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. (You can also subscribe on Apple Podcasts, Google Play, download the MP3, or email us at email@example.com)
- 👋 STEEMIT (STEEM) layoffs and how crypto projects are weathering winter
- 💸 CVL stiffed its employees with inflated token promises
- 🗞 A study shows the media coverage of Bitcoin tipped from mostly positive to mostly negative in 2017
- 🏦 Erik Townsend from Macro Voices comes on to talk about govenment issued crypto
- Beyond Blockchain: The Death of the Dollar and the Rise of Digital Currency (Erik Townsend, 2018)
- Steemit Lays Off 70% of Its Staff, Citing Crypto Bear Market
- “I had to borrow money to pay my rent”: Civil’s tokenomics has left some of its journalists wondering where their salary is (Nieman Labs)
Jay Kang: Hey, how’s it going?
Aaron Lammer: Good. Price-wise bad. That was true last time so nothing to cry over here.
Jay Kang: It’s over $4,000.
Aaron Lammer: It’s stability right around $4,000.
Jay Kang: Yeah. I guess Ethereum right now is at $116. Do you have Ethereum right now or did you sell it off?
Aaron Lammer: I’m about one-third in Ethereum.
Jay Kang: Okay. If you don’t mind saying, what did you get it at?
Aaron Lammer: All the way down. The best buys were at like 0.027, which is like where we are now. We’re a little bit about that.
Jay Kang: How many dollars is that?
Aaron Lammer: That, I won’t be disclosing. How many dollars was that? It was higher but it was also when Bitcoin was higher so it was adding up the same relative price to Bitcoin. I think it was …
Jay Kang: Was it like 300?
Aaron Lammer: No. It was closer to 180 or something like that.
Jay Kang: That’s nice.
Aaron Lammer: I haven’t been holding Ethereum the whole time. When I got really, really low, I was like, well, if I think both things are going to recover, I wouldn’t mind being a bit in Ethereum because it’s really quite low against Bitcoin.
Jay Kang: Okay. I don’t want to talk about the market too much but I did have one question, which is like, I think we talked about this a little bit before. I was thinking about it last night, which is all these Ethereum projects that are in the Ethereum amusement park as we like to say, all these projects that are being built out on it, do you think that there’s any indication that there might be a … that the crash in these prices might actually lead to a stalling of development of some of these projects?
Aaron Lammer: Absolutely.
Jay Kang: Because so much of the liquidity that they have, so much of the assets that these places have, so many other ways in which they paid people out was all through Ethereum, right? I think that if you have a software engineer who when Ethereum was 10 times what it is now, which really wasn’t that long ago or it was more than 10 times like what it is now, right?
Aaron Lammer: Briefly.
Jay Kang: It was 15 times as some point. Yeah. That person probably is maybe looking for another job right now. I have to imagine that that sort of stuff is going on.
Aaron Lammer: Steemit. Steem?
Jay Kang: Yeah.
Aaron Lammer: They just fired 75% of the people working there.
Jay Kang: Yeah. That’s brutal. I bet that a lot of those people also might have gotten doubly fucked because they might have Ethereum as well.
Aaron Lammer: Is Steem RC20 token? I don’t know.
Jay Kang: I imagine that they’re getting paid in some form of cryptocurrency, don’t you think?
Aaron Lammer: Yes. I mean, it really doesn’t matter. No matter what was going on there, it’s not good for the people who are working there. I feel like, additionally, so you know what’s happening right now with mining? Where basically mining is like, it cost more to make a new Bitcoin than it’s worth and this will continue until the difficulty algorithm adjusts. Until then, people are either mining at a loss or they theoretically could shut down their equipment and wait it out.
In the case of companies, it seems like companies like Steem, which is like writing, you get paid for writing and the readers tip you. It’s not even a huge universal way from the Civil kinds of stuff, which I think we’re going to talk about later. Those kinds of projects, at a certain point, if you take enough out of the economy, the economy just collapses. It can’t pay the people to maintain the site.
Jay Kang: Yeah.
