Good morning. Hello. How are you? #539
A crypto essay (oh god I am sorry)
I suppose it is time I write about crypto. Again. Or anew. Because my views have changed. Somewhat. Or expanded. Something. And I’m, like, explaining the mechanisms behind Uniswap liquidity pools in Slack groups to people that thought I hated crypto, and they’re not unreasonably confused why I know this. So here we go.
This is way too fucking long. Substack is pissed. I’m sorry. Feel free to skim it. I tried to subhead and bold it for you.
You absolutely don’t have to read this, unless you’re gonna make fun of me when I mention crypo shit. Sorry, those are the rules.
Still a Bitcoin (specifically) skeptic
In 2009, I read the original Bitcoin whitepaper, downloaded the software and started mining on my high-end Mac Pro. I mined for a week. Mined, god, maybe 10 or 20 coins, maybe a hundred. Thought “well, I need like a million of these to buy a pizza. This is dumb. But fun.” And I stopped. I knew enough to be careful and to not lose my wallet, not lose my password. But there were no online tools for these things yet and thanks to LaCie, I lost them anyway. I still mourn this. Very sad about this.
(Don’t worry, this was not even close to the largest, stupidest financial mistake I’ve made. It’s probably around fourth.)
BUT I found then, and still think, that Bitcoin is inherently flawed, was always inherently flawed, and irredeemably so. My two main complaints about Bitcoin are the same as they always were:
“Proof of work” is technically genius, but an environmental catastrophe. This is a deal-breaker for me, full-stop. It gets worse every year. It is horrifying and terrible and I want no part of it.
I think there is a logical fallacy built into Bitcoin’s algorithmic money supply. At the end of the day, the money supply of Bitcoin is literally a thing one man made up, with no recourse, no competition, no nuance. This is traditionally pitched as a good thing, since Bitcoin’s supply is not subject to political pressure. I disagree. The fallacy is that Satoshi was comparing Bitcoin’s supply algorithm to a single central banker. But we do not live in a world of a single central banker. We live in a world with many central bankers, who all compete to be a fiat currency, or the fiat currency. I prefer to live in a world with many central bankers, with no single monopoly central banker. I believe that the competition between central bankers will keep them (more) honest. I don’t feel the need for a cryptocurrency to be a fungible, widely used actual currency, but if I did, I would not choose one that has zero nuance in its approach to the money supply, and certainly not one where that approach is dictatorial.
I’m also not a target audience for the good things Bitcoin has to offer. I mean, I get it, but I have a great credit rating, I don’t buy illegal things online, I am perfectly happy with my financial service providers. I like, understand, and trust conventional databases. I love databases. I’ve been buying shit on the internet for thirty years and it’s been fine.
For the longest time, this belief was pretty much enough to keep me out of the crypto game. It’s hard to convey how much the environmental damage upsets me. It upsets me with my car. It upsets me when I fly. I’m stuck with those, though I am trying to fix them. But I am deeply hesitant to add another environmental atrocity into my life.
Ethereum didn’t originally change this calculus
When Ethereum came along, I followed the whole initial launch, initial hype. I was a VC at the time, we started getting a lot of crypto pitches, many of my friends went all-in (there is another giant financial mistake in here). The proof-of-work approach to Ethereum was mostly a non-starter for me. The Smart Contracts and DAOs seemed technically interesting, though I am still deeply skeptical. When the great ICO frenzy of 2017 or so happened, I felt old. Slightly alarmed. Happy to see the SEC step in and shut things down. I’m old, I read history, I felt the opportunity for fraud was too great. I generally like accredited investor rules and securities laws.
I was happy to mostly keep these opinions, and check out for a good, long time. Five years or so. Somewhere in there, I read David Golumbia’s The Politics of Bitcoin and found it fairly compelling, and believe everyone in the community could maybe read it and have a good long think.
I think I’ve just spent too long in web2 (still cringe at this terminology) and earlier. I have a good understanding of the tech, the operational, the economic aspects of it. A good idea of the things it could do, even if it doesn’t. So a lot of these supposed innovations seemed perfectly doable to me already, under L’Ancien Régime.
I’m in the ad business and I, generally speaking, like ads and believe in ads, despite the horrible stuff that happens in the industry. Of course, for a long time I did not see the contradiction there: Advertising is fine even though there’s tons of fraud and graft and horrible shit, crypto is terrible because there’s fraud and graft and horrible shit. There was (is) a hypocrisy there, I admit it.
