Ransomware Revenues Decline, FTX Collapse Takes its Toll & the AI Crypto Revolution is here
The Web Three Newsletter | Jan 25, 2023
We curate and summarize three key opinion pieces or industry updates from the world of crypto, weekly
This week, we take a look at:
1️⃣ Victims say “no, thank you” - Ransomware Revenues Decline in 2022 | Summary of an analytical piece published by Chainalysis, a leading blockchain analysis firm
2️⃣ Trapped in the FTX Collapse : Travis Kling shares his first-hand experience & insights | Key takeaways from an episode on the “What Bitcoin Did” Podcast
3️⃣ The AI Crypto Revolution | Brief outline of twitter thread by MrktMeditations ..
🕵️♂️ Want to learn on-chain analysis and become a blockchain sleuth? Tune into this workshop by Crypto Illuminati & Footprint Analytics coming up on 27Jan
Section 1️- Victims say “no, thank you” - Ransomware Revenues Decline in 2022
We look at the state of ransomware in 2022, including a drop in revenues and an increase in unique strains. Also find insights into the inner workings of the ransomware ecosystem.
Summary from an analytical piece published by Chainalysis, a leading blockchain analysis firm
2022 was an impactful year in the fight against ransomware. Ransomware attackers extorted at least $456.8 million from victims in 2022, down from $765.6 million the year before. However, this doesn't mean attacks are down, or at least not as much as the drastic dropoff in payments would suggest. Instead, Chainalysis believes that much of the decline is due to victim organizations increasingly refusing to pay ransomware attackers.
🔐 2022 Ransomware by the Numbers
Despite the drop in revenue, the number of unique ransomware strains in operation reportedly exploded in 2022, with research from cybersecurity firm Fortinet stating that over 10,000 unique strains were active in the first half of 2022. On-chain data confirms that the number of active strains has grown significantly in recent years, but the vast majority of ransomware revenue goes to a small group of strains at any given time.
Likewise, ransomware lifespans continue to drop. In 2022, the average ransomware strain remained active for just 70 days, down from 153 in 2021 and 265 in 2020. As will be explored below, this activity is likely related to ransomware attackers’ efforts to obfuscate their activity, as many attackers are working with multiple strains.
When it comes to money laundering, the data indicates that most ransomware attackers send funds they’ve extorted to mainstream, centralized exchanges. In fact, the share of ransomware funds going to mainstream exchanges grew from 39.3% in 2021 to 48.3% in 2022, while the share going to high-risk exchanges fell from 10.9% to 6.7%. Usage of illicit services such as darknet markets for ransomware money laundering also decreased, while mixer usage increased from 11.6% to 15.0%.
⛰ Sizing up the Ransomware Ecosystem
The constant turnover amongst top ransomware strains and appearance of new ones would suggest that the ransomware world is a crowded one, with a large number of criminal organizations competing with one another and new entrants constantly coming onto the scene. However, looks can be deceiving. While many strains are active throughout the year, the actual number of individuals who make up the ransomware ecosystem is likely quite small.
One place this is seen, is in affiliate overlap. Most ransomware strains function on the ransomware-as-a-service (RaaS) model, in which the developers of a ransomware strain allow other cybercriminals, known as affiliates, to use the administrator’s malware to carry out attacks in exchange for a small, fixed cut of the proceeds. However, it’s been seen time and time again that many affiliates carry out attacks for several different strains. So, while dozens of ransomware strains may technically have been active throughout 2022, many of the attacks attributed to those strains were likely carried out by the same affiliates.
An example of this is the affiliate group known as DEV-0237, who has carried out attacks using the Hive, Conti, Ryuk, and BlackCat ransomware strains, according to Microsoft Security. This group is just one example of how the ransomware ecosystem is likely made up of a small number of individuals who are constantly shifting between different strains.
While the number of unique ransomware strains and the amount extorted from victims may be down in 2022, the ransomware ecosystem is still a major threat to organizations. The decline in payments is likely due to more organizations refusing to pay the ransom, but this doesn't mean that attacks are down. The number of unique strains and the turnover amongst top-grossing strains suggests a crowded ecosystem, but the reality is likely a small number of individuals constantly shifting between different strains.
Section2️⃣- Trapped in the FTX Collapse
In this podcast episode, Travis Kling, Chief Investment Officer at Ikigai Asset Management talks about the recent turmoil in the crypto market after the FTX collapse and its impact on retail customers and businesses. Travis also shares his personal experience and insights on the topic.
This is a summary of an episode from the “What Bitcoin Did” Podcast
💸 ”The Day My Funds Disappeared”
Travis shares his personal experience and insights on the topic, walking through the day when he realized his funds on FTX were gone. He explains how the collapse occurred at a speed he never could have imagined, and the uncertainty that came with it. He also shares some of his thoughts and concerns about the bankruptcy process and what could happen to withdrawals getting clawed back.
💵 Personal Toll of the Crypto Collapse
Many instances of irresponsible lending and leverage have come to the forefront over the past few months. The host shares a personal experience with the collapse of one of their sponsors, BlockFi - many listeners used it and lost their assets. The discussion also touches on the ongoing dispute between Gemini and Genesis, and the challenges of navigating such complex and fluid situations.
