The Breakdown - The Legacy of Aaron Swartz 10 Years Later

Episode Date: January 15, 2023

On this edition of “Long Reads Sunday,” NLW reads:   Why I Am Optimistic for Crypto - Stefan George  13 Narratives to Watch in 2013 - the DeFi Edge Aaron Swartz - Patrick Campbell    Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW   - Join the most important conversation in crypto and Web3 at Consensus 2023, happening April 26–28 in Austin, Texas. Come and immerse yourself in all that Web3, crypto, blockchain and the metaverse have to offer. Use code BREAKDOWN to get 15% off your pass. Visit consensus.coindesk.com. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. Music behind our sponsor today is “Swoon” by Falls. Image credit: Javier Zayas Photography/Getty Images, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

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 15th, 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. All right, folks, happy LRS Day. Today we're doing one of my favorite things where instead of reading articles, we actually go read a few threads from Twitter. Now, I'm going to read three threads today, and two of them are a pretty

similar theme. They're about projects and themes and narratives that make the author excited or optimistic for the next year. The third is a little bit different, but I think you'll agree is kind of important. So first up, we have a thread from Stefan George. This came out on January 10th. He writes, Why I am optimistic for crypto in 2023, what will drive blockchain demand, and what projects to watch out for in 2023. Markets are down, but fundamentals are strong.

To get out of the speculative bubble, connecting blockchain to, quote, the real world will be key. We have to decouple demand for blockchain from pure crypto-intrinsic demand, making it part of everyone's daily transactions. If people were to use blockchain for real payments or actual banking, demand would not depend on hype and speculation. There are two main trends, which will unfold in 2023.

One, more real-world assets, RWA, on-chain, making them part of the DeFi ecosystem. Two, integration of blockchain into the railways of old world of payments and banking, making transitioning seamless. Real-world assets have come a long way. USDC and USDT are leading, but there is a demand for more. Backed Fi is about to launch the first fully backed stocks, ETFs and fixed-dealed products as ERC-20 tokens without any restrictions, making them fully compatible with their DeFi ecosystem. Centrofuge is already bringing real-world assets successfully to DeFi and

recently hit $100 million of total value locked, proving the demand to use real-world assets as collateral in DeFi. While there are many options for USD-backed tokens, EUR has always been neglected. Monarium is here to change that with EURE and tight integration into the SEPA banking infrastructure. Today you can issue EURE with a simple SEPA transfer instantly. Sending Fiat Euro with an on-chain transaction works as well. On and offboarding from Euro to cross-reporting. crypto has never been easier and cheaper. D-Sai is a new emerging sector with big growth potential creating a new type of real-world assets, IPNFT capturing and monetizing intellectual property as pioneered by Vita Dow and Molecule Dow. Payments is the original use case of Bitcoin,

but for many reasons never materialized. We are working with SaltPay Crypto to bridge blockchain to the old world of payments. Soon you will be able to pay with crypto anywhere where Visa is accepted, non-custodial. Even if the same products can be offered on chain, user experience has to be on par with Web 2 as well to get mass adoption. This is why account abstraction is key, allowing users self-custody without worrying about seed phrases, fees, or complex transaction sequences. Wallet's support is needed to make the benefits of account abstraction widely available. Safe, Argent, and linen are the leading wallets implementing smart contract accounts today. All building blocks are here. We just have to put them together and complete the puzzle.

End of 2023, managing your bank account on-chain will be viable and the experience will be seamless. All right, now hold aside the specific projects because I'm much more interested in themes than projects, although obviously for themes to come to life, you have to have great projects doing them. I am definitely seeing the discussion of real-world assets on chain flare up in a huge way, and in some ways this is an old narrative. This goes back to 2017 and 2018. One of the new variables here is the extent to which NFTs open up new types of technical approaches to bringing real-world assets on chain or bringing approximation or ownership representations of real world assets on chain. In a lot of ways, when push comes to shove in this area, a lot of it's

less sexy than other parts of the crypto industry, which is part of why it's tended to peter off as a narrative in other times, just less interest and demand for entrepreneurs to be working on it. However, sometimes the least sexy things are the biggest opportunities. And I don't think people are wrong to look at the financialization of many types of real world assets that on-chain representations in DeFi could make available as a really big, interesting, and meaty space. Now, what form that takes is a whole different question. But with that, let's move to the second thread focused on some of these ideas. It comes from the Defy Edge, who writes, you can generate wealth if you're early to the right crypto narratives. Here are 13 narratives you should watch in 2023, and a few to avoid.

