The Breakdown - The Breakdown Weekly Recap | Jan 25 2020

Episode Date: January 24, 2020

A single long-form episode with all the week's content + a TL;DR. This week was all about macro frame-setting coming out of Davos.  Monday - 4 Reasons Crypto Should Care About Davos Tuesday - Gitcoin's Kevin Owocki on Controversy and the Future of Open Source Funding Wednesday - Why Vodafone’s Defection Won't Matter For Libra Thursday - Will Mass Adoption Be More PayPal or Pornhub? Friday - Davos Takeaways, CBDCs & the Rise of Bitcoin Art featuring Brekkie von Bitcoin

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 the breakdown. It is Saturday, January 25th. And as usual, we are here with the weekly wrap-up, all five episodes from the previous week, in one spot, one convenient, long file for your long drive, your long run, your long run,

long, whatever it may be. And as usual, I'm going to start off just by giving a quick TLDR on the week. I think the week had its tone inevitably set by Davos and by the World Economic Forum. This is an inescapable event if you're paying attention to anything in terms of geopolitics or economics. And we kicked off the week by asking whether the crypto industry should even care, what the crypto industry's relationship with Davos is and should be, given that in some ways we're trying to build an alternative economic system that doesn't play by the same rules and doesn't need to be governed in the same way that the systems that people at Davos are in charge of. And ultimately, my feeling just on a personal level was that the reason that we need to be

paying attention to what was being said at Davos and what was happening at Davos is effectively that we are on their agenda, whether they're on our agenda, right? And that, that's, That was literally true in the sense of how many panels had to do with topics in the crypto space. Now, in particular, the big themes, I guess you could say, that came up over and over again at Davos were one, the cashless future and what digital currencies were going to do to privacy and how it would or wouldn't be good for society. And two, the race for central banks to create their own digital currencies. These things came up just over and over and over again. And I think that in a lot of ways that was the story of this week. In some ways, and that's the story of our time.

During this time, we saw some news that just had interesting implications for who was going to be at the forefront of those changes, right? So we saw Vodafone defect from Libra. They were the eighth company to leave the Libra Association. And so on Wednesday, I actually argued that that didn't matter. I think that what matters in terms of Libra's success or failure right now is basically how much the U.S. government fears the rise and the uninhibited rise of China when it comes to digital currencies. We saw other news from CBDCs throughout the week. We saw the World Economic Forum itself put out a toolkit for central banks as they explore

CBDCs. We saw governments from Thailand and Hong Kong report on their efforts. We saw lawmakers in Japan push for a CBDCs. DC to check specifically to check the rise of China's influence among emerging economies. So again, this was a subtext and undertone for what was going on, not just at Davos, but around the world. We also saw some interesting news just from the mainstream crypto world. Bact was at a side event at Davos, and they talked about effectively that their app was

on track for a 2020 release, and their consumer app was going to be almost like a a latter-day PayPal, but for all types of digital assets. So everything from the cryptocurrencies that we know to virtual goods. Well, on that same day, Pornhub announced that they would be accepting or allowing their performers to cash out with Tether. A couple months after the actual PayPal had blocked those performer payouts because they're a centralized service that can unilaterally decide for morality reasons that a set of performers doing a completely legal adult thing, 100,000, by the way, being the size of that set, don't get to be paid, which really only serves to reinforce the point about why cryptocurrencies. So that was this week, right? It was all

about the big picture issues, the macro context that cryptocurrencies are operating within. I will say that conspicuously absent from a lot of the conversation at Davos was Bitcoin. Bitcoin continues to be this uncontrollable force for so many. people, right? We can talk about Libro, we can talk about China, we can talk about a U.S. digital dollar, but Bitcoin is such an anomaly because there is no one who controls it. There's no one foundation. There's no one organization. Even the network itself is widely distributed and it's not clear where leadership lies because that's kind of the whole point. So Bitcoin continues to remain this X factor. And I think that's what makes it so powerful. So a lot of conversations

about things that aren't Bitcoin this week, but do not be mistaken. Bitcoin is a presence in all of these conversations because of the other that it represents, because simply put of the lack of control that anyone can have over it. So a really fascinating week, one that I think is really worth thinking about paying attention to and reflecting upon, particularly if we're trying to understand the larger macro context in which we're operating. But I'll shut up now. I hope you enjoy it. I guess the last thing I'll say is in terms of guests this week, on Tuesday we had Kevin O'Waki from Gitcoin talk all about the round, the fourth round of grants that they did, their quadratic funding model and all of the controversy. And then on Friday we had Breckyvon Bitcoin talk about

Bitcoin art. So if you're interested in those guest episodes, I recommend skipping ahead to episode two with Kevin O'Walky are skipping way to the end the last five minutes of this whole thing to hear what Breckyvon Bitcoin had to say about the rise of Bitcoin art and why it should matter to everyone, even the most hardcore, culturally disinterested finance first Bitcoiners in the world. Thanks guys for listening. As always, I appreciate it. Catch me on Twitter at NLW. Subscribe at or subscribe nLW.com. And have a great weekend. I'll see you on Monday. 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 The Breakdown. It is Monday, January 20th, and today we are talking Davos. It is the beginning of the 50th annual World Economic Forum, one of the most notable or perhaps notorious, depending on who you're asking, pillars of the global economic order. It's where elites bomb in on their private jets to talk about climate change. If you ask some, it's where leaders of business and impact come together to talk about how these two fields don't have to be at odds to ask others. And no matter what, it has our attention throughout the week and usually throughout the year. This year, as there has been for the last several, there is attention around

cryptocurrencies and blockchains and digital currencies and digital assets more broadly. And so what I wanted to do today is actually take a look at what's going on first, what they're talking about, and pose a question, which is should the crypto industry actually care about the conversation at the World Economic Forum? Should we care about what's happening in Davos? First, let's start with a little bit of background. The World Economic Forum was founded in 1971 as a meeting point for leaders from the political sphere, the business sphere, the cultural sphere. It was designed as a place where they could talk about major issues, right, and shape global,

regional industry agendas. It is in many ways inherently tied to other major institutions of the global economic order, certainly in terms of narrative and in terms of people's minds. And you can see that played out in the themes that find their way into Davos each year. So this year's theme is stakeholders for a cohesive and sustainable world. A huge part of the agenda is talking about climate change and sustainability as a major issue. And more broadly speaking, the overall tone of the event is the idea that the world is at a critical crossroads, which is a term used by Klaus Schwab. He said, with the world at such critical crossroads, this year we must develop a Davos Manifesto 2020 to reimagine the purpose and scorecards for companies and governments.

So in some ways the question to me is, okay, then what is at stake for cryptocurrencies? The obvious answer in some ways is that this is where global agendas are set, or at least this is where you can see the global agendas being set, manifest, and told, and stated publicly, which is important. But before we get into that and why crypto should be there or not, what is crypto's history with this event? How long has crypto been a part of this event? And Sandra Rowe, who's the CEO of the Global Blockchain Business Council, which is a whole posting an event around Davos, wrote a piece about the history of, quote, crypto Davos and how it came to be. And basically, the way that she describes it is that four or five years ago, early folks in the Bitcoin and crypto community started posting or starting doing side events.

You know, all of these major world events, all of these major regional conferences, be they South by Southwest or CES or what have you. they all have created a whole ecosystem of side events for people who want to be around the event, but not necessarily, you know, buying a badge or whatever. So that started four or five years ago, and things started to get bigger and bigger as the industry got bigger and bigger. And the peak of this was, of course, in 2018 when we were just at the very height of the ICU boom. That was the point at which there was the greatest amount of activity and companies paying for sponsorships on the promenade and all of that sort of stuff. Last year, the numbers were obviously much more muted, which was the case for any crypto event, any crypto participation in events around the world.

And this year, the question is what's coming back. Now, if you look at, CoinDesk has started a pop-up newsletter from the ground in Davos to talk about what's going on. And one of the notable things that they pointed out, just in terms of gauging where crypto companies were with this with this event is they didn't see a lot of crypto logos. There weren't a lot of sponsorships, clearly from crypto companies of booths or of, you know, spaces on the promenade, you know, anywhere that they'd prominently display their logo, which suggests that to the extent that crypto companies are being or getting involved, it's more on doing business behind the scenes level rather than a public-facing level, which I think makes sense for just where the industry is.

We're still in this weird hybrid of a barren bull market where no one can quite wrap their head around it. And it's not exactly clear what slapping your logo on something does from a value proposition anyway. So whatever the case, it seems like this is kind of an in-between year in terms of crypto's participation in the event. However, there are some parts of the event that are clearly connected to this industry. notably the World Economic Forum has a department that focuses on this area, right? So Sheila Warren is the head of blockchain and distributed ledger technology at the World Economic Forum. And she wrote, along with Sumeda Deskmu, who was a project specialist in that same department, an op-ed about why the WEF is convening a group to create a blockchain bill of rights.

And so effectively what their argument is is that this technology is a chance to get it right or at least writer than we have in the past. And they want certain design principles for a decentralized future, which is their precise terminology, to actually be intentional and have some broad agreement among folks in the industry. So in this op-ed about the blockchain Bill of Rights, they write, the goal is to align private sector leaders, policymakers and consumers in a fundamental vision of how users can and should be protected as blockchain technology develops, particularly around the following pillars. One, agency and interoperability, the right to own and manage data. Two, privacy and security, the right to data protection. Three, transparency and accessibility, the right to information about the system.

