Block3 Workshop - Crisis Management During Stablecoin HacksDepegs

testing testing one two one2 okay I think I'm probably ready when you are okay all right okay hi everybody thank you very much for coming um it's been a little bit chaotic so I appreciate your patience as we've been setting up my name is Rebecca Jones I am the founder of block 3 PR we are a PR agency specializing in web 3 companies um our biggest client right now is true flation so please have a look at what they are doing they've just won investment from coinbase and they are bringing economic data on chain in an independent and Fairway we have other clients too but I'm not going to plug them all today I'm going to be talking about crisis management during hacks and deegs which obviously is particularly important for stable coins we are at the unstable summit we're here to talk about stable coins we're going to go into why that's particularly important but before we do I will just kind of run through who we are my credentials and um so I used to be a journalist I was a journalist in London for a very long time writing for newspapers um like the independent and the Observer and the Daily Express um so I have a very strong tradire background I found myself coming into web 3 by a kind of happy accident by living in uh Vietnam which is the country with the highest rate of crypto adoption in the world if you didn't know um and I founded a Content agency which led me down the rabbit hole and here we are I found a block 3pr in May 2022 right in the middle of the terror Luna crash and as somebody just said to me that's really great if you don't care about making money um and also if you're interested in getting experience and we definitely got a lot of experience when it comes to crisis management um and dealing with you know dealing with reputational issues through events uh my core team here this is Floren delone he does our digital digital communication and this is Anna federova who was a colleague of mine in London she also wrote for the independent and she helps out on our PR team as well so 101 what is a dpeg or a hack so a dpeg as most people will be familiar here is when a cryptocurrency typically a stable coin deegs or decouples from the asset that it is trying to mirror so typically that's the US dollar in in our world um and our most recent dpeg of course was usdc which we're going to go into in a little bit of detail as we go on and then a hack is sometimes related to a dpeg um but it's a much more live situation and I'm sure maybe you guys might have dealt with a hack even Hands-On at some point during your careers it's uh a multifaceted live situation that has a lot of different angles that you have to cover so we'll go into that in a bit more detail um as I mentioned earlier these events are particularly damaging for stable coins because stable coins are meant to be stable they are not meant to jump around in the way that Bitcoin jumps around we're very used to seeing Bitcoin go up and down by 10% on a day that's not what stable coins are meant to do so when we do see a dpeg or a hack trust is lost and trust is is really really key even in this trustless environment that we find ourselves in which is a debate in and of itself and I have this debate all of the time and at the Q&A session perhaps we can go into that in a little bit more detail but first of all I wanted to talk a little bit about what we can learn from tradire because I have a tradire background um and as much as there is an antagonistic relationship between trfy and web 3 there are things that we can learn especially from 2008 the global financial crisis so this was a real turning point for the whole world um we are still feeling the reverberations of it in terms of monetary policy quantitative easing money printing that was rolled out during then and then really really rolled out during covid is the reason we're now facing High inflation High interest rates and as everyone will know in this room it's the reason that crypto exists because Bitcoin was founded in 2009 as a direct criticism to the corruption that was uncovered during the great financial crisis the person that came out as the hero of this as you may or may not know is this guy here Jamie dimon So Jamie Dion's the CEO of JP Morgan and JP Morgan was probably the only Bank at the time that came out and said um quite famously to the shock of all investors the mortgage Market is a a ton of [ __ ] and I hope I can say [ __ ] if not you'll have to edit that out it's a ton of [ __ ] and we're involved to the you know to the tune of perhaps about 95 billion um and it's it's not going to be pretty so they got a lot of criticism at the time but in fact their transparency during that period meant they came out the solid winner and Jamie Dion in particular was very very very very visible he was always at the Forefront of um any kind of committee any government committee very very forthright JP Morgan shares I think went up something like 180% between 2008 and 2018 perhaps um and it's now the biggest bank in the world and this really was to do with the way it was handled and it it was handled in a way that generated trust and again we're always going to come back to this issue of trust because it's crucial even in web 3 we look at somebody like Jamie Dion who's a very calm and collected States person and we think Daddy's in charge he's got the wheel we can relax our money is safe and so this is really what we're trying to get to I think in in web 3 perhaps in a different way um but trust is is really key and it's and it's what we have to work on as an industry okay so going deep into deep EGS um the last two or the very big ones most recently usdc during March of this year when we did have another wobble at the US Banks which of course turned into nothing because the FED decided to rewrite the rules and then of course we have us and they're two very very very different situations um there are also two very very different coins and that's worth mentioning because obviously I'm taking this from a comm's perspective but it is worth mentioning you know us was an algorithmic stable coin based on very shaky Foundation usdc was a centralized stable coin that you know had proven reserves backed by Black Rock so they are two very different coins to to say that but nonetheless you know the leadership when we saw those DPS made a very very big difference um just to remind everybody of of what that looked like as if any of