The Breakdown - Crypto Daily 3@3 - 7.22 | The "Libra Goes To Washington" Recap [LRS56 Top 5]

Episode Date: July 23, 2019

From 5 to 1, counting down the most important threads, essays and content from last week. Featuring the key setup questions for the Libra hearings; a case study of Cuba on whether a project like Libra could make a difference to the "unbanked"; the uncoupling of Libra and Bitcoin; the respond of China; and a Congressman calls Bitcoin an "unstoppable force."  Produced in partnership with BlockTV https://twitter.com/BLOCKTVnews Watch the video version: https://www.youtube.com/nathanielwhittemorecrypto

Check check. All right. Welcome back, everyone. So as I mentioned last Monday, on Mondays, in lieu of the normal Crypto Daily 3 at 3, I've been sharing the Long Read Sunday top five video that I do every day or every Monday with Block TV. And so basically, you know, for those of you don't know Long Read Sunday, it's a curation of all the kind of top essays and threads that I found the week before. I try to put them in kind of some sort of rash, coherent narrative arc and then with block TV we turn that into kind of a five clip top five countdown of the most important threads essays tweets pieces of content what have you and so I thought because you know so much of Monday is just about catching up on last Sunday this would be a better way to do this rather than doing something completely new each Monday afternoon and and I wanted to actually start to do this video and maybe broadcast this live as well so we can kind of like like talk about it as it's being watched. So with that, I'll click in. For those of you who are

listening, hopefully the audio works for you as well. But yeah, thanks for hanging out whether you're watching or listening, and I will see you tomorrow. And welcome back to Block TV, where every Sunday the crypto community received that treat in the form of a well-researched and thought out Twitter thread by one of the top writers documenting the ecosystem. Indeed, Nathaniel Whitmore, who we are also graced with his presence every single week to go over those threads. Nathaniel, Thank you so much for being with us. How are you? Good. How are you doing?

You know, still I'm still recuperating from that amazing week of... It's quite a week. I wouldn't mind if this one is a little bit more quiet. Entirely so. And we're talking, obviously, about both the Senate and congressional hearings for Libra, that thing that will dominate our lives. And I love what you picked. Let's start our Long Read Sunday with number five from five to one as we do.

There we go. And the first thread focusing on Maya Zhavi, or her Twitter handle, which is Maya Z, and that's what I like about so much. It's focusing, I mean, it's almost like she live tweeted the hearings, but what sounded through her reportage, if I may, is the familiar nonetheless fundamental argument, and correct me from wrong, of Libra ain't no Bitcoin or crypto. Yeah, I mean, so what was interesting about this, I feel like every choice, every selection this week is almost representative of something larger. And I thought Maya's thread was one of the best

kind of summarizing what questions people had going into the hearings. You know, she really laid out a huge number of the big, hairy issues that Libra had to contend with. And really kind of started to put a little pin in this idea that first, I guess, two things. One, that that Libra was a different phenomenon in a kind of fundamental way than other types of permissionless cryptocurrencies, but two, that there were potential implications when you have the sort of mass scale right out of the gate like you would with Facebook. And in particular, she talks about the implications for local monetary policy and central banks' tools to, you know, write the economy. And I think that one of the things that I really liked about this is that sometimes in

crypto, we go straight to kind of like the doomsday apocalypse, like let's dance on the grave of the old fiat system, but things are densely interconnected. And I think there's a difference between looking for solutions and looking for hedges against potential cataclysmic failure and rooting for it. And I think a lot of what her thread was doing was pointing out the potential systemic risk in really clear terms in ways that Facebook really needed to answer. Such as, give me an example, as she says, you know, I went through her thread and she, as you said, she very much, you know, put a pin in each and every question that almost you wanted the, you know, the representatives or the senators to ask.

Questions about, you know, I'm reading out loud, one, there's a question Congress needs to carefully think through before Lieber winds up as a tax haven for domicile companies to hide income offshore in jurisdictions with lower tax rates. They really didn't answer that, did they, how they're going to combat that? No, well, they didn't really get asked that, to be honest. I mean, so here's a preview for the rest of this top five. You know, everything is sort of about the whatever we had 17 hours or so of hearings. Altogether.

