The Breakdown - What Progressives Should Understand About Crypto

Episode Date: August 20, 2023

A reading of "What progressives get wrong when it comes to crypto" by Sheila Warren and Justin Slaughter. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

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. What's going on, guys? It is Sunday, August 20th, 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. You can find a link of the show notes or go to bit.ly slash breakdown pod. Hello, friends, welcome back to another dose of Long Reads Sunday. Now, today's essay is a topic that I feel very strongly about. It's one that comes up quite frequently on the show, and it's about progressivism and Bitcoin.

Now, Bitcoin has, of course, had a historic reputation as a bastion for libertarians, and there are lots of reasons why that is. Holding aside the early adopter group, which often intersected with that political cohort, the fact of the matter is, Bitcoin and all of the cryptocurrencies that follow it did take something that has for hundreds of years been the province of governments, i.e. money creation, and put it in the hands instead, not only of private citizens, but really of this totally new type of force, which is a math-based protocol. Inherently, then, there is a power-limiting aspect to it relative to government, and so it's perhaps not a surprise that it's more historically been associated with the right,

which again typically favors smaller government than the left, which has more confidence in the government to help be involved in producing a better world and environment for citizens. That said, Bitcoin and crypto had, until very recently, done a pretty remarkable job of staying a nonpartisan concern, at least when it came to policy. Then, of course, FTX and SBF happened. Democrats in particular, who had looked to SBF as something of a hope for the future, not just in crypto, but as a wealthy primarily Democratic donor, where extra cane to be seen as tough on the industry coming off of that betrayal. Now, in some ways, I think what that's really meant is the anti-crypto forces that were always there in the Biden administration, having a window to kind of run roughshod over their peers

who might not feel as strongly as them, because in the wake of FTCS, there just wasn't anyone who was going to risk their political capital to defend an industry that seemed really messed up. However, that has started to change once again. We've seen Democrats break from their leadership in order to pass sensible legislation like the Stablecoin legislation along, and in general we seem to be getting to a point once again where the biggest line dividing how people think about Bitcoin and crypto isn't so much party, but age. So that is the backdrop for today's essay,

which is called What Progressives Get Wrong when it comes to crypto. It's by Sheila Warren, the CEO of the Crypto Council for Innovation, and Justin Slaughter, the policy director at Paradigm. It was published in Fortune. Sheila and Justin write, from women's suffrage to civil rights, from the growth of unions to the fight to protect the environment, social movements typically grow from the bottom up. Leaders emerge, but in victorious movements, those individuals reflect the views of the people.

That's why we, died in the wool progressives, are confused and distressed over a choice by many of our allies to devalue decentralization in the technology space, and even to portray it as worse than big tech alternatives. In recent months, a number of progressive commentators have attacked the very idea of decentralization, arguing that it's a very important. distraction from other political goals. This has also led to progressives making crypto a favorite target and, bizarrely, taking the positions of big banks, which are notoriously monopolistic. To us, the more pressing concern is legacy tech platforms, and their ongoing capture of user data. Decentralizing technology will prove crucial in ensuring that the world isn't run by a handful

of unelected technologists. As progressives, we join the crypto space not despite our personal history, but because of it. Crypto is an exception to so much technology because it runs on blockchain and no single person or corporation can control it. We value a world where power is dispersed to the people, where no one is so powerful that they can dictate terms to the rest of us when it comes to civil rights and civil liberties. That is a decentralized world. Needless to say, we are far from that utopian vision today. Around the world, inequality has spiked over the last few decades, a trend especially bad here at home. There are many causes, but one is certainly that the power of technological change has accrued to a handful of giant firms. When it emerged 30 years ago,

the internet was a wild expanse of opportunity. Now, it is just a small collection of corporate walled gardens, which are difficult, if not impossible, to escape from. We all know people who have sworn to leave a social media network only to return because, quote, everyone else is there, or because their content remains the property of one of those digital feudal lords. Anti-crypto folks would say this doesn't matter, that the problems posed by large technology companies and large banks can be solved through political action. And while we support such efforts, there is no reason to think of political action and decentralized technology as oppositional. Instead, they are two arms of the same fighter. You need government to knock giant firms down to size and nascent decentralized technology

to create competition for those giants in a way that doesn't just produce more giants. So, we're perplexed. Why the progressive distaste for decentralization in tech, and the apparent support for behemoths with well-known drawbacks? Maybe it's because they don't understand the technology, and if so, that could be on us. We in the crypto industry have may not done enough to explain it. Decentralization at its core includes a public permission ledger, one that no single person inherently owns. Blockchain is tracked through a ledger that uses computers globally to ensure that only validated information is added. Think about the websites we use, banks, YouTube, even Reddit, and how a single centralized entity owns all of them and can decide on a whim to change the site's

features, remove users, or use those users' data in novel ways. Just look at what's happened to Twitter. Comparatively, a blockchain allows everyone to own their own data, to control their own information, and to port that information and data to another system at their discretion. It also allows for people to exchange both data and money in a peer-to-peer manner without permission from expensive, bureaucratic, and in many cases, unnecessary intermediaries. Why does this matter? A great example is the rapid response to the Russian invasion of Ukraine, while the international community faced months of bureaucratic hurdles before it could provide critical support, crypto-bridged that gap immediately by identifying wallets that could not be seized or frozen by

