[Community Post] Long Reads Sunday - Issue #61
Nathaniel Whittemore - August 25, 2019
The inescapable undercurrent of this week was the acceleration of the battle for the future of money.
It started when Binance announced Venus. If Facebook’s Libra felt like a top down force from outside, Binance positioned Venus as a regionalized, collaborative alternative. They even likened it to China’s Belt and Road initiative, while talking about “breaking financial hegemony and reshaping the world financial system.”
This would not be the last time we would hear the word “hegemony,” uttered in the context of the shifting financial system, however. In a stunning speech at the annual gathering of central bankers at Jackson Hole, Bank of England governor Mark Carney argued that perhaps, the US dollar as the global reserve currency was no longer serving the global interest. Instead of switching to another single-government currency, however, the answer might lie in what he called a “synthetic hegemonic currency” - a joint effort global cryptocurrency that would effectively be Libra, minus Facebook.
Libra itself, meanwhile, remains mired in regulatory skepticism, with reports this week that 3 Libra Association members are getting cold feet as the EU heightens antitrust explorations. On top of all this, reports are that Tether is working on a new stablecoin pegged to the Chinese yuan.
Whatever comes of Carney’s proposal, it’s clear that Libra has raised the stakes on the global Game of Currencies - in ways that perhaps even they can’t control.
Happy Long Reads - NLW
Long Reads Sunday #61 - How Everything Changes edition.
Underneath what appeared a relatively calm, end-of-summer week was the specter of seismic change of the global money order. Don’t believe me? Well, cop a coffee and let’s dive in; it’s long reads time.
If the potential of a startup is proportionate to the size times the incompetence of its competitors, the most promising startup of all would be one that competed with national governments. It's not impossible; this is what cryptocurrencies do. - Paul Graham
2/ The two poles of the week were Binance announcing Venus - a regionalized, independent, government collaborative version of Facebook’s Libra - and Bank Of England Mark Carney’s stunning proposal for a “Synthetic Hegemonic Currency” to replace the US dollar as the global reserve currency.
3/ Binance’s announcement of Venus was almost subdued. Blog posts went live Sunday, and interestingly, the blog post in Chinese was a much fuller statement, more defiant and directed in its invocation of transforming a new financial era.
Rest of the Chinese announcement completely develops its own narrative. Again reemphasize on the financial hegemony, and "It's Binance's dream to break the financial hegemony and reshape the world financial system" - Dovey Wan
4/ Binance invoked China’s belt-and-road initiative as a way to describe how, whereas Libra presented a top down, external force, Venus would be a bottoms up collaboration that allowed governments to issue digitized versions of their currencies. @DoveyWan explained more on 3@3:
5/ Not content to let Binance have all the fun, Tether dove into the stablecoin fray with reports that they will issue ‘CNHT,’ a new stablecoin pegged to the Chinese yuan. @DoveyWan with why some weren’t pleased
The boycott of Tether’s CHNT by local Chinese crypto OG already started this one is by Jun DU, former cofounder or Huobi, owner of the biggest Chinese crypto media JINSE and many others His reason is “It will bring systematic risk to local Chinese crypto ppl and companies” - Dovey Wan
and get the full backstory here
6/ In this video, @SimonDixonTwitt also gives more background on the entire space of digital versions of offline fiat currencies while honing in on the competition between a People’s Bank of China digital currency and Tether’s pegged version.
China Central Bank and Tether to compete. Here’s what you need to know. $USDT #PBOC - Simon Dixon
7/ The question, of course, is why is all this happening now? Well, one part of it, undeniably, is Libra. The entrance of Facebook into the global Game of Currencies has significantly increased the urgency for central banks to find their place in a digital world.