Okay but you’re into this now? So what changed?
All right then, great Rick, you don’t like crypto, cool. Why are you writing this? Ah yes, right. Well, some things have changed since then.
Engineers are having fun!
Some time ago, I had another friend start getting roped into crypto, fascinated by it, coding on it. He’s an engineer I deeply respect, one of my best friends, so, you know, had to pay attention. And he said something kind of interesting: that it was just super fun to be doing new shit again, that his work has been pretty boring for a long time, and all these tools are built, and if you are a kid and a developer and you’re looking at web2, it’s not super fun and web3 seems a lot more fun. And I started thinking about my day job from the point of view of the engineers, compared to the engineers at, say, Barbarian Group in, like 2004. Version control and unit testing and automation and commits and security audits and QA and all of that. Way more of the code now is pre-made, it’s a lot of plug-and-play and connect-this-package-to-that. It’s just night and day from 2004. I’m not a developer anymore but… that seems less fun? And I saw his point. It didn’t have a lot to do with me, having given up on coding around Actionscript 2 (RIP), but it did make me think about it in a new light.
So, you know the drill, I started doing my research, really trying to understand things. This part is not super interesting, it’s a cliché, there are plenty of essays out there about “I was skeptical and then I learned it and here is me telling you all I learned.” I figured out the basics, I read a shit-ton of white papers, I ventured beyond the walled gardens of Robinhood and Coinbase. I watched a lot of ICOs (still a hot commodity!). I bought weird tokens, I cried about gas, I would find Tweet threads that used to read like Greek and smugly understand them now. I caught up.
So where am I now?
Eth2 and Proof of Stake are real
First and foremost: the mainstream press has done a horrible job about Eth2. I mean, I know it’s taken a while, but when you start digging in, reading the docs, reading where it is now, I was shocked to see how far along proof of stake is. Shocked. The entire party line in the mainstream press is “Proof of stake has been riddled with problems and may never happen. They say it’s gonna happen in 2022 but LOL.” I believed this. I understood Proof of Stake and that it was happening, but I believed all those tech writers who pooh-poohed it.
Now, I’m still learning here, I could be wrong, but it sure looks like proof of stake is solid, imminent and real. For me it is a complete game changer. It’s not here yet, but it will remove one of the biggest obstacles for me. That’s not nothing.
It’s so easy to LOL at gas prices and write the whole ecosystem off, without seriously engaging with the idea that maybe gas prices won’t be this absurd forever.
I used to buy a shit ton of environmentally devastating plastic bricks that came wrapped in plastic bags, packed into a cardboard box. Filthy habit. They are still sitting in my attic. A hundred of these boxes, never opened. The company that makes them tells me that in eight more years, they will be environmentally friendly. And, of course, that’s aspirational and probably not going to happen. Eth2 looks positively lightspeed and concrete compared to this bullshit.
Another thing that’s changed in the last few years, of course, is that NFTs came along. I’m a collector. I fucking love collecting things. I collect collections: records, CDs, the entire catalog of Factory Records, vintage vibrators, hotel keys, socks from internet startups, beer coozies, band t-shirts, old Harvard Business Review and Wired magazines, rare books, Care Bears, cassingles, stickers, Vaughan Oliver paraphernalia, Anais Nin autographs, 1972 Pirelli Sarah Moon calendars, card decks, zines, Chartreuses, fernets, coasters shaped to look like burgers, Little Debbie president cards, my god it is so out of hand. I fucking love collecting. I also have a ridiculous collection of something like a million digital images, all meticulously sorted. So obviously the rise of NFTs was of some interest to me.
I instantly got NFTs. I like the concept. I still kept the whole thing at arm’s length, though, because proof of work. I remember chatting with a friend of mine who was in the crypto world and we were chatting about NFTs and I mentioned my environmental concerns, and he was like “well, the gas is rough at the beginning, but then that’s it” and I’m like “no! It’s not it! It is a record in a database, spread across thousands of computers that have to stay online forever. The whole point is its infinite! It’s forever! Thus its energy consumption is forever!”
He did not pursue the subject.
I see now that that objection is kind of right but also kind of wrong, but also unfair, in that my Dropbox is eternally online as well, and that in a Proof of Stake world, these weren’t much different.
The web3 migration reminds me more of the web0-to-web1 migration than a migration from web1 to web2. I’m not talking cultural impact here, I’m talking career moves. Let me see if I can make this make sense.
