The Breakdown - Crypto Daily 3@3 - 7.15 | Long Reads Sunday #55 Top 5

Episode Date: July 15, 2019

Every Sunday, I put together a list of the top tweets, threads and essays shaping the crypto conversation. On Monday, I countdown my five favorites with BlockTV. Monday's Crypto Daily 3@3 is the audio recording version.  For those who want to watch, check out the replay at: https://www.youtube.com/nathanielwhittemorecrypto https://blocktv.com/   Follow me on Twitter: https://twitter.com/nlw Follow BlockTV: https://twitter.com/BLOCKTVnews

Welcome back to the Crypto Daily 3 at 3. Quick note on this one today. So every Sunday, for those of you who don't know, I do a thing called Longreed Sunday, which is basically a curation of the most important threads, essays, interesting tweets, etc. that I've seen around crypto and Bitcoin of the week before. And then on Monday mornings, I film a top five video segment of that with Block TV. And instead of just repeating the same things maybe that I talked about there, I thought that might be just the best idea to actually try to import that audio and share that with you each Monday as the Crypto Daily 3 at 3.

So we're going to give it a try this week. As always, and with anything that I do, please let me know if you like it, if you don't like it, if you have different ideas, and we'll see where it goes. But for now, enjoy the Long Read Sunday top five, courtesy of Block TV, and I'll catch you tomorrow. Welcome back to Block TV. Now, every Sunday, the crypto community receives a little treat in the form of a well-researched and thought-out Twitter thread by one of the top writers documenting the ecosystem. I'm talking, of course, about Nathaniel Whitmore and his Long Read Sunday Twitter column, which he puts out once a week. Nathaniel, thanks so much for joining us. Yeah, thanks for having me.

All right. So to break down now your top five thoughts for the week, let's start with number five. Now, you're speaking here about Blockstack and the SEC clearance they received. What can you tell us? So this is an interesting moment, right? For a few years, obviously, since the beginning of the ICO boom, we've been talking about what the purpose of tokens are, right? On the one hand, you have the very theoretical and philosophical argument that they are a mechanism to align communities,

a way to kind of get the utility of a network, so on and so forth, right? That's been kind of the given answer for why a token. Now, in the background, of course, this massive market, for tokens emerged and really kind of answered this other, they answered that same question in a different way. And the purpose of tokens was to make money. And the tension between those two has been with us for throughout the kind of industry's young life.

And so part of the question is, where is the SEC going to fall on this? Are tokens all going to be determined to be securities? Are they going to be kind of hammered for being illegal securities offerings? And some companies decided to take a different route and actually try to get the SEC to approve their token listings. And what we had this last week was the first ever effectively SEC approved token sale using an exemption they have called Regulation A Plus, which is a crowdfunding tool that's been around for a couple of years. But this is the first time it's been applied to token sales.

And so BlockSack was the first to get approval within a matter of hours. U-NOWs Props Project also got approval. And so the interesting question that now comes is that we've gotten an answer, and this is the way that Jake Chervinsky, kind of one of crypto-Twitter's best-known lawyers put it, we have an answer to whether the SEC will approve a token sale through Regulation A-plus. The question is whether anyone will care effectively. That's me paraphrasing. And so what we have now to see is that will these regulated tokens, which will allow non-accredited investors to actually participate in the sale, be interesting to people when they're kind of disconnected from, you know, unlicensed exchanges that allow for kind of massive price action. And that's the thing that we'll see next.

Perhaps what we'll see next, but I suppose I've got to ask, do you think this is the opening of the floodgates now where we're going to see these sort of SEC regulation coming into place more so in the future? I think that it means that for those companies and projects that have the resources to actually pursue this path, it becomes a very clear precedent, right? And so, you know, there's, there weren't specific numbers about how much this cost block stack or you now to determine, but, but lawyers estimate that it's, you know, they probably spend upwards of a million or two million dollars in compliance cost. So obviously that's going to cut off a lot of different projects. But I guess so that the positive side is there is now a path for non-accredited investors to with the, full sanction of the US government participate in a particular type of token sale. The question is whether the flip side of this, whether the market actually finds it interesting because of what it limits on the other side. But it's definitely progress and we'll be interesting to see what happens. Certainly will be an interesting one for us to watch. But now turning to your number four for this week, we have an interesting different perspective

