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Show Notes


Robot Voice: This episode of Coin Talk was taped Thursday, June 29th at 2:00 PM Eastern Standard Time. The Bitcoin Prize Index was $5,883.

Aaron Lammer: Welcome to Coin Talk. I’m here with my co-host, Jay Kang-

Jay Kang: Hello.

Aaron Lammer: And a very, very special guest, Gideon Lewis-Kraus, live here in the crypto cave.

G. Lewis-Kraus: Thank you guys so much for having me here.

Aaron Lammer: Gideon, what do you think about the crypto cave?

G. Lewis-Kraus: I love the crypto cave. I’m really impressed by it, actually.

Aaron Lammer: Thank you. Thank you.

Jay Kang: You’re our first full-time guest.

Aaron Lammer: Yeah, that’s true.

Jay Kang: Usually we have the guest sit on a stool in the corner.

Aaron Lammer: Yeah, you’re-

Jay Kang: So Adrian and Charlie Warzel were sitting in a [inaudible 00:01:51] stool in the corner. You’re our first full-time guest.

Aaron Lammer: You’ve been given a position of prominence here. I hope you feel honored.

G. Lewis-Kraus: Well, I appreciate the view of all the tools, because it makes me feel like this is a place of real, physical industry and mechanism.

Aaron Lammer: Yeah, either that or a place where we torture people to get their private keys.

Jay Kang: It’s a very manly space, I gotta say, Aaron.

Aaron Lammer: It’s to compensate. This room is like the poor man’s Lamborghini.

Jay Kang: There are two … Do you see two … There two … Every time I’m down here, I’m fascinated by the fact that you have two vicious looking crowbars hanging, and [crosstalk 00:02:24]-

Aaron Lammer: Well, I’ll say-

Jay Kang: What do you need two crowbars for?

Aaron Lammer: I’ll say this. What happens if your first crowbar breaks?

Jay Kang: Why do you have one crowbar?

Aaron Lammer: I’ve used that crowbar before?

Jay Kang: Really? Okay.

G. Lewis-Kraus: Well, one of them is pretty rusty, I think. So one of them is if you need a rusty crowbar.

Aaron Lammer: That’s because I’m always out there crowbarring in the rain.

Jay Kang: Oh, okay.

Aaron Lammer: Gideon, you wrote an article for Wired about Tezos. I’ve never actually been clear. Is that the correct pronunciation?

G. Lewis-Kraus: Some people say teezos. Some people say tayzos. Some people say tehzos. There’s no clear pronunciation.

Aaron Lammer: I remember … I can’t even remember … It was in the article, but where did the name Tezos come from?

G. Lewis-Kraus: Arthur Breitman, who is the technical-

Aaron Lammer: Does it use some sort of combining multiple different languages or something?

G. Lewis-Kraus: No. So Arthur Breitman, the technical founder … It’s a husband and wife couple, Arthur and Kathleen Breitman, and Arthur wrote a script to produce pronounceable two-syllable words in English that did not appear on the Internet.

Jay Kang: So he failed, because it’s tehzos, tayzos, or teezos.

Aaron Lammer: How can a made up word be in English?

G. Lewis-Kraus: No, well, pronounced [crosstalk 00:03:31].

Jay Kang: Not used in English.

Aaron Lammer: Pronounceable. Okay, yeah.

Jay Kang: Well, so that-

G. Lewis-Kraus: But, then, actually, it does turn out that there are some meanings in some languages [crosstalk 00:03:37].

Aaron Lammer: Well, the weird thing is that when I first got into crypto, I was always confused by Tezos and Trezor sounding … Both having a T and a Z, and I actually, I’ll admit, I originally thought that was one thing.

Jay Kang: Did you think they were both related to Trent Reznor?

G. Lewis-Kraus: I thought that, actually, every time I Saw it. Trezor.

Aaron Lammer: The NIN coin’s still waiting out there to happen.

Jay Kang: The NIN coin.

Aaron Lammer: So I want to get to Tezos and your story, but do you guys want to do a little news first?

Jay Kang: Yeah, let’s do it.

Aaron Lammer: Gideon, we were actually talking about that … What is it? The National Bureau-

G. Lewis-Kraus: Bureau of Economic Research.

Aaron Lammer: Economics report. Tell us the basics of what that report said.

G. Lewis-Kraus: There’s a economist at the business school at the University of Chicago, his last name is Budish, and he wrote this paper in collaboration with some other people that basically demonstrates through some relatively simple equations that if you look at the incentive mechanism that would stave off a 51% attack, that the transaction fees have to scale so high as the network grows, that essentially it would destroy Bitcoin as a means of exchange for smaller transactions.

Aaron Lammer: I mean, we’ve come back to it a lot of times on this show. It’s kind of incredible that the Satoshi elegant system works as well as it does. If you had told me this eight years ago, I would have been like, “It’ll hit some sort of roadblock. It’ll be something that people haven’t foreseen and it’ll destroy the whole system.” I don’t think the fact that it’s existed for, what, 10 or 11 years now, means that won’t happen, but we have passed many similar roadblocks along the way, where I was like, “This seems like a fatal problem.”

But I don’t know. It depends whether you think Satoshi has thought through things like this.

G. Lewis-Kraus: Yeah, but he … Okay, but then he also divides up the paper into two different motivations for a 51% attack. So the bulk of the paper is devoted to the economic incentive for a 51% attack, that you take control of 51% of the hash power, you from then on control which is the consensus chain for some number of blocks, and you can infinitely double spend in that period of time, and that’s the basis for the money that you could make.

Whereas he also then says, “One of the arguments that people have made is that it goes against anybody’s incentive to destroy the network because that would destroy the value that they hold on the network.” But he says, “At a certain point, if you take Bitcoin Maximalists at their word and believe that this is going to be the backbone of international banking or whatever, at that point, actually, there are people who would want to use a 51% attack not simply to steal a bunch of money, but to cripple the system.” And he was like, “So at that point, the incentives are totally different, because you’re no longer trying to calculate, ‘Are my transaction fees high enough that you’re always going to be incentivized to protect the system?’ It’s a whole different set of incentives that would lead you to want to just destroy the system.”

Aaron Lammer: Yeah, I mean, this is … We’re still due … Jay, do you want to do a close read of the white paper as our next book club?

Jay Kang: Yeah.

Aaron Lammer: I think we’re overdue, because I’m remembering this all from the white paper but hazily, but I do remember that all of the explanation of 51% attacks basically assume that 51% attacks are done by thieves, by people who are financially motivated, and I think you’re correct that if we reach possible Bitcoin Maximalist state, and let’s say the adversary stops being thieves and starts being the state itself, A, the resources are higher, and B, the game theory inputs are different, and you wouldn’t have really thought about that problem in advance. I haven’t even really thought about the state shutting down Bitcoin through a 51% attack rather than through throwing people in jail, which I think is most people’s baseline assumption of how Bit-

Jay Kang: Yeah, I hadn’t really thought about that, either, but I don’t understand why they wouldn’t … It seems like that’s the silver bullet that the state will always have.