Web2 people are, like, “this all reminds me of hanging out in South Park when they were making Twitter and Facebook and stuff,” and I think that’s true, but I’m older and what it reminds me of is 1996 and the graphic design community, and all the arguments we had about whether or not we should get in on this “Internet” thing. And how bad “The Internet” was, and how it didn’t have leading, or kerning, or tracking (the good kinds) or even proportional fonts. We couldn’t use PostScript or Pantone. Color matching was so bad. And goddammit, we just learned Quark and stopped using cameras for paste up why do I have to change again.
I was young, wide-eyed, filled with excitement about the future, an optimist back then, and it was never a super-difficult decision to jump to the internet. Of course, I was never really that good. But since then, I’ve had to endure twenty-five years of old analog designer friends saying “Hey how do I get into this internet thing,” and I’ve watched as their career options have shrunk because they didn’t embrace “the new thing.”
Again, I’m not talking the social revolution perspective here. I mentioned this similarity to my wife, and she said “yeah but the internet changed everything, crypto isn’t” and she may be right! I am yet to be convinced that the impact will be as huge as the migration from web0 to web1, but I suspect for people in my line of work, it will become increasingly problematic to not understand crypto.
The cultural impact is real
Over the pandemic, I developed a bit of a YouTube habit. Subscribed to a bunch of educational and how-to YouTube content and I watch it in the evening with my daughter. Seems better than watching Marvel with her or something. In the process, I’ve come to understand YouTube influencer culture, learned who Mr. Beast was as MKBHD and Mark Rober and Shelby Church and Hannah Lee Dugan and so on and so on. I was pretty excited last year about #teamtrees and it seemed really impressive. And it really drove home the cultural impact of YouTube in a way I hadn’t previously grasped, since my knowledge of YouTube stopped back when we did Beer Cannon.
This year, Mr. Beast and Mark Rober once again teamed up to do a big charity drive, #teamseas, to raise $30 million to remove thirty million pounds of plastic from the ocean. And they got so many other YouTubers in on it. It was really exciting! And it’s going great. They are up to $17 million raised, which is a monumental achievement by any measure.
Now, I think raising $30 million to put a constitution into a museum is a little weird. Fun fact: there is already a copy of the US constitution in a museum, that you can go see, for free! But there is no denying that a community coming together to raise that much money that fast, is a helluva thing. And really drove home the size of this community.
Sometimes it’s OK to reinvent the wheel
On the one hand, DAOs and tokens and blockchains mostly have old-school analogs that mostly work just fine. It’s still a running joke in my head when people talk about how the blockchain will revolutionize something that could easily be done with a database. My friend and I constantly joke about how this one crypto project we’re working on could have been so much easier if we just did a Rails app and a website. But that’s not the point, really. We’d never have bothered if it were just a Rails app and a website. The fun is the learning.
The other day I had an epiphany: it would have been pretty cool if I had gotten tokens from all of my old clients and startups. Like, when some blockchain maximalist makes a Twitter rant about how someday our wallet will be our CV and the tokens of the projects we worked on will show people our experience, I still kinda roll my eyes, but… also:
I totally have a whole shelf —a couple shelves— of old buttons, badges, stickers, coozies, socks, hoodies, shirts, swag from the companies I’ve worked for and worked on. I definitely like little tokens of past experiences.
I super, super liked Foursquare badges a whole lot.
In my past life, I have worked with, for or been involved on some capacity Apple, Facebook, Google, Digg, Foursquare, Timehop, Tumblr, Soundcloud, HBO, Britney Spears, Justin Timberlake (oh wow, twenty years later I just noticed that irony), Bloomberg, VW, Virgin America, Nike, Red Bull, Harmonix… Yeah. I totally wish I had little tokens from all of them that randomly went up in value, even a decade later, as their cachet grew. That would have been awesome…
…and of course I could’ve gotten stock for working for/at those companies, and many people do! And it’s even more common now than it was, like, 25 years ago. But lots of people don’t. There is still, to this day, a raging debate in the agency world about agency compensation and how they don’t get to participate in the upside of what they create. And we could give them stock, but we don’t. So, hey. A complete rebuilding of everything from the ground up? Sure, why not. Maybe this time around we’ll compensate those who help. Maybe not, but it’s possible and heading that way. We don’t know yet. May as well be involved to, you know, try and help.
