The Breakdown - Dovey Wan on Binance's Venus / Snowden on surveillance at Web3 / INX $130m IPO / Bitcoin Miniscript

Episode Date: August 20, 2019

Binance is pursuing a strategy that is a bottoms-up "belt and road" alternative to Facebook's top down global cryptocurrency Libra. VC Dovey Wan explores that strategy, and why their Chinese announcement was more aggressive than their English. We also look at the anti-surveillance sentiment at Web3 Summit (best expressed by keynote Edward Snowden); the $130m regulated token IPO from new exchange INX; and the new Bitcoin scripting language Miniscript.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another Crypto Daily 3 at 3. All right, so today we're going to do one, a quick check-in on the Binance Venus news from yesterday with a little guest commentary from Dovi-Wan. Second, we're going to look at the INX exchange offering. It's a $130 million regulated IPO token sale, so something interesting and a little bit different. Two or three, I guess, we're going to look at Web3 and how much of a kind of anti-10. high surveillance undercurrent there is from the first day of the event from Berlin this week. And then three, we're going to look at a couple cool little updates from Bitcoin, including a new hire on Squares part and a new scripting language.

So let's dive in. So yesterday was Monday, which means that I do a thing called Narrative Watch, where I look at one of the trending or emergent narratives that I'm seeing, gets sent out through Masari. And so yesterday we looked at Binance, Venus, and, Central Bank Digital Currencies. So Central Bank Digital Currencies are effectively a kind of controlled version of crypto or digital currency that is effectively like a digital fiat almost. It's controlled by the central bank in the same way, but it has some of the kind of convenience benefits of what a

cryptocurrency might offer. Alongside, of course, all the surveillance benefits that makes central banks interested. Well, yesterday, Binance announced the launch of Venus, which, as TechCrunch said, it calls an independent regional version of Facebook's Libra. So basically, Binance is playing on the fear of Libra, which is causing so many governments to really accelerate their development of central bank digital currencies, or at least accelerate the conversations around that area. Binance is effectively building something that theoretically governments could plug into. Now, a lot of the conversation yesterday was how they certainly weren't alone, but there were a couple points that I thought were really interesting that I wanted to maybe give you guys a little bit more context on.

So the first was the idea that the announcement is different in Chinese than it is in English. And this was flagged by Dovi, who's about to speak, but it was really kind of more aggressive in the Chinese version. And I think that that's something that's pretty interesting to see. Now, the second part is someone from Binance, the CMO, Binance, called it kind of a version of their belt and road strategy, which harkens to China's big global development initiative that has invested in infrastructure in something like 150 countries around the world. And it's kind of a bottom-up approach to building political capital and infrastructure and et cetera. And so there's been a comparison made to that. So with that, I'm actually going to turn it over to this clip from Dovey. I'm going to mute myself so I don't interrupt it, and then I'll be back after.

Finance announced this Venus project yesterday, which can be a potential competitor to Facebook's Libra. I looked at the Chinese version announcement and also the English one. So the Chinese version has a lot more strong narrative. It's even suggesting the Chinese regulator to allow private sector to issue their own staple coin, which is totally illegal right now back in China. This is something that finance wants to deliver to the Chinese authority, I think, and it's very bold for Binance to say so because finance right now is a non-compliant for like illegal company back in China.

I think issue an R&B on Binance chain can be very hard because finance chain is a permissionless chain. But it's possible to have finance as one of the blockchain as a service like tech vendor. especially when PBOC recently said that they're open to consider like different technical paths and also wants to reconsider the model of the digital Reming Bee, especially in the face of the Libra and many other global digital fias competition. Binance co-founder Hei said that the Venus is the one-belt one role version Libra.

I think this is pretty smart play if it can pan out. So one-bought-one road here refers to the Chinese government's global infrastructure investment over 150 countries along the Asian soup role. As we all know, Libre right now is still larger represented by Facebook, eBay, and then just like typical Western developed countries and corporations. So the one-belt one-one road version here by Binance is going to be a much-bottner approach. And I think they can potentially help the last develop nation to the frog leap is assisting financial infrastructure. At least that's what they are.

So at least that's what they're like hoping for. This can also play really well with finance strategic advantage, in my opinion. So, I mean, a lot to think about there's still not that much that we know other than what they've said publicly. But certainly it's taking, it couldn't be more. opposite in some ways than Facebook. And there's a real, it'll be really interesting to see if, you know, while Facebook gets just mired in legal regulatory compliance issues, Binance does interesting things around the world, you know, kind of outflanking them in some way. But there's a lot of ways that it could go wrong too. So anyways, we'll keep watching this,

but I'm going to move on now to our main topics, starting with the INX exchange. So there's been a lot of exchange news recently. The latest, is that INX, or maybe it's called Inks, I'm not sure, is planning to raise $130 million through an IPO. So this is the first time this happened, and it's actually a regulated token offering that's being conducted as an IPO. And so there's some interesting reactions. So Noel, who writes Coin Desk's institutional newsletter, said this is potentially a big deal, not just for the size of the registered sale, but for the breadth of assets, the institution-focused exchange plan. plans to trade. An ambitious plane, even if not successful, it's pushing the envelope.

