The Breakdown - Can Bitcoin Avoid the Partisan Curse?

Episode Date: May 27, 2023

On this episode of Long Reads Sunday, NLW reads "DeSantis and the Growing Culture War Around Bitcoin" by Daniel Kuhn.  Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribeto the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

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. What's going on, guys? It is Saturday, May 27th, and that means it's time for Long Reads Saturday. A quick note before we dive in, the breakdown is now the Breakdown Network. I would love it if you went and checked out our other shows. For those of you interested in how AI is changing the world all around us, check out the AI breakdown. And for those of you who just want to stick closer to home, check out Bitcoin Builders. It's a show all about the incredible creative and entrepreneurial energy that is coming to the Bitcoin and Lightning ecosystem.

And there is a great interview over there right now with Obie from Fetty that I think you will really enjoy. Now, today on Longreed Sunday slash Saturday, where I want to start is with some further analysis around Ron DeSantis' announcement that he was, A, running for president, and B, in so doing was hoping to protect Bitcoin. Because this isn't a political show, I didn't get into the politics of DeSantis in America, although they are, of course, very complex. Plenty of people have pointed out that his focus on the freedom that Bitcoin creates is perhaps inconsistent with some of his other positions. But holding aside specific policies, there's also questions of what his embrace of Bitcoin suggests about how it fits into the larger partisan framework.

Coin desk Daniel Kuhn wrote a piece this week called DeSantis and the growing culture war around Bitcoin. Daniel writes, This week, CoinDesk published one of the most thought-provoking and balanced articles on Bitcoin mining I've ever read. The report is focused around the Greenage Bitcoin Mining Company in upstate New York, which was at the center of a protracted media cycle last year, after environmental activists claimed the facility was boiling the waterways and poisoning delicate ecosystems. Those claims went on to influence an actual policy decision by Governor Kathy Hocel, restricting Bitcoin mining in the state.

The thing is, most of the worst claims about Greenage were straight up wrong. Coin-desk Nick D, Doreen Wang, and Cheyenne Ligon took a trip to Dresden in upstate New York to take the temperature of the lake and speak to locals, finding that not a single lawmaker visited the Rust Belt town or spoke to its mayor before drafting what is essentially a freeze on new Bitcoin miners. Most of the Bitcoin mining debate today has centered around the Bitcoin Network's environmental impact. Greenage became a lightning rod because before the company moved equipment into the plant that now uses natural gas, it was deactivated, meaning that when the miners were turned on, they weren't just drawing on electricity that would have been produced

anyway, but actively releasing quote-unquote fresh carbon into the atmosphere. The Bitcoin network uses as much energy as a country like Norway, and trying to wrap your head around whether that is or isn't worth it often comes down to your point of view on how you value permissionless money. Individuals can certainly make up their minds on the matter, but how a state should treat Bitcoin, for instance, whether mining should be encouraged or banned, is a societal-level conversation involving politicians, stakeholders, and those affected. In a behind-the-scenes account of how the story came to be, Dee wrote that he expected locals to hate the plant. He and his team had heard that Greenage was pumping pollution into Seneca Lake

and creating incessant noise, a claim that was also debunked. Instead, their team found that many in the town and surrounding areas supported the upstart business. Although Greenage created a relatively small number, every job counts in a town like Dresden, population 296. In fact, the few complaints about Greenage lodged by locals came from so-called cottage people. the wealthy out-of-towners with vacation homes on the lakeshore. Sure as taxpayers, these people have a right to be concerned about their property value, but should their opinion matter more, because it seemed to. And here layeth the nut. Beyond all the other intractable debates about Bitcoin mining lies a class conflict. You all know the story. Bitcoin was born during the great financial crisis,

a tool that allowed anyone to access a semi-private electronic cash system, where the money supply would always be verifiable, a total rebuke of banking and the Federal Reserve. Over time, that narrative has gotten a little more complicated, especially as some of Bitcoin's biggest supporters have become entrenched elites themselves, essentially for making a few good trades a decade ago. There are now a lot of white-collar jobs based around analyzing Bitcoin's price performance and lobbying for newfangled investment vehicles derived from Bitcoin. Bitcoin mining too has gone from something you could do on your home computer to become a highly capital-intensive industry, requiring the purchase of hundreds or thousands of specialized computers that draw electricity 24-7 if you want to

compete on any meaningful scale. But the proof-of-work algorithm that makes Bitcoin also tethers it to the ground. These investments are being made in real communities. Greenage, for instance, has hired unionized electricians and created dozens of short-term construction jobs. The company has made a number of improvements into Dresden, including fixing up a children's playground and other beautification efforts. Not all facilities operate their own converted coal plant like Greenwich requiring as much labor, but many do create opportunities for people where opportunity doesn't always come a knocking. If greenage is any indication, the real conversations we could be having around Bitcoin mining in class will be increasingly consumed by another conflict, the culture war.

