The Breakdown - What’s the Real Point of ‘Crypto’ Anyway?

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 sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Sunday, October 3rd, and that means it's time for Long Reads Sunday. And a lot of you seem to really like the switchup where I read Twitter threads instead of a specific one single essay. and so I'm going to do that again this week, and we have a really fun variety of topics. So first, we are going to go hardcore Bitcoin, a thread from the one and only Alex Gladstein about the crypto revolution and whether it's failing. So let's dig in. Gladstein writes,

Starting point is 00:00:56 A media outlet asked me to answer the question. Is the crypto revolution failing? Once they saw my response, they declined to publish. They thought I would say no, but I said yes. The idea intercepted by a Satoshi Nakamoto of a peer-to-peer electronic cash system beyond the control of governments and corporations can seem like a distant memory when scanning news about today's top cryptocurrency projects. Dogecoin, which caught mainstream attention after generating an 85x return over the past 12 months, has turned corporate, launching a new advisory board starring Ethereum creator of Vitalik Buterin, and an individual representing the coin's top promoter, Elon Musk. Stable coins pegged to the dollar like USDC and exchange tokens like Binance Coin are issued and operated

Starting point is 00:01:35 by companies that work closely with governments and enforce regulations and blacklists. What's more zooming out, stable coins do more to promote the popularity of the U.S. dollar abroad than usher in any kind of fundamental monetary upheaval. The most popular projects built on Ethereum are now either captured by special interest, see Dye's problem with USDC, or are coming under regulatory pressure. For example, the Protocol Star App uniswap is under investigation by the Securities and Exchange Commission. According to the Global Defy Adoption Index, growth in defy has been primarily powered by, quote, experienced cryptocurrency traders and investors looking for new sources of alpha in innovative new platforms,

Starting point is 00:02:10 with large institutions dominating transaction volume. In NFT land, the three most popular issuers by volume are regulatable companies, larva labs, ARPLabs, and Yuga Labs, not decentralized autonomous organizations. As for the most popular NFT marketplace, OpenC, it is not a Dow either, but rather a company whose head of product was recently accused of insider trading. Governments are now even entering the arena and creating their own cryptocurrencies called central bank digital currencies. The Chinese Communist Party has already rolled out its Govcoin to millions of people, while the EU has been vocal about the progress of its digital euro project, and even the U.S. government has discussed the idea of Fed coin as a matter of when and how, not if. Given the current state of affairs, is it fair

Starting point is 00:02:49 to ask, was the cypherpunk dream a sham? Was it all for riches after all, in a game where principles were dispensable and where negotiations with the state and corporatization were inevitable? Few want to acknowledge this dilemma, where the main impact of crypto, and, and the main impact of crypto, Web 3, and Defy has been to recreate a Wall Street system of Cantillon Insiders, enrich a tiny few institutions and VCs often at the expense of retail token buyers, and extend dollar popularity globally? Can we still separate money and state and create an alternative system to corporate bailouts and mass financial surveillance? Where is Satoshi's political revolution? The answer is, in Bitcoin. In a world where 1.2 billion people live under extreme

Starting point is 00:03:25 inflation, Bitcoin's slow but steady increase in purchasing power over time for its users has been a literal lifeline for millions. According to recent exchange data, there are millions of Bitcoin users in major emerging market countries like India, Nigeria, and Turkey. Today, in any major urban area on Earth, one can quickly find a buyer for Bitcoin, either through centralized exchanges or peer-to-peer marketplaces. This is as true in Havana as it is in Gaza or Minsk. The same cannot be said for Dogecoin, Solana, or Amazon stock. And this is where the real revolution emerges, against the backdrop of a world where most cryptocurrencies, equities, real estate, and bonds, have mostly benefited a small group of wealthy or connected insiders.

Starting point is 00:04:02 So I've said before frequently that I think part of the problem of discourse in the crypto industry as a whole, if we take it as one industry, is that we don't differentiate objectives very well. Bitcoin has made a particular set of trade-offs to be able to be the most censorship-resistant, the most unconfiscatable, the most powerful alternative money system, the most powerful and most promising non-state money system that exists. No other cryptocurrency has made the same set of trade-offs to do that. I think the issue for me personally comes if a cryptocurrency promises that same set of deliverables without the same set of trade-offs. Where I have less of an issue is where some different subcategory of the industry is focused on entirely different things.