I think the time came up once or twice. Maybe only just once, which to some extent probably just means that there's, it's almost like such an obvious issue that they're going to have to deal with that it's like bigger fish to fry in the first hearing. But it was notable in its absence, I felt like. Entirely so. And she also, the thing that I liked about thread, you know, mentioning very much so, that not only, you know, separating it, which would seem to be hard for some of the people asking of the questions,

I had a feeling constantly that they were lumping together, you know, Bitcoin with Libra. I mean, some of them showed a lot of knowledge. Some of them showed lesser knowledge. But she was arguing, you know, the form of KYC that Facebook would have out the gate if they used their database, which to me was the most frightening thing. Yeah, I mean, absolutely. I think ultimately there's two big buckets of worry. There's for kind of privacy advocates, it's the worry of the creeping surveillance state. For governments, it's the undermining of the monetary system and a new player that's able to print money.

And those are the kind of the two poles of people who are at least initially antagonistic towards the project or skeptical of the project, let's say. No, very much so. I want us to move to number four because Lee and Cuba raised something that I actually was thinking about throughout those hearings as well. Number four, Lee on Cuba, the context, as Nathaniel you so rightfully pointed out to us, a lot of the discussion was about banking the unbanked, which is, of course, when you listen to David Marcus' opening statements, and, you know, it was all about reaching those people who don't have access to banks, et cetera, et cetera.

And Lee focuses on what? So she's, her piece came out before. So it wasn't specifically about anything that they said there. But I think that she was kind of inspired, you know, there's so much rhetoric around Libra, around the idea of banking the unbanked, but almost that is kind of a proxy for just helping people at the bottom of the socioeconomic pyramid kind of writ large, right?

And so this is something that, for anyone who's followed, Lee's writing at Coin Desk and before, this is an area that she focuses on a lot. And she went out and talked to Cuban Bitcoin users and just really like kind of with, I think, in the back of her mind, the question of, well, would Libra actually help? Because I think, you know, again, this is,

I think, universally acknowledged pretty much among Congress people and senators who weren't just trying to tear down Facebook was that the goal and the ambition of helping this demographic, both at home in the U.S. and abroad, was law of law of the way, and was important. The question was whether it was able to actually do it. And I think that especially on two of the hearings,

which was the congressional hearings, you saw a lot more skepticism that Libra would actually make a dent in the unbanked. And so Lee went out and talked to a lot of crypto users in Cuba. And effectively what she found was that, you know, there are some of the hurdles for them are hurdles that aren't necessarily going to be solved by something like Libra, right?

The issues are Fiat on off ramps in particular, right? How do you get your money out of crypto once you bought it? The issues are things like sanctions in the U.S. sanctions, which obviously Libra isn't even, I think, intending to be available for Cubans because of that. So, you know, I think that her point is, she actually, I don't even know if she uses the word Libra in the whole article, but I think that what she's trying to say in the context of our larger conversation is that To the extent that we are really authentically trying to address the larger kind of economic issues that folks kind of in disadvantaged situations around the world have, we can't look at anything like a silver bullet. And certainly we can't just take it at face value that somehow Facebook is going to magically infiltrate these systems and make them better.

Yeah. And one of the things that, you know, she did having that thread was also that, you know, basically you can shut down. And that you were very right in saying, pointing that sanctions are also authority, you know, dictatorship regimes or God knows what can shut down Facebook apropos on a whim if they want to. And then how does that help the unbanked there? That said, I don't think that's an issue, just as, you know, we all remember, and I'm wondering with you, because that's something that could also happen to cryptocurrency. And I don't think that's all. I mean, if a certain regime decides to shut down the Internet, as the Egyptians did throughout 2011 and the Arab

spring, there goes the axis. And then what does one do? Yeah, I mean, there's, there's interesting projects playing around in that space, last mile Bitcoin type things and the block stream satellite. But I mean, these are very, I guess the biggest ones now are recently we saw big financing for for kind of like effectively like almost like a mesh networking system that's designed. I think Multi-Coin was a big investor. So people are thinking about that. No, Cardano's thinking about as well. You're totally right. It's one thing that needs to be solved apropos, you know, combating that and just the switch off of dictatorship. But moving along to and here we're getting into the nitty-gritty of those hour-long hearings, which were fascinating.

Melton Derry Roars. And of course, she's quite the name within the sphere. She was put on the hot seat, as you so rightfully wrote, to help explain more than just shitcoins. One of the highlights of those hearings, the congressional one in the panel following Marcus's day two testimony. She was the lone crypto-native to have to explain just how different Libra and permissions, blockchains like Bitcoin are. Let's take a look at that moment from the second day of the hearings on Capitol Hill as that golden phrase as shitcoins was actually uttered on Capitol Hill. Let's have a listen. I think the idea here is Bitcoin has had a long track record.

