The Breakdown - The Future of Crypto Isn’t With Wall Street

Starting point is 00:00:00 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is produced and distributed by CoinDesk. What's going on, guys? It is Sunday, January 22nd, and that means it's time for Long Read Sunday. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. find a link in the show notes or go to bit.ly slash breakdown pod.

Starting point is 00:00:40 All right, friendos, we are going to do something a little bit more positive to close out this week. No more bankruptcy talk, at least for a little while. We're going to read a couple different pieces, and we're going to start with a piece by Michael Casey, CoinDisc's chief content officer called Worldwide Grassroots Projects can lead crypto recovery. The subheader reads, crypto is not hurting lower income in marginalized communities, but instead providing them with new tools through innovative. government models and tokenomics to regain control from historically oppressive financial systems. During the House Financial Services Committee's FTX hearings last month,

Starting point is 00:01:16 Representative Jesus Garcia, Democrat from Illinois, described crypto as an entire industry that thinks it's above the law, and then said something that irked me even more than that unhelpful opening generalization. Crypto companies, quote, are making money using one thing hype, Garcia said. And when hype runs out, and ordinary investors, especially late comers, who are disproportionately low-income, black, and Latino, lose. Now it's true that many people of color bought crypto in recent years, and that by extension, many have lost money on account of Celsius Network, FTX, Voyager Digital, at all. But there's a subtext to Garcia's comment, whether or not he consciously intended it,

Starting point is 00:01:54 that patronizingly paints certain communities in the U.S. and elsewhere as ill-informed and vulnerable, denying them agency and blindly missing a bigger story of empowerment. Take a look at hundreds of grassroots crypto projects. led by blacks and Latinos in the U.S., and at the many crypto-based business models arising in Africa, Asia, and Latin America, and you will find large swaths of human beings from income challenged, marginalized or oppressed communities seeking new ways to take charge of their lives. There's a reason why the top four positions in chain alices, activity, and purchasing power-weighted country ranking of per capita crypto adoption are occupied by Vietnam,

Starting point is 00:02:29 the Philippines, Ukraine, and India, and why the 6th-10th position belong to Pakistan, Brazil, Thailand, Russia, and China. And according to a forthcoming report on Black experiences in Web3 from the Crypto Research and Design Lab, cradle, there's also a reason why the fifth position is occupied by the U.S., the only developed Western country on the list. It's because of an outsized level of adoption among Black Americans. Hint for Garcia, the common denominator across this top 10 is not Sam Bankman-Fried. FTC's Super Bowl ads featuring Larry David weren't subliminally targeting rickshaw drivers in Vietnam, refugees in Ukraine, or for that matter, black hospitality workers in the U.S. Millions of people worldwide got into this field because they

Starting point is 00:03:08 saw a way around a legacy financial system that had kept them from executing on their own untapped potential. Sure, these marginalized early adopters are still a minority in their communities. Cryptocurrencies are far from universally accepted, and the negative sentiment generated by the 2022 meltdown will slow growth. But the worldwide adoption trend among these groups is on the up, and it's poised over the long term to disrupt the Western financial establishment, which whether it likes to be labeled as such or not, includes privileged crypto bros who treated centralized token exchanges as casinos to 10x their dollar wealth.

Starting point is 00:03:40 These people, once marginalized, are now poised to lead the industry's recovery from its doldrums. Change from without, not within. I believe the solutions these outsiders build will end up as the true source of this technology's promised revolution in the Web3 era. It won't be like the prior Web 2 internet revolution when Wall Street listed U.S.-owned Google, Amazon, and Facebook disrupted the infrastructure of mainstream commerce by enticing Westerners operating inside those legacy systems to shift to new

Starting point is 00:04:07 platform-based business models. The paradigm change is going to emanate from outside the system, from the developing world and from marginalized communities within the developed world. After the implosion of the CFI trading and lending bubble, it's the ones bringing local, real-world-focused use cases to their communities who now have the opportunity to redefine crypto's purpose to separate it from the empty hype of speculation that FTX came to define. The unpublished cradle report on black crypto adoption notes a startling statistic from a Federal Reserve Bank of Kansas City survey. 18% of black consumers in the U.S. hold cryptocurrencies, while only 7% own stocks and 2% mutual funds. By comparison, 12% of white consumers own crypto, while 19%