on the matter of the Libra announcement and what it really means for the industry. Can you break down a little bit about what your focus here is, Nathaniel? Yeah, I thought this one was really important. So this was released, I think, maybe even last Sunday, right after the last Long Read Sunday. So Ben Hunt, Epsilon Theory, writes about financial markets in kind of larger global macro context. He dips into cryptocurrency occasionally, and this was one of those times. And I thought this was notable because for the last few weeks since the Libra announcement, we've had a very strong social consensus, I guess you could say, that it was going to be,

it's good for Bitcoin. It's going to increase its exposure, right? And that it creates a pathway for people to learn about other forms of permissionless cryptocurrencies like Bitcoin. So that's been kind of the narrative, at least among our community. What Ben Hunt is saying is something very different. He is basically saying that this Facebook's, that Libra's purpose, whether it intends to or not, is to totally co-op the narrative of Bitcoin to create a version of cryptocurrency, that is safe, palatable, and actually reinforces state power

as it exists now and even increases state power. In his estimation, what the pathway is, as everyone starts to participate it, it's not that more and more people will find their way to Bitcoin, but less and less people who might have found their way to Bitcoin will ever have reason to care. And instead of actually providing a gateway drug, so to speak, for permissionless blockchains,

it's just going to totally suck the oxygen out of the room for this entire category of technology and money in a way that really relegates all of those of us who are interested in Bitcoin to kind of like the screaming old Abe Simpson, hollering at the sky and not getting anywhere. So I think it's important to contemplate, even if we don't agree necessarily, at least with all of it,

because it is, anytime we start to get such strong, clear consensus in this community, I worry that it's about what we want more than what we actually think or know. So I thought it was a great counterpoint to what we've been talking about for the last couple of weeks. Certainly so. And I suppose this has come up a lot now in people talking about, you know, the store of value element. We'll touch on how this impacts on the wider macroeconomic stuff in a moment. But that Bitcoin is an effective store of value, an effective counterpoint to gold.

But also what that means, again, about it potentially being usurped. There's this sort of a presumption that Bitcoin will always be the prime coin. But do you think here that there is that counterpoint? undervailing view that perhaps Libra, just by sheer force of numbers and who's backing it, could potentially take on that role in a primary sense. Yeah, I think that that's, I think that for a lot of the folks, even those who are interested in Bitcoin as kind of a replacement as a global reserve currency, if you look at, you know, I think Marad from Adaptive Capital put out a picture last year that was retweeted about a

bajillion times that had the pathway for becoming global sound money. showed, you know, in his estimation, the store value piece becomes before the medium of exchange piece, but it does get there, either through base layer scaling or through layer two scaling. And effectively, Ben Hunt is without, you know, referencing that whole set of conversations saying this cuts off that entirely. And maybe, you know, in the same way, there's a relatively small number compared to the mainstream financial ecosystem of gold bugs. Maybe this kind of relegates Bitcoin into that position.

And, you know, of course, there are some that might think that that's a fine place. for Bitcoin to be. But I think that when it comes to this dream of a stateless, you know, permissionless global reserve currency, he's seeing Libra as a major threat to that. Certainly a potential threat there. But speaking of store of value, not store of value, this week for your number three, we saw commentary on a bit of positive news regarding Jerome Powell and here the Fed chair coming out and speaking of Bitcoin as a potential store of value. What can you tell us? this was fascinating because in any other week this would be not just the big news but the big news for

weeks or months at a time you have at you know basically in his testimony to you know in front of the U.S. government that Fed chair was asked about Libra and Bitcoin and just cryptocurrencies in general and instead of just being dismissive it was a much more dynamic response that showed clear consideration and just kind of a fascinating take. And so basically what he said is, or what he was asked is, you know, do you think this is a threat to the U.S. dollar? Do you think this is a threat to the U.S. dollar status as a global reserve currency? And effectively, he said that if there were widespread adoption,

you could see a scenario in which there were multiple currencies, and we kind of had a multiple currency system, as had happened in the past. but that at the same time there really wasn't mass adoption yet. He also pointed out, though, that the way that people currently are talking about and treating Bitcoin is not so much as a medium of exchange currency like the US dollar, but more as a store of value akin to a digital gold. All right, but so Nathaniel, this comes out in a little bit of a, I guess, a backhanded way you could call it, because Powell wasn't necessarily trying to complement Bitcoin and all its potential,

