The Breakdown - 4 Reasons Crypto Should Care About Davos

Episode Date: January 20, 2020

The World Economic Forum kicks off today. CoinDesk and The Block both have representatives there. Numerous panels relate to topics around the industry. At the same time, the centralized power structure is something of an anathema to the world crypto is trying to build. The question is: should crypto even care? 

Welcome back to the breakdown. An everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The breakdown is distributed by CoinDesk. Welcome back to the breakdown. It is Monday, January 20th, and today we are talking Davos. It is the beginning of the 50th annual World Economic Forum, one of the most notable or perhaps notorious, depending on who you're asking, pillars of the global economic order.

It's where elites bomb in on their private jets to talk about climate change. If you ask some, it's where leaders of business and impact come together to talk about how these two fields don't have to be at odds to ask others. And no matter what, it has our attention throughout the week and usually throughout the year. This year, as there has been for the last several, there is attention around cryptocurrencies and blockchains and digital currencies and digital assets more broadly. And so what I wanted to do today is actually take a look at what's going on first, what they're talking about, and pose a question, which is, should the crypto industry actually care about the conversation at the World Economic Forum?

Should we care about what's happening in Davos? First, let's start with a little bit of background. The World Economic Forum was founded in 1971 as a meeting point for leaders from the political sphere, the business sphere, the cultural sphere. It was designed as a place where they could talk about major issues, right, and shape global, regional industry agendas. It is in many ways inherently tied to a, other major institutions of the global economic order, certainly in terms of narrative and in terms of

people's minds. And you can see that played out in the themes that find their way into Davos each year. So this year's theme is stakeholders for a cohesive and sustainable world. A huge part of the agenda is talking about climate change and sustainability as a major issue. And more broadly speaking, the overall tone of the event is the idea that the world is at a critical crossroads, which is a term used by Klaus Schwab. He said, with the world at such critical crossroads, this year we must develop a Davos manifesto 2020 to reimagine the purpose and scorecards for companies and governments. So in some ways the question to me is, okay, then what is at stake for cryptocurrencies?

The obvious answer in some ways is that this is, where global agendas are set, or at least this is where you can see the global agendas being set, manifest, and told, and stated publicly, which is important. But before we get into that and why crypto should be there or not, what is crypto's history with this event? How long has crypto been a part of this event? And Sandra Roe, who's the CEO of the Global Blockchain Business Council, which is hosting an event around Davos, wrote a piece about the history of quote, quote, crypto Davos and how it came to be. And basically, the way that she describes it is that four or five years ago, early folks in the Bitcoin and crypto community

started posting or starting doing side events, you know, all of these major world events, all of these major regional conferences, be they South by Southwest or CES or what have you, they all have created a whole ecosystem of side events for people who want to be around the event, but not necessarily, you know, buying a badge or whatever. So that started four or five years ago, and things started to get bigger and bigger as the industry got bigger and bigger. And the peak of this was, of course, in 2018 when we were just at the very height of the ICO boom.

That was the point at which there was the greatest amount of activity and companies paying for sponsorships on the promenade and all of that sort of stuff. Last year, the numbers were obviously much more muted, which was the case for any crypto event, any crypto participation in events around the world. And this year, the question is what's coming back. Now, if you look at, CoinDesk has started a pop-up newsletter from the ground in Davos to talk about what's going on. And one of the notable things that they pointed out, just in terms of gauging where

crypto companies were with this event, is they didn't see a lot of crypto logos. There weren't a lot of sponsorships, clearly, from crypto companies of booths. or of, you know, spaces on the promenade, you know, anywhere that they'd prominently display their logo, which suggests that to the extent that crypto companies are being or getting involved, it's more on doing business behind the scenes level rather than a public-facing level, which I think makes sense for just where the industry is. We're still in this weird hybrid of a barren bull market where no one can quite wrap their head around it. And it's not exactly clear what, you know, slapping your logo on something does from a value proposition

anyway. So whatever the case, it seems like this is kind of an in-between year in terms of crypto's participation in the event. However, there are some parts of the event that are clearly connected to this industry. Notably, the World Economic Forum has a department that focuses on this area, right? So Sheila Warren is the head of blockchain and distributed ledger technology at the World Economic Forum. And she wrote, along with Sumeda Deskmoo, who was a project specialist in that same department, an op-ed about why the WEF is convening a group to create a blockchain bill of rights. And so effectively what their argument is, is that this technology is a chance to get it right. or at least writer than we have in the past.