Starting point is 00:04:46 owned stocks and 12% mutual funds. The report explores the root cause of this contrast, describing a deep-seated mistrust of the stock market and of the white financial establishment among black Americans, which stems from the phenomenon of generational financial trauma, GFT, which has in turn fed an appreciation of the crypto-narrative of self-empowerment. A concept that researchers have identified since their studies of Holocaust survivors in the 1960s, GFT is the idea that historical racial injustices are passed on for generations and shape how its victims interact with financial systems. Slavery is the example par excellence, a source of lasting trauma that, via structural raises

Starting point is 00:05:21 and deep-seated mistrust, has imposed burdens on black Americans for centuries. If you're inclined to dismiss such ideas and want descendants of slaves to let bygones be bygones, I urge you to listen to the Money Reimagined episode we released on May 21, 2021. It featured Jerry Tardu, a Haitian author, entrepreneur and politician, and Danielle Jean-Pierre, co-founder and chief operating officer of Zimbali networks, which is developing digital currency payment products on the island. There we talked about the massive loan that France imposed on the Haitian government, formed by the ex-slaves who had ousted their former masters in 1804. It was framed as compensation for French slave owner's loss of quote-unquote property.

Starting point is 00:05:56 The unpayable debt ultimately ended up in the hands of the National City Bank of New York, which would later become Citibank. The debt was finally retired in 1947, but not before it had imposed a century-long burden of economic dependency on the impoverished Caribbean nation. It's understandable that Haitians would hold an abiding mistrust of Wall Street and might be open to Simbali's offerings. From Philippines to Nigeria. For other examples of crypto projects developed by and four local communities,

Starting point is 00:06:21 look at the projects showcased in the Web3athon that Cradle explored in partnership with CoinDesk. Winners and standouts include Evolve, which has built a polygon-based, incentivized financial literacy program for women among Black, indigenous and people of color, Indigigi, a decentralized autonomous organization for indigenous communities, and the Carbon Coffee Collective, a regenerative financing project providing financing the coffee farms to switch to generative agriculture. Or consider the phenomenon of Web3 gaming guilds such as Yield Guild games from the Philippines, or IndieG-Dou, an Indian version. Philippines-based in Farsis director Leah Callan Butler, a coined-esque opinion contributor,

Starting point is 00:06:55 describes these communities of play-to-earned gamers as, quote, a great example of Web3 innovation that is super grassroots and community-oriented. She says there are already 17,500 such Web3 guilds around the world. Calin Butler also cites impact market, a protocol designed for communities to develop financial inclusion and social impact projects as a tool that's driving other grassroots empowerment projects in developing countries. These tools and ideas are stirring innovation that's tailored to local needs everywhere. In another Money Reimagined episode from 2021, my co-host Sheila Warren and I learned from Yelabato Mose, the former CEO of Payments App Bundle Africa, and Adia Saoho, a venture builder

Starting point is 00:07:28 and operator, about the explosion of defy innovation underway in Nigeria. There, local developers who are fed up with rampant inflation and a corrupt, oppressive government, are building workarounds to the official financial system. And in yet another episode that included South African digital artist Lathabo Huma, we highlighted the opportunities that NFTs posed to black and and other historically underrepresented artists to sell directly to collectors, avoiding the exclusionary practices of art snobs in the white-controlled gallery world. What's striking about a lot of these projects is that they're founded on something

Starting point is 00:07:55 more than technological or financial innovation. It's a form of social innovation, of figuring out how communities can use new governance models and tokenomics to band together in both the common and the individual interest. The more they proliferate, the more they will start to stand as a challenge to the centralized hierarchical systems of the West, beholden as they are to the financial system led by Wall Street. It won't happen overnight, but it reflects a slow, quiet revolution. Over time, its impact will make the FDX meltdown seem like a blip. Back to NLW here, I agree entirely, and in fact, one of the things that was most frustrating to me that is most frustrating to me about the whole FTCS situation, is that for a time

