The Breakdown - Crypto Daily 3@3 - 8.5 | Protests & privacy / Global macro Bitcoin / Crypto's Inevitability

Episode Date: August 5, 2019

A key theme from last week's Senate Banking Committee hearing was the sense that, like it or not, cryptocurrency was an inevitable force. On this top 5 summary of Long Reads Sunday, we look at that plus how the global macro narrative is converging with Bitcoin, why the internet hasn't evolved in a way that is free and open (and how that could change) and why digital privacy is the political issue of our time.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another Crypto Daily 3 at 3. All right, guys, happy Monday. Hope you had a good weekend. As every Monday, instead of the normal 3 at 3, I rewatch basically the video that I do every Monday morning with Block TV. That is the top five from the Long Read Sunday. Long Read Sunday, for those of you who don't know, is my weekly curation of the most interesting Twitter threads, essays,

basically anything in the crypto space that needs to be seen that I don't want to get see kind of lost to the ether and and then on Monday mornings with Block TV I do a video version of it that kind of counts down what the big ideas are and so I just want to give a quick kind of preview I guess before we dive in of what the themes are so the first was recapping the Senate hearings last week and why I think there's a sense of inevitability entering the conversation from Congress and the Senate around crypto. The second kind of the middle section focuses on the larger macro environment. There were fed rate cuts for the first time.

You're seeing more and more folks actually come in from the macro side and discuss why Bitcoin is a hedge against what's happening in the macro markets. We look at a couple examples of that. And then we turn to kind of the larger conversation around surveillance, privacy, et cetera. And we look first at an analysis. essay about the free and open internet and why the internet has evolved in maybe a slightly different way than that free and open way enabled by the internet protocol. And then we look at an essay that's arguing that political or sorry, privacy is the political issue of our time. So with

that, I'll shut up and I'll kick it over. Block TV for the LRS top five. Thanks for hanging out and see you for the Crypto Daily 3 at 3 tomorrow. Welcome back to Block TV. Now every Sunday, the crypto community receives a treat in the form of a well-resour. and thought out Twitter thread by one of the top writers documenting the ecosystem. I'm talking, of course, about Nathaniel Whitmore in his long reads Sunday Twitter column. Nathaniel, of course, happy Monday.

Hey, how are you? Well, thank you very much for being here. Now, kind of talking us through your selection of crypto Twitter's best, let's call it of the week, from five to one, of course, starting with sense of the inevitable around crypto, kind of recapping the hearings that are. that the Senate seems to love crypto at this point.

Yeah, so last week we had the second Senate banking committee hearing on crypto in the last three weeks. The first one was explicitly focused on Libra. They had David Marcus from the Libra project testifying before them. This one was theoretically about crypto regulation more broadly. As it turned out, it was actually still kind of about Libra and the shadow of big tech. It was hard for the Senate, the senators who were present at that hearing to really escape. that. However, there were another number of interesting themes. So one thing we saw was, as I mentioned, this idea that it's kind of still about big tech, not just about crypto regulation in general. A second interesting theme was that there is a lot more skepticism of kind of the banking, the unbanked narrative, which is something that was really high a focus for Facebook in their hearings a couple weeks previous. But the third piece, which I thought was really interesting in which I'm kind of calling out in this particular tweet. is there seems to be a sense that as antagonistic as some members of the Senate might be towards

Facebook and Libra, there's a real feeling that this is an inevitable shift that's happening and that cryptocurrency is a force that they have to contend with. And I think that that has two dimensions. The first is that Bitcoin is really an unstoppable force, at least in the estimation of some of the folks there, right? You actually had Patrick McHenry, a congressman from North Carolina, used those exact words to describe it a couple weeks ago at the congressional hearing. But the other piece of this inevitability is a feeling, I think, that Zuckerberg and Facebook are going to do pretty much whatever they please.

And, you know, the Senate has to and the Congress has to figure out how to deal with that reality and deal with the reality that these cryptocurrencies are coming down the pipeline. But it seems that I'm sorry to kind of cut you off here, but it seems that they are in the know of that. So it seems like surrounding the conversation, nobody was denying the fact that blockchain and cryptocurrencies are going to become a full-fledged thing at some point.

I think that was kind of a theme as well during this hearing specifically. It really seemed like they were trying to kind of get answers to things that they simply didn't understand. Absolutely. And I think though the relevant point and kind of what you're saying is it was almost like they were speaking to that

themselves to some extent, like really, you know, accepting in a way that this was something that they now, it was going to be on the agenda, right? They were going to have these hearings every month or two because, you know, these things were not going away. And I wonder to what extent during the bear market, and this is obviously just speculation on my part, there's some number of, you know, senators and congresspeople who were just hoping that, you know, maybe it was just a flash in the pan and a fat and it wasn't something they were really going to have to deal with. And a lot of what we've seen over the last couple weeks is acceptance that that's just not the case. And in some way, some shape, some form, cryptocurrency is here to stay. Right. No, absolutely. It does, I mean, boggle the mind, though, how lack of education, crypto and blockchain education there was amongst panelists. And I think particularly their choices of people to kind of give them those answers wasn't necessarily something that we would agree with

is the correct choice if you're trying to then understand. But, I mean, we have a, like you said, there are probably plenty of committees like this and hearings like this to come in the future until we get to proper understanding. And maybe the U.S. will be on par with other countries when it comes to regulating crypto as a whole. But now moving on to number four, the significance of the week from a macroeconomic standpoint. Yeah, so the next couple pieces on this top five have to do with a similar theme, which is that I think that we're seeing the convergence of a narrative kind of, from a macro perspective with the Bitcoin and cryptocurrency narrative. And so from the macro perspective, you have investors. So John Hussman, for those who don't know, is a well-known hedge fund manager.