us could forget uh this was Us's leadership when all of that went down we had um some memes um although you know strong engagement on that Meme it can't be denied we had some poetry that was cute um yep that was nice and then of course the famous deploying more Capital steady Lads you know we s May 8th May 8th May 10th then by May 17th we're going to We Now start seeing very long tweet threads on what can be you know what they're doing to try and save this project um again foundations were very shaky we could go into the technicals and in fact if anybody wants to come up and and and question me on on what I say at any point on the technical side please do I'd love to hear about it um but the approach here was just everything not to do it was mocking the situation it was not in touch with the user base it wasn't taking anything remotely seriously um and it was it was key it was key to the downfall alongside of course the algorithmic situation between us and Luna usdc on the other hand very different situation the key thing actually for usdc and for Jeremy Al is getting out ahead of the story so this tweet here regarding the $3.3 billion do of usdc reserves svb that almost came out before anybody really knew what was happening at svb they were almost they were almost first off off the off the block there with that so they got right ahead of the story in recognition of the fact that if you don't get ahead of the story someone else will you need to be leading from the front at all times and this was a real exemplary moment there they actually caught a lot of flack for this on Twitter they got a lot of negative criticism you know this is just worrying people why would you say this but actually as time went on it it it proved to be the right move you know and they you know not just Twitter there were blogs there were um appearances on CNBC on Bloomberg there was constant communication press releases we were aware at all times of what as what usdc was doing um of course it also affected the industry at large I did a round table earlier on today and heard from people like Bader da and uh and others and that were really negatively impacted by this and it's been a lesson for the whole industry but in from a comm's perspective this is this is really how you do it again though this is a centralized project backed by Black Rock so we can ask ourselves the question could a decentralized project ever engender this kind of trust it's a question maybe not but you know it's something that we as an industry can perhaps work towards so hacks hacks are a different situation hacks I sometimes I think you have to think of a hack a little bit like a a kind of battle like you've got your your developers you got your devs down in the in the trenches fighting the fires putting the fires out you know you've got your comms people like me kind of out of the gates trying to hold things back and you've got your leaders of Cavalry out out there trying to you know you know rally the troops and then usually your community guys that are really on the front lines taking taking the hits you know so it's it's a very very very live situation so whereas in a dpeg you're probably thinking more about kind of keep calm and carry on in a hack it's more about keep running keep running keep running keep running and the the unique feature of a hack as well is that sometimes you've got the hacker involved in the conversation which is quite unique for for web 3 um we'll have a look at in a moment at at beant stalk for example which which suffered a very big hack uh in 2022 um and at which point the the the leaders were actually communicating with with the attacker and asking for for for conversation and not only is that a great way to try and limit losses for your users but it's actually really good PR because it makes you look very calm and very in control of the situation so it's one of those features of a hack that can actually be turned around in your favor um but just to go a little bit deeper into into these two different examples we're going to look at Bean stalk as I mentioned and also cashio and the Lessons Learned there between these two events in March and April 2022 uh is that your community really really really matters as we've already touched on so Bean stalk communicated very clearly with its users and cashio decided to just go on holiday uh and leading the narrative so cashio was a salana uh application it lost 52 million in um I always forget the ex I think it was an infinite mint glitch one of those lovely technical things but effectively it it did the the hacker found a vulnerability within the within the collateral mechanism which led to the downfall and the draining of the protocol and honestly this was about the only communication that was issued from cashio here and then then there was nothing there was actually there was actually a canny user that decided to try and update everybody else but otherwise 52 million disappeared and we never heard from cashier ever again and saber actually took a really nasty hit to its reputation if there's any saber people here I might get a bit of trouble but sa didn't come out very well from this um so again this is an example really of of how not to do things ever um Beanstalk on the other hand this was at the time I don't know now but at the time it was the fourth largest hack in defi so it lost I think 181 uh million um but four months later it relaunched and it relaunched because of the way that this was handled again constant communication straight out in the front lines tweets amas blogs uh Community engagement I was chatting earlier on to um somebody from uh chida and he said the same thing that the most important thing in situations like this is that you're out there engaging with your community even if you can't really tell them anything of substance sometimes you just need to be there to hear them you know because the people are losing money and they're frightened and so your community team should be out there reassuring them all the time that's really really really key so four months later they relaunched um they gave an exclusive to coin Telegraph during this relaunch as well so they were really engaged with the Press which is very key because as we know the crypto press can get a little bit nasty when things go down so it's good to have them on side um this is something I work a lot with I do a lot of relationship management between my clients and the Press so that there's always