The Breakdown - “Stacking Sats” vs. “ETH is Money” - The Memes That Shaped 2019

Episode Date: December 18, 2019

From “digital gold” to “stacking sats” to “ETH is money,” 2019 was a year of narrative battlegrounds and meme warfare. And when every narrative is competing for scarce resources and attention, things are sure to get contentious. This special episode breaks down Ryan Selkis’ recent list of top ten crypto narratives and adds a few more worthy of note. Does “The Revolution Need Rules?” Is “Dissident Tech” the newest important area of focus.

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to a special edition of The Breakdown. So today is Wednesday, December 18th, and throughout this week, we've been looking at crypto narratives in the context of contemporary news, and trying to understand how the stories closing out the year validate, or change and suggest something different about the narratives that have defined this year? Well, today we're doing something a little bit different, and we're going to actually look at narratives on their own terms. And this was inspired by a post by Ryan Selkis, CEO of Masari, who wrote a huge tome,

basically with predictions for 2020 as well as reflections on 2019. And from that extracted something he called the year's top 10 crypto narratives and published it on CoinDesk as part of their 2019 year and review. you. So Ryan kind of goes through 10 different narratives or memes that he thinks defined this past year. I'm going to go through each of them, give you my take on what I think about them, where I think their place in the market narrative is. And then I'm going to share one more, one that I think is important to me and actually preview a piece that I have coming out for CoinDesk. One thing that you'll notice as we dive into this is that there's a slight difference, I think, to me, between a narrative and a meme.

A meme is a really powerful way to simplify complex phenomena into something grocable quickly. And a lot of these ideas that Ryan puts forth, I think, are powerful memes. To me, a narrative is an orientation in the world. It's a way that we understand and make sense of what's happening around us. And it's the way that we compete to get other people to see the world in the same way that we do. So when there's a Bitcoin narrative that Bitcoin is for day-to-day transactions versus a Bitcoin narrative that it is a way to opt out of an unjust fiat money system, those narratives run into each other because they're competing for some scarce amount of attention and resources. And so

that's what narratives do. Now, memes can be a distillation of narratives. And as you'll see, it gets a little bit blurry, but just to give you a hot take on how I think about it before we dive in. Number one, and I think that Ryan was doing these 10 unranked, but I could be wrong about that. His number one is hyper-bitcoinization versus digital gold. And really, he's saying that there's two ways that Bitcoiners are approaching the world. One of them is saying, hey, there's this hardcore libertarian narrative, as Ryan puts it, that the Fiat Money system is doomed to collapse, and Bitcoin is going to take over, and that's hyper-bitquinization, versus the digital gold narrative, which is like, hey, you know, this doesn't do everything that money does really well, but it's a really

great digital store of value that allows you to park your money somewhere else. Ryan is arguing in this piece that we should go after digital gold first. We'll get into this even in the context of what he has later. I think two things. One, ultimately these narratives aren't strictly mutually exclusive from one another. They're a matter of prioritization and sequencing in some ways. So that's part one. Part two is I do think, as we'll see for reasons later, that Bitcoin's perception beyond our circles as a digital gold or a digital store value is likely useful for us. and we'll see why. So that's number one, hyper-bitcoinization versus digital gold. Narrative number two, long Bitcoin short the bankers. Anyone who follows Pomp will recognize this one.

Interestingly, the place that Ryan takes this is what he's talking about is the emergence of an infrastructure for self-lending, basically being able to put our crypto assets to work, not by selling them, but by borrowing against them. And really, truly being our own banks, using our assets as collateral to take out loans and to use that money. He sees that as a really positive advancement, and I do as well. I think that we're going to just see more of that. We're going to see more of basically custodial lending, probably non-custodial lending in different ways too, and more and more pieces of that banking infrastructure are going to move to a sort of semi-permissionless model based on crypto assets. Now, one thing that Ryan doesn't get into,

but I'm watching closely, it's a little bit different, but in the context of decentralized finance. So far, we've had entirely over collateralized loans. That's kind of the way that the system protects itself. But will we see under collateralized loans starting next year? That feels to me to be the place that that whole space has to head in some ways in order to address the global potential for it, because not everyone's going to have a huge amount of crypto assets as collateral. So that'll be really interesting to see, but I think reinforces this idea of long,