And they want certain design principles for a decentralized future, which is their precise terminology, to actually be intentional and have some broad agreement among folks in the industry. So in this op-ed about the blockchain Bill of Rights, they write, the goal is to align private sector leaders, policymakers, and consumers in a fundamental vision of how users can and should be protected as blockchain technology develops,

particularly around the following pillars. One, agency and interoperability, the right to own and manage data. Two, privacy and security, the right to data protection. Three, transparency and accessibility, the right to information about the system. Four, accountability and governance, the right to understand available recourse. So they're talking about within blockchain systems how they're designed and how they're designed intentionally. So the point of this is to say that the World Economic Forum itself is clear.

clearly investing some amount of resources and some amount of thinking and time into this area. But it still brings me back to this question of should the crypto industry itself actually care about the conversations happening in Davos? And if so, why and if not, why not? So first, let's talk about why someone might choose not to care much about what's going on in Davos. the crypto industry, and in particular the Bitcoin-focused segment of the industry, does have a general sense of dissatisfaction with the elites, with the global economic order as it is. In many ways, Bitcoin is seen as a way to opt out of the existing financial system, or at least opt into something that is inherently different and less controllable,

and less manipulable, and less subject to the same challenges that have, risen in the dominant financial system. And I think that there are the folks who I see not wanting to engage with this community, not wanting to engage with these conversations, tend to think that there is importance in actually keeping distance from those power centers so that in order to avoid capture, right, in order to avoid capture and integration into a system which doesn't play by the same set of rules and which doesn't respect the same set of values. So there's kind of a if Bitcoin is inherently a response to a global economic order that is out of control and the elites who perpetuate it for their own benefit, why would Bitcoin choose to be a part of the

conversation about how those elites can continue to change and shape the world, right? This is broadly speaking, the reason that I can see someone just not being really interested so much in what's going on there. Another potential reason is that historically, the World Economic Forum and Davos haven't been particularly interested in or, you know, positive about this whole technology area, or at least the attendees haven't been. So, for example, last year, there were a number of critiques in major events. The PayPal CEO called Bitcoin basically limited appeal. One of Mark Carney, the Bank of England governor's senior advisors, said that he wasn't particularly worried about cryptocurrencies because of how slow they are. And in general, even those folks who have been

positive about the underlying technology, it's been one of these crypto not, or blockchain, not crypto situations, right? People are interested in what distributed ledger, technologies can do, which is obviously a thing that we've heard over and over and over again. So in terms of this, why shouldn't we care column, there's two big bullets. One is the inherent tension of participating in a system that in some ways we're trying to upend. And secondly, the issue of just the track record that this event has in terms of what people think about this technology at the event. I think these are reasonable. I think these are important critiques. I am particularly sympathetic to the

challenge of and fear of capture and absorption by an existing power structure. I think the hallmark of power structures is that they are good at staying in power and they are good at adapting to new realities in order to stay in power. And to the extent that we're trying to create something that is in any way fundamentally different and in any way disrupts the upside benefits to the existing system for the people who reap those benefits now, we have to at least be cautious and intentional and diligent about the possibilities of institutional capture. So I'm sympathetic. However, I do find myself coming down on the other side, which is why we should care about the conversations happening at Davos and why we should be trying to have even more of a seat at the table.

table. So let's talk about that. All right. So let's talk about why we should care about the conversation happening in Davos, happening at the World Economic Forum. I have four reasons. The first is understanding. I believe that we should want to take the temperature of this global elite perspective, even if we don't particularly like it, even if some of us find it repugnant that the world has evolved in such a way to create this elite superstructure. I still think that we can acknowledge that the way that power works in the world is such that we need to understand where this group is articulating its priorities and what that means for the businesses that we're trying to operate, the protocols that we're trying to bring to life. So I think when we're talking about trying to

understand this global elite, we're really talking about two things. First is we want to understand where they are on macro issues. We want to understand how they're talking about the dollar and the dollar's place in the world. We want to understand how they're talking about China and its economic influence around the world. We want to understand how they're thinking about just the role of central banks and monetary policy more broadly. These are inescapably the context for everything that we do in this crypto industry. Even if we are building systems that are meant to escape this reality, this reality sets the context that we are trying to escape from. We have to be able to understand what people are thinking, how they're acting, in order to better act ourselves. So part one

is understanding of where the global elite is around macro issues. Second, I do think it's valuable to understand what people are thinking about this industry particularly. Is this conversation this year going to be more of the same blockchain, not crypto? Are we going to be talking about digital assets, not crypto, and have it be a whole securities kind of tokenization conversation? Is instead the entire conversation in this digital space, digital asset space going to be about digital currencies, the rise of Libra, the discussion of China's digital yuan, a conversation about central bank digital currencies. What is the crypto conversation going to be not from our perspective looking in, but from their perspective looking out to us and to our industry that we're in? How are they talking

about Bitcoin? Is Bitcoin even on the agenda? Are we just talking about Libra and CBDCs? These are really important questions. Again, not because they necessarily will immediately change anything about what we're building or how, but because we want to understand how the world is thinking about what we're building, even if we choose to reject it. So that's part one, understanding. One of four reasons to care about the conversations at Davos. Part two, reason two is infiltration. There are prospective allies everywhere.

There are pre-coiners everywhere. And just because someone hasn't been an advocate for Bitcoin yet, just because someone hasn't been an advocate for decentralized network, yet. Just because someone hasn't thought and been broken out of the paradigm of institutional thinking that they're in yet doesn't mean they aren't convertible. And as a, we are in some ways a space, an industry, a sector, and a movement that is predicated upon converting people to think and act as we think and act, to see the world in the same terms that we do. Davos is a chance to go recruiting effectively.

