Repoast from r/cc
tl;dr I think this is one of the best things I’ve ever written, and it is the result of a huge amount of research. It’s less than 2000 words, please just give it a go.
First, let’s identify the participants in this conflict:
The Idealists: The crypto builders driven by idealistic vision and talent, who are building out scalable micro-economies whose defining characteristics are full accountability, transparency and verifiability.
They want to build a world where even the most powerful network participants, the biggest and richest organisations on the planet, are constrained by rules that are fair, that are unbreakable due to cryptographic guarantees, and that can be verified by anyone to be functioning as intended. A massive improvement on the current system. More democratic, more resistant to corruption and collusion, and not just better but provably better.
The Charlatans: Money focussed parasitic grifters who latch on to the technological narratives of crypto and seek to enrich themselves. Their “job” is essentially to provide a credible narrative to retail that draws on the real advances being made, while not actually intending to make a valuable contribution to the space beyond lining their own pockets. Their effect is to massively muddy the waters about what is being built, what it can do, and who is building it.
The Institutions: The big end of town. The guys with their hands on all the levers, who have always been “too big to fail” and who have so much power and control that they can literally stop the game and move their chips around when it looks like they are about to lose.
They have a huge vested interest in maintaining the status quo, and immense resources of money, media and enforcement at their back. They will not take a transition to an opt-in, verifiable, disintermediated global economy lying down. The promises of fairness and accountability provided by crypto are anathema to their endless goal of wielding more and more power.
Now, say you’re the Institutions, and you have witnessed the explosive growth of crypto, both in terms of the fundamental technological advances as well as the speculative penny stock casino built on top of it. Every penny that moves into decentralised economies moves out of your immediate control, and what was once millions of dollars is now billions, and looks on course to be trillions in the near future. What do you do? I will outline a two step process of how they are fighting their battle. Step 1 is well underway, Step 2 is being built as we speak.
Step 1 is you want to hobble the Idealists as much as possible. While you can’t shut down the technology in one stroke, and indeed, you don’t want to, as many of the developments coming out of crypto have revolutionary applications for your own businesses, you want as few people as possible building in the “idealists” camp. The people trying to build fair systems are the enemy, when you profit from an unfair system, and you want as few people recruited into that as possible.
You do this from a wide range of angles. On one front, you restrict their access to traditional banking services, making it very difficult for Web3 native companies to interface with regular banks. Nic Carter has a fantastic article laying out the many, many ways that they are doing this:
https://www.piratewires.com/p/crypto-choke-point
On top of this, you create a regulatory environment that is deliberately designed around a lack of clarity. Many Web3 native companies talk about how they’ve tried to approach the SEC with the question “How do we play by the rules?” only to be turned away, followed by the SEC crowing about how “All they need to do is play by the rules”. This uncertainty, along with seemingly random enforcement actions (that often target the most credible firms in the space rather than the most egregious scammers) creates a very difficult environment for crypto firms that want to be good to get anything done.
I have seen this expressed as a sign that the government doesn’t know what it’s doing. On the contrary, I think this is their absolutely intentional goal. To keep crypto developers on shaky ground, to slow development, to slow recruitment into the Idealists camp, and to generally hobble the industry to buy time for Step 2, which I will describe below. Another way to hobble the industry is to undermine it as an investment vehicle. I wrote earlier
https://www.reddit.com/r/CryptoCurrency/comments/10or6kz/how_they_are_killing_crypto_without_anyone/
about how many promising early stage products are no longer open to retail. What would have been ICOs in 2017, or airdrops in 2020, are now “insiders only” projects who receive funding from VCs and select individuals, with no investment opportunity open to me or you at all. Maybe we’ll be allowed to invest in a year or two at 50x the current price, maybe not, who knows. The effect either way is that high information retail investors simply aren’t allowed to profit from learning about exciting projects at the early stages. Meanwhile the dogcoin carnival is open to everyone. It’s a flagrant waste of money, it’s not a threat to any vested interests. So much for “consumer protection”.
