TL;DR
In an essay for Phrack, hacker and entrepreneur cts (aka gf_256) explains how technical curiosity and market literacy intersect, using crypto 'shitcoins' to illustrate how token deals and incentives drive outcomes. He breaks down two dominant token-issuance patterns and argues rushed launches and perverse incentives create both investor harm and insecure code.
What happened
In a piece published in Phrack Issue #71, author cts — a longtime hacker, CTF competitor and founder of a security firm called Zellic — lays out a practical primer on how money moves in crypto and startups. He begins by broadening the label "hacker" to include people who understand systems beyond software: network stacks, hardware quirks, DRM, market microstructure and even practical workarounds for mundane friction. Using shitcoins as a case study, cts describes two common token-commercial structures. The first, an "Asian Arrangement," is an explicit pump-and-dump ecosystem connecting exchanges, market makers, founders and VCs where insiders receive large token allocations and often unload on retail after listing. The second, the "Western Way," dresses similar incentives as value creation, using metrics and ecosystem spending to justify higher valuations while insiders still extract gains. He links those incentive dynamics to rushed product and insecure code in many crypto projects.
Why it matters
- Token economics and deal structures can reward insiders at the expense of retail investors.
- Perverse incentives to launch quickly can produce low-quality code, increasing the risk of hacks.
- Understanding markets and technical systems helps practitioners spot where value extraction may be occurring.
- Framing dubious token launches as legitimate growth (the "Western Way") can obscure the same extraction mechanisms as blatant pump-and-dump schemes.
Key facts
- The author identifies as cts (also known as gf_256) and is the founder of Zellic and a former CTF team member.
- A hacker, per the essay, is someone who understands how systems work across software, hardware, and services.
- The essay claims the primary purpose of many tokens is price appreciation — "tokens go up."
- Two token-deal archetypes are defined: the "Asian Arrangement" (an explicit pump-and-dump network) and the "Western Way" (value-creation rhetoric masking similar incentives).
- In the Asian Arrangement, four roles are highlighted: exchanges (list tokens), market makers (provide liquidity), founders (hype and issue tokens), and VCs (organize deals and receive token promises).
- VCs commonly receive token exposure via agreements such as SAFTs (Simple Agreement for Future Tokens).
- When tokens list, insiders often sell into retail demand; retail investors typically bear the downside.
- The essay links rapid token launches and the rush to market with widespread low-quality code, which the author ties to a higher incidence of crypto hacks.
- The author frames markets as computational systems that produce prices and allocate resources — a domain where hacker thinking can be applied.
What to watch next
- Continued prevalence of rapid token launches and whether that correlates with exploit frequency (source links rushed launches to insecure code).
- Behavior around token listings — in particular, allocation and lockup practices that determine how and when insiders can sell.
- not confirmed in the source
Quick glossary
- Token: A digital asset issued on a blockchain; in the essay, tokens are discussed primarily as assets whose value is often engineered to rise.
- Market maker: An entity that provides liquidity by quoting buy and sell prices for an asset, helping markets appear active and tradable.
- Exchange: A platform that lists assets for trading and connects retail buyers and sellers; exchanges may receive fees or token allocations for listings.
- SAFT (Simple Agreement for Future Tokens): A contractual arrangement where investors provide capital in exchange for a promise of future token allocations.
Reader FAQ
Who wrote the essay and what is their background?
The essay is by cts (also known as gf_256), a hacker and founder of Zellic who previously helped form a competitive CTF team and has worked with crypto clients.
What is the main claim about tokens?
The author argues many tokens exist primarily to increase in price — summarized bluntly as "tokens go up."
What are the 'Asian Arrangement' and 'Western Way'?
They are two archetypal token deal patterns: the Asian Arrangement is described as an explicit pump-and-dump network of insiders; the Western Way dresses similar extraction in value-creation language.
Does the essay link token launches to security problems?
Yes — the author says rushed launches and incentives to ship quickly contribute to low-quality code and a higher risk of hacks.
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Sources
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