He kind of was renowned for successfully calling the dot-com bubble, for successfully kind of predicting at least to some extent the 2008 action. And so he basically wrote this thread arguing that there were so many things that were all coming together in terms of overpriced equities, in terms of ridiculously high valuations around a variety of different asset classes, in terms of kind of the growing amount of negative yielding bonds and negative yielding sovereign debt that is basically governments are now, you know, people are paying to hold government debt instead of the other way around. And so for him, it's all of these forces kind of converging together to suggest that there's a really significant, uh,

economic shift happening. And he wasn't discussing cryptocurrencies in general, but I think as we'll see in kind of the post coming up, there are a lot of folks who are making that connection between kind of the economy as it is now and as it seems to be trending and the value that, something like Bitcoin with provable scarcity, you know, enables.

A lot of, I mean, with Bitcoin in general, yes, absolutely, we have to of make those points, of course. Moving on to number three, Raul Paul on Bitcoin. Yeah, so this is kind of the flip side, right? So if John Husman was the kind of macro narrative of all of the forces that are shifting what the macro economy is like,

number three is really someone who lives in kind of that macro world connecting the dots with Bitcoin. So Raul was an equities trader for a long time. He started in 2014, a thing called Real Vision, TV, which is basically finance YouTube in some ways. And so he's been spending a lot of time. He's kind of been back and forth on Bitcoin. If you look throughout its history, he was really interested in the beginning.

He kind of moved out for a while. He was, you know, self-admitted, very worried that the forks were going to be incredibly value destructive, and he was kind of off it again. And he wasn't necessarily super interested in the alt-coin thing. But now he's back with a vengeance. And so some bit-coiners aren't super fans of a vengeance. that idea of kind of moving back and forth. But the interesting thing for me is that he's coming back

into Bitcoin now because he's really starting to see it as a generational hedge for millennials and younger generations in the same way that the boomers had underpriced equities and underpriced bonds and underpriced real estate in the early 80s. You know, to him, what he's seeing is all of these assets that are more expensive that they've ever been, boomers who are going to have to sell at some point

because they're not just going to continue to go up forever, and they're going to need to actually take money off the table to be able to support their lives, and no real buyers in the form of millennials. And in his estimation, he kind of thinks, if you're a millennial or if you're kind of a younger generation, why wouldn't you take that bet or that hedge into cryptocurrencies and into something like Bitcoin?

So he has a lot of interesting opinions on not only Bitcoin, but also about Libra and what it represents. But I think the important thing here, and why I wanted to highlight it is that it's about this, I'm seeing this convergence of a narrative from a macro perspective kind of top down with the bottom-up Bitcoin narrative that's turning into something that I think

is much bigger than just digital gold or even a- Are you thinking that this is like a trend? Is this kind of the beginning of a trend? Yeah, I think it's, well, I think it might be the middle of a trend where you know you've been having kind of Bitcoiners who are talking in these larger terms for a while and now you have the larger,

macro world coming to them. And that's potentially really interesting narrative fuel. So it'll be interesting to see kind of over the next few months how this plays out and whether, you know, I think a lot will be determined by how Bitcoin performs, you know, relative to the rest of the markets. Does it continue to remain, you know, non-correlated and something that seems like this interesting different force or does it fall into lockstep? Right. And then kind of even putting that fuel, as you called it aside, podcasts and anything that kind of gets information out there, I think, is kind of a way to garner attention for the crypto sphere as a whole. And if that, whether you're a Bitcoin malxamilist, you're good with

alt coins or whatever the narrative may be, as long as you're being kind of exposed, I think the sphere is doing a better job in general. Moving into number two, Ellen Farmington, free and open internet. Yes, so this is a really important point. So you kind of have, as we mentioned, you have this larger macro narrative around the instability of the economic world and what might be happening. But you also have another kind of larger macro narrative that relates to crypto, which is the state of surveillance and the state of freedom and liberty and openness on the Internet and in communications technology. And you're seeing this play out around the world. And so I really love this essay from Alan Farrington who basically is arguing that the Internet was designed in this kind of free and open way.

right, internet protocol is designed to be able to use unrestricted by anyone. It was designed to withstand a huge amount of kind of subjective forces in trying to control. That's kind of the nature of the internet as a protocol on a protocol layer. However, the internet as we experience it is actually dictated largely by these hyper-powerful intermediaries,

right? The Amazon's, the Facebook's, you know, the Wechats of the world that all serve as the gateway, for internet use. And those services are obviously not free and open. They're incredibly powerful, you know, value capturing mechanisms. And basically the point that he's making

is that, you know, to some extent, the world that we're experiencing now and that we're having to try to kind of walk back from almost a little bit was not necessarily the only way that the internet could have developed. It was the way that happened to come about based on how these networks, effectively leveraged network effects to become these incredibly powerful gateways and intermediaries.