Like I said: if we don't lead (and by "we" I mean the Free World, *not FB*) others will. It wasn't a figure of speech, an exaggeration, or a spin of the reality we face. It was the truth. (Article) - David Marcus
8/ That said, for as much as Libra has set off the starting gun for others, it has not yet cemented its role in the new world order whose coming it has accelerated. @JoeSquawk and the squad at @SquawkCNBC discussed reports that 3 Libra Association members are getting cold feet
The many reasons why @JoeSquawk hates libra and (presumably) loves bitcoin - Squawk Box
9/ In many ways, however, all of this was simply prelude to the most seismic moment of the week, which were Bank of England governor Mark Carney’s remarks at the annual central banker gathering at Jackson Hole.
BREAKING: Bank of England says that central banks should join forces and create a cryptocurrency to take the spot as the new world reserve currency. A "Libra-like" currency to end the US Dollar's dominance. - Rhythm
10/ @TuurDemeester highlighted the key points from Carney’s speech on a “Synthetic Hegemonic Currency” and summed it up here: technology has the potential to destroy the dollar’s network effect.
In layman's terms, he's saying: "Technology has the potential to destroy the dollar's network effect." I have never heard a central bank figure say this. - Tuur Demeester
1/ Historic Jackson Hole speech by BOJ Governor Carney: "Technology has the potential to disrupt the network externalities that prevent the incumbent global reserve currency from being displaced. " (Thread)
11/ This idea *has* been floating around outside of Carney’s speech. For example, @ErikTownsend from @MacroVoices discusses it in his preview of a video series on the digital currency revolution, and discussed something like this in a book last year as well.
This free video fully anticipated/predicted the global digital reserve currency Mark Carney pitched at Jackson Hole, and explains why that outcome is inevitable. Teaser clip in tweet; full video at https://youtu.be/_J8_bDvKx4g. - Erik Townsend
12/ Another recent example came from @RaoulPal on the @hiddenforcespod, who discussed the inherent disruptive potential of the basket of currencies approach. Hidden Forces host @CoveringDelta explores the manifestation of that in Carney’s SHC further here
Today's international monetary system is the result of four hundred years of consolidation in banking networks, clearing houses, and exchanges. The destruction brought about by WWII laid the foundation for a new, gold-backed system of fixed exchange rates that arguably... - Hidden Forces
13/ As if that weren’t enough to come out of Jackson Hole, after Fed chair Jerome Powell spoke, President Trump asked (via Twitter, of course), whether Powell or Chinese Chairman Xi were a bigger enemy. @nic__carter captured what I think many were feeling after all of that. https://twitter.com/nic__carter/status/1164983029867175936
Today: - Trump steps up attempts to capture the Fed - BoE governor wants to end the world's dependence on the dollar as I said on @HiddenForcesPod, it's a good time to be skeptical of the financial system - Nic Carter
14/ So what does this all mean? Well, for one, it means we’ve entered a new phase in the battle for digital currency. It’s not just blockchain-based cryptos competing any more, and for government’s it’s no longer theoretical. Expect stories like this on Rwanda’s central bank CBDC research coming from everywhere.
15/ Of course, government backed digital currencies aren’t the only contenders. One major question will be to what extent bitcoin will continue to fly under the radar as things like Libra smash up against central bank efforts. BTW, lest you think this is new thinking, check out Hal Finney from ONE WEEK after the genesis block https://twitter.com/DrBitcoinMD/status/1165004233663496197
You think bitcoin twitter is bullish? Hal Finney (@halfin), was calculating a bitcoin price of $10,000,000 per coin just ONE WEEK after the the genesis block on January 3rd, 2009. Absolute legend.
16/ One of the worries that some have with private central bank digital currencies is their potential for increasing financial surveillance. The battle against surveillance was again on display in Hong Kong, in what @NeerajKA called “the first extremely surveillance conscious protest”
Is this the first extremely surveillance conscious protest - Neeraj K. Argawal
17/ Speaking of Hong Kong, @Zooko flagged the news that Twitter had accused China of running disinformation campaigns to try to disrupt the work of Hong Kong protestors.
