Aaron Lammer, co-host of the Longform journalism podcast and cryptocurrency show Coin Talk, didn’t even notice at first when his website was hacked. Instead, a follower tipped him off that aaronlammer.com had been replaced by a notice that read “Ooops, your website has been encrypted!” and a countdown clock, indicating that the site would be deleted unless a ransom of 0.025 Bitcoin, or about $230 at the time of writing, was paid to the hacker.

Instead of paying, Lammer clicked on a link that said “Contact us.” It led to a Facebook page under the name Barberousse Mohammed. Lammer sent Mohammed a message. “Hi,” he said. “I don’t have any Bitcoin. Do you accept Ripple?” And thus began an epic trolling as Lammer cycled through ideological talking points from all the facets of the cryptocurrency world while his hacker got more and more exasperated. Mohammed did not respond to The Verge’s request for comment.

Ransomware attacks peaked in 2016 and 2017 with attacks like WannaCry targeting millions of machines and demanding cryptocurrency payment. According to a report from the cybersecurity firm SonicWall, these types of attacks have been on the decline in 2018 (though more unique ransomware strains are emerging), and the tactic is still popular with hackers.

Cybercriminals have benefited from the proliferation of cryptocurrency as a semi-anonymous way to send cash. “Cryptojacking,” in which hackers seize control of a user’s machine without their knowledge and use the processing power to mine cryptocurrencies, has increased 27 percent from the last quarter of 2017 to the first quarter of 2018, according to the security software firm Malwarebytes, which releases a quarterly cybercrime report. Meanwhile, hackers are still targeting individual public-facing Bitcoin users such as cryptocurrency YouTubers.

“From driveby mining attacks via browser to scams meant to drain users’ cryptowallets, cybercriminals are taking every opportunity to exploit the rising value and popularity of Bitcoin and other cryptocurrencies,” the Malwarebytes report says.

Luckily for Lammer, he didn’t really care about this particular website, which is just a single page with links to his projects. So he used the opportunity to troll.

At one point Mohammed says, “Dude i’m just hacker i’m not realy into bitcoin [sic]” to which Lammer responds, “You’re not into Bitcoin? Cmon bro. Why not? I was so excited when I saw that you hacked me because I don’t have that many people I can talk to about decentralization.”

Lammer also decided to tap into the most acrimonious of cryptocurrency feuds, the ongoing Bitcoin versus Bitcoin Cash debate. He pretends to have sent Mohammed Bitcoin, then gripes that it hasn’t arrived yet because Bitcoin isn’t as fast as or cheap as Bitcoin Cash and that it “probably hasn’t hit yet because fees are trash.” When the hacker responds, “sir just make the payment the fees don’t matter,” Lammer puts on his best impression of a Bitcoin Cash zealot. “Fees dont MATTER!?!?!?!? oh my god [sic],” he says.

“I just thought it would be funny if I could get him into a ‘who’s on first’ situation where I kept insisting BCash WAS Bitcoin and then eventually blame transaction times for the delay in his payment,” Lammer told me over Twitter DM.

Lammer reclaimed his website by contacting his domain host, which detected that the site had been hacked through a WordPress exploit on an unused domain connected to the account. The fix happened quickly enough that Lammer was still chatting with Mohammed when he regained control of the account. “Towards the end of the chat, Dreamhost had actually already gotten the domain back and he didn’t seem to have noticed, so I was playing with house money,” Lammer said.

Mohammed finally took the bait when Lammer asked, “Whats your favorite anime series ever?” “I like hunter x hunter,” Mohammed says. “No[w] are you gonna ke[ep] wasting my time?”

Lammer posted the full conversation with his hacker on Twitter and Medium. Most people were amused, although a small number accused Lammer of faking the conversation. Some comments devolved into the same ideological arguments that Lammer was parodying. “Mostly people are like ‘that sucks, but that was funny’ and then if you go deep enough in threads, there are people like ‘buuuuuut wait BCASH is better though,’” Lammer said.

Research suggests that Lammer was right not to pay his hacker. In 2017, only half of the victimized organizations that paid the ransom actually got their data back, according to the cybersecurity research and marketing firm CyberEdge Group.

Even if he paid, Lammer says, he wasn’t sure he’d ever get his site back. “I thought he might just ask for more,” Lammer said. “Plus, I really like talking to scammers and if I had paid him he woulda probably instantly disappeared.”

Twitter suspended the @Bitcoin Twitter account, which is run by an anonymous user, over the weekend. The account was briefly taken over by a user who claimed to be Turkish, then by a user who claimed to be Russian, before apparently being restored to its previous owner Monday afternoon.

“We do not comment on individual accounts so nothing to share,” a Twitter spokesperson said when asked about the suspension. “That’s some bullshit if you ask me,” the user behind @Bitcoin tweeted. “I’d like to know why my account was given to someone else, and then when it’s reinstated I’m missing 750,000 of my followers.”

The @Bitcoin account had more than 821,000 followers when it was suspended. Those followers disappeared, but it appears that Twitter is slowly restoring them.

The mysterious suspension naturally stoked conspiracy theories in the Bitcoin community. The @Bitcoin account is supportive of Bitcoin Cash, also known as Bcash. Bitcoin Cash was founded by a group of developers, miners, and other members of the community who split off in August 2017, duplicating the bitcoin blockchain and establishing a new cryptocurrency, after a dispute over how to address the growing network’s scaling issues.

The relationship between Bitcoin Cash and Bitcoin, or Bitcoin Core, is acrimonious. Some Bitcoin Cash supporters suspected that their enemies on the Bitcoin Core side caused @Bitcoin’s suspension by falsely reporting it to Twitter for spam or harassment.

There have been calls to report the @Bitcoin account before. In January, a user called on others to report the account, calling it a “Fake @Bitcoin account.” Some members of the community agreed while others objected, saying the owner of the account should be able to tweet about whatever they want. As with many online conversations about bitcoin, it’s difficult to tell who is real and who is a sock puppet; the thread was eventually locked because the moderators claimed users were “brigading and vote cheating.” Similarly, on Twitter, there was a flood of tweets from accounts claiming that they had reported @Bitcoin for spreading what they viewed as propaganda for Bitcoin Cash. Others said they reported it for “spam,” “hate speech,” or “price pumping.” “I complained to Google, because when I would Google bitcoin I would get a prominently displayed Twitter feed of @Bitcoin with three separate posts, and always the first one was that bcash was the real bitcoin,” reads one Reddit comment. “I found it a fraudulent statement intended to confuse and induce newbies to buy their cheap knock off product.”

