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Web3 has a metadata problem, and it’s not going away

Published

2 months ago

March 16, 2025

Opinion by: Casey Ford, PhD, researcher at Nym Technologies

Web3 rolled in on the wave of decentralization. Decentralized applications (DApps) grew by 74% in 2024 and individual wallets by 485%, with total value locked (TVL) in decentralized finance (DeFi) closing at a near-record high of $214 billion. The industry is also, however, heading straight for a state of capture if it does not wake up.

As Elon Musk has teased of placing the US Treasury on blockchain, however poorly thought out, the tides are turning as crypto is deregulated. But when they do, is Web3 ready to “protect [user] data,” as Musk surrogates pledge? If not, we’re all on the brink of a global data security crisis.

The crisis boils down to a vulnerability at the heart of the digital world: the metadata surveillance of all existing networks, even the decentralized ones of Web3. AI technologies are now at the foundation of surveillance systems and serve as accelerants. Anonymity networks offer a way out of this state of capture. But this must begin with metadata protections across the board.

Metadata is the new frontier of surveillance

Metadata is the overlooked raw material of AI surveillance. Compared to payload data, metadata is lightweight and thus easy to process en masse. Here, AI systems excel best. Aggregated metadata can reveal much more than encrypted contents: patterns of behaviors, networks of contacts, personal desires and, ultimately, predictability. And legally, it is unprotected in the way end-to-end (E2E) encrypted communications are now in some regions.

While metadata is a part of all digital assets, the metadata that leaks from E2E encrypted traffic exposes us and what we do: IPs, timing signatures, packet sizes, encryption formats and even wallet specifications. All of this is fully legible to adversaries surveilling a network. Blockchain transactions are no exception.

From piles of digital junk can emerge a goldmine of detailed records of everything we do. Metadata is our digital unconscious, and it is up for grabs for whatever machines can harvest it for profit.

The limits of blockchain

Protecting the metadata of transactions was an afterthought of blockchain technology. Crypto does not offer anonymity despite the reactionary association of the industry with illicit trade. It offers pseudonymity, the ability to hold tokens in a wallet with a chosen name.

Recent: How to tokenize real-world assets on Bitcoin

Harry Halpin and Ania Piotrowska have diagnosed the situation:

“[T]he public nature of Bitcoin’s ledger of transactions […] means anyone can observe the flow of coins. [P]seudonymous addresses do not provide any meaningful level of anonymity, since anyone can harvest the counterparty addresses of any given transaction and reconstruct the chain of transactions.”

As all chain transactions are public, anyone running a full node can have a panoptic view of chain activity. Further, metadata like IP addresses attached to pseudonymous wallets can be used to identify people’s locations and identities if tracking technologies are sophisticated enough.

This is the core problem of metadata surveillance in blockchain economics: Surveillance systems can effectively de-anonymize our financial traffic by any capable party.

Knowledge is also an insecurity

Knowledge is not just power, as the adage goes. It’s also the basis on which we are exploited and disempowered. There are at least three general metadata risks across Web3.

Fraud: Financial insecurity and surveillance are intrinsically linked. The most serious hacks, thefts or scams depend on accumulated knowledge about a target: their assets, transaction histories and who they are. DappRadar estimates a $1.3-billion loss due to “hacks and exploits” like phishing attacks in 2024 alone.

Leaks: The wallets that permit access to decentralized tokenomics rely on leaky centralized infrastructures. Studies of DApps and wallets have shown the prevalence of IP leaks: “The existing wallet infrastructure is not in favor of users’ privacy. Websites abuse wallets to fingerprint users online, and DApps and wallets leak the user’s wallet address to third parties.” Pseudonymity is pointless if people’s identities and patterns of transactions can be easily revealed through metadata.

Chain consensus: Chain consensus is a potential point of attack. One example is a recent initiative by Celestia to add an anonymity layer to obscure the metadata of validators against particular attacks seeking to disrupt chain consensus in Celestia’s Data Availability Sampling (DAS) process.

Securing Web3 through anonymity

As Web3 continues to grow, so does the amount of metadata about people’s activities being offered up to newly empowered surveillance systems.

Beyond VPNs

Virtual private network (VPN) technology is decades old at this point. The lack of advancement is shocking, with most VPNs remaining in the same centralized and proprietary infrastructures. Networks like Tor and Dandelion stepped in as decentralized solutions. Yet they are still vulnerable to surveillance by global adversaries capable of “timing analysis” via the control of entry and exit nodes. Even more advanced tools are needed.