Aaron Lammer: Yeah, it’s going to be like NATO and [inaudible 00:07:53] together to do a 51% attack.

Jay Kang: I don’t … At the point where they’re like, “Maybe we should kill this thing,” they can just pool their money together and be like, “Okay. It doesn’t exist anymore.”

G. Lewis-Kraus: Well the-

Aaron Lammer: Is it possible the state wouldn’t be able to get enough chips and computers through that? I mean, is there enough hardware on earth to buy out, to do it?

G. Lewis-Kraus: Well, but, I mean, if you’re talking about state actors, and we all know what a high percentage of miners are in China, like that … If China wanted to nationalize the ASIC production industry, sure, of course they could do that.

Aaron Lammer: Some would argue they already have.

G. Lewis-Kraus: Yeah.

Aaron Lammer: In terms of countries that would attempt a 51% attack on Bitcoin, who do you think the front riders are? China?

G. Lewis-Kraus: Yeah, I mean-

Aaron Lammer: But they’re destroying a lot of the wealth, because a lot of the money’s in China.

Jay Kang: I don’t think that any country right now is incentivized to destroy Bitcoin. The number one is probably Russia, because if they can actually create a competitor coin, and then they destroy Bitcoin, but I don’t [crosstalk 00:08:45]-

Aaron Lammer: Ooh, I like this idea.

Jay Kang: I don’t really see … Because there’s going to be like … They want the crypto ruble.

Aaron Lammer: It’s like a Putin and Vitalik conspiracy to crash Bitcoin.

Jay Kang: Well, no, because they actually are trying to create a nationalized cryptocurrency, so it does kind of make sense for them to destroy all the other cryptocurrencies, and then have all cryptocurrency enthusiasts kind of begrudgingly, maybe, use a crypto ruble or something like that. I think they’re probably number one.

I guess I just don’t really see the incentive for this, and I am actually curious. Does he list in the paper how much money this would cost right now to do a 51% attack?

G. Lewis-Kraus: There is an implication of that. I mean, of course, you have to assume all these different kinds of variables. I mean, like billions, and billions, and billions of dollars.

Aaron Lammer: Yeah, and it also assumes that you have all of the hardware and all of that. But it would be interesting to play out a scenario in which certain governments are pushing a 51% attack on the Bitcoin network, and other governments are protecting the Bitcoin network, potentially because their current … they have gone to a Bitcoin standard.

Jay Kang: Yeah, you just described an extremely boring Bitcoin movie.

Aaron Lammer: Yeah, I was just like [crosstalk 00:09:58] … Who do you think would be leading the 49% resistance? The Swiss would be the kind of country that would be protecting the Bitcoin network.

Jay Kang: I think they’re too neutral. I think that it would have to be a ragtag group of cipher punks.

Aaron Lammer: A Venezuela in resistance?

Jay Kang: They have no nation, but they just want to save Bitcoin because they believe in it, and they end up working for the state. It’s like Catch Me If You Can, the Leonardo DiCaprio movie where he’s a check forger. I think it would be like that.

Aaron Lammer: Well, you brought up, Jay, in our last episode, when we were interviewing Saif Ammus, you were like, “Do you really think it’s a good idea for the Winklevoss twins to have more than 1% of the world’s wealth?” And he was like, “Absolutely.” But the people who would truly be able to defend a state 51% attack would be like futile oligarchs of our future, like the Winklevoss twins.

Jay Kang: Oh, that’s true.

G. Lewis-Kraus: Well, I mean, but also they would need access … I mean, I think you would be talking about an energy oligarch, because they would need access to the massive amounts of energy they [crosstalk 00:10:59].

Aaron Lammer: Oh, interesting. Interesting.

Jay Kang: That’s true.

Aaron Lammer: Yeah, who’s got all the power? There are some countries that just have a lot of electricity-

Jay Kang: Iceland.

Aaron Lammer: And that’s going to become more and more pronounced as energy becomes environmental rather than oil-based.

G. Lewis-Kraus: But a part of the reason that so much hashing is in China, obviously, is they have overproduction of hydro, which means that there’s tons and tons of cheap energy available.

Aaron Lammer: This would be a fun board game to play, where we’re all trying to get electricity and miners.

Jay Kang: Yeah, I’m kind of into it. And you can do like the flag-

G. Lewis-Kraus: It would be one of those German board game [crosstalk 00:11:31]-

Jay Kang: You could do like a [crosstalk 00:11:32]-

Aaron Lammer: Yeah, it takes 11 hours to play and has 700 pieces, something like that. I’m attacking from Kamchatka with my [inaudible 00:11:42] two.

Jay Kang: I have started development on nuclear fusion. Will take 245 turns.

Aaron Lammer: Yeah, I think this is … I think we should just do this Kickstarter, guys. Kickstarter’s actually a good transition, because I remember, Gideon, that you wrote about a failed hardware Kickstarter.

G. Lewis-Kraus: I did, yeah.

Aaron Lammer: How long ago was that? Three or four years ago?

G. Lewis-Kraus: Yeah, three years ago.

Aaron Lammer: Three years ago.

G. Lewis-Kraus: I think that was spring of 2015.

Aaron Lammer: And there’s nothing that the ICO environment resembles to me more than a failed hardware Kickstarter.

G. Lewis-Kraus: Oh, I mean, that was on my mind the whole time that I was working on this. But the background of the Kickstarter story is that, actually, in that case, also, a couple, they weren’t married at the time-

Aaron Lammer: Just to pause, you guys. Doing a Kickstarter or an ICO with your wife? Easily one of my lowest life priorities. I would never do something like that.

G. Lewis-Kraus: Well, I actually think in both of those cases, some element of the frustration that the community experienced had to do with the fact that this was a romantic couple, because it just triggers so much weird familial stuff with people, and the Kickstarter, so this couple they were going to … They had invented this incredibly precise home espresso machine that was going to occupy this low market niche, and the thing worked. It wasn’t … They had actually built this. But then-

Aaron Lammer: Yeah, the challenge was mass producing it.

G. Lewis-Kraus: The challenge … Well, so, I mean, the funny thing about that story, which actually is sort of relevant to the Tezos thing, also, which is that because of the economics of production, if they had gotten 150 orders, they could have just made it in their garage, and if they had gotten 100,000 orders, they could have realized the economy of scale, and produced it in an economically viable way. But they basically had to deliver 2,000 of these things, and it was almost impossible, in a cost-effective way, to deliver 2,000 of these espresso machines. They tried really, really hard. But-

Aaron Lammer: Yeah, it’s kind of an issue in miners, also.

G. Lewis-Kraus: Yeah.

Aaron Lammer: But until mining became a huge industry, most of the early miners were pieces of shit.

G. Lewis-Kraus: But their community of people who had bought this, in part because of the weird liminal nature of what a Kickstarter donation is, where you don’t actually own a piece of company. It’s not like equity. They don’t owe you anything. So the community became convinced that there had to be some really elaborate conspiracy here that was keeping their coffee machines from them, and I do think that the fact that it was a husband and wife couple meant that there was this feeling like they were being shut out of the parental bedroom, and they were trying to peer in through the keyhole and see what was going on, when in reality, nothing nefarious was going on. They just couldn’t build this.