I've said for a while, perhaps being too reductionist, that Bitcoin is going to become a red-blue issue in the U.S., with Republicans increasingly endorsing it and Democrats disavowing. Although the network itself will likely always remain credibly neutral, the way that we think about it and politicize it will fall along predictable lines. Many topics have traveled thus. Before climate change became a wedge issue in American politics, for example, it was a relatively nonpartisan issue that many politicians agreed on the need to do something about. Just yesterday, Florida Governor Ron DeSantis spoke about Bitcoin's threat to the current regime in an announcement event for his 2024 presidential campaign. Although modeling himself as a populist, DeSantis has the early support of money

technologists like Elon Musk and fellow PayPal Mafia member David Sachs. DeSantis is probably most well-known nationally for what's been termed the don't-say-gay-bill and a fight with Disney. Something tells me that DeSantis' pledge to protect Bitcoin is as performative as his ban on central bank digital currency in Florida before the Fed has even decided whether it's worth fully studying a digital dollar. But it'll still be enough to color some people's impressions of crypto, furthering the type of political feedback loop that enabled environmentalists to lie about Greenwich's ecological footprint and the Democrat government in New York to buy it whole cloth. As my colleague Nick said, a conversation that doesn't

include the people most directly impacted can lead to wonky outcomes, when the only two political parties of consequence are shadowboxing about fake internet money, the only people who can get a word in edgewise probably own a vacation home. So I've asked this question about the partisanship and Bitcoin and crypto for quite some time. There have been a few pretty remarkable moments over the last few years that have demonstrated just how resoundingly apolitical, or at least bipartisan or nonpartisan, Bitcoin and Crypto are. One of those moments was during the infrastructure bill fight, when a tax was shoehorned in at the last minute that would have forced nodes and other non-custodial operators to collect information that they just genuinely don't have access to. And at first,

it seemed like it was an unintentional mistake derived just from people not really understanding, but then it became clear to advocates that it was actually people within the Department Treasury, who disliked Bitcoin and crypto, who were trying to sneak it in as a way to actually effectively soft-ban the industry. Now, what was interesting about what happened next, in addition to the crypto community just holding up the whole bill for about two weeks, was that it wasn't clearly along partisan lines who was supporting changes and who was supporting some version of the definition to remain in the bill. You had Democrats like Ron Wyden who were fiercely fighting alongside the crypto community, and you had a number of Republicans on the other side trying to keep the language in.

Now, of course, the partisanship has hardened over the last couple years since that infrastructure debate. Or at least it appears to have. Two notes on that. First of all, the Republicans who are loudly supportive of the crypto industry today, people like Patrick McHenry, Congressman Warren Davidson, Congressman Tom Emmer, have been that way for quite some time. What you haven't seen is Republicans who previously didn't really give a crap about Bitcoin or crypto getting into it because it's now a Republican or conservative talking point. To the extent that there's anyone that fits that model, maybe you could argue that it's Ted Cruz. But if you listen to Ted Cruz speak about Bitcoin, it's pretty clear that he's done the work. And even if you disagree

with him on a lot of other things slash everything else, it's pretty undeniable what his positions on Bitcoin and Bitcoin mining are. Now, on the other side, if we look at the Democrats, have we seen lots of progressive politicians turn against crypto when they used to be for it? The answer again is no. Elizabeth Warren has never been for crypto. She has never been for Bitcoin. She has for as long as it has been an issue that commanded her attention, just assume that if it had to do with money stuff for value exchange of any kind, it was just another Wall Street Wolf and Sheep's clothing. That was her position two years ago, and that is her position today. Perhaps one could argue that

Biden himself has had a change of heart, given that last year's executive order was relatively nuanced and open, and now he's using crypto as a bully cudgel in his debt ceiling debates. But I kind of think that that's just talking points from the Democratic Committee going forward. I don't think it really represents the president's feelings. I don't even know if the president really has any feelings about this industry. What's happened over the last six months is not that all of a sudden a ton of progressives have come to hate crypto. It's that the progressives who always hated crypto, the Sherman and Warren wing of the party, have been allowed to run roughshot over everyone else because who's going to defend this industry after Sam Bankman-Fried? Who's going to defend this industry after the

collapse of Luna and 3AC. The answer is, of course, no one, which means the people who make it their job and who stand their career on being against crypto, have more freedom to do what they've always wanted to do. So the counterclaim to what feels like clearly hardening partisan lines when it comes to crypto is that there's not yet evidence really that anyone's changed their mind from where they were a couple years ago. It's just that all the people in the middle, who either haven't made up their mind yet, or aren't willing to deal with it because it's contentious, are certainly not willing to dive into the debate at this highly contentious and hostile time. That's very different that it becoming a partisan football. And if you need more

evidence of this, the fact that both DeSantis and RFK have talked about Bitcoin suggests that there's at least more bipartisanship when it comes to this issue than some others. Now, could this change, of course. Bitcoin and crypto could just become another issue, as Daniel points out. The countervailing force is that there is a very, very serious age factor when it comes to the debate about digital assets. For all younger members of Congress, Republicans or Democrats or independents, Bitcoin and crypto make more sense than they do to their older colleagues. There's just no denying that. And I don't believe it's ages to point it out. Even Died in the Will Progressives like AOC have expressed more openness if you watch the way that she engages in hearings than many of her older colleagues.

I continue to believe that there is an opportunity to keep Bitcoin and crypto nonpartisan. But that does mean strenuously fighting those who are still against it. Anyways, it's a very interesting time in this particular aspect of Bitcoin and Crypto, and it would be fascinating to see how the next cycle's dynamics change and influence it, if at all. For example, does the fact that Ethereum is now proof of stake, and as such more quote-unquote environmentally friendly, change the narrative around NFTs the second time around? I don't know, but it'll be interesting to see.

Anyways, guys, that's it for this holiday weekend long read Saturday. If you're enjoying the breakdown, please go like, subscribe, and share it. Peace.