The network has been operating for 10 years. The Bitcoin network has been tested. The decentralized nature of the Bitcoin protocol has been tested. People have tried to co-opt control of Bitcoin's source code and push it in certain directions that benefit their business models. And this network and this protocol and its open source governance have withstood that test. It is robust. It has been tested.

And it has had the benefit for it. frankly, of spending its first five years in its nascenty, sort of operating in this environment of innovation and not having a lot of regulatory attention. That was probably the most, you know, concise, detail answer about the difference, you know, between what Bitcoin is and what other, you know, attempts are. And it was interesting that it came from her, wasn't it?

But going into your thread about that, breaking it down for us. Yeah, I mean, so it was really interesting. So Melton was the only, like I said, the only crypto-native, really crypto-industry person to be invited to these hearings. And it was the second day, Congress, after David Marcus had his chance to answer questions, there was an expert panel. And she, you know, if you read the formal statement that she released or that she shared in advance of the hearings, it was very clear that her objective was to make very clear that. the difference between permissionless chains, like Bitcoin, and really in particular, Bitcoin, from something like Facebook's Libra.

And her objective was not, by the way, she almost, you know, except when very poignantly pressed to answer questions about what she thought about Libra. That was, it wasn't her intention to actually kind of cast aspersions or even draw any sort of judgments on that project. Which she was there to do was to articulate what made Bitcoin different. And I think that what was kind of powerful, about this is that, you know, day one of these hearings, which is the Senate hearings, was just a nonstop Zuckerberg bash fest, basically. The amount of substantive conversation was, you know, you could count on one hand in terms of the number of minutes.

Whereas day two, you know, I was kind of thinking that it was going to be the same, having watched all of day one. And day two was very different. I mean, right out of the gate, as we'll see in a couple minutes, phone was different. And people were engaging. clear that the folks who had spent time in the blockchain congressional caucus and who had worked on things like the Token Taxonomy Act were going to use this as a chance to make some of the same points that Melton was trying to make that there was a difference between these different types of blockchains and these different types of cryptocurrencies and in particular Bitcoin. And I think that what was kind of magical about this is that this really this narrative seemed

to really hold. I think I don't think that anyone went into this thinking that Bitcoin would come out looking like the regulator's approved preferred option relative to Libra. That's really what happened. And, you know, I spent a lot of tweeting trying to think about it. And, you know, one of the big things is that the Federal Reserve is less threatened when there's nothing that looks like a Federal Reserve, you know. So it was fascinating to watch. Very much so. And that's the thing that came up over and over again.

and I agree with you, the second day in Congress, which, after I was expecting them to actually pound more because at the end of the day, Congress, a bunch of people really pissed off they lost the 2016 election. But they came prepared. There were a lot of people that were sat prepared. As you mentioned, we're going to see it in the second.

But that said, you know, Melton, not only that, you know, not just perspective, but coming with the knowledge. And then, as you said, you took this thread and even went sideways, taking a quick trip through, you know, a various, sorry, very, reactions to what was going on and one of them by Preston Byrne who there we go let's take a quick trip through Rugg's Gallery of Reactions one of the main reactions there after this will be no ordinary monopoly it will be neil

feudalism of course you know some of us will tend to agree but those reactions were abundant I'm sure after that second day yeah I would say that the by in large the crypto community and they might have been ready to do this anyways, but they jumped on the fact that the narrative seemed to be, yay, Bitcoin, nay, Libra. And, you know, Preston's essay, I think is, you know, particularly well written and thoughtful about, you know, and I don't think he composed it even before the hearing. So it wasn't necessarily a reaction. It was just, this is the sentiment in a lot of places, right? That these, you know, again, I think we talked about this maybe last week or the

week before, but when Libra was announced a big part of the frustration, nervousness, criticism from the crypto community was that instantly Zuckerberg or a Zuckerberg product at least was going to become the standard bearer for this whole industry when in so many ways didn't have the fundamental underlying characteristics of this type of blockchains and cryptocurrencies that make this industry different in terms of being leaderless in terms of being permissionless in terms of being decentralized and and so as we saw I a number of representatives of the US Congress actually make that point.