Aaron Lammer: And this is … As we’ve talked about ICOs on this show, this has been a consistent theme where I’ll ask Jay, “What percentage of these Altcoins are scams?” And Jay will say, “More than 95%.” And I’ll go, “Well, I see it more as 90%.” And then we’ll be like, “Well, the difference in those two figures depends on how you perceive some of these things that are colossal failures but potentially well-intentioned, or at least neutrally intentioned as projects.” Which is a good way to describe … I don’t think many people started Kickstarters as true scams, but many people who back Kickstarters got scammed.

What was the final outcome in that story? Did they ever deliver?

G. Lewis-Kraus: No, and then this other guy came in and bought their technology, or tried to buy their technology, but it didn’t ever really come to anything.

Jay Kang: Did you ever have a espresso that was made in their espresso machine?

G. Lewis-Kraus: I did, actually. It was-

Aaron Lammer: Was it good stuff?

G. Lewis-Kraus: It was really good. I mean, that’s the thing that was sad about this whole story, is they had this functional product. They just couldn’t scale it.

Jay Kang: But having a functional product puts them at least three tiers above all ICOs for me.

Aaron Lammer: Yeah, they were going to the ICO hall of fame for that.

Jay Kang: Yeah, exactly.

Aaron Lammer: For building but failing to scale-

Jay Kang: This is the most reputable, successful ICO in history. Hall of fame.

Aaron Lammer: I think that you just described, actually, what the closest similarity between the Kickstarter and the ICO is. The audience is in a similar position, where you’ve got their money. You’re supposed to deliver something and you may or may not actually be able to deliver it, and a lot of the people who are selling it, not necessarily people you would bank on to be able to deliver the thing that they set out to deliver.

So in the case of this, this is like a couple who had no real experience building hardware, right? In the case of Tezos, which I want you to give us the elevator description of the story, also people who didn’t have experience that would lead you to believe they were going to necessarily be able to execute a $200 million plus software project, although you could say the same thing about Vitalik, right?

G. Lewis-Kraus: Well, except that was only $18 million.

Jay Kang: And that already existed.

G. Lewis-Kraus: Well, it wasn’t finished, though.

Jay Kang: But it existed-ish.

G. Lewis-Kraus: Well, but Tezos did, too. I mean, I’m not sure that there’s that much of a difference here, like-

Jay Kang: In terms of where they were at that-

G. Lewis-Kraus: In terms of where they were. I’ll give kind of a top line summary of the whole thing, but then there are some interesting things to go into what makes this different from a Kickstarter. So Arthur and Kathleen Breitman. Arthur is French, gone to this very selective school in Paris, had studied math, and computer science, and economics. He was working as a higher frequency trader, Goldman Sachs. His now wife Kathleen, name McCaffrey, now Kathleen Breitman, they had met when she was still in college, and then they had started paying attention to Bitcoin relatively early, and dissecting what was wrong with it.

And one of the first things that Arthur had published under a pseudonym was about the flaws that he saw in Bitcoin in 2013, I think it was. Some of them are the common flaws that lots of people have diagnosed about energy usage and stuff like that, and also he thought, “Oh, well, we need something that could do a lot more than Bitcoin could do in a way that was describing what became smart contracts and Ethereum. But then the other thing was that he was like, “There’s no dispute resolution mechanism,” which means that … Satoshi had created this thing, had become kind of an absent god, and now there was a core development team, but it was this fundamentally conservative project because there was no way, internally, to change it.

That like there were software updates that then you could either accept or walk away from. So your only option was to vote by exit. Now, this has become kind of a standard talking point, especially after the Bitcoin hard fork or whatever, but when he first started talking about this, this wasn’t really … He’s right that this wasn’t really on anyone’s radar back then, just how to resolve these disputes in a democratic manner.

So he starts working on this thing that he ultimately calls Tezos. He publishes a white paper under the pseudonym L.M. Goodman, which was a snide reference to Leo McGrath Goodman, the Newsweek journalist who had found [inaudible 00:18:29] in the phone book.

Jay Kang: Gideon, this one of the things that … This is a total aside, but it was one of these things that I think your writing is good at with little details, but isn’t it the first time they went … that these two, the Breitmans, went on a date, that he took her to a narco-capitalism meeting?

G. Lewis-Kraus: Yeah.

Aaron Lammer: Under false pretense. She believed that she was going to a different event.

G. Lewis-Kraus: Yeah, that was when they met.

Jay Kang: I was going to say, that is the worst first date idea I’ve ever heard of in my life.

G. Lewis-Kraus: Hey, it worked out.

Aaron Lammer: That’s definitely the first scene in the crypto movie, though, is the guy being like, “Hey, you want to go to a meetup with me?” And then it’s just all dudes.

G. Lewis-Kraus: Well, they had never met. It was … They were set up by a mutual acquaintance.

Aaron Lammer: It’s so crazy to be like, “I’m interested in this woman. My first idea will be to take her to a crypto anarchist meetup.”

G. Lewis-Kraus: Well, no, because he had heard about her classical liberal beliefs, and e-mailed her to say, “Do you want to come to this meetup?” But he declined to tell her that it was, in fact, an anarcho-capitalist meetup, and then only revealed this to her when she comes in, and then she says, “She wouldn’t have come, but it was too late.”

Aaron Lammer: Do you think he did this serially? He would find women that he thought might have libertarian leanings, and then just be like, “Come to a classical liberal meetup?” Is there even such thing as a classical liberal meetup?

G. Lewis-Kraus: That’s what I think is so funny about it, is that … I mean, that’s what I think is so funny, is that there was this part of her that was like, “Oh, it’s completely normal to be asked on a blind date to a classical liberal meetup.”

Aaron Lammer: The only thing I can think of that would be worse is if you went to a Craft Homebrew Convention, that was your date. I think I would rather got to a narco-capitalist meeting than a bunch of home craft brewers. Anyway, I’m sorry. This is quite a diversion, but go ahead.

G. Lewis-Kraus: So he publishes this white paper, same listener of where Bitcoin had made its debut. Everybody ignores it. He then spends some time trying to sell it to corporate entities, but by his own admission, he wasn’t a very good salesman. He doesn’t have a ton of patience for people that he doesn’t think are all that smart, and so the whole thing stagnated for a little while, and he went to work at Google doing machine learning stuff. Then at some point in the late summer of 2016, he hears from this guy named Johann Gevers, who is a South-African expat now living in Switzerland. He has this digital payments company called Monetas.

They had met through one of these Laissez-faire cities that are funded by the sea setting people, and they-

Aaron Lammer: This is like a description of a person that I would just run away from. I mean, South-African living in Switzerland with a background … I’d be like, “No, don’t want to do business with this person.”

Jay Kang: You do a Bitcoin podcast, Aaron. I feel like that’s the next thing in that list there.

G. Lewis-Kraus: And so this guy had become one of the big evangelists for Blockchain-related FinTech Enterprises in Switzerland, and not just in Switzerland, but in the small canton of Zug near Zurich. See, and he had been part of the original Ethereum ICO. In January of 2014, this had raised $18 million, which has been enough to complete the project and launch the network. There have been a number of successful ones since then.

