The cryptocurrency industry was built with anonymity at its foundation – but with bad actors running amok, that core ideal is proving troublesome. Rob explains the current dichotomy between Web3 creators and this sense of obscurity.
There is an uncomfortable irony in the NFT and blockchain gaming scenes. Formed off the foundations of crypto, it´s a little bizarre how something that held transparency and trustlessness at its core could give birth to two brilliant children who have problems with both of those values – and yet that’s where we find ourselves: in a land of smoke and mirrors.
I write and speak about issues in these sectors regularly, but my motivations are not to discredit NFTs or blockchain technology, but rather to raise the standards and to help us all identify bad actors. One article on that very subject was right here on NFT Insider.
However, of late, I have noticed an uptick in projects that revel in the fog of a new industry, particularly one that is pseudonymous as standard. It’s important, therefore, that we open, and keep open, a conversation on what is permissible and what ought to be criticized in this new world.
NFTs and Blockchain Gaming: The Land of Smoke and Mirrors
There is some cognitive dissonance in crypto and I’m experiencing it as much as anyone. That is, there is a cherished level of privacy and anonymity (well, it’s pseudonymity, really) in all corners of crypto. Those who do not want their real identities attached to their wallets need to be publicly connected to them.
Conversely, these pseudonyms (wallet addresses) are as public as is humanly possible via decentralized ledgers, with all their actions logged for anyone to see – but that’s not where the dissonance lurks.
The issue is with how at odds the separation between real life and crypto operates, particularly with regards to money.
Outside of the world of crypto, any request for money, be it investment or purchase of goods, would require some personal information given up by the recipient – and yet, with NFT collections and blockchain games, inordinate sums of money are asked for (and often received) with little mind paid to the lack of information available about the person or people behind the project.
This falls squarely under the remit of accountability in my list of common red flags in crypto; could you hold anyone accountable if something went wrong? Too often the answer is no, and there’s a distinct lack of recourse for recovering your funds too.
So, is this a state of play we’re comfortable with? Is it acceptable? Is it anti-crypto to expect information from people who want money from their endeavours in the space?
We’ve already seen major exchanges having little choice but to integrate real-world. accountability measures into their processes. The most common example, and one you’ll have likely encountered, is KYC (Know Your Customer/Client). This is where you must provide proof of identity and address to use the exchange’s services, for instance. It isn’t particularly desirable to give your information to major organizations – Web2 showed us why – but it does feel necessary.
When collections or games are looking to raise a significant amount of money for their project, I believe it’s both reasonable and necessary to require some verification of the person or people behind it. There ought to be at least one person who could be held accountable should things go sideways down the line.
They could be bypassed (to an extent) if platforms (marketplaces, games libraries, and so on) take that responsibility themselves by offering private KYC of the project’s creators, so that the creators can remain anonymous/pseudonymous, though that’s a big ask.
The concession of identity can be beneficial not only in that it offers a way to get justice. if you have been wronged by a project, but it also acts as a deterrent against bad actors. If you’re interested in being duplicitous, you’ll prefer the shadows to the light. If, when caught out, you can simply vanish and return under a new name, there will be far more people with malleable ethics tarnishing the space.
In the short time blockchain gaming has been popular, we’ve seen a wealth of projects start, gain some funding and support, waver for a while, then vanish before starting something new instead. This is not a sustainable path for NFTs or blockchain gaming.
As for the question of whether relinquishing anonymity is anti-crypto, I don’t believe it is. For crypto to achieve mainstream adoption and prevalent utility in ordinary life, it cannot bear the risk it did back in the days of Silk Road. There are two key details, however.
Firstly, I believe it’s only necessary – at least in the current state of crypto – for the people selling NFTs or blockchain games to make themselves accountable in some way, not everybody.
Secondly, and on that note, the way in which someone makes themselves accountable doesn’t always mean they must offer their real name to the public. However, the creators must ask themselves, in lieu of pseudonymity, what can they offer as collateral?
Projects pulling in millions of dollars off the back of whitepapers and promises, but offering no information about who they are or how to contact them, cannot continue, even if they are trustworthy. It forms a hotbed for the untrustworthy to do as they please without much risk of repercussions.
Without naming the project, there is one blockchain game that has made a fortune by anyone’s standards without being contactable, communicative, or having any people attached, even with pseudonyms. Furthermore, their company structure is more smoke and mirrors with numerous parent companies and offshore entities.
Conclusion
As wary as we’ve become over being free and open with our information in the modern world, and the shelter that crypto has provided from that, we cannot swap one extreme for the other.
Complete anonymity from project creators within crypto, particularly when the project is open for investment in any number of ways, is incompatible with a safe and accessible system in real-world terms.
When bad actors can exploit people with relative impunity, the whole ecosystem will fall apart or it will begin to regulate itself, as we have seen with white hat groups.
This is why I believe that while much of crypto can remain hidden behind pseudonyms, as is its right, any person or project that is looking to receive money (fiat or crypto), must concede at least some of this right.
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Professional wordsmith, blockchain gaming zealot and petrolhead.