The Breakdown - John McAfee and the End of Crypto’s Gonzo Era

Starting point is 00:00:00 John McAfee died yesterday. He was 75. However it happened, it happened. And with it, something larger passed too. And sure, there are still some gonzo people. But overall, with every week that passes, the industry becomes a little less gonzo and a little more Goldman Sachs. 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. The breakdown is sponsored by nexo.io and circle, and produced and distributed by CoinDes. What's going on, guys? It is Thursday, June 24th. Hunter S. Thompson wrote, Some may never live, but the crazy never die.

Starting point is 00:00:45 Yesterday, John McAfee died in his Spanish prison cell, waiting to be extradited back to the U.S. to face trial for tax fraud. Just hours earlier, a Spanish judge had cleared the extradition to go through. The internet is, shall we say, not buying it. MacAfee was one of the wildest characters in crypto. I mean, he would have been one of the wildest characters in any industry. It's just that crypto came to suit his particular brand of crazy. He was at turns reviled, lionized, a bad joke, a deadly serious warning, a clown, a prophet, a caricature, a soothsayer, a shit-coiner, and a true believer. Whatever he was, he was unignorable. He was an icon, an icon of an era of crypto that is quickly passing by. History is a messy affair. Historians like to use emblematic events to mark passages

Starting point is 00:01:31 from one phase to the next, even if the reality is by no means that clearly organized. Hunter S. Thompson had something to say about this, too. He wrote, history is hard to know because of all the hired bullshit. But even without being sure of history, it seems entirely reasonable to think that every now and then, the energy of a whole generation comes to a head in a long, fine flash, for reasons that nobody really understands at the time, and which never explained in retrospect what actually happened. I wonder if in a decade or two, McCaffey's End isn't seen as one of those emblematic moments, a marker of the time that Crypto moved from something wild to something well, not as much. First, though, the man himself. Anyone who used computers in the 1990s knows the name McCaffey.

Starting point is 00:02:13 He built the first commercial antivirus software and founded McCaffey Associates in 1987. He left the company in 1994, but its legacy lived on. After leaving the company, he did a slew of other things in technology. He developed one of the first instant messaging protocols. He invested in firewall software. He got absolutely wiped out in the great financial crisis, after trying to invest in and build mansions around the U.S., and he tried to grow plants for medicinal use in Belize. John McAfee's life in Belize was the subject of a 2016 documentary aired on Showtime called Gringo, The Dangerous Life of John McCaffey. The documentary covers suspicions of drug trafficking, accusations of rape, and even accusations that McCaffey was involved in the

Starting point is 00:02:52 murder of a neighbor, something that would prompt him ultimately to leave the country. After leaving Belize in 2012, he was sort of quiet for a while. He ran for president in 2016 as a libertarian, but in the meantime, he had started to go deep in the decentralization space. He founded a company called Future Tense that was meant to build a decentralized networking tool that used mesh networks to send messages and files outside of the web. And then in 2017 and 2018, he became perhaps the world's greatest ICO Schiller, charging more than $100,000 for a single tweet, and at one point actually getting a sky coin tattoo on his back. During this era, he also made one of his most famous pronouncements. In a July 17th, 2017 tweet, he said that if Bitcoin wasn't at

Starting point is 00:03:34 500,000 within three years, he would, quote, eat his dick on national television. A few months later, he doubled down, saying, quote, when I predicted Bitcoin at 500K by the end of 2020, it used a model that predicted 5,000 at the end of 2017. Bitcoin has accelerated much faster than my model assumptions. I now predict Bitcoin at $1 million by the end of 2020. I will still eat my dick, if wrong. Unsurprisingly, as a wave of people got absolutely wrecked thanks to Schillers like McCaffey, the SEC didn't stay quiet for long. And McCaffey moved into a new phase, staying on the move via his boat and tweeting to his more than million Twitter followers. In January 2019, he announced that he was on the run from U.S. authorities. That didn't

Starting point is 00:04:15 stop him from running for president again in 2020. On October 5th of last year, McCaffee was arrested in Spain for tax evasion. On October 6, the SEC said that he had made $23 million promoting ICOs. On March 5th of this year, the U.S. Attorney's Office of New York said that they had formally indicted him and then just yesterday, the Spanish National Court authorized his extradition. A few hours later, he was found dead by apparent suicide. To get a sense of how the internet is taking it, Last night, both Epstein and McCaffey didn't kill himself were trending. As disinterested in conspiracy theories as I am, it's hard to ignore the suspicion. On November 30th, 2019, McCaffey tweeted, getting subtle messages from U.S. officials saying, in effect, we're coming for you, McCaffey,

