Never Trust Custodial Crypto

It should actually be a point of optimism that centralized technology tends to destruction while decentralized tech can survive pressure…

Some highly attentive people might have noticed that LandChad.net lost one of its articles: that on how to set up a website with the Basic Attention Token (BAT) which is a crypto-currency tied into the Brave Browser. I can’t even tacitly endorse this project due to some recent personal developments that we’ll see below…

I’ve used the Brave Browser (in fact, I’ve even defended it as a browser), but the BAT project itself is almost a perfect example of a poorly-designed crypto project. Like most 💩coins, it is constructed to enrich a business behind it, not to truly be an open standard.

The main issue.

BAT is a browser-mediated system that allows users to view ads in the Brave browser and collect their BAT cryptocurrency, which they can give to “creators” (i.e. people with websites or social media profiles registered with them).

Forced KYC

The issue is, however, is that the entire system is a centralized one, not just around Brave, but “creators” like me with websites cannot actually receive their BAT earning in their own wallets. Instead, earnings must go to a centralized Know-Your-Customer exchange that has a relationship with Brave: Uphold or Gemini. Even the addition of the choice of Gemini is new—Uphold used to be the only option.

Either way, I made an Uphold account when I registered my sites with Brave. I would receive a small amount of monthly BAT and after several months, since I am not braindead, I would transfer those funds to non-custodial wallets every once in a while. I would have liked to transfer them immediately, but Uphold charged obscene withdrawal fees ($15 + some percentage).

Aside from that, I never used Uphold for anything. I’ve never heard of anyone using Uphold for anything other than BAT Rewards anyway.

Uphold emails me.

After years of being forced to use Uphold for literally no reason, this past month I began getting a flurry of vaguely worded emails asking me for “more information about myself.” Here is the most recent (they have all been the same in content):

We’re following up on our request for additional due diligence information sent on May 27. As a regulated financial services business, we’re required to perform ongoing risk and compliance reviews. Please note that if we do not receive the requested information, we reserve the right to restrict your account. Please provide the following information at your earliest convenience:

  • Purpose of your Uphold account.
  • Estimated monthly activity.
  • You previously mentioned that you are unemployed, please elaborate more about your source of wealth. [sic, lol]
  • Please explain the purpose of your withdrawals to different crypto wallets and your relationship with them. You have withdrawn funds to X different external wallets.
  • Relationship with the users you receive funds from, as well as the purpose of such transactions (Include supporting documentation, if any)
  • Incoming $X — USD (X transactions from X users)
  • Is your account used for activities related to a business?

Please use the following link to upload your files:

…

As the old adage goes, “Bitcoin fixes this.” Or at least it’s supposed to if people actually used it.

As I said before, Uphold is a KYC exchange: they already know who I am and have a picture of a photo ID of mine. They can also clearly see the origin of 100% of my incoming transactions from “Brave Software International.”

I respond to this email here.

  • Purpose of your Uphold account.

The reason my account with Uphold exists is because you have some kind of financial relationship with Brave Software International wherein you have nearly exclusive rights to receive BAT payouts. The reason my account exists is because I can’t just receive funds to—you know… an actual cryptocurrency wallet, so I have to use your worthless non-service and pay $15+ dollar fees every time I want to turn your fake custodial crypto into my own.

  • Estimated monthly activity.

You are a centralized custodial exchange so you can easily see my mountly activity and in my case, you will see that it is actually perfectly uniform across months.

Not that this should matter, nor do I appreciate the tacit assumption that irregular and variable income (which is extremely common nowadays) is somehow bad.

I should add that the only other thing I’ve ever tried to do is there was one point where I figured I’d bite the bullet and buy some KYC Bitcoin to slurp some heckin’ dipperinos at short notice. Unfortunately, your site is so broken that no transaction ended up going through.

  • You previously mentioned that you are unemployed, please elaborate more about your source of wealth.

Could you elaborate on which country you live in where four figures over the course of three or four years in considered “wealth”?

(Not quite sure when I ever said I was unemployed. I may’ve answered that on a questionaire to avoid questions on the level of stupidity I am dealing with now.)

As in the question above, you, Uphold, are a custodial exchange that can clearly see 100% of the transactions into my account come from “Brave Software International” and considering Brave is Uphold’s only reason for existence, I should not have to explain how they work to you.

  • Please explain the purpose of your withdrawals to different crypto wallets and your relationship with them. You have withdrawn funds to X different external wallets.

I am interested in having cryptocurrency. I am not interested in having pretend custodial crypto funds indexed to the price of crypto which ultimately I have no control over. I can understand that you are upset that I would like to own my own assets rather than letting you “just hold onto them” in exchange for an IOU, but the fact that I am receiving this email illustrates why it is important to keep 100% of my assets off of platforms like this.

In the previous case, you could hold my money against me. In this case, I am laughing at you. I have $0 on Uphold and I will continue to have $0.

If the issue here is the fact that I withdraw to different crypto addresses, I suggest you instead contact users who withdraw to the same wallet addresses and chide them for reusing addresses and thus using cryptocurrency in a more privacy-violating fashion.

  • Relationship with the users you receive funds from, as well as the purpose of such transactions (Include supporting documentation, if any)

As previously established, like everyone else who is forced to use Uphold, I use it for BAT. As such, I know the identities of literally zero of the people who may have donated to me through BAT. This should not be an issue for you since you do know these user’s accounts and at least can exhaustively track the movement of BAT payouts on your system.

So this is a question I should be asking you out of curiousity, if I cared about it.

In the BAT system, anyone who stumbles onto my website can end up giving me BAT. If you want me track everyone somehow and tell you, you are delusional.

Notice the Questions…

Notice the issue at work here: they don’t just want to have my information, but they seem very interested in:

To even answer these questions could put other people’s privacy at risk.

This is why people who say “I don’t care about privacy, I got nothing to hide” need to remember that in fighting for free and open, yet private tech is not a war we wage for our own selfishness, but to keep everyone else, including our children safer and more private than we have been able to be.

“Bitcoin fixes this.”

What is so pathetic about this email, which represents the wider comply-cuck movement in crypto—is that it is precisely what Bitcoin was developed to avoid.

The goal of a peer-to-peer currency is to make the “due diligence” of financial “custodians” irrelevant since users have every technology sufficient to control, hold and secure their own funds.

The two greatest unfortunate problems in crypto are that:

  1. Scammers and “developers” realize that they can mimic the custodianship in the traditional financial system to control users’ funds in centralized exchanges.
  2. Most people in cryptocurrency are simply not discerning. They talk about self-custody, privacy and security, but they don’t actually do what they need to get any of that.

I will just say, it’s quite a shame as well how little the overlap between the free software movement widely and cryptocurrency is. These ideological strands absolutely require each other, but for bizarre historical reasons, they are separate, don’t understand each other and it is to everyone’s detriment.

On BAT and Uphold

I let my Upload account be closed. Who cares? I have to stand for something and it’s easy to do so when it’s humiliating to comply.