Aaron Lammer: At this point, trusting someone because they were or claim to be associated with the Ethereum Lodge, terrible idea. There must have been 10,000 people involved with the launch of Ethereum if we are to believe-

Jay Kang: Well, how how involved was he? This is a legitimate guy, though, I’m just saying.

Aaron Lammer: Yeah, you’ve actually looked into this person.

G. Lewis-Kraus: The question of his legitimacy becomes the big question. But he claims that the original Ethereum Foundation members were thinking about Singapore, and they were thinking about other … I think this was before Malta and Gibraltar were doing Blockchain stuff, but they were thinking about other flexible jurisdictions, and they had crashed on his floor, and he had introduced them to these lawyers at a law firm called MME, which is like the big ICO law firm, and that he had helped … At the very least, it seems like he helped broker the introductions initially.

Ultimately, Gevers says to the Breitmans, “You guys should do an ICO.” So then the question is, what exactly is an ICO? Especially given the Kickstarter framing.

Aaron Lammer: What year are we in right now?

G. Lewis-Kraus: This is summer/fall 2016. And one of the things that I think tends to get lost in a lot of these conversations is that there really are two different goals in an ICO. The analogy that I use in the piece is that it’s like you’re planning a theme park, and you’re raising money against future tokens to use the rides in order to build the theme park. So you’re publishing the blueprints of the theme park, and you’re saying, “I need money to build this, and in exchange for the money that you’re going to put into building this, you’re going to get tokens that work on the rides, and beyond that, it’s going to be a participatory, cooperative, decentralized theme park, where if you want to then come in here and put up your own ride, you can come in kind of like a second life way. Come in and just build, right?”

Aaron Lammer: And additionally, part of the claim is, “Those tokens will allow you to ride the rides, and this amusement park is going to be so awesome that everyone’s going to want to ride these rides, and your token will increase in value as a result.”

G. Lewis-Kraus: Well, okay. So nobody is going to say that, because the minute that you start telling people that there is an expectation of speculative return, then you get into securities territory. So everybody knows that there is some … possibly like the interest is overwhelmingly speculative, but because of the way that American securities all works, you have to play that part down. You have to say that this is not about making a return on your investment in the token. This is about being able to use these tokens down the line.

Aaron Lammer: So this will allow you to ride one ride, and [inaudible 00:24:20], there’s a decentralized exchanged in which you might be able to sell it, but hey, who knows?

G. Lewis-Kraus: Well, and … But also, and one of the things that’s slightly-

Jay Kang: What was that coughing noise you made?

Aaron Lammer: I was just saying that’s like there’s a wink-wink element which says, “While this is like a ticket to ride, it’s also a ticket ride where there’s an elaborate system for trading tickets to ride already in place.”

G. Lewis-Kraus: Well, and that’s not incidental, right? Because the thing is, you’re fundamentally selling something that does not have any value and may never actually have any value, depending on do these rides get built? Does anyone care about the rides once they’re built? So the only way that you’re going to establish a baseline value is because of speculation. So you actually need the speculators to essentially make the first sort of auction bid. You need somebody who believes it’s going to be worth something, and, of course, those people … You’re going to be running on speculative motivation, even if you’re, at the same time, disclaiming that for legal reasons.

Aaron Lammer: Additionally, as I understand it, when you take something like Ethereum, you’re selling tickets to ride, but people are buying well more tokens than they would ever have an appetite for roller coasters, so you at least … If you don’t believe that it’s going to speculatively be worth more, you at least believe that you will be able to exchange with other people those tokens.

Jay Kang: Yeah, it’s a-

Aaron Lammer: Because otherwise you’re signing up for a life of amusement parks.

Jay Kang: But that’s-

G. Lewis-Kraus: Well, no. Well, but that’s because you also fundamentally believe, especially with something like Ethereum, which is offering a decentralized world computer, you believe that there are going to be so many different kinds of rides available in this park that you never have to leave the park, that it’s going to become like a Truman Show of parks.

Aaron Lammer: Right, and Jay and I, if I went deep on roller coaster coin and Jay went on giant soda coin, I’m like, “Hey, we could swap. I could get my giant soda. You can ride the thing. Everyone wins.”

G. Lewis-Kraus: Right. Exactly. So there’s the premise that at the beginning, you’re always going to need to cash out of your tokens to pay your rent or whatever, but that down the line, these are going to … they’re going to be such big networks for their usage that you’re no longer going to have to do that.

Jay Kang: You pay rent coin.

G. Lewis-Kraus: So setting aside the question of speculation, and the need for speculation to establish an initial price interest, there are two different things that an ICO is doing that tend to get collapsed, and of course they’re related, but they are two fundamentally different things. One side is the sheer fundraising side, which is we need the money to build the amusement park. The other side of it is exactly what we’re describing in terms of building up the network effects of the economy, which is that we also need a lot of people who are going to use it, because the only way it will be valuable is if people are building applications that run on these tokens, and if there are enough people involved that you have a liquid market for their trading, which is going to give you priced ability, and all the other things that network effects and a currency bring you.

So it is simultaneously a fundraising project and a community formation project, because the thing about Bitcoin is, A, there was no fundraising necessary, because the thing was built, and B, the community developed organically over a period of now like 11, 10 years. So-

Aaron Lammer: And it was mined.

G. Lewis-Kraus: Right. Well, so, yeah.

Aaron Lammer: So people didn’t have to put in fiat in the first place. People were able to create the initial value through mining, which is not true in the case of Ethereum or Tezos, as far as I understand it.

G. Lewis-Kraus: Right. I mean, you probably could make a kind of abstract argument that the initial fiat investment is in the capital necessary to do the mining, which is in … Well, originally it was just general purpose CPUs, so that didn’t matter, but of course, you were paying for the electricity. So there is some kind of bedrock value.

Aaron Lammer: Well, I think economists would also argue that people figuring out how to mine it is a form of productivity.

G. Lewis-Kraus: Right, right. But the bottom line is that the community that arose around Bitcoin was bootstrapped, and it took a long time, and one of the ideas behind an ICO was you’re going to get the money to finish the network, and it’s going to come with this prebuilt-in community of users that are all the people who bought your tokens. So now that there are a million different coins that are all fighting it out, it is a way to make a strong move to establish a user community that cares about building things for the tokens. So that’s other half of it. It’s not just about the money. It’s also about building a net.

G. Lewis-Kraus: So there are these dual purposes, right? So they’re generating a community and the finances to build it. So then Switzerland comes in because for various reasons that we don’t need to go into right away, or maybe ever, Switzerland has a way where you can do this through a nonprofit foundation, when-

Aaron Lammer: Not surprising that there’s a Swiss loophole that makes it easy to do things that are financially frowned upon in other countries.