Four, accountability and governance, the right to understand available recourse. So they're talking about within blockchain systems how they're designed and how they're, how they're designing. intentionally. So the point of this is to say that the World Economic Forum itself is clearly investing some amount of resources and some amount of thinking and time into this area. But it still brings me back to this question of should the crypto industry itself actually care about the conversations happening in Davos? And if so, why and if not, why not? So first, let's talk about why someone might choose not to care much about what's going on in Davos. The crypto industry, and in particular the Bitcoin-focused segment of the industry,

does have a general sense of dissatisfaction with the elites, with the global economic order as it is. In many ways, Bitcoin is seen as a way to opt out of the existing financial system, or at least opt into something that is inherently different and less controllable and less manipulable and less subject to the same challenges that have arisen in the dominant financial system. And I think that there are the folks who I see not wanting to engage with this community, not wanting to engage with these conversations, tend to think that there is importance in actually keeping distance from those power centers so that in order to avoid capture, right,

in order to avoid capture and integration into a system which doesn't play by the same set of rules and which doesn't respect the same set of values. So there's kind of a, if Bitcoin is inherently a response to a global economic order that is out of control and the elites who perpetuate it for their own benefit, why would Bitcoin choose to be a part of the conversation about how those elites can continue to change and shape the world, right? This is broadly speaking, the reason that I can see someone just not being really interested so much in what's going on there. Another potential reason is that historically, the World Economic Forum and Davos haven't been particularly interested in or, you know,

positive about this whole technology area, or at least the attendees haven't been. So, for example, last year, there were a number of critiques in major events. The PayPal CEO called Bitcoin basically Limited Appeal. One of Mark Carney, the Bank of England governor's senior advisors, said that he wasn't particularly worried about cryptocurrencies because of how slow they are. and in general, even those folks who have been positive about the underlying technology, it's been one of these crypto not, or blockchain, not crypto situations, right? People are interested in what distributed ledger technologies can do,

which is obviously a thing that we've heard over and over and over again. So in terms of this, why shouldn't we care column, there's two big bullets. One is the inherent tension of participating in a system that in some ways we're trying to upend. And secondly, the issue of just the track record that this event has in terms of what people think about this technology at the event. I think these are reasonable. I think these are important critiques. I am particularly sympathetic to the challenge of and fear of capture and absorption by an existing power structure. I think the hallmark of power structures is that they are good at staying in power and they are good at adapting to new realities in order to stay in power.

And to the extent that we're trying to create something that is in any way fundamentally different and in any way disrupts the upside benefits to the existing system for the people who reap those benefits now, we have to at least be cautious and intentional and diligent about the possibilities of institutional capture. So I'm sympathetic. However, I do find myself, down on the other side, which is why we should care about the conversations happening at Davos and why we should be trying to have even more of a seat at the table. So let's talk about that. All right, so let's talk about why we should care about the conversation happening in Davos,

happening at the World Economic Forum. I have four reasons. The first is understanding. I believe that we should want to take the temperature of this global elite. perspective, even if we don't particularly like it, even if some of us find it repugnant that the world has evolved in such a way to create this elite superstructure. I still think that we can acknowledge that the way that power works in the world is such that we need to understand where this group is articulating its priorities and what that means for the businesses that we're trying to

operate, the protocols that we're trying to bring to life. So I think when we're talking about trying to understand this global elite, we're really talking about two things. First is we want to understand where they are on macro issues. We want to understand how they're talking about the dollar and the dollar's place in the world. We want to understand how they're talking about China and its economic influence around the world. We want to understand how they're thinking about just the role of central banks and monetary policy more broadly. These are inescapably the context for for everything that we do in this crypto industry. Even if we are building systems that are meant to escape this reality,

this reality sets the context that we are trying to escape from. We have to be able to understand what people are thinking, how they're acting, in order to better act ourselves. So part one is understanding of where the global elite is around macro issues. Second, I do think it's valuable to understand what people are thinking, about this industry particularly. Is this conversation this year going to be more of the same blockchain not crypto? Are we going to be talking about digital assets not crypto and have it be a whole securities kind of tokenization conversation? Is instead the entire conversation in this digital

space, digital asset space going to be about digital currencies, the rise of Libra, the discussion of China's digital yuan, a conversation about central bank digital currencies? What is the crypto conversation going to be not from our perspective looking in, but from their perspective looking out to us and to our industry that we're in? How are they talking about Bitcoin? Is Bitcoin even on the agenda? Are we just talking about Libra and CBDCs? These are really important questions.

Again, not because they necessarily will immediately change anything about what we're building or how, but because we want to understand how the world is thinking about what we're building, even if we choose to reject it. So that's part one, understanding. One of four reasons to care about the conversations at Davos. Part two, reason two is infiltration. There are prospective allies everywhere. There are pre-coiners everywhere.

And just because someone hasn't been an advocate for Bitcoin yet, just because someone hasn't been an advocate for decentralized networks yet, Just because someone hasn't thought and been broken out of the paradigm of institutional thinking that they're in yet doesn't mean they aren't convertible. And as a, we are in some ways a space, an industry, a sector, and a movement that is predicated upon converting people to think and act as we think and act, to see the world in the same terms that we do. Davos is a chance to go recruiting effectively. And you can't recruit if your only disposition is antagonism and uninvitation, disinvitation. I think that if we are really serious about letting people participate in a different economic order, we have to find the right ways to invite them in.

So I think I don't want to belabor this point because it's kind of obvious. But Davos, when you have people concentrated in a small space, It's different than getting on their calendars, you know, through the press office. It's a chance to actually get ideas flowing and people involved in a very different way. So part two is infiltration. Part three, crypto operates in the context of a larger world. And the issues that we are trying to address are related to a number of different issues that don't just have to do with the way that monetary policy is conducted in any one

government or another. There's a set of related issues, right? Orthogonal issues that touch this space in this industry that are immensely important and very much connect to what we're trying to build here. Issues such as privacy and surveillance and which of these is, you know, where the balance between the larger battle between governments providing for the safety and security of their citizens versus the sovereignty of their citizens, right? These are very fundamental. fundamental issues in this internet era where information is so readily available. Speaking of information, one of the banner new issues that is being addressed at the WEF in a totally new way, or at least in a totally new scale, is the issue of deepfakes

and synthetic media. We've had some fun with deepfakes in this crypto space seeing, you know, CZ Binance's face strapped on Jetli's body in a fun ad. But deepfakes have a major, they create new questions and policy questions that are going to impact all types of digital media. We have a stake in that conversation, even if it's not what the technology that we're building is trying to address. So there's this whole world of related issues, which I think are unignorable by us.

And again, being able to be a part of those conversations at the highest level does feel important to me from the larger context of, I'm in. this industry to create the world that I want to see. The main dimension that we are fighting that battle on has to do with money and what money can do and what money's attributes are for different people in the world, but it doesn't mean I'm not interested in those other parts. And in fact, depending on who you ask, issues like privacy and surveillance might be as high as sound money principles. So this whole set of related issues which are very integrally tied to the what's going on and the conversations being had at Davos are extremely important.

The fourth and maybe most salient point is that we're on the agenda, quite literally. Crypto is on the agenda, and it's our choice about how deeply we're going to engage with it. So I went to Twitter to ask their opinion about this question even before recording this podcast. I said, should this industry even care about what goes on in Davos? And Nelson Rosario, who is a lawyer in the crypto space, he wrote, I'm paraphrasing here, but just because you do not take an interest in Davos, it doesn't mean Davos won't take an interest in you. And one look at the agenda suggests the truth in his statement. On Tuesday, there are sessions about, quote, shaping the future of the financial and monetary system. There are panels about from token assets to a token economy, a panel about the China Economic Outlook.

On Wednesday, there's a panel about the future of financial markets. On Thursday, challenging the dominance of the dollar. On Thursday, again, creating a credible and trusted digital currency. On Friday, a larger question, global economic outlook and the centrality of central banks. These issues, particularly in the context of Libra and China's digital yuan and the up-leveling of the whole industry that that created, are literally on the WEF-Davos agenda. They've invited people from this industry to be participants in this conversation. And I think that we have a choice.

We can either let them happen in the absence of our broader community participation and just kind of let them stay in the domain of some random panel discussion in Switzerland that we don't particularly care about because we're off debating the next thing on Twitter. Or we can decide that it's clear. that this industry and the set of issues that we're fighting for, the set of issues that we're addressing are on the Davos agenda. They are on the global elite agenda, at least in some way. And it behooves us to participate in that conversation. That's certainly where I land. I believe that the characterization of Bitcoin and the characterization of crypto is still far from

where we want it to be. I believe that even as we are trying to build new power structures and new power systems, we have to understand and be able to play the game in certain instances of the old power systems. I don't believe it's everyone's job to care. I think that it's a completely reasonable individual decision to opt out of really giving crap about anything that's said in Davos, writing it off as just a bunch of talking and only caring about actions that are actually taken. Like I said, I think that that's a reasonable personal position to take. But I think to the extent that we're operating as an industry and as a community, understanding what's going on, trying to infiltrate and influence those conversations, recognizing that there are related issues that

should matter to us, that do matter to us. And finally, having a stake in the conversations about us that have been convened is important. So I'm going to be watching Davos closely from here. You know, if there's interesting announcements, I'll report them on the breakdown. I won't necessarily do a full analysis like this again, because I'm sure there's going to be a million other things to talk about, but that's my two cents. I guess what I'll leave you with is just what I'm seeing in the community. Like I said, I ask people, should they care? And I put up a little poll. And the numbers aren't huge in terms of respondents because polls are terrible and Twitter really needs to work on that UI. But right now, 40.9% of respondents say, yes, like it or not, the W.EF and Davos folks are

power brokers and we should be paying attention to the conversation. Forty-three point two percent said, no, we're trying to build something new. And 15.9% said they are not sure. So really split, really interesting. Let's keep an eye on it, guys. Let me know what you think. Email me or hit me up on Twitter at NLW. And thanks, as always for listening.

I will catch you tomorrow. 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 The Breakdown.

