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Episode #19: Alt Spring on the Campus Quad

Jay & Aaron reawaken from hibernation to ask “Is this really alt season?”

COIN TALK is produced in partnership with Medium and hosted by Aaron Lammer and Jay Caspian Kang. Press “Listen to the story” above to play the episode or read the transcript below. (You can also subscribe on Apple Podcasts, download the MP3, or email us at


  • George Soros makes the dictator case for Bitcoin
  • Telegram retracts their ICO
  • What happens when companies HODL and prices crash
  • James Surowiecki’s MIT Technology Review piece “Bitcoin would be a calamity, not an economy


Jay: How are you?

Aaron: I’m feeling a little spring in my step.

Jay: The weather is not cooperating with us, but there is a strange thing that happened today when I looked at CoinMarketCap and all the top coins, which is that, I saw not only green, but some double digit numbers and I cannot remember the last time I saw that.

Aaron: Some random alts to FOMO out on. Just floating to the top of those Bittrex lists.

Jay: I think I was like, “Holy shit, maybe I should buy this thing, like, it’s going up.”

Aaron: Well, if you felt that way, think about how I felt. Our editor posed, the question o”Is it alt season?” I don’t really know if there’ll ever be an alt season or if alt season is even a relevant concept at this juncture, but I’ll tell you how this day felt, Jay. I think you may recognize this. Now, was your schooling in the New England area?

Jay: The first few years of my life, yes, until fifth grade, yes, and then college-

Aaron: College is what I’m talking about. This is a college phenomenon.

Jay: Yes.

Aaron: Where it’s about this time of year, it’s like early April, and there’s one kind of hot day and there’s like the big, grassy hill and everyone is out and there’s dudes in basketball jerseys and girls in short shorts and everyone’s vibing and it’s like, spring is here, and it’s totally mistaken. It’s all gonna go away shortly, but for that one day, you can enjoy it.

Jay: it is the best day if you went to … I believe you and I both went to a New England small college.

Aaron: That’s correct.

Jay: I went to one in Maine. I believe you went to one in central Connecticut. It is really the best day of the year.

Aaron: That’s correct.

Jay: You wear shorts, you wear flip flops. It’s about maybe 52 degrees, but it feels like it’s 80. Girls are wearing shorts. Guys are showing off weirdly pale bodies, but, you know, everybody is happy. I think that back in college, all my best days in college might have been that first day where you could bust out shorts and kinda walk around like a human being.

Aaron: Everyone is getting along with each other. All these people who’ve been like viciously sniping against each other during the cold winter are suddenly all on the same page, and that’s how I felt when I saw yesterday that Ubiq was up 40%. I was like, “Yeah, I’m riding on team Ubiq with Doug Kim again!” You know? Even though I had done my Ubiq a long time ago. But, I was just kinda like, I was just kinda happy for everyone.

Jay: Yeah, it is true. It’s the first real actual win that I think we’ve had in three months, or four months maybe, right? It just feels-

Aaron: All my old favorites, VIA coin. Remember VIA coin? I’m sentimental about these coins from early in our days.

Jay: You and I both owned VIA coin at some point and I believe-

Aaron: Oh, yeah.

Jay: Correct me if I’m wrong. It was about $1.00 back then.

Aaron: Bought at about $1.70, yeah.

Jay: And we were always debating whether or not we should dump at $1.20 and since then, VIA coin has gone up and down and up and down and up and down and it seems funny that you and I were kind of arguing over such small percentage changes.

Aaron: The funny thing is that I don’t even remember where any of these coins … I would have to look at historical data to know where they were. I just remember the old times we had together.

Jay: Yeah.

Aaron: It’s not about where we are now and where we were then. I think we’re probably up from then.

Jay: Oh, yeah. I mean, when we got in, Bitcoin was about 2900–3500, so, we’re at least twice that.

Aaron: Yeah. I think a lot of those coins are to Bitcoin, but what else is new.

Jay: So, I have a question. I mean, our editor asked a question and you posed it once again, which is, is it alt season? I think that we can define at least one alt season during the past year.

Aaron: I got a pair of mesh basketball shorts on here, some soccer sandals.

Jay: The last alt season seemed to be when Bitcoin was around 15–17,000 and all these stupid alts were mooning and this is about the time when you and I both signed off for somewhere between 4–10 separate exchanges to buy shit coins, is when you started your disastrous and lengthy, but I will say, very committed relationship with Sumokoin.

Aaron: Do you remember when I had the plan to just collect them all? I was just gonna buy every coin on Bittrex and probably, if I had succeeded in that, I would’ve been like, what if I get at least one of every coin on Cryptopia? That would be an amazing brag to be like, “I have every coin that’s ever come out.”

Jay: When was that? That was back in November, right?

Aaron: Yes.

Jay: So, we are now in April, so it’s been five months. I hesitate to say that it’s alt season right now because all these things are so racked, right? So, at some point, if we were going to continue this analogy that we’re using, if there was a deep freeze and half of the college population died of hypothermia and then one day, it got up to 33 degrees, is that really spring or are we still in some sort of winter and there’s this sort of delusional day? I think that’s the question that everybody is asking right now.

Jay: I’m sure that, at least with what the market is showing, is that people are really pouring back into this stuff and they believe it’s real, but do you believe this is real?

