Author: Daniel Dob

Old money doesn’t ruin the cypherpunk dream

https://blockworks.co/news/old-money-doesnt-ruin-the-cypherpunk-dream

Calling blockchain and its associated technologies an “industry” is, to some, still an insult. To call it a “sector” is too dismissive, an “asset-class” too reductive. How about: Prophets of a new sacred social covenant? Defenders of libertarian finance? Acolytes of a decentralized faith? Trustees of the trustless? A belief in the wisdom of crowds.

For the longest time, crypto has served as an alternative institution: Whether it’s for finance, art or community, it’s considered a tokenized counter-cultural movement. Permissionless, trustless, decentralized, open, embracing the fringe — a community where everyone is welcome, and no one can tell us what to do.

Yet even the most red-fevered crypto-anarchist must admit by now that the direction of travel is set. Whatever primitive emancipation certain users experienced from the traditional financial system through crypto is fading. 

Old money is coming, and global finance is moving on-chain. 

The idea that crypto can become a mainstay social force without old money is quaint. Like it or not, these financial behemoths run the world. If there is to be a new on-chain, decentralized internet financial system, then established paradigms of money management that are backed to the hilt by legislative structures have to be involved. It’s by taking advantage of crypto’s unique properties through these institutional structures that will allow crypto’s potential to truly flower.

And even a blind man can see old money’s interest in crypto. 

ETFs are a huge gateway drug to this adoption. Crypto has waited with baited breath on the result of applications led by BlackRock and co. Even pension funds are opening to bitcoin, with Fidelity, the largest US-based 401(k), leading the charge. In fact, many believe the accumulation is well-underway and the only reason why we haven’t dropped lower — remember bitcoin (BTC) at $15K post FTX slump? ETFs might signal only the starting gun — not the moon push many expect. That will come later, when every single financial account manager finds they need to offer 5% exposure because everyone else is doing it.

Read more from our opinion section: DeFi has a reputation problem

Has crypto failed to build an alt financial system? Is crypto straight up replicating centralized finance, now even more so by using traditional finance liquidity? Yes and no. Crypto is like water, it adapts to the shape of the glass. Should an institution want to add BTC to its balance sheet, it can — whether through an ETF or via self-custody off a P2P exchange. Should you want to live CEXless and own your coins in kind, you can. The Infinite Machine is now mature enough to take any shape assigned. To some, it’s not about breaking free of Wall Street, but about catering to it. To others, it’s about living the on-chain life.

Then, if TradFi goes all in, what does this world look like?

Soon enough, DeFi TVLs will be boosted by pension fund buy-ins, ticker tapes for derivative baskets of cryptos will roll daily across Bloomberg News and investment shops will let Mom n’ Pop buy indexes that track the entirety of the shitcoin spectrum. Banks won’t just let you buy crypto — they’ll buy it with your retail savings and give you 3% a year.  

Eventually, if not imminently, investment banks will trade NFT portfolios over their OTC desks. Some bright young thing in a whip-sharp suit will concoct synthetic CDOs and credit default swaps on tranches of CryptoPunks, and before you know it, grandma’s pension fund will own apes. Ultimately, we’ll all have apes. Or be apes — fractal pieces of ownership in the crystalline structures of global finance. Tokenized assets, mutual funds, ETFs. These indexes that track whole markets have a fungibility and legitimacy that can’t be achieved any other way. They are, in short, what people truly mean when they say “adoption.”

But wait, isn’t crypto replete with problems? Scams, hacks, unclear regulation, the grave freedom that is self-custody. They are problems institutional money was invented to solve, yet crypto solves and does things iMoney only can at great expense and with enormous inefficiency: settlement risk, remittance, HFT, exchange fee handling, dividend payout, payment processing, insurance arbitrage. The list is as long as the financial service sector itself.

An influx of retail money channeled through financial scions will create the predictable yields that let innovation truly prosper. Everyone will take mainstream finance crypto projects seriously. Innovation will, newly minted, go into overdrive. A whole cabal of investors, entities that sit currently outside the angel and VC edge cases that are the current primers of any crypto run, will be looking for Web3 projects to make sustainable, long-term investments in. 

