Crypto's Big Rupture Won't Be My Fault
Saturday, December 26, 2020
While reviewing headlines for the weekly cryptocurrency show that I co-host, I came across an opinion piece written by Ryan Zurrer and published on Coindesk. In it, the author discusses the growing rift in the industry between what he dubs the "crypto-native" and "centralized-corporate" factions. The author makes a compelling case that this rift is prepared to burst into a full-blown rupture in 2021, forking the industry into two distinct identities, with disparate goals and different destinies.
While Zurrer's thesis is sound, and should ring true with anyone that has been following events and evolving attitudes in the cryptocurrency space, he makes a critical error while exploring the crypto-native reaction to this growing rift. The article has since commanded some attention, so it is worth the time to address this error. For the severity of an industry rupture as Zurrer describes, and it's impact on projects, investors, users, and other participants, depends in large part on how well the adherents to each perspective understand each other. Misunderstanding can only lead to additional wasted time and resources, needless bloodshed and the consequent destroyed value and bad sentiment that comes with all of this. I think we can agree that this would hurt everyone in the industry, regardless of outlook.
There is also the small matter of fairness. Regardless of one's opinion of the crypto-native outlook, there can be no credible denial of the fact that it was this perspective that resulted in the birthing of cryptocurrency as a concept and as an industry. And, let's be fair, Satoshi Nakamoto's stated goals did not include being assimilated by the Borg of traditional finance, to serve them. Indeed, the very first line in the whitepaper uses the verbiage: "without going through a financial institution"
If strengthening financial institutions had been a founding goal, the Bitcoin source code would have been copyright protected, the technological methods patented, and the whole package pitched until it was sold to a player in the existing finance industry. But everyone knows that this didn't happen, in large part because the entire point was to provide The People with a viable, self-regulating alternative to these systems of power and control, not to strengthen and expand them.
However, any artist loses much control over his or her work as soon as it is published. While we may not think of computer code as "art" per-se, it does share many qualities with art and literature as a form of expression, and is equally as vulnerable to this reality, if not more vulnerable. In the case of Bitcoin, the disappearance of Satoshi Nakamoto from the scene certainly did nothing to diminish the impact of this effect. That fateful decision, while wise in many ways, left the fulfillment of "his" vision completely in the hands of others. It has been difficult enough for people acting in good faith to interpret this vision, and there have been many disagreements.
Since that time, many new people have come along and seen the power and value of blockchain technology and want to leverage and exploit both. They were attracted not by the crypto-native ethos, but rather by the efficacy of the technology. As a result, most of these people do not share the values that characterized the original movement. They come from a completely different world. The more cynical among us would say that conflict was inevitable.
But guess what? Except for some loud exceptions, the crypto-native community is a welcoming and inclusive one. Until recently, a tense coexistence has proven possible. It doesn't hurt that the centralized-corporate set has credibly extended the holy grail of adoption as a Carrot. But as this thing gets bigger, we can't get away from the long shadows of the Club: the realities that come with the centralized-corporate vision for the future. And here is where Zurrer miscalculates, causing him to misinterpret the opinions that he is observing among the crypto-native population. After describing the different facets of the centralized-corporate perspective, Zurrer writes:
"I would strongly encourage everyone to remain open-minded about the innovation that CBDCs and corporate currencies will bring."
"As we move into 2021, users and entrepreneurs will continue to face the dilemma of what economic superhighway they want to build on, crypto-native or centralized-corporate. The infrastructure between these super-highways will be interesting areas of opportunity."
If only this were true.
It is impossible to understand the motives and actions of a particular party without examining the end game that party has in mind. And in this case, the desired end game for the centralized-corporate perspective has been made abundantly clear on many occasions. Adherents to this paradigm, and those they must cooperate with like governments, banks and other power brokers, have no wish or even willingness to coexist with any form of crypto-nativism. Part and parcel with the achievement of their goals is the destruction of the crypto-native way of life.
Consider KYC as an example. I cannot recall ever hearing a crypto-native make the case that an exchange shouldn't be allowed to require identification, if that is how they choose to offer their service. It certainly makes fraud more difficult, decreases the likelihood of other shenanigans, and increases the real and perceived surety of a trading platform within certain metrics.
But from the centralized-corporate perspective, these gains are not enough. They still feel unsafe and, perhaps more crucially, at a disadvantage, in a world where others are able to choose to give their business to a non-KYC exchange instead. People might commit crimes! People might not pay all of their taxes! Oh my! And sure enough, if you ask representatives of the banks, governments and even many crypto people of the centralized-corporate stripe, they ultimately believe that every exchange should be required to perform KYC. Indeed, their allies have already succeeded in outlawing non-KYC exchanges in some jurisdictions.