Some said they believed the account had been previously been hijacked by Bitcoin Cash supporter Roger Ver. The account, which was registered in August 2011 according to its Twitter bio, only began tweeting about Bitcoin Cash in January. At the time, @Bitcoin tweeted, “The ownership of this account has not changed hands. I became busy with other things, much has changed since then and I’ve decided to take a more active role in the community once again.” Ver claims he has no connection to the account, and that it “is owned by someone involved in Bitcoin since 2009.”

A deeper conspiracy theory says that Twitter suspended the account because of CEO Jack Dorsey’s support for Bitcoin Core and $2.5 million investment in Lightning Labs, a startup building technology for Bitcoin Core.

“I’d love to hear a public explanation from @twittersupport about why #bitcoin competitor #LightningNetwork investor @jack disabled this account, gave it to someone else, only to return it in the face of public backlash with 750,000 fewer followers,” the @Bitcoin account tweeted after being restored.

Some felt that the @Bitcoin account shouldn’t be used by anyone. “Twitter is a platform for people to promote their own agenda,” tweeted Nick Tomaino, a cryptocurrency venture capital investor. “Only right that @bitcoin stays inactive/suspended.”

Twitter started blocking cryptocurrency-related ads at the end of March but confirmed it does not have content rules specific to cryptocurrencies.

Jason Powell, a real estate broker and Democrat who has served in the Tennessee State Legislature for six years, became interested in cryptocurrencies in 2017 as the price of Bitcoin was spiking. Around the same time, he was hearing that an exciting new innovation called blockchain, the data structure for shared recordkeeping that underpins Bitcoin, was poised to create “incredible opportunities” in the real estate industry. In January, he introduced a bill to help bring the burgeoning blockchain industry to Tennessee.

The bill, which was signed by the governor on March 22nd, declares that records on a blockchain are considered electronic records, signatures using a blockchain are considered electronic signatures, and a contract will not be invalidated simply because it employs a so-called smart contract at some step of the process. This was arguably an unnecessary law, akin to saying that a record created with Microsoft Word or Google Docs is still an electronic record, but Rep. Powell called it a “small but important step.”

“It shows that our state is supportive of blockchain,” Rep. Powell told me, “and we’ll do what we can to encourage and promote businesses who are already in this space or are interested in it to set up shop here or continue to thrive.”

At least seven states have enacted or adopted laws that reference blockchain: Arizona, Delaware, Illinois, Nevada, Tennessee, Vermont, and Wyoming. (Separately, eight states have amended their money transmitter laws, which usually specify strict requirements for companies like Western Union that deal with money transfers, to address cryptocurrencies as of March 1st, 2018.)

The blockchain laws range from the creation of task forces to study the technology to tautologies like Tennessee’s to more substantive initiatives like Wyoming’s decree that some cryptocurrencies issued on a blockchain will not be regulated under state securities law. But they all share a common goal: encouraging blockchain companies to bring their high-paying jobs to the state.

According to the blockchain and cryptocurrency news site CoinDesk, more than $2.4 billion in venture capital has poured into blockchain companies since 2012. Blockchain developer jobs pay $130,000 to $150,000 a year, and demand for employees with those skills is growing, according to ComputerWorld, but the jobs are still concentrated in high-tech regions like Boston and Silicon Valley. The hope is that by passing legislation, states will get noticed by blockchain companies looking to set up a headquarters or local office.

The blockchain legislation trend seems to be accelerating. A search for “blockchain” in the legislation-tracking database LegiScan pulls up five bills that were last acted on in 2017 and 19 that were acted on in 2018. Hawaii, New York, Colorado, Nebraska, Vermont, Virginia, Florida, Maryland, and North Dakota are among the states considering bills around blockchain or cryptocurrencies.

“I think it is a massive trend,” said Angela Walch, an associate professor at St. Mary’s University School of Law and research fellow at the Centre for Blockchain Technologies at University College London. “Almost every day I see something new.”

Walch has written extensively about the slipperiness of defining terms like “blockchain” in legislation before the technology and terminology has had time to coalesce. Her scrutiny of definitions in state laws has also led her to conclude that many lawmakers are passing these bills without truly understanding the technology.

She combed through the Tennessee law, pointing out oddities like the use of “execute” in two different ways within paragraphs of one another: one to mean a computer program executing; the other seemingly refers to the execution, as in satisfaction, of a contract. “We still have a lot of buzzwords that are ambiguous in the statute,” she said. “It looks to me like they threw kind of the kitchen sink into the distributed ledger technology definition. They just put a bunch of words in there hoping that they covered everything.”

Walch doesn’t think the Tennessee bill is likely to do any harm to the public, although it may create confusion for the courts in the future. She’s more worried about what seems to be blind enthusiasm among lawmakers, which could lead them to be advocates for the technology with regulators and may result in the adoption of an immature technology for important social services.

Blockchains still face serious challenges around scaling and security in order to be competitive with centralized databases, and there is limited real-world data about them. Furthermore, there is widespread misunderstanding about what the tech can accomplish; claims that it is “immutable,” “secure,” and “trustless” are arguable and these features vary widely depending on the type of blockchain and how it’s implemented.

Some early blockchain projects have run into obstacles as expectations meet reality. A number of high-profile projects in the financial sector have stalled. “Basically, it became a solution in search of a problem,” an executive at one Wall Street services firm that had been trying to position itself as a leader in the technology told Reuters. Vermont was considering blockchain-based public recordkeeping, but a report found that a switch would have high costs and “very limited possible benefits.” (One benefit? Luring blockchain companies to Vermont “may result in some economic benefit to the state.”)

Still, governments have flirted with blockchains and related technologies for public services. In Illinois, the state undertook a pilot project that put land records on the Bitcoin blockchain. Illinois, Delaware, and the blockchain provider Hashed Health put together a presentation on the technology’s “transformational potential for Medicaid.” One bill in Colorado says the chief information security officer in the governor’s office of information technology is required to “annually assess the data systems of each public agency for the benefits and costs of adopting and applying distributed ledger technologies such as blockchains,” while a bill in Arizona would allow residents to pay income tax in bitcoin.

It’s unclear if passing blockchain-themed legislation actually draws blockchain startups seeking a place to settle. Wyoming has been the most aggressive in passing blockchain-friendly legislation, passing five laws: declaring that “utility tokens” would not be regulated under state securities laws, exempting cryptocurrencies from property taxes, adjusting its money transmitter regulation to accommodate cryptocurrency exchanges, allowing LLCs to register on a blockchain, and enabling the secretary of state to register companies on a blockchain.

