The Breakdown - Stablecoin battles / Trade Wars & Safe Havens / Berlin Blockchain Recap

Episode Date: August 23, 2019

Libra Association on the verge of losing members? That's the report from FT as members get spooked by EU antitrust proceedings. Over in the trade war, Trump ratchets up the rhetoric against China, and we explore both how it might drive Chinese innovation and what it means for the BTC safe haven narrative. Finally, we do a quick recap of Berlin Blockchain Week so far, including the anti-surveillance forces and furries alike.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Where are you on Libra? I have never understood. I don't like it one bit. I don't like it because it's centralized. I don't like it because it's Facebook. I don't like it's because everybody gets to keep the flow. And I don't like it because it's like a debit card. I don't like it because it doesn't have any inherent value.

I don't like it because it's not. Welcome back to another Crypto Daily 3 at 3. Kicking it off hot with Joe Squawk, Joe Kernan on Squack Box this morning, talking about all the reasons he doesn't like Leibre. And so today we're going to start with the stable coin wars, new information on the Libra front. Second, we're going to talk about a little bit of a Berlin blockchain week recap. And three, we're going to give you a little rabbit hole for your weekend to maybe dig deeper into the trade war and some big kind of macro concepts that are going around right now. But back to Joe Squawk and Libra and why he doesn't like it.

So the news out of the Libra camp this morning was that basically the tensions are rising. the EU's antitrust action exploration, which we talked about earlier this week, starts to heat up. It's making companies who are involved with the Libra Association nervous, as you might expect. And so reportedly, this is according to the Financial Times, three of the companies, unnamed sources, unnamed companies, are reportedly trying to back out or interested in backing out because of all this tension. you know, this is to some extent non-news. It's news in the sense that it's being reported as news. The Financial Times is obviously a serious publication. It got ramped up into the realm of TV via squackbox, right? So people are talking about it and because of that it has the potential for a bit of self-fulfilling prophecy, right? Like the more that this happens, the more likely it is that these

outcomes come to pass, even if it wasn't necessarily the case before. However, the the it's not necessarily that something huge and new has happened since we last talked about it it just i think goes to reinforce how big a path or how long a road really facebook has in front of it as it tries to as it tries to bring this this whole thing online right um our doubt says tired libra is going to die because the regulators will kill it wired libra was stillborn do you have any idea how hard it is to get 27 organizations with different goals, cultures, and incentives to pull their shit together and deploy code without this regulator bullshit. So the point that he's making, obviously, is that to the extent that this does die, you know,

at birth, basically, at the hand of regulators, it was almost always doomed to that, which is why people were so interested at the beginning of this week when Binance announced Venus, because it's seemingly trying to do a little bit of an end run around that by getting the buy-in of companies and collaborating with them on their own localized versions of stable coins. So stable coin wars this week we've had Binance entering in a huge way with their Venus project, which you talked about earlier this week. We've had two now Facebook kind of antitrust legislation kicking up the dust around them and having some of their Libro Association members getting nervous.

The third interesting thing that happened in the Stablecoin Wars this week is this news that Tether is going to issue basically an RMB, a yuan-backed or pegged stable coin. So basically a Chinese version of Tether. Dovey reported this when it first happened. So the news came from a private chat group from an analyst. Let's pull this out from CoinDesk. Yeah, an over-the-counter trader in China and shareholder of crypto exchange, Bitfinex, which shares managers and owners with Tether, revealed the move on WeChat.

on Wednesday, saying Tether plans to call the stable coin CNHT. So again, this is kind of, this is not an official announcement. There's only a little bit of information. But Dobie in that, in that thread was basically saying that there's a lot to be nervous about that the Chinese government is not going to like this. She later posted the boycott of Tethers CNHT by local Chinese crypto OG has already started. This one is by Jundu, former co-founder of Huobi, owner of the biggest Chinese Crypto Media, Jinzi, and many others. His reason is it will bring systematic risk to local Chinese

crypto people and companies. So all of this is just really interesting to point out where we are right now, which is that there's this incredible, there's so much happening between China accelerating at Central Bank digital currency on the one hand, Binance trying to make it dead simple for local, or local kind of country-level governments to issue their own digital currencies. You of these sort of non-state, non-sovereign major competitors in the form of things like Libra. Tether is trying to compete by creating a Chinese denominated stable coin.