NLW note, you may recognize some of these from what we just discussed. The Defy Edge writes, tokenize real-world assets. Defi needs more sustainable yields. tokenizing real-world assets unlocks cash flow that's not affected by crypto's volatility. This can improve transparency, capital efficiency, and liquidity in assets. Think real-estate, art, and more. Real-world asset protocols. There's progress being made. Some highlights. Maker Protocol has 600 million in real-world asset collateral. Goldfinch and Maple Finance are tackling loans. Centrofuge's Tin Lake has some diversified real-world assets.

Next theme? NFT financialization. The biggest NFT projects have value. Board of Yacht Club floor prices are around 73-Eth. Defy X NFT is about unlocking NFT's liquidity and turning them into productive assets. The first wave of projects allow you to use your NFTs as collateral, such as NFT-Fi and Bendow. The next wave. We're starting to see the next generation of NFT financialization. One, NFT-P, shorter-long NFTs with leverage. It's in beta and has attracted 21 million plus of volume.

Two, insert finance, shard vaults. They fractionalize NFTs and then you can earn yield. Next theme, Cosmos Chains. Plenty of new chains are being built with Cosmos. Barra chain, proof of liquidity consensus, Kajira, an ecosystem built around real yield. They're constantly launching new products. Kanto, EVM compatible on Cosmos. Liquidity is a public good. Next theme, C. Say is a D-Fi-specific L-1 chain optimized for trading.

Clubs or central limit order books are the standard for TradFi. In crypto, only centralized exchanges could use them due to the speed requirements, i.e. they utilize Fast Web 2 technology. New possibilities. We've been wanting clobbs due to tighter spreads and lower slippage. Say has figured out how to make it decentralized and fast. There will be a new generation of DeFi products built on top of Say's technology. Next theme. ZK. Roll-ups.

Ethereum is relying on layer two solutions to scale. There are two types of roll-ups. Optimistic roll-ups such as Arbitrum and Optimism. Two, ZK. roll-ups have the first mover advantage, but many consider ZK. roll-ups to be the superior tech. Next theme, decentralized sports betting. Crypto DGens and sports betting naturally go together. We are too early as there aren't that many protocols live yet.

Next theme, decentralized social media. Twitter's going through a chaotic time, TikTok maybe bin in the U.S. There's a desire to own our data and to prevent censorship. Two headwinds. UIUX lags behind Web 2 and gaining adoption. Next theme, decentralized stablecoins. Stable coins are the biggest use cases for DFI, but there are issues around centralization. OFAC sanctions on tornado cash led Circle to freeze USDC and the TC Protocol.

USDT is frozen 435 million. Next theme, big brands joining Web 3. 2022 was a big year for big brands to onboard to Web 3 thanks to Polygon. In 2023, let's see how Starbucks Odyssey and Nike's swoosh and Fertie efforts perform. Bigger themes. I listed out several narratives, but I noticed several larger themes that tie it all together. One decentralized everything. Two, specialized blockchains.

Three, tokenized the real world. Four, new approaches solving the blockchain trilemma. But what about what's overrated in my opinion? opinion. One, GameFi. It's inevitable, but we're a few years away from nailing it. Good games take a while to develop. Two, Crypto-AI. I'm bullish on AI overall, but anything Crypto-A-I-related is a money-grab now. Three, Solana. Too many Ls last year. Horrible optics. Overall, I'm embarrassed this year. The macro's terrible and it'll take time to get the Luna and FTX stench off the public's mind. 2023 is all about staying engaged and planning the seeds for 24 and 25.

Now, I think there's a lot of good thoughts in here. I actually didn't read the entire thread, there's some things that are just two in the weeds if you're not deep in defy, and also a few that are really super specific on a single protocol or platform, which I didn't want to get that deep into either. But I do think that the Defy Edge's thread, again, reflects a lot of the things that I'm also seeing people talking about in the markets. One thing that I do find fascinating is the difference in the way that different people talk about this tokenized real world assets thing. The Defy Edge, whose name obviously gives you the perspective they're coming from, is definitely looking at it to some extent in terms of the value that tokenizing real-world assets can bring to

defy. They write, defy needs more sustainable yields. tokenizing real-world assets unlocks cash flow that's not affected by crypto's volatility. However, I think that to the extent that this does become a thing, it's not going to be because of what real-world assets do for defy, but what defy does for real-world assets. And the Defy Edge does address that as well, saying this can improve transparency, capital efficiency, and liquidity in assets. I think that the motivation for a real-world asset holder to want some sort of online representation of that asset or to have an ownership clarity on chain is to be able to bring different types of liquidity and financialization to those assets. But either way, it's a really interesting thread, and I love

that people are taking the time to actually think through these things on a high level. The rise in threads, I think, can be directly tied to the depth of the bear market we find ourselves in. 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, Web 3, and the Metaverse yourself in all that blockchain technology has to offer creators, builders, founders, founders, brand leaders, entrepreneurs, and more. Use code Breakdown to get 15% off your pass. Visit Consensus.coindex.com or check the link in the show notes.