“They’re clearly signaling that they want to be kind of putting out the welcome sign for blockchain and crypto companies, and it’s cool that Wyoming did that,” said John Bass, founder of Hashed Health, a Nashville-based company that proposes to improve aspects of health care using blockchains and distributed recordkeeping technology.

“Part of me worries that if a bunch of states come up with their own versions of these laws, then you’re going to have a very complicated environment for companies like ours,” he said. “I have mixed feelings about it.”

Coin Center, a Washington, DC-based think tank, tracks state guidance around money transmitter laws, which specify whether cryptocurrency services need to meet certain criteria and obtain a state license. Coin Center does not track blockchain legislation because it typically doesn’t radically affect on-the-ground policy, said Peter Van Valkenburgh, director of research.

“Sometimes I wonder whether some of them are just like marketing — ‘We should do something about blockchain and be seen doing something about blockchain,’” Van Valkenburgh said.

He’s concerned that states passing legislation will lead to a fractured regulatory environment and unintended consequences that could hurt blockchain companies. Most laws have definitions for terms like “blockchain” and “smart contract,” and those definitions could end up causing problems in the future, he said, if some future iteration of a blockchain or a smart contract doesn’t strictly meet the definition set out in the law. Instead, Coin Center hopes to get a money transmission licensing standard passed at the federal level.

“Now if we go down this road where we’re passing a different law for blockchains and smart contracts in every state, we could end up with a bunch of different standards and that would be terrible,” he said.

Back in Tennessee, Rep. Powell worked with Tara Aaron, a Nashville-based intellectual property transactions attorney, and the Tennessee Blockchain Alliance, which represents the blockchain community, to craft the language in the law. They ended up paring back some of the broader definitions, especially the language around smart contracts — which are not contracts in and of themselves, but a way to automate the enforcement of terms in a contract. Aaron acknowledged that blockchain records, signatures, and contracts were probably already valid under the existing law.

“This is not earth-shattering legislation,” says Aaron. “I don’t think anybody would tell you that it is. It was an effort to make it clear that Tennessee is open for business.”

She says she’s happy with how the bill turned out, although she is still a bit skeptical of the effort. “I don’t know that legislation is the best way to send a PR message,” she said. “I will reserve judgment on that because this is such a new thing.”

When the legislation was addressed in a legislative session on February 27th, 2018, one member asked Rep. Powell, “Can you just explain what we’re doing here, and dumb it down for me please?”

“Sure. So essentially this bill deals with distributed ledger technologies and also blockchain,” Rep. Powell said, then looked down and appeared to read from his notes. “So, blockchain is a data structure in a copy and paste digital world,” he read rapidly without inflection. “The blockchain’s innovation is certain transparent and verifiable digital uniqueness. Think of a blockchain as a transparent shared and secure ledger of time-stamped transactions. Each transaction is cryptographically connected to every previous transaction visibly recorded for every participant of the network to see.” He looked up. “In essence, what we’re doing here is saying any contract that’s within the blockchain, distributed ledger technology in Tennessee, is a valid contract under Tennessee law.” Even though the explanation was inscrutable, the legislator did not ask any follow-up questions. The law passed unanimously.

Every six months for the past four years, some number of former customers of the defunct Mt. Gox bitcoin exchange have gathered in a small room in a Tokyo courthouse to hear an update from Nobuaki Kobayashi, the stoic Japanese attorney appointed as the trustee for the case.

The number of creditors attending the meeting has dwindled over time: the first one reportedly drew more than 100 people, but the most recent one earlier this month drew fewer than 30, according to the estimates of one attendee.

That does not mean the Mt. Gox case has gotten any less strange — just the opposite. By definition, bankruptcy occurs when an entity cannot pay its debts. But as of this writing, Mt. Gox has enough assets to pay off its claims with more than $1.4 billion worth of bitcoins left over. The trouble is figuring out what to do with them.

“This is absolutely unprecedented in Japanese law,” says Andy Pag, who got a group of creditors together under the name Mt. Gox Legal and hired an attorney to advocate for better terms. “There’s never been a bankruptcy like this in Japan or probably anywhere in the world.”

Mt. Gox was started in 2010 by Jed McCaleb, a serial entrepreneur who is now the founder of the cryptocurrency-inspired financial services platform Stellar. The domain name was repurposed from a previous project, Magic: The Gathering Online Exchange, which was a platform for trading the playing cards. At the time, there were few options for buying and selling bitcoin, and the exchange grew fast. It got too big for McCaleb, who sold it to Mark Karpelès, a French entrepreneur who had moved to Japan in 2009.

Mt. Gox handled an estimated 70 percent of all bitcoin transactions going into 2014, but the site’s rise was never smooth. It suffered hacks, outages, a run-in with the US government, and a $75 million lawsuit. Karpelès’ inability to manage a bizarre sense of priorities became legendary. (“He invested quite a large amount of money in an oven that was specifically built to cook quiche,” according to one former employee.)

In early 2014, customers started to complain that they had requested withdrawals from Mt. Gox but never received the money. Then, the site shut off all withdrawals. Its Twitter account disappeared. Behind the scenes, Karpelès had discovered that an attacker had slowly been draining all of Mt. Gox’s bitcoins without being noticed. The company filed for bankruptcy in February 2014, citing $64 million in liabilities.

Customers were in shock. “When MtGox was operational, I generally had a great experience with the site,” one Minneapolis-based creditor said in an email. “Until close to the end it was, by far, the most functional and trustworthy Bitcoin exchange that existed. I had a lot of faith in the site.”

At first, Mt. Gox planned to restructure the business in a process called civil rehabilitation, but in April 2014, it changed its plans and asked the court for permission to liquidate, which was granted. Kobayashi was appointed trustee, and he set about tracking down all of Mt. Gox’s assets as well as soliciting claims from customers and other creditors. He took over the Mt. Gox website, which is now used to post updates on the bankruptcy. The first creditors’ meeting was held in July 2014.

Kobayashi was flooded with claims from Mt. Gox users, which he reviewed for legitimacy. On May 25th, 2016, he announced the completion of the review process. There are 24,750 approved claims totaling ‎roughly ¥‎45 billion ($432 million), almost all of them from former Mt. Gox customers. The trustee priced the bitcoins at their 2014 value of $483, a choice that upset many creditors since the price of a bitcoin is now roughly 18 times that. Some acknowledge that this price lock-in could prove beneficial if the price of bitcoin crashes before the bankruptcy is concluded, but it’s still hard to watch the price of a bitcoin skyrocket to $20,000 when you know yours is stuck at $483.