Aaron: I think we’re probably still in no man’s land here, at least until a few of these days string together. Until that happens, I don’t know what’s gonna happen. But, I do feel a glimmering of that because, just like the people would be buying alts at all right now, considering the sort of existential questions that have come up on this show about alts, I think it’s just a strong sign that people are willing to wile out again.

Jay: Okay, here’s my other question. Who is buying these alts? NEO-

Aaron: Ledger Status. He’s buying alts. We had him on last episode.

Jay: Neo is up 12% today, right? I can understand why some people in China or in Asia would buy NEO. EOS is up 45% today, right?

Aaron: Yep.

Jay: But, every single coin is up. I mean, OMG is up, Bitcoin Gold is up, Steam is up, Wanchain is actually down, but Dcred is up. All of our old favorites, like when you and I had every single alt in the world between the two of us, every single one of those is up. Some of these, I’m pretty sure in the past six months or so, have been abandoned. Is there just money flowing in randomly or do you think that this is some sort of other effect where everything kinda goes up at once? Dentacoin is up 2%. I cannot imagine a person who would buy Dentacoin.

Aaron: I think that the alt market is full of crafty speculators now. People are sniffing around and they’re just … I mean, look, it’s worked in these cases. EOS , it just seems like people are willing to engage in the same behaviors that they have previously engaged in the alt market. People have not wised up.

Jay: Well, if it is all crafty speculators now, if it is people whose trading abilities are somewhere around the level of Ledger, who we had on last time, who is a friend of ours, then I would argue that maybe this is somewhat, to use a poker analogy, like what happened when poker kinda came back, but then everyone realized that, there’s no dumb money left anymore.

Aaron: Yeah.

Jay: And that it’s just good players playing against one another. That sort of market is difficult to sustain because everyone is playing the exact same game.

Aaron: I’ll just say, I’ll buy that. That sounds relevant to me.

Jay: Talking about alts and ICOs, just a little bit of news that I think we should talk about, which is that the biggest ICO, which was the Telegram … TON is the Telegram Open Network and the Gram is the name of the currency. If people remember, telegram is the messaging app that’s supposed to be encrypted. It’s debatable whether it is or not, and they launched an ICO to try and build sort of like a layer on top of their messaging network in which people could use it almost as Venmo, but also it’s open marketplace is everything like that, right?

Jay: They had an announcement today that they are most likely not gonna do the public part of their ICO and that the only people who are going to get the gram token are the only people who are able to invest in this, are the sort of friends and family first round of people, which I think, rumor was that it included everyone from rich people here in the United States to Roman Abramovich, who is the oligarch who owns The Chelsea Football Club. What do you think happened here?

Aaron: Well, so, okay. It’s basically open to accredited investors, which is, we’ve talked about before, is people who have, make over $200,000.00 a year or something like that. What’s the accredited investor line? Do you remember?

Jay: Yeah, I think like $250,000.00 a year, but I don’t think that was even true of Telegram. I think that, basically, Telegram, it was … People actually had no idea how to invest and one thing that happened was that there were all these scams going on, people being like, “I have a back door to get the gram token, just give me half of Bitcoin or something like that, and I’ll exchange it for you,” and a lot of people, for reasons that I cannot even begin to fathom because it seems so stupid, but a lot of people were taken in by this sort of stuff.

Jay: What Telegram basically said was the reason why we did the ICO was to raise money and we raised enough money to build the Telegram Open Network, which again, is sort of ecosystem of shops and currency. But, here’s the thing that I can’t quite get. Maybe you can elucidate it for me, which is that, if they’re building the Telegram Open Network, right, and it is powered by the gram token, what type of economy are they building where nine people now hold all the gram tokens and nobody else can get them until the market opens? They have basically created an oligarchy within the Telegram Open Network. Have they not? Nobody else can buy it.

Aaron: Few things caught my eye in this story is maybe the story behind the story or the story that will keep repeating itself, which is, one of the reasons that they had to do it, to sell this way and not do the traditional ICO, is that the product doesn’t yet exist, so it falls under various securities regulation differently and this is unusual. It’s unusual to be raising this much money for something that is not yet functional. This is a unique element of the crypto economy, the sort of cart before the horse kind of thinking.

Jay: It’s not even necessarily that it doesn’t exist yet, it’s that when you read the white paper, which we did on an earlier episode, they can’t really even articulate what it is.

Aaron: It’s just some shit that they’re gonna build, which is, it’ll probably work.

Jay: Do you like Telegram? Great. Okay, now trust us. We’re gonna build something really cool involving crypto on top of Telegram, and that was about it.

Aaron: But, here’s the second thing that caught my eye, which is, basically, I think what Telegram is saying is, “If we can just get the money, people just wanna give us all the money, that would be better for us than having an openly-traded token and a gazillion owners who are shifting and speculating and selling and want us to do various things that will affect the price of the coin. If you just got Roman Abramovich and a bunch of other rich people who are just like, fuck it, do whatever will make money in the long run or the short run or whatever, that’s a better situation for the people behind it.”

Aaron: So, in some ways, a true ICO is kind of like a step down from Silicon Valley style, I’m just gonna give you a bunch of cash. Especially when it’s not like, oh, there’s gonna be a board or something like that behind it that represents the interest of that cash. If they could really just take the money, not distribute the tokens, that’s the best case scenario for them, right?