Starting point is 00:04:45 However, as much as I believe it's important to recognize that different cryptocurrencies don't really exist in the same stratosphere of objective, I have to concede that there is a reality of shared perception from the outside. And for that reason, it is important to draw distinctions, to be more articulate about why some coin or another exists, or how NFTs are different from Bitcoin, or how to help someone parse through the market and really understand and align their values with what they're investing in. I love folks like Gladstein for being so articulate about that, and I suggest you go read, his piece, is the crypto revolution failing. You can find it on his medium page, gladstein.medium.com.

Starting point is 00:05:22 This podcast is sponsored by Nidig, a firm that's making Bitcoin accessible to banking customers on Main Street and Wall Street alike. As part of their mission to bring Bitcoin to the people. Find out more at Nidig.com slash NLW. That's NYDIG forward slash NLW. Next up, let's stay on the revolutionary train and do a thread from Alexei Navalny. Lexi Navalny is basically the only credible political opposition to Vladimir Putin. If something surprised me in the latest elections, it was not how Putin forged the results, but how obediently the almighty big tech turned into his accomplices.

Starting point is 00:06:13 The giants Apple and Google have complied with the Kremlin's demands and removed our app from their stores. My beloved YouTube has deleted our video, and the telegram messenger has blocked our bot. These programs, which Putin calls extremist, only contained information about opposition candidates in your constituency. By law and common sense, each of us has the right to campaign for voting or not voting for any candidate. In our case, the very intention to organize voters in order to put competitive pressure on the ruling party was declared criminal, and Big Tech agreed with this. This means that it

Starting point is 00:06:42 recognizes the right of an authoritarian thief to subjugate the internet, turning it into an instrument for seizure of power. It's one thing when the internet monopolists are ruled by cute, freedom-loving nerds with solid life principles. It is completely different when the people in charge of them are both cowardly and greedy. One of the modern challenges is that false profits now come to us, not in sheep's clothing, but in hoodies and stretched jeans. Standing in front of huge screens, they tell us about making the world a better place, but on the inside, they are liars and hypocrites. The media write that the Kremlin forced Big Tech to make concessions

Starting point is 00:07:13 by showing them a list of their employees to be arrested. If so, then keeping silent about it is the worst crime. This is encouragement of a hostage-taking terrorist. I know that most of the people who work at Google, Apple, etc. are honest and good people. I urge them not to put up with the cowardice of their bosses. So obviously very strong words from a person who is very inside the eye of the storm. I think the question of big tech in society is immensely difficult and immensely complicated. These are companies that have absolutely transcended the type of power that any private institutions

Starting point is 00:07:47 have had in history unless you take the church to be a private institution. But of course it's not as clear as them just having an opinion. It's that there's new mechanisms through which power is meted out, through the algorithm, through censorship decisions. It feels inevitable that something has to give, but I don't know what it is, and I don't know who's going to be the one to do it. To ask folks like Balaji Shrinivasan, the answer has to somehow lie in crypto and permissionless systems, and I hope they're right.

Starting point is 00:08:15 Next, let's take on another slightly dysfunctional political system, although one that in the wake of Alexei Navalny's thread certainly has problems that I'm more willing to deal with, but this one comes from Adam Cochran, and he writes, If you don't follow U.S. politics, let me just say that this debt-ceiling standoff is an utter show right now. Political games are being played all over the spectrum, and there is a significant level of disarray and divide here. Do I think the U.S. government will default on its debt? No. That would be the most catastrophic thing to ever happen in modern finance and would impact the global economy for a century. I think we'll avoid that. But I'll say in my time closely following

Starting point is 00:08:49 politics, I've never seen a game of political chicken that has had this big of a cost and yet both side seemed genuinely willing to bring it to the line. There are two magical dates, both of which are rough. One is the end of this week which could push the U.S. government into a government shutdown, an extraordinary measure in which government operations are furloughed to save capital expenditure. That's happened before on a few occasions. It's not good. It hurts the economy, and it damages the faith and credit of the U.S. government. The other date is currently estimated to be October 18th. That's it. That's the estimated doomsday date. It's the one we think will avoid, but that's the day the U.S. would run out of money. They would default on debt and key payments like Social

Starting point is 00:09:24 security would fail. Once again, it seems like an impossibility of that happening, as surely a last-minute deal would be struck to avoid that moment. But the closer the U.S. gets to that line, the more damage it does to the economy. When you play with fire on a deadline, it's really easy for some complexity to trip up or delay the process, and it could have catastrophic results. We're just starting to get on the other side of a catastrophic pandemic that significantly damage the economy. The economy shouldn't be held hostage in political games. Take the time to call your senator and express your frustrations about the games they are playing with your livelihood, economy, and future. There are a couple different responses from the Bitcoin and Crypto set.