I still have one of those pages on my personal website where you put the little badge logos of the companies you invested in, and so does the VC fund I’m a partner in (though we both seem bad about updating them). I like little involvement tokens, participation trophies. They’re fun. Am I into some better version of those with additional verification? And update themselves? Sure!
Blockchain tech and crypto might end up being the Pneumatic. Or it might end up being the Telephone. We don’t know yet, but I’ve never really been one to stake my reputation or livelihood on accurately predicting the future. I’m as bad as everyone else, sometimes I think things are dumb, dismiss them out-of-hand without investigating. Sometimes I turn out to be right! I was right about Clubhouse. And sometimes I’m right but then it turns wrong. I was right about podcasts for, like, ten years and then one day it turned out I was wrong. My predictions are irrelevant.
I’ve come to realize there is some nobility in doing a wholescale rebuild even when it’s not strictly necessary. Like that guy on YouTube who’s spending years of his life and so, so much money rebuilding a 1800’s sailboat. Sure, he could buy another boat, but those people are having so much fun rebuilding that boat. This metaphor is a bit iffy, but it works for me.
The point is it’s okay to reinvent the wheel sometimes, and it’s not my place to pooh pooh it out of hand. Do I think perhaps some (most) of the more wide-eyed predictions about the blockchain are absurd? Absolutely. The appeal for me is not revolutionary. It’s to tinker around and have fun.
You say you want a revolution
Maybe I’m wrong and there is a revolution in all this. That’s fine. That’s just not my thing, and I’ve been burned too many times going down that road. I’m just gonna old out on that one. And I reserve the right to make fun of wild-eyed proclamations. I’m deeply mortified how bad web2 turned out, I’m horrified about my place in it. While this could mean that web3 has some shot at redemption, I’m scarred and burned and cynical and find it impossible to believe that it’ll be any different or better.
I thought the money lust of web1 and web2 were unseemly, but it seems even worse on web3, but, then, I am probably blocking out the year 2000 where we all unironically discussed buying MarchFirst or CMGI stock or some shit.
But what I’ve realized is who cares? Ha, I don’t mean, like, “who cares, let’s go get wasted dude to the 7-11 to the liquor store let’s party all night and party some more” kind of way. I mean… Yes, there is a lot of revolutionary fervor, but there’s also a lot of fun, a lot of creativity, a lot of passion and a lot of excitement. I will focus on those, that is nice, I have missed that.
Assholes to the left of me, Assholes to the right.
For the longest time I focused on the assholes of the crypto world and, god, they really are awful. What’s occurred to me lately is that I’ve been stuck with assholes my entire adult life. I was stuck with assholes when I was playing in noise bands, in shoegaze bands, I was stuck with assholes when I worked in the music industry, in prepress, in copy shops, in advertising, on the internet. Assholes when I was a cashier at the state fair. So many assholes. Everywhere. For so long. Why on earth am I letting the existence of assholes dictate my interests? They are fucking everywhere.
Asset? Currency? Lol.
Next: I was hung up for too long on “Bitcoin needs to decide if it’s an asset or a currency” for too long. That ship has sailed. For now. It’s an asset. It will be for a long time. I know that’s upsetting to some people, but for me, it helps my brain to resolve that for now so I can move on. Of course lots of people are working on making various tokens and coins more currency-like, but personally, not my bag.
Robin Sloan, in his excellent crypto essay, asks a question: “a good diagnostic question to ask might be: would you still be curious about Web3 if those currencies were worthless, in dollar terms?” And for me, the answer is yes. I don’t really care about that stuff at all. I mean, sure, I’ll throw a couple bucks on a coin, why not? But it’s not interesting to me any more than people who obsess over the stock market.
It’s different this time. Or not. No one knows.
Many of my non-crypto friends say “It’s a bubble, it’s all gonna crash” and, of course, they might be right. Bubbles are real, they happen, bubbles can happen in crypto, and the whole thing might implode from a financial point of view. Munger is maybe right! I personally don’t care if it does or not, that’s not my bag. I own some coins but it’s not gonna make a difference one way or the other on my personal well-being.