And we're starting to see, you know, more than starting to see, I think obviously all of the conversation and the stress and the nervousness around Libra has to do with Facebook's power. But you're also seeing it in in places like Hong Kong where the kind of next step of data technology is being used to actually combat peaceful protests. So you have authorities who are trying to use a very advanced facial recognition system to tamp down on, you know, public dissent and civil unrest. And you have protesters who are actually using basically lasers to try to stop facial recognition technology. And in a lot of ways, this is the, it feels almost like the kind of endgame of the battle between privacy and surveillance, although I think, unfortunately, it's not the end game so much as just the beginning of something we're going to see. And anyway, tying it back to Allen's essay, it's really in some ways about the architecture of the Internet as it's been created. And the question is, can we walk it back?

Are there alternatives available? And he kind of, he only gets into Bitcoin a little bit at the end, but he effectively makes an argument that it's one of the first infrastructures for a different approach to the Internet that we've seen. So pretty interesting both for the substance and also for the larger conversation that it represents. Right. Well, also within the sphere, kind of blanche. blockchain has been called a potential big brother, so to speak. If you want something on there, you want it there forever, you want it to be immutable, you want it to be transparent. But then how do you see this ending, this battle, so to speak?

Where do you see it going? Well, that's almost the right segue to our number one, right? It's kind of the battle for privacy and surveillance is, I think, the big mega trend of the next 10 years. Great. So let's move on to our number one, which you said. that is Jake Brukman on digital privacy as the issue of our time.

Yeah, so Jake is, for those who don't know, he's an investor at Coin Fund and a really just deep thinker in general. And he basically is kind of capturing the sentiment that I think a lot of people have around what's, basically where, the importance of this kind of question of digital privacy and how it's going to exist. And it feels like every single week,

there's some new story that gets at this question, right? So, you know, a couple weeks ago you had GitHub kicking off Iranian users basically complying with U.S. sanctions. And you have WhatsApp who's potentially kind of threatening their own encryption tools. You have the U.S. Attorney General of the U.S. who's talking about backdoor encryption to kind of get around text end-to-end encryption. And basically saying that as soon as there's a terrorist attack where they use something like WhatsApp to coordinate, that'll be their excuse to go away.

in and, you know, get around encryption. So this is almost, it's almost a meme, but it's not a meme enough in some ways. You know, there's still a real question about to what extent people care about their privacy. And I think it's a real challenge. And part of the reason that essays like Jakes are so needed is that there's still such a broader consciousness raising that's required for people to stop thinking about privacy is something that only criminals care about. And to look to places like Hong Kong

where all of these tools of convenience, facial recognition isn't a tool that was designed in kind of this dystopian way by the Chinese government necessarily, right? Like that's this kind of science fiction version of it, and that's kind of how we're seeing it play out. But really, like, the way that it's experienced by most people day to day

is a simplifying force for their grocery transactions, right? They can just pay with their face. It's incredibly easy, right? We unlock our iPhones with facial recognition here. It's incredibly convenient. But all of that creates the opportunity for abuse and abuse at a systemic level. And until we kind of understand that it doesn't take too much

for governments to kind of enjoy their most authoritarian impulses, we're going to be in a real tight spot. So I think that's why Jake's essay matters so much and essays like it. You know, for me, the more of this kind of conversation that we can see, and especially people who are, you know, firmly in a domain, you know, Jake is a crypto investor who thinks about consensus algorithms all day. I want more people bringing it into their domains, even if it's a little bit outside.

I don't just want it to be a conversation between privacy experts. But that is actually, it's an interesting thing to ponder, right? When do people care about their privacy? Does it have to be on what level? Is it convenience versus privacy? What wins out at the end? But then kind of thinking about millennials and thinking about this kind of generation that's coming up, do you think that this will now be a bigger issue? I think it will, but I think that it's going to, it's going to be, basically, it's one of those things where I think that unfortunately a lot of people are going to have to have their privacy threatened in ways that actually feel painful for it to become a broad issue. You know, in some ways my wish is that

rights, it's not necessarily always the role or the job of citizens to have to advocate for every one of their rights. there should be some things that we accept as a society, as a culture, and then enshrine that into law that are just the case. That's why I think these hearings matter, you know, and it matters to pay attention, because lawmakers, Supreme Court, these are the institutions, at least in the U.S., that have been built to protect these sort of rights, even when people aren't paying attention to them, right? And then human nature comes into play, and it's actually not what should be, but rather what is ultimately. Thank you very much, Nathaniel Whitmore, with that Longreed Sunday's breakdown. We appreciate you being here very, very much. For all of you out there, keep watching, blacktivu.com for more crypto and blockchain news. For more news and updates, follow us on Twitter.