The Breakdown - Bitcoin Is Human Rights Technology

Starting point is 00:00:04 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexus.com, near NFTX, and produced and distributed by CoinDesk. What's going on, guys? It is Thursday, June 9th, and today we are talking about why Bitcoin is human rights technology. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it. rating, give it a review, or if you want to dig deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Also, a disclosure, as always, in addition to them being sponsors of the show, I also work with

Starting point is 00:00:51 FTCX. So today we are talking FUD, so let's start by laying a few ground rules on the discussion. When I say FUD, I do not mean all criticism of crypto. People, of course, are welcome to their opinions, even when they come to totally different conclusions than I do. What's more, I think in general, a certain skepticism towards big claims, particularly around how any given technology might change the world, is a totally healthy disposition to have. There are also areas of critique and concern around crypto that are both legitimate but can veer into FUD, with the environment being maybe the best example. I am not in the camp, for example, of Bitcoiners who think that climate change is not an issue, I believe that it is. What's more, I think,

Starting point is 00:01:35 like all industries, it is completely legitimate for people to ask questions about how Bitcoin mining can become greener and less carbon intensive over time. I think it's even reasonable to ask questions around incentives and ask what happens in the circumstance that carbon-intensive energy sources are the cheapest. But if we have that discussion, I want to start it in good faith. I want the people on the other side of the conversation to compare, for example, Bitcoin's renewable usage relative to other industries. I want them to take. acknowledge the uniqueness of focusing so much attention on Bitcoin's energy footprint as opposed to other industries. And I want them to take seriously the claims from miners and other advocates

Starting point is 00:02:16 around how Bitcoin can actually be useful and helpful when it comes to renewable grids. Those are all good, non-FUD discussions we can have around Bitcoin and the environment. The vast, vast majority, however, of discourse you see on this topic comes from either one, who fundamentally do not believe that Bitcoin should exist, and so who don't want it to use any energy at any cost, and two, news outlets for whom the flashiest, most sensational headlines are going to drive more attention and thus advertising revenue. The point of course is that even within a single topic, there can be both legitimate discussions to be had as well as FUD. And when I'm talking about FUD, I'm not talking about the legitimate discourse. Now, this is all important because

Starting point is 00:03:00 today we're looking at two recent pieces of fud. The first has to do with mining concentration in the early days of Bitcoin. Basically, a new academic paper is out, co-authored by nine researchers from six universities, that looks into Bitcoin network concentration in the first two years of the network's existence, basically the time period before Bitcoin was worth $1. The researchers uncovered data that shows that around 64 parties controlled most of the mining power in this early era. One of the researchers told CoinDes, quote, sought to understand the socioeconomic process by which Bitcoin transitioned from a digital object with no market to a functional medium of exchange. So what we're looking at here is the first two

Starting point is 00:03:40 years or so after Bitcoin was created. For most of this period, Bitcoin was worth effectively nothing. This is the period where Laslo, for example, bought pizzas for 10,000 BTC. This paper then is examining the profile of the community around Bitcoin at that time and found it was small, which I don't think is really surprising. There were technical barriers to entry, cost to the participant with no promise of reward. We're used to a world where Bitcoin is in the press constantly, but that wasn't the case then. It hadn't even had its first mainstream mentions for most of this time. The paper goes on to look at this small community and say how easy it would have been for a small group to 51% attack the network. Yet, the researchers write, strikingly, we find

Starting point is 00:04:20 that potential attackers always chose to cooperate instead. Okay, so all interesting. This is cool Bitcoin historical research and what's more, the fact that it was so vulnerable and was attacked is sort of bullish, right? It suggests the network small that it was were good stewards on Bitcoin's path to growth and further decentralization. Well, that was not the story the New York Times decided to promote. The New York Times piece, a whopping 4,000 words about this paper, was called How Trustless Is Bitcoin Really? The lead reads, in myth, the cryptocurrency is egalitarian, decentralized and all but anonymous. The reality is very different scientists have found. This is sort of mind-blowing relative to the story that I just told you, right? Well, Nick Carter sums up

Starting point is 00:05:06 what I think a lot of people were feeling seeing these headlines coming out of the NYT. Quote, unpublished paper uses extra nonses to attribute early miners, finds that certain agents had lots of hash power in 2009 and 10, especially early GPU miners. Some miners could have attacked network but didn't. New York Times says, Bitcoin isn't anonymous, decentralization theater. This is probably the most egregious instance I've found of an article saying something completely anodyne and the New York Times trying to gin it up into a big scandal. This paper is not notable at all. It's not published in a peer-review journal, and it covers the 2009-2011 period in mining. As far as I can tell, beyond some new attribution of early miners, the paper doesn't

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Starting point is 00:07:09 with up to 85% lower fees than competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDXUS is also the only leading exchange that supports both Ethereum and Solana NFTs. When you trade NFTs on FTCX, you pay no gas fee. Download the FTX app today and use referral code breakdown to support the show. Now, some other people found the study interesting, even if they agreed broadly with Nick's assessment. Alex Thorn wrote, the paper is pretty interesting and does some attribution clustering on early minors,

Starting point is 00:07:46 but the New York Times characterization is hyperbolic and misses a lot of context. Atcham Warner writes interesting math if you don't get triggered by how other people might interpret the headline. Alex Gladstein from the Human Rights Foundation responded to that tweet saying, it's not a matter of trigger. It's that the New York Times alleges that early mining pattern somehow makes Bitcoin not decentralized, which is just false. Honestly, when I read the article itself, it's not particularly negative. It's maybe a little bit weird to be given 4,000 words, but the issue here is the headlines.