As I promise, the third thread is a little bit different, but I think really important, and so let's end there. It's a story from Patrick Campbell about Aaron Schwartz. On Wednesday, January 11th, Patrick wrote, 10 years ago today, Aaron Schwartz took his own life after overly aggressive prosecution. He invented internet infrastructure. He defeated the greatest threat the internet had ever seen. And you probably don't know who he is. You should.

Here's his story. Aaron led a life that makes you insecure for binging HBO and YouTube shows. shorts. At 14, he helped invent RSS. He dropped out of Stanford. He joined Paul Graham's first Y-combinator class. He was early team at Reddit. And these aren't even his biggest accolades. We'll get to those. Aaron believed in the open internet. Patrick, isn't the internet always open? No. Some people out there want more corporate control, tighter government regulations, a lot more censorship. Aaron was extreme in the other direction. Aaron believed research and public records should be free. He wrote something called the Open Access Manifesto. You probably

don't realize 98% of scientific research is behind a paywall and 80% of legal records too. Patrick, why would that be a problem? Let me explain. Imagine you're the scientist's key to unlocking an energy breakthrough. You're a smarty, but you need to read a bunch of research. Well, that research costs $40, per paper. You probably can't afford that, so no free energy. Here's an even worse scenario. Imagine you're poor and get arrested. Did you know that accessing court records for your case costs money? They're in the public record. They're quote-unquote owned by the taxpayers, but you have to pay for them. Guess you go to jail. This is where Aaron dug in. After cashing out from Reddit's sale, Aaron set his sights on PACER. Pacer's a big old database of

U.S. court records. It's not supposed to make money, but somehow makes $100 million per year. Thankfully, Aaron and a group of hacktivist found a hole in the system. Pacer was, quote, free to access its 17 libraries in the U.S. All the group needed to do was write a handy perl script on a thumb drive and plug it in. They downloaded 2.7 million documents and set them free. When Sacramento Library racked up 1.5 million in charges, the FBI got involved. Thankfully, since access was free and no one was profiting, no felony occurred. Pacer still charges, but a lot of pressure in orgs like Free Law Project lead to much cheaper access. This was just Aaron's warm-up, though.

Next came the biggest war in the history of the internet. In 2012, Congress put forward a bill to combat piracy, SOPA-slash-PEPA. The bill appeared to be a Trojan horse for the government to take down any website without warning, all for quote-unquote copyright protection. Certain companies loved this, open internet advocates went to war. In a truly amazing response, Aaron and crew organized hundreds of websites to go completely dark for a day. You couldn't access Wiki, Reddit, Craigslist. Even Google blacked out their homepage.

Thankfully, we won. But then came the fight that ended Aaron's life. Aaron set his sights on releasing the largest academic database out there, J-Store. He created a script for mass downloading and hit it on a computer in an MIT storage closet. He downloaded millions of papers over months. MIT and J-Store couldn't catch him. Then came the feds. MIT and J-Store obviously didn't intend for open-campus access to be used this way,

but MIT has a hacker culture and acts of rebellion are commonplace. Aaron got caught, though. U.S. prosecutors took a liking to the case and pushed forward with prosecution. Aaron was charged with 13 felonies carrying up to 50 years in prison. J-Store asked for the charges to be dropped. MIT asked for the charges to be dropped. But U.S. attorney Carmen Ortiz kept going. Aaron refused plea deals and due to harsh prison time threats took his own life.

After his death, Ortiz conceded that she didn't have enough to show Aaron acted for personal gain a big piece of the charges, nor evidence to support the harshest penalties. Prosecutors want to win. I guess lack of evidence doesn't stop empty threats for a plea. Lawrence Lessig sums it up best. Somehow we need to get beyond the I'm right so I'm going to nuke you ethic that dominates our times. That begins with one word, shame. One word and endless tears.

Aaron wasn't perfect. He wasn't the only person involved in these movements. But I can't hold back all the tears when I think of his death. He's the one person I've met with who is the complete embodiment of truth and openness. In an era where truth has jumped from that which frees us to a four-letter word to an amorphous concept, we need more pursuit of the truth, not less. It's not a weapon. It's not a liability. It's not binary. It's progress. And progress shouldn't be closed. Anyway, just remember people like Aaron exist. You don't have to agree with what he did. just know his ideals are important. We should all try to be more like the best of him.

I'll leave you with a poem from the founder of the internet, Tim Berners-Lee from January 12th, 2013. Aaron's dead. World wanderers, we have lost a wise elder. Hackers for right, we are one down. Parents all, we have lost a child. Let us weep. Until tomorrow, guys, be safe and take care of each other. Peace.