The final way in which pressure is applied is through media and reporting. You want to guarantee that the average person’s understanding of crypto is entirely based around what the Charlatan group is doing, with as little as possible attention going to the Idealists. Every scam, every rugpull, every bridge hack, every ape picture selling for $100,000, is a story you want to maximise. Go to r/technology and mention crypto and you will be treated a wall of derision, that is all framed in terms of the worst excesses and scams of the space. How many people there know what a zero knowledge proof is, or its implications? How many even understand the principles of verifiability? It’s not by accident. The more you maintain the perception that crypto is all charlatans, the more you prevent the Idealists from recruiting more technologically competent developers.
So to summarise, Step 1 of the institutional fight against crypto is:
Squeeze them out of access to tradfi.
Create a regulatory environment that makes it extremely difficult to be a “good guy”
Don’t let retail make too much money
Make sure that everyone outside the space is convinced it’s all a scam.
This, as I said, slows recruitment into the crypto Idealist camp, slows development, and buys you time. Time to build Step 2.
So what is Step 2? Step 2 is the institutions releasing their own version of Web3. In the coming years we will see massive projects built around some of the principles of crypto. With the entire media apparatus at its back, the public will be presented with a faster, more performant, more composable and cheaper economic apparatus that is based on Distributed Ledger Technology and smart contracts. Say farewell to the scams of old, bad, crypto, here’s a version of Web3 provided by the big, high reputation companies that you know and trust.
Flick through some of these:
https://www.vdigitalassetbroker.com/#ecosystem?s=true
https://www.jpmorgan.com/onyx/index
https://r3.com/
https://corda.net/
https://www.swift.com/news-events/news/connecting-digital-islands-paving-way-global-use-cbdcs-and-tokenised-assets
Institutional development of quasi-crypto products is steaming ahead. It’s worth noting here that many of these entities are actively fudding crypto in the media while building their own parallel solutions.
And I don’t think it’s going out on a limb here to predict that, when these products launch, all of the r/technology “skeptics” will suddenly disappear. “When crypto was a wild, open source community all it built was scams, now that the big players are involved it’s a different story. Crypto was a scam, but blockchain is the future.” I can see it now.
And when these massive products launch, with KYC, with full regulation, and with massive amounts of institutional liquidity, they will play off the perception that they are taking the Web3 dream forward. That rather than dying, crypto finally “went legit”.
But what will actually happen? They will still have their hands on all the levers. They will be able to devise the new system however they like, and do you think they will want 100% accountability? Do you think they will want maximum decentralisation and giving power back to regular people as network participants? Do you think they will want a ruleset that massively constrains the most powerful players, which are themselves? Do you think they will want a system where literally anyone can verify that they are playing by the rules?
Or do you think they will just release a faster, shinier version of the current system, that has been used with great effect over the last 50 years to funnel money from the average person into their own pockets?
And so it will be with great celebration and fanfare that crypto will “die”, while all the headlines are saying that it has succeeded, that it has been adopted, that it has finally gone global.
So what will happen to the Idealists? They will still exist, but with constant anti-competitive pressure they will be pushed to the sidelines. They will be treated as a humorous niche of nerds, the Linux enthusiasts of Web3, who are all mired in the ideological technical stuff, but nothing a “normal” person would be interested in. And like this the average person will never know what they lost out on, never know what real chance for fundamental change was squandered.
There’s a talk I saw about a year ago that I wish I could find. It was from a central banking executive with a Korean name and a perfect Oxbridge accent, and if anyone could find it I would be immensely grateful.
The talk was about 20 minutes long. In the first 10 minutes he talked about how terrible crypto was, with much laughter from the audience. In the following 10 minutes he described all the exciting new functionalities of CBDCs; Tokenised assets, smart contracts, guaranteed execution, atomic swaps. Literally all concepts that were born and developed in the crucible of open source crypto. That talk summed up the whole conflict. They will try and kill the dream, and then take credit for everything it invented.
It’s hard not to be cynical. It would feel disingenuous to finish up with an exhortation to “join the Idealists and we will win!” Because honestly, I don’t think we will. The amount you need to know to really see the fundamental world-changing value in disintermediated systems is too high, and many of the devs themselves who were previously in the idealist camp have already followed the glowing path of money across the bridge to the institutional side. The institutions are simply so much more powerful than the dreamers. But just because it’s a lost cause, doesn’t mean people shouldn’t know what’s going on. And it certainly doesn’t mean that they shouldn’t be mad about it.