“Facebook, Twitter accuse China of running disinformation campaign against Hong Kong protesters”(Article) - Zooko
18/ If you’re interested in how the dots connect between global socio-political unrest like what’s happening in Hong Kong with Bitcoin, let @gladstein be your guide via his recent podcast with @nickgillespie @reason
Had a blast talking about the global fight against authoritarianism and how Bitcoin and the future of money plays into it all with @nickgillespie This is a good one, folks! - Alex Gladstein
19/ The fight against surveillance was also front-and-center at Berlin Blockchain Week, exemplified by @snowden’s keynote at @Web3Summit. @avsa captured one of the great moments here.
“Currently what you’re all building are seen as novelties by the State, they don’t care, you’re not a threat. But at some point you will be one. And when that happens, you must very quickly move from a threat to an unstoppable force” - Edward Snowden at web3summit - alex van de sande
20/ For more on Berlin Blockchain Week, check out a couple other threads as well. @coindesk’s @christine_dkim live tweeted a number of different sessions
Speaking now @ETHBerlin about the Ethereum Foundation grants program is @CathTunti! - Christine Kim
while @sassal0x summed up the main themes as usability, governance, DAOs and funding https://twitter.com/sassal0x/status/1164983374479548416
1/ Heading back home tomorrow (a 27 hour journey!) so I figured I'd do a small recap of my experience at @meta_cartel demo day, @dappcon_berlin and @ETHBerlin. Main themes: dapp usability, governance, DAOs, and funding of the open source ecosystem. (thread) - Anthony Sassano
21/ And of course, don’t forget this uber triggering meme-driven development panel at @ETHBerlin, which was pretty much a Rorschach test for everyone in the industry.
This is the ideal developer community. You may not like it, but this is what peak performance looks like. - Tony Sheng
22/ So, what else happened this week? Well, there was a big return of the crime narrative, with OFAC listing BTC and LTC addresses of global opioid ring leaders, the White House saying crypto was used to by Fentanyl, and an @Nytimes report on terrorists using Bitcoin.
23/ Still, @La__Cuen’s follow up about how bitcoin is actually used in places like Gaza and the Palestinian Territories got significant attention as well. The “crime is the only use” narrative is a lot harder when freelancers locked out of PayPal et al are being paid for making websites with the same currency.
There's lots of this sort of cryptocurrency usage happening all around the world. It's not easily tracked as being revenue of some crypto remittance company, but then we should have expected that all along, crypto is all about reducing need for centralized intermediaries... - Vitalik Non-giver of Ether
24/ This sort of usage narrative is something different than just the straight store of value. The notion that BTC will act as a safe haven got a bit more data reporting this week as well, from @_RJTodd at @TheBlock__ and here:
Tweets mentioning Bitcoin with "safe haven"/"risk off" by users identifying as portfolio/fund/asset/wealth managers Probably nothing - Quant Fiction
25/ Speaking of narratives, @AriannaSimpson waded into the fray with her thread arguing that, as good as bitcoin’s long term prospect looks, the notion that all other cryptocurrencies are irrelevant is a short term response to current market conditions, and unlikely to hold.
1/ The general crypto narrative seems to be drifting back to bitcoin maximalism, so I wanted to share a few thoughts on bitcoin relative to the rest of the crypto market:
2/ BTC has clearly outperformed most other cryptoassets by a wide margin YTD. Expecting that this will always be the case (or that holding only BTC is the right move) strikes me as foolish.
3/ Why? First off, there is a strong recency bias in the crypto community (and in the investing world at large, tbh). Just because something has been the case lately does not mean that will persist in perpetuity.
4/ Those who have been in this space for many years should recall that this is by no means the first time the pendulum has swung back and forth -- in 2017 bitcoin was old news and it was all the shiny new layer1s that were going to take over the world.
5/ In reality, ETH was a better performing investment for many (even when considering the major correction of 2018!) than BTC was. So BTC remains king, but discounting everything else is silly.
6/ Anyone who knows me (or has followed me on twitter for more than 5 minutes) is aware of how bullish I am on BTC. If I could only hold a single asset, BTC would be it.