So a huge amount's going on in that space. And I think it has more to do with just, it clearly is a bet that the power of an opportunity of digital currency is gonna create immense value for the winners in that space. So lots to watch here. obviously an evolving story. But let's go on to number two,

which is Berlin Blockchain Week. So we talked about a little bit about this when we talked about Snowden's panel earlier this week. And basically talked about how Web 3 Summit was all about privacy and was all about the idea of surveillance and fighting against surveillance. And I was kind of saying that I think

that to the extent that the web 3 community can really own that space and create a place for people to fight back against kind of surveillance and surveillance powers enabled by technology, that's something that could be really powerful. But since then, Berlin Blockchain Week obviously has a lot of events. It had Web3 Summit. It had DAPCon. Now we're in the middle of Eith Berlin, which includes just this massive, massive hackathon. And yesterday, basically, seemingly the entire crypto community, was triggered by the meme development panel at Heath Berlin, which you can see on your screen. For those of you who are listening to this, it's Amin, the founder of Spank Chain, dressed as Amin normally does,

with a black Ethereum t-shirt, and five people dressed as furry. So full head-to-toe animal costumes. It looks like there's a lion, there's a bear, there's a leopard, there's a bat thing of some kind, and there's a fox, which sounded suspiciously like Vitalik. And so the way that this conversation went is obviously there's a huge number of people who, for them, this confirmed all of their suspicions about the absurdity and irrelevance of the Ethereum community. There are others who are interested in kind of this idea of mass adoption and trying to be professional and for actual users and this being a way to isolate them. So kind of they're getting it on both sides. Meanwhile, Tony Shang has wrote, this is the ideal development.

community. You may not like it, but this is what peak performance looks like. And I believe that what Tony is referring to is the fact that, you know, Ethereum has been under assault or that community has been under assault for the last, I don't know, forever, but especially the last week. And this is basically they're, they're meming their way back. They're kind of saying like, look, when the going gets weird, the weird turn pro, which is a famous quote from Hunter S. Thompson. And this is what it looks like. And by doing this, by owning it, they're actually casting a net and planting a flag and says that if you don't fit, you can come hang with us. And I think that people maybe underestimate just how powerful that is in terms of attracting developers. But it's kind of neither

here nor there when it comes to the actual substance of this event, which I think really like the, if you look across the events going on in Berlin, there's just no denying how deeply developer focused and developer-centric they are. You have just, you know, so I mean here again, who we were just looking at, wrote about, around his Dapcon experience. He said, just wrote two Mollick-Dow queries with Dune Analytics. Thanks for putting on a great workshop. And he basically talks about how we went to this workshop with this analytics platform and what he was able to do with it and why it's interesting and valuable. So again, super technical stuff. Chris Hobcraft basically prepared a list of interesting project previews for people who were going to

the ETH Berlin and the kind of the hackathon, right? So, you know, just a huge amount of developer focus at this event. If you're looking for kind of a high-level overview, Christine Kim from Coin desk was there and did this kind of long thread about everything happening. And I guess just the one other thing I wanted to return to is just the sum up, as we talked about the other day, of just what Web3 meant and how it kicked the whole week off. So Lane, Reddick, an Ethereum core developer, wrote, the Web3 Summit feels less like a summit and more like a university. One that meets just once a year for three days. The main talks are the lectures. The professors are cypherpunks. The hackerspace is the study groups.

How do we scale this and make it permanent? So anyways, there's a lot of really positive sentiment coming out of these events. And I think that we're just beginning, you know, they're still ongoing. Heath Berlin is happening as we speak. It'll be going on around the weekend. But I'm excited to see what comes out of these, what comes out of these events. And just, you know, I think that from our standpoint is trying to understand what's happening in the crypto community, these things may feel insular, right? They may feel like they're not CNN, you know, squawk box worthy. But this is where a lot of what's being built is being built and iterated and experimented on. And, you know, it's a reasonable position to not care about that, to care only about the fundamental economic changes of Bitcoin.

I think that that's a defensible spot. And certainly for myself, you know, I find so much relevance and interest in that high, the highest macro level of what Bitcoin in particular can do. But I think that to the extent that these technologies, as technologies and as new approaches to other parts of the money system are going to impact things, a lot of those innovations may come from gatherings of weirdos, which is what this was. And I mean that in the most complimentary way possible. But anyways, let's move on to number three now. So number three, Donnie, Donnie, Donnie, Donnie, Donnie. So Donald Trump was up to his old tricks today. He was railing on the Fed for not doing more of what he wanted. Going so far as to say, my only question

is, who is our bigger enemy? Jay Powell or Chairman Gee, the chairman? chairman of China. He went further with a different thread on China. Our country has lost stupidly trillions of dollars with China over many years. They have stolen our intellectual property at a rate of hundreds of billions of dollars a year and they want to continue. I won't let it happen. We don't need China and frankly would be far better off without them. Yada, yada, yada, yada, yada, and so it goes. Right. So, oh, by the way, don't miss fentanyl. We talked about fentanyl yesterday and the crime fund, well, fentanyl's back in the headlines. But anyways, I thought that it might be interesting to kind of do something since it's Friday