G. Lewis-Kraus: Right. So in Switzerland, these lawyers have come up with this idea where instead of buying these tokens that might never do anything, you’re actually donating the way that you would donate to a Kickstarter, and the money is going into a nonprofit foundation, and then the foundation is controlling how the funds get dispersed, which is going to provide investor protections. So this whole thing gets set up with Gevers as the president and founder of this Swiss foundation, which means that he has the financial and budgetary oversight over the way that the money gets spent, but Kathleen and Arthur Breitman are the ones who are still building this network that they’ve been working on, but, technically, they have no legal role with this foundation, which everybody thought this would be cleaner, it’s not going to look like a license for you guys to print money. You’re going to be separate from this.

But at the same time, the foundation isn’t necessarily going to be doing operational tasks. The foundation is going to be building the network. It’s going to be setting up the corporate entities and cutting the checks. So at the time, the Breitmans had set up this overview that said if we raise $5 million we’ll do this, and if we raise $10 million, we’ll do this, and their kind of stretch goal was $20 million. And then they joked that if they were going to raise more than $20 million, they were going to buy a major media property, or found a university, which later was used against them as evidence that of course they knew that they were going make a ton of money, but I think the whole thing was kind of tongue in cheek. I don’t-

Aaron Lammer: I mean, it’s also strange … it’s a strange environment that by a factor of 10, people are uncertain about how much money they’re raising. When people have raised money for startups, etc., they have some idea of what they’re raising it for. Like the idea that something-

G. Lewis-Kraus: Well, but not when Kickstarter was going on. I mean, if you want to use a Kickstarter as an analogy, you just had no idea. There’s-

Aaron Lammer: But people had to deliver it. For each person who backed the Kickstarter, they had to deliver one product, so it was scaled. I mean, it’s just … It’s strange to think a company that conceivably could have delivered a product for $10 million within rational thought also could take $200 million.

G. Lewis-Kraus: Well, so, yeah. And they claim that really as late as the late winter of 2016, early 2017, that they thought that they would be lucky if they raised $20 million. Now, in retrospect that looks totally disingenuous. I don’t think there’s any way to evaluate that claim now. I am tempted to believe it because this was before everything had gone insane.

Aaron Lammer: $10 and $20 million is actually a lot until people are raising $200 million.

G. Lewis-Kraus: Yeah, yeah. So the-

Aaron Lammer: I mean, Ethereum was $18 million-

G. Lewis-Kraus: 18 million.

Aaron Lammer: And that was considered a lot when it happened.

G. Lewis-Kraus: Exactly. But then in the meantime, while they’re setting up all the legal structures for this, the ICO market starts to take off, and there are all kinds of interesting reasons for this. So then this is where I more or less enter the story. In spring of 2017, a group of people get together and they found what they call the Crypto Valley Association in the canton of Zug, and the idea is we have developed this pioneering legal strategy that allows people to do this. It’s really hard to build these kinds of decentralized networks in other jurisdictions because they occupy this regulatory gray area, and right here, we have the expertise, and we have the wealth, and we have the regulatory flexibility to do it.

Aaron Lammer: And we’ve got a great name like the canton of Zug.

G. Lewis-Kraus: Zug, right. And also, Zug had been known … Zug had been the home of exiled commodities trader Mark Rich. It had been known as a place where post office box companies did creative things with their money. So I had seen this press release announcing the formation of the Crypto Valley, and I had thought, “Oh, this could be kind of a fun, weird little projected Bitcoin utopia in Switzerland.” So I had to be in Europe anyway, and I had pitched Wired on the idea of like I should go write about whoever is hanging out in the Crypto Valley.

I get there, and the first person I met was Gevers. I met a lot of other people, and then Gevers happened to tell me that Arthur Breitman was in town. He was telling me about Tezos, which at that point I hadn’t heard of, but he was anticipating was going to be the big ICO for all sorts of reasons. While I was there, Bancor raised $150 million, and at the end of that trip, was the June of 2017, about two weeks before the Tezos ICO, I went back to my editor, and I was like, “Look, there’s a lot of stuff going on there. We could probably write a funny little postcard from Zug right now, or we could wait until something happens here, and follow up on that.”

So we decided we were going to wait. So then Tezos raises $232 million in 13 days, becoming what was, to date … like, to that point, the biggest ICO in history. I mean, I had heard about it because I’d been in Zug, but then I started to notice that random people at backyard barbecues in Brooklyn had bought into the Tezos ICO, and I thought, “These people don’t know anything about cryptocurrency. Where did this marketing come from and how did this happen?”

So then, basically, the whole thing falls apart. So then the story ends up-

Jay Kang: Pretty quickly, right?

Aaron Lammer: Well, how did they get … What was the marketing that made it so effective?

G. Lewis-Kraus: I think the marketing was that … So they positioned themselves, and this gets a little granular, but they positioned themselves as the answer to the Dow hack. The Dow hack had threatened to undermine the whole system because of A, sloppy security, and B, the inability for the community to come together and figure out how to move forward, and that Tezos was going to be the last cryptocurrency because it would have these democratic procedures that would allow the community to come together and decide how it should be administered.

So it wasn’t just going to be like, “Okay, Satoshi is an absent god, so we’re all kind of paralyzed because we don’t know how to move forward.” Or, “We have this living, breathing god in the form of Vitalik, and he’s going to exercise executive fiat that’s going to determine the shape of this. So it’s going to be decentralized in name, but then there really is an executive presence behind it.”

The whole premise of Tezos was we’re going to get around this problem because it’s going to be something that the community can … There’s a voting mechanism for the community to decide how it works.

Aaron Lammer: And this is not a totally original idea. There’s … Decred is another.

G. Lewis-Kraus: Well, now it’s not a total-

Aaron Lammer: Okay. At the time it was-

G. Lewis-Kraus: Well, I mean, at the time … I mean, if you go back to the original white paper, it was really the first time people were talking about this, and then even at the ICO, this was a new thing, and lots of people kind of poo-pooed it and said, and still say, “There’s no reason to have governance on a protocol layer for various reasons.” But they were pitching themselves as first these things come in threes, and there was Friendster, and MySpace, and then Facebook, and in this case there was Bitcoin, and then Ethereum, and now there’s going to Tezos. That was kind of the … That wasn’t the explicit marketing. That was kind of the message behind it.

Aaron Lammer: Well, I mean, I thought you were going to say the flip side of that, of why this one, why then, is coming off of Ethereum, a much smaller raise. Everyone made a shit ton of money who bought in early, so there’s a bunch of that. A bunch of the money that’s coming in is not true fiat but people who’ve made a bunch of money by speculating on Bitcoin. So people are gambling with-

G. Lewis-Kraus: Unmarked-

Aaron Lammer: A lot of house money, and house money gambling has been very good to people at the time. I always kind of read it, and tell me if you disagree, that Tezos was a bit at the right place at the right time.

G. Lewis-Kraus: Oh, yeah. For sure. And, I mean, they would say the same thing. If they had had the ICO six months earlier, it’s entirely possible they only would have raised $20 million.

Aaron Lammer: I still don’t totally understand what Tezos is, though. I want to read the description from your article. “While the irony of preventing the fragmentation of cryptocurrencies by releasing a new one does not escape us, the second paper concluded, Tezos truly aims to be the last cryptocurrency.” So my frame of reference here is Ethereum and various what we refer to as matryoshka doll cryptocurrencies, which are … it’s a currency that you can make more currencies with. It’s a token for making more tokens.