Jay: Yeah. I think I agree with you for them. I guess it is just weird for a thing that involves this amount of money, right? Which is like, I think they raised 1.2 billion dollars or something like that, or they say … the SEC filing says that they raised 1.7 billion dollars. Where the messaging can change immediately from, we wanna create an open network with this gram token that is used to fund what a lot of people think crypto should be, which is this sort of decentralized marketplace, right, where you don’t have to use fiat currency and you can trade cryptos and you can sorta bank money that way, to now just being like, actually, we’re not even gonna make that token for a while. It’s just weird.

Aaron: It’s a crypto thing. Or, if we could just fund it however, it’s a whatever kinda thing.

Jay: It’d be like, guys, you knew that all we wanna do is raise 1.7 billion dollars and we did that, so what’s the problem? You know?

Aaron: I guess it’s still a block chain product, but as we’ve talked about lots of times, possibly confusingly, as these block chain products drift from being either like, truly decentralized applications or from being operated through like a token system like this, I kinda fail to even understand exactly what category that product ultimately will fall in. Is it the app category? Is it a cryptocurrency category? Is it some kind of a new thing that doesn’t exist yet?

Jay: Yeah, I agree. I have no idea. This just made it more confusing. So, on another sort of market place type idea, Bloomberg wrote about this and I find it actually very interesting, kind of has to do also with what we talked about with Maria Bustillos before in terms of content creation and it’s something that’s called Dtube and there’s also a version called Steemit, but the basic idea is, have there been decentralized YouTube, can there be decentralized Facebook, can there be a decentralized Twitter?

Jay: The Bloomberg article is about a guy that had a ton of YouTube followers. I think what he did mostly is body build and eat competitively, which is half of YouTube. The other half is people yelling about social justice warriors. So, this guy had a big following and then he moved everything to DTube, which is sort of like a micro tipping version of YouTube that is supposed to be decentralized. I don’t know if it is yet or not, but the idea is that when this thing is up and running that if you as a viewer like what is going on, you can sort of, in the same way that you can do it on Twitch and other places, you can sort of like, micro tip that way. What do you think about this?

Aaron: Clearly we’re hitting some sort of an end of the road for things like YouTube and all of the problems that happen when you create that kind of an environment, I think.

Jay: Yeah.

Aaron: I can understand why these content creators would wanna go on to some sort of a totally decentralized, anonymous tipping system, but I don’t really understand why a bunch of viewers are gonna leave YouTube and go to DTube.

Jay: I guess if you have a following and it’s functionally the same thing that maybe they would follow you that way and people like PewDiePie and all these big YouTubers, they all use micro tipping systems anyway. This would just be an integrated one. Let me read you the six newest videos on DTube, because I think you and I had the same assumption that when we hit the newest videos that have been uploaded, it would all be beheading videos.

Jay: It’s actually not. The first one is about the Toronto housing market crash, which makes no sense. The second is the Woody Allen film, Sleeper. The third seems to be some sort of retelling of the birth of Saint Mary the virgin mother of God. In fact, as I scroll down, the only one that looks even somewhat questionable, but certainly would be okay on YouTube, is an ad for Brahma beer, in which boobs are inflated and deflated, which I think was around the internet five years ago.

Jay: There’s really nothing right now that seems particularly disturbing to me. With pushing this as not a need for block chain based or decentralized systems, it is really just that people are really, really frustrated with the current centralized systems. Not because they’re necessarily centralized, because they were okay with them two years ago, but because they’re having problems that have come up where the people feel like the central powers are acting against them, right?

Aaron: If I were to extrapolate in a generally somewhat non-linear and confused manner about this, and this is mostly things that I think are happening on the internet, more so than things I’m actually involved with on the internet, but the whole Twitch TV phenomenon, people watching each other playing video games, and the idea that that whole platform is not only for streaming video game playing, but it sort of is the culture of that. It’s the culture.

Aaron: I always find it the most effective to think of crypto not as a monetary system, but as a culture. It makes a lot of sense that if crypto expands as a culture, it builds its own institutions like YouTube, Twitter, et cetera. I kind of buy that at some point, most of the people that are deep into this stuff will be using its native chat, its native video upload system. I can kind of believe in that future.

Jay: Yeah, me too, actually. I don’t really think that the way that YouTube wants YouTube to go is particularly interesting to me, at least, and I do think that the people who have the power, they can take Alex Jones off of YouTube, but if Alex Jones goes to DTube, then everyone who really is into InfoWars is just gonna go to DTube. All the people who like watching Alex Jones because they like to make fun of him will go to DTube. It’s not like they’re gonna stop watching it just because it’s off YouTube.

Jay: They’ll certainly lose some people, but it could be as we find in a lot of ways with these patch around sort of pod casts or people who live off these massive amounts of micro tips that it might end up being more lucrative for them. I actually am like pretty bullish on all of this stuff. I mean, the DTube page, it just looks like YouTube. There’s really not that much difference to it. The only thing I’ll say is that at first, because you have to pay with cryptocurrencies, I believe, and the whole system is run on cryptocurrencies, that it’ll really only attract people who are willing to take that second step to buy a cryptocurrency and then participate in this.