Aaron Lammer: I don’t know. I feel like we still have a long way to the bottom with some of these companies because they raise a lot of money. If Steem can be broke, I got to imagine, a lot of people might be.
Jay Kang: I think that the saving grace of a lot of these companies is that they probably have either a high percentage of true believers or they don’t really have that many employees. I think that maybe that’s why these types of stories aren’t coming out.
Aaron Lammer: Truly, decentralized projects shouldn’t relay on having a huge salary pool for employees forever.
Jay Kang: No, I agree. I agree.
Aaron Lammer: It’s a bit of like a weird mix and match between sort of startup style companies and companies that are like far closer to a protocol where it could just be maintained on an open source basis. I think we’re both generally a little suspicious of the companies that are treating this more like a startup work atmosphere.
Jay Kang: I agree. I’m not so worried about them.
Aaron Lammer: Yeah.
Jay Kang: I imagine that all of those are going through tough times. What I’m more worried about is the talented software engineer who maybe a year and a half ago started working in the crypto space and has gotten wrecked and a lot of his payments were in cryptocurrency. If that person is just moving on, because I was thinking that if there was a time to have a brain drain out of crypto, it would probably about right now, right, where things just look bad and where all the news is bad. You can say that that’s been happening for a while. I imagine that this isn’t like some sort of breaking point. There probably have been people living the space for a while.
One of the examples of that, I think, is the first thing that we wanted to talk about today, right, which is Civil, our old friend that we seemingly can’t get away from.
Aaron Lammer: We promised to never talk about Civil on the show thus we’re talking about it repeatedly. Though, it is presently dead, at least, as an initial fundraising foray. Go back and listen to the Civil episode if you haven’t. Civil was supposed to be offering for a journalism token that was going to power Civil news rooms. One of the publications is Popula. We’ve had Maria Bustillos from Popula on here. Definitely, some true believers in the Civil camp. Additionally, definitely some people who were a bit overconfident in an ICO that didn’t really appeal to the ICO market.
Jay Kang: Yeah. Also, I would say, there was a lot of people on the journalism side who were just trying it out. They were probably a little bit more risk tolerant than your average journalist. Maybe risk tolerant isn’t the right way to put it. There are just people who are willing to give this thing a shot.
Aaron Lammer: You’re talking about the early employees right now, not the …
Jay Kang: No, I’m talking about people who were … like people who are starting podcasts and they’re funded by Civil or people who started publications that are funded by Civil. Not all of those are true believers. A lot of them were people who were hoping to break the endless cycles of poverty for journalists. Also, I think that there are probably people who are crypto curious. All of those people right now are probably less crypto curious or maybe crypto angry because it hasn’t gone particularly well.
Aaron Lammer: What came out is one disgruntled employee who left said, “Look, a bunch of the salary that I was promised was in the CVL token and I was led to believe that this token was going to be worth a bunch when this fundraising inevitably worked.” Certainly, I would not have ever advised someone this. Nothing we advise, people on the show is in any way advised. If you’ve listen to the show for long enough, you’ll know that you should always bet against Jay and I.
Additionally, no one really knows whether one of these projects is going to work. If they were truly leading the people who work there to believe that this was like a done deal that seems pretty sad.
Jay Kang: Yeah. Who knows, I mean, this is one person’s report. We don’t have reason to believe or disbelieve the report. My gut feeling is that there are probably a lot of things that were said that were pretty vague. They could be interpreted however the person wanted to interpret them. Maybe they’re not legally binding as being promises of price. I tend to believe that it is not unreasonable. The person who came away with that conclusion was probably not being completely unreasonable.
I honestly don’t think that Civil was probably being as forthright as they could be. It’s just the way that these things work always. It’s not just in crypto but in any type of new enterprise, where some amount of money is promised in the future based on something that everybody who’s working there obviously thinks is a sure thing, but with might not actually be a sure thing. The other thing is like maybe when they said that thing, right, which is in the height of the ICO boom, it probably was a little bit more of a sure thing than it …
Aaron Lammer: Sure. Look, I feel bad for anyone who got denied 70% of their salary. Anyone who is taking that much of their salary in any kind of a token should have been advised that that was a pretty risky move. When we’re talking about startup compensation in terms of options, it can be a lot of money, but it’s usually not as a pure replacement for your salary. It’s the incentive that gets you into a tech company like some kind of a startup is that there is this massive options upside in addition to a salary.