Crypto, whether you like it or not, is going to become an industry, and — if it truly proves the widespread utility it has claimed, especially as scaling challenges are met and bad actors are flushed out — might be all the better for it.

Ex-journo, legal ace, comms lead, and narrator of new-age net tales, now at the helm of GM Factory, where he helps digital neophytes beam beyond the daybreak.

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Apocalypse PoW: Bitcoin and the End of Days

https://bitcoinmagazine.com/culture/apocalypse-pow-bitcoin-and-the-end-of-days

Annihilation commencing. Whether through poorly conceived boot up instructions to a novel AI, a global war between desperate nation states, or the final rug pull of our fragile ozone layer – the end of the world hasn’t felt this tangible since school children ducked and covered under desks in the nuclear psychic ashes of the post-WW2 era. Eschatological preachers now claim the end times without needing the Mayan calendar on hand to back them up, with the Covid pandemic still a livid scar on the fragile socially-driven economies that make up our global village.

When everything is gone, what will remain? For doomsday preppers, tech enthusiasts, and hedge fund managers making the biggest hedge of all – the answer is crypto, in particular Bitcoin, with its time-tested Proof of Work (PoW) economics. But why? Why in a world of scavengers and sawn-off shotguns would the world’s largest decentralised ledger have any use at all? The answer breaks down into two parts: what Bitcoin is, and what it has gone on to narratively represent in the global economic consciousness.

Bitcoin, to date, has performed excellently in the face of macro-economic squalls. Its birth, remember, was the result of a crisis. Nakamoto’s original zeal was born out of the horror felt seeing state treasuries around the world, following the UK Chancellor Alistair Darling’s lead, massively devaluing their fiat currencies in order to plug the liquidity crisis in the global banking system – and in doing so, playing god with the value distribution among the societies they were elected to lead.

The average citizen saw their life savings reduced dramatically to cover the losses of the irresponsible and the criminal. A system the public had played along with, and paid into, was altered to maintain the status quo and entrench wealth inequality in every aspect of society. Bitcoin has always been, in effect, an alternative to ‘when things go wrong’.

And so it has continued to prove. In Venezuela, Zimbabwe and Turkey, whose economies and national currencies continue to struggle, crypto ownership is on the rise. In Russia and Ukraine, where war rages, crypto is seen as a safe haven. In both cases, Bitcoin is a global asset, supported by a network that reaches far beyond any locality, even one the size of a country. Crypto’s most recent bull run happened against the backdrop of a global pandemic. If a pillar in the current system fails, Bitcoin rises on the back of it. It currently sits pretty as the ultimate ‘out of context’ asset, a decentralised, deracinated system that works no matter what happens in a country. Should a state’s central systems architecture suffer a cyberattack, the ledger still runs. If global warming floods a nation’s land, destroying its economy, value held in BTC by its citizens will remain. And if a country rampantly inflates its currency to protect its merchant class…oh wait, that one already happened. Bitcoin will always function and have value, oftentimes regardless of which government rises and falls and – crucially – irrespective of how cold they are towards it. Then again, if the immense industrial power of the United States was ploughed into upkeep of the Bitcoin ledger – this changes things. The brute hash force an entity like the U.S could bring to bear if committed would very quickly upend the current Bitcoin dynamic, and force others to participate for fear of them seizing the network for themselves.

Bitcoin’s censorship resistance and pseudonymous security means that as an exchange of value, it remains viable even if a dictatorship were to rise and attempt to stamp it out or seize control. There is nothing a small nation state could do to affect the global integrity of the network, but a fast acting U.S or China with its energy reserves intact could threaten the network without adequate competition – competition that would be sorely lacking in the result of a massive network disruption event. Despite BTC’s global network status, nodes are still far too heavily concentrated in specific areas of the world and held by too few operators, and if one major miner survives and the rest don’t – total seizure of the network is on the table, albeit the inevitable hard fork designed to maintain the time-space continuum of the ledger.