Bitcoin short the bankers. Number three, stack sats and earn crypto. I think for Ryan, this is almost more of a hope, a wish. He wants to see more of this idea that you can monetize your time via crypto. But he also thinks that it hasn't hit yet. And that's important to him. He says, I'm shocked we haven't seen a big specialized payroll company that offers Bitcoin payouts as a percentage of your paycheck. But there is more, as they point out, in the how to earn free big coin quote unquote just by doing what you normally do. Right now, the place that we're seeing that most is shopping apps like Lolly and Fold. He's bullish on those potentials. He thinks that there's going to be more earned free crypto type of experiences in the year to come. I think that stacking

sats as a meme is actually a little bit different than earning crypto. And I think that stacking sats is definitely one of the memes of the year, right? It is such a great way to convey the fact that If you're invested in this future, you're constantly buying a little bit more of that future. That's what Stacking Sats is. And it was popularized by Matt O'Dell and Marty Bent, although they're always clear to say that they didn't invent it. But certainly it's become associated with them. So I think stacking sats is a super, super powerful meme over the course of 2019. Now, when it comes to this whole crypto earning thing, I'm very impressed with the execution quotient of both Lolly and more recently Fold.

Obviously, Fold is a lot newer. but these guys are executing really, really aggressively. They're exposing people to Bitcoin in new ways, which I think is good. I have some skepticism that you can really easily translate getting effectively cashback or Bitcoin back into a real meaningful experience with the asset. Anything that doesn't involve a decision to intentionally put part of your money into it, it requires so much less burden.

Now, the ways to address this are to say that these companies are going to to take on the role of also educating and getting people to understand what that asset means, there's also an argument that there's different parts of the funnel. And their job is just to build the biggest funnel possible. And it's other people's job to actually turn those small amounts of stats that get cashback rewarded to them or whatever into deeper engagement with the space. I'm a little bit more skeptical of how far earn crypto can take us. But I'm really impressed with the companies doing it.

and I think that they represent some of the best entrepreneurial energy that this space has to offer, and I'm glad for that. That's number three. StackSats and earn crypto. Number four, unbanked the banked. So this is a little twist. We obviously have seen a huge amount of bank the unbanked as a justification for projects like Libra and other stable coin projects, and really a whole variety of different types of projects.

unbanked the banked is basically Ryan arguing that this is the idea of building tech for this people that are on the inside, but they are misfits, right, and dissidents, and they want to break out, and they want to challenge the system. And he tells a really interesting story where he says Bitcoin took off in the U.S. in large part because Wences Cesare, Silicon Valley's quote, patient zero, was a successful entrepreneur from Argentina with a superhero backstory and a stunt that caught the attention of the rich. Bitcoin caught fire in the U.S. because he passed $250,000 of Bitcoin around a table in Silicon Valley power brokers at an exclusive 2013 dinner, not because someone at the party bought LSD

on Silk Road. Okay, okay, maybe it was both. Which I thought is a great little anecdote. I'm not really sure how this narrative fits in this year. I agree with Ryan's assessment of its potential power. It's not something I saw a lot. In fact, I think that if we're having a really clear assessment of what narratives dominated this year. It's actually the reverse, even if it's a little less interesting or if it's a little more insincere in its application of bank the unbanked. But that's number four, unbank the banked. Number five, missionaries versus mercenaries. This was most recently seen again in a pomp piece that he sent out to his off-the-chain newsletter about the difference between Wall Street mercenaries and Bitcoin missionaries. And effectively, what