And you can't recruit if your only disposition is antagonism and un-invitation, disinvitation. I think that if we are really serious about letting people participate in a different economic order, we have to find the right ways to invite them in. So I think I don't want to belabor this point because it's kind of obvious. But Davos, when you have people concentrated in a small space, it's different than getting on their calendars, you know, through the press office. It's a chance to actually get ideas flowing and people involved in a very different way. So part two is infiltration.

Part three, crypto operates in the context of a larger world. And the issues that we are trying to address are related to a number of different issues that don't just have to do with the way that monetary policy is conducted in any one government or another. There's a set of related issues, right? orthogonal issues that touch this space in this industry that are immensely important and very much connect to what we're trying to build here. Issues such as privacy and surveillance and which of these is where the balance between these two lies in the larger battle between

governments providing for the safety and security of their citizens versus the sovereignty of their citizens, right? These are very fundamental issues in this internet era, where information is so readily available. Speaking of information, one of the banner new issues that is being addressed at the W.EF in a totally new way, or at least in a totally new scale, is the issue of deepfakes and synthetic media. We've had some fun with deepfakes in this crypto space seeing, you know, CZ Binance's face strapped on Jetli's body in a fun ad. But deepfakes have a major, they create new questions.

and policy questions that are going to impact all types of digital media. We have a stake in that conversation, even if it's not what the technology that we're building is trying to address. So there's this whole world of related issues, which I think are unignorable by us. And again, being able to be a part of those conversations at the highest level does feel important to me from the larger context of, I'm in this industry to create the world that I want to see. The main dimension that we are fighting that battle on has to do with money and what money can do and what money's attributes are for different people in the world.

But it doesn't mean I'm not interested in those other parts. And in fact, depending on who you ask, issues like privacy and surveillance might be as high as sound money principles. So this whole set of related issues which are very integrally tied to what's going on and the conversations being had at Davos are extremely important. The fourth and maybe most salient point is that we're on the agenda, quite literally. Crypto is on the agenda, and it's our choice about how deeply we're going to engage with it. So I went to Twitter to ask their opinion about this question even before recording this podcast. I said, should this industry even care about what goes on in Davos? And Nelson Rosario, who is a lawyer in the crypto space, he wrote, I'm paraphrasing here,

but just because you do not take an interest in Davos, it doesn't mean Davos won't take an interest in you. And one look at the agenda suggests the truth in his statement. On Tuesday, there are sessions about, quote, shaping the future of the financial and monetary system. There are panels about from token assets to a token economy, a panel about the China economic outlook. On Wednesday, there's a panel about the future of financial markets.

On Thursday, challenging the dominance of the dollar. on Thursday again, creating a credible and trusted digital currency. On Friday, a larger question, global economic outlook and the centrality of central banks. These issues, particularly in the context of Libra and China's digital yuan and the up-leveling of the whole industry that that created, are literally on the WEF-Davos agenda. They've invited people from this industry to be participants in this conversation. and I think that we have a choice. We can either let them happen in the absence of our broader community participation

and just kind of let them stay in the domain of some random panel discussion in Switzerland that we don't particularly care about because we're off debating the next thing on Twitter, or we can decide that it's clear that this industry and the set of issues that we're fighting for, the set of issues that we're addressing, are on the Davos agenda, they are on the global elite agenda, at least in some way. And it behooves us to participate in that conversation. That's certainly where I land. I believe that the characterization of Bitcoin and the characterization of crypto is still far from

where we want it to be. I believe that even as we are trying to build new power structures and new power systems, we have to understand and be able to play the game in certain instances of the old power systems. I don't believe it's everyone's job to care. I think that it's a completely reasonable individual decision to opt out of really giving crap about anything that's said in Davos, writing it off as just a bunch of talking and only caring about actions that are actually taken. Like I said, I think that that's a reasonable personal position to take.

But I think to the extent that we're operating as an industry and as a community, understanding what's going on, trying to infiltrate and influence those conversations, recognizing that there are related issues that should matter to us, that do matter to us, and finally, having a stake in the conversations about us that have been convened is important. So I'm going to be watching Davos closely from here. You know, if there's interesting announcements, I'll report them on the breakdown. I won't necessarily do a full analysis like this again, because I'm sure there's going to be a million other things to talk about.

But that's my two cents. I guess what I'll leave you with is just what I'm seeing in the community. Like I said, I ask people. should they care and I put up a little poll. And the numbers aren't huge in terms of respondents because polls are terrible and Twitter really needs to work on that UI. But right now, 40.9% of respondents say, yes, like it or not, the WEF and Davos folks are power brokers and we should be paying attention to the conversation. Forty-three point two percent said, no, we're trying to build something new. And 15.9% said they are not sure. So really split, really interesting. Let's

keep an eye on it, guys. Let me know what you think. Email me or hit me up on Twitter at NLW. And thanks as always for listening. I will catch you tomorrow.