So if I’m reading you correctly with regards to governance, this is an Ethereum-like project with a governance layer that’s slapped both on top of Tezos itself, and derivative tokens that would have been built the other rides in the amusement park, Big Gulp soda ink, [crosstalk 00:39:50] stand.

G. Lewis-Kraus: So they never placed a lot of emphasis on those derivative tokens, and in fact one of the things that remains unclear to me, exactly, is the relationship between what the derivative tokens would be and the fundamental underlying tokens.

Aaron Lammer: So there wasn’t like an ERC20 of Tezos.

G. Lewis-Kraus: No, they do have … That will be possible, but that’s not really their emphasis.

Aaron Lammer: So the whole thing could run just on Tezos. Okay.

G. Lewis-Kraus: Yeah. So, okay, here is the foundational myth as Arthur explained it, which I think is … It fell out of the piece because it was just a little bit too technical, and there was so much necessary detail. So Arthur said that he first began to lose faith in the evolutionary possibilities of Bitcoin over Zcash, where he was like, “Zcash is developed as a privacy preserving protocol that could easily have been integrated into Bitcoin.” And lots of people, Arthur included, thought that Bitcoin should have integrated Zcash. This was a big step forward. But there were also Bitcoin purists who fundamentally didn’t trust Zcash because it requires what’s called a trusted setup, which means that there was a moment in time in which a bunch of people had to collude to set the whole thing up. But at that point, forward, it was automated.

So Arthur thought it was a really big mistake that Bitcoin didn’t integrate Zcash on a protocol level, and the mistake was because there was no mechanism for people getting together to make that decision. So Arthur thought all of the Altcoins that they describe as this Cambrian explosion, that there are tons of different, interesting ideas that each one had tried to add to Bitcoin, but that there was no mechanism by which the good ideas could be kept and the bad ideas discarded via a democratic process.

Aaron Lammer: There’s a moment in the story, I would say maybe the most damning moment of the story, in which Breitman wife, what’s her name?

G. Lewis-Kraus: Kathleen.

Aaron Lammer: Kathleen says, “It’s just like tote bags.” And this has been a longstanding question we’ve had about ERC20 tokens, Tezos, whatever, which is, is the token guaranteed to actually do anything?

G. Lewis-Kraus: No.

Aaron Lammer: Because there’s this company in San Francisco, I can’t remember the name, that was selling a token based on the idea that they would do security audits, and the whole thing was built on the idea that the only way to get these security audits was to buy their token, and then they actually sold the token, and then they’re like, “Oh, some people wanted to get a security audit, so we just sold it to them in US dollars, and some of them paid in Bitcoin.” And it was like, “Oh, well, there’s not really a market for that anymore.”

I understand that she probably should not have said that, but is she accidentally revealing a bit of the truth there, that this tokens are potentially … could mean anything?

Jay Kang: They’re like souvenirs for-

Aaron Lammer: Yeah.

Jay Kang: Or if you … The context in which she said it was like, “If you give money to NPR, they’ll send you an umbrella,” or something like that, and that’s a gesture of appreciation.

G. Lewis-Kraus: Well, okay. But, so on a very basic level, this was just a mistake that she made in trying to explain what was essentially just a very complicated legal structure to ensure some degree of complicity with regular-

Aaron Lammer: And she didn’t say this to you. She said this to a Reuters reporter who originally wrote that in a story.

G. Lewis-Kraus: She said this to a Reuters reporter, yeah. Yeah. So on some level, it just reflects the fact that it’s kind of hard to describe the whole point of the foundation structure, but-

Aaron Lammer: Sure. It’s kind of hard to describe how tokens work, because even people who understand them, I don’t even put ourselves among them. There’s not a unified view on them. You … Yeah, okay. [crosstalk 00:43:36].

G. Lewis-Kraus: Right. Yeah, yeah. Well, I mean, the best view is just that it’s basically like an arcade token. The thing that I think reflects some deeper truth in the tote bag comment … I mean, I just think the tote bag comment was an ill-advised comment, and she didn’t have a better way of explaining it.

But the deeper truth that does exist there is that when you get the NPR tote bag or whatever, the New Yorker tote bag, there is some signaling function at that place, and it includes you as part of the visible tribe of people who give money to NPR, give money … that are New Yorker subscribers, or whatever, and that part of this is about the establishment of a tribal identity that has a certain view of what the future’s going to look like, and how money is going to figure into that future, and that the tote bag thing is … Some people are buying just as speculators. Some people are buying because they clearly, really, deeply understand the underlying technology, and think that they could build something on top of it.

Most people are buying it because they feel some kinship to the broader philosophy behind it, and this is their way of signaling membership in that community.

Jay Kang: Hmm. I don’t believe that.

Aaron Lammer: Do you believe that? I’ve never heard of a single person buying because of that.

Jay Kang: I think it is 99% speculators, 0.9% people who are like, “Maybe I can use this to build another coin,” and then 0.1% who might be not real either.

G. Lewis-Kraus: Well, okay, but, I mean, I’m not arguing for the proportions. Maybe those proportions are right. But especially if you spend time on Tezos Reddit, there are true believers here. I mean, look at the interview you did with Saifedean Ammous last week. Although he would loathe to think of himself this way, he is a fundamentally religious figure, and that is religious doctrine that he is preaching, and I think, when it comes to some of the … These other projects don’t have the same kind of religion, but there is something there that is about a collective belief in a future that could be different than the past.

Jay Kang: Let me make a counterpoint, though. I agree that almost everyone who’s investing deeply in cryptocurrency is ideological and has a religious belief.

Aaron Lammer: Really? I mean, I invested, and I had no ideological or religious belief.

Jay Kang: Well, at least early adopters.

G. Lewis-Kraus: Yeah, early-

Jay Kang: We’re talking about at the time of that.

G. Lewis-Kraus: We’re talking about the kind of people who read Tim May’s manifesto. The core people that have-

Jay Kang: People who haven’t touched a vegetable in a year. But my point was going to be, I think you can be both. You can be an ideological believer and a speculator.

G. Lewis-Kraus: Yeah, of course.

Jay Kang: And someone like Saifedean would say, I think, that in the case of Bitcoin … Saifedean hates shit coins, right? But in the case of Bitcoin, if you buy $1,000 worth of Bitcoin, you are buying that percentage of the overall supply of Bitcoin in the world. You are actually … You own a piece of Bitcoin. You may not have governance rights to it, but you … Actually, you do have a form of governance rights because you can buy and sell forks, but you’re owning it, whereas in the case of an ERC20 token, or an ICO, you’re buying into something that doesn’t have some clear supply relationship like that. You’re getting a little bit … It’s more like a tote bag. You’re signaling and you’re speculating, but what the thing is … One Bitcoin is not the same as one ERC20 token, and that-

G. Lewis-Kraus: Well, okay. Okay, so first of all, this is not an ERC20 token in the sense that it’s not just parasitic on somebody else’s underlying Blockchain. So it is its own Blockchain.