Starting point is 00:10:02 One is, it's all political theater, there's no way they're going to default on the debt. That seems to me to be the default. The second is the almost nihilistic bring on the default. Let the chaos rain. A third, I suppose, is being on one side or the other of the debate. But I wanted to share Adams thread because obviously there is a big macro context that whether we like it or not affects the shape of these Bitcoin. markets, and I think Adam's observation that we keep getting closer to the line every time we play

Starting point is 00:10:29 this sort of political chicken is worth noting. Let's wrap up with one on the complete opposite side of Alex Gladstein's thread that we started with from Jason Yanowitz, called Cryptopunks will eventually trade for $10 million each, and here's why. For nearly a decade, crypto was a tool for financial innovation, and if T's created a tool for cultural innovation. Cryptopunk symbolizes evolution from the financialization of crypto to the cultural revolution of crypto. The value of a collector's item boils down to four traits. Community, story and passion, ability to show off, and personal joy. Lionel records, comic books, classic cars, trading cards, fine art, it's all the same. The stronger the sum of the traits, the more valuable the item. Community. Community is the most

Starting point is 00:11:11 important aspect of all NFT projects. There are very strong punk communities on Twitter, Discord, and in the physical world. If and when Twitter launches NFT ownership verification, the punk community will get even stronger. Story and passion. Cryptopunks are one of the earliest examples of an NFT. Punks symbolize being early and having faith in crypto and others laughed at us. There will be millions of NFTs, but Cryptopunks will always be the OG project. Ability to show off. The first thing someone does when they buy a punk has changed their profile pick. We will soon live in a world with digital museums and smart frames in every home. You'll use your museums and frames to show off your NFTs and digital art to your friends. Or you'll just print a picture of your punk for an extra hard flex.

Starting point is 00:11:50 Personal joy. Punk 6529 said it best. Everyone likes having an NFT. It doesn't matter how valuable it is. It's an amazing experience. Right now, there are only 200,000 NFT holders. This will soon change as people experience the joys of NFT ownership. Just wait until Cryptopunks are shown off in movies, TV shows, and video games. Larva Labs, creator of Cryptopunks, just signed with one of the largest talent agencies to bring Punks to Hollywood. This is the first time that CryptoNative IP enters mass media. Finally, one of the biggest drivers of punks is wealth. There's a lot of money being made in the world right now. Traditional financiers buying art, a Hockney piece sold for $90 million a few years ago. Crypto DGens buy NFTs. Right now, the entire crypto market cap is roughly

Starting point is 00:12:31 $2 trillion. Bitcoin trades around $40K and Eath at 3K. At these market caps, most punk sell for between $300,000 and $400,000. Aliens, zombies, and apes consistently sell for $1 million. When Bitcoin hits $200K, Bologi and Olaf Carson-Wee estimate that more than 50% of the world's billionaires will come from crypto. That's a lot of new billionaires who owe their wealth to this new asset class. I'd bet they don't go buy that hockney for $90 million. My bet is that they stick with digital native art that their entire community cares about. Cryptopunks are the ultimate collector's item. As crypto becomes the largest asset class in the world, where punks will become the Mona Lisa of our digital first world. This won't just happen for punks by the way. Board apes, autoglyphs, Fidensas, and Perfect

Starting point is 00:13:14 Spectrum Squiggles will be the Monais, Van Goghs, and Picasso's of the next hundred years. So what's the takeaway? Get involved. Buy an NFT. Which one? Whichever one looks best to you. That's it. Lean into your personal tastes. Create a digital museum. Why wait for the future when you can experience it today? Some of you guys hate it, I know, but I love that we get to fuck around in a space where we can reasonably weigh these two threads, these two poles of experience with whatever the cryptocurrency industry is in a single podcast. And somehow they make sense together, even if in some ways in opposition to one another. My guess is that a lot of you are just hungry to figure out the future for yourselves,

Starting point is 00:13:54 so I hope this helped, and I appreciate you listening. Until tomorrow, guys, be safe and take care of each other. Peace. Hello, listeners. If you're a financial advisor, manager, or CFA looking to learn more about Bitcoin, investment strategies, and tools to share with your clients, then you're invited to attend CoinDesk's Bitcoin for Advisors event on October 6th. It's a fully virtual event experience designed for advisors by advisors.

Starting point is 00:14:21 who have found ways to get compliance ready in order to add Bitcoin advising to their practices. You can head over to coin desk.com slash events to secure your complimentary registration today. That's coindesk.com slash events where you can register for free. We'll see you on October 6th, and thanks for listening.

The Breakdown - What’s the Real Point of ‘Crypto’ Anyway?

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