Jay: That’s probably gonna be a lot of racists, all white guys at first. But, most of the internet starts out with a bunch of-

Aaron: A lot of things start with racists on the internet. I just think that the people it attracts, I’m not even judging them, they’re gonna be a pain in the ass. If that’s your core content offering, that may have problems, I think.

Jay: If you are envisioning DTube as being Cambridge Analytica, Trump fake news, nipples that have migrated over from Instagram and a lot of beheading videos and then a lot of alt right stuff, I think you’re probably right. I think right now, they probably are just scrubbing all that stuff off their page. That’s why it’s so clean right now, but that’s what it’s gonna be for a while.

Jay: Different things will move in and there will be more communities. It’s similar to what we see with Reddit, where a lot of Reddit is just porn and at the beginning it had really, really reprehensible sub Reddits like revenge porn or creep shots or jail bait. All these things that Adrian Chen wrote about. And now it’s like-

Aaron: No-coiner Adrian Chen.

Jay: No-coiner Adrian Chen wrote about. And now, it’s more or less, it’s not great, but you know, they’re trying to make it clean and there are people who use it for interesting conversations, but it’s still a little bit of what it was when it started. Don’t you think that’s kinda the future for these types of decentralized platforms?

Aaron: I think so. I think that’s the bull case, probably.

Jay: That is the bull case, yeah.

Aaron: That’s as good as it could go. Let’s not even discuss how bad it could go.

Jay: It could go so bad. Alright, so, do you wanna talk about George Soros?

Aaron: Yeah, tell us what happened with George Soros.

Jay: This is the most strange story possible, but a lot of outlets started reporting earlier this week that George Soros, who back in January said that Bitcoin is a bubble, this was at Davos when he said that. He said that now, he might be into Bitcoin, but it’s actually impossible to figure out if he is or not. The closest thing we have to sourcing on this is a guy who works at the Soros family trust, said that he wants to trade coins personally, which I don’t know if it should be said yes or no.

Jay: For me, it’s like, okay, if I do this podcast and I say, alright, I’m back into alt season and I’m gonna buy a ton of Zero X, does that mean Chain Smith and Vice News or like the New York Times are super into crypto now? It seems like it was a little bit of a stretch of sourcing, but then at the same time, I kind of believe that some of the places that reported are pretty reputable, so I imagine that he probably is interested in it.

Aaron: Okay, so he said this publicly on January 25th. He said, “As long as you have dictatorships on the rise, you will have a different ending because the rulers in those countries will turn to Bitcoin to build the nest egg abroad.”

Jay: Yep.

Aaron: First of all, that’s total rich guy talk. I’m not saying I’m keeping a secret escape hatch in Bitcoin, but if I was gonna do that, here’s how I would do it. I don’t know, it seems like he’s caught a little Bitcoin imagination fever.

Jay: Here’s the one thing that I would say is most sort of telling is that the Soros family trust is the third biggest stakeholder in, which is basically just like owning Bitcoin at this point. They’ve completely converted to block chain based technology and their own ICO, and so, there is evidence there. Being the third biggest stakeholder in Overstock is really like a pretty large investment.

Aaron: I have a side note on this topic also. I’m always trying to tell people that conspiracy theory is a terrible place to go with your life. The Illuminati is not real, but when you have George Soros talking about a massive Bitcoin investment and he’s the big owner of Overstock, it does kinda feel like the world is some kind of a weird virtual reality simulation.

Jay: Yeah, especially when his reasoning is that hey, dictators are going to start cashing out and building nest eggs in cryptocurrency, that’s why I’ve gotta be there, you know? What does George Soros know?

Aaron: How long ’til now to the very first George Soros paid protestors in Bitcoin story do you predict?

Jay: Okay, when is the next protest, because that’s when it’ll be. The best conspiracy theories will be if Bitcoin actually does go on a bull run after George Soros buys it, you know?

Aaron: Hey, it probably will.

Jay: Yeah, I mean, look. George Soros, it seems like he’s pretty bullish on it and he says-

Aaron: Okay, followup question. How much do you think of the current climate for Bitcoin is being set by the worldwide rise in authoritarianism?

Jay: That’s actually a very good question. I actually think that they are related. I think that they are related for two reasons. The first is that around the world, people who are far right authoritarians or nationalists are all very interested in Bitcoin. It doesn’t matter the country that you go to, those people are interested in cryptocurrency and so, there’s more of them and they’re hanging out and talking about cryptocurrency, it follows that there would just be more people into cryptocurrency.

Jay: I do think that part of it is because people are afraid of an extremely unstable world, right? And they feel like this is a hedge. So, even if you put 10% of your money into Bitcoin because you think it’s a hedge and you don’t care if it goes up or down because you’re only basically waiting for the bombs to start falling out of the sky and for Bitcoin to go up like 100 x so that you can live when your bank has been destroyed or something like that.

Jay: Those are decisions that people are making. All the big, rich prepper guys, right, in Silicon Valley who have bunkers in New Zealand, they’re all into Bitcoin. I don’t think that’s only because they think the technology is interesting. I think they’re probably doing it as a hedge, too.

Aaron: I think our bunker is gonna be the crypto cave. Great place to defend down here.

Jay: Oh, my God. It can’t even handle three inches of snow without leaking.