It is Tuesday, January 21st, and today our main content is going to be an interview with Kevin Awaki, the founder of Gitcoin. Gitcoin has been all over crypto Twitter around its grants program, which has created controversy, both within the Ethereum community and beyond, but is something that's a really interesting experiment in open source financing of not only technology, but community, communications, and marketing efforts. So today is the last day of matched voting and matched grant making for Gitcoin. And so I wanted to have this interview to get Kevin's take on basically everything that's been going on and to just explain the system a little bit better. But first, let's start with a few

headlines that are related to stories we've covered recently here on The Breakdown. derivatives, derivatives, derivatives, derivatives have been one of the major themes around the financialization and institutionalization of Bitcoin. And there's just no way to see 2020 as anything other than starting off with a bang. According to Skew, which is a data analytics firm, there are $235 million worth of open positions across 5,329 contracts on the CME's Bitcoin Futures as compared to $110 million in early December. So basically, this number of open interest, it's the sum total of all contracts that haven't expired, been exercised, or actually delivered. So the point here is just that the volume is significantly higher than it was even a month ago, which is, again, just

further evidence of the importance of derivatives in the market and the growing importance of derivatives in the market. Next, we've been talking a lot about this battle between privacy and surveillance. And in some ways, the centerpiece of this conversation on a larger than crypto level is the battle between Apple and the U.S. government and in particular the Attorney General's office around backdoor encryption. Well, the latest is breaking news from Reuters that basically discovered that Apple had dropped plans that were set to allow iPhone users to fully encrypt backups of their iClouds, right? And this happened after the FBI. I complained to them that it would harm investigations. So Apple is taking a pretty bellicose stance

and fighting an attempt to create encryption back doors, but at the same time, they are not implementing new features which certain agencies of the government say would harm their law enforcement. This is obviously a bummer for those of us who have been looking to Apple as something of a standard bearer for big tech companies when it relates to privacy, but perhaps not surprising in terms of just the pressure that can be brought to bear on private companies. Davos is going on right now. We talked about it all yesterday about whether the crypto community should care about what's happening at the World Economic Forum.

And in particular, we've been talking a lot about the significant increase in attention in forums like the WEF on crypto and on digital currencies because of the rise of central bank digital currencies. Well, we saw a little bit of news today around Libra, which is a little bit of the news today around Libra, the project that pretty undeniably got digital currencies to a new place in terms of the consciousness of governments around the world. The first comes from Switzerland. The former president of Switzerland had called the project of failure just a couple of weeks ago. The Swiss government has now backpedaled from that, you could say, and wrote a memo that was seen by Bloomberg that says

the country's regulators haven't ruled out the possibility of Libra achieving their approval and that they're continuing to monitor the project. This suggests to me, at least, that Swiss regulators don't want to see or push Libra away from their shores. Libra came out of the gate saying that they were going to be domiciled in Switzerland, which was to the chagrin of the U.S. It was one of the major points of contention in hearings. This sounds to me like trying to walk back an aggressive stance from a government official who was no longer in power. Switzerland was not, however, the only country to discuss Libra in the last few days. Australia's Prudential Regulation Authority, or APRA, which is one of the country's top financial regulators, has said that it has the

potential to regulate Libra. This was in an official submission to a Senate inquiry on FinTech. It was published yesterday. And basically, APRA said that it had proposed a new regulatory framework that would allow it to oversee wallets that are widely used as a means of payment, which is a direct quote, and they include Facebook's Calibra proposal as an example. So again, this is all a way of saying that the governments of the world in Davos and beyond continue to watch Libra, continue to think about digital currencies, and that is just an unescapable frame set for this year. But with that, let's turn our attention to our main topic for the day.

Gitcoin is a platform that is meant to help change the way that we finance and support open source contributions. It was started by Kevin Awaki. It is backed by consensus. And it has been all over the news in the last few weeks around its Gitcoin grants program. I wanted Kevin to join the podcast to talk about Gitcoin broadly, but also the Gitcoin grants program and what they're trying to do differently in terms of quadratic funding, as well as to address controversy that has come both from outside the community and also from within the community, from within the Ethereum community that is kind of the core of Gitcoin's audience right now. So I think it's a really interesting conversation. We talk a lot about the future of funding open source projects. So even

if you're not necessarily super close with the Ethereum community, I think this will be a really interesting interview. So let's dive in. All right. I am here with Kevin O'Walky, who is one of the founders, or maybe the founder of Gitcoin, which has been dominating crypto conversation. And I think it's been a really interesting project to me for a while, but has kind of jumped to a new level, I think, in terms of activity and excitement and interest and maybe even a little bit of controversy this month, really, and is one of the interesting stories from the beginning of 2020. So, Kevin, thank you so much for taking some time today. Yeah, excited to be here. Thanks so much for having me.

Awesome. So for people who aren't familiar with Gitcoin, do you want to just give us a little bit of background or history? Yeah, sure. Happy to. So, Bitcoin's mission is to grow and sustain open source software. We think that open source creates a lot of value for the world. I think $400 billion per year in economic output. And so we want to give software developers the opportunity to capture some of the value that they're creating for the world. And we've got a couple of products that allow developers, to do that. The first is our virtual hackathon product, which basically allows you if you're someone who's building an API or a community that needs developers to engage with our community of 30,000 software engineers. The other sort of thing that we've been working on, which has really gotten a lot of attention over the last few weeks, is Gitcoin grants, which is like a sort of Patreon where you can pay other people in the community with crypto in exchange. for the work that they're doing in open source software.

And so we've come up with this interesting matching formula for contributions to Gitcoin grants, where basically if you contribute up to, if you contribute one die, which is $1 to a Gitcoin grant, that it can be worth up to $100 worth of matching. So that's kind of gotten a lot of buzz on social media over the last couple weeks. And I think that it's been a pretty exciting experiment in seeing how the Ethereum community funds itself. That's, I think, the interesting context is that all of this is playing in the space of how to make contributions to open source software development viable, right? And you're looking at, I think, interestingly, multiple types of contribution, because the

Bitcoin grants, there's a technical side and a marketing or just a community side, right? One of the things that's fascinating to me about a lot of things going on in the cryptosphere is that it's like it's dogfooding itself in terms of all of these new governance systems, all of these new funding mechanisms. The use case number one is, can we make it work for us and for our community? So I guess just, I would love to hear just a little bit more about the quadratic funding. How does the mechanism work in terms of a small amount of contribution can lead to a much larger matching grant? So I guess two questions is. One is where is the matching coming from? What's the combination of institutions and individuals? And then two is what's the mechanism of allocation?

Yeah. Your question is start with the deep why of why we're doing this. So basically, this quadratic funding is built off of a paper that Glenn Weil and Detalik posted called Constrained Capital Liberal Radicalism. And the idea is basically to move the decision of what projects get funded in the Ethereum space from a centralized decision maker that gets to make that decision to decision by your peers. So basically, do your peers respect your project, is there a broad democratic support for your project? And the funding decision is made off of that instead of by a central authority that gets to disperse the funds, which means you can do the funding distribution way more democratically. And it also means that you can do

it in a way more scalable way. You can evaluate way more projects that way. So basically, according to Glenn, quadratic funding is the quote unquote mathematically optimal way to fund public goods that a community broadly cares about. And the formula, the way it works is that if you have Project A, which raised $100 from one donor, and you have Project B that raised $10 from 10 donors each, then that second project would be matched in a much more liberal way than the first project, because it has a broader base of support of unique contributors that actually cares about it. And so quadratic Matching basically takes in the number of contributors and the matching amount and decides which projects to match with a centralized matching pool based off of those two numbers.

And it can be really powerful because if you have a broad base of contributors, then a $1 contribution can mean up to $100 or even $200 in matching because that project has such a broad base of community support, which is what we're trying to measure in the first place. But we're doing two rounds of grants this time around. The first is technology grants. So projects like Tornado Cash and Metagame and the Trinity Ethereum client are raising thousands of dollars through Gitcoin grants. And then the second category is the media grants. So basically eFub and there's this Twitter personality called Antiproceesis that are raising money on the Bitcoin grants platform for media grants.

And I think that the media grants have been a little bit controversial, but they bring in attention for the technology grants in that, you know, these people with media grants that are raising money on get coin grants already have a built-in audience to drive traffic to get coin grants. So, yeah, that's the long and short of quadratic funding. Happy to dive in on any of those points. I guess with the quadratic funding, you know, the part of the motivation was a critique of just coin-based voting, right? where it's like, how do you deal with the plutocracy problem, which not everyone thinks it's a problem, but to the extent that you're a person who thinks that plutocracy and just sort of voting on the basis of one token, one vote or whatever, is not going to lead to optimal results. It's an experiment in that. I guess the only other question that I had on that front is, have there been any other experiments with

quadratic voting yet? Or is this the first one that you know of? Yeah. So I know that a few other people have experiments with quadratic funding. and I'm forgetting the name of the project that presented a radical exchange that was doing quadratic funding experiments. But as far as I know, Gitcoin grants is sort of the biggest round of quadratic funding experimentation that we know of. But obviously, we're encouraging experimentation. The community is interested in taking the success of Gitcoin grants and expanding it out to other quadratic voting mechanisms. But I don't know that I'm at liberty to talk about. any of the other ones, partially because I'm just not really super informed by who else is doing what.

It's a cool experiment to see live rather than just theoretical. So I want to talk for just a minute about, I guess, the controversy, because I feel like part of, like, I remember seeing Neeraj from Coin Center tweet like a week ago or something. It's like, wait, what is Gitcoin? Which I thought was like, if you're in the business of like media and you think that any attention is good attention, I think that's a really good thing in some ways. But it's been interesting to me to watch because, well, a couple things. One is that you're seeing it from people who are kind of outside the Ethereum community looking in,

but you're also seeing really robust debate about what constitutes or should constitute grantworthiness inside the community. I think part of it is the decision you guys made to have this media category, right? Which I think is super interesting because if you're trying to address entire decentralized ecosystems, not just how the tech gets built. It's one of the major areas where if you see things as competition with centralized alternatives, centralized alternatives have marketing departments. And so it is interesting to see where that fits. What has been your take on some of the controversy?

And I guess these questions more broadly of just what constitutes grantworthiness? And I know that you've had to adapt a little bit and actually kind of re-update some of the terms almost. I think it was a question of where resources are coming from, right? So is this basically like, is consensus or the Ethereum Foundation just now paying Ethereum shills? That is like what it amounts to, which I think is interesting from a controversy standpoint because I think one could flip to the other side, even if you fully like took that line, you could say, well, why like shouldn't that be a thing that people are able to do. But I'm not taking any position about that. I think that one of the central lines of difference or disagreement between Bitcoin's community and any other community

is questions of centralization of people who are pushing the protocol, right? And consensus is obviously a lightning rod for that. Ethereum Foundation is a lightning rod for that as they are comparatively more powerful than any any comparative institution in Bitcoin. So I feel like that, It was an updated version of that same larger point of contention, which has to do with central authority. That's how I would describe it. But I don't know if that's how I felt from your end. Yeah. So before I answer, I guess I should provide a disclaimer that Gicoy itself is funded by consensus.