For these former customers, the bankruptcy proceedings have been agonizingly slow. Some creditors sold their claims at a discount, preferring to cash out rather than wait for the saga to play out.

“There has been so little progress and so little information from the bankruptcy proceedings that it has seemed that we would be left in limbo, forever waiting to see if we will get any repayment for our lost coins,” says the Minneapolis creditor. “Every six months I get my hopes up that the Trustee will announce at the next creditors’ meeting some resolution to the case, and every six months I’m disappointed by the scant information given at the meeting and the lack of progress.”

It’s not quite true that Mt. Gox’s upside-down bankruptcy is unprecedented.

Melissa B. Jacoby, a bankruptcy law scholar and professor at the University of North Carolina at Chapel Hill, pointed to a handful of cases where assets equaled or exceeded claims. In the 1990s, the New Valley Corporation of New Jersey went into bankruptcy and auctioned off Western Union. There was a bidding war, and Western Union eventually went for $1.153 billion, enough to pay creditors back in full. In 2011, Nortel Networks, a Canadian telecommunications and networking provider whose fortunes declined after the dot-com bubble burst, auctioned off a patent portfolio that was estimated to be worth $900 million but ended up selling for $4.5 billion. In January 2018, the court finally approved a plan to pay creditors back.

“It is indeed rare for bankruptcy companies to be solvent, but the bankruptcy process is intended to maintain and enhance value relative to what might have happened outside of bankruptcy,” Jacoby said in an email.

The Mt. Gox case is expected to stretch on for years. While they wait for news, creditors talk on private forums like the one run by Mt. Gox Legal and the subreddit r/mtgoxinsolvency. There are two major complaints. The first is that Japanese bankruptcy law says that any surplus will be redistributed to Mt. Gox’s other shareholders including Karpelès, who owns 88 percent of the company. The second is the question of whether creditors will be repaid in bitcoin or fiat currency, which the trustee is still considering.

Much of the chatter revolves around the motives of the trustee. Earlier this month, creditors grew angry when they found out Kobayashi had sold, with the approval of the court, roughly 35,841 BTC for ¥38 billion, or about $360 million, between December and February, accusing him of driving down the price through the sell-off. (As the trustee, Kobayashi is tasked with managing Mt. Gox’s assets during the bankruptcy in order to maximize and protect value for creditors. He decided it would be prudent to sell some of the coins and lock in the fiat value while the price was high. Kobayashi sold the coins through a private offering and took care to structure the sale to minimize the impact on the market price, he told creditors. (It is undecided whether the cash will be disbursed to creditors immediately or held until the case is over.) And yet, other creditors appreciate his caution. “Everybody is criticizing him. Everyone is calling him a crook,” says Jerry Folta, one of the creditors. “In the meantime, I think he’s just doing his job.”

The moment when Mt. Gox’s bankruptcy flipped upside down came in 2017 as the price started to climb past $2,000. At the September creditors’ meeting, Kobayashi explained that assets in excess of the claims would go to the shareholders, including Karpelès.

That spurred Pag to start Mt. Gox Legal, which has raised about $200,000 from around 900 creditors to hire its own attorney. The group is now trying to move the case out of bankruptcy and back into civil rehabilitation, which would allow the surplus coins to be redistributed to creditors instead of Karpelès and the shareholders, Pag says.

“This whole price rise has galvanized creditors that were fairly dormant over the last four years,” Pag says. “If we act together we can put the right sort of pressure to bear.”

There are at least two other groups of activist creditors. Kolin Burges, who had 311 bitcoins at Mt. Gox when it shut down, hired a lawyer and has been providing updates on the bankruptcy at mtgoxprotest.com and maintains a forum for creditors here. Another group of anonymous creditors provides updates at mtgox-creditors.com.

Karpelès has written in favor of moving the case to civil rehabilitation. This makes sense since he would likely be besieged by lawsuits if the surplus were given to him. He wrote in an email that “a lot of work remains for the bankruptcy to enter civil rehabilitation and successfully distribute assets, and I intend to help as much as I can.”

“I only hope for the best resolution, which means as much assets possible distributed as soon as possible, for the benefit of all creditors,” he said.

When Mt. Gox collapsed, there was the danger that it could have an outsize effect on the bitcoin economy. A leaked document from Mt. Gox labeled “Crisis Strategy Draft” and published by the blogger Ryan Selkis read, “The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public.”

Obviously, that didn’t happen. The Mt. Gox collapse doesn’t seem to have deterred even its victims from buying bitcoin. All the creditors I spoke to told me that they had continued to invest in the cryptocurrency after the site shut down.

“I don’t have regrets,” one creditor, who asked to be identified only by his last name, Bartels, told me in an email. “When you play with fire (which MtGox was from mid 2013 to collapse) sometimes you get burned.” “It’s an adventure,” Folta told me. “I’m emotionally disconnected from it.”

Mt. Gox wasn’t the first exchange to suffer a massive theft, and it wasn’t the last. In 2016, 120,000 bitcoins worth $72 million at the time were stolen from the Hong Kong exchange Bitfinex. In January, 500 million tokens of a cryptocurrency NEM worth $400 million were stolen from Japan-based Coincheck. Mt. Gox isn’t even the only exchange to file for bankruptcy: in December 2017, South Korea-based Youbit did so after a hacker stole a fifth of its holdings.

“I think we still are in the early days of bitcoin,” Bartels said. “I am sure there will be stubborn or lazy people and businesses repeating past mistakes, and I am also sure thorough, careful people and businesses will find new mistakes to make.”

It’s a seller’s market for domains suggestive of Bitcoin, cryptocurrencies, and blockchains. The domain name Tokens.com sold for $500,000 in February. Cryptoworld.com sold for $195,000 in January. Eth.com sold for $2 million at the end of 2017. Blockchain.us wants $3.45 million, and Ethereum.com is asking for $10 million. In this climate, a domain like Crypto.com is likely worth millions of dollars. But Matt Blaze, who has owned it since 1993, isn’t selling.

“No, my domain name isn’t for sale. Yes, I mean it. Yes, I’ve probably already muted you,” he tweeted in September.

Blaze is an associate professor at the University of Pennsylvania and a well-regarded cryptography researcher who is credited with the phrase and concept of “trust management,” an important framework for modeling the authenticity and reliability of parties in information security. More recently, he has been heavily involved in cybersecurity research around voting machines, and he testified in front of Congress in November. He did not respond to a request for comment, but he apparently registered the domain fairly easily. “People my age could just register names like that when we were your age,” he told security researcher Melissa Elliott on Twitter.