and since folks are, you know, heading into the weekend to propose kind of a little rabbit hole for your weekend, which is maybe around the trade war. So a couple of things I want to just throw out there that are, consider these further reading rather than assessments. So first, going back to Dovi again, she wrote Trump will make China great again. And basically goes on to argue that all of this intensity and pressure is creating a cauldron for China to innovate and to move faster. Where we've certainly seen this in the context of crypto is the fact that more or that the Chinese government seems to be accelerating its efforts with regard to a China bank digital currency, right? And this was even kind of prompted by seeing what was happening in Libra.

So there's clearly a lot going on, and Dovia has a whole thread here. I think that's an interesting thing to explore more. Is Trump effectively going to make China better by putting so much pressure on them? Second is kind of some of the larger political implications. And this is, I think, where one of the things that's been happening over the last few weeks, few months, is the convergence of this macro political narrative or macroeconomic narrative, rather. the Bitcoin narrative. And so Andrea Steno-Larsen says, one, Trump will continue to push forward in the Cold War 2.0. Two, the Fed will not follow suit with sufficient easing. Three, the U.S.

economy faces a high risk of recession as a result. Four, the Fed will be able to blame Trump. So basically the assessment here, and this is retweeting his tweet about Jay Powell, is that this is effectively all a political game around re-election next year. And who gets to blame whom for what? which I think is obviously nerve-wracking for those of us who are just living in it, which is basically everyone in the world. But I thought that there was something that was interesting was someone asked me, do you think S2F by 100 trillion USD, that's a stock-to-flow ratio, is becoming a Bitcoin narrative now being quoted endlessly on Bloomberg,

or is it a foundation for the safe haven narrative? So this is really getting at what we've been talking about on 3 at 3 for the last few weeks, which is this idea of Bitcoin as a safe haven. And so there's no question about why people are interested in the idea of Bitcoin as a safe haven. We saw it with, we're seeing it as we watch these seemingly kind of insane back and forth on mediums like Twitter about huge economic issues. The question obviously is what's driving it. And so the analysis that he's talking about, and this is kind of your homework for the weekend, let's call it, if you want to read it, is comes from Plan B, and it's called modeling Bitcoin's V. value with scarcity. And basically he talks about the idea of the stock to flow ratio. So the stock

being the supply of something and the flow being the ease of making more of it, right? And so things like gold have a very high stock to flow ratio where you could, you know, make a huge amount more, or you could significantly increase the supply of gold in terms of mining and it wouldn't impact the overall, it wouldn't impact the overall supply very much. Bitcoin has a similar kind of scarcity, where there's so much less Bitcoin being minted now as compared to what already exists, that it creates a really high stock to flow ratio. And so Plan B effectively takes this concept, which builds off work by Nick Sabo and was kind of most best known or best popularized, I guess you would say, by Safene in the Bitcoin standard,

and actually models it out from where Bitcoin's stock to flow ratio is now and what it's likely to be over time. And so this has come up in a number of kind of these macro guys recent analysis in coming over to Bitcoin. Most notably or most recently, Rao Paul and in conversation with Dan Tapiero. So they talked about Plan B specifically in this analysis specifically. And so my answer was basically that yes, I did in fact think that this idea of kind of a stock to flow ratio was part of the narrative driving the Safe Haven narrative. or I guess that, you know, driving the Safe Haven piece of things, but that it was basically a way to model out

what scarcity looks like in market terms and what it might mean going forward. So anyways, I think that the, again, as I said, this is not so much a big comprehensive analysis here. It's more something that I think, you know, as we see more bluster around the trade war, as we see more just kind of insecurity and unassuredness when it comes to the footing that we're on economically, I think understanding more than just

does Bitcoin number go up when stocks go down on any given day. But what the fundamental idea behind this safe haven narrative is is really worth making your own assessment around, right? It's a do-your-own-your-own-one research kind of situation and all of it's available. So I want to close with that. I think it's an interesting thing to explore for the weekend. and always, as always, keeping an eye on Hong Kong, amazing images coming out of there where something like 45 kilometers of people holding hands all around the city organized by no central authority.

As Jason Choi put it, you might call it, hold on, let me find the exact quote because it's too good. Jason Choi says, Returned home for Berlin to find citizens have self-organized without one single organizer into a human chain spanning 45 kilometers. In other words, a leaderless 560 block chain. All right, guys, it's been a great week.

I hope you've enjoyed it. I will catch you on Monday. Peace.