7/ But given the numerous high caliber of teams who are building crypto networks, I think it is incredibly unlikely that over a period of several years the entire rest of the market amounts to nothing. Not to mention, other chains will serve different functions!
8 / I actually don't believe many other cryptoassets are even directly competitive with BTC -- if it captures the "digital gold" category, there is no reason other cryptonetworks cannot own other categories (compute, storage, etc etc).
9/ So in sum, I believe claims that "alts are dead" and bitcoin alone will make it are nonsensical. I am most definitely long BTC. But call me after you've tried deploying an app on bitcoin versus ethereum -- alternative chains might not seem so useless after all! - Arianna Simpson
26/ In some ways related, @cburniske looks over at the Ethereum community and argues that it is “enduring its 1st bear market,” comparing it to BTC in 2014/2015 and reflecting on what it means for price and market development.
1/ $ETH is enduring its 1st mainstream bear market, just as $BTC did in 2014/15. In retrospect, 2014/15 was the best risk/reward period for investors to get BTC exposure.
2/ To objective observers, the network’s momentum was clear despite the bearish price action; those pre-disposed to dislike based on perceived vested interests, were blinded by biases & missed the bus. What happened to $BTC then is happening to $ETH now. #StackSats, #EarnETH - Chris Burniske
27/ It’s not the first place I’ve seen the idea that there are certain maturity phases that all protocols go through. Reflecting on time at Blockchain week, @udiWertheimer likened the bitcoin hard fork wars to coming battles between different groups connected to Ethereum like EF, Cosmos, Polkadot
Spending some time in Berlin Blockchain Week makes me want to retweet, again, this masterpiece from 2 years ago - Udi Wertheimer
28/ One narrative that just keeps trying to resurface is that of the fabled alt-season. In this thread @anambroid argues that value capture has simply moved elsewhere. https://twitter.com/anambroid/status/1163740479944634373
Thread about value capture in crypto: @BitTube is fundamentally awesome. The company has been working really hard at developing their products. They have pivoted several times when the original vision wasn't working out, showing flexibility where it matters. -
Do you want to buy the coin though? Not really. It's been in a downtrend since its inception, because of the brutal emission. New coins are mined constantly, whether the market wants it or not, whether the market is bullish or not, whether the market can handle it or not.
The coin is down 96% IN USD, since it came out! How does that happen when the team has been working so hard? Ez. The coin does not capture value and has no proper utility. A proper investment should be tied to something that accrues value. All TUBE has is constant sell pressure.
On the other hand, you can invest in the company itself on the Dusseldorf stock exchange. And guess what? Despite being illiquid AS FUCK, it's up 80% since the coin came out in 2018. That's because by buying shares you buy something that gives you some rights, instead of vapor.
Investing in utility tokens/coins will mean you get shat on by the people dumping them on you constantly: a/they have the premine b/they bought a presale at a "discount" c/they are mining/staking it at a margin.
Most likely, the only "utility" coin that will be successful will be Bitcoin, because of its artificial scarcity and necessity of using it: a/#hodlgang b/base crypto trading currency c/loan collateral d/uncorellated investment asset (traditional mkts) e/limited block space
(This is why Litecoin and Dogecoin are not going anywhere - as long as they are used for arbitrage and as long as litoshi and dogetoshi markets exist, so will these coins.)
Many "utility" coins attempt to be commodity money like gold and silver used to be. All others will suffer the same pressure other money suffered in comparison to gold.
@saifedean's interpretation in his book is that even silver got demonetized, because it wasn't good enough compared to gold This is long term pressure on good money, sped up a fuckton on all shitcoins, because crypto is capitalism on steroids and is native to the internet.
In short, the "age" of investing in utility coins is past and if you are still calling this type of speculation investing, you are puling the short end of the straw.
