Brothers, in the past few days on Binance Square and Twitter, everyone has seen the news about the Backpack airdrop witch, right?
I checked the post of the big guy Meta Ape, and here's the specific situation: he put over 3 million US dollars in real cash into this exchange for arbitrage. What he did wasn't that kind of fake data with crazy trading scripts, but rather all real trading demands: spot-futures arbitrage, cross-exchange price differences, and capturing funding rates.
To provide funding efficiency, he used multiple accounts, utilizing the KYC of his entire family. He even discussed this multi-account issue face-to-face with the project party and talked about his trading strategy.
So what happened? Hundreds of thousands of accounts were directly judged as studio witches by the foreign team of Backpack because they did not implement so-called 'account isolation' and 'IP isolation', leading to almost complete devastation of the airdrop. Meta's big shot helplessly posted self-mockery: 'The person I taught this arbitrage strategy from start to finish actually got labeled as a witch? The project party gives no respect, and I feel like a clown.'
Now in the community, everyone is criticizing the project parties for their narrow vision and for exploiting large holders. But if you step back from the emotions and think deeper, it actually exposes a crucial vulnerability in the current Web3 infrastructure:
Under the logic of 'fully transparent tracking', real large funds have no dignity in normal business operations.
This involves a long-debated proposition in the crypto circle: do we want absolute transparency or commercial privacy?
In traditional Wall Street or physical businesses, a hedge fund opens a main account to hedge risks and improve capital turnover, with dozens of sub-accounts running different quantitative strategies underneath, and funds are transferred internally. This is the most basic routine operation.
However, in the current Web3 system, because the ledger is fully transparent, project parties and on-chain detectives can only rely on tracking your fund trails and IP associations to detect cheating.
This has led to an extremely distorted phenomenon: whether you are a real arbitrage shark with 3 million dollars or a wool party with 30 bucks, as long as there are fund transfers between your wallets, the algorithm treats you uniformly and labels you as part of a 'gang operation'.
You are clearly doing business openly, but the underlying algorithm forces you to act like a thief, physically isolate, buy dynamic IPs, and hide the path of funds.
Understanding this pain point, look back at what I've been breaking down recently @MidnightNetwork , and you'll understand what kind of infrastructure those who truly understand the industry are seeking.
What should a 'bottom safety house' that can truly catch old money look like?
Assuming in the future there is a top-tier multinational market maker entering with tens of millions of dollars to run complex arbitrage strategies.
If the underlying infrastructure comes with a mature ZK network, when compliance departments or exchanges need to verify identities, this institution doesn't need to publicly disclose all the fund transfer base orders of dozens of wallets underneath for everyone to observe.
Their local system only needs to run a piece of code and throw an unalterable cryptographic conclusion to the auditors: 'The entity's funds all come from compliant channels on the whitelist, with clear tax obligations, and are genuine actions of a single institution.'#night
The auditing party receives this conclusive 'green light' and directly approves compliance, ensuring no misjudgment.
But at the same time, no one on the entire network can uncover what arbitrage strategies this institution used, how internal funds were distributed, or what the positions are through the blockchain explorer.
It achieves perfect mathematical isolation between 'self-certifying identity to regulators' and 'protecting core trading strategies'.
Many people in the square are still indignant about Backpack's algorithm standards. But the essence of investment is to see through the flaws of the cycle. When real arbitrage funds of millions of dollars are humiliated and wiped out under the existing transparent rules, you should understand that the future regular army of Wall Street will absolutely not tolerate making large transactions in a makeshift setup with no commercial privacy that relies on IP checks for conviction.
Whoever can fix this 'compliant yet confidential' bottom sewer can catch the next cycle's true old money. Don't let the farce in front of you cloud your judgment; understanding the underlying logic is essential to holding onto truly valuable chips.
