We Track Whales : Interview with Frank from Whale Alert (All Interviews ① 〜 ④)

We are very exited to share an exclusive interview with the co-founder of Whale Alert with you, where he is taking about unknown wallets, whale activities and consequences with real incidents, and also referring to the importance of transparency.

(Frank : Co-Founder at Whale Alert)

Interview Date :13th February 2020

The beginning of Whale Alert

I am one of the founders of whale Alert. We have been developing for a long time and we used to create all sorts of stuff, mostly websites and business applications. During 2017 we were actively trading and we noticed that the market was very volatile. We wanted to find out why this was happening so we decided to create some tools. One of these was a Bitcoin and Ethereum tracker that informed us of large transfers to and from exchanges. After the big crash we decided to stop trading and shelved most of our tools. After a while we discovered that the scanner was still running and we decided to share it with the rest of the community through a Twitter channel and it turned out to be very popular.

The Importance of Transparency

I think it’s everything. It is not possible to have trust without transparency. It is not just about showing big transaction transfers, but we are showing people where the money is going, especially Tether and the other stable coins, and whether they are being minted or being burned. This is to show that there is actual value moving. I think before Whale Alert it was really hard for people to tell that blockchain was really alive. However, with Whale Alert, you can actually see the movements and working as part of the economy. And that’s one part of transparency.

We Track Whales

We decided to to give a little bit more insight to what a whale actually is with examples of whales and how rich they actually are. For example, we tracked Jed McCaleb for a bit and checked his previous transactions. Jed McCaleb is a really rich man because of XRP, and because of blockchain. The thing is, he has so much power in that blockchain that in terms of how much he actually has, and how big his assets are, he has the ability to completely destroy the market in one transaction. 

Now, let’s consider the numbers on a particular Cryptocurrency data site at times aren’t very accurate according to some researchers. One of the bigger sites in particular, estimated 40 billion circulation supply of XRP. However after our research and calculations, we found out that there is an estimate of 25 billion XRP actual circulation supply. Our estimate is that Jed McCaleb still has around 4.7 billion XRP. If you look at the numbers and compare 25 billion against 4.7 billion and try to compared to the total circulating supply, it’s really a lot. However, they limited his power with an agreement they made between Ripple and Jed McCaleb. We don’t know that’s when it’s going to end or anything about that agreement, but what is for sure is that, when it’s going to end that’s when it could go poorly for a lot of people.

That’s one of the reasons for why we try to inform people a bit more about what the market actually looks like, and provide more information so that they actually can determine for themselves for their next step. It’s not only the movement of price or volatility, but there is so much more behind it, especially so much more money behind it. When we wrote the article on Jed McCaleb, the price of XRP was around 25 cents, compared to 30 cents now. Virtually, he managed to make about 100 to 200 million in one day. I am still having difficulties understanding how that’s possible. We just want people to be careful. We don’t want anybody to panic or anything, we are really all about that people need to do their own research and we are providing these information allowing them to be able to do the research.

Tracking ”Unknown Wallets”

When we see very large unknown transfers, we try to see if we can figure out who the owner of that wallet is. If we suspect a certain exchange is the owner, we often contact the exchange directly for confirmation. Unfortunately, sometimes it is not easy or even possible to find out who the owner is.

Recent Money Laundering Activities

I really don’t like people focusing so much on that part of blockchain because it is really unfair to the whole system. Most of the criminal activity in the world is being done with cash and dollars with the aid of banks and nobody ever talks about those problems. Nobody knows exactly how many dollars there are, nobody knows where they are or how many fake dollars there are or what they are being used for. Compare that to blockchain: we know where it is, how much there is and when it is used. In my opinion the stupidest thing you can do right now is using bitcoin for illegal activities. Even if we don’t find out now that it is being used for illegal activities, the ledger holds everything and all of the data is on the blockchain. So there still is a risk of that we might find out in the future.

The Market at the time of Mt. Gox Crash

I think the way the market was, it was disaster waiting for it to happen. The existence of the Mt. Gox fund should have been calculated into the price but most of the people didn’t know. I’m not sure if they could have known and we didn’t see it coming either. If Whale Alert had been available and tracked that big Mt. Gox transfer, more people would have been informed about what was happening and why it was happening, and this could have saved them a lot of money.