This is not an accident or collision – it is by design. And so it is down the line. In nearly every facet of cryptocurrency from engineering to governance to public policy, we find that the success of the centralized-corporate vision necessarily entails the defeat and dissolution of the crypto-native community. There is no coexistence on offer. There may still be "Bitcoin" under such a system, but there would be no legal way to buy, sell, hold or move it without using a "trusted" intermediary that knows who you are. That isn't Bitcoin anymore, and doesn't represent a compromise, but rather an unmitigated defeat. In the business world this would be dubbed a hostile takeover, not a collaboration.
This is why it is not accurate to suggest that crypto-natives are not open-minded about collaboration and new concepts. I think that we (for I count myself among the crypto-natives) are very open-minded and committed to listening to the needs and wants of people different from us, and to putting in the hard work to accommodate them as best as possible. One of the most successful exchanges, Coinbase, was built on these principles, and has done well.
Many in the community have observed and experienced, however, that the lion's share of people in the centralized-corporate camp are not open-minded in the same way, or at all. In fact, while they may tolerate us for the time being in order to meet certain goals, the contempt many actually feel about the crypto-native portion of the cryptosphere is often palpable and at times tangible. We know that they want our way of doing things gone, and this reality is underscored in nearly every move from that side of the aisle. So how would they have us proceed to our doom... in the spirit of cooperation?
Impossible. The sad thing is, and I say this to adherents to the centralized-corporate outlook, it doesn't have to be this way. Most members of the crypto-native set couldn't care less if you want to build the most perfect, super-safe ecosystem for use by normies, complete with fully centralized and reversible blockchain, quadruple identification KYC, and an explanation required for transactions over $1000. Have at it. Many in the crypto-native community will even help you build it, and you will do great with it. True, most crypto-natives won't use it. But you will have plenty of takers and a healthy share of the market action.
But leave us with our preferred solutions. You don't have to use them if they frighten you. And before you claim that all we really want is to commit untraceable crimes without accountability, please consider the following:
We understand that you prefer a centralized authority in whom you can place trust, and to whom you can make a case if things don't go the way you want. We understand, and most of us can appreciate, that having such a system helps you to feel safe in your financial reality. However, most of us prefer a ledger beyond the reach of human corruption, which we have learned is one of the most pervasive and insidious forces infecting the smiling population out there beyond our front doorsteps. Eliminating the potential for corrupt malfeasance makes US feel safer, regardless of whether or not you can understand or relate to this.
You prefer custodial solutions, so that you don't have to bother with the details of holding cryptocurrency safely, and again so that third parties can intercede in disputes and so that authorities can impose their will unilaterally. Most of us prefer holding our own keys, that no one can revoke for any reason whatsoever. This also makes US feel safer, since we know that the value we have stored will remain available to us, even if we become unpopular with powerful people or governments. This even at the risk that we might lose the keys ourselves.
You prefer to trade cryptocurrency out in the open, with identification out on the table, which is fine. But you also insist that we must do so as well, and that is not fine. Many of us prefer to trade where we are not known to anybody, in order that our chances of becoming a target for predators is diminished and so that our personal financial privacy is protected. Again, this makes US feel safer, whether or not you understand this or relate to this.
Fundamentally, the salient point from where I stand is this: I have my own calculus for risk vs. potential rewards in life, and I am so far satisfied with my decisions and their outcomes. I neither ask nor require others to do my thinking for me, and to determine that some situation is too dangerous, or some investment too risky, for me to choose. Again, you may never understand this. But regardless of your understanding, you ultimately have no ethical right or basis to try and deprive me of my self-determination just to secure your position of control and help your adherents feel safer.
There is no nuance here – this should all be very clear. Asking us to be open-minded about you taking these things away from us for The Greater Good (a.k.a for your own comfort) is not reasonable. This remains true no matter how many of you there are or how much power you have accumulated.
I agree with Zurrer that maximalism isn't the right approach to cryptocurrency. I like choices - the more the better - and I have often been at loggerheads with maximalists of all varieties. In my view, there is room enough for people with all manner of different viewpoints and preferences in this world, and in the cryptocurrency industry. But if we're being fair, the worst maximalism does not come from overzealous Bitcoiners. The most dangerous and toxic maximalism IS the centralized-corporate vision for the future. It is incorrect and unfair to imply that people taking a defensive stance towards this announced, overt, and existential threat are not being open-minded enough, regardless of whether or not you agree with them.
Time will tell which outlook prevails. The centralized-corporate set has a lot of money, influence, power and, very often, laws and regulations on their side. The odds, frankly, favor their success. But the crypto-native community does have one thing going for it. We have proven the ability to build things that are hard to break, hard to track and hard to shut down. This, and the reality that many of us are very, very stubborn. In short, good luck with those goals.
Will 2021 bring the more advanced rupture Zurrer describes? Perhaps. It certainly seems inevitable. Might there be opportunities in this mess? Perhaps. But let's at least be clear on the players involved, what their motives are, and whether or not they are speaking and acting in good faith. Doing so will make this whole process less wasteful, less painful, and help the history books of the future to be more accurate.