3rd August 2023 > > Worldcoin con and Tangem reassessment.

tl;dr

Our Worldcoin warning seems to have some legs. Our view of Tangem may have been unreasonably harsh.

Market Snap

Market Wrap

There’s a bit of vol creeping back in, which is maybe no bad thing. Yesterday saw a sharp rally from 28.8k to just shy of $30k and a quick retreat to where we are now. You might want to point to Fitch’s downgrade of the US as the cause, but that really is just a side-show. It is baked in that rating agencies are backward looking, though Fitch is far superior to Moody’s or S&P. It is more likely that the spike in 10-years was caused by robust private payrolls data, but this is likely to be short-lived. 2-10s remain inverted at an elevated 74bps. Rate cuts are heading our way, and soon.

Curious Cryptos’ Commentary – Worldcoin

You heard it here first.

On the 24th and 25th July the CCC warned our readers that despite the hype and publicity around Worldcoin, we were very sceptical.

Germany has started regulatory action against Worldcoin.

France has started regulatory action against Worldcoin.

Kenya has banned all Worldcoin operations.

The CCC is always ahead of the game.

Curious Cryptos’ Commentary – Tangem wallet

You may recall my initial enthusiasm for the Tangem wallet which was later tempered by my experience which I shared on 10th June 2023 (https://www.curiouscryptos.com/post/10th-june-2023-tangem-wallet-in-short-don-t).

My initial enthusiasm was sparked by the idea that the private keys to a crypto wallet (accessed using a credit card shaped bit of plastic) could be internally generated but never revealed to anyone. Allied with the promise of one or two back-up cards in case of loss of the first card, it seemed to me that this could be a game-changer for retail crypto adoption.

My hopes were dashed when I identified some warning signs as documented on 10th June.

Tangem have kindly contacted me to respond to my missive of that day. It is only fair to give heed to their counter arguments.

…

My first complaint was that the set-up instructions appeared to come from China, though Tangem is based in Switzerland.

My second complaint was that the package containing my Tangem wallet, and two back-up cards, was posted from Hong Kong, though Tangem is based in Switzerland.

In response, Tangem tells me:

“Tangem is a team of professionals distributed around the world. We have production partners in Europe and Asia and fulfillment centers in the USA, Europe, and Asia. This allows our company to flexibly manage development, production, and logistics, keeping very reasonable prices for such a high-tech product.”

I have no way of verifying this information, but I also have no reason to dispute it. It is a reasonably likely explanation.

…

My next complaint was that the set-up instructions referred to a .ru website. Not sure about you, but any Russian based website makes me stop and think.

In response, Tangem tells me:

“We heartily apologize for the confusing link in the instructions, it was a contractor error and has already been corrected.”

…

My comment that the supposed HQ of Tangem in Switzerland looks empty and run-down received no response.

Finally, my major concern was that the process of setting up the back-up cards seemed to necessarily involve the transmission of private keys from the wallet to the app, and then to the back-up. This seemed to me to be a major point of weakness.

Tangem responded:

“As for your assumption that private keys should be stored inside the backup application, it is expected but actually far from the truth. Tangem's main know-how lies precisely in the technology of securely backing up the private key through an untrusted environment. Neither Tangem nor attackers can intercept the private key, because the primary card encrypts it with a one-time key known only to it and the backup card during transmission. You can read the technical details of this solution in our blog at this link:

https://tangem.com/en/blog/post/how-tangem-wallet-backs-up-private-keys/”

In essence, the private key is transmitted from the card to the app and then to the back-up card but in encrypted form.

This concept makes sense though the blog post describing the process takes a bit of work for us non-techies. The underlying idea was first posited by Whitfield Diffie and Martin Hellman in 1976:

https://en.wikipedia.org/wiki/Diffie%E2%80%93Hellman_key_exchange

…

So, how are we left?

Tangem states:

“Our business reputation can be attested to by our respectable investors, SBI Crypto and Shima Capital.”

SBI Crypto is a listed company based in Tokyo spun out of Softbank in 2006. Shima Capital appears to be a private business, possibly also located in Tokyo. The Japanese connections are reassuring.

I am in no mood to replace my core cold wallet, Ledger Nano X, any time soon. But I am now feeling a lot more reassured about Tangem. I will commit 5-10% of my crypto stash, and I will let you know I get on.