Aaron: Okay, so when I look at myself as a test case, if I were to write a profile of why did Aaron buy Bitcoin for the first time? I do think that the election of Trump made me think that Bitcoin was a better investment. Now, it does mean that I think the United States is gonna descend into some kind of a fortnight-esq free for all with assault rifles, but as we’ve seen with various collapsing currencies around the world, if there’s an overall rise in this kind of craziness and it leads other countries to fall and as Soros says, or dictators to put money in, whatever, it doesn’t matter.

Aaron: If people start pumping money into Bitcoin, it makes Bitcoin more valuable and so I think probably, Bitcoin became more valuable because of the rise of an unprecedented set of authoritarian leaders elected in the last two years.

Jay: I’m with you, man. I think it’s a very hard thing to prove.

Aaron: Sure.

Jay: I think this is the most tin foil hat conspiratorial that you and I … we probably get a little bit more than this before. We’ve talked about this from way back in the basement tapes, right? When we saw what happened in Zimbabwe, right, where the Zimbabwean currency crashed and there was all sorts of political instability and the price of Bitcoin there was like two and a half x what it was on US exchanges and we were like, “Holy shit, in Zimbabwe.” You and I not knowing, admittedly, at the time and even now, not knowing much about the economy of Zimbabwe and we’re like, “Look, in Zimbabwe, people, when the shit hit the fan, put money into Bitcoin. Why would they not do that in other countries and I don’t think that we know that answer, but I think that we can reasonably assume that in some of them, they will.

Aaron: Here’s a bull case for Bitcoin. Massive international sudden demand due to worldwide instability. It’s a dark place to go, but that would be a good time to be owning a bunch of Bitcoin.

Jay: Yeah, every time, it seems like we’re veering toward some sort of war, which now seems like every two weeks, I really do kind of appreciate the fact that I still have a little bit of Bitcoin. It really is a reassuring thought. I don’t think you and I are alone or even close to the extreme on this. I think that the true believers and the maximalists are basically like, “Fuck yeah, destroy the world.” You know?

Aaron: Yeah. Sure.

Jay: Yeah.

Aaron: Speaking of instability, I had one question for you that I’ve been thinking about recently I wanna get your take on. We just lost something like Ethereum, say-

Jay: Yeah.

Aaron: From over $1,200.00 down to trading below $400.00 at a point. For all of these companies, which anyone who’s sitting on a ton of Ethereum and that is part of their future and business model, what do you think happens when the market takes that big a dip? Do the plans change? Do people get laid off?

Jay: No, we haven’t really heard of lay offs in block chain companies, but I don’t think it’s the type of thing that would be public anyway, because we don’t even know where half of these companies are.

Aaron: Yeah.

Jay: And I would imagine that a lot of these companies bought in so early that unless they have some sort of crazy expansion plan that it was based on, Brian Armstrong’s declaration that the value of cryptos can only go up, you know? Then, I think that a lot of them might still be doing okay, but I don’t know. If you lose 60% from 1400 to like 400 or even, I was thinking about things like, Bail bloc, which is that project in which people from the New Inquiry magazine and they’re sort of activists on weighing, are mining Monero to try and bail people out.

Jay: That sucks. You’ve lost a shit load of the money you made and a lot of the power you used to make that money has just been flushed down the toilet and then what do you do at that point? Do you reassess? Do you try and pick another cryptocurrency? Do you start trying other forms of fundraising? I don’t know. I think that probably a lot of those companies are either gone or in a shit load of trouble right now.

Aaron: I don’t know. They probably hold some fiat. They must hedge in some ways against these kind of events.

Jay: Yeah, but, maybe you don’t know because you’ve mostly worked for yourself, but when these things happen, it’s not just that your value goes down, it’s that people who are working for you lose focus. A lot of people leave during these periods of time, sort of have a brain drain, and whatever seemed like forward momentum is gone, and that really matters to small companies that are growing and trying to work in new spaces.

Jay: I’ve worked for several media startups and there’s always this point where … I think it happened at Grantland, which I think I can talk about candidly because everybody is right now. There’s a point where we came in at the beginning of Grantland, and somebody at ESPN had forgotten to renew the URL, and so we got to work and the website, when you typed, it went to a page that was a buy this URL page, and it took two and a half days for us to fix it and to load everything back up.

Jay: It was massively disruptive and dispiriting and, I don’t know. I just think little things in new companies can feel catastrophic, so I imagine that these things are feeling somewhat catastrophic right now.

Aaron: I don’t read it entirely quite as negatively as you, but I would say, it must be one of the defining things about investing a lot of your time and your career working in these projects that these projects fates are also tied, in some ways, to value. Even if you say I don’t care about value, I’m not a speculator, if you need a bunch of people to execute on a concept and the money you’re holding to pay those people is held in crypto, and those people have to be paid in US dollars or at least against some sort of a US dollar peg, you’re on a rollercoaster. Good times.

Jay: Yeah and I wonder how places like Consensus and other sort of big companies are doing right now. They probably just have their heads down, honestly.

Aaron: Anyone who’s still in this truly believes it’s gonna recover. You know?

Jay: Yeah.

Aaron: You have to.

Jay: You and I basically believe that to.

Aaron: Yeah.