Jay Kang: Right, or an Ethereum token, let’s say.

G. Lewis-Kraus: Yeah, right. Second of all, okay, but you just betrayed one of the axiomatic beliefs of the Saifedean religion, which is that it only has value because of its scarcity, and as you guys discussed, this is the core tenant of Austrian economics, and it reflects a fundamental belief in economies as zero sum-

Jay Kang: The deflationary world.

G. Lewis-Kraus: Battle Royal-

Jay Kang: Mad Max.

G. Lewis-Kraus: There’s something really dark about that in the background. So the Breitmans were portrayed … When everything started to fall apart, and we haven’t even really talked about what happened-

Jay Kang: I feel like people would … If you’ve listened up to here, read the story for how it all fell apart, and suffice it to say, it all fell apart, and not in a code-based way, not in a security flaw, in a very human way.

G. Lewis-Kraus: It fell apart more or less because the person that they trusted, Gevers, to administer the funds, had very different ideas about organizational structure and what should be done with the funds, and there was a battle for control over all of this money, and in the meantime, all of their assets were in Bitcoin and ether. Those are rocketing up by Christmastime. There are lawsuits, there are death threats, and the foundation is sitting on a billion dollars.

Jay Kang: Yes, and has yet to produce anything with that billion dollars.

G. Lewis-Kraus: And no one has been paid and nothing has been built.

Jay Kang: Yeah.

Aaron Lammer: Just awesome.

G. Lewis-Kraus: So-

Jay Kang: Amazingly, one of the best business models might be to do a failed ICO that just gets you a bunch of ETH, and just sit on it.

G. Lewis-Kraus: Yeah. So when people started accusing them of securities fraud, one of the accusations was, “Well, you guys had an uncapped ICO, which … So you were just trawling for anybody who would put money into this, and in fact, this shows how fraudulent the whole thing was, because everybody knows that value comes from scarcity, and you guys weren’t … the fact that you weren’t capping it means that these were never going to have any value because there wasn’t going to be scarcity.”

Now, it’s a circular argument because you’re establishing, initially, that value only comes from scarcity, which is not necessarily true. I mean, that is a core belief of the Austrian economics side of things, but-

Aaron Lammer: Don’t make me get down the crowbar. We only allow Austrian school of economics here.

G. Lewis-Kraus: But in their case … So they felt like, “Okay, if we cap this, then what basically happens is the only people who get tokens are the people who are able, technically, or whatever, to get in on the scarce resource, and then there’s going to be a pop once it starts trading, and it’s going to be akin to the pop that happens on the first day of IPO, where essentially the banks are making sure that their institutional investors are going to see an immediate return, which the banks can do because they are in the position of [inaudible 00:49:57] in this case, and that is money that will not be seen by retail investors, and will not be seen by the company.”

And so the Breitmans, I think, legitimately did not want to have that kind of speculative pop, because they thought that that was unfair. So they wanted to have an uncapped ICO because they felt like we were going to issue as many of these as we can. We want to discourage speculation, and in the long run, we want people to find these valuable because they’re useful, not simply because they’re scarce.

Aaron Lammer: I mean, they failed in that respect. They failed as much as two people could possibly fail.

G. Lewis-Kraus: So far. I mean, they did just launch their … Or they’re in the process of launching their betanet. I mean, it might all actually, really happen, and it remains an open question.

Aaron Lammer: Interesting. So you believe that they could come back from something like this. When we got into crypto a year ago, if you had started typing ICO scam, Tezos would have auto-corrected from Google. It became synonymous with a project that people poured a ton of money into and produced nothing except hilarious if you didn’t put money in stories, and additionally, I think that there’s a certain schadenfreude here, which is anarcho-capitalists who believe that the market can solve anything being thwarted by the most basic of human conflicts and everything that happens that makes things not a pure market, like when you get into business with a South African Swiss [inaudible 00:51:33], it may not just play out as a frictionless system of energy bouncing around. Where are they at now?

G. Lewis-Kraus: Well, I think they’re-

Jay Kang: Rich?

G. Lewis-Kraus: They’re not rich, though. I mean, they ultimately, by the terms of their deal, once the network is operational for three months, the foundation can buy their Delaware core, called DLS, for 8.5% of the original proceeds. So once the network is launched and functional for some period of time, yeah, they’ll get $20 million, and they’ll have 10% of the Genesis block of the tokens, which then could be worth far more than that. But could they still make this happen? Yeah.

They still have … One of the ironies that I point to in this piece is that the Blockchain, which for so many people is supposed to kind of replace trust, in this particular case, because the situation got so screwed up, their community of token holders came together to form this zealous tribe of supporters, that then in fact helped influence the outcome, even without recourse to a Blockchain, like with good old-fashioned human organizing.

Aaron Lammer: This happens in a lot of … This happened in Bitconnect, everything. It almost becomes a worthwhile project simply because it’s built a passionate audience, because that passionate-

Jay Kang: Aaron is talking himself into $SUMO again right now.

Aaron Lammer: Well, but this is the psychology the people who hold these tokens that go down in flames, is if this is our low moment, we got a bunch of people here. If we could just build this back, we could at least get our money out, etc. This seems like a dangerous form of thinking, though.

G. Lewis-Kraus: Well, but, in this case, because they have this common enemy, and they could be like this guy took advantage of them, and he was supported by this whole community of people in Zug that wanted to prop the whole thing up because they didn’t want bad publicity, because they had this common enemy, they came together as this community to support it, and now they’re more zealous than ever.

Aaron Lammer: A thing we’ve talked about on the show before is that it’s hard to figure out why anyone’s actually going to build these projects if they’re rich. If you make a ton of money on an ICO, and it sounds like, actually, they didn’t, but some of these ICOs are structured so day one, the founders are fuck you rich, why actually build something? What incentivizes people that-

G. Lewis-Kraus: Well, in this case, I genuinely do not believe that they were incentivized by money here. I really think … Especially Arthur, to maybe a slightly lesser extent, Kathleen, because she’s the less technical member of the team and the couple, this was genuinely a labor of love, that they wanted to create something that they thought would do some variety of good in the world, that-

Jay Kang: Really? I mean, do they mean that? Or-

G. Lewis-Kraus: Oh, yeah. Oh, for sure. For sure.

Jay Kang: Okay, but we hear the same-

Aaron Lammer: Austrian school. Good.

Jay Kang: We hear similar things from every tech company. I mean, so what level of sincerity compared to, let’s say, your average Silicon Valley startup that is figuring out how … building spikes so that the homeless can’t sleep on the sidewalks, and then saying, “We’re trying to help the world.”

Aaron Lammer: Well, if you consider exposing people to free markets and stateless banks as good, then that’s good, right?