In regard to how disastrous it was, it turned out quite bad for many people I imagine. However, for us it wasn’t too bad because we had already exited the market. But I think for a lot of people they were losing 100s of thousands worth of bitcoin, and a lot of people learnt an expensive lesson. That’s why I think tracking service companies like Whale alert are important. It helps people understand why things are happening and also warns people about what the market looks like; who actually has Bitcoin? who has Ethereum or Ripple? Most of all, if people are better informed, that should take a lot of the volatility out of the market. That’s our view on it. For some people the volatility is good but for blockchain as a whole, it doesn’t really help that much for adoption.

Regulations and the Future

There are several things that are kind of difficult in blockchain right now that might be destructive for blockchain. I think one of them is insufficient regulation, because regulation is much needed. There is some centralization going on with blockchain, for example the Chinese government is really pushing for blockchain, and I am not sure they are doing it for the right reasons. There is still a lot of money chasing happening, and there still are scams and pyramid schemes etc. People are unfortunately still  falling for that. I think if you look at the crash in the early 2018, that really set blockchain back a lot and really did a lot of damage for adoption because people became convinced that it all was nothing but scams. So it is important with a balance of decentralization and regulations.

Challenge of Tracking Illegal Activities

We are getting a lot better at it. It’s all about data, so the more data we get the more accurate we can get with our tracking. We are not tracking individuals, we are tracking large whales and exchanges. I think with the right amount of data I think you can make a good analysis. The whole money laundering thing is being used to escape a whole other big issue that people should be focusing. Of course these things should be taken care of, but I don’t think its the main issue here, as it only makes up a small part of the whole picture. 

First time I heard of Crypto

The first time I read about it was around 2011 I think. If you read the tech news websites, every now and then there would be something about it but I never really paid much attention to it. To be honest I  didn’t completely understand what it was, nor what it meant. I had to learn a lot about all the implications of decentralization, and not only about the technology, but also about what it would mean for the general; the effects of having a decentralized currency.

Facing failures and Challenges

I have another perspective on failure. All this thing about “I should have bought Bitcoin back then” or “I shouldn’t have sold it” etc,that’s not really how you should be discussing it with yourself. There are opportunities that you miss every day. Some time ago, I read about somebody who committed suicide after he lost his keys to his wallets, containing Bitcoin that he had bought years before the hype. This lead him to depression and really had an impact on his mind. That incident really struck me . So, this whole thing about “could have, should have, would have” it’s not something you should be focusing on. 

I believe there will be many more opportunities in the coming future, but one should think that there are many or weak-points and aspects with the coins as well. Therefore, you have to be careful with anything concerning sending your money etc. You have to make sure that you really are using it correctly. Unfortunately a lot of people made a lot of mistakes, but I think it is getting better now. It’s all a part of crypto.

Importance of tracking transfers

We wanted to explain some of the volatility of the market. We were able to explain some of what was happening with our tracking system. For instance, back in 2017 some of the really large drops corresponded with large Mt. Gox transfers that we tracked. We noticed that the price dropped right after these kinds of big transfers. One of the most interesting things during that time was the EOS team transferring their ETH to exchanges. Our tracker picked up the huge movements and shortly after, the price of ETH started to drop very fast. There were a lot of theories floating around on what caused the drop, but we knew what was actually happening.

We can see any transfer made on non-privacy blockchains and people move their Bitcoin or Ethereum for a reason. One of these reasons is to sell or trade. If there is a lot of people selling, there’s got to be a lot of people sending. This might not be the case for everybody and for every single person, because a lot of people already have their assets in exchanges, but in most cases it turned out to be true.

There are several types of account holders and asset holders. Right now we differentiate between exchanges, hackers・scammers, ICO’s and companies, like Ripple. We do not track individuals (aside from some whales who are involved with the creation of a blockchain). The whole process of determining an owner (sender or receiver) is quite complex and involves a lot of math, research and data and is different for every blockchain.

There are a lot of differences between blockchains, but for us the most important difference is the way the transactions are structured. Blockchains like Bitcoin can have multiple inputs and outputs, making it harder to figure out where the coins came from and are going to. Blockchains like Ripple, Ethereum and EOS are much simpler, because they have “one in” and “one out” in most cases. Bitcoin and Ethereum remain the most popular blockchains in terms of holders and transaction frequency, with some other blockchains being hardly used.