Joe believed in me back in 2017 when I Cape Flew to New York and I said, I want to build a social network for developers to help create economic opportunities for open source developers. But Joe's believed in me for the past three years, so take whatever answer I have with a grain of salt because I can in no way be a neutral, unbiased observer. With that disclaimer out of the way, I think that the mechanism of Quadratics funding, it's the democratically optimal way to fund public goods that people care about. So the question of who is a Twitter shell and who is not a Twitter shell and who is worth. funding is now being removed from consensus in the Ethereum Foundation and being put to the Ethereum community. And I think that that's a powerful, powerful example of pushing power to the edges with respect to what projects are funded. Whereas like two years ago, consensus grants or the Ethereum Foundation grants team would have been making this decision and that's way more centralized

decision making. Now, I mean, I think that you could say maybe the funds are still coming from the same place so it doesn't matter. I don't really buy that argument. I think it's about deciding who gets the funds. And then you get into an interesting discussion about who's even qualified to make that decision. Why does it matter who I think is a Twitter show and who's not? It really should be up to the community to self-organize, who's valid to fund and who's

not. And that's sort of exactly what get coin grants is. So I sort of reject out of hand that this is just another centralized fund. by consensus in the Ethereum Foundation. This is really radically pushed power to the edges, in my opinion. Yeah, I mean, it feels to me like there are a couple different experiments going on, right? One of them has to do with how do you take pools of resources wherever they come from, whatever combination of central and decentralized funding mechanisms there are,

and allow them to better reflect the will of the community that's involved, the stakeholder community. So that's kind of like with the core piece of quadratic funding. So in some ways, like, the point is that you're taking a centralized pool of resources, quote unquote, from whoever is contributing them, but then you're changing the way that they're distributed in a meaningful way. Right. So like, that's experiment one. I imagine that experiment two is also just how much can you shift the burden from centralized funding to external funding by having a stakeholder system that's better reflective, right? They're interrelated, but in some ways different pieces of

this pie, where from a game theoretical perspective, how much does it take from a centralized matching pool to actually incentivize radically more from a distributed network? My guess is that you're better, a lot of the bets of the folks who are really excited about this, would be that the better that you reflect the will of the community of contributors, the more that you're going to see resources come in from those contributors on the margins who are skeptical, right? So it's like, if this does a better job of allocating those resources, then you might actually see more resources to allocate the next time. Right. Yeah, it's kind of like a self-fulfilling prophecy in that way. Just so that we understand, I should have led with this information up front, but we've seen about 5,000 contributions from 1,100 unique contributors in the Ethereum space that have raised 100K worth of funding for Ethereum-based projects.

and then there's a 200K matching fund. So just so we get a sense of the sort of numbers that we're playing with, that's what Grants Round 4 is doing. I think we had 200 contributions for Round 1, 400 for Round 2,000 for Round 3, and then Round 4 now has 5,000 contributions. So it's got momentum. And just so you get a sense of my end game here, Nathaniel,

is to grow and sustain open source software. I want to build a platform where developers can just, work by and for the open internet and not have to have a boss, can earn for just contributing to open source software. And so that's sort of one of my end games. And the top four-five projects on Gitcoin grants could actually fund a full-time person for an entire quarter with the money they've raised. So I'm super proud that we're starting to get a point where we're changing lives by providing these funding rounds. So I think that in that sense, if you look at it on the individual vector of the people who are now able to focus more on their projects that are good

for Ethereum, that I think that this is a win. Totally. Like you said, the first part of the controversy has to do almost with the outside, like previously bringing whatever, like, whether people share their biases or not, you're not going to say that that like critique source isn't biased as it relates to Ethereum. But then the second controversy, which is like is a little bit different, which I think is actually really integral to this sort of experimentation, has to do with, Again, on the MediaGrant side, a little bit more, but like what constitutes a worthy contribution to the community in terms of what should be funded? I saw that you have a new policy around quid pro quo. So I'd love to hear just like a little bit more about that.

So basically, Gekcoin Grants is a platform for raising money for anything. The matching rounds is constructed in economic terms with this mechanism called CLR, constrained to capital liberal radicalism, which is a mechanism for funding public goods. So a public good is a good that's both non-excludable and non-rival risk, and that individuals cannot be excluded from using or enjoying that good. And there's no rivalry dynamic. A rival risk good is like a campground that's around a lake that only has 10 camping spots on it.

You would have rivalry in order to use that public good because you can only have 10 people parked at that lake at a certain time. A non-excludable, non-rival risk good is like air. The fact that you're consuming air doesn't stop me from consuming air. And so basically, where I'm going with this is that when we release Bitcoin Grants Round 4, it just had a ton of buzz on social media. And there was people who were starting to develop quid pro quo relationships with their contributors.

Quick pro quo just means that you give something and then you give something and then you get something in return for that. And the whole problem with the quid pro quo with respect to the mechanism is that if your contributor is giving one die and generating a hundred die from the matching pool, but there was like a quid pro quo between the grant funder and the grant owner, in that they're giving away, say, a membership to a private group or a t-shirt in exchange for that one-dye contribution, well, that quid pro quo isn't really benefiting the commons. That's a rival risk sort of relationship that you're setting up because you're excluding that good from the rest of the community by giving out the quid pro quo.

So what we did was we set aside a guideline last week where we said, listen, you can't give people monetary or instruments of value in exchange for your Gipcoin grants contributions because it runs the public goods funding experiment with respect to how Gitcoin grants are funded. This brings up a lot of interesting questions about permissionless architectures and whether or not we can even enforce the fact that there's no quid pro quo, which are open research questions that Metallic and Glenn and other CLR researchers are working on. The TLDR is that KICOA grants is for funding public goods and if you're giving away T-shirts or if you're giving away rewards to, like, kickbacks to people who are contributing, that you're not truly fulfilling.

filling the spirit of the mechanism. And so we're trying to set up social norms in the space where people understand why that's a bad thing. And any broad public broadcast of a quid pro quo or bribery attack will be sort of not part of the social norms of the experiment and the users will revolt against that. So we're sort of trying to design that social norm in the Gitcoin grants community in order to set expectations about what. what's in downs and what's not.

But it's an experiment, and you can expect that for round five, we'll issue very tight guidelines for what's a quid pro quo and what's not and why it matters, because I think it's existentially important to the mechanism that people aren't just using this to get kickbacks in exchange for their contributions. That's, I guess, the second bout of controversy that's come out of Gipcoin grants round four, and it's led to some interesting research problems and product design problems that we're going to be addressing in upcoming rounds.

Yeah, I mean, in some ways, like I read it, like if I put on my technology hat, it's a classic issue of when you release something, people are going to use it for the thing that makes sense of them, not necessarily for what you intended it for. You're talking about a need for a public funding infrastructure that's better at distributing public resources for the public goods. That doesn't mean that there's not also a cryptocentric Patreon that needs to be created, you know, or people just need to use Patreon for a different type of contribution, you know, that's a direct one-to-one with thought. but it strikes me, and this is kind of where it felt like it landed, that it just is two different types of funding that were nudging up against each other uncomfortably in the same context. Yeah, I think so. And I believe in being transparent and accountable to the community, we did not do a good job of setting that expectation up front. But I think that in round five, we're going to do a better job of setting that expectation

up front. Maybe someone will come up with a good mechanism for club goods, for companies, for funding club goods in the Ethereum space because arguably those add value too. It's just that we're going to have to set clear expectations in round in round five around exactly what's in bounds and in what category to push the community forward. Listen, I really appreciate all the time. I think it's super interesting. Like I said, right at the beginning, I think it's awesome to see a live action experiment in different ways to distribute resources and fund public infrastructure. So I'm really excited that you're doing this. For those who want to pay attention,

two things. One is where can they find more information? And two, what are timelines that they should be looking at? When does round four close? When is round five open? What should people know? You can go to getcoin.co and check out the Gipcoin web experience. You can follow Gipcoin at Gipcoin on Twitter. And we'll be announcing updates about Gipcoin grants there. You can expect that round five will be probably sometime in April. So we're aiming to do a Gipcoin grants round every quarter during 2020. This round's in January. The next round will likely be in April. And most importantly, if you're doing something that's good for the blockchain community, then you can open up a Bitcoin grant at gipcoin.com slash grants and earn money in exchange for the good work you're doing

in the space. So check out that web experience and start shilling your grant for around five early. All right, guys, there you have it. Gipcoin from the source. Today, if you're listening on Tuesday, the 21st, is the last day to participate in Gitcoin's quadratic funding program. But there will be other opportunities, as Kevin said, they're looking to do a new wave of grants each quarter this year. And no matter what, I'm interested in your take. Tell me what you thought about Gitcoin, what you think about the future of open source

funding in general. Feel free to hit me up at NLW. And as always, I appreciate all of the subscribes and all of the likes and all of the shares on Twitter. Thank you so much for listening. I will be back tomorrow with another breakdown. 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 the breakdown. It is Wednesday, January 22nd. And today we're going to kick off by looking at the latest high-profile defection from the Fledgling Libra Project and what it means for, Facebook. Second, we're going to be looking at Square Crypto, which has just announced a new lightning-related project, as well as breaking news of a new patent that has implications for

their efforts with crypto. And third, and finally, we'll be looking at some interesting legal intrigue around Telegram's case with the SEC. Yesterday, Vodafone became the latest company to leave the Libra Association, and in fact, the eighth overall to leave the association. Before it, the company, the company's that had left included PayPal, MasterCard Visa, Mercado Pago, eBay, Stripe, and Bookings Holdings. So this is obviously a different category. Most of those players are in the payment sector. Most of those defections came all at once. It had to be a very bad weekend for David Marcus and team. Vodafone is a large telecom conglomerate. And the difference in this case is a few parts.