but rather to say that it doesn't serve as a payment system and more as a speculative store of value, as Alex Kruger points out. Yeah, 100%. And this is a good point to make. That the excitement was not because all of a sudden the Fed chair is real bullish and happy about Bitcoin. It's that he's using a language that is similar to the language that the Bitcoin community is using to describe itself. And what it, you know, in a lot of ways, I think there are many of folks in the crypto community who think that part of why Bitcoin is sort of continued to allow to be evolved or has faced less

antagonism, let's say, from the U.S. government is that it doesn't seem to threaten the U.S. dollars' use case as kind of a medium of exchange currency. And so I think that the bullish part, you know, you're exactly right to identify that this is not him being all of a sudden, you know, a Bitcoin proponent. It's more that he's recognizing that it does have kind of a different function whose purpose isn't to take down the U.S. dollar, at least currently. And that's probably good for the adoption of, or rather the continued enablement of the growth of Bitcoin without being, you know, fully targeted by the U.S. government.

At least that's what we were talking about for the first part of Thursday. Certainly exactly right. And of course the first part of Thursday. And now leading to your number two, the only man that could possibly have overshadowed Jerome Powell, Donald J. Trump coming out. And finally, speaking about Bitcoin, who would have thought? And I want to just read one little quote from your tweet here, as you say. On Thursday night, every other conversation came to a screeching halt as crypto denizens from Twitter to telegram came out to holler about this doozy. I just love the language there.

Thought you needed a shout out. But what's your takeaway, Nathaniel? What do you think from this? Yeah, I mean, I was just settling in to watch some American Ninja Warrior with my wife when everything exploded, right? So basically, you know, first of all, the undeniable and indisputed fact of this is that, you know, the loudest and at least sort of most vocal politician on the global stage just elevated Bitcoin and crypto to the national conversation, right? And that is what everyone jumped on to first. And so the immediate reaction from the crypto Twitter community was extreme excitement, extreme bullishness.

And it almost had nothing to do with the analysis of what he said, is that this is a moment of arriving on the main stage. Now, when it came to what the actual substance of this thing was, it was a little bit more kind of, let's say that it wasn't necessarily exactly what you would have wanted to see the highest office of the U.S. government say about crypto, but it wasn't also necessarily unexpected, right? So first of all, you have this kind of reliance on the old narrative of crypto as criminal enablement, right? And, you know, for anyone who's analyzed how crypto would be targeted by governments from kind of a rhetorical standpoint,

it's always been about the idea of criminalization, the idea of enabling terrorism, right? That's the straw man, or you could argue, depending on where you sit, the real worry that people have. So you had that in the first tweet. Then in the second tweet, you kind of have this focus shift from Bitcoin and quote other cryptocurrencies to Facebook's Libra. And I think that a lot of folks, when you kind of stood back and got over the initial excitement of just what a big deal it was that the president was tweeting about Bitcoin, It seemed kind of more like this might have been about an attack on Libra that had to kind of shoehorn in this idea of Bitcoin as well because you want to speak about the whole thing. Third, there were a lot of folks who said that the grammar was a little too good in this and it didn't exactly seem like it particularly came from the Donald himself, which, you know, we can't know that for sure. But I think that what's clear is that Libra has, Libra has, you know, elevated the conversation about cryptocurrencies in general and what they mean in terms of the U.S. dollar status.

And the U.S. government is responding, right? And they're responding in a big way. So, you know, this was huge. I mean, this was the story of the week. This is going to be the context. You know, I think it's not impossible that when we look back, you know, across the course of the early history of Bitcoin and cryptocurrencies, we kind of view this as one of those touchstone moments that can pretty cleanly divide the world into, you know, before the Trump tweet and after the Trump tweet, in ways that we won't know for some time. And in saying that, and I suppose,

bringing up that question of whether Trump himself wrote the tweet or not, but regardless, do you think that these three tweets effectively set the policy agenda or set any sort of meaningful policy when it comes to the Trump administration and cryptos? I don't think so because I think that cryptocurrencies are one of the most chaotic issues from a political partisan standpoint in America. This is actually part of what I think a lot of the folks who are in crypto like. It is very hard to draw clean political analogies in this, right?