Increase of transfers through side-chain

We have chosen not to explicitly track or report on side-chain transactions, but we do report transactions, like the USDT token swaps that we have seen a lot of that are part of side-chains. This means that we will report tokens being locked or burned on one chain and tokens being unlocked or minted on the other (Like USDT swapping from Ethereum to TRON). One of the reasons why we don’t combine these transactions, is that it might not always be 100% certain that two transactions are connected (with USDT swaps these transactions can be days apart). We do use these type of side-chain transactions to attribute addresses to specific users across chains though. 

Influence of Youtube on Cryptocurrency

There were a few famous YouTubers that were really influential, followed by tens and thousands of people. We noticed in early 2017 that these YouTubers had a very strong influence on prices. We created a warning systems for whenever they started talking about any cryptocurrencies. This worked really well. The best way to describe this period is “crazy” as a lot of people made and lost a lot of money and unfortunately it gave people a very bad impression of blockchain when it all crashed.

Differences between Countries

If we think about how do countries like Japan, America and Malta differ in structure regarding crypto, then my idea is it is due to the difference acceptance to new ideas and technologies regarding the market. More than here in the Netherlands, I think countries like Japan are a little more progressive about it.  Also, the Koreans, they seems a little more risk-taking in the sense of cryptocurrency, they don’t mind the idea that they might lose their investment into it which is a good thing. But here in the Netherlands, people are a little more conservative with their money and don’t like to take risks with their money. They also are a little skeptical about looking at new ideas. They rather think “let’s wait a little and lets see what happens”. But then it might be too late.

Collecting all the data

It takes a lot of technical knowledge and a lot of computers to collect data. We have over 40 servers right now in order to collect all the data, and are also working on some really big upgrades for our system. It’s not easy especially with the amount of data that’s being processed. In the future, people are going to use cryptocurrency a lot more and the result of this will be more transfers. So we will have to design our systems accordingly to the changes coming. We are going to see many more transactions and it will be, and is, a very hard challenge to tackle. However I think we are pretty successful in regard to that. That is why are innovating to become the biggest source of transparency.

Hacks and Poor Network Security

People call it hacks, but most of the time it is poor security leading to hackers stealing money from exchanges. So the word “hack” actually describes what happened. Anytime money is stolen from someone and it is transferred, people call it a “hack”. But it doesn’t necessarily mean that Bitcoin or a blockchain is hacked.

There was an incident of an Canadian exchange called Quadriga. Quadriga’s Gerald Cotten, who was the CEO of Canada’s biggest cryptocurrency exchange, who suddenly died due to a disease when traveling to India. The key for his share which he had in the blockchain allegedly got lost, and this also resulted in prices changing and increased volatility. We will probably never know.

Thus, also have to consider the transparency aspect of hack transfers. For instance, we are tracking all donations made to Binance to show people where their money actually is going to give them the promised transparency. Especially with donation etc. those kind of things, nothing escapes the watching eye of Whale Alert. We are protecting and showing the people that their money is being spent in places as they wish to be send to. On the other hand, people who steal money are never going to be able to spend the money anywhere. There has been a lot of problems with exchanges, especially fake exchanges that stole money or got hacked etc. That’s also one of the things we are working on; giving people more transparency into how safe an exchange is, and how much money an exchange has. Where does it go? Are they spending it in the ways it should be?

Young founders of big Crypto Companies

In this industry, there are many young people who are managing businesses, but I don’t think we need to be concerned about young people in their twenties handling cryptocurrency companies. People in their mid twenties are not children anymore, and I think that with such a new thing as cryptocurrency, how much does experience really matter ?  It’s a bit it too early to say that there is an the right way or a wrong way, but there are many smart people in blockchain and if it all goes south, it is because we probably were wrong about the future and not because of incompetence.

Future Vision for Whale Alert

Our vision is to create more transparency. I think a lot of the problems in the world right now, especially inequality and such is due to things not being transparent. It is difficult to say where exactly all the value in the world is, and what is happening at the moment, or how the flow of the market looks like, and who’s transferring money where. However, I think that’s going to become an even bigger problem than what we can expect in the future. We need transparency and blockchain is the answer to that. I think Whale Alert has the potential to become the center of transparency.


Interviewer , Editor : Lina Kamada

     

【Disclaimer】

The Article published on this our Homepage are only for the purpose of providing information. This is not intended as a solicitation for cryptocurrency trading. Also, this article is the author’s personal opinions, and this does not represent opinion for the Company BTCBOX co.,Ltd.