Instead, look for things that somehow accrue value. This is usually done through: a/artificial shortage (buyback and burn - @binance coin) b/profit sharing (hellooo, securityyy - @NexoFinance) c/running the infrastructure for a platform, receiving fees ( @renprotocol,...)
d/network effect (it's widely used for x -Ethereum gas, fundraisers) e/decentralized governance (voting rights - @decredproject, @MakerDAO) f/ownership rights (NFT's, STO's) g/PoS with slashing (@cosmos) h/forced token utility that overcomes max velocity/block space (hard to do) - Ambroid
29/ One of those areas of value capture that has emerged are in the form of exchange tokens, which offer holders benefits vis a vis the business of the exchange. A big new entrant to the exchange market came with the announcement of @INXLimited’s $130m regulated IPO
The first real SEC approved crypto exchange token - been following this groundbreaking project for over a year, might be a real game changer, and not just the token model (Article) - Maya Zehavi
30/ @Katherineykwu argues that INX’s regulated token initial public offering, especially when combined with a number of other recent projects positive interactions with regulators undermine certain arguments that have kept the Wild West wild.
With INX's IPO filing, Props & Blockstack's Reg A approval, Securitize as an SEC-registered transfer agent, NYDFS granting more Bitlicenses, and a growing body of legal precedent, the 'we can't comply w US laws b/c of regulatory uncertainy' argument is less compelling by the day. - Katherine Wu
31/ Then again, there is still a bit of wild out there. Check out this analysis from @elementus_io on how PlusToken, a Chinese Ponzi scheme, was able to accumulate $2b worth of ETH.
32/ Speaking of data analysis, check out these two new metrics from @hansthered over at @Ikigai_fund: 1. HODLer Index - ratio of Tx to Bitcoin Days Destroyed + 2. HODLer Network - # unique addresses.
33/ In the “WTF” story of the week, read about the fall of Patrick Byrne, one of the public market’s largest crypto advocates, who resigned from Overstock in the wake of his involvement in a Russian Spy Scandal
34/ Finally, since we started with central bank currencies and corporate coins like Libra, let’s wrap with a few more pieces on the great X factor in the future of money. @MartyBent flagged a great piece from @parkeralewis on Bitcoin’s speed.
35/ @dergigi keeps up his great run of content with this mini thread on power re-alignment in an internet-native world
1/ "The Rise of the Sovereign Individual" - Thoughts on how power is re-aligning itself in an internet-native world, and how freedom-enabling technologies can ensure your rights in cyberspace. - Gigi
36/ @CitizenBitcoin does a great job overviewing the state of bitcoin podcasts. I continue to believe that this space is the vanguard of a larger shift to the importance of independent media across industries.
1/ The quantity and quality of bitcoin pods has mooned. We really crushed it this bear market and we're ready for the next wave. A thread of my favorite bitcoin pods, why I listen, a link to a choice episode from each, and how I manage to consume so damn much audio content. - Brady
37/ @100trillionUSD’s writing about stock to flow ratio and what it means for bitcoin have increasingly filtered into the larger global macro conversation about BTC. This week, he shared a short curation of must read articles on the topic
Must read stock to flow articles: 1) Original s2f article https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25… 2) Analysis validating (not falsifying) s2f model, based on cointegration https://medium.com/@phraudsta/falsifying-stock-to-flow-as-a-model-of-bitcoin-value-b2d9e61f68af… 3) Analysis rejecting s2f model, based on not meeting all OLS assumptions https://medium.com/burgercrypto-com/challenging-plan-b-a-review-of-modelling-bitcoins-value-with-scarcity-3d4e7e141286 - PlanB
38/ And finally, maybe the most viral thread of the week came from @allenf32 on the cocaine binge nature of the modern economy. Agree or disagree, this thread struck a serious and unignorable nerve.
1. what is ACTUALLY happening in financial markets right now. a thread. TLDR: everything you think you know about economics is nonsense. - Allen Farrington
39/ And there we have it! Another LRS in the books. As always, thanks for reading and you can sign up to get these direct via email. And for your daily dose of LRS style content, check out the Crypto Daily 3@3. Listen as a podcast wherever you listen; get it via email or subscribe on YouTube for the vids.
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