Today’s story revolves around the ownership of digital assets - private keys. Everyone in the circle knows the saying "private keys are law". There may be countless ways to lose money in this circle, but the most unexpected and easiest to ignore is the one. The method is to forget the wallet mnemonic or it is stolen online... Then the preservation of the private key becomes an important issue.
Referring to asset management in the traditional field, Fosun Group Chairman Guo Guangchang, the richest man, was asked a question during an interview with a reporter: Does your wife manage the money at home? Guo Dafuhao said disdainfully, do you think this is playing house? A listed company with tens of thousands of employees and hundreds of billions of dollars has a complete management team. The money must be managed by the financial team. I can't even touch it. Which wife can take care of it?
In traditional fields, because of the perfect financial management system, the use of each asset requires the approval records of various departments. In the web3 circle that advocates decentralization and trustlessness, the owner of the private key has the right to dispose of the assets. For those bigwigs in the circle who have too much Bitcoin and even become a trouble, how do they keep their private keys? Do their wives manage the money? If they accidentally step on the sewing machine, how can they pay the vast number of customers? Will the wife take the private key and elope with a gigolo? I am not making this up. I have personally experienced a related case. A CEO of an industry giant was framed and imprisoned, and our assets were frozen by certain departments. The police responded to our rights protection and informed us that the private key was in the hands of the CEO and his wife. His wife swore that she was penniless and even borrowed money from us to fight the lawsuit. Later, it was confirmed that the wife fought against the iron fist for her husband, showing the traditional Chinese virtue of being strong and faithful. After a period of time, she got the private key and moved into the same community with the department’s white gloves. Whether this was to relieve the embarrassment of her husband being imprisoned, or to legally transfer the husband’s family property to her own pocket, is unknown.
Based on multiple proven facts, this article will talk about the assets of the bigwigs in the cryptocurrency circle. Who is the most trustworthy person?
Xu Mingxing: The dictatorial boss controls the wealth of tens of millions of users
The cryptocurrency market in 2020 is like a roller coaster, with one wave after another. If the 312 flash crash in the first half of the year was the first black swan, causing most investors to fall from the peak of hope to the valley of despair, then the black swan in the second half of the year revolved around OKEx and its founder Xu Mingxing.
On October 16, OKEx announced the suspension of withdrawals. This announcement was like a bomb dropped into the cryptocurrency market. Not only did OKB fall by more than 17%, but the top 100 cryptocurrencies by market value also fell to varying degrees.
As the second largest exchange in China and the world, OKEx has a large number of assets stored by investors in its wallets, with 200,000 bitcoins alone, worth about 15 billion yuan at the time. If it is completely impossible to withdraw cash, the consequences will be disastrous.
For OK users, the result is to lose all their money.
At first, OKEx wanted to minimize the impact of this incident and did not mention Xu Mingxing's name, only saying that the person in charge of the private key was cooperating with the public security agency in the investigation. But they are all old leeks in the circle, and everyone knows that the private key is equal to assets. This is the core key to control the entire exchange. How could Xu Mingxing allow others to get involved in such an important thing?
The private key scandal broke out, and many netizens anonymously broke the news, saying that Zhao Changpeng left OKEx because he was dissatisfied with the private key management method, because the private key was managed by Xu Mingxing and his mother at the time. For the partners at the time, this behavior was indeed too dictatorial.
If Xu Mingxing's story is about testing the brink of imprisonment, the following events are directly about the concept of the imprisonment sector.
Zhu Su: Can going to jail be the secret to making money?
On December 2, Zhu Su, who had been in prison for two months, updated his Twitter. With only two letters GM, his startup project OPNX surged 50%, with the highest price reaching 0.021. Friends in the VIP group should have an impression that we recommended this coin as early as November 26. At that time, I learned from some internal information that OX would have a recent trend. At that time, the price was only 0.014. Sure enough, the subsequent plot developed like this, and I made a small profit of 50%.
Next, let’s talk about Zhu Su.
If you don’t know who Zhu Su is, then you should at least know Three Arrows Capital.
If you don’t even know Three Arrows Capital, at least you know LUNA.
It’s the LUNA that crashed last year from $90 to nothing left.
opnx is a startup project to “repay debts” after Sanjian Capital went bankrupt, and OX is its token.
Zhu Su is the person connecting these three.
Let's briefly review this story. Three Arrows Capital was once one of the largest and most successful hedge funds in the crypto space, and Zhu Su was one of the founders. In 2022, the crypto market fluctuated violently. In May, LUNA, a token invested by Three Arrows Capital, collapsed. Due to high-risk investments, Three Arrows Capital was unable to repay its loans and eventually went bankrupt.
After the bankruptcy, Zhu Su was arrested for refusing to cooperate with the bankruptcy liquidation investigation, but was released only two months later. It is uncertain whether Zhu Su cooperated with the bankruptcy liquidation investigation.