Even in total blackout, however, as long as a few nodes exist somewhere, the network will sustain. It might require a hard fork to reduce difficulty (the original BTC timeline conceived with Moore’s law fully in mind and probably not expecting computing power to fall), but even in the event of a truly global apocalypse – the Bitcoin network should survive. With the use of the Bitcoin satellite network, SMS services being developed, even radio, plus the ability to make offline transactions – even internet outage wouldn’t spell the death of the ledger. Certainly not any more than it would spell the death of every major banking and financial institution.

A risk remains, however, of forks emanating from areas isolated from global telecommunications that results in a splintered network. Antarctica’s ledger, say, may begin to diverge significantly from the rest of the world through lack of global participation – but at least it would still work temporarily for the people living there. This fungibility, malleability, resistance, permanence and privacy is what made many early crypto users ‘cypherpunks’, believers in alternate anarchist structures fused with a libertarian ethos. Self-custody of your beans, your Bitcoin and your guns. Take it from me.

PoW has drawbacks (some readers will drawl wryly about how energy usage by Bitcoin miners will cause the climate catastrophe in the first place), but its resistance to ex-mural shocks still make it king. As BTC becomes more ensconced in the TradFi system, effective legislation can offset the most deleterious effects of excessive energy consumption. Proof of Stake (PoS) has a crucial weakness in the face of an apocalyptic event – the entrenched systems that support it may break entirely.

PoS requires an ordered world of stakeholders voting to a precise regimen. If 60% of your network holders and validators evaporate under the crimson fire of a hydrogen bomb, some networks may not even be able to reach a plurality in the first place, even to change the regimen – rendering it worthless. Or, the network may become so vulnerable to economic attack it loses its meaning entirely. Many PoS networks rely on economic infeasibility to attack it, something meaningless in an apocalypse scenario. BTC just needs a few computers fighting over the protocol and the system still works as well as it ever did, albeit with a need to grow. PoS requires a structured wealth owning democracy, Bitcoin does not.

So, buy Bitcoin and hide in a basement until it’s the only currency left? Well, not quite – despite its obvious status as the ultimate hedge against disaster alongside gold, the digital version of a golden tooth for a rainy day, would-be preppers shouldn’t dream of calamity too quickly. Global adoption for BTC is still low, even in developed countries like the UK, where only 6.1% of Brits reportedly have experience with the on-chain realm. If people don’t want BTC now, then why would they want it when the world ends? The network as a whole needs to experience substantial growth and adoption – even if explicitly in the general public consciousness alone – for it to act as a failsafe currency.

Self-custody in a world without police forces and national militaries will indeed revert the world to be wary of highwaymen, wielding wrenches and looking to pull out your golden digital tooth – by force if necessary. Alternatively, no one will care about your keys – they’ll want your canned tuna more than they’ll want a USB with a string of ‘meaningless’ ciphers.

Yet, for all that, the narrative persists. In a world of all-too-physical attack vectors, the decentralised digitised ephemerality of the blockchain makes it uniquely resistant to a global catastrophe. Yes, should an asteroid come knocking, and all that’s left is cellular life – the ledger will fail. Yet as long as a few pockets of humanity survive, upkeeping the ledger may be the best chance of holding onto some remnants of an order and hierarchy without resorting to brute force.

Bitcoin’s cradle was visited by the wise men of anarchy ethics, and its early adopters were almost exclusively those with an anti-societal, libertarian, doomsday leaning view – so it’s no shock to see that ethos sustain right up into the present day, even as Bitcoin is being welcomed into the TradFi world as the 13th asset class of the S&P index, and currently being tarted up by ETFs to be sold into the pension schemes of municipal governments. The fact remains that Bitcoin is a hedge against anything and everything – even the very end.

If it truly is the apocalypse now, it won’t be the apocalypse for PoW.

This is a guest post by Daniel Dob. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Crypto has a copycat problem

https://blockworks.co/news/crypto-has-a-copycat-problem

Crypto has always worn its open-source ethos as a badge of honour. Permissionless means just that — anyone is permitted to add to the creative commons, and novel entrepreneurship is never monopolized by a centralized power holding all the cards. 