Russian authorities, and delivering since the invasion began, some $421 million directly to Ukraine for defense, medical aid, and rebuilding. On the data side, war crimes being committed by Russian militants against Ukrainian civilians are being documented on the blockchain. So tamper-proof evidence will be available at later hearings. Even in peacetime, progressives who engage in potentially dangerous organizing similarly needs secure ways to communicate that can't be compromised by governments or corporations. As risk-averse banks have cut off operations within entire countries, millions have been excluded from more formal financial systems and driven towards shadow banks or riskier actors. Blockchain-backed crypto offers a transparent way to create fund flows

without incurring the hugely expensive intermediary fees that arise when banks deem an area a greater risk. Migrants also use crypto to send money to their home countries, and this activity alone will become increasingly important as political and climate migration continues to accelerate. We understand that some support for centralization stems from a good-hearted hope that centralized actors can be more easily steered towards the common good. It's tempting to think that a strong central government could bring about radical change by fiat or that a more concentrated economy enables better central planning. But history tells a different story. As the saying goes, absolute power corrupts absolutely, and efforts to drive where were governments towards the common good

without a strong decentralized movement, have resulted in tyranny. The best path forward requires leaning into decentralization to create a world where no one person or click is indispensable, where an economy of diverse actors can work together to preserve stability and fairness for all. The way to avoid new tech monopolies is to create an infrastructure that doesn't allow for them. Instead of focusing on how the few can bring change to the many, we should be supporting systems that empower the many to affect change. That's the ideal for which Web3 is striving, and one that we hope other progressives will also look to as a path forward, not a movement to be suppressed by any means necessary.

All right, guys, back to NLW. The first thing that I will say is that I think our discourse around this issue, progressives in Bitcoin and crypto, is getting a lot more sophisticated. The arguments are getting more cogent. They're being aired by people who actually understand what progressives are thinking in Washington, and I think that's a hugely positive thing. Now, one of the things that Sheila and Justin posit as a possibility is that a reason that progressives don't support crypto or decentralization efforts

is that we haven't done a good job teaching about them. Frankly, this strikes me a little bit at least as letting the political class off the hook, given that there have been now years and years of exactly those types of efforts from numerous organizations trying to do exactly that. What's more, I think that it's quite clear that those efforts have borne fruit.

As I mentioned, if you look at some of the latest legislation to be working its way through Congress and the Senate, strict party lines haven't applied to how that has advanced. At the risk of sounding ages, because I don't mean to be I don't think that there's anything inherent that makes it so, younger Democrats and frankly younger Republicans are simply more likely to have given this technology the time of day and see things in the way that Sheila and Justin are describing. One of the problems, I think, that may explain why there appears to be an age gap, outside of just a different technological

literacy in general, is that the longer that someone has been in Washington or on any field of battle, the harder it is to not bring one's priors and pattern recognition to things that are fundamentally new. When I first saw Elizabeth Warren, for example, going off on crypto, the interesting thing about it, because it was a money thing, it must mean that it was corrupt as every other money thing that she had fought against. It was almost as if the idea that anyone would spend time on a money thing made them as a person, and by extension as an industry, null and void as a person or an industry that she wanted to engage with, or thought had any redemptive qualities whatsoever. That's not crypto. That's the priors of old battles, many very legitimate that she fought, being mapped on

inappropriately, frankly, to a new field, in which, as Sheila and Justin explain, many of the people there are trying to fundamentally change the problems of the traditional financial sector. You can see the same thing happening with the big tech patternicity happening now as well, while Sheila and Justin point out that decentralized technology is the inherent enemy of big tech consolidation. There are many on both sides of the aisle who simply saw crypto as another tech thing. And because they didn't like Zuckerberg, they clearly didn't like this. Now it perhaps didn't help that, for many of them the first time they actively engaged with the issue was around Facebook's Libra project, i.e. crypto in the Zuckerberg universe, but it's still bringing Pryors back from a different fight into a new one.

It's also hard not to feel, especially if you listen to someone like Brad Sherman, that part of that bringing priors, part of bringing that antagonism and old battles from both finance and big tech into crypto, is that these politicians just flat out don't like us. Ultimately, anything that's a part of human nature is unfortunately a part of politics as well. So there's not necessarily much to be done for that. But it is a really bad way to make policy. And that's why I'm so glad to see a shift happening. Once again, where this issue of decentralization

and the crypto industry that embodies it is not just owned by one party or another. I think that our fights around technology are going to do nothing but get more serious as new technologies come online. And I think a lot of what we will look at now, these early skirmishes, will be viewed as just prologue for what's coming next.

So let's do our best to get as smart as we can and have the best conversations, because Lord knows we're going to need it. Hope you guys are having a great. weekend. Appreciate you listening as always. Until next time, peace.