the League of Legends developer is now doing everything it can to cut ties (opens in new tab).
The serious stuff
Joe Biden has none of that crypto malarkey: The president says he wants to know a lot more first commit to something like a digital dollar (opens in new tab).
Meta aka Facebook once had big plans for cryptocurrency including releasing its own crypto wallet, which it quietly withdrew from this year (opens in new tab). Yes, crypto is too unpredictable even for the company that bets it all on the metaverse. At least you can console yourself with a GameStop NFT wallet (opens in new tab).
In terms of really good news it was a highlight of the year Ethereum is finally moving to a proof-of-stake model (opens in new tab): basically the world’s second largest cryptocurrency making itself more environmentally friendly. Not a moment too soon either.
Oh, on what note: This trend has seen large-scale mining outfits unable to pay back crypto lenders (opens in new tab). Isn’t your heart just bleeding?
Until 2023 and beyond
There is one crypto story of the year that I want to end with, although it didn’t make any headlines. I’d always been a fan of the now sadly defunct ReplyAll podcast, which in its heyday was a wonderful mix of weird tech stories and in-depth investigations into the weirdest corners of the internet. One of the hosts, PJ Voght, left the show and launched a standalone podcast earlier this year: Crypto Island (opens in new tab).
PJ Voght is a great podcaster and the pitch here was a curious outsider exploring the world of cryptocurrencies: trying to figure out what substance is actually behind all the buzzwords and hype. The show is named after a bizarre project to create a crypto commune recounted in the first episode, but Voght then went on to investigate an attempt to buy a copy of the US Constitution by a crypto collective, the attend a crypto conference to talk to attendees and interview evangelists and skeptics alike.
However, something interesting happened. Voght started the show as a crypto agnostic. In interviews, he asked exactly the questions you should be asking, but I had a feeling he wanted to be convinced: that if only he had the right person to explain it, the blockchain and the billions and frankly the fervor would finally can be correct. It can’t all be a scam, can it?
The show began a rapid run of episodes in March and April, and Luna’s collapse happened in May. Voght quickly produced an episode, “The Madman Who Crashed Crypto,” which explored Do Kwon’s personality and explored exactly what was behind all that happened. After that, the podcast had another episode at the end of May, one in June about an NFT robbery, and one in September where Voght announced the imminent end of the project.
The final episode, ‘The End’, came out just before Christmas. It’s a somewhat meandering account of a trip to Greenland that revolves around the environmental impact of crypto, but is really about climate change (with an excellent Coolio anecdote along the way). Global warming is an issue of such existential consequence that in this context crypto, and the arguing over proof-of-work versus proof-of-stake models, feels like a carnival sideshow.
My point is not that someone started a podcast and got bored of the topic. Because I don’t think Voght was bored. Crypto Island feels like an idea that came at just the wrong time and as it tried to explain crypto and make some sense of it, the “certainties” of the crypto world around it started to collapse. You almost feel Voght getting tense towards the end, and the feeling that the project may have given too much credence to crypto, been too fast to believe or at least spread some of the nonsense that is accumulating around this phenomenon .
Crypto Island is a great listener, even if it was disappointing. But that in itself summed up the year in cryptocurrency for me, another curious outsider who is fascinated by this world of gamblers and grifters claiming that these products represent the future of the global economy. The space remains wrapped in confusing language designed to give the appearance of solidity to pure wind (“mint”, “land”, “token”) and if 2022 has shown anything it is that the fraud is not limited to smaller players, but looks endemic. The use cases for crypto remain marginal, while the products become harder to trust with each new collapse.
2022 is a year when cryptocurrencies and the emerging industry around them have lost a lot of credibility and started looking awful as a space that not only needs regulation, but demands it. The vision behind Bitcoin, which ultimately comes down to cutting out middlemen and giving individuals more control over their money, feels completely bastardized. And the saddest thing about all of these stories is that while some of the villains will eventually face justice, there are too many people who have trusted the jargon and lost serious money to crypto to count.