G. Lewis-Kraus: Yeah, I mean, on the spectrum of the … I think they’re much closer to the genuinely, ambitiously well-intended, maybe naïve side of things, than the app for your on-demand dry cleaning, or whatever. I mean, obviously, any of these companies in Silicon Valley, to raise the money, you have to believe in it. You have to bring yourself to the point that you think that you’re doing something to change the world. And so-

Jay Kang: Okay, but I don’t think that that’s true of ICOs, though, because this is something Aaron and I talked about last week, which is that … I don’t doubt your reporting at all. I think that if you tell me that these people are well-intentioned, then I believe that they’re well-intentioned. The reason why the initial response is to be skeptical is because I think that part of what Ethereum did was that it made it so that it’s so easy to print coins and so easy to do ICOs, that in fact there is no emotional labor or anything to get one, and we just find a whole bunch of them, that there is no good intention. There’s actually no intention, period. It’s just, “Hey, maybe they’ll open this door.”

G. Lewis-Kraus: Right. But also, 98% of human activity in any field at any given time is utter bullshit, so I-

Aaron Lammer: Mozart sucks.

G. Lewis-Kraus: I mean, because you guys like to talk about art as an analogy on the show, and so, yeah, most gallery art being produced in Chelsea is bad, and you can … But what is the … Where does it get you to question someone’s motives? That everyone is kind of working in the system, and to some extent, maybe some people believe more in it than other people do, but also, I don’t actually even necessarily think that the purity of your belief reflects the value of your contribution.

There are people who would hole up in a cave, just painting their whole lives, outside of any commercial system, and are they producing … And maybe they’re producing terrible work. And then there are other people where they have been really successful in the gallery system, and their work sells for a lot of money, and they make genuinely good work. So I don’t think that all of these things necessarily hang together, whereas for a lot of the true believers here, they do believe that, that there’s justice in the world.

I mean, when you listen to Saifedean talk, and he says, “The difference between good music and bad music is how much time someone put into this,” you think, “Oh, that’s really sweet that he has this kind of fantasy that contributions can be quantified that way, and that this is clearly somebody who deeply believes in a certain kind … like the justice of a certain kind of system.”

Aaron Lammer: So if we remove intentions, and I agree, intentions are hard. If a scammer and a well-intentioned failure end up in the same point, it makes it difficult to say, “Oh, intentions are everything.” In some ways it becomes results. So in thinking about what went wrong here, and I think at this point we still have to classify Tezos in the what went wrong camp.

You could just put your head down and be an evangelist for Bitcoin, or build things that help expand Bitcoin, or you can be like, “I believe in this so much that I think my ideas should come into place.” And you put yourself in a position where you become a messiah figure, and I think that Vitalik is a messiah figure, and if this had succeeded and had been one of the big three, Arthur Breitman would have become a messiah. A, I wonder whether these people really should become messiahs, like personally, whether it’s like these are the right people to take on that kind of a thing. And I also wonder if we can really say they’re fully well-intentioned if their intentions are to do something that changes the world, but it’s their thing that changes the world.

G. Lewis-Kraus: Well, okay. So that gets-

Aaron Lammer: That’s a Silicon Valley ideology.

G. Lewis-Kraus: No, but that gets exactly to the core of this whole thing, which is … It is the use of centralized structures built around charismatic individuals that are supposed to develop things that ultimately become totally decentralized, participatory networks that are not based on the initial institutional viability, the initial concentration of power ability in one person, or the cult of personality surrounding that person. So there’s a fundamental irony here.

Aaron Lammer: They’re post-human, in a way.

G. Lewis-Kraus: Yeah, yeah, for sure, because-

Aaron Lammer: Like Saifedean talks about the Blockchain extending for hundreds of years, beyond a person’s lifetime.

G. Lewis-Kraus: Of course. The idea is that humans are fallible, and we’re going to get past human fallibility, get past the problem that humans aren’t reliable and aren’t trustworthy, and we’re going to outsource all those failings to this thing that is mathematically verifiable. But you don’t have to look very far in American history to look for cases where extremely strong, centralized fiat was put into … and fiat, meaning decision making, rather than fiat, currency-

Aaron Lammer: Don’t make me get the crowbar down.

G. Lewis-Kraus: Is put into the service of broad equality, right? I mean, so you talk about messiah, you have literally William Jennings Bryan giving his Cross of Gold speech, marking him as one of the great American populist heroes, and that was a campaign for monetary experimentation. So one of the things that I think gets lost in so much of the conversation around Bitcoin and all kinds of stuff now is that this is just the most recent version of a long history of monetary experimentation, which often, historically, is more associated with the left than with the right, although that’s been different for Bitcoin.

In a sense, they did get hoisted on their own [inaudible 01:00:54] here, like they ran into one of the fundamental problems with getting something decentralized going via a centralized apparatus. It’s not like that centralization doesn’t wither away.

Aaron Lammer: Well, I think that’s absolutely true, and also it seems like they ran up against some of the limitations of people.

G. Lewis-Kraus: Yeah. Oh, yeah.

Aaron Lammer: That we keep imagining these frictionless market systems in which people can’t intervene or whatever, and they only assume this slight bit of human trust, but the minute you give the guy the only keys to the bank or whatever, that’s a human thing in there, and I feel like crypto imagines itself to be post-human, but the realities of doing anything in the world right now are that you have to interface with people, and I don’t know. I guess I’m curious about projects that would sort of assume that, rather than assume, “Oh, people won’t play into it.”

G. Lewis-Kraus: I mean, I think one of the most exquisite ironies about this is that there are people who looked at it as, “Oh, look, this was all about just trusting the machines, and ha, ha, ha, the one guy they had to trust fucked them.” Whereas the thing about them is that they’re not absolutists, in that sense. They weren’t just building the thing that worked because of math. They were acknowledging that human politics are going to be involved in the administration of all these things, and you had to incorporate that, and you had to make allowances for human coordination, and that was going to be their differentiating factor is the recognition of the importance of the humans at the end, and they were the ones who then got screwed because they trusted the wrong guy.

Aaron Lammer: If this was a novel, I’d be like, “Eh, it’s hitting the nail on the head a little bit hard here. Did they have to get screwed over by the Swiss South African bank guy?” Yes, they did. They did.

Well, thank you so much for doing this, Gideon.

G. Lewis-Kraus: Thank you, guys.

Aaron Lammer: Where can people find the story?

G. Lewis-Kraus: Oh, it’s on the cover of Wired this month, and it’s on their homepage.

Aaron Lammer: And where can people find you?

G. Lewis-Kraus: Oh, I’m at gideonlk.com. I’m not on Twitter.

Aaron Lammer: Are you going to continue to write about Blockchain and crypto related stuff, or do you need a five-year vacation at this point? This story took a lot out of you. You’re grayer than the last time I saw you before you were working on this. Yeah, and you were personally threatened during this thing.

G. Lewis-Kraus: I was, yeah, at the final scene of the story, I was threatened.

Aaron Lammer: Okay, well, if you disappear mysteriously, I’m going to investigate, okay? Will you come back on next time you get something on this copy?

G. Lewis-Kraus: Yeah, any time. I’ll come back on whenever you want.

Aaron Lammer: Awesome. Thanks.

G. Lewis-Kraus: All right, thanks, guys.

Robot Voice: This episode of Coin Talk was taped Thursday, June 29th, at 2:00 PM Eastern Standard Time. The Bitcoin price index was $5,883.