So her point is kind of that just in terms of just how ambitious this is, it's potentially going to expand what the SEC is used to seeing and hopefully approving. More commentary, Maya, who's a, you know, in general is a pretty skeptical disposition towards these projects actually has some pretty positive words for this. So she says the first real SEC approved crypto exchange token. I've been following this groundbreaking project for over a year might be a real game changer and not just the token model. To be clear, this is going to be a full-fledged IPO

as in a public sale with real underwriters selling a security token for all things. Only the security token is in itself, a utility token used for transaction fees on the exchange. It also rewards its holders to some rev share. And so basically, they're doing what we've seen become popular, in terms of having an exchange token that costs or that reduces your fees that cuts people in, but they're doing it through this fully compliance strategy. And that end of itself could be really interesting. There's also, it came out later, there's some pretty heavy hitters, at least involved as advisors, Jameson Lops, Hans and Mao. So clearly some Bitcoiners who are

interested in this as well. And it kind of, I think, is reflective to me of something that's that is really fascinating to me, which is that the market is very clearly decided that the exchange wars are not solved, that the network effects of today's exchanges are not even close to determine it in terms of who the ultimate winners are. And you can see this just in terms of the incredible number of new projects that continue to come out. So you have this one, obviously, in the US, but then Rakuten, the Japanese e-commerce, you know, giant, a huge, huge global company is launching an exchange that it'll be available via the Android mobile app and eventually through iOS as well. So again, just a ton of activity in exchanges, even though we're used to

the, you know, such a similar set of characters and it feels like such a congested space. Okay, with that, let's move on to number two. So it's Berlin Blockchain Week. There's a lot of different things going on. And one of those things is the Web 3 summit. And I think it's really interesting to see, you know, all of these different projects, all of these different communities are continuously evolving their understanding of themselves, I think, in some way. And it's been fascinating to watch just to what extent the Web 3 kind of space is moving now into, is really, I guess, a better way to put it, is maybe harnessing their anti-surveillance, roots, right? So the idea of Web 3 versus Web 2, you know, to the extent that these acronyms are

reactions to what came before, Web 2 was a reaction to the inability for users to create content and to participate in conversations. Web 2 was all about social. It was all about creating a socially connected Internet where people could actually, were the creators of the content, not just the consumers of the content. Web 3, in a lot of ways, at least as theorized, is about correcting some of what happened when we created these incredibly powerful network effects. And so, you know, that's the idea at least. Now, it's been caught up in just what's happened with the ICO movement or the ICU boom, I guess, in 2017, 2018, and what's happened since. But the really interesting thing here is to what extent, to me at least, what extent Web3 is trying to recapture that

anti-surveillance idea and really reinforce the purpose of what people are trying to build. And so just looking through a few of the different folks who spoke at Web3 Summit. Lane Reddigg, who's an Ethereum Core dev, talked about, he said that there's absolutely packed standing room only crowd as Richard Stallman, the grandfather of Free is in Freedom Software, tells us, don't take a photo of me of you and post it on Facebook or Instagram or Twitter, don't feed the beast. Lane apologizes for doing exactly that. But so Richard Stallman has been one of the kind of leading voices in the free software movement forever.

You had Jillian York from the Electronic Freedom Foundation. She said, our publics have been privatized and commoditized. The only spaces that we think of as a town square are actually more like a shopping mall. They're governed by state and corporate actors through the process of content moderated. You had Edward Snowden, which is kind of where it really caught my interest speaking. So I tuned in for a little bit, and he asked, what does it mean when we have, when the greatest safeguard of human rights we've had in human history, the law begins to fail. And what he's talking about is basically that we live in this, this totally different world now,

where the amount of data that governments have access to via corporations transforms the nature of how people relate with one another. And this is a, you know, this is a hugely important theme. I think a big part of what he's interested in and a big part of the conversation that I saw was kind of reflected in this quote as well. When we construct transaction process machines, we should have to make sure the semantics are what they should be. As Snowden said, if you go to the gas station to buy water, your transaction should be validated by an exchange of value, not by your identity. So a big theme from Snowden's talk was this idea that we shouldn't have to pay for the fundamentals of societal participation with our identity. We should have some way to prove proof of use, right, or proof of ability to use.

And that could be an anonymized token of some kind. So anyways, this is all a big larger conversation about the state of surveillance and corporate surveillance and surveillance capitalism. to use a term that's, you know, increasingly known and increasingly popular. And I think it's a really good place for kind of this Web 3 movement to re-anchor itself. You know, it's bigger, I think, than just trying to create decentralized alternatives to Facebook and things like that. It's about a fundamental ground-up reconstruction of the nature of people's relationship to identity and to the nature of the relationship between businesses and individuals and individuals' identities and individuals' data.

