So the long anticipated ICO freeze is coming techcrunch.com/2017/12/12/sec… is a good example of what's here now, and what's to come. I have three thoughts on this phenomena and how it's going to shape the markets as we go forwards into the regulated portion of the blockchain's future.
The first thing is that the smart money has always known the regulators were coming. reddit.com/r/Bitcoin/comm… Obama made it clear nearly two years ago. Look at the length of the Reddit thread: people knew. The President told us the way this was going to go. Don't act surprised.
The second thing is that the regulators have an *amazing* array of tools at their disposal because people have been fleecing the public for centuries. Law evolves. Securities law, insider trading, anti money laundering etc. "Token" isn't a legal category so law gets to define it!
The third thing: now that the regulators are in motion, they aren't going to stop moving. They'll keep going until they've created a world pretty much like the one we have. They are the forces of the status quo: not of *evil* but of stasis. BTC represents nearly violent change.
We now enter the special kind of hell reserved for innovators that must negotiate with The Great Leviathan. The old order wants many things, some good, some evil. But it holds all the cards that the innovators don't, and that's 95% of the economy and all the power. Mice and dinos
The internet goes through the napster years, then a winter, then the bittorrent years, then a winter, then Netflix and Spotify. That equilibrium holds. DRM in some areas, open formats in others, a sort of messy middle ground detent between future and past forms: a new balance.
So let's examine the Full Vision around BTC. The economy goes 100% dark. Government can't tax. Welfare collapses, the military collapses, property rights define society, and the nerds inherit the earth. In this scenario we have 299 million new enemies, some with nuclear weapons.
So that's not happening. Instead, we co-opt forces. Big Tech starts selling braindamaged blockchain-lite. Banking flirts with it all. A lot of traders make a lot of money. The lawyers warm. Some of the trade people go hmm. That's a power base. Not much of one but we have friends.
And $500bn is a lot of money. It's the kind of money that can buy things like lobbyists and maybe fund some election campaigns. It's enough to be a sector, an industry with a voice and political influence. We start to buy our way into the negotiations of the real powers.
What do we offer at those tables? Well, here's how you get a seat at those tables: you solve a problem everybody wants solved, and that nobody else can solve. Supply chain financing is a really good fit for that problem. So is provenance of goods. So are remittance payments.
But the great grandaddy of horrible problems blockchain can solve is terrorist and criminal financing. You ID people before you let them on the blockchain, and then you have a totally transparent payment map of the entire society. That's what The Powers want with blockchain.
AH! You say, but BTC is anon, and zcash can blind transactions in any system with a gateway. Yep, you bet, right on. So there's the battle lines for the next five years: zeroprivacy vs. zcash. Use and abuse of zksnarks. Authoritarian vs. libertarian, all on very similar tech base
If we were smart, right about now, somebody would put $100m in a bucket and start buying influence using DC lobbying firms, and whoever does that job at the UN, particularly the ITU. Those are the fights we have to win not to wind up as dead as Napster and The Pirate Bay by 2020.
I would say "getting Napstered" but most people who're BTC/ETH rich are *too young to have used Napster*. I can't even make an analogy they remember, because they haven't lost a great technology to regulation within living memory. Trust me: by 40 you'll know the feeling!
Now, let's talk about Too Big To Fail. Dotcom bubble peaked around 10 trillion of value, 20x the BTC bubble. Consumer spending online wasn't enough to support a bubble of that size. BTC *has* to get industrial uses in supply chain to survive: it has to become a trade instrument.
And I don't mean this daffy consumer spending B2C or darkweb shit. I mean people have to be buying and selling oil and aeroplanes for BTC. You say "but price volatility" and I say "I KNOW!" Because if nobody's selling anything for BTC except dollars? Big trouble. Let me explain.
Right now BTC is a currency. The *enormous* sell off of dollars to buy BTC is a currency bubble. It's not shares in a company: companies make things. BTC is the national currency of The Future, and people are shorting the Present to buy the FutureCoin. They're shorting status quo
But The Future shares a geography with The Present. The governments *own* The Present, and you can't just open The Future right in the middle of their turf without a dialogue. If America wasn't turning into a failed state, this massive Dollar Short wouldn't be remotely possible.
But a lot of people with a lot of money are performing a great hedge against a dollar price collapse brought on by political factors - you can imagine what a Trump impeachment followed by open insurrection in the South would do to bitcoin prices, can't you? Well, so can they. But
And the but is, right now, nothing is for sale in BTC other than other currencies, and a few share-like instruments in companies that aren't actually doing any real trade yet. We have a huge slab of unhedged political risk tied up in our FutureCoin holdings. This is very unstable
If America's governance recovers from the strain Trump has put on it then the Machinery of State kicks in, trims BTC down to something it can manage (probably with KYC regulations) and you get a safe Present/Future mix, 80%/20% or maybe a bit less. Life goes on: no revolution!