Jay: Alright, so our last topic is an article that was written by one of my colleagues at Vice News. His name is Jim Surowiecki. He was the financial columnist at the New Yorker for, I think, over a decade. He’s a wonderful guy. He’s very smart and thoughtful. The article he wrote made a lot of people in the Bitcoin community angry. Jim is a no-coiner, but he is not an incurious person who is just dismissing it. He is really just writing it because as an economist, as a guy who studied all this stuff, these are the conclusions that he came to.

Jay: This is for the MIT technology review. We will put a link in our show notes, and it was called Bitcoin Would Be A Calamity, Not An Economy. So, Aaron, what can you tell us about this article?

Aaron: Okay, so I plead naïve ignorance on several accounts. I read something like this, to me, I’m like, “Hey, this is pretty interesting.” It seems to be pissing off a lot of our people I’m friendly with who I think are smart in the crypto world, not really pissing off, but just kind of like, “Oh God, these arguments again.” But for me, these arguments, I’ve never had them totally clear in my mind. I’ve said things, Jay, you’ve heard me say on this show, “Yeah, I mean, I kinda think it’s all gonna work, but it might destroy the world.”

Jay: Yeah, that’s your theme.

Aaron: That’s something I think. And you’re like, “Well why are you holding crypto then?” And it’s like, “Well, you know, I don’t wanna have no money when the world is destroyed.” But, I didn’t really understand, what are the scenarios in which the world is destroyed and one of them, he kind of lays out in this article, basically about the ways that centralized bank uses the currency it issues and it is able to issue more of to control various things in the economy, which we generally look at as good for an economy.

Jay: Basically, Jim is talking about how you control for things like recessions. Why don’t we just read the part that we’re talking about here. This is the part where I think he explains it.

Jay: “If the dollar and the euro were replaced by Bitcoin, how would the system adapt and how would the economy and the financial system function? The simple answer is, not well. Our economies and financial systems are built around fiat money and they rely on the central bank’s control of the currency to help manage the business cycle, fight unemployment, and deal with financial crises. An economy in which Bitcoin was the dominant currency would be more volatile and harsher economy, in which the government would have minimal tools to fight recessions and where financial panics, once started, would be hard to stop.”

Jay: So, basically, he is arguing the piece that you kind of need liquidity. You need an ability to print more money because you need to solve crises. So, if Bitcoin is being all held by a small group of people and there’s only 21 million of them or however many there are after the ones that were burned, that’s an impossible system to issue liquidity in.

Aaron: Yeah. To someone who wouldn’t really know which economic model to trust, that makes a lot of sense to me. I think that harsher world, I think that there are people who believe in Bitcoin who also believe in that harsher world or believe that some sort of a calamity is coming anyway and that, therefore, we might as well go to Bitcoin, which is to say the centralized banking system is also on the brink of failure, I think would be their viewpoint. I do find it sort of convincing that people have designed the system in a specific way for a reason.

Jay: Yeah, no, I think that’s true as well. Look, fiat currency is difficult to defend as a concept, but it certainly is a useful one and I that to solve crises in so that you don’t have places completely crashing out and giant population suddenly becoming impoverished. It just doesn’t feel elegant and it doesn’t feel fair in some ways.

Jay: If you look at the 2008 crash, which is what precipitated the creation of Bitcoin anyway, but I’ve always thought it was odd to say that the ways in which the 2008 crash was handled, that therefore means we should throw out the entire system and not just say that, “Whoa, everything that was handled there was kind of handled in a fucked up way and maybe we shouldn’t do that next time.”

Aaron: Not to insult Mr. Surowiecki, whose reading I very much enjoy, but I do think it’s kind of a general no-coiner stance to look at this as euro some game, where it’s like, “Oh, Bitcoin is gonna replace all fiat and destroy the economy and that’s the only eventuality where it succeeds and thrives.”

Aaron: I feel like usually the way that these things ultimately resolve is weirder than that. I don’t think that possibility or the total failure of Bitcoin possibility. It seems like there’s a lot of ground between those two.

Jay: Oh, sure. In fairness of Jim, he was responding to what Jack Dorsey said when he said that Bitcoin would become the world’s single currency within a decade and so he’s basically saying, “Okay, so if that happened, what would it look like?”

Aaron: Yeah, I think that’s fair.

Jay: But, to be fair to you, I think that later on, he does talk about, “Okay, well, what if we had a system in which there are a lot of different cryptocurrencies.” This is the part of the article that I found the most interesting. Having an only Bitcoin system is difficult because no one really knows how many Bitcoin there are, sort of Bitcoin words are very, very concentrated, like that guy in Thailand who had 100,000 Bitcoin and nobody knew who he was. That’s so much fucking Bitcoin.

Jay: He does think about what would happen if you had Litecoin and Ripple and all these other economies and he brings up a historical example that I want to read to you so that you can react to.

Jay: “This isn’t speculative. We actually have a historical example of how this works. In the United States in the decades before the Civil War, there was no national currency. Instead, it was an era of what was called free banking. Individual banks issued bank notes theoretically backed by gold that people used as money. The problem was that the further away from a bank you got, the less recognizable a bank’s note was to people and every time you did a deal, you had to vet the note to make sure it was worth what your trading partner said it was worth. So-called wildcat banks spread up, took people’s money, issued a host of notes and then shut down, making their notes worthless …”

Jay: Sounds like an ICO to me.