First, it seems to be amicable. At least they're presenting it that way. Vodafone is going to pains to say that it doesn't have to do with regulatory concern or delayed timing or anything like that. And the reason that they are leaving Libra is they want to direct those resources that they might have spent on the Libra project to their own internal project M-Pesa. M-Pesa is one of the best established and best-known digital payment services in Africa. It currently serves six nations. They want to expand it. And so that's the logic. That's the reasoning that they're giving for why Vodafone is leaving the Libra Association. If your Facebook, the first instinct and the first instinct to market commentators has been, uh-oh, it's another bit of bad news, right? It's

another negative news cycle where some big company has lost faith in the mission and doesn't think it's going to actually be brought to bear. And that's generally the attitude. Very few people think that will actually see a Libra launch in this calendar year, right, in 2020. I tend to have a slightly different opinion in terms of the significance of this defection for Facebook, which is frankly that I just don't think it's that important. I think when Libra launched, they wanted to show that they could go rally big, big companies to the cause, right? It was meant to be a first impression kind of thing. It wasn't meant to be done, right? They had something like 30 Libra Association members when they announced it. They wanted to get it up to 100.

and they've continued to say that they have something like 1,500 companies on a waiting list. They wanted to launch with a big set of people. They were able to do that. What's happened since then is we've seen the fragility, let's say, of many of those relationships and informality and the still kind of in progress nature of those relationships as particularly payment partners have tended to exit the process. project at this point. Why I say that I don't think this is particularly significant for Facebook and the Lieber project right now as it stands is a couple parts. First, I think that it was a much

bigger deal to see those payment partners go. That first wave of defections, I think, was much more demoralizing and probably has a much more significant impact on the project itself than this particular partner in Vodafone and in terms of what Vodafone brings. Second, it feels to me likely that many of these quote-unquote partners and members of the Libra Association were not and are not particularly enthusiastic about the idea of a Facebook-led initiative that has the potential to disrupt their core businesses. But they feel it's important enough. The actors who are involved are significant enough that they have to have a seat at the table. So there's a pressure to do it. That's why you saw, I think, a reversal that was so quick,

is that as soon as that pressure was released, everyone left all at the same time. These things, to me, are not what Facebook's real challenges are with the Libra project. After watching all of the hearings, after seeing so much commentary from central banks around the world, I think that they're going to face three or four big issues. And that those issues are much, much more significant than who is or isn't in the Libra Association at any given time. So what are those four issues? The first has to do with where they're domiciled.

One of the biggest red flags for U.S. regulators was the fact that Facebook was saying to them that they wanted this to be an America-centric project and good for the dollar and good for the dollars place as the reserve currency of the world, yet they were domiciling the project in Switzerland. And they had a very ham-fisted answer when people pushed on that, saying that, you know, Switzerland was where international organizations set up. Many congressmen pointed out rightly that New York is also where many international associations set up. So that's one. I think domiciling is a huge issue for U.S. regulators in particular. Second, the basket of currencies approach. This is one of the most novel parts of the design of Libra is that rather than being pegged to any one currency, it's pegged to a basket of currencies. And that basket of currencies has the dollar in it, but not weighted more than.

then 50%, at least that was the intention. Now, this was another major bone of contention for U.S. regulators, who again said, if you really want this to reinforce the dollar's central role in the world order, why would you have it not pegged to the dollar? By the time that Mark Zuckerberg was testifying, after David Marcus had testified, it was clear that this was something that they were potentially willing to give up. Meanwhile, however, other actors in the central bank digital currency space or just the general digital currency space have picked up on this idea. You saw Mark Carney, the Bank of England governor, propose a synthetic hegemonic currency, which would be basically a central bank association or consortium creating a digital currency that was like Libra pegged to a

basket rather than just one dollar denominated currency. So I think that that basket of currencies issue is another huge barrier for the Libra Association. Third, speaking of competitors, it is not just individual governments creating a digital version of their fiat that have entered into the scene in the wake of Libra, but many discussions of regional consortiums. Lee Quinn from Coindesk has been reporting from Davos and pointed out conversations along those lines with Asian nations talking about regional digital currencies, with African nations talking about regional digital currencies. You have Binance's Project Venus, which is basically aiming to enable that type of activity. So you have this new competitor, right? That's a new way of

thinking about digital currencies that is neither the totally radical model of a corporate lead coin like Facebook's Libra, nor a traditional model of just a digital fiat, I guess. Who knows whether that will take root? Certainly the euro and the eurozone show just how difficult this sort of project can be, but it also shows the possibilities of it. So that, I believe, is another big challenge that Facebook faces. But by far, the number one most determinant issue, I think, in terms of whether Libra will proceed and how it will proceed is how U.S. regulators come to understand the threat of a Chinese digital currency or not. China has made it clear that they are bulldozing their way into this new space and that they are going to be the first to

release of the major powers a digital currency. The U.S. right now continues to seem to have this attitude that that's not particularly important to them or that that doesn't worry them. Now, that's obviously not the case for all regulators. We've seen Congresspeople ask and request the Fed start thinking about a digital dollar. But at the same time, we've also seen those requests more or less ignored, rebuffed, dismissed. And I think in some ways Libra's destiny may be tied up at least a little bit in whether the U.S. at some point wakes up or turns around and says, my goodness, we are behind the eight ball and we have to work with what's in front of us, which is Libra, right? We don't have time to do a unique government-led R&D effort for another five years like China's

put into this. We have to go now. So we have to work with some actor that already exists. That, to me, is the most likely scenario to really accelerate Libra as a force, is basically having it be effectively a proxy for a U.S. digital dollar. Who knows if Libra would even be willing to do that or interested in doing that, but they seem to give signals that say yes. Either way, lots of really interesting stuff to think about, right? the Davos context of this conversation around central bank digital currencies has lived up to the expectation that it would be a major point of conversation and contention. And I think it will continue

to be throughout this week and beyond. But with that, let's turn to our second topic for the day, which is Square and their new efforts around Lightning. Even as Bitcoin has settled into its digital gold narrative, and it's competing against central banks, not competing against Visa narrative. There are many folks who are very conscientiously looking to layer two developments, particularly lightning, as a mechanism that Bitcoin can also play a role as a medium of exchange, as a mechanism for people to actually make payments or buy things or just transact more easily. And Square Crypto is Square's project that was basically convened as a way, as a skunk works, for the people who are hired to really figure out just what they could best offer to the Bitcoin

space and do it without any real consideration of how it impacts the company directly, right? The mandate that they were given by Jack Dorsey was not to improve Square's Bitcoin efforts or cash apps Bitcoin efforts, but to just do things that were good for Bitcoin. Well, what they've come with most recently is that they are going to build a lightning development kit. This is effectively infrastructure to make it easier for other Bitcoin projects to integrate Lightning. This is a developer-centric bit of infrastructure. So the new kit is going to include an API, language tools, demo apps, and basically all these other features that are designed to integrate payment into other wallets that already exist or to build new wallets that have this built in.

They said in a medium post, quote, for Bitcoin to become a widely used global currency, one that can't be stopped, tampered with, or rigged in anyone's favor, improvements to Bitcoin's U.S., security, privacy, and scaling are required. And they are trying to, rather than, again, own some centralized thing like a wallet, they're trying to provide infrastructure for the rest of the markets. This was greeted, as you might expect, with a ton of enthusiasm from Bitcoiners, who I think continue to feel that Square is at the forefront of how. how a big company can interact with this new ecosystem.

Speaking of Square and speaking of interacting with this new ecosystem, it was also announced just today that Square had won a patent for basically a any currency to any currency transaction network, which obviously has really interesting implications for crypto. The application that Square filed said, the present technology permits a first party to pay in any currency, while permitting the second party to be paid in any currency. And the Coin desk article about this points out that this could be really advantageous for

contexts such as retail where maybe you don't accept the cryptocurrency that I want to pay in, and we don't have time to obviously negotiate or haggle over that. We're worried about settlement issues because if you have to go convert it, there's potential losses there. The technology that Square has just patented basically would allow for real, time settlement that moves from the currency that I want to pay in with the currency you want to be paid in, which could be huge, right? So taken together, it's just an indicator of how aggressively square is moving in this space, how important they see cryptocurrencies in general,

but Bitcoin in particular to the future of what they want to do. So really exciting stuff, I think, for anyone who is invested in more and more people coming into this ecosystem. Our third and final topic for the day has to do with Telegram. Two interesting little bits of news around that from the last couple days, both having to do with blockchain advocacy associations filing briefs in support of Telegram effectively and asking the SEC for either more clarity or for a specific designation. So the first of these was the Chamber of Digital Commerce, which basically is pushing the SEC to be able to distinguish between, on the one hand, an investment contract and on the other

hand, the underlying asset. So the point of this, obviously, is that even if purchase agreements for tokens were securities, that doesn't necessarily mean that the tokens themselves are securities once they are released, once they are used in the network. This goes back to the idea that something can start a security and become something that's not, that's a commodity or some other designation. This is a real wrinkle in the whole token ecosystem that is incredibly important. There's a lot of common sense logic to this idea that the sale itself constituted securities offering, even if the underlying asset in the long term is not actually a security. So the Chamber of Digital Commerce was not necessarily taking a huge side one way or another

in terms of what they were asking the SEC, but they were very strongly asking the courts. to be able to distinguish between investment contracts and the underlying assets. And of course, this has much bigger implications than just Telegram itself. The second amicus brief that was filed was from the Blockchain Association. And whereas the Chamber of Digital Commerce wanted the U.S. courts to make this distinction, but wasn't going to take sides on the lawsuit itself, the Blockchain Association is a more straightforward supporting brief for Telegram. They basically are arguing that Telegram made sufficient effort to meet all of the criteria put forth by the SEC

and arguing and worrying that the court's action could harm not only Telegram's investors, but the market in general. So the quote from the brief says, The court should not block a long-planned, highly anticipated product launch by interfering with a contract between sophisticated private parties. Doing so would needlessly harm the investors that securities laws were designed to protect. The SEC's lawsuit also raises novel questions regarding whether companies are forbidden from raising funds from sophisticated U.S. investors under well-established regulatory provisions to build blockchain networks. So the point here that they're making is that Telegram did everything it could to actually ensure the protection of investors. It only worked with accredited investors. It jumped through all the hoops. And they're still subject to this litigation, which makes it seem like it's something about the crypto space in general, which is potentially not.

not what the SEC is supposed to do to single out industries just because they don't like them. So interesting stuff, I think for me, the reason that I wanted to share it is that we saw last year kick and their kin token try to sort of rally the crypto community behind their cause and to go fight the SEC, right? They started their big Bollyhoo defend crypto campaign, which no one ended up contributing anything to. It felt so much like it was just a market. effort in some ways and trying to leverage the broader discontent that the crypto industry had for their own personal gain. I don't necessarily want to say that anyone who was involved with that was insincere in their belief about how the SEC should behave, but it didn't really hit, right?