You have Democrats who are against cryptocurrencies because they see them as, you know, kind of a threat to the existing order. you have Republicans who are against them because of kind of the law and order type of conversation and the anti-terrorism conversation. But then within each of those parties, you have, you know, the libertarian side of the Republican Party who's excited about them because they feel like a reduction in state power, which is their ultimate goal. On the liberal side, you have them as kind of a force for good when it comes to things like remittances and self-sovereignty and international issues. So it's very confounding to try to draw those clean political lines. And I think that's going to make it a really interesting and dynamic conversation within the U.S. government. You know, it's not going to be so clean to say, you know, Dems think this way and Republicans think this way. So, you know, I'm looking forward to the testimony this week, which I guess is worth mentioning.

You've got David Marcus testifying before both the Senate and Congress this week. So we'll learn a lot more about how at least individual, senators and congresspeople are thinking about this particular issue. Certainly it looks set to be a very big week for cryptos in the US and this is an interesting segue to your number one tweet for this week where not focusing on the president himself but rather the reaction I perhaps could say the look towards the future this particular one by Caitlin Long saying that the genie is out of the bottle and if the US fights it they could be bypassed by other countries. Why

focus on this Nathania what was your particular takeaway here? So I think I I I chose this post from Caitlin is almost emblematic of a larger set of community responses. So again, once the kind of shock and awe and excitement had worn off, then people were left like, okay, what do we do next? And I think that when you really think about what just happened, the one conclusion that I think is pretty clear is that the mainstream, the rest of the world has come to crypto's door and to Bitcoin's door. And to some extent, now is our change. to decide how much we're going to let the narrative be shaped by potentially antagonistic politicians and by the mainstream media, whether they kind of understand crypto or not, or whether we're going to try to provide the counter narratives and the stories that we think are most important. I think Kaylin does it a really good job of doing exactly that. She, you know, she points out that this is a, this is something that is, you know, that's possible to work with government. She uses her experience in Wyoming that's put together a really kind of crypto-friendly set, but also protective set of legislation that allows crypto companies to operate within the bounds of the legal structure.

But she also points out that, you know, we live in a global world. And this is, you know, when you unleash a force for that increases people's sovereignty and power and freedom, it is very difficult to stuff that back in. And you've already seen kind of a little bit of what she's talking about, this gene of people kind of bypassing the U.S. system. You don't see people obviously leaving the U.S. to use cryptocurrencies. But what you do see is founders who used to locate themselves in extremely, you know, clear physical hubs of entrepreneurial activity like Silicon Valley, having to spend time in other jurisdictions in Switzerland, in Malta, in Puerto Rico, you name it. They are going to find the places where they can build and where they can accomplish. experiment and where they can create, you know, with clarity.

And I think that the, you know, the, the, the great hope, I believe, for people who are still optimistic about the U.S.'s role in all of this is, is not necessarily just to all of a sudden make it incredibly crypto-friendly, but to create sandboxes and to give it space to experiment, to say to people that they're not going to be punished for experiments that go wrong as long as they, you know, take some reasonable risk or reasonable steps to mitigate risk, right? That's what people have been asking for. They've been asking for clarity so they know how to how to function well. And I mean, this kind of ties back in some ways to Blockstack.

Right now we have companies that are having to spend, you know, $1, $2 million just on regulatory compliance just to try a thing that they don't even know will work. That's not a great way to have the U.S. retain its leadership position as an innovation hub. And that's kind of what Caitlin's talking about here. Certainly the potential to stifle innovation, a big concern for any country wanting to maximize their opportunities in the Cryptosphere. I guess we'll have a very interesting week this week with the hearings on Libra and other big news coming out to see what's happening out of the US in regards to policy and how that's going to impact the cryptosphere as a whole. But I want to thank you Nathaniel Whitmore for your Longreed Sunday. I look forward to next week where I'm sure we'll have much to discuss as well.

So make sure you stay tuned to BlockTV.com for all the latest news and information. I'm Ashra Westrop Evans. Thanks for watching. For more news and updates, follow us on Twitter.