Noise networks

All surveillance looks for patterns in a network full of noise. By further obscuring patterns of communication and de-linking metadata like IPs from metadata generated by traffic, the possible attack vectors can be significantly reduced, and metadata patterns can be scrambled into nonsense.

Anonymizing networks have emerged to anonymize sensitive traffic like communications or crypto transactions via noise: cover traffic, timing obfuscations and data mixing. In the same spirit, other VPNs like Mullvad have introduced programs like DAITA (Defense Against AI-guided Traffic Analysis), which seeks to add “distortion” to its VPN network.

Scrambling the codes

Whether it’s defending people against the assassinations in tomorrow’s drone wars or securing their onchain transactions, new anonymity networks are needed to scramble the codes of what makes all of us targetable: the metadata our online lives leave in their wake.

The state of capture is already here. Machine learning is feeding off our data. Instead of leaving people’s data there unprotected, Web3 and anonymity systems can make sure that what ends up in the teeth of AI is effectively garbage.

Opinion by: Casey Ford, PhD, researcher at Nym Technologies.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Coin Market

Trump signs bill criminalizing nonsensenual AI deepfake porn

Published

20 minutes ago

May 20, 2025

US President Donald Trump has signed a bill criminalizing nonconsensual artificial intelligence-generated deepfake porn, which also requires websites to take down any illicit images within 48 hours.

Trump signed the bill into law on May 19, known as the TAKE IT DOWN Act, an acronym for Tools to Address Known Exploitation by Immobilizing Technological Deepfakes on Websites and Networks.

The bill, backed by first lady Melania Trump, makes it a federal crime to publish, or threaten to publish, nonconsensual intimate images, including deepfakes, of adults or minors with the intent to harm or harass them. Penalties range from fines to prison.

Source: Melania Trump

Websites, online services, or apps must remove illegal content within 48 hours and establish a takedown process.

Trump said in remarks given at the White House Rose Garden and posted to the social media platform Truth Social that the bill also covers “forgeries generated by an artificial intelligence,” commonly referred to as deepfakes.

Melania Trump had directly lobbied lawmakers to support the bill, and said in a statement that the law is a “national victory.”

“Artificial Intelligence and social media are the digital candy of the next generation — sweet, addictive, and engineered to have an impact on the cognitive development of our children,” she said.

“But unlike sugar, these new technologies can be weaponized, shape beliefs, and sadly, affect emotions and even be deadly,” she added.

Senator Ted Cruz and Amy Klobuchar introduced the bill in June 2024, and it passed both houses in April of this year.

US the latest to ban explicit deepfakes

There has been a growing number of cases where deepfakes are used for harmful purposes. One of the more high-profile instances saw deepfake-generated illicit images of pop star Taylor Swift rapidly spread through X in January 2024.

X temporarily banned searches using Taylor Swift’s name in response, while lawmakers pushed for legislation criminalizing the production of deepfake images.

Other countries, such as the UK, have already made sharing deepfake pornography illegal as part of the country’s Online Safety Act in 2023.

A 2023 report from security startup Security Hero revealed that the majority of deepfakes posted online are pornographic, and 99% of individuals targeted by such content are women.

Magazine: Deepfake AI ‘gang’ drains $11M OKX account, Zipmex zapped by SEC: Asia Express

Coin Market

Indonesia’s DigiAsia shares pop 90% on plan to raise $100M to buy Bitcoin

Published

1 hour ago

May 20, 2025

Shares in the Indonesian fintech firm DigiAsia Corp nearly doubled after the company said it plans to raise $100 million to seed its first of many Bitcoin buys.

The Jakarta-based Nasdaq-listed company said on May 19 that its board of directors approved creating a Bitcoin (BTC) “treasury reserve” and it was “committing up to 50% of any net profits generated to fund the acquisition of BTC.”

DigiAsia said it was also “actively exploring a capital raise of up to US$100 million” to kickstart its Bitcoin holdings and would look to earn yield on its holdings through means like lending and staking.

DigiAsia said it had “initiated discussions with regulated partners” on yield strategies and managing its planned Bitcoin holdings. The company added that it was also assessing whether to offer convertible notes or crypto finance instruments linked to its planned Bitcoin haul.

DigiAsia stocks explode on Bitcoin plans

Shares in DigiAsia Corp (FAAS) closed May 19 trading at a gain of just over 91% at 36 cents after the company’s Bitcoin announcement, according to Google Finance.