I was always a little bit weirded out by how the whole Civil things works because the newsrooms are up and running. I guess that money comes from consensus. It sounds like some of the money wasn’t really coming from consensus, it was coming from future value on the token.
Jay Kang: Yeah, which is too bad. Look, everyone here works at a startup in Silicon Valley or wherever, in New York, Austin even in Las Vegas or any of these. You and I could start a startup tomorrow. Our employees, you go in whenever you get options or you get stuck, as part of your compensation, you go in taking a risk. I think it is reasonable to say that if anyone went in to that type of system and the stocking question was not stock but it was a cryptocurrency, then they would probably be thinking this is a lot of risk.
I don’t know. Journalism is in a strange place right now. I don’t know how I feel about it. Everybody is getting laid off. The demands for labor organization are much higher, not in terms of that more people want it. It just seems like people are much more strident about making sure that their shops are unionized. There’s almost no money coming in. It seems like a very difficult position, because I tend to agree that workers and media need more protections than they have. I sympathize with the young people who are organizing these things. There’s just no money and these places are just going to keep shutting down.
I just don’t know what to do about it. Like mike.com for example shut everything down recently, right, this week. I think they laid out their entire editorial staff. The people in Mike were trying to unionize and I think that instead of having that happen, they just basically jettisoned everybody. I just don’t know how to stop that from happening, because unless everybody in media across the board becomes unionized on one idea. I find that hard to believe.
Aaron Lammer: Yeah. I don’t think unionization, really, answers, at least in this case, the central questions, which is, where’s the money coming from? In trying to build Civil, trying to build multiple decentralized newsrooms, you’re trying to change the ownership structure and the revenue structure but there still always has to be like an input of cash on one end. It’s like the cash has to flow in. Whether it’s this or Mike or whatever, at a certain point, it’s not going to matter if there’s solidarity amongst the workers if all these schemes, basically, outside of some sort of a weird lotto ticket in the form of an ICO have no real financial basis.
That’s how it feels in the wake of this Civil thing is the only real chance Civil had was the money, was people to pump ridiculous ICO money. Otherwise, this was going to fail and these people weren’t going to get paid.
Jay Kang: It certainly wasn’t going to be like the tip system or some version of that where Basic Attention Token where people are going to quickly use this as an economy to supplant parts of people’s salaries. That type of ecosystem takes years to develop. It just isn’t convenient or usable as like Josh Benton in the, what was it, the Nieman labs guy?
Aaron Lammer: Yeah.
Jay Kang: He detailed that very well that the idea that this thing was going to flow on anything outside of like ICO speculation was … like now in retrospect, it just seems like there’s no chance that was ever going to happen, right?
Aaron Lammer: Jay, can I post a hypothetical for you?
Jay Kang: Yeah.
Aaron Lammer: Let’s say Civil, the whole apparatus comes out a year earlier. The token sale is kind of like right when we’re getting into crypto. It’s when every ICO is going through the moon. There’s like all these guys with scammy YouTube channels telling you which ICOs to buy. Let’s say …
Jay Kang: I feel like you’re pointing at one person and I don’t appreciate it, because I enjoy his YouTube presence but let’s keep him unnamed.
Aaron Lammer: It totally works. It sells out on the first day like every stupid ICO was selling out on the first day during the ICO boom. Let’s say this is at a much lover Ethereum, this is at Ethereum 200. Then, Ethereum shots up to $1,000. Let’s say some very prescient Civil newsrooms start going to fiat and funding themselves to the air. This feels like the only way that this was possibly going to work.
Jay Kang: Yeah.
Aaron Lammer: I only think it could work that way. I don’t think it was even unreasonable to think it might have work that way, because it would have work that way if they come out a year earlier.