The open-source approach, rooted in principles of collaboration, security and transparency, promises a world where our tech-bureaucracies remain transparent, with anyone able to view, audit and modify code.  

Yet “open-source” has a dark underbelly, where great innovation is lifted wholesale, rebranded and put out to tender with barely a backwards glance (or credit) given to the original creators. In the crypto realm, far more intellectual effort and productive zeal is expended on marketing than on advancing the baseline technology that brought us all together. Not so much standing on the shoulders of giants, but sometimes breaking their backs as you crawl up to seek starry riches from the promontory. 

We’ve seen it countless times. New layer-1/layer-2 ecosystem getting hot? Quick, fork any DEX that’s seen moderate success, splash on new paint and claim you’re the first DEX on the hottest new chain. And it’ll work. While forking makes the dream work and we wouldn’t be here without open-source — innovation remains paramount to stop crypto from ossifying into a game of quickfire copycat.

Where open source began

Open-source traces its roots back to the mid-90s, an evolution from the “free software movement” of the 80s. Spearheaded by visionaries like Richard Stallman, it championed the belief that software’s use, reproduction and editing are fundamental human rights. Think of it as the digital age’s “freedom of speech.” This gave rise to licensing practices emphasising that software should remain free and distributable.

In contrast, not all open-source licences share this ethos — for instance, the permissive MIT licence is neutral, focusing less on ideological standpoints and more on the pragmatics of code distribution. It’s a blessing and a curse. 

On one hand, a developer can repurpose Uniswap’s code, re-theming a DEX around, say, “PastaSwap,” potentially improving upon the initial. On the other, there’s nothing stopping this innovator from sealing their code in secrecy, also known as close-sourcing, even if 95% of their project stands on the shoulders of the original.

The sad truth is that in many cases, open-source has melted into a marketing buzzword. Many projects claim they claim they are “open-source” when really, only the basic code they copied under the MIT or Apache licence is truly open-source and auditable by all, with plenty of proprietary behaviour happening on the backend, hidden from view under the claim of protecting users from “day zero” vulnerabilities.

And let’s not even start on meme coins. While some might argue these tokens embody the spirit of decentralized fun, these candy-coloured trojan horses often conceal dubious intents. For every sincere project that forks open-source, innovates and improves the interchain thesis, there’s a horde of malicious actors plotting in the background. 

The more mundane, but no less insidious to crypto’s health, is the rampant regurgitation of any successful project under a hundred aliases. V3 liquidity announced? Everyone is suddenly about v3. Who cares what it means or what it does, just copy the code and put it in. This race leads to poorly implemented products that adhere to no real vision, but rather just create mass user fatigue and diversion from the progress being made.

Read more from our opinion section: Crypto is lost at sea, but I’ll be the lighthouse

Which, of course, is a massive shame. Web3 is all about being open. Crypto is just a part of a much larger social, philosophical and technical movement towards enshrining free roam of our virtual worlds, digital ownership and protection against censorship. 

So how do we strike a balance with the open source question? 

The holy trinity is providing the right incentives, mentorship and nurturing a culture of recognition. 

Rather than relying on mercenary liquidity incentives, ecosystems can establish grant and bounty programs, where devs are rewarded for improving code and introducing features that benefit the greater good. Often though, this can’t be done without mentorship, since many founders mistakenly believe that repackaging a product and relying solely on existing open-source code is easier and provides the same end result: These same founders fail to account for the long-term consequences of just creating yet another copy. 

Crypto needs to develop a decentralized social conscience. Yes, not everyone will play fair. But founders, thought leaders and crypto-focused institutions must understand that to make the tide rise and lift all boats, we must add new water to the sea.

Ultimately, copycats are here to stay. But those who adhere to a genuine, open source ethos should benefit most. Respect OGs, review code, give credit and make tangible improvements. Crypto could then transform from a nascent asset class into a global, permissive and inclusive internet financial system, with network effects that revolutionise the micro and macro economies of our modern world.

Ex-journo, legal ace, comms lead, and narrator of new-age net tales, now at the helm of GM Factory, where he helps digital neophytes beam beyond the daybreak.

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