Jay: “… to be sure people came up with work arounds, there were volumes that were a kind of Yelp for banking, to explain the panoply of bank notes and rating them for liability and value, but the product consequence was that doing business was simply more complicated and slower than it otherwise would’ve been. The same will be true in a world where some people use Ethereum, some use Litecoin and others use Ripple.”

Jay: I actually find this to be a very contentious part of the piece. What do you think about it?

Aaron: Wait, I wanna just say, before we go any further, that the free banking system, the post Civil War years, my first reaction to that is, sounds like a great HBO show.

Jay: Oh, yeah.

Aaron: Competing banks, weird old west ICOs.

Jay: Jim and I do not really work for HBO, so maybe we can pivot.

Aaron: My further reaction is, yeah, maybe, but it just seems like we’re projecting very specific future outcomes on something like if you looked at it one year ago, would’ve looked so different.

Jay: Do you feel like these two are analogous because I don’t want this to all be caveats, but I do like Jim and I do work with him and I think that what Jim would want and what most people want when they write is for people to debate the things that they say. I’m not sure if this analogy quite works because the problem that he outlines with the sort of free banking system is that the further that you get away from the source bank, then you can’t really tell what’s a real bank or not and people in Oklahoma might not be able to know what a bank note from Georgia looks like.

Jay: That is not necessarily a problem for cryptocurrencies because if a place takes Litecoin, it’s not like they’re gonna be duped into taking a fake Litecoin or something like that. The idea that there is some sort of geographic concentration or any sort of concentration that is based on possible fraud through mistaking what the coin is, that’s not gonna happen because the way that cryptocurrencies work.

Aaron: To be a little bit more zoomed out about it, I think the part that’s centrally apples to oranges, in my mind, is that when we look at these biggest currencies that he’s citing, Bitcoin, Litecoin, also to a lesser extent, Ethereum. They’re not issued by a bank. Not a bank of any kind, and there’s no claim of any reserve value to back them. They’re just open-ended systems that people created that people have imbued with value. No one ever said a Bitcoin was worth anything. That is not the Satoshi vision that Bitcoin should become some sort of an E bank.

Aaron: The vision, as I see it, is that the rules of the system will be laid transparent and people will be able to make whatever decisions they want around that. I’m not sure I’d say that about ripple, but for the most part, most of these coins, they’re mined. Proof of work is the only real value.

Jay: And the democratic process of buying it. So, the one thing I will say, yes, I do agree that in a world where everyone is using a different coin that it will be hard to do sort of complicated transactions, but there are solutions to this stuff that are being worked out now, whether it’s atomic swaps or different applications of the Lightning Network as things get faster. It’s not like you’re going to have to go take your Litecoin and then compare it in a book to another Litecoin and that you’re gonna have to get an appraisal to make sure that Litecoin is right and then convert it into Bitcoin.

Jay: These solutions can be somewhat faster and they can actually eventually, I think, become fast enough and are on the way to becoming fast enough where it is [inaudible 00:45:17] like a credit card transaction in a foreign country where there is a lot of conversion going on, but you don’t feel it.

Aaron: Okay, wait, hold on one sec. I’m still enjoying being in the open banks in the post Civil War period timeline and I’m putting my mind into the mindset of the problems created in this totally chaotic wild west banking situation and I think the most analogous would be … okay, project into the future where everyone’s taking most major cryptocurrencies. Monero has flourished. I am going skydiving and the guy’s like, “Yeah, man, I take Monero for this sky dive.” I’m like a middle-aged thrill seeker who wants to try skydiving for the first time, and I’m like, “Oh, hey man, I have these Sumokoin and Sumokoin is actually a Monero clone, and it actually is interchangeable on the Monero network.” I think something that people are working on. There’s a bunch of these Monero forks now too, also.

Aaron: So, I’m trying to use some kind of an off-brand clone or fork coin and I’m like, “You should accept it.” And the guy is like, “I don’t know, I don’t have a wallet for that.” And you’re like, “No, you can just change it back to Bitcoin using the blah, blah, blah network.”

Aaron: That’s the kind of everything doesn’t work that well kind of future that I could see with a gazillion coins out there.

Jay: I thought that you were saying that as a good outcome where things would work, and I was like, “This sounds fucking horrible.”

Aaron: No. Well, isn’t the lesson of the open banking system was kind of like a disaster?

Jay: Yeah, and I don’t actually even … I don’t disagree with Jim’s conclusion that it would be bad to have … you know how you walk in and you see a sign that says, “We take MasterCard, American Express,” And they have the little symbols and that now, when you, in the eight stores across the world that take cryptocurrencies, they have the little symbols on the bottom there.

Aaron: I’m pretty sure that already exists.

Jay: It does exist, but in eight places that they post constantly on Reddit. I think that’s bad. I think it’s bad when these currencies have different values. When you use a credit card, you use a Diner’s Card, which I don’t know why anyone would do, but let’s say that it’s like 1985 or something like that or you use the MasterCard. You’re using the same currency, it’s just a different processing center and it gets kind of bad to use Litecoin and Ethereum and Bitcoin and try to figure out how much you actually have to pay in every single one of them.