The campaign just didn't hit. It didn't see people rally around kick and kin. In fact, part of why they didn't is that they weren't necessarily supportive of that project. We're seeing something a little bit different when it comes to telegram. We're seeing these advocacy groups be willing to put themselves on the line actually filing legal amicus briefs in the context of these court cases to support them. It's a different tone. It's a different time. And I think that it's hard to deny that this will be the most significant case, at least that we know of now, with regard to the designation ultimately of cryptocurrencies and crypto sales in the U.S. regulatory regime. So really important stuff to watch. For now, though, that's it for today's break

I hope it was helpful. I hope you enjoyed it. Subscribe, as always, iTunes, Spotify, wherever you listen to podcast, just search for my name. Hit me up on Twitter at NLW or get all of the breakdowns by email by going to nLW.substack.com. Thanks as always for listening and I will catch you tomorrow. 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 the breakdown. It is Thursday, January 23rd, and we are today going to kick off looking at the ye-old question of mass adoption and where it comes from and whether it's about consumers picking up new habits around digital assets or whether it's something different indeed and is about censored transactions.

Second, we're going to be looking at a new proposal out of the BCH, the Bitcoin Cash World. that would divert 12.5% of all block rewards to a new developer fund. And as you might expect, this is causing a bit of controversy. And third and finally, we'll be looking at research that has just dropped. One piece by CoinDesk, that's an overview of a lot of what happened last year, and another piece from the Block and the Blockchain Association about trends in blockchain employment. But let's dive in with this question of mass adoption. Is mass adoption more likely to come from PayPal or from Pornhub?

That's the question we're looking at today. So yesterday at an event hosted by the Block at Davos, during the World Economic Forum, obviously all these different companies are hosting side events. The CEO of BACT, or the president of Bact, rather, Adam White, said that the company was on track to release their consumer-facing app this year in 2020. The plan for this consumer-facing app is to have it be more of a overall financial app experience than just a crypto app. So the way that the block called it is more PayPal than Coinbase. But it sounds to me actually like it's even more than what PayPal offers.

So Back's app will be able to interact with a variety of digital assets. So not just the cryptocurrencies that you would obviously expect, but an array of virtual goods as well. so that could be digital versions of equities. It could be loyalty and reward points. It could be NFTs, right? So the idea here is that BACT wants to be the place where all of your digital assets live, crypto and otherwise. And so what does this really mean? What is the bet here? The bet here is that there's going to be a behavior shift in the coming years where people get comfortable interacting with digital assets in a new way. One part of that is digital monies, but there's they're also going to find things like loyalty points, like virtual goods, just more and more

a part of the experiences that are being offered to them. And the idea or the land grab for a company like backed is to be the place that consumers interact with that full array of digital assets. This is, I think, an adoption thesis that lots of folks in crypto feel compelled by, right, that there's an inevitable shift of everything to the digital realm and that the more people interact with digital goods, be it through just wanting to use them for money-like interactions or money-like uses like cryptos or more in the context of gaming and digital assets and gaming, there will be this growing comfort with digital assets and with the way that people interact with digital assets and the companies that are building the infrastructure now stand to win.

So this is one thesis on mass adoption is basically the slow, deliberate, diligent growth of people interacting with digital assets, probably punctuated by spikes around particular use cases that break out for some period of time. There's another theory of where mass adoption might come from that is less to do with mass adoption in some ways. This was articulated by Jill Carlson last year in her end of year post for CoinDesk, where she argued that cryptocurrency's most important use case was to enable otherwise censored transactions. Now, this got a lot of conversation going in the space because of the almost triggering to see

something that sounded like it was an argument promoting illegal use cases, which is not what Jill was going for. What she was saying is that there are certain types of transactions that are for not just legal, but often moral reasons, not allowed. And that what cryptocurrencies are good at is allowing people more sovereignty and control over how they spend their own money without having to deal with that local morality or that sort of corporate-determined morality. Well, we had another example of this just today or just over the last couple months. In November, PayPal out of the blue and unexpectedly and without much announcement started blocking payouts from Pornhub to it's something like 100,000 plus performers, right? So there's 100,000 people who use this site

to make money, right, to interact with people. And the payout system was through PayPal. Well, PayPal decided that that was an unpalatable use case to them. They didn't want that as part of their network. They didn't want that type of activity as part of their network. And so they blocked it. Well, there's a lot of people, 100,000 people, in fact, that were counting on this financial service to allow them to get their money, right? This wasn't. money that PayPal had any claim to. It was something that had been given by an adult buyer to an adult seller and was now blocked. And so there were other ways on Pornhub for those performers to get cashed out, but they just as of today announced that they would now be also offering payouts in

Tether, USDT. And they, in fact, suggested that people use the TronLink wallet as a way to get that tether. So holding aside anything you think about tether or holding aside anything you think about Tron, the point here is that this is a live in-action example of cryptocurrency's value as a way to overcome otherwise censorable transactions. Not because of legality. This is perfectly legal behavior. This is perfectly legal activity. But because a centralized company, i.e. PayPal, doesn't want, quote-unquote, that type of activity on their network. So the question in some ways becomes, are these visions of mass adoption mutually exclusive? And I don't think that they are. I think that there is, in my mind, an inevitable shift to digital. And I think that generations who are

coming up now, who are interacting with the world in a more digital first way, who have a huge part of their lives spent inside virtual worlds in the context of games. For them, these sort of digital assets and virtual currencies are not going to be nearly as strange. In fact, it'll be many of the old legacy systems that we have that feel strange and out of sync and out of time. So I do think that the thesis that there is an inevitable shift to the digital realm that digital currencies will follow is true. I believe that thesis. However, I don't know that I think that that's exactly where mass adoption will come from. I do think that when it comes to proving the unique utility of a lot of these digital assets, particularly in the realm of cryptocurrencies, it is going to still and continue

to be, at least for a little while, these transactions which are censored by the decision of a single centralized force in the form of a company like PayPal. We've seen this before that often the beginning of new technologies where the use case comes from, getting around is distributing things that people don't want distributed. Pornhub is effectively a cultural phenomenon as much as it is just a pornography site. You have 100,000 models. This is not some fringe behavior. This is as mainstream as it gets.

So the fact that this thing, which counts many, many people from every walk of life, from every economic group, from every demographic background, as users is now actively promoting cryptocurrencies as a mechanism by which they can allow their business to be conducted is a powerful thing, right? This is an example of where mass adoption and censor transactions actually meet. So what is the future of mass adoption? Is it censored transactions or is it just the slow, inevitable growth of digital assets? The short answer is probably both, but I think we're going to see a lot of spikes like this one around these censor transactions that are going to really prove a point to people about just what makes these cryptocurrencies so different. But now let's turn our attention

to a very different part of the industry, mining and the cartelization of mining. Yesterday news broke that a group of Bitcoin cash miners, in fact the four largest Bitcoin cash miners, were basically establishing a new norm where they were insisting that 12.5% of block rewards would be diverted to a new developer fund. This developer fund would be housed in a new Hong Kong corporation that has been set up specifically for this purpose and distributed in some way that they say will be open and fair but they don't make clear. Now importantly, this group, which again, like I said, includes the four largest mining pools

of BCH has said that anyone who doesn't comply, their blocks will be orphaned. Many people recognize this rightly, I think, right away as effectively the establishment of a cartel. Hasu says on Twitter, BCH to openly establish a cartel that directs 12.5% of all block rewards to a developer fund. The cartel will orphan any blocks that don't donate, signed by the four largest pools, BTC.top, antpool via BTC, and Bitcoin.com. So this, as you might imagine, generated a huge amount of discussion, not just in the Bitcoin

cash community, but also in the BTC community. So you have Whale Panda who says BCH implementing a 12.5% miners tax is hilarious, and anyone not donating will have their blocks orphaned, literally a centralized totalitarian regime with a 51% attack threat. Charlie Lee from Lightcoin says this mining cartel currently owns only about 28% of the BCH hash rate. They can't enforce this coercive soft fork unless they come up with a lot more hash rate, and it would likely lead to many forks, adding such a centralizing feature in this coercive manner set such a bad precedent. Nick Carter jokes referring to a previous parody that he had written.

He said, my Bitcoin mining parody wasn't meant to be an instruction manual. This is what's called, quote, dropping the veil of decentralization. It means sir, meanwhile, kind of had a more diverse perspective on this. He pointed out a couple things that he thinks might be good about it or at least makes sense. From a financial perspective, he tweets, there's something clever going on. The costs are mostly borne by Bitcoin. The cost shifting will continue to work as long as Bitcoin is hash rate dominant. From a security perspective, the tradeoff here is slightly lower hash rate for BCH in exchange for developer funding. This is sensible. Empirically, more attacks have been due to underfunded devs than to malicious hash rate. From a practical perspective, it's much better to see devs funded

and incentive aligned than to watch them make protocol changes to divert fees and income to layers they control, and much better to fund them than to watch them use sock puppets to steer their community astray. But then there are three unpalatable aspects to this proposal. And basically, he says, first, it's coercive on minors. Second and substantive problem is the way the proposal came out of nowhere. Springing such a proposal with orphaning built in on a community with no prior discussion was terrible PR and community management. And third and finally is that there's a There are many under-specified aspects of the proposal, specifically who will manage the collected funds and how will they be distributed.