And I think it's bigger than just the kind of small buzzwords or even big buzzwords that we throw around. And so I was, for one, I guess, really excited to see this tone and this tenor from the conversation. You know, there will, of course, be people who are skeptical who think that this space has kind of forfeited any any legitimate claim it has to moral high ground on the basis of how ICOs and token sales happened. I don't feel that way. I think that there's a lot more that needs to happen around rebuilding the foundations of how

we relate to technology. And whether it's the Web3 movement as it's defined now or something else, I think Bitcoin has a huge role to play here. And so that, I wanted to end this segment actually on a pretty interesting conversation or thread from Andreas. So Lane again quotes Vlad Zamfier, who's talking about law and legal thinkers. So Vlad said our main legal thinkers, Nick Sabo, Gav of York, and Andreas are legal skeptics. We need much more of law than avoidance of capture by special interests.

Nothing that we do, including our buggy code, is above, beyond, or outside the rule of law. And so Andreas actually responded in pretty articulate form. He said, I have always had the same simple question. Whose law? Law is entirely local bound by jurisdiction. Open blockchains are entirely global. Whose law do we apply? This is not a trick question.

Least common denominator law is the worst choice. Jurisdiction patchwork is bad too. So he goes on and he talks about the veneer of legitimacy that law creates. But I think that this is where he really gets to and this is the important piece. Forcing people to obey unjust laws by encoding them in blockchain governance is immoral, giving people the option to escape unjust law by using open blockchains as justice and a moral imperative, at least for me. Finally, law is not immutable.

It is ever-changing as cultures change. Many of the laws of the past century are both absurd and horrifically unjust to modern people. I see open blockchains as tools that express the evolution of justice, the arc of history bending towards justice. So, again, just to wrap up this piece of things, I think the important part is not whether your particular protocol of choice is the vehicle for this. but that the conversation that we have to be having, whether you're a Bitcoiner or in Ethereum or whatever,

is very fundamental. And it's about our relationship with power. And so I'm glad to see that conversation really highlighted here and at the fore. But with that, we'll move on to our last topic, just a quick one to round out. So a lot of great stuff going on in Bitcoin right now. This one I wanted to just take a quick minute on. So Peter Walla, who's at Blockstream and is a Bitcoin Core developer,

announced last night, something that he's been working on, he and colleagues have been working on for months called miniscript, which is basically, as he puts it, in short, it's a way to write some Bitcoin scripts in a structured, composable way that allows various kind of static analysis, generic signing and compilation of policies. Imagine a company wants to protect its cold storage funds using a two of three multi-sig policy with three executives. One of the executives, however, has a nice two-factor authentication, multi-sig time lock based setup of his own. Why can't that entire set up be one of the multi-sig participants. So this could sound like gibberish, and I think actually I'm about to share something that's better. But I think the point here that's notable is that even as we're

talking about kind of expressive scripts, and despite the fact that, you know, CoinDesk calls this a smart contract language, really it's clear that the focus is how bitcoins get used and better controls over how that happens, which is more or less what Udi here signs up. He says, mini script and less than a tweet. Fully compatible with current Bitcoin scripting, no fork, but simplifies scripts so they feel natural to author, audit, and use. Scripts in Bitcoin are for policy. What needs to be done for this coin to be spent? So that's really the key part here, right? Like, what needs to be done for this coin to be spent? That's what this is trying to make simpler.

Marty in his, in, in, in, in, in, in, in, in Marty's Bent Daily newsletter today also wrote about this, and does another great job of kind of making it similar for or making it understandable for the average user. He says the possibilities that are enabled by this are a huge boost to security as it's now much easier to make it very hard to move your Bitcoins, hopefully encouraging practices that create strong disincentives to attack. So anyways, you know, just further kind of technical innovation on how Bitcoins are used and in particular how they're protected, which is exciting to see. And then lastly, just one more note. One of the things that I really love in this market right now is how Square is and Cash App are creating a real template for how big companies can be involved with crypto.

They announced a few months ago that they would be dedicating a certain number of positions to just building whatever those folks that they hired thought was best for Bitcoin. So no requirement that it would be good for Square or Cash App's bottom line. And they made their first hire a couple months ago, Steve Lee, and they just announced that Matt Corallo, who was one of the founders of Blockstream, has been in Bitcoin development forever, is joining as well. Lots of people are excited about this. It's great. Another great kind of asset for Square. Another great person to have really unleashed to do and build interesting things and continues to show just how early we are in figuring out the relationship between these open protocols and big companies. So anyways, there's always a lot of exciting things going on in Bitcoin.

Tons of exciting stuff, I think for me at least conversations happening now in Berlin around the nature of power and technology and how we recalibrate those two. But that's it for today's Crypto Daily 3 at 3. I will see you back here tomorrow. Peace, guys.