Messari Daily Brief Feb. 16, 2021: Maximalism: Lucrative for #Influencers, Expensive Otherwise

I’m digging out from a long weekend, and catching up on a bunch of news and updates because crypto (very inconveniently) never sleeps. And I’m feeling reflective as we touch $50k bitcoin for the first time.

In particular, I've been mulling over two things. One is the recent claim from Naval on Clubhouse (I didn’t hear it, but it doesn’t seem to have been disputed): “I’ve decided to actively focus on crypto for the rest of my career.” The other is the continued, rabid maximalism infecting otherwise sane and somewhat intelligent people -- in spite of all evidence that one asset zealotry is foolish.

First, there’s Naval’s comment, which reflects my own thinking.

Sure, it sounds obvious to make that “rest of my career" claim today, but that was far from the case as recently as 18 months ago. "Is “crypto” a career path, or are we lucky to have bitcoin and payments applications as our one miraculous invention?” was a legitimate question as ETH cratered, and ICO treasuries dried up.

Then and now, it’s helpful to go back and look at prescient posts from folks like Naval, Fred Wilson, the Coinbase team, etc. whenever you’re tempted to write off the next big thing as an overvalued fad, or panic quit the correction.

Here’s Fred Wilson on Bitcoin in 2011: So it seems to me and my colleagues at USV that an alternative currency with roots in peer to peer networks and based on an algorithm that is transparent to everyone is an idea whose time has come. The question remains if the Bitcoin algorithm or some other algorithm (possibly a derivative of the Bitcoin algorithm that deals with some of Bitcoin's weaknesses?) will ultimately win out. That's an important issue that has a lot to do with when this space becomes investable.

But Bitcoin or something else, I'm confident we'll see the emergence of currencies that are not controlled by nation states in my lifetime. Whether that is a good thing or not remains to be seen. I think it is, but there are significant ramifications that will result from the decoupling of currencies from governments. And one of them is an interesting investment opportunity that we hope to participate in.

Here’s Naval on Appcoins in 2014: Let’s posit a dozen new Appcoins. Using application-specific coins rewards the open-source developers with a pre-mined quantity. A TorCoin can be paid to its developers and gateways and by Tor users, achieving consensus via proof-of-bandwidth. We can allocate any scarce network resource this way – i.e., BoxCoin for Storage, CacheCoin for Caching, etc….Cryptocurrencies are electronic cash, and as such, will be used by electronic agents to exchange value, verify contracts, and track identity and reputation. All of a sudden, the computing resources spent by the Bitcoin miners doesn’t seem wasted – it seems efficient, given that it can be used for congestion control and routing of other network resources. Cryptocurrencies are an emergent property of the Internet – almost a fifth protocol in the Internet suite.

Here’s Coinbase on DeFi just last year! The Decentralized Finance (DeFi) or Open Finance movement takes that promise a step further. Imagine a global, open alternative to every financial service you use today — savings, loans, trading, insurance and more — accessible to anyone in the world with a smartphone and internet connection. This is now possible on smart contract blockchains, like Ethereum….While some of these concepts might sound futuristic–automated loans negotiated directly between two strangers in different parts of the world, without a bank in the middle– many of these dapps are already live today. There are DeFi dapps that allow you to create stablecoins (cryptocurrency whose value is pegged to the US dollar), lend out money and earn interest on your crypto, take out a loan, exchange one asset for another, go long or short assets, and implement automated, advanced investment strategies.

Bitcoin had just crashed to $2 (a 90%+ crash) when Fred wrote about bitcoin. It had crashed 60%+, the industry’s largest exchange had gone bankrupt, and Ethereum had yet to even run a crowdsale when Naval wrote about appcoins. Coinbase wrote a 101 on DeFi about 100x ago, after many 2017 ICOs had just cratered 90%+.

It is costly to be a skeptic, but it’s obscenely expensive to be an active critic and short-seller of human creativity.

It makes you wonder what maximalists have to gain, really, and the answer is pretty simple: many of the most vocal BTC-only, or ETH-only maximalists make money selling BTC-only, or ETH-only services. Divergence costs them clicks and money. I suppose that's obvious, and the same can be said of me (and Messari): we do well amidst a bull run across a wide range of assets.

I will say that we at least call balls and strikes on everything. And we'd rather be on the open-minded side of the spectrum, which is, historically, the winning side.

Headlines that matter:

• INTEL: ETH, LUNA, SNX, YFI, MKR, ALPHA, CREAM (+ 20 updates)
• MacroStrategy is at it again with another $600 million convertible note
• Bitcoin’s rise reflects America’s decline (FT)
• Options data shows institutions aren’t worried about correction (CoinDesk)
• Hot Topic: Bitcoin subsidizes energy production (Jimmy Song, Meltem)
• NFT Mania: Variant Thesis, Linda Xie Explainer, Binance Guide
• How crypto insurance can incentivize protocol audits (Delphi)
• Avalanche bug explainer (CoinDesk), Alpha Homora exploit (Post-Mortem)
• Dapper Labs raises $250 million at $2 billion valuation (CoinDesk)
• Ethereum’s HF1 is the first beacon chain hard fork proposal.
• Daily Shade: Maximalism is toxic for your wallet, mind, and soul.