This is exactly when some much-needed community discussion would have been useful. So overall, what to make of this? It's a clever proposal with good intent. The six-month sunset clause makes it even better, but it needs to be debated and made concrete. Any attempt to force shortened discussion and debate is a terrible idea and sets a bad precedent. So where are people landing with all of this? Well, one, some people are just never going to be interested in anything that has to do with Bitcoin Cash and God bless, that's reasonable. However, the people who are engaging with this,

I would say come down in sort of broadly speaking two camps. There's disagreement over whether a dev fund like this is a valuable idea at all, right? There's some people who say that based on where Bitcoin Cash is and based on just the need to have developers stay engaged, that something like this could be a good move on that front. There are others who just simply don't support the idea of developer funds at all, right? And would argue that for any protocol, not just this one. So there's kind of two different takes on the concept holding aside the execution. Now, the execution is almost universally being pooh-poohed and dismissed for this idea of cartilization, the built-in idea of orphaning, all of this with no discussion and coming out of nowhere,

right? It just really serves to reinforce the fact that minors are in control. So it's very interesting to watch. It's particularly interesting to watch as an outside observer with a little bit lower stake in the outcome. It's an example of live and inaction of a community figuring out where power lies and what they are and aren't going to abide by. And frankly, it also gets at this question, which we talked about earlier this week with Kevin Awaki, about open source funding and how developers are funded for their work. So we'll be really interesting to see if the community accepts this, if they embrace it, and why and what happens. one to watch for sure.

Third and finally, I wanted to just briefly touch on two research pieces that both came out today. The first is CoinDesk is now doing a quarterly research review, which I think is great. I'm a big fan of the more research and research aggregation we have in the space, the better. Often I've said on this show that I'm all about the narratives, but because of that, I really want to see as much data as I can to know where my narratives are off or at least need to be challenged. So I'm glad that CoinDesk is doing this regular recurring bit of research now. So anyways, they released their quarter four 2019 research piece and really in some ways it looked at more than just quarter four. It was throughout the year.

Just a couple highlights that I thought were interesting. First, the number of addresses holding more than 1,000 BTC continued to grow. So large holders in the Bitcoin space, there's been basically a continuous gradual upward trend that continued unabated throughout the markets last year, regardless of price, which is interesting and may suggest something about either just sort of the durability of Bitcoin Wales, new entrance to the market who are holding more, but either way, a continuous growth of addresses that hold 1,000 Bitcoin or more. Second, let's talk price action for a second, there were only four assets that outperformed BTC in 2019. There was Chainlink, which was by far

the biggest growth asset of last year up almost 400%. There was Tezos in the number two slot, BNB in the number three slot, ETHLAND in the number four slots. So only four assets that had any sort of real volume that outperformed Bitcoin. And finally, they also looked a lot at defy and how defy had performed over the course of the bear market. This is a number of stat that some are calling into question, but is really the best that we have at least right now around understanding just the total.

growth of defy, the total amount of ETH locked in DFI, right? So that grew over the course of last year from around 1.7, 1.75% at the beginning of the year to a high of 3% at the end of the year. So that's the total amount of ETH that is actually locked up in these DeFi apps. Now, the reason that some people don't love that measure, especially when it's denominated in U.S. dollars, is that when the price of ETH goes up, obviously that means the amount of U.S. dollar denominated value that's locked in, defy goes up too. We saw this just last week when there was a price bump. It was kind of hard to tell what amount of that was from the price of Ethereum going up versus new money coming in. But either way, what's clear is that more money is moving into the

defy space and being locked in these defy applications. Now, the second research report that I wanted to look at was about employment trends in this digital asset industry. And this was a collaboration between the blockchain association and the block, and they looked at basically how this industry had grown from an employment perspective. And just a couple of top-level stats that I found really interesting. The first was that you see almost nothing in 2016, and now you have something like 20,000 industry employees.

So obviously, significant meaningful growth there. Of those 20,000, something like 85% are concentrated in just three areas, mining exchanges and development firms. So this might not surprise you. The two big economic activities and drivers in this space are speculation and trading on the one hand and mining on the other. So obviously that fits with that. But 85% obviously a huge, huge concentration. A second or another interesting number that came out of this was the percentage of these employees who are based outside of the U.S. It's 67% fully two-thirds of the people who work in this industry. industry are not based in the U.S. This isn't surprising in the sense that it's a great big world out there

and the U.S. is only one small part of it. It is surprising if you look in the historical context of where new technology movements come from. Historically, it's always been centered around the U.S. And I've often said that one of the things that makes this industry so exciting is that it's the first major tech innovation space that is growing up concurrently, not just in the U.S., but around the world at the same time. And in fact, other parts of the world have significant claim to say they are ahead or developing it even further and faster in different ways. So that seems borne out, at least in these employment numbers. Finally, one random number that I thought was remarkable. Now, there aren't a particularly huge number of utility token launches going on anymore. That's kind of a 2017 term.

However, 40% of the utility token launches that did happen last year took place in Singapore. So, obviously a huge amount of geographic and jurisdictional arbitrage heading in favor of Singapore when it comes to people who are trying to launch utility tokens for token-driven networks. So really interesting stuff, like I said, I think that this type of research is incredibly valuable and just a great way for us to check ourselves against our own narratives. But let me know what you think. What other numbers did you see that were interesting or exciting in that CoinDesk report or in the Blockchain Association and Block Report?

What do you think about this question of BCH and the cartilization of mining? Is it just what you would expect or is it something new? Is it actually good for the community? Is it something that other protocol communities should think about? And finally, what do you think about this question of mass adoption? Do you think it's going to be more PayPal or Pornhub? Hit me up at NLW on Twitter. Subscribe on substack nLW.

Substack.com. And as always, thanks for listening, guys, and I will catch you tomorrow. 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 the Breakdown. It is Friday, January 24th, and Davos has come to a close. Yes, we started the week talking about whether crypto should even care about the conversations at the World Economic Forum. We're going to end the week starting off with three of the key Davos themes and what we learned about the global establishment's thoughts about cryptocurrencies and

digital currencies and blockchains this year. Second, we're going to dive into one particular issue, which just as we thought was right at the center of the Davos conversation, which is central bank digital currencies. This is going to be one of the most important themes for the year as this week makes clear. And then finally, we're going to end on a different type of note, something fun and interesting for a Friday. I asked my friend Brecky von Bitcoin to talk a little bit about Bitcoin art and culture and even why it should matter to folks who don't particularly care about the culture side of Bitcoin or even the philosophical side, but just the finance side. So it should be an interesting episode.

And let's start with these three conclusions or themes from Davos. All right, let's start with the banner headline from Davos this year. As the Coin Desk Confidential newsletter put it, crypto and Bitcoin are still dirty words, but blockchain, its neutered cousin, has been fully assimilated. This was definitely a year where there was conversation about blockchain frequented throughout, but it was subsumed in the context of other issues. There were conversations about how blockchain might be able to help in the context of climate change, which was far in a way the most important and most talked about issue at the event. There were conversations, as we'll discuss more, about Libra and about central bank digital currencies.

But when it comes to Bitcoin specifically, it continues to be something of a pariah. And I don't think this should be unexpected. Bitcoin is a singularly uncontrollable force relative to all of the systems that the folks who frequent Davos are in charge of. And so it's not a surprise that it isn't exactly top of. mind and top of focus for them, whereas something controllable like central bank digital currencies might be. So theme one, perhaps not unexpected, was crypto and Bitcoin still dirty words, even if blockchain is okay. Number two, cash is dead. There was a huge amount of conversation about the future of money and society. And one point of consensus seemed to be that cash is not

a part of it, right? Physical money is not a part of it. Earlier today, Lee Quinn posted one of her wrap-up pieces from Davos, and this was the central thesis that across the board, as she talked to government officials, it was clear agreement and consensus that cash just didn't have a place in the future. One interesting quote came from Yuval Noah Harari, who folks in this crypto community know as the author of Sapiens. But basically, he said that he's skeptical. of Bitcoin saying money is going in the direction of more and more trust. Bitcoin is based on mistrust. It's basically a return to gold. I think that many of us in this space would argue that trust is the direction we're headed in in this day and age when trust in institutions is at an all-time low,

but that's neither here nor there. However, he did also tend to agree that the erosion of financial privacy could happen, quote, very quickly and could be, quote, dangerous, which is strictly in agreement with all of us over here. However, that seemed to be not the common viewpoint. Lee writes, ask almost any economist, banker, or politician at the WEF about financial privacy, and they'll scoff. With shockingly few exceptions, most will say that more financial data collection and passive surveillance will benefit society. When pressed, they might emphasize the importance of encryption and regulating access to the data. This is exactly the scary scenario in terms of seeing the world in completely different ways that I think folks in this crypto community are worried about.

The idea that somehow just having unfettered access to financial information about anyone is better for society is incredibly suspect. And I think that the good news is that it's not all governments that agree with this. Just yesterday, Bloomberg reported that New York City is making a move to ban cashless stores. So they want to make it a requirement that stores continue to take cash. This is following other cities who have done this, San Francisco and Philadelphia. The reasoning has to do with low-income folks for whom paying in cash is incredibly important, right? The argument is some way is that the cashless stores discriminate against big portions of society. This is maybe a different context for why some of us in the crypto community

are worried about cashlessness, but it amounts to at least two more. meaningful sides of the political debate as it relates to cash and financial privacy. It creates a mechanism by which to talk about financial privacy. However, I think that the only conclusion looking at Lee's reporting and others reporting from Davos is that we have a strong battle when it comes to financial privacy ahead of us because cashlessness and just the unfettered benefits of cashless society seem to be de rigour and commonly regarded as obvious to the existing economic order, which could be an issue. It also gets into our third and final takeaway that the digital currency race is real. This, I think, is what we all expected to see from Davos, a ton of conversation

about central bank digital currencies in the wake of Libra, in the wake of China, announcing its digital currency, and that has certainly borne out. All right. So, this. The World Economic Forum was just chockerblock full of conversation about CBDCs. You could tell that even from afar. A couple different pieces worth highlighting. First was that the WEF itself has developed a toolkit for CBDCs. It's a 28-page toolkit that has information on a variety of different CBDCs, including what they call retail, wholesale, cross-border, and hybrid.