Jay: I mean, can you imagine the poor waitress that would have to split a bill between one person paying with Ethereum and one person paying with Litecoin? It’s nonsense. So, I agree with his conclusion.

Aaron: I think you could have some sort of an overall Bitcoin standard price of Satoshis or something. I think they could figure it out.

Jay: Whatever it is, it’s just unpleasant to think about. I’m not excited by thinking about it.

Aaron: This did trigger a memory for me, which is that I went to the cheap street corner ATM by my bodega just outside the crypto cave here, and I was taking out money on a pay ATM and I was like, “Ugh, I’m not gonna walk to the bank, I’m just gonna pay the fee, I’m gonna do it.” Okay, I did it. And there’s a big bumper sticker on the top of the ATM that was like, “Bitcoin, Litecoin, Ethereum, Google them.” And then it was like, “Wanna tip me?” And a QR code. I was like, “What? Tip you?” Why would I tip you for putting up a crypto bumper sticker onto my ATM?

Jay: Well, he’s doing the Lord’s work and putting out the word of Bitcoin I guess. But, that is very, very weird. That’s just a scam, you know? The bodega near my house actually has a Bitcoin ATM and I cannot figure it out.

Aaron: Oh, yeah. What’s up with that?

Jay: I don’t know. I can’t figure it out.

Aaron: Have you tried to make a withdrawal ever?

Jay: You can’t make withdrawals. You can only buy Bitcoin with cash. If you put ten dollars in, they’ll give you a wallet address on a little receipt.

Aaron: Alright, so my final note on this story. I was Googling the story to read it before we did the show and I ended up on the wrong story, which was the very first story that he wrote about Bitcoin in 2011.

Jay: Oh, my God.

Aaron: I mean, it’s actually, I think it holds up pretty well in someone who’s predicting where things were going and mostly in a critical sense, but one detail caught my mind in this story that I think is kind of incredible.

Aaron: He talks about the head of the Swedish Pirate Party. This is 2011. He’s like, “This guy converted his life savings to Bitcoin.” That’s kind of a like, this nut. Okay, so, A, what do you think? This was May 2011. What do you think the price of Bitcoin was?

Jay: May 2011, the price of Bitcoin, I bet, was about like $2.40.

Aaron: Very good guess, $3.47. So, I was like, okay. Just do a little buyback of the envelope math here. How much money do we think the head of the Swedish Pirate Party had in 2011?

Jay: Oh, my God. Fifteen million dollars.

Aaron: This guy is like a hacker anarchist. This guy is like living in [crosstalk 00:50:41]. The guys not a rich guy.

Jay: $400,000.00.

Aaron: Think about the guy who’s like the guy who like started Pirate Bay. That kind of a guy.

Jay: Yeah, 15 million dollars.

Aaron: Okay.

Jay: How much is it?

Aaron: I don’t know the answer. He never said what he put in. I did the conservative estimate as $100,000.00. If he had $100,000.00, that is now worth $700 million dollars, if Bitcoin was $7,000.00.

Jay: He must’ve sold a lot on the way.

Aaron: Yeah, but I just have to say, that was a great move.

Jay: I know. Here’s the last question I feel like we should ask.

Aaron: Yeah.

Jay: Are you gonna buy alts?

Aaron: I’m not gonna do anything until I see a lot more rally than this.

Jay: Okay. So you’re not getting suckered in?

Aaron: I will eventually be tempted, but we’ve already seen so many bounces around the $7,000.00 mark for Bitcoin. I’m not totally seeing this until everything kind of starts moving for a few days. What do you think?

Jay: I’m with you. I’m sticking with my general thought that if Bitcoin isn’t health, then all this is just noise, but man, I’m scrolling through CoinMarketCaps like top 200 coins right now and it is so tempting. Dumb shit I used to buy like DigiByte is up 14%. I, at some point, owned DigiByte. I’m glad I don’t own it anymore, but man, it’s tempting.

Aaron: I still hold a little bit of Proof of Stake Wallet, PSOW. I still hold a little Power, a little Salt, a little QTUM. So, I’d rather-

Jay: You still have those?

Aaron: Rather than fomoing into this alt season, I’ve just sort of quasi-accidentally rode this alt season. Those were all the things I had the smallest bags of and they were just so incredibly wrecked that I just never did anything with them. So, I’m just kinda like, “Oh, I’ll just play this Bingo card, Why not?”

Jay: Yeah, it’s more annoying to have to sell it.

Aaron: I would hope that those will have a pretty good week at some point in the nearest future, but who knows?

Jay: Yeah. Well, we’ll see. What will it take for you to buy back in?

Aaron: I’m probably gonna just kind of stick with most of what I’m holding right now, but a little bit of a rally, I might be interested in holding a little more Bitcoin than I’m holding right now.

Jay: Or a huge crash.

Aaron: Yeah, honestly, if there was a huge crash from here, I would just be like, “I don’t know what the fuck is happening.” But, I mean, you kind of like talked about it so much that now I think it probably will happen, so when it doesn’t happen, I’ll be like, “Phew!”

Jay: Yeah. Well, alright. I’ll talk to you next week.

Aaron: Alright, talk to you next week.

The official podcast of Bitcoin crashes. Hosted by @aaronlammer and @jaycaspiankang. Mailbag/contact:

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