comp's argument was, is that there is just such a palpable difference between this one cohort of people who are doing it exclusively for their own personal benefit and who want to just take every advantage they can of the system as it exists versus this group that's trying to fundamentally change the world and believes in significant ways that it actually can be changed. That's the idea that I had seen of missionaries versus mercenaries. Now, Ryan's taking it to a different place, and he says, the only crypto communities that will survive in the long term will have strong memes. On the flip side, most attempts to bribe developers and use with airdrops and developer grants will fail, many already are, and most attempts to recruit insiders to a cause with pre-sale discounts and the diminishing allure of token flips

will bring dysfunction and gridlock to projects that otherwise may have had a chance. He goes on, and I think this is worth noting, I'm predicting another bloodbath for privately funded token networks that come to market in 2020. We're also intentionally avoiding coverage of many new competitive layer 1. in blockchains in this thesis for the same reason. The vast majority are simply not interesting from a narrative standpoint. So what Ryan is saying is that projects have effectively been using these mercenary tricks of giving away value, not even real value, future potential value in the form of air drops, in the form of pre-sales, and that those things worked kind of a little, slightly in terms

of projects, you know, maybe being able to raise some capital in better days, but that they create a fundamental misalignment of incentives, that they actually warp things, that they don't so much get, allow networks to move past the bootstrap phase, but just ensure that all of the token holders and all of the network value simply don't care, right, because they don't have investment in it. Now, that's not to say that none of these projects, none of these new layer one type blockchains are capable of building missionary communities. In fact, I think a lot of lot of the ones that we'll see start to emerge next year, have probably spent a lot of this year 2019 heads down winning the devotion of developers. But I think it's a really, really salient point,

and I think that it is interesting. The way that I might phrase this as a narrative leading into 2020 is the smart contract platform wars. And I think that if I extrapolate Ryan's point, the only ones that have a chance are those that develop those missionaries. And that I completely agree. So that's number five. Missionaries versus mercenaries. Number six, Bitcoin is a platypus. So Ryan grabs from an analogy that blockchain capital Spencer Boggart wrote saying Spencer Boggart had one of the all-time classic analogies for Bitcoin in a 2017 post, the platypus. And he basically says, what type of animal is it? As it turns out, the platypus isn't good at being a duck. It's not good at being an otter, nor is it good at being a beaver or reptile. The platypus is, however, great at

being a platypus. In the end, the platypus was so distinct that scientists had to create a new animal category to accommodate its unique features. The platypus is a category creator. And his point, when you relate it to Bitcoin, is that Bitcoin doesn't fit easily into any of these categories, which makes it harder for people who are on the outside to GROC, which creates a barrier to adoption in some ways or a barrier to interest. However, and this is a point that Ryan makes that's, again, a little bit more subjective, but goes back to that first point about hyper-bitquinization versus digital gold, he says, when someone in power says this isn't money, it sucks as money, no one accepts it, you should say, you're right. When they say this isn't

digital gold, it sucks as a store of value, you should say, you're right. Please, please, please, let us hide in plain sight for one more bull run that gets us too big to fail. I agree completely with this sentiment. I think that there is a weird benign neglect still, even as Libra has happened, even as people have noticed, Libra in some ways, because they were so scared in the U.S. government of what Mark Zuckerberg and his two billion users might do relating to the U.S. dollar, it forced Bitcoin even further into a very kind of sidelong category of digital gold. I think that's to the benefit of the ecosystem. I think that the longer it goes, the more that Lindy effect takes hold, the harder it is

to kill, the more resistant to tampering it is. I'm with Ryan. I think that if we can keep hiding in plain sight for a little bit longer, it's a good thing for all of us. All right. Number seven, the revolution needs rules. So this comes from a Gemini campaign where effectively Gemini blanketed Manhattan with advertisements saying the revolution needs rules or, you know, the regulated exchange, really trying to show that they were the on-ramp and the connection point to the crypto world for traditional financial people who found the skirting around the regulated infrastructure, distasteful, whatever.