There was a lot of doubling down, let's say, in the crypto industry to really hammer that narrative home. Hammer that narrative home and entirely focused. When Lieber came out of the gate, and if you just look at their promotional clips, entirely there is a difference, but it was using the code words of the sphere

to sell itself out. And I think that was something that cleared up of it in those hearings. Let's go to number two. We head to one, of course. Number two, Dovey, I love her. Hitting the nail on the head because that was very much a narrative also I think that Marcus wants to be sold and somehow it worked And looking at Dovia, of course she coming from China and that one of the narratives Libra made the second top trending topic on Waybo Chinese Twitter

unlike the first hearing she writes Emma which didn't make much splash outside crypto groups in the second one Marcus admitted Libra will compete with Ali Pay WeChat which triggered the attention bomb widely and And before we focus on that one, though, I'm wondering with you, because what was so interesting to me about Marcus finishing his, so to speak, you know, piece de resistance of why LiBush should exist, is he's basically telling, you know, he told Congress and Senate, if you don't give this to us,

China wins. Yeah, I mean, okay, so, so there's a whole lot to unpack here, which is why I put it so high. So first, just in context, so after day one, I was actually completely, shocked. The word China did not get uttered. No one said it. The only intimation was in that opening statement, as you kind of mentioned, where Marcus said that there will be a digital money and that if it's not Libra effectively, there's good reason to think that it will be someone who doesn't share our

values. That's all he said. He did everything but say China. I mean, it's written so they understand. But yes. Exactly. But frankly, to me, given the political, I can't believe that his first word wasn't just staring them in the eyeballs and saying China. Guys, let's talk about China. Let's talk about the rise of state-sponsored Chinese media. Let's talk about, you know, like what, like that is the big thing. And I, you know, I'm not a politician. I don't know what the political calculus is. I don't know if that's the conversation that's going on behind the scenes. And so this is the kind of the sanguine on the front scenes.

I don't know if he doesn't want to be caught up in the trade war rhetoric. But this is to me kind of one of the obvious narrative for them to try to get some amount of attraction to build. And so anyways, after that first day, I asked a number of my friends just on Twitter who spend more time, not just in kind of Asian crypto circles, but who are actually natively speaking different languages and in those different social media sites. And the response of everyone from Dovey to a number of different folks was, yeah, they're not really talking about it except maybe as an explanation for why Bitcoin went down to like $9,000.

You know, that was the, whereas day two, a number of, you know, so Marcus had the kind of the same statement. It seemed like maybe he was going to be a little bit more willing to dive into that and make that point on day two. And then he was kind of fed that red meat from a number of congressmen who explicitly asked him, you know, is this going to compete with Ali Pei? A number of congressman who explicitly said, will Chinese, you know, kind of state-sponsored businesses be able to buy into the Librozo? So there was a much bigger chance for that to happen. In a way, I do think, if memory certainly right, I believe he actually, that's one of the questions he answered. Because, I mean, if one thing, and just to give you my theory on why he never said the word China out loud, because at the end of the day, Marcus is such a skilled negotiator and more politician than others that he would have entered, you know, a can of worms.

But, you know, he did answer, and I think he said that, yes, this is, this is aimed to compete. aimed to compete with that in a way. Yeah. You're absolutely right. That was a question that he actually answered. And that is what it turns out triggered that. Because it wasn't an intimation that could be lost in translation. Someone said, is this going to compete with AliPay?

And he said the word yes. And that's all it took. 220 million views and 17,000 comments later, it's one of the top trending topics on Waybo. Entirely. And as you mentioned, it's the one answer. I think he had very few yes and knows there. And that's one of the yeses.

But number one, number one, who really is our favorite from last week. Let's go to number one on Long Read Sundays. And needless to say, I really think he's the star of that second day. That would be, of course, U.S. Congressman Patrick McKenry, who serves on the 10th District of North Carolina, for those who do not know. And he's the man this fear will agree possibly coined the T-shirt phrase of that second day. Let's have a listen to what he said before we delve in. Just because we may not fully understand a new technology proposal does not mean we should immediately call for its prohibition, especially when that proposal is just that, a proposal.

But let's face it. Let's be honest. It's Facebook. And I'm skeptical, but we can either make you a political talking point, or we can choose to conduct thoughtful governmental oversight. That's my hope for this day, is its thoughtful government oversight. The reality is whether Facebook is involved or not, change is here. Digital currencies exist.

Blockchain technology is real, and Facebook's entry in this new world is just confirmation, albeit at scale. The world that Satoshi Nakamoto, author of the Bitcoin white paper envisioned, and other are building is an unstoppable force. We should not attempt to deter this innovation, and governments cannot stop this innovation, and those that have tried have already failed. Wow. I got to say about McHenry that, first of all,

we were watching this here, of course, we had live coverage at Block TV, and this was, to me, the winning vindication of Bitcoin. Wasn't it for you? Oh, yeah. I mean, and this was the second statement out the first statement on day two after Chairman Waters introduced the whole panel. And so to see this, it was like, okay, everyone strap in because this is going to be a different day than yesterday was. And sure enough, it was. Again, you know, clearly a much bigger and more significant number of congressmen and women have engaged with blockchain and cryptocurrencies and Bitcoin. But he really laid out the importance and the significance of this right away.