If things stay harsh, however, there isn't enough Will in Team Present to rein in Team Future. And this, my dearest friends, is where the shit truly hits the fan. Because Team Future don't have a plan. They have *brutal* tactics, but no sense of what world they are building.
The Libertarian dream has precisely zero chance of working. The simplest argument against it is that an unprepared and heavily indoctrinated population will simply refuse to play ball. Monopoly regulation and environmental law are worse theoretical problems. It's not ready to run
Of course, electoral democracy has also broken down - target advertising house-by-house has made money so terribly, terribly good at buying elections that even the Russians could spend a dime and buy a whole passel of trouble in America. So we've got Broken Present, and No Future
Under these circumstances, no wonder the music is getting good again. I recommend some St. Vincent tidal.com/video/81220825 or maybe the awesome to get some flavor of how this is playing out inside of our wider culture. Watch the music: it's where it lives.
Interlude over, let's get down to business. What to do? Well, let me propose a philosophy you might want to master: PROUT. Prout is a batshit Indian alternative to Capitalism from the 1960s en.wikipedia.org/wiki/Progressi… the goal is a society without waste, including of human potential.
Now I am not recommending PROUT. It's old, it hasn't seen much in the way of updates, and it's socialist in some very unhelpful ways. But there's the seed of an idea there: blockchains *could* enable a near-zero-waste society. What's that worth? 10% of GDP? 25% of GDP? #BigNumber
A very low waste society is a fascinating place: everything has a price and an owner. In that sense, Libertarian-like. Efficient. On the other hand, we admit market failures need to be fixed by non-market mechanisms. And *everything* improves as you reduce waste: waste is entropy
The Sea Container is said to have put 7% on global GDP just by putting things in metal boxes to move them around. Tell me, as you look around the world, there isn't at least that much slack waiting to be taken out of the system. It's *filled* with unpriced waste you can't buy.
Now, there are probably four or five other Big Plays out there: banking the unbanked, global identity w. crypto to protect your biometrics, microtransactions, currencies backed by natural resources, and C2C versions of fintech normally used for businesses (i.e. hedging a flight.)
You put all this stuff together, in an age of increasing and accelerating global change, and you break down some dumb structure around health, education, social care (i.e. medical records portability, transparent service pricing in hospitals) and the blockchain is indispensable.
So I wrote a piece at $100 eth medium.com/humanizing-the… and this argument is now roughly 10 times as true. At $500bn, we have twice the cash pile that Apple has. We could, in theory, finance @elonmusk's Mars shot twenty times over and still be left with more cash than Apple. Yes!
I'm doing my part here. mattereum.com @mattereum is my bid to get the necessary legal frameworks in place to make direct control of physical property using the blockchain recognized in 150+ countries. I want to break the door open to the material world, so we can fix it
But what I'm really saying here is this: at $500bn of assets, the crypto community is a real new global force, with phenomenal technical skills. To secure our place at the table, and our ability to negotiate with the SEC etc. we better be solving some real global problems.
Because if a year from now we're going to see the crypto space at $1tn of assets, it's going to have to be like Apple: used by a billion people every day, and loved by most of them. Otherwise, it really will have been a bubble, and the wealth will drain away. Build like hell!
It's going to need *massive* investments in public facing apps that solve real problems - things that really show people they are living in a better future - to justify these valuations. It's going to require proof that we *are* the future, not just carpetbagging imitators.
What legitimizes our claim that society needs us, and that The Present Police should leave us alone to build the future is the power and validity of our future vision. We need a bigger, better vision of the Bitcoin Future if we are going to hold together the ship against pressure
Ethereum has a ton of the pieces of that puzzle: smart contracts give us the reach to really interact with the real world. But we aren't going to get to houses and cars on the blockchain without some real effort to find social utility in addition to the straight financial play.
Anyway, these are my thoughts. I'm trying to frame the zone of aspirations, the things we should be fighting for as we go forwards into 2018 - the year that the blockchain is recognized as a global power, and has to learn to act like one. Godspeed you maniacs, and all success!
medium.com/humanizing-the… here's the tweetstorm on the half trillion dollar crypto currency pool, now as a medium post - my 2018 "year in preview" piece on the crypto ecosystem.
here's a technical appendix to this tweet storm that explores governance, algorithmic security and monetary policy issues.