DigiAsia’s Bitcoin plan has seen its stock price rise over 90% in the regular trading session. Source: Google Finance

However, after the bell, DigiAsia stock dropped 22% to 28 cents. The company’s shares are down nearly 53% so far this year, having peaked at just under $12 in March 2024.

In a financial update on April 1, DigiAsia reported its revenues grew 36% year-on-year to $101 million in 2024. It projected growth of 24% to $125 million in 2025, along with earnings before interest and taxes of $12 million.

A growing number of companies are adding Bitcoin to their corporate holdings, following its popularization by Michael Saylor’s Strategy, formerly MicroStrategy, which has the largest Bitcoin holdings of any public company at 576,230 BTC, worth nearly $60.9 billion.

Strive Asset Management announced on May 7 that it’s going to transition into a Bitcoin treasury company, and video game retailer GameStop Corporation (GME) finished a convertible debt offering on April 1 that raised $1.5 billion, with some proceeds earmarked for buying Bitcoin.

Corporate Bitcoin treasuries collectively hold over three million in Bitcoin, worth over $340 billion, according to Bitbo data.

Blockstream co-founder and CEO Adam Back predicted that firms with Bitcoin-focused treasuries are driving global adoption and could push Bitcoin’s market cap hit $200 trillion in the coming decade.

Bitcoin’s market cap is currently sitting at around $2 trillion, with BTC changing hands at $105,642, up 2% in the past day, according to CoinGecko.

Magazine: Rise of MicroStrategy clones, Asia dominates crypto adoption: Asia Express 2024 review

Coin Market

SEC’s Crenshaw says agency playing ‘regulatory Jenga’ with crypto

Published

3 hours ago

May 20, 2025

The US Securities and Exchange Commission’s sole Democratic Commissioner has said the agency is “playing a game of regulatory Jenga” with its approach to the crypto industry and market regulation under the Trump administration.

In May 19 remarks at the SEC Speaks event, Commissioner Caroline Crenshaw cautioned against what she described as a dangerous dismantling of “discrete but interrelated rules” on crypto and the wider market.

She likened market stability to a “Jenga tower” that the agency’s rules had “carefully developed over the years,” which could topple if some rules were removed.

In addition to a lamentable loss of staff, Crenshaw said the SEC has used staff guidance to effectively reverse rules without proper analysis or public comment, particularly around crypto

“Our statements on these crypto-related issues are the equivalent of a wink and nod intended to convey that we do not plan to rigorously apply our laws in certain, specific situations.”

She added that the regulator has abandoned enforcement actions, especially in crypto markets, creating what she calls “regulation by non-enforcement.”

“I am deeply troubled by the Commission’s abandonment of swaths of our enforcement program,” she said.

SEC Commissioner Crenshaw. Source: SEC

Crenshaw, the SEC’s last remaining Democrat commissioner, said the agency’s “about-face” is problematic for a host of reasons, such as corroding its reputation in court, undermining its credibility, and casting doubt on the state of “longstanding and fundamental case law.”

Crenshaw, who had also opposed the SEC’s settlement with Ripple, said in her latest remarks that the 2022 FTX collapse was an example of what a “large-scale crypto crisis” can look like.

“Those risks have not gone away, but the calls for serious regulatory scrutiny are a lot quieter these days,” she said.

“Failing to appreciate and address these risks and complexities destines us to repeat hard lessons with high stakes as crypto becomes increasingly entangled with traditional finance.”

In comparison, remarks from the SEC’s Republican commissioners welcomed the agency’s embrace of the crypto sector.

Crypto was “languishing in SEC limbo”

SEC chair Paul Atkins said at the SEC Speaks event that “crypto markets have been languishing in SEC limbo for years,” adding that the agency should not be in the business of stifling innovation of crypto companies.

Commissioner Hester Peirce, who heads the SEC’s Crypto Task Force, said in remarks that the agency’s approach under the Biden administration has “evaded sound regulatory practice and must be corrected.”

She also claimed that crypto did not come under the purview of securities laws because “most currently existing crypto assets in the market” are not securities.

“Even if a broad swath of the crypto assets trading in secondary markets today were initially offered and sold subject to an investment contract, they clearly are no longer bought and sold in securities transactions. Many of these crypto assets are functional.”

Commissioner Mark Uyeda echoed the sentiment of his peers, stating that the SEC “should undertake efforts to provide assurances that regulation by enforcement will not be a tool used for future policymaking.”

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