“It’s actually an unbelievable domain,” said Niko Younts, who sold BitcoinWallet.com for $250,000 back in 2014 and currently holds a portfolio of more than 1,000 cryptocurrency-related domains. “That word ‘crypto’ is very powerful to industry leaders, and from a marketing perspective. It could be quite literally a $10 million domain.”

Other domain sellers agreed. The pseudonymous administrator of Crypto Domains, who claims to have sold coingeek.com to billionaire and cryptocurrency enthusiast Calvin Ayre, says they would price it “in the $5 to $10 million dollar range.” New.life, another domain seller who also asked to remain pseudonymous, also priced crypto.com at $5 million to $10 million. “Crypto.com is attractive because it defines a space where billions of dollars are changing hand with the amount growing annually,” Ron Jackson, the editor of Domain Name Journal, said in an email. “I think it is definitely a 7-figure domain name. Rare to see $5-$10 million these days but I wouldn’t be shocked if it did hit $5 million.”

That’s a lot of money for anyone, and the offers have been pouring in. Blaze tweeted in January that a hopeful buyer had called his university trying to get ahold of him. “Note to the idiot who hassled my department receptionist about wanting to buy my domain. It’s not for sale,” he wrote. “And if it were for sale, it definitely wouldn’t be for sale to you.” Although the frothy market for domains peaked in December when the price of Bitcoin hit $20,000, Blaze has been getting inquiries for a while. “Just got angry email from someone who wants to buy my domain (not for sale, btw) insisting I must sell it because capitalism,” he tweeted last June. “If you want my domain bc you’re speculating on crypto currency, just send me all your bitcoins instead. I promise to lose them for you.”

The “crypto” in Blaze’s domain name is a reference to cryptography, a long-standing shorthand in the information security community. (See “don’t roll your own crypto,” a common aphorism that refers to the riskiness of developing new encryption methods instead of using established ones, as just one example.) People outside the cryptography community started using “crypto” to refer to Bitcoin and its descendants, however, as a flood of cryptocurrencies debuted over the last year.

This new colloquial use of “crypto” caused consternation in security circles. “On the internet, ‘crypto’ has always been used to refer to cryptography,” wrote Motherboard cybersecurity reporter Lorenzo Franceschi-Bicchierai. “Think, for example, the term ‘Crypto Wars,’ which refer to government (originally the US government) efforts to undermine and slow down the adoption of unbreakable communications systems.”

Blaze himself scored a decisive blow in the Crypto Wars in 1994 when he discovered that the Clipper Chip, a device designed to allow the government to listen in on anyone’s phone calls, had a critical flaw that would allow criminals to circumvent its purpose. His paper about it, “Protocol Failure in the Escrowed Encryption Standard,” is available on crypto.com.

“I think calling cryptocurrencies ‘crypto’ is a poor choice, with bad consequences for both cryptography and cryptocurrencies,” he wrote on Twitter. “That doesn’t mean I’m some kind of language prescriptivist, and your saying that ‘language evolves’ or other such prattle doesn’t invalidate my concerns.”

In response to this attitude and his refusal to sell his domain, Blaze has been told that he is shortsighted, doesn’t deserve the domain, or is just bitter that he didn’t get on the lucrative cryptocurrency train earlier. One Twitter user told Blaze he is “greatly under-utilizing an incredible asset and defacing it with political nonsense that would make CNN proud” before adding “don’t be afraid to ask for $30+ million.” Another Twitter user advised Blaze to hold out for a billion.

Earlier this month, Blaze added a disclaimer to his website. It says: “This site does not trade in or provide services related to cryptocurrencies. It is concerned with cryptography, computer and network security, and technology policy research. Warning: Many cryptocurrencies are scams, and I strongly advise against their use as investment vehicles.”

This isn’t the first time Blaze has had to defend his domain. In 2000, amid the dot-com frenzy, a Delaware company calling itself Crypto.Com, Inc. started pitching “a new keyless encryption technology for secure communications on insecure circuits.” Blaze posted a statement on crypto.com calling the claims “extravagant” and noting that he has no affiliation with the company. He also pointed to cryptographer Claude Shannon’s proof of perfect secrecy, which showed unbreakable encryption over “insecure circuits” requires the use of a key. As they say, don’t roll your own crypto.

Bitcoin, Ethereum, and other cryptocurrencies have entered the mainstream discourse, but they’ve also been joined by a concept that is widely circulated, but poorly understood: “the blockchain” or just “blockchain.” The idea of a blockchain, the cryptographically enhanced digital ledger that underpins Bitcoin and most cryptocurrencies, is now being used to describe everything from a system for inter-bank transactions to a new supply chain database for Walmart. The term has become so widespread that it’s quickly losing meaning.

“What is a ‘blockchain’? The word is a buzzword that is increasingly ill-defined,” David Gerard, author of Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts, said in an email.

There are countless blockchain explainers in text, audio, and video around the web. Almost all of them are wrong because they start from a false premise. There is no universal definition of a blockchain, and there is widespread disagreement over which qualities are essential in order to call something a blockchain.

The Bitcoin system is considered the first blockchain — the epiphany that launched the blockchain industry that proponents say will revolutionize money, government, and beyond.

Bitcoin was designed to be public and allow anyone to join, and its blockchain was born out of the need to keep people honest in the absence of a central authority. The design sacrificed efficiency in order to ensure that theft wouldn’t pay because rewriting the ledger would require so much computational power that it would be more costly than any potential upside. In order to achieve this effect, the Bitcoin blockchain consists of a digital ledger that records all transactions from the beginning of time to the present. Copies of the ledger are not stored in a central place; instead, they are kept by superusers called “nodes.” Some of these nodes, called “miners,” batch transactions and add them to the ledger in “blocks,” cryptographically linking each block to all the previous blocks. Miraculously, this system, combined with stewardship from the core Bitcoin development team, has functioned for almost 10 years.

Bitcoin, which debuted in the wild in 2009, “is the first implementation of blockchain technology,” according to IBM. And yet, many of the technology designs that are labeled “blockchain” today bear little to no resemblance to Bitcoin’s blockchain.

Differing definitions

Google’s definition of “blockchain” is “a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.” While most people would agree that a blockchain is a digital ledger, many blockchains do not have an associated cryptocurrency and are not recorded publicly. Some would even argue that a blockchain needn’t be digital.

Investopedia says, “A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions.” Again, many blockchains are not public, and many others are not decentralized.