Travis candidly discusses the emotional toll that these events have had on him , sharing that his mom got seriously sick at the same time as the FTX deal was happening, leading to a “1-2 punch”. He expresses how the work stuff just became secondary, and how he was on autopilot for his mom's priority.
📉 Comparing Mount Gox and FTX
Travis compares the collapse of Mt. Gox and FTX, two major crypto exchanges that have caused significant financial loss to their customers. He talks about how he sees these situations slightly differently and how the things that have started to happen are bigger and worse because this technology has expanded and more people are now involved in the crypto world.
He also talks about how the case of Mark Karpeles (former CEO of Mt. Gox), was of somebody massively out of his depth, whereas he thinks what happened with FTX is more dishonest and sinister. He also highlights how the crypto ecosystem lost 1.4 trillion dollars in market cap last year and how the numbers are bigger and more dangerous now.
🤔 Navigating the Ethical Dilemmas of Crypto Investment
The speakers reflect on the ethical dilemmas faced by crypto investors and portfolio managers. They discuss the consequences of promoting unsafe or dishonest investments, and express remorse for endorsing a crypto exchange that ultimately proved to be unsafe for investors. They also touch on the importance of intentions and the belief that one is doing good in the industry. The speaker ultimately suggests that there is a need for more accountability and transparency in the crypto space.
💰 The Hidden Risks of Sponsorships in the Industry
Travis & the host then delve into the complex and sometimes opaque world of crypto sponsorships. They discuss the potential risks and losses for listeners when they trust and rely on third-party middlemen who sponsor podcasts and other media. They also reflect on their own experiences with sponsorships, including their public endorsement of the now-troubled crypto exchange FTX.
They acknowledge the importance of self-regulation and increased transparency in the crypto industry to prevent similar issues in the future. They also mention about potential solutions to dealing with trusted middlemen in crypto - one being moving the whole thing on chain and no more centralized exchanges, option two being regulation of trusted third parties, and the third option being self-regulation by crypto exchanges.
💰 Market Predictions for 2023
The podcast then discusses the potential future of the Bitcoin market in 2023. The host expresses optimism about the future price of Bitcoin, stating that they believe it was suppressed by recent market events and large amounts of Bitcoin being sold off. They also mention rumors of big funds attempting to suppress the price, but it is unclear if these rumors are true.
The speaker also mentions the difficulty of convincing people to invest in the industry after many may have lost money. They express hope that smaller startups working on innovative ideas around Bitcoin technology may take the place of larger companies, and that grassroots efforts such as podcasts and newsletters may be more effective in expanding the adoption and use of the technology.
🏦 Lessons Learned in the Bitcoin Evolution
The evolution of Bitcoin has taught us many lessons, one of which is the importance of self-custody and not relying on exchanges. The Mt. Gox and ICO scandals were prime examples of this, yet complacency can still set in. The latest lesson is the dangers of leverage and trusting third parties.
However, as new people enter the market, it's important to remember that these lessons must be continually reinforced as they may be dismissive of the past experiences of others. Reflecting on a personal experience, one individual learned the hard way about counterparty risk and the importance of being quick on the trigger to pull assets off exchanges. This has led to the contemplation of how to manage other people's money in a safer manner, such as using multiple exchange accounts and distributing risks.
Section3️⃣- The AI Crypto Revolution
An overview of the potential of the AI crypto revolution. We take a look at the game-changing innovations in content creation, what happens to job security and what could be the ethical considerations
Summary of twitter thread by @MrktMeditations
Artificial Intelligence (AI) has long been the subject of sci-fi movies and games for decades. Books like Snowcrash and feature films like Ready Player One have heralded incredibly strong real-world narratives we see throughout the crypto industry on a daily basis. This is why it's not surprising that major players such as Microsoft saw the value in investing in AI long before it captured the public's attention.
In 2019, Microsoft invested $1 billion in artificial intelligence research company OpenAI. Now the international software giant has invested $10 billion in the same company. This investment in OpenAI has led to the development of innovative AI-driven products and services that boast a variety of creative content abilities that have found use across many different industries.
One example of this is ChatGPT, a Chat Generative pre-trained transformer, which offers users advanced search functionality but has found a home with content creators to draft surprisingly well-written material on social media channels. Another example is Tome, which combines the best of both worlds by producing storyboards featuring generated written material together with AI-driven art to provide a PowerPoint-like collection of slides with a unifying theme called storyboards.
We've seen crypto Twitter overtaken by admirers marveling over AI-driven products and services that boast a variety of creative content abilities finding use across many different industries. Many are even fearing for the future of job security based on how well OpenAI’s ChatGPT responds to questions and prompts. Some are already referring to it as a “FREE employee”.
The AI crypto revolution is here and it's changing the way we think about technology. With the power of AI, we can now create advanced search functionality, well-written content, and even entire narratives from scratch within seconds. The possibilities are endless, and it's exciting to see what the future holds for the AI crypto revolution.
It's important to note that while AI has tremendous potential to change the way we think about technology and the way we live our lives, it's also important to consider the ethical implications of its use. The AI crypto revolution is just beginning, and it's important for us to consider the implications of its use and work towards a future where AI can be used for the betterment of humanity.
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