Jay Kang: Do you remember when Ethereum was around $400 or $500 and Brian Armstrong from, what it’s called?
Aaron Lammer: Coinbase.
Jay Kang: Coinbase said, I wish that there was a way to donate Ethereum and make sure that the charities that you donate to keep it in Ethereum and …
Aaron Lammer: Yeah. Yeah.
Jay Kang: Yeah.
Aaron Lammer: It was one of our early topics [Jerry Hoadley 00:15:48].
Jay Kang: His essential point was that because the price of Ethereum can only go up that he wishes that these stupid people who run nonprofits wouldn’t keep selling the Ethereum because if they had only known that the laws of physics make it only possible for the price of Ethereum to always go up and that they would constantly be appreciating the amount of money that they have. I think that is a mentality behind a lot of the stuff, right?
Aaron Lammer: Yeah.
Jay Kang: That was the assumption. Maybe for a while, like it was almost reasonable to believe that. I actually do think that if that had happened then, at least based on some inside sources and based on a lot of the news that have come out, like they didn’t really have restrictions on when these people could dump these coins.
Let’s say the ICO sells out and that the price spikes 4x and it goes on Cryptopia and it goes on like Kucoin. Maybe it even makes it to Binance. Those people are going to catch up for a lot of money. I think that’s what everyone who is involved in it was hoping for. It just didn’t work out. In fact, it was the opposite of working out.
Aaron Lammer: Yeah and really, really didn’t even come close to working out.
Jay Kang: Yeah, yeah.
Aaron Lammer: Can I ask you on a different dimension to this Civil debacle?
Jay Kang: Yeah.
Aaron Lammer: When I first heard about ConsenSys and ConsenSys is based on Bushwick and it’s run Joe Lubin, who is, I think, rumored to be the largest Ethereum owner. I thought like ConsenSys had a bunch of different projects like this massive umbrella projects. It didn’t give a shit about any specific one of them, so something like Civil failing, who cares? We have 40 projects coming out this year.
Now that Civil actually has failed, it feels to me a little bit like ConsenSys is taking it harder than I expected them to. It seems like they really did try to prop up the sale and are kind of still like, you know like when someone really badly losses a football game but tries to give their really positive press conference?
Jay Kang: Yeah.
Aaron Lammer: There’s kind of a weird desperate vibe coming out of ConsenSys about Civil.
Jay Kang: It was their most highly publicized thing.
Aaron Lammer: What’s it? Okay. I think I didn’t realize that at the time.
Jay Kang: Yeah. Not even just in terms of … maybe it’s not their most supported thing in terms of this stuff that they put the most man, power, money behind it.
Aaron Lammer: Biggest press event?
Jay Kang: Certainly it’s because it’s a journalism start up and because it sort of drew in a lot of people who are notable. It was going to get the most press coverage of anything.
Aaron Lammer: Right.
Jay Kang: I think that they’re trying to do damage control because if the sentiment out there in the press is that every ICO, every Ethereum project, every big flagship announcement is garbage and is going to be instantly compared to Civil then that’s a big problem for ConsenSys, right?
Aaron Lammer: Yeah.
Jay Kang: I think it’s a problem that they can’t explain a way honestly, like how could they explain it? Even if the project is real, are going to lose their association with Civil because they’re people … you basically took a big bet trying to go straight into the viper’s nest and convert everybody and you just didn’t. In fact, you just made it all a lot worst. I think they do probably have a big problem in their hands in terms of PR going into the future.
Aaron Lammer: I think the only thing that wipes clear the memory of this is a success. A hit is the only thing that’s going to ultimately save ConsenSys or anything else.
Jay Kang: Yeah.
Aaron Lammer: It continues to be bad news until we hear some good news is kind of how all the stuff feels right now. I’m sure they feel like they’ve got some cards up their sleeve and things coming down the pipeline. Right now, it feels pretty barren.