Ryan's point is a big fan of this. He says, I believe they were trying to convey that Gemini is a regulated exchange that follows the law and sets the standard. Good for them, but I take a less supplicant stance. When I think the revolution needs rules, I don't think of placating U.S. regulators so much as I do of training a rag-tag militia. If we want to be better than the incumbents than token teams, start discloting insider sales, exchanges, clean up your wash trading, wallets, learn how to integrate with tax offer systems and help your customers minimize their liabilities and pay only to Caesar what is actually Caesar's. The rules of the revolution shouldn't all be defensive.

So that's interesting. So he's taking it. He's taking this campaign appealing to one set of users, i.e. the existing financial world. And he's reapplying the meme to what I would say has been a growing narrative for 2019, although he frames it differently, which is self-policing, self-regulation, push for transparency. Obviously, Masari, for those of you who follow along, is a part of this, right?

Masari has a product where they get companies to voluntarily disclose a huge amount about themselves that they didn't previously. Their on-chain FX product has filters that make it really easy to filter out exchanges that are likely culpable for watch trading. Another one who's kind of in the same space is nomics. Nomics has transparency ratings for exchanges. So to nomics, it's less about kind of picking a random grab bag of exchanges that we think are credible and more saying who has the most transparent data, right?

because it's a lot harder to trade wash trading when you have full historical accounting trade-by-trade data than it is if you only have 24-hour candles, which can hide all manner of sin. So the revolution needs rules as a meme or as a narrative about the emergent internal push for self-policing, self-regulation and transparency, I think is absolutely part of the story for 2019. Number eight, ETH is money. So Ryan is of the opinion that the rebuilding the financial system in a decentralized, permissionless way is such a big thing that the idea that Ethereum would split itself and work on other projects like non-financial applications and digital collectibles and things like that is nuts to him, right? So he says, back in May,

I spoke at Ethereum and told the room full of decentralized world computer fanatics that it was stupid for the Ethereum community to build non-financial applications. Being the reserve currency for defy and open finance was plenty good enough. So basically, that's his argument here. I think a couple things about this eth is money meme. One is I think that it's interesting from a pure meme warfare standpoint that they learned the lessons of Bitstein on Twitter who had given this very contentious speech about memes and Bitcoin and a whole slew of things. But the eth is money folks, they really took some of those ideas, including the idea of a three-word meme and put some teeth to it. And a lot of people have talked about eth is money and this idea of eth's money, even people who

hate it still talk about it, which makes it a successful meme. I think more importantly in underlying this though is 2019 was definitely the year that decentralized finance and permissionless finance became the underlying most important without a doubt narrative within the Ethereum community. So much so that I think that as we go into 2020, you're going to see Defi as a discipline actually expand and really try to push outside of Ethereum. Now, of course, folks who are in the Ethereum community will probably rightly from their standpoint, really try to keep it close. They'll argue why Ethereum offers so many benefits as compared

to, you know, more centralized networks like Eos and certainly like Tron or whatever, but you are going to see defy experiments on Bitcoin. We're already seeing them. You're going to see defy experiments on new chains that emerge. This idea of decentralized permissionless finance is one of the most important narratives of 2019. You know, it emerged in 2018. The term was coined in 2018, but This has been its year to consolidate. So that's ETH is Money, number eight. Number nine, dissident tech. This is a term that has emerged more recently, was coined by Maya Zahavi, and I think that

it's a really powerful update in some ways of the idea, or some of the ideas that got people into the space in the beginning, right? When 2017 happened, there were really these two different strands of crypto. There was tech crypto and there was money crypto. And money crypto was looking to systems that they saw as undefined. just because of the way that Fiat money creates cantillion effects and exacerbates inequality and problems of sound money. So that was their side. While the tech crypto folks were looking at the idea of monopolies, right, and these Web 2.0 companies, which had started off as