Starting point is 00:08:30 it seemed like we would be able to contribute to exactly the type of innovations and changes that Michael was discussing. It is eternally and endlessly frustrating that all of that was just artifice, at least for the people at the very top. But again, I said that this is a day for positivity, and I think all those projects are great examples of that. And in a very different way, so too is this piece by Daniel Kuhn called Remembering Hal Finney on the 14th anniversary of the first Bitcoin transaction. The legendary Cypherpunk was the first to download and receive Bitcoin helping to prove the system worked. Daniel writes, it's been 14 years since the first Bitcoin transaction was sent. On January 12, 2009, Satoshi Nakamoto, the pseudonymous creator of the Bitcoin

Starting point is 00:09:10 system sent Hal Finney, a well-regarded cryptographer and computer scientists, 10 Bitcoin. This test transaction, set before BTC had a quotable price, was a harbinger of the many peer-to-peer transfers to come enabled by the world's first cryptocurrency network. Finney, who died in August 2014, was also the first person besides Satoshi to download and run Bitcoin software. He detailed his story in a 2013 Bitcoin Talk Forum post, where he said he was the first person Phil Zimmerman, another legendary cypherpunk, hired for the PGP Corporation to build the pretty good privacy encryption solution. When Satoshi announced the first release of the software,

Starting point is 00:09:45 I grabbed it right away, Finney wrote. He was primed to find interest in a project that separates money from politics and enables user sovereignty over their wealth, having experimented with earlier instantiations of digital cash. Others, Finney claimed, were initially more skeptical. Finney wrote, Cryptographers have seen too many grand schemes by clueless noobs.

Starting point is 00:10:03 They tend to have a knee-jerk reaction. So Finney minted a few coins, found a few bugs, and let the software run for a few days before determining the protocol was stable, but draining on his computer's CPU, so he switched it off. In August 2009, a few months after he was the first to download, receive and walk away from Bitcoin, Finney was diagnosed with Lou Gehrig's disease, or ALS, a debilitating illness that attacks a person's nervous system. ALS left him paralyzed within the span of a few years.

Starting point is 00:10:28 He eventually found his way back to Bitcoin, to which he contributed after his illness forced him into an early retirement. At the time he was writing out his recollections, Finney was building a new type of wallet. It's very slow, probably 50 times slower than I was before. But I still love programming and it gives me goals. Bitcoin was a project he could see growing very quickly. In a received email to Nakamoto, Finney was one of the first to put a price on the cryptocurrency. Estimating a fraction of total global household wealth would spill into the project, each of the 21 million coins could one day be worth up to $10 million.

Starting point is 00:10:58 Since we're all rich with Bitcoins or we will be once they're worth millions of dollars like everyone expects, we ought to put some of this unearned wealth to good use, he wrote in a separate 2011 Bitcoin talk post. If it sounds lofty, Finney was aware of the speculative side of crypto-economics. Quote, the danger is if people are buying Bitcoins in the expectation that the price will go up, and the resulting increased demand is what is driving the price up. That is the definition of a bubble, and as we all know, bubbles burst. His other economic predictions, like the nature between the network's growth and security, have more or less been borne out. Finney is commonly suspected to have invented Bitcoin. Beyond the fact that coders are often

Starting point is 00:11:32 their own first users and business founders, their own first customers, Finney certainly had the chops to design something like Bitcoin, which combined several pre-existing cryptographic and computational ideas in a novel way. For instance, Finney created the first reusable proof-of-work system in 2004, building on the original proof-of-work algorithm designed by Adam Back, another Satoshi contender, allowing people to redirect computational energy towards a useful purpose. Finney's use case for RPO was a digital token system. If Satoshi's true identity didn't matter then, it hardly matters now. Finney wrote that in his correspondence with Satoshi, he thought he was dealing with a very smart and sincere person, a quality he learned to recognize over the years. But what mattered most was that

Starting point is 00:12:09 the code ran and the idea was sound. As folks on Twitter are so fond of saying, TikTok, another block. Until tomorrow, be safe and take care of each other. Peace. Join CoinDesk's Consensus 2023, the most important conversation in crypto and Web 3, happening April 26 through 28th in Austin, Texas. Consensus is the industry's only event bringing together all sides of crypto, Web3, and the Metaverse. Immerse yourself in all that blockchain technology has to offer creators, builders, founders, brand leaders, entrepreneurs, and more. Use code Breakdown to get 15% off your paths.

Starting point is 00:12:55 Visit Consensus.coindex.com or check the link in the show notes.

The Breakdown - The Future of Crypto Isn’t With Wall Street

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