Jay Kang: News, like this is actually something that I think that you and I have talked about obliquely on the show. There is this report that came out that was called, “Mainstream Media’s Sentiment Towards Cryptocurrency.” Did you see this?
Aaron Lammer: Yeah, I did. I almost feel like you could have been the author of this. By Jay Kang.
Jay Kang: There’s a lot of charts in it.
Aaron Lammer: Yeah. No, it’s got more of an info graphics I feel. I thought maybe you’ve gotten some of those interns from VICE News they used down there and been like you guys put together graphics package for me.
Jay Kang: Listen, I don’t want to slander those interns but whenever I ask anybody to put together graphics, it was not the easiest thing.
Aaron Lammer: Graphics are tough.
Jay Kang: It wasn’t because they’re aren’t working hard but it was generally because it was like four hours before air and I’d be like, listen, we need to chart out all this stuff [inaudible 00:20:35]. They’d look at me and be like [inaudible 00:20:38] too.
Aaron Lammer: I think, really, like how the mainstream media covers Bitcoin has been of a bet of pet obsession for us.
Jay Kang: Yeah.
Aaron Lammer: I think we’ve gone back and forth on how much we think it matters to the price of Bitcoin and to Bitcoin’s future. This study would suggest, it kind of does.
Jay Kang: Yeah. Let’s throw the caveats out there first. The first is that this thing is not vetted. It’s not …
Aaron Lammer: Oh God.
Jay Kang: … peer reviewed. I would not say that it’s complete advocacy and dumb data science that we should throw out the window. It is based on pretty arbitrary ideas.
Aaron Lammer: Yeah, it’s based on automated sentiment analysis which is like kind of garbage anyway, so giant, giant …
Jay Kang: Let me read a little bit of it to you. Okay and I want you to response. The introduction, we can just tell you what they set out to do, which is “From the time of their creation, cryptocurrencies have existed in uneasy symbiosis with the media outlets that cover them. Despite the opportunities for mutual benefit, the crypto community and major news outlets have frequently found themselves at odds. After all, reports first fueled Bitcoin’s rise from an idealistic experiment to blockchain behemoth. Today, as new cryptocurrencies compete for investors’ attention daily, coverage can make the difference between ascendance and irrelevance. As for reporters, crypto is a subject matter worth salivating over. Which other beat could offer so many compelling characters and rags-to-riches narratives?” Agree, Roger Ver, as we said in the last episode, is a great character.
Aaron Lammer: Lots of great characters and they haven’t gone anywhere.
Jay Kang: Yeah. They go on to say that what they tried to do is study the complicated relationship between cryptos and the publications that have covered them. They don’t say that they are basically saying any sort of causation, right?
Aaron Lammer: No.
Jay Kang: They’re not saying that one thing leads to another, but they want to see if there’s any correlation. What they generally found is that at the very beginning, most of the coverage of Bitcoin was positive.
Aaron Lammer: Yeah. It’s kind of like, what’s Bitcoin.
Jay Kang: Yeah. I don’t know if I believe that because I just spent three hours playing Sea of Thieves with Adrian Chen famous Bitcoiner.
Aaron Lammer: Yeah. I think being like mockingly positive still counts as positive.
Jay Kang: I know.
Aaron Lammer: It wasn’t like Adrian was like Bitcoin is going to destroy the world and use up a bunch of like energy and it’s like fascist. He’s just like, huh, this is so dumb.
Jay Kang: I think he thinks all those things.
Aaron Lammer: I feel like that came later. At that point, he was just like this is dumb.
Jay Kang: Okay. I don’t know if this is dumb is mockingly positive. It seems like mockingly negative but …
Aaron Lammer: No, but like who are the majority of the people who are covering like Bitcoin in the early days? It was like the business …
Jay Kang: Adrian, right?
Aaron Lammer: No, but like it was the business press kind of like lightweight like, who are these Bitcoiners kind of stuff.
Jay Kang: Yeah.
Aaron Lammer: It wasn’t going to be critical because people didn’t know what it was.
Jay Kang: Let’s a take them at their word. Let’s believe them for a while. They’re basically saying that as Bitcoin went up, stepped in price and spike in price at the end of last year that the press coverage swung, right?