IBM’s definition says, “Blockchain technology is used in a peer-to-peer network of parties, who all participate in a given transaction.” Except that at least for one well-publicized blockchain, the one built by World Food Programme, there is only one participating party: itself. IBM goes on: “Because the ledger is distributed, everyone involved can see the ‘world state’ at any point in time and can monitor the progress of the transaction.” Mastercard’s blockchain, however, is not viewable by anybody (and seems to have no function outside of marketing since Mastercard admits that payments are still running through its existing system).

Highly marketed efforts in Estonia provide a good example of how the term “blockchain” has been stretched and diluted. “Since 2007 Estonia has been operating a universal national digital identity scheme using blockchain,” the Harvard Business Review wrote last year. The New Yorker wrote in December 2017 that “the backbone of Estonia’s digital security is a blockchain technology.”

Estonia’s system actually predates the Bitcoin blockchain, and there is some disagreement over whether it should be called a blockchain technology.

David Birch, a fintech consultant and author of Before Babylon, Beyond Bitcoin, found himself at a blockchain event with Estonia’s CIO, Siim Sikkut, who seemed to confirm that Estonia’s system is not a blockchain.

“I asked him where this ‘Estonian blockchain ID’ myth came from since I find it absolutely baffling that this urban legend has obtained such traction,” Birch wrote. “He said that it might be something to do with people misunderstanding the use of hashes to protect the integrity of data in the Estonian system.”

Estonia’s technology vendor, Guardtime, rebranded its offering from “hash-linked time-stamping” to a “blockchain technology.” That’s not necessarily untrue since “blockchain” has no agreed-upon definition — and for now, it’s a good marketing tactic.

“We have been working on the topic long, long before Bitcoin was thought of,” Mike Gault, the CEO of Guardtime, said in an email. “There is no new cryptography in Bitcoin — the genius behind it was taking different cryptographic building blocks and building a cryptocurrency protocol that incentivizes people to use it.”

Blockchain is “an append-only data structure that contains data records that are cryptographically linked together,” he said. “Data records are added to the data structure when multiple distributed parties come to consensus based on pre-agreed rules.”

Private blockchains

A significant chunk of new blockchain proposals, like those proposed for the financial industry, are so-called “private” blockchains. Critics say these projects are old technology masquerading as something new.

“‘Private blockchain’ is just a confusing name for a shared database,” wrote Arvind Narayanan, an assistant computer science professor at Princeton who co-teaches a popular blockchain class on Coursera.

Narayanan argues that the key innovation behind Bitcoin’s blockchain was the so-called proof-of-work consensus mechanism, which was intended to replace the need for a central authority with rules and incentives that would keep members of the network honest. Proof of work is inefficient and is the reason Bitcoin’s network consumes so much energy, so it’s not necessarily a bad thing to ditch it. But without proof of work, is there anything really new about blockchains?

Some would cite other cryptographic techniques as being the distinction between a blockchain and “a vanilla shared database,” Narayanan wrote, but those techniques are nothing new. “The crypto makes the system harder to tamper with and easier to audit,” he wrote. “But these aspects of the blockchain weren’t Bitcoin’s innovation! In fact, Satoshi tweaked them only slightly from the earlier research that he cites in his white paper — research by Haber and Stornetta going all the way back to 1991!”

Definitions in the law

This uncertainty has contributed to the general bubbliness of the industry by inflating the number of “blockchain” projects and exaggerating the capabilities of the technology. It may also cause unpredictable problems in the future as states pass blockchain-related legislation.

Angela Walch, an associate professor at St. Mary’s University School of Law and research fellow at the Centre for Blockchain Technologies at University College London, wrote a paper about blockchain-related terminology and the law.

“A bunch of states are really in a rush to pass some sort of legislation to demonstrate how crypto-friendly or tech-savvy they are,” she said. “Many of them are putting definitions of blockchain technology in these statutes, and from my perspective, they are very problematic definitions.”

The definition that concerns Walch the most is the one developed by the state of Arizona. Arizona’s Electronic Transactions Act was amended in 2017 to clarify that it covers transactions done on a blockchain. In doing so, the legislature wrote a definition: “‘Blockchain technology’ means distributed ledger technology that uses a distributed, decentralized, shared and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless. The data on the ledger is protected with cryptography, is immutable and auditable and provides an uncensored truth.”

In particular, Walch is concerned about the phrases “immutable” and “uncensored truth,” which ascribe absolutes to a technology that may be better described as “hard to change” and “uncensored as long as the people maintaining the network, who may include miners, developers, or dictators, want it to be.” Gideon Greenspan, founder of Coin Sciences, wrote that the cost of rewriting the Bitcoin blockchain is well within reach for a motivated nation-state. There are many highly publicized instances of blockchains being altered: Bitcoin was forked multiple times, including in 2010 when an “integer overflow” error in the software led to the creation of 92 billion bitcoins and the entire network had to roll back the ledger. Ethereum was forked after a massive hack in 2016. Furthermore, due to Europe’s General Data Protection Regulation, which comes into effect in May and says users must have control over their data, developers are now exploring ways to delete data from blockchains.

The phrase “uncensored truth” also ignores the fact that just because the data is in a blockchain doesn’t mean the data is accurate. Inaccurate data, such as a mistake on a medical record, can still be validated in a blockchain.

“What is a court supposed to do later when the definition there has no resemblance to the technology? And what are the implications for that from a legal perspective?” Walch said. “Things can get very messy.”

To make things worse, Arizona’s definition is now being used for proposed legislation in other states including California. Blockchain designs have also been proposed by over 200 governments for use in various applications including voting, property records, and digital identity.

Toward a standard

Victoria Lemieux, an associate professor of archival science and head of the blockchain research cluster at the University of British Columbia, is leading the effort to develop a blockchain terminology standard for the International Standards Organization.

“In general, if the transactions are gathered together in blocks, and it is blocks that are secured on the chain using cryptography, and it is designed to be tamper-resistant and produce immutable records, the system qualifies as a blockchain,” she said in an email. “That said, in general usage, blockchain is often a term that encompasses a broad range of distributed ledgers, even if transactions are not organized into blocks.”

Her team has run into some challenges, including the fact that “different epistemic communities have formed their own ideas about what blockchain is, some with very strong political and social views around open source, sharing, and autonomy.” These communities are not well-integrated into the ISO process, she said, and many members feel they are being overshadowed by large tech firms and other commercial interests.

Another challenge is the proliferation of legal definitions that “may mean that these jurisdictions are out of step, and complicate legal processes or application of the technology,” she said.