Starting point is 00:04:59 we're going to kill yourself. I got a tattoo just in case. If I suicide myself, I didn't. I was whacked. Check my right arm. He got a tattoo saying whacked. On October 15th of last year, he wrote, I am content in here, I have friends. The food is good, all is well. Know that if I hang myself a la Epstein, it will be no fault of mine. It's not just crypto people who are crying foul. After he died, his official Instagram account posted the letter Q, although to be honest, the best explanation of that I've seen is that it is exactly the type of thing McCaffey would have done to fuck with all of us and find hilarious. Eric Weinstein came out with a wrought threat on how screwed up it all was. So, even in death, McCaffey is likely,

Starting point is 00:05:41 to stir as much controversy as he did in life. The coming days will reveal much and obscure even more, and debates will rage. No matter what one thinks of the man, I hope he rests in peace in a great, wild beyond. But where I want to go now is one notable fact. McAfee's absence as a part of this new bull run, this new phase of crypto. So let's talk about the idea of the end of crypto's Gonzo era. First, what the hell does this word Gonzo mean? In 1970, the same guy that I keep quoting Hunter Thompson wrote an article called The Kentucky Derby is decadent and depraved. The piece absolutely obliterated all norms of journalism. Rather than assuming an objective stance, it put the author directly in the middle of the action, a participant observer, unwilling to leave any detail

Starting point is 00:06:25 untold, any opinion left out, any drug undone. The Boston Globe's editor Bill Cardoso called the piece Gonzo, an old Irish bar slaying for the last one standing after a night of drinking, and the name stuck. HST would make the style of writing even more famous with his fear and loathing in Las Vegas from a couple years later. But more than just a style of writing, Gonzo was a style of living that attracted acolytes. It was to live unafraid, unafraid of norms, or moors, or failure, or pain, or even ultimately death. It was to do things that others thought crazy because they seemed like the right things to do. Life, HST wrote, should not be a journey to the grave with the intention of arriving safely in a pretty and well-preserved body, but rather, to skid and

Starting point is 00:07:06 broadside in a cloud of smoke, thoroughly used up, totally worn out, and loudly proclaiming, wow, what a ride. This type of living, as you might imagine, involve some pretty serious volatility, some wild swings that make the conventions of normal living seem quaint in comparison. By that definition, the first decade of crypto was absolutely gonzo as fuck. Looking for the best way to unlock your crypto's liquidity? Nexo.io is exactly what you need. Borrow against your digital assets at just 6.9% APR, earn passive income with yields of up to 12% and swap between more than 100 market pairs with the Instant Nexo Exchange. Try the Nexo wallet app to get the whole 360 degrees of crypto banking. Get started at nexo.io. That's nexo.io to get started today. Circle yield is now available

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Starting point is 00:08:51 different form of money and an entirely different form of human organization. When you actually step back and think about that, it's absolutely staggering. It puts every vision slide on every Silicon Valley pitch deck to shame. But the crazier thing is that some people bought into it. They started messing around, trying it out, contributing to a forum discussion, contributing code, contributing the computing power that mine the thing, that secure the thing, never really knowing what it might become, only that it represented something different, and that different was something they wanted to be a part of. As with so many new technologies, Bitcoin's earliest dedicated users were those forced thereby

Starting point is 00:09:26 rejection from other parts of the civilized world. It isn't an accident that something like Silk Road happened. And while many will forever try to paint Silk Road as exclusively a haven of criminals, there were probably a fair few people who better fit another HST definition of outlaw. An outlaw can be defined as someone who lives outside of the law, beyond the law, and not necessarily against it. This is not to aggrandize nor celebrate any particular people or behaviors, only to recognize that being a refuge of malcontents is a hallmark of a truly open network. But that wasn't the only gonzo part of the early days.

Starting point is 00:10:00 The crypto exchanges that we know now are some of the largest, fastest-growing financial institutions in the world. Coinbase is a public company. Cracken has a banking license. FTX just became the first exchange to partner with a big four American sports league. The earliest exchanges were held together with duct tape and paper clips. They were unwieldy, vulnerable, and wild. Mount Gawks started as the Magic the Gathering online exchange. That particular story, the exchange hack that drained funds for literally months

Starting point is 00:10:29 and set the professional development of the industry back years, is still incomplete today. There were also the earliest people involved in the industries. The stories of the earliest adopters are Legion, and many will turn into future novels and screenplays. Take, for example, the professional poker player who became an exchange entrepreneur built a decentralized dark market before moving to Rojava, aka Syrian Kurdistan, in order to serve in the YPG military. But the crypto industry's Gonzo era wasn't just early Bitcoin and Bitcoiners. Let's zoom forward to the Ethereum hard fork. The Dow.