It's designed basically for central banks who are either just starting the research and who want to, quote, make progress quickly. It is basically a step-by-step evaluation process, including the benefits and challenges. So this is obviously a demonstration of the WEF itself placing its stake in CBDCs and saying that this is an important part of the future. It also reflects the fact that number of governments made announcements this week that suggested that they were digging in. So Rashid Maraj, who's the governor of the Central Bank of Bahrain, said, we will pilot the new toolkit developed by the World Economic Forum. We hope that it will

be an opportunity to learn, grow, and to adapt to the changes in the fourth industrial revolution. The governor of the Bank of Thailand echoed that saying that the toolkit could, quote, provide actionable framework for CBDC deployment. Now, Thailand is extra interesting because they had also issued a project report about their own CBDC project, which was alongside the Hong Kong Monetary Authority also issuing a report about their CBDC project. So a lot more activity. And then kind of topping this all off, you had a WSJ story this morning talking about a new report from the Bank of International Settlements, which suggests that one in 10 central banks

surveyed in 2019 said that it was likely to offer digital currencies within the next three years. covering something like 20% of the world's population. And when you raise that timeline to six years, the number of central banks that said they're likely to issue a digital money almost doubled. So clearly this is a top of mind sort of issue. You have 20% of central banks around the world representing a meaningful part of the world's population, saying that within the next five or six years, they're likely to have a digital money. So this is now just, it's happening, right? There's no longer a question about whether or not there will be central bank digital currencies. It's about what form and how they take a hold and what tradeoffs they come with and how they're designed and all these sort of things.

Another piece from Reuters this morning about Japan, I think it's to the core of maybe why this is such a big issue. So the article is titled Japan Ruling Party lawmakers to Float Idea of Issuing a Digital Currency. and the whole context of the article is the fear of what China's economic influence looks like if they have a digital currency and there's nothing competing. So there's a quote from Nakayama, who's a member of the group of lawmakers who's making this proposal, who said, China is moving towards issuing digital yuan, so we'd like to propose measures to counter such attempts. And going down, the Reuters article basically makes the same point that we've been talking about

on the breakdown for months now, which is, Facebook's push to launch its Libra cryptocurrency has prodded central banks to quicken the pace at which they look at issuing digital currencies. Of the major central banks, China's has emerged as the frontrunner in the drive to create its own digitized money, though details of its project are still scarce. Some Japanese lawmakers have voiced concern over Beijing's move as an attempt to expand the yuan's use as a settlement currency in emerging economies. And that is, of course, the geopolitical question here, is influence around the world, influence in emerging economies, influence in even developed economies that are transacting and interacting in an international way. So this is the stakes of the game.

The CBD race is real. The U.S. continues to ham fist its way through it, seemingly not interested. And it could be one of those turning points where we look at years later and say that was a major mistake that the U.S. made to not dig into that, to not try to compete against China in a meaningful way when it came to global economic influence through a digital currency. Now, the question, of course, is what this all has to do with our industry. And I think it's actually more complicated than it seems. The easy pat answer is that CBDCs are good for the crypto industry because they bring awareness to blockchains and they create an on-ramp where people are perhaps using digital wallets, and so from there they can learn about Bitcoin. And I understand

those things. However, I think that in some ways the reason to care about them is also that they are anathema in some ways to what a lot of the projects in this space are trying to build and trying to provide for. There is nothing alike, perhaps other than the underlying technology, between something like Bitcoin, which is meant to be a undeasible, non-sovereign, permissionless type of money from a tightly controlled, surveilled convenience fiat, basically, that is what these digital currencies will constitute, especially when they're coming from a place like China. We need to care about CBDCs not because of just a blithe excitement that maybe will get some of their runoff for users to come find our digital assets and our digital cryptocurrencies, but because they represent

perhaps the most significant threat that we have ever seen to what we're doing, you think that today's existing monetary system and Visa and MasterCard are threats when it comes to surveillance, wait till we get an entire world that's transacting on a Chinese digital yuan with complete total transparency and surveillance for that government. That is the Panopticon that we're worried about. So I think that we do need to be paying attention to CBDCs. And I think that the folks who say that there could be positive impacts of people coming into contact with digital currencies are correct. However, the bigger states of the game, I think, is much more adversarial perhaps than we are letting on.

Now, one more note before we leave CBDCs and move on to perhaps more fun Friday topics is Christopher Giancarlo was one of the most active speakers hustling around Davos. The former CFTC chairman just announced recently that he was building something called the Digital Dollar Foundation to basically design and push and advocate for the U.S. to actually have a digital dollar, to not be left behind in this race. Giancarlo sat down with CoinDesk, and I just wanted to play a little bit of the clip from that, because I think it gives you a context about how someone who has been in government in the U.S. and who is now currently trying to influence government in a specific direction,

is thinking about digital currencies. Digital dollar would be an alternative, a third form alongside cash, but it would be a direct transaction, and it would be honored by the federal government. We propose this. We believe that the dollar's usage in the global economy is underserved by serving as a continual analog instrument in a digital world. And we, with Accenture, and we're going to bring together a thought panel of some leading experts in constitutional law, in central banking, in technology, in blockchain and other technologies, in anti-money laundering and other fields, to think through how do we create a digital dollar that serves well into this coming. digital century. Let's envision a world where you have, and this is hypothetical, where you have a Chinese central bank currency, you have a commercial transparency like a Libra, and you have a U.S. dollar currency. Central bank, U.S. dollar?

A Bitcoin over here. Oh, and let's say Bitcoin over here, right? In those three worlds, one of them, one government is going to want to know every transaction, especially transactions to political opponents to freedom movements. In another world, one of those operators is going to want to know every commercial transaction to know whether you're shopping with Target or whether you're shopping with Nordstrom. And one of those providers is going to be constitutionally restricted from collecting either of that information. And that one is going to be the U.S. government. Because the Fourth and Fifth Amendment's Constitution prevent the U.S. government from taking

information without a subpoena and without due process and without just compensation. Now, jurisprudence around that will need to be developed, but we think in a digital dollar, people could see a digital dollar as your information being more secure, not less, than a central bank currency offered by other governments or by commercial vendors. So this is a fascinating take, and I think reinforces exactly what we're just saying about this adversarial concern, although perhaps from a different perspective than we might have. Effectively, Giancarlo is saying that, look, if your options for a digital dollar are one, China, who wants to know everything about how you transact because they might be able to use it

against you politically. Your second option is Libra, who wants to know everything about your commercial transactions so they can offer complete and total control over your buying habits. Or your third option is the U.S., which is constitutionally restricted from collecting information about you and using that information. Who are you going to pick? Now, of course, the skeptics, the cynics are going to say that that constitutional mandate doesn't necessarily stop intelligence agencies and it still creates a broader boogaloo for data collection that could come back to haunt us. However, I think the important point is that he is thinking about it in frankly a similar adversarial light than maybe some of us are, and this is why he's crypto dad

and we love him. But let's move on from this topic. It's not like we're going to be done with it anytime soon to something just to wrap up our Friday, which is about a totally different part of this industry, art. As much as Bitcoin is a financial movement or a technology movement, it is also a cultural movement. It has underpinnings of philosophy and just a perspective on how one should engage with the world, what the nature of society should be, how people should interact with one another, how people should be able to design their own future and have control over their own future. These are all philosophical elements, as much as they are economic or tech.

technological. Because of that, I think it doesn't surprise me that Bitcoin has started to create its own art segments, right? And crypto more broadly, but I think Bitcoin in particular have inspired a new wave of artists to have the influence both of Bitcoin itself, but also the ideas underpinning Bitcoin find its way into their art. This is a topic that, obviously, it may not be the front of mind for people who are just strictly focused on the financial aspect of it or some other part of it, but I think is a really important part of the Bitcoin story. And so I asked Brecky von Bitcoin, as he's affectionately known, who does a ton of Bitcoin art, is constantly on Instagram and on Twitter sharing his art, and also advocating for other artists. He has a whole

newsletter about Bitcoin and crypto art. I asked him two questions. First is what the state of Bitcoin art is. And second is why someone in the finance side, who doesn't particularly care about this should actually pay attention to what's going on in Bitcoin art. Hey, Nathaniel, thank you for having me on. So your first question, what is the state of Bitcoin art? So, you know, I think it's first important to address the concept of Bitcoin art. You know, what the heck is Bitcoin art? Is it just art that features the Bitcoin logo or a honey badger or the word Hoddle? Yes, that kind of thing is Bitcoin art, but to me at least, Bitcoin art is so much more than that. It's meant to spark conversations, to make people question the world

they live in, to make them want to learn about Bitcoin, and ideally to give them hope for the future. It's both a record of the times, and it's a call to action. For some, it's frustration with how things are, but it's also hope for how things could be. With regard to the state of things, Bitcoin art is definitely still in a nascent stage, which is nice for artists because there really aren't that many of us. We all kind of know each other, and for the most part, we collaborate and help each other because we're all mission driven. You know, not only do we want to succeed as artists, but we want Bitcoin to succeed. In terms of the market for Bitcoin art, it's definitely also small, but definitely also growing. You know, more importantly, I think over the last year, we've seen some really fantastic growth in terms of how art is viewed by the community, and even some folks outside the community.

You know, this year, for example, Bitcoin art had a great presence at Art Basel, and later this year at Bitcoin 2020, you know, the conference organizers, they're really doing a great job going to great lengths to feature artists in the community. When it comes down to it, what they're actually featuring isn't just artistic talent, but it's overall passion for Bitcoin. This kind of brings me to your next question, which is, why should art and culture matter, even to the finance folks, only focused on the money side of Bitcoin? You know, for those folks, for the finance folks, number go up may be the most important thing.

Number go up is important for regular folks and artists too. But art and culture aren't always reactionary. You know, I really think that they can be drivers of this change as well. If I ask myself, has Bitcoin already succeeded in being a decentralized censorship-resistant sound money and store of value? You know, I think the answer is yes. But can it be even more successful at doing that? That answer is a resounding yes.

Art's a broad category in my view, and it includes all sorts of content, whether it's a painting, a sculpture, or even a podcast. But regardless of the format, art makes people think and feel. And the more we can get people to think and feel things about Bitcoin, the more successful Bitcoin can and will be. So to all the finance folks listening, if you want number to go up, buy some Bitcoin art. Put it on the walls of your offices and homes and if possible in public places. Because when people look at Bitcoin art and see the passion artists have for their work and for Bitcoin, there's a good chance they'll start to get curious themselves. And next thing you

know, we have one more Bitcoin or today than we had yesterday. So there you have it. One more Bitcoiner today than we had yesterday. I think it's awesome thoughts. Thank you so much to Brecki for joining us here. I'll link to Brecky's newsletter, Brecky's art in the show notes as well as in the post. But for now, guys, I hope that you have an excellent weekend. Keep chilling. Keep stacking stats. And I'll talk to you soon.