Lemieux is also well-acquainted with misconceptions about the capabilities of blockchains. “The concept of trustworthiness — at least from an archival science perspective — goes far beyond what the blockchain can do, or even promises to do, in most cases,” she said. This idea implies that records are accurate, “which is not something typically in scope of a good number of blockchain solutions” and exaggerates their reliability, which is an “issue if you have poorly written smart contracts or novel and untested consensus algorithms.” It also exaggerates claims of authenticity, which relies on the robustness of whatever identity system is paired with the blockchain. “Finally, immutability implies permanence, and there’s no guarantee that ledger records created and kept on chain will last, even with lots of copies around, because of technological obsolescence and the fact that incentives to keep the system going may die off after a time,” she said.

Establishing a clear definition will help clear up some of these misunderstandings. “Developing a more precise understanding of what blockchain technology is will help us address its shortcomings and improve upon it so that it can better be used to in the transformative ways that its proponents envision,” she said. “It’s difficult to have a conversation about advancing a technology or using it when we all mean different things when we speak about it.” Unfortunately, she estimates the terminology standard will take approximately 18 months to be finalized.

The digital currency exchange and wallet service Coinbase, founded in 2012 and backed by Silicon Valley investors, recently told shareholders that it booked $1 billion in revenue in 2017. A new independent analysis says about 43 percent of that came in December when the price of bitcoin was surging, and the company’s revenue has plummeted since then.

“By no stretch of the imagination are they continuing that same trajectory,” says Jonathan Meiri, CEO of Superfly Insights, which analyzes data about consumer behavior. “There is a rise up in December. It’s not like it stayed on this plateau into January, February. It came crashing down.”

Superfly Insights’ Coinbase analysis is based on anonymized and aggregated data from user email receipts from about 25,000 users through 2017 and the first six weeks of 2018, Meiri says. The data were collected through productivity apps, personal finance apps, and expense management apps. Superfly Insights typically provides this type of data and analysis to its clients, which include hedge funds, banks, and venture capital firms. It also provides data and analysis to KPMG, Meiri told me, and “three out of the top five ride hailing companies in the world.” The data collection is stated in the terms of use for each app or service involved, Meiri says, and the tracking is compliant with Europe’s strict new privacy law, the General Data Protection Regulation.  

The 43 percent figure lines up with what investors told Recode in January: Coinbase was expected to do about $600 million in revenue over the course of the year, but “bitcoin’s run between Thanksgiving and Christmas boosted the company’s 2017 revenue to over $1 billion.” The distribution also makes sense given the extreme price gains bitcoin saw in December.

Superfly Insights’ numbers are plausible, says Nicolas Christin, a professor at Carnegie Mellon who has experience tracking the digital currency economy through his revenue analysis for the infamous dark web market Silk Road. However, it would be difficult to verify them using the Bitcoin blockchain, the somewhat public transaction ledger, because services like Coinbase pool their transactions, he said. Coinbase declined to comment.

It isn’t surprising that Coinbase’s fortunes rise and fall with the price of the cryptocurrency market’s flagship coin. The New York Times called Coinbase “the heart of the Bitcoin frenzy.” Coinbase makes money from transaction fees, which vary depending on where users are based and which currencies they are using. In December, the price of a bitcoin surged from around $11,000 up to over $19,000 and then back down to around $13,000. That month, Coinbase experienced repeated outages, which it attributed to “high traffic.” According to the Times, the service was getting twice as much traffic as its previous peak and eight times what it was in June.

Higher prices and greater trade volume meant higher transaction fees for Coinbase and a gross revenue that will be hard to beat unless bitcoin prices surge again in 2018. “It’s going to be hard unless the trajectory picks up,” Meiri said. “It’s not going to be that easy to reach that same number.” Of course, many cryptocurrency pundits, several of whom are involved with companies in the space, say there will be another price surge this year. “There is no reason why we couldn’t see bitcoin pushing $50,000 by December,” Thomas Glucksmann, head of marketing at cryptocurrency exchange Gatecoin, told CNBC earlier this month.

Coinbase is popularly regarded as a darling of the cryptocurrency movement, the company that figured out the classic picks and shovels business to Bitcoin’s gold rush. For a long time, it was difficult for the general public to get their hands on cryptocurrencies: they either had to figure out how to mine the currency or find someone willing to sell, maybe through a website like LocalBitcoins. Coinbase was the first mainstream service to make it easy to buy and store bitcoin and other digital currencies using bank transfers and credit cards. Its CEO Brian Armstrong gave interviews to media and showed up at conferences, in contrast to the shadowy, pseudonymous entrepreneurs of the Bitcoin 1.0 era. That and Coinbase’s Silicon Valley pedigree gave it legitimacy. By the end of 2017 — and despite faulty customer service and a scuffle with the IRS — Coinbase was riding high. A New York Times profile reported that the company was adding two new floors to its San Francisco office.

Coinbase’s competitors were nipping at its heels, however, and now there are multiple options for buying digital currencies. In 2018, Square and the stock trading app Robinhood introduced support for digital currencies. Both companies said they are not charging fees for digital currency transactions, which puts pressure on Coinbase.

Superfly Insights also found that the breakdown of Coinbase transactions changed dramatically over the year. At the beginning of 2017, Superfly Insights found that bitcoin purchases made up about 90 percent of Coinbase transactions and the average purchase was $483. A year later, bitcoin purchases make up less than half of all transactions on Coinbase, which also supports Ether, Litecoin, and, as of December 2017, Bitcoin Cash. Superfly Insights also found that users rarely sell their bitcoins, but when they do, the average sell order is almost three times higher than the average purchase: $1,393.

“I’m curious how Coinbase intends to build a recurring business considering the low revenue per user per month,” Meiri wrote in his analysis. “In layman’s terms, people come to Coinbase to buy Bitcoin, they continue to do so until they accumulate a certain amount and that’s about it. Considering how many times a day I check Coinbase, it is quite shocking how few fee-baring things I do inside.”

The Superfly Insights analysis shows how Coinbase’s revenue reflects the volatility and lopsidedness of the still-nascent digital currency world. The company may be able to boost its revenue through its new merchant platform, Coinbase Commerce, which enables vendors to accept digital currency payments — and if more merchants are using digital currencies, the trading price of those currencies may go up as well. That will depend on whether Coinbase can convince businesses to jump into the digital currency world. “They need to reach out to merchants, make the business case,” Meiri said in an email. “Most merchants are not that interested in the (relatively small) number of BTC or ETH holders.”

Coinbase has raised more than $225 million from investors. Its most recent funding round valued the company at $1.6 billion, in part due to its explosive growth.

You have to admire Pavel Durov’s audacity.