Aaron Lammer: Yeah.
Jay Kang: That when it was at its peak, it had basically equalizers, equal positive and equal negative, articles. I think the negative articles are probably stuff like, Jamie Dimon says this thing is a scam. I think that’s …
Aaron Lammer: Yeah. There was the whole, it’s a pyramid scheme, it’s a bubble. Think about how many of those are probably Dutch tulip stories. It’s probably like 25% Dutch tulip stories on the negative side.
Jay Kang: Yeah. You could just do it by searching Dutch tulips like you could find all of the negative ones because they all use that metaphor. Maybe he was right.
Aaron Lammer: This win point is at 2016, which is from the light side to the dark side.
Jay Kang: Yeah, yeah, yeah. I’m sorry. Yup.
Aaron Lammer: That’s a big moment. That’s kind of like right as we’re about to get into Bitcoin.
Jay Kang: “Mid-2017 articles expressing negative sentiment grew more common, this trend was fueled in part by grim prognostications from the likes of Warren Buffett and Mark Cuban, who guessed that a bubble was underway.” Then, now, as everything crashed, the negative articles multiply. Now, they say that almost everything is negative, right?
Aaron Lammer: Yup.
Jay Kang: Does that generally match up with how you experience it being a person who is into crypto?
Aaron Lammer: I haven’t heard a positive mainstream media narrative about Bitcoin in 2018, really.
Jay Kang: Yeah, me neither. I can’t remember one.
Aaron Lammer: I can’t remember one. I would say, we follow the news pretty closely. We follow a lot of the writers pretty closely, some of them listen to the show, some of the people who cover crypto for the mainstream media. I like trying to break the fourth wall and talk directly to them. I don’t even know what the positive story would be. I can enumerate the negative stories which are, I would say at this point, pretty well established and aren’t breaking particularly new ground.
You can always bring out the irresponsible stories, the electricity stories, what is the counterbalancing, like if you had to write a super positive story about Bitcoin right now, what would it be in the mainstream media?
Jay Kang: I don’t know, maybe better, wonderfully, entertaining and erudite podcast.
Aaron Lammer: Yeah. It’s tough. You, I remember, would bring up on early episodes that there’s no messaging apparatus for Bitcoin. Bitcoin does not publicize itself. I don’t think it’s really just a Bitcoin problem, are there really any positive Out Coin narratives going right now?
Jay Kang: No, no, no. People like Charlie Lee have disappeared. The people who used to be the face of these types of projects are not heard from as much as they were. I don’t know why. I think it’s probably they’re just rich and I mean like that was great.
Aaron Lammer: Look, these people were the most visible at the top. If you bought Litecoin at the top, if you bought Ripple at the top, if you bought Bitcoin at the top, if you bought Ethereum at the top. If you bought anything at the top or even really during any of 2018 or 2017, you’re probably underwater right now. You’re probably not like, oh I can’t be wait to be entertained by the thought leaders of crypto.
Jay Kang: Okay. Sure. I did find something that was interesting in this which I did not expect. I wanted to ask you about it because they don’t really have a good explanation for it. I don’t think it’s their job to have an explanation. They just want to present the data. It’s that when they looked through all the articles written on crypto, they say that the outlets had skew liberal. For examples, they have CNN or the LA Times or the New York Times or UPROXX.
Aaron Lammer: I like this list. Steven Hyden formally of Grantland a great music writer, I think he’s over there at UPROXX. Shots to Steven Hyden.
Jay Kang: Yeah. Actually, it’s not even generally but quite a significant margin that liberal-leaning publications had much more positive coverage of crypto than conservative. For conservative, they’re talking about Fox News, Breitbart and the Daily Caller. What do you think is the …
Aaron Lammer: I’m a little surprised by that too. I mean, I guess it depends on what you consider the set of conservative publications. If you’re talking about the National Review as opposed to, say, Alex Jones, then maybe.