And I'm wondering with you when McHenry says, because, you know, he says Bitcoin is unstoppable. We know it. Some people apparently on Capitol Hill know it as well. But it's not the prevalent idea. It's not what most of them think at the end of the day. No. But it's so right now, though, you have, I mean, again, Everything is politics and what people believe at a current time.

And so I would say that what we saw on Wednesday at those congressional hearings is that you have one pocket of folks who believe, like McHenry does, that Bitcoin is an unstoppable force. You have another set of people who are kind of rocking this narrative that maybe Bitcoin can coexist with the existing financial system, that it's used as more like a store of value. or a digital store of gold, which is what Treasury Secretary Mnuchin's comments previously had suggested. But that Libra, and it's 2.7 or whatever, 2.2 billion users, that's the threat. That's the problem. Then, of course, let's call that 20% of everyone. You have 80% of everyone who says Zuckerberg wants to do what now. And, you know, that's the whole different thing. And so, you know, but again, I think that most people anticipated, I think if you had pulled the crypto audiences going into this week after Trump's tweet, they would have, you know, and asked them what they thought was likely to come out of this. Bitcoin being more targeted by regulators as a threat, you know, whether it was because of Libra or in opposition to Libra, or on the other hand, Bitcoin being kind of regulatory favorite as compared to Libra.

I don't think a lot of people would have gone for that number two. the idea that Bitcoin was going to come out looking so distinctly better. And it really did. I mean, that was the story of the hearing. And certainly, I think it's important maybe to not overstate how many allies Bitcoin has. And, you know, let's say, if tomorrow Libra was gone, I don't think that we'd necessarily have everyone being like, cool, let's make great safe for Bitcoin. But it's still, it's still notable and it's still pretty exciting compared to where I think. Very much so.

But apropos your line, if tomorrow Libra is gone. You know, some people, at a certain point there, throughout the second day, and I think we're conflicted and we're theorizing right now, is will Libra make it? Through all this, you know, will it even make it, there's a possibility of that as well. And Maxine Waters already, Chairman McSie Waters already said after that second day hearing that they're going to want to see him sit there, Mark Zuckerberg. Do you think of Zuckerberg, first of all, I don't think he's ever going to make it to the hill on this because it's just bad beer.

But if he were, would that sell the idea of Libra? No, he should never go to the hill again. No, I think they're being annoyed. Like, he should make himself incredibly available behind the scenes. But that picture sitting at that desk again, I agree with you. Because that's a distinct request from those congressmen right after that second day, that they're not completely satisfied and they're going to want to hear from him. Well, this is the problem here, and maybe just to wrap this.

Because this is, you know, ultimately, like, I've kind of co-opted this because it's good for Bitcoin and I'm telling the good for Bitcoin story. Where does this leave Libra? Maybe it's a good place to just spend 20 seconds on. The biggest thing is that there is an unresolved antitrust issue with U.S. legislators and Facebook that doesn't really have anything to do with Libra. I think that there's a, you know, they haven't finished the conversation about whether Facebook should be forced to spin out Instagram and WhatsApp, whether there should be

kind of, you know, whether it should be seen as a public utility because of how big it is. And those things have, you know, totally separate questions that aren't about Libra. And in some ways, I feel like a lot of the folks who are frustrated about this conversation were like, you're almost distracting from the issue, which is we got to have that conversation before we have this conversation. And unfortunately, the way that the world works and, you know, a big company like Facebook is going to make it this way is that you have to have it all at once. But, you know, I don't know where Libra stands.

I think it's entirely possible. I guess I'll give one ray of hope for Libra that the entire purpose of this particular couple days was for David Marcus to just take blows to the chin left and right for Zuckerberg and let everyone get it off their chest and stand there and smile and give his best explanations and not do anything other than, you know,

look calm and collected. I didn't agree more, almost like going through the most. They need almost like they needed to do that. The politics behind the politics. But very, very true. Nathaniel Whitmore, thank you so much. And apropos, indeed, I think that, you know, what's shown through this segment and those hearings were

the power of Bitcoin over what we are yet to decide is Libra. Thank you so much for joining us. Long Read Sunday, we're blocked. You will be right back. For more news and updates, follow us on Twitter.