But what is certain is that Zhu Su must have more than one private key to his wallet, and it can even help him control the market in prison. This time, OX exploded, and the on-chain monitoring found that a new transaction occurred in his wallet the day before he was released. At that time, OX had already risen to 0.02. Coupled with the updated Twitter after he was released from prison, the market sentiment was pushed to a climax, and he perfectly realized cashing out at a high level.
As for who is this person who cooperates with Zhu Su to raise the price and cash out and makes him completely trust him? Let's make a bold guess. Could it be Davis, the partner who is rumored to have run away? After all, they both have important handles on each other. They don't want to go in, nor do they want to liquidate. The interests of both parties are interlinked, and such a foundation of trust is undoubtedly the most solid.
SBF: Falling from the altar can also stir up the market
As a concept in the imprisonment sector, SBF is not as lucky as Zhu Su. The founder of the leading cryptocurrency exchange FTX, a 90s cryptocurrency legend, and a prodigy with a net worth of over 180 billion, may spend the rest of his life in prison.
In the cryptocurrency world, there is no shortage of counterattacks, reversals, and falls, but the "fall" of SBF has actually been traced for a long time. Before bankruptcy, as one of the top three exchanges in the world, a complex financial system, FTX did not even have a complete financial management system:
The financial management is chaotic. FTX’s customer deposit address is shared with SBF’s hedge fund Alameda Reaearch, which means that Alameda can withdraw unlimited funds from FTX.
There is a serious lack of financial records. At FTX Group, fees and invoices are submitted through Slack and approved through Emoji. These joke-like records can approve tens of millions of dollars of transfers at any time, and the transfer records are so casual that they don’t need to be recorded.
Decision-making power is highly centralized, and FTX’s decision-making power is mainly in the hands of three people: SBF, Engineering Director Nishad Singh, and former CTO Gary Wang. One of the executives even jokingly said that if Singh or Wang was hit by a bus, “the whole company would be finished.” (This is a bit like the previous story, when Xu Mingxing went to jail and all customers could not withdraw their coins)
The private keys were stored too casually without any security measures or risk management. Most of FTX's private keys were stored in plain text on the FTX Group's servers without any encryption protection. The bankruptcy team even found private keys for millions of dollars of crypto assets on the server, and the descriptions of these private keys were very simple, with some only marked "use this" or "don't use it." The accumulation of the above factors eventually led to FTX's bankruptcy, with total liabilities now reaching $12 billion.
But even in prison, SBF's shadow still appears in the market. In July of this year, BALD on the BASE chain collapsed a thousand times overnight. The deployer withdrew 10,000 ETH and 224 million BALD liquidity overnight, causing the price of BALD to drop from US$0.09 to around US$0.02 in one or two minutes, a drop of more than 85%.
Twitter "Sherlock Holmes" found out that the BALD deployer is closely related to FTX and SBF, and is very likely to be SBF's startup project: by analyzing the clues of the on-chain address, they found that this address is closely related to FTX and Alameda, and has been transferred many times, and the sentence structure of the deployer's tweets is similar to SBF's tweets. More importantly, the time of its on-chain activities is consistent with the court date/bail time, and SBF was also using VPN at the time.
It turned out that SBF just couldn’t manage his clients’ private keys and assets well, but he was able to firmly control the private keys of his own assets. Even during the short period of bail, he was able to operate the assets on the chain and turn the circle upside down.
In the web3 world, we have always advocated decentralization and trustlessness. However, through the above events, we found that the private key custody of these cryptocurrency giants is still mainly centralized, which can be divided into three situations:
1. One person is in charge. Take Xu Mingxing as an example. He is the only one who keeps the private key of the entire company. It was previously reported that he and his mother kept the private key together. However, judging from the tea drinking incident, family ties are not enough to make him trustworthy. The lifeblood of the company is still in his hands.
2. A small number of companies are managed by partners. This is to prevent someone from getting into trouble and causing the company to be unable to operate. In the story above, Zhu Su and his partners are very likely to be of this type. As far as I know, a certain FIL mining machine manufacturer that had an accident before was also managed by partners.
3. Very few cryptocurrency tycoons will choose to manage the company together with their relatives, such as their wives. This situation is limited to when they participate in the operation of the company together and their interests are mutually bound together, such as Zhao Changpeng and He Yi.
After all, digital assets are not currently protected by law, and human nature cannot stand the test in the face of huge profits, unless they have greater common interests.
This is the case for the bigwigs in the cryptocurrency world, so for ordinary investors, it is even more important to master private keys and mnemonics and protect the security of assets.
Just like what I said in the previous video about screening exchanges, only trade on the top-ranked mainstream exchanges, and it is best to store large amounts of assets in cold wallets. You must not have the illusion of asset security, "Code is Law" & "Not your key, not your assets.