Anonymity in the cryptocurrency industry is nothing new. From Bitcoin and its creator, Satoshi Nakamoto, to projects like Komodo, Peercoin and others, there have always been developers and founders who would rather keep their identity secret while navigating the cryptocurrency world.
There are multiple reasons for staying anonymous as a project leader while maintaining the integrity and transparency of the project itself. Today, we’re going to run through some of the reasons why some figures in crypto choose to remain anonymous.
Keeping one’s identity secret allows them to remain safe. While it is quite unlikely for someone’s well being to be threatened as a direct result of running a cryptocurrency project, it has happened before and can happen for many reasons.
Possibly one of the most pertinent examples took place in late 2020, when the developer behind Yearn.Finance (YFI), Andre Cronje, was working on an unfinished project dubbed Eminence (EMN). Once the community caught on, investors sent funds to the unreleased project, banking on the success of Cronje’s previous projects. A smart contract in the Eminence project was subsequently exploited and drained, resulting in a $15 million loss.
As a result, Cronje received several death threats via social media and was even sued by some of the investing parties. Both these issues could have been avoided if the developer was completely anonymous or at least hid his relation to the Eminence project, which was prematurely hyped by the community due to the past success of Yearn.Finance.
Social engineering attacks
Another great reason to stay anonymous is to eliminate attack vectors. The cryptosphere is riddled with scammers and hackers, both due to the anonymous nature of cryptocurrencies and also due to the nascent nature of the ecosystem where many people can still be easily scammed.
As so, people working in blockchain companies or projects can be seen as targets for hackers, and social engineering is often one of the most viable ways to gain access to someone’s computer or accounts. These types of attacks can be quite effective and can happen to the most experienced and tech-savvy people in the field.
Just last month, Hugh Karp, founder of Nexus Mutual, was hacked, resulting in a loss of 370,000 NXM. While the attack was an elaborate hack which compromised Karp’s computer, it was also an obviously targeted one according to the blog post that summarised the events leading up to the hack.
The hackers knew what they were doing and who they were targeting. Something that could have been avoided.
Regulation and law enforcement
While projects usually attempt to stay within the confines of the law, it can be tricky to do so, especially in an environment where there is very little regulatory guidance. This is the case with crypto, a nascent industry that is being regulated as innovation spurs, which means new regulation or action by regulators can have a devastating impact on the project.
Ripple’s XRP is a prime example of this. Ripple was recently hit with a lawsuit from the Securities and Exchange Commission (SEC) which has caused many exchanges like Binance US, Coinbase and others to delist the token. XRP price has sunk heavily after reports of the lawsuit hit media outlets.
Another interesting case comes in the form of the Financial Conduct Authority (FCA) ban on cryptocurrency derivatives for retail investors in the U.K. Many, however, point to decentralized derivatives as a possible way to circumvent the ban, allowing retail traders to access the financial tools they see fit. While decentralized projects can’t be “stopped”, other vectors can be used and going after the developers and founders of the project is one of them.
While DeFi is generally thought of to be legal, regulatory hurdles may soon come and, if they do, anonymity may be the only way to safeguard the people’s access to decentralized financial tools.
As previously mentioned, scams are rampant within the cryptocurrency world and they take many shapes and forms. Possibly some of the most common scams involve convincing unsuspecting investors to fork over their hard-earned coins by posing as the founder of a certain project or company or a well-known figure in the space.
Many of these scams will do so in the guise of donations, loans or promise of higher returns. For example, in July 2020 there was a massive twitter hack affecting high profile accounts like Elon Musk, Jeff Bezos, Warren Buffet, Coinbase and Binance. Other examples are often found in the form of fake twitter or telegram profiles, which has caused Vitalik Buterin, the founder of eth to change his handle to "vitalik not giving away eth".
As so, keeping a low profile can be a way to keep the project’s community safe from these types of attacks.
This last example is becoming more relevant as time goes on, especially with the surge of “cancel culture” when even harmless fictional characters like the beloved pepe frog can be spun as “hate symbols”. Individuals tend to express their thoughts on the internet, whether they are political or otherwise. Controversial opinions, statements or actions by the leader of a project can have a negative impact on the project itself.
For example, Tesla stock prices went down after the well-known Joe Rogan podcast episode where Elon Musk smoked cannabis with Joe Rogan. The same thing happened when he tweeted about the price of Tesla stock being “too high”.
There are other examples within the crypto industry itself. For example, forks of Bitcoin have had a bad reputation due to some of the people affiliated with them, including Roger Ver and Craig Wright, who are generally seen as bad apples within the cryptosphere and their association with their respective Bitcoin fork projects has damaged the reputation of said projects.
As so, anonymity may be a great way to exert one’s right to free speech in his or her personal life without fearing any negative impact on their work.
What about transparency?
Can a project be anonymous and still be transparent? We believe so. Given the open source nature of cryptocurrency projects, users don’t need to trust the claims made by project leads, they need only to verify them. While this may be too technical for most participants, tools like the Messari Disclosures Registry can be used to verify claims made by developers which is why OctoFi has joined said registry.
It’s hard to imagine what Bitcoin would be like if the identity of its creator was known. On the other hand, this also leaves room for imposters like the infamous Craig Wright to take the spotlight and muddy the project’s reputation. In the end, there will always be trade-offs associated with anonymity, but for OctoFi, we feel that staying anonymous is the right choice, at least for now.