But what I find intensely interesting is that the economic dynamics of the crypto ecosystem are unprecedented in the history of humanity (oh god that sounds so absurd). I don’t mean because of the revolutionary potential blah blah, because, like I said, I don’t care about that. What I mean is that the vast majority, if not all, of economic theory isn’t gonna work with crypto, at least for a long time, because the basic environment is totally different:
The whales of crypto are unlike anything we’ve ever seen in terms of wealth concentration, and their motivations are almost certainly different from the plutocrats of yore. This is probably not actually good for the ecosystem as a whole, but when you have a thousand or so people dominating the entire economy, with a vested interest in propping up that economy, it starts to introduce unpredictable results. The whales of crypto are like a 100x JP Morgan when he propped up the Panic of 1907. Shit, they probably have more power than the Federal government does in terms of influencing their economy. Should the bottom fall out of crypto, the whales’ power and motivation to prop up the economy is indescribable. And I’ve seen no traditional economic modeling of bubbles that takes this into account.
HODL is real, and it’s different in crypto. In every panic there are true believers who stick with it and ride it to the bottom, but HODLers are a different beast, or beasts. There are a few cohorts:
They’re all in, working at a crypto company, and getting paid in crypto, paying rent in crypto, etc: A crash won’t matter to them. Their life is unchanged.
They’re a true believer who invests responsibly, has a diversified portfolio, but a lot of crypto: if crypto falls alone, they will just hang on because why not. If it falls in sync with the stock market, what are they gonna do besides hold?
They’re in an unhealthy amount: unpredictable, but they’re probably employed, and they probably will still be able to pay rent and buy food.
A crypto crash is an unpredictable hybrid of what crashes would look like in beanie babies, comic books, vinyl, commodities, stocks and the art world. It suffers the fashion ups and downs of Beanie Babies and comic books, but those markets don’t have whales. It acts a whole lot like a commodity but there aren’t a lot of die-hard porkbelly HODLers. It’s weird. It’s its own thing. This doesn’t mean it won’t crash, but it means that anyone who tells you what’s gonna happen when it does is probably lying. It’s not (yet) widely held to take down the economy.
Now, again, personally I don’t care if it crashes financially or not, but it did strike me that I should take even smart predictions with a grain of salt, and even if it crashes, god, maybe it’ll be like working on the internet in 2002 which was kind of my favorite year of working on the internet.
Okay so what
What I’m saying with all this is that one doesn’t have to buy into the hype, doesn’t have to believe that DAOs are going to replace unions or Bitcoin is going to supplant the dollar to fuck around and find the parts that you do find interesting. The gaming stuff is interesting. The investing and speculating is kind of interesting, sort of, but, I mean, it’s just another asset. I know people who’ve made a mint off of LEGO and vinyl and taxicabs and chargebacks and all sorts of weird stuff, so sure, fine, make a mint off crypto, that’s cool. I respect that. I think NFTs will be very interesting once Proof of Stake is implemented and I can stop feeling guilty about the environment. I’ll stay away from Bitcoin forever until they’re off of Proof of Work. I can pick and choose.
Do I think crypto is going to change the world? I mean, yes and no. Did Atari change the world? Adobe? Steam? Apple? Sure, yes, all of them. Do I think it will be a revolution on par with the internet? No, I absolutely do not. Could this be a limitation of my imagination? Yes, possibly. Could it be a grizzled cynicism that comes with three decades of this shit? Yes, possibly. Could it be knowledge that comes from three decades of this shit? Yes, possibly. I don’t care if I’m right or wrong about it, I’m here to have some fun, to mess around, to putter. Because there’s some interesting tech, some pockets of fun community, some colorful personalities, and a PHD thesis that could be written about whitepaper verbiage.
So, now, I find myself working on two or three different crypto projects with friends. I still think that many of them could be done with a good old fashioned normal database. But that isn’t the point. The engineers are having a grand old time, you can get engineers to actually join your project because it’s fun for them and, god, I’ve missed that. The community has its cooks, white supremacists and assholes but not especially more than other communities and certainly not more than those that exist in my daytime profession. The tech is fascinating and endless and impenetrable and comical and absurd but also fantastic and it reminds me of back when we were so surprised that someone made a shareware font editor or something, circa 1997. I fucking LOVE how excited everyone is about multi-signature wallets, how they are constantly teaching each other the concept of two signatures to make a withdrawal, a thing that banks have offered since the 1800’s. I LOVE IT. I love so much reading a white paper that’s like “we have multi-sig wallets!” on the same day that in my day job I’m filling out some SOC questionnaire about “does your company require more than one signature on a bank account.” Tomaytoe Tomahtoe.
Today’s mix is just a mix. Old and new. I am running out of words. Substack is yelling at me. We will go now. I AM SORRY.