those strong relationships you can lean on when the times get a little bit tough you want them on your side and Beanstalk recognized that and they had coin Telegraph on their side and that really really helped and they're they're still alive despite being one of the biggest hacks uh in history they the tvl is somewhat lower than it used to be but the uh and even though Bean is volatile it still pretty much hovers around it's it's $1 Peg so you know it survived whereas cashier is gone and the way that they communicated is key to that survival so just to kind of sum up really how to manage a crisis on the pr side and also the social media side social media being crucial in web 3 so PR get head of the story as we saw with usdc and also Bean stalk who did things very well be the first to be talking about it don't be the second person to be talking about it even be the first person to be talking about it you want to be leading the story you know if something's gone wrong get out there and say it's gone wrong be the first person to say it's gone wrong be transparent you know you want you really do want to be as transparent as you possibly can you can't always be super transparent especially in a situation if you have law enforcement involved I mean that's if we're getting very top level you know sort of tornado cash level but if you do have law enforcement involved um you won't be able to give all of the details but you can say what you are doing about it right now and you can try to reassure users in terms of what they should do um in a very clear and transparent way that's really really important be visible again thinking of back to our tradire example and and kind of Jamie dimon and then and Jeremy alair during usdc be be visible during this you know you need we want to see our our leaders reassuring us that everything's going to be okay that is very different from getting on Twitter and venting which we'll come on to in the social media section but do be visible uh and be consistent too because web 3 is uh not uniquely but it is one of one of those Industries where anyone involved in the project has a platform usually through Twitter or telegram or Discord so if you're not all singing from the same hym sheet um that's not going to look good so you might need to make sure that your team is very tight and that you're all saying the same thing um you know and that you're keeping them updated in the same way that you're keeping your your users updated as well create that sense of teamwork so you don't have any Heroes going out feeling they can solve the situation on their own So to avoid I mean this is just the flip side of that same coin concealing the truth don't lie because well not even not even lie but don't don't try and conceal anything because it will come out um and it's better that you know you're the person saying it don't try to be funny actually during a crisis um I love cracking a joke but crisis isn't the time it's not the time for memes um memes are fun when things are going well they're not fun when people are losing you know tens of thousands or millions of dollars so don't try to be funny keep the tone professional and consiliary and don't bury your head in the sand don't pretend it's not happening because it very much is happening and if you don't know what to do come to someone like me that does know what to do you know reach out to a professional ideally you've put plans and strategies in place to deal with this before the crisis even comes up you know um and preparing for a crisis will be my next talk because that's a whole you know another piece where you do a lot of solid ground workor but if you don't have a com steam if you don't have PR you know reach out and rather than be silent because it might save your project and it might save millions and millions of dollars uh on the social media side similar again react really fast considered but fast but fast don't sit there on your hands make sure you're doing something utilize your users again in the bad in the good times rather when the when the sun is shining you should be building up your community and incentivizing them and make getting them involved in decisions so I worked at yield app I was the head of communications for yield app we had the yield app Army so these guys were just really enthusiastic token holders that were super super into the project and whenever we needed help on the communication side these guys were always willing to kind of rally around because they were really passionate about the project that's a really great asset to have so don't discount that and really work on making sure that you've got a strong community and then make sure you keep that Community updated at all times give them a space to vent uh as I mentioned earlier it's it's important that just that they can complain and worry and just give them a space to do that uh and use the right content as well so probably in a hack situation that's the only time anyone's going to read through like a 20 Level you know tweet thread um people will take the time at at that time but you might want to try video content as well especially if you have a charismatic leader that is good on camera because that's going to be reassuring if you don't probably avoid it but you know consider consider different types of content uh again mistakes to avoid reacting emotionally we've all been really really drunk and gone on to Facebook at times we shouldn't have done and that's fine because only our mom and dad and friends are going to see that if you're a web three leader especially if you're do Juan you're never going to live that down you know and and it's it's not going to help you your users your project keep the emotion for the bar and make sure there are no journalists around um reacting too late again yeah don't sit don't sit around and wait just just go at and if you don't know what to say find somebody that does and don't overpromise being transparent is uh is not the same as um you know saying everything's going to be fine when you know it's not going to be fine just stick to the facts don't overpromise that's really really important people want to be reassured but don't lie to them at the same time now I was going to do a little breakout session but actually I don't think we probably have enough people today for a little breakout session so I think we're just going to stick to the Q&A um and I love to hear any thoughts or feedback you guys have on hacks and deegs