Over the past few months, the CEO of Telegram convinced 81 accredited investors, including Silicon Valley giants Sequoia Capital and Benchmark, to give him $850 million in a presale of his company’s cryptocurrency in advance of an initial coin offering, or ICO. Now he’s trying to raise even more money from accredited investors before the coin gets offered to the public in a secretive second presale.

This week, investors got an email explaining that Telegram is doing another private presale, four sources with knowledge of the deal told The Verge.

The exact amount to be raised is still being determined, according to one source, but two other sources said Telegram is estimating it will be around the same size as the first round, which would bring the total raised to over $1.6 billion before the ICO even opens up to the general public. Telegram’s offering was already the largest ICO ever, dwarfing the previous record of $232 million. Telegram declined to comment on the second presale. Sequoia Capital declined to comment and Benchmark did not respond to questions.

The change in Telegram’s plans comes as the company is under scrutiny for its proposed Telegram Open Network or TON, which promises to be an Ethereum-like ecosystem with apps, services, and a store for digital and physical goods. Critics say the proposal is short on technical details, and that Telegram’s high valuation is being driven by hype and speculation rather than the value of the technology.

How much money is Telegram raising total? Estimates have varied. The company seemed to revise its goals upward as interest in the offering surged. One cryptocurrency and blockchain investor, Carlos Mosquera of Solidus Capital, said the numbers presented by Telegram kept changing; he was offered different versions of the offer from different intermediaries. Discounts on the presale coins ranged from 30 to 80 percent of the expected public price, according to multiple investors who were pitched on the first presale. “A month and a half ago we got the pitch and the opportunity for Telegram,” Mosquera said. “We passed because we received two or three different terms and deals by the same ICO. None of the information was clear.”

Mosquera’s firm was not invited to participate in the second presale, but he said he isn’t surprised to hear that Telegram is looking for more private investor cash. “Nowadays the presales are hotter than the crowd sale itself,” he said.

It makes sense for Telegram to raise more private money if there is enough demand, multiple investors told The Verge. The first presale was rumored to be oversubscribed, and early investors are reportedly flipping their shares and making 2x returns on the secondary market.

The SEC has also been increasing its oversight of ICOs, which means Telegram may not make its public ICO available in the US, CNBC reported. That could be part of the reason why Telegram wants to get more money from accredited investors — meaning firms and individuals with annual income of $200,000 or a net worth of $1 million — because there are fewer regulatory requirements through that process than through an offering to the general public.

Telegram’s public ICO was expected to take place in March. It’s unclear if the new second private offering affects the timeline for the public sale or how many coins will be available to the public at launch.

Telegram’s ICO is one of the most anticipated the cryptocurrencies world has seen, and it’s the first to attract more traditional Silicon Valley venture capital firms. But observers are skeptical of its value offering.

Telegram’s ICO will fund a suite of blockchain-based products including file storage, a DNS service, and an ad exchange as part of the TON, according to the 132-page “technical white paper” circulated to investors. Critics say the proposal makes ambitious claims, such as being able to process millions of transactions per second, without explaining how.

Christian Catalini, a professor and founder of MIT’s Cryptoeconomics Lab, is working on a study of about 1,500 ICOs with his team. “We actually document in our research paper that there has been a major transition from more technical white papers to the kind of white papers that look a lot more like sales pitches,” Catalini told The Verge. “There’s been less focus on technical details over time and, for some of these, much more on selling the vision. In the case of the Telegram one there is a lot that is being promised and not a lot of clarity on how that would be delivered.”

Matthew Green, cryptographer and professor at Johns Hopkins University, had a similar reaction to the white paper. “So to their credit, Telegram has shown that it can execute and get software written. That’s actually a big deal when it comes to blockchain projects,” Green said in an email. “That plus millions of dollars means they could pull something off. But I’ll be honest, the white paper reads like someone went out on the internet and harvested the most ambitious ideas from a dozen projects and said ‘let’s do all of those but better!’ It feels unachievable, at least at the scale they’re aiming for now.”

Even if the Telegram team had included more technical details, not everyone is convinced it makes sense conceptually. Telegram is effectively proposing to act as a benevolent dictator — it will control a majority of its currency, at least to start — helping a system that will eventually be decentralized get off the ground.

“Blockchains are useful when there’s no central authority in command, or when there’s risk that the owner of the platform might fold,” Emin Gün Sirer, a professor at Cornell, expert on distributed systems, and co-director of the Initiative for Cryptocurrencies and Contracts, said in an email. “Yet Telegram ICO’s appeal stems from its reach to 200 million users, and its central vision over the future of the platform. If the owner folded, there would be little value to what remains. So their adoption of a blockchain, in fact, a whole family of blockchains, seems spurious.”

Others have speculated that Durov is not really raising money for a new blockchain-centric venture, but simply to keep Telegram afloat. Durov was reportedly self-funding the company with his earnings from selling VK.com, the Russian Facebook clone that he founded. “With growing user base, he would’ve eventually run out of money. Therefore he opted for an ICO as a mechanism to raise funds without getting outside investors into Telegram’s shareholder capital,” Gregory Klumov, CEO of the government blockchain company Stasis, told Bloomberg.

Charles Noyes, a quantitative analyst at the cryptocurrency VC firm Pantera Capital, said his team passed on Telegram’s private presale the first time around. (His firm did not get the offer for the second presale.) To him, the secretive Telegram ICO goes against the spirit of blockchain development.

“It’s very important in blockchain technology and specifically cryptocurrencies that you be very open with what you’re trying to do and have as many people as possible looking at it to see if they can find a flaw,” he said. The Bitcoin white paper was first published to a cryptocurrency mailing list, and its pseudonymous author Satoshi Nakamoto requested feedback. Not inviting outside scrutiny is dangerous, Noyes said. “When you operate the way they do, which is closed, with secrecy, not subjecting yourself to peer review, you basically open yourself up to the possibility that there is a trivial bug in it that destroys the network.”

Whether the platform functions well may not matter for early investors. Even with the lockup period that restricts them from selling their tokens right away, investors who bought their coins at a discount could see a significant return after the ICO opens up to the broader public and starts circulating on the TON. Telegram can also promote its ICO to its users, who numbered 170 million in October 2017 according to one of the presale documents, and its app has become a hub for cryptocurrency chat groups.

“Telegram as a messenger may attract them to Telegram’s new network,” said Alan Woodward, a visiting professor at the University of Surrey, expert in cryptography and information security who has criticized Telegram in the past for using proprietary cryptography instead of commonly accepted, peer-reviewed cryptography. “Something seems to have worked,” he wrote in an email, “in that they have raised a lot of money already.”

Additional reporting by Casey Newton and Lauren Goode