June 10, 2022
TGIF! This morning we have a quick decentralization explainer and then we fly off to Austin.
📝 Let us know if you're ever pitched on a scammy-sounding crypto project that's new and weird: [email protected].
- 🚨 Situational awareness: 8.6% inflation.
This newsletter was edited by Pete Gannon and is 1,106 words, a 4-minute read.
💿 1 big thing: Decentralization explained
If you're a millennial, Gen X'er or Boomer, odds are that if you stream music now, the service is not the first one you used. Who goes back far enough to remember sites like Grooveshark, Yahoo Music and Pandora? (Yes, Pandora is still around...)
- If you've ever jumped ship to a new streaming service, you've probably experienced this: vaguely remembering some band you once listened to on the prior site but you've completely lost track of since.
That is the problem of centralization, Brady writes.
Why it matters: Decentralization shifts control from service providers to users. It's a completely different way of looking at how the internet works, though, so it can be tough to conceptualize.
Breaking it down: Imagine if, every time you favorited a song or a band or even hit play, that data went into a database that you control. In that world, your streaming site of choice would only have access to that data as long as you permitted it.
- If some other streaming site came along with a better deal (say, lower prices, better playlists, dinners out with Taylor Swift) you could grant them access to all your past data.
- That way, you wouldn't lose track of any of your favorite music. And the new service would have the data they needed to give you the best possible experience from day one.
- Services like Spotify and Apple Music lock users in by holding onto all that data. If you switched, you'd lose your listening history.
Is there a decentralized music service? Not one that has access to the big acts, but Audius is probably the best known. It has lots of rising artists.
Yes, decentralization also relates to Twitter: The most fraught story in all of technology very much has a decentralization angle.
- Maybe you hadn't heard 🙃, but Elon Musk is trying to buy Twitter (well, sort of). Some people have wondered if he would decentralize the site.
- Users feel manipulated by how Twitter decides what to show them. If it were decentralized, lots of different companies could create different Twitter experiences (such as images only, news only or even sorted by mood).
- Crypto's boy billionaire, Sam Bankman-Fried, CEO of the exchange FTX, wrote a giant thread about it in April.
"Would this be good for Twitter's bottom line? I think so," Bankman-Fried wrote, "Would this democratize social media, make the finances transparent, and remove single point of failure moderation? Yup."
Be smart: Bitcoin and Ethereum already work this way. Whichever piece of software you use (Ledger, Exodus, Trust, Metamask, etc., etc., etc.) can only spend your crypto if you give it access to your private key. You can use several if you want.
🛒 2. Charted: 64% of retailers integrating crypto
Retailers are gearing up to accept crypto.
- That's according to a fresh report from Deloitte. They surveyed over 2,000 executives in retail organizations, and 65% of respondents said that their company either has already enabled crypto payments or should do so within a year, Brady writes.
By the numbers: Other findings include:
- 64% said they saw significant customer interest in paying with crypto.
- 85% said they believed crypto payments would be ubiquitous within five years.
- 83% said enabling stablecoins was a high priority, at least.
What they're saying: “This survey shows that merchants view acceptance of digital currencies — driven by consumer acceptance and demand — as key to driving business, and those that are slow to adopt run the risk of falling significantly behind,” said Zachary Aron, principal, Deloitte Consulting LLP.
💭 Our thought bubble: Very surprising, honestly.
💡3. Crypto leaders stirred by bear market
Leaders of the crypto industry, whether discussing roiling markets or the future of [name anything], encouraged enthusiasts and skeptics alike to see the value of crypto as tech, Crystal reports from Austin.
Driving the news: Thousands flocked to the city as Digital Currency Group subsidiary CoinDesk kicked off their crypto conference yesterday.
State of play: "I'm going to keep it real, the next 12 months from a macro economy perspective is going to be really tough," Christine Moy, head of digital assets at Apollo Global Management, said during a panel on market making, custody and other institutional demands. "It's not a crypto thing. It's a global markets thing."
- "If we have a small or maybe not-so-small bear market on our hands, a lot of [institutions] will delay their decision," Evgeny Gaevoy, CEO of market maker Wintermute Trading, added.
- "Back in 2018, a lot of potential institutions who were ready to go into the space decided it's canceled. It'll happen again now, probably," he said.
The intrigue: But what if crypto was not necessarily one giant homogenous asset class, but tech?
- "Digital assets are a new technology like an ETF, " Jeff Dorman, CIO at digital assets investment firm Arca, said during a panel discussing market turmoil.
- "A token is a conduit, representative of something else," Dorman explained. "Think about what we're talking about. We talk about crypto or digital assets like it's one thing."
- But there's bitcoin, which has no intrinsic value, asset-backed stablecoins, Dorman said, rattling off others: DeFi, CeFi, NFTs, gaming.
- "You could argue that most digital assets are recession-proof. There’s member loyalty," he added. "Target gift points don’t go down on recession."
Context: An ETF is a vehicle used to express an investment idea, one that can track an index of stocks, bonds or any asset class (just not spot bitcoin). It is also considered tech, an improved wrapper to the mutual fund that enables greater trading flexibility and efficiency.
💭 Crystal's thought bubble: If the token is merely a wrapper to express an idea, then "crypto" as a whole should not be blamed for any one singular disaster story. That blame falls on the makers of said wrapper whose idea did not work the way they planned.
🏃 4. Catch up quick
🦉 PWC reports that 38% of traditional hedge funds have invested in cryptocurrency, up more than 50% from the prior year. (TechCrunch)
🐵 Our long national nightmare is over: Entertainer Seth Green got his stolen Bored Ape back (after buying it again, for more money). (Buzzfeed)
🙅♀️ More trouble for Do Kwon: A court ruled the SEC investigation into his firm (not related to the luna collapse) can proceed. (Decrypt)
🤯 Citadel Securities — whose CEO once called crypto a "jihadist call" against the dollar — is looking to set up a digital asset exchange. (CoinDesk)
🥣 5. Culture hash: No wallet for you
One of bitcoin's core ideas was this: a way to store value (money, basically) on the internet without needing help from anyone else. With a bit of software, the idea went, a person could manage value stored on a public database (bitcoin) all on their own, Brady writes.
- If someone else helped, that person would be a custodian. All the traditional money held on the internet (which is most of the value online, period) is held by some kind of custodian.
Driving the news: Lithuania is moving against such software wallets, according to reports, following the European parliament's move to require personally identifying information tied to every cryptocurrency transaction.
- Of note: That measure didn't include person-to-person transactions.
Flashback: In yesterday's newsletter we wrote about how the U.S. Department of Justice is arguing for pushing harder globally to crack down on crypto transactions that don't identify the parties.
- Now, look again at the first panel above.
📺 If you have time this weekend: Here is an eye-popping YouTube documentary about a doozy of a crypto hustle. —C & B