Starting point is 00:11:02 literally the first of its type thing that gave the new organizational form its name, starts, and becomes at the time the most successful crowdfunding campaign in history, raising over 150 million equivalent in ETH from over 11,000 people. An auspicious and inauspicious sign of things to come in the ICO era. However, the code is vulnerable and the Dow was hacked, compromising more than 60 million in ETHER. At the time, the Dow had 15% of ETH locked up, so the community is faced with a serious choice. Let that theft be enshrined and sanctioned, that value lost forever to those who owned it,

Starting point is 00:11:36 risking upsetting all the people who are making this nascent network, crest the hump of network effects, or play God by community mandate, roll the state of the blockchain back to before the hack and proceed. This is an insanely gonzo moment. It's not about what the right answer is or was. It's about the fact that there was this moment in 2016 that was so early in the life of this network

Starting point is 00:11:58 that has gone on to represent so much massive future potential, for so many people, where an existential threat came down to a community decision and a decision that still shapes how many people perceive the project today. And then, of course, there is the ICO era. Never in history has so much wealth been created out of so much nothing, so fast. It was a perfect story of pent-up demand to be a part of this massive wealth creation of venture technology, plus social media amplification, plus the most friction-free fundraising in history, plus people like MacAfee who were willing to use any tool in their toolbox to incite insane FOMO. Within a few months, ICOs were massively outstripping traditional venture financing.

Starting point is 00:12:37 Projects were raising tens of million with bullshit white papers and worse websites. And some folks actually thought that this was the beginning of the mainstream of this industry. In retrospect, it was just another flashpoint in Crypto's Gonzo Age. Of course, it attracted all manner of crazies from ruthless exploiters to amoralists willing to shill the thing to make the quick buck. MacAfee was a king among the shills. The washout of the ICO era washed a lot of the gonzo out of this space. The wild exploiters packed up and looked for greener pastures. The promoters and hype people slunk off to shill cannabis stocks or new age neutropics. And the people who were left around got to building. Some of them worked on a

Starting point is 00:13:17 totally different model for tokens that weren't fungible and could represent uniqueness, believing that there were applications for art, content, creativity. Some of them took what had been started with smart contracts and slagged off to tokenize the world projects to instead return to the roots of all of this by focusing on building new open finance focused protocols. And then there were the Bitcoiners recovering from the block size war, more convinced than ever in the sound money principles underlying this asset, and outtelling a story of resilience and difference in the face of an ever more interventionist fiat world. It worked. The industry matured. In the wake of the COVID-19 crash, all of those millions of conversations turned into the sions of trillions of trillions of

Starting point is 00:13:55 traditional finance pointing over in the direction of Bitcoin and saying, this thing offers something different. And even if you don't believe it, you can't argue with the facts that no matter how many times we call it, it just won't die. Hedge funders came in. Corporate treasuries came in. Insurance company general accounts came in. Entertainment companies came in. And all of a sudden, things were different, at least a little bit. Sure, there's still some pretty gonzos shit that happens. It's entirely possible that in 10 years we say, good God, remember when they let us trade with 100x leverage? And sure, there are still some gonzo people. Max Kaiser will probably have a fuck Elon we're not selling party for his funeral. But overall, with every week that passes, the industry

Starting point is 00:14:39 becomes a little less gonzo and a little more Goldman Sachs. There are warnings to be had here. Ben Hunt has written eloquently about the risk of turning into Bitcoin TM, a Wall Street-owned and operated casino where the truly disruptive parts, those ones that challenge the power system, are lost, and all that's left is another game where the house always wins. But whatever the case, the march away from the beginning is inevitable. John McAfee died yesterday. He was 75. However it happened, it happened, and with it, something larger past, too. I'll end with one more quote from Hunter Thompson. Yesterday's weirdness is tomorrow's reason why. Make of that what you will. Until tomorrow, guys,

Starting point is 00:15:19 safe and take care of each other. Peace.

The Breakdown - John McAfee and the End of Crypto’s Gonzo Era

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