Starting point is 00:08:15 This is an editor's decision. And if you want to understand why it matters, well, it's because we live in a headline world where people don't take the time to go deeper. Proving that point is Rick 1067 on Twitter who tweets, It turns out that Bitcoin was invented and is run by yet another small, wealthy elite. It is neither secure or trustless, immune to those who would attack the system, take it over or abuse it. And of course, he shared that headline. But the New York Times wasn't done there.

Starting point is 00:08:43 Ah, venerable Paul Krugman, the same Krugman who in 1998 wrote, The growth of the internet will slow drastically as the flaw in Metcalf's law, which states that the number of potential connections in a network is proportional to the square of the number of participants becomes apparent. Most people have nothing to say to each other. By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machines. Yes, so that, Paul Krugman, had another column on Bitcoin and Crypto this week called from the Big Short to the Big Scam. The key line is, as a number of analysts have pointed out, stable coins may seem high-tech and futuristic, but what they most resemble are 19th century banks, specifically U.S. banks

Starting point is 00:09:20 during the free banking era before the Civil War, when paper currency was issued by largely unregulated private institutions. Many of these banks failed, in some cases due to fraud, but mostly due to bad investments. They also ask why, if crypto is the future, Bitcoin, which was introduced in 2009, has yet to find any significant real-world uses. In my experience, the answers are always word salad, devoid of concrete examples. End quote. Now, if you want a vocal defense of free banking, go check out the response thread from George Selgin. But as you might have guessed, I'm a little bit more focused on the argument that Bitcoin hasn't found any real-world use cases. Congressman Roe Kana tweeted in 1985 there was an article in the New York Times that the laptop did not have many

Starting point is 00:09:59 beneficial use cases for the average consumer. This turned out to be spectacularly wrong. It should give us humility before prognosticating about the use cases of future tech. Still, I think that the most compelling counterpoint and the most ironic thing about the timing of this piece is that it came out the same day that 20 human rights activists from around the world released a letter about why Bitcoin did in fact matter to them. Troy Cross sums it up. Quoting Krugman, he writes, Bitcoin, which was introduced in 2009, has yet to find any significant real-world uses. This comes out on the same day as the letter from 20 human rights activists. Buying bulletproof vests, helmets, and medical equipment? Not significant. Escaping hyperinflation,

Starting point is 00:10:39 not significant. Protesting misogyny and police violence. Not significant. So what Troy is referring to is a new open letter, created in the same template as that open letter to politicians from the quote-unquote tech executives and tech experts that we discussed last week. That piece that said crypto is bad, bad, dangerous, bad, all bad, and not innovative or useful in any way. Remember, it was the one that got all sorts of mainstream headlines about how technologists in general, not just these 26 people, but in general, didn't like crypto. Well, here's an excerpt from this new one, and perhaps you, like me, will find it somewhat more compelling. We are 21 human rights advocates from 20 countries around the globe who have dedicated ourselves to the struggle for freedom

Starting point is 00:11:22 and democracy. In this struggle, we have relied on Bitcoin and dollar instruments known as stable coins, as have tens of millions of others living under authoritarian regimes or unstable economies. We can personally attest, as do the enclosed reports from top global media outlets, that when currency catastrophes struck Cuba, Afghanistan, and Venezuela, Bitcoin gave our compatriots refuge. When crackdowns on civil liberties befell Nigeria, Belarus, and Hong Kong. Bitcoin helped keep the fight against authoritarianism afloat. After Russia invaded Ukraine, these technologies, which the critics allege are not built for purpose, played a role in sustaining democratic resistance, especially in the first few days when legacy financial systems faltered. Unlike most citizens on the planet,

Starting point is 00:12:01 nearly all of the authors of the anti-crypto letter are from countries with stable currencies, free speech, and strong property rights. Dollar and euro users have most likely not experienced extreme currency devaluation or the cold grip of dictatorship. To most in the West, the horrors of monetary colonialism, misogynist financial policy, frozen bank accounts, exploitative remittance companies, and an inability to connect to the global economy might be distant ideas. To most of us in our communities, and to the majority of people worldwide, they are daily realities. If there were far better solutions already in use to overcome these challenges, we would know. We do not claim that Bitcoin and stablecoins solve every problem or that they

Starting point is 00:12:38 are entirely positive or without risk. But in contrast to the claims made by the authors of the anti-crypto letter, ample evidence suggests that Bitcoin has and will continue to empower Americans and global citizens in the coming decade. And that, alongside stablecoins, this open and decentralized monetary network will help defy tyranny and strengthen democratic movements abroad. Most of us dream that our fellow citizens could have access to the dollar or euro systems, but they do not. Bitcoin might not be our plan A, but amidst the failures of legacy financial systems, it is a valuable plan B. as a bridge to the global economy, and as a counter to the Chinese Communist Party's model of

Starting point is 00:13:12 surveillance and control. To claim that the practical value and future potential of cryptocurrencies does not exist, denies the lived experience of millions of people like us and our colleagues who have depended on Bitcoin and Staplecoins in times of crisis and autocracy. You can find the full note that they wrote at Financial Inclusion.Tech, and man, that is fud fighting in the best possible way. For now, I want to say thanks again to my sponsors, nexo.io, near NFTX, and thanks to you guys for listening. Until tomorrow, be safe and take care of each other. Peace.

The Breakdown - Bitcoin Is Human Rights Technology

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