trying to open the world up for people and ended up just actually creating these phenomenally powerful monopolies. Dissident tech is a little bit, I think a better maybe product market fit narrative for where some of those tech crypto folks wanted to go and wanted to take it. Maybe it's not, at least right now, about beating Amazon at its own game with a decentralized store, but it is instead about technology that allows people who are in dangerous circumstances or unjust circumstances or extremely controlled circumstances or repressive circumstances, work their way, opt out of the system that they're in, and try to plug into something different and build more avenues for freedom and sovereignty and

expression. This has been crystallized in the second half of this year in some of these new terms like dissident tech. They're embodied in things that we've seen like Peter McCormick, obviously the host of what Bitcoin did, launched the second podcast called Defiance. I think that we're seeing more like this. We're going to see the productization of dissident tech more and more. Decentralized hardware networks like helium are a good example. Orchids, the privacy VPN is coming to market finally. You obviously have privacy focus browsers like Brave. I think that you're going to to see more privacy-based chains really start to push themselves out over the next couple years. You have new funding apparatuses that are anonymous and different.

And then, of course, you have this whole slew of DAWS. And this is something that Ryan doesn't really talk about. But Luis, one of the founders of Aragon, said something this morning about how at the beginning of the year, we talked about how the year was going to be the year of DAWS. And there was a few DAWs every month that were explored. and now there's a few Dow's starting every week. I do think that this idea of decentralized organizations that can coordinate resources and align people around specific types of action are going to be a much bigger part of 2020. So couldn't agree more that dissident tech is an

important part of 2019. I think it's poised for an even bigger 2020. Finally on Ryan's list, OK Boomer, but for crypto. This is Ryan's way of describing that we have battles ahead of us. He thinks about Representative Brad Sherman from California a lot, who he has often said is the saviest critic of Bitcoin and Crypto. He's the one who says that the end goal, you know, every time there's a hearing, he doesn't actually use any of his time to ask questions. He uses it as a bully pulpit to talk about how the end goal of Bitcoin and crypto is the displacement of the U.S. dollar, how the only people who need to use these cryptocurrencies are money launders and terrorists and drug dealers. He plays on all of the narrative tropes that are likely to scare

people. And basically, Ryan is saying, we need something that is as impactful and dismissive as OK Boomer, but for people who are dismissing crypto. It's less that it's a thing that happened this year and more than it's a thing that he hopes happens next year. I do think that we need to be savvy about the fights ahead. And I do believe that there are going to be fights ahead. So with that, I completely agree. And that actually brings me to the one narrative that I wanted to talk about. So I'll have my own narrative year and review piece for CoinDest coming out sometime in the next week or so. And for me, my most important narrative of 2019 was the emergence of a true digital currency war. I believe that the emergence of Libra onto the scene, the response of China to Libra,

and then the response of every country in the world to China responding to Libra is totally changing the context in which we are operating. It has leveled up and will continue to level up the significance and the same. stakes of everything that we do. It is the difference between every congressperson and senator thinking about this once in a blue moon when it happens to come up versus having junior staffers who are dedicated and focused on this area. The battle for the future of money was a thing that used to be far off that is now here. And I do think in that context, the ability to actually answer and address the questions to shift the narrative away from criminal money and terrorist money and drug dealer money is going to be important. And I don't think that we're quite there yet.

So connecting kind of Ryan's number 10, OK, Boomer, to my single overarching emergence of a digital currency war, I think that's a real battle for 2020. What do you guys think? Do you think that these were the narratives of 2019? Do you think that 2020 is going to be about digital currency wars, or is it going to be about defy? Let me know. I'm really interested in what you have to say. the discussion of narratives is so important. They are where we compete for defining the space that we live in and compete to get people to see the world the way that we do so that they dedicate themselves to our cause in the same way.

Narratives are how we recruit missionaries instead of just having a bunch of mercenaries. Thanks for listening. This is a fun episode. Tomorrow we'll be back with a little bit more of a traditional kind of integrating the news and narratives. But hope you guys enjoyed this and I will see you tomorrow.