Jay Kang: Yeah, or like the Ron Paul newsletter or stuff like that. I’m not even speaking fastidious here.
Aaron Lammer: Yeah. I guess it depends if you exclude French conspiracy and libertarian conservatives from the conservative mix. Certainly, I hear very little of positivity towards Bitcoin from the business conservative wing, the Wall Street Journal wing, the Wall Street wing, the markets thinkers wing. I would agree that from that part of the publishing world, it’s been a long time since I’ve heard anything positive about Bitcoin. It doesn’t even seem like there’s a lot of enthusiasm around any of this, like ETF, official Wall Street products stuff as there was a year ago.
I think the SEC said that until the exchange is cleaned up, they wouldn’t even consider an ETF. Not a lot of good news.
Jay Kang: I think that the definition that they have of a conservative is off.
Aaron Lammer: Yeah.
Jay Kang: Something like Reason Magazine, which is a libertarian publication, which I would say is certainly more reputable and journalistically sound than Breitbart or the Daily Caller. That’s a conservative publication. I don’t know if they would consider themselves that but they certainly aren’t liberal and they certainly aren’t centrist.
They’re very supportive of cryptocurrencies and so I don’t know. I just think that there’s something maybe something wrong with their data. Again, if we take it a phase, I just think that maybe cryptocurrencies were covered more by left-leaning outlets than right-leaning outlets and that maybe that has to do with. Maybe there’s just a smaller sample size.
Aaron Lammer: I think it’s negative across the board. I mean it’s not like I really think that CNN is like a bastion of liberal reporting that’s like wacky like hall of mirrors 2018 going into 2019. Just in general, I don’t think it really matters where you look. People are just going to keep pointing out the problems of crypto. They’re not going to be swayed … there’s not a dominant narrative about it like really helping the world. Unless, some of these narratives around like the Venezuela, like stabilization of currencies kind of stuff. I think those stories could become bigger. Right now, it’s a little murkier.
Jay Kang: I think right now, basically people are also ignoring it a little bit, right?
Aaron Lammer: Yeah.
Jay Kang: There’s not really anything to talk about except people going broke and how many of those stories can you really tell. I don’t know. I think the idea that people got totally scammed on this and they … people like have mortgages now and took out like third and fourth mortgages to buy cryptocurrency and then broke of off it. I don’t know. I think that you can’t tell that story twice.
Aaron Lammer: It’s all the same story in the stock market and people are doing the same wacky shit on the stock market. The stock market is also not interesting when it’s low. People want to read about the stock market when it’s surging through new records and various people are trying to take credit for it and there’s fights happening.
People just don’t want to hear about it like on the low side. I don’t totally buy into the like, this is really important time, build all. I do kind of think it makes sense to have like hype cycles followed by miniature deaths followed by hype cycles. I can’t really predict what the next hype cycle will look like. It doesn’t feel likely to me that there isn’t going to be at least one more narrative about this stuff.
Jay Kang: Yeah. It might take like a world changing event for that to happen. The nice thing about world changing events is that they happen quite frequently.
Aaron Lammer: Something will affect something.
Jay Kang: Yeah. It’s not going to be just like [inaudible 00:32:37] oh, yeah. Remember Bitcoin? That was cool. Just to end this section here, the conclusion is essentially, I find this to be super mushy and unsatisfying and maybe not true. Whatever your own biases may be, the influence of press reports on cryptocurrencies is difficult to ignore. In traditional domains of finance, it’s long been understood that media can move the market but in an industry in its infancy, the press may be particularly powerful.
Before you make investments based on the latest hot take you’ve read online, consider the ideological disposition of the article’s author, as well as …
Aaron Lammer: Shots fired.
Jay Kang: See, this is where it falls apart from there.
Aaron Lammer: Shots fired.
Jay Kang: Yeah. This is where …
Aaron Lammer: Is the person speaking to you wearing a Ron Paul badge?
Jay Kang: Really, when I was reading this report without doing any research into Clovr, the first like six paragraphs I was like, I don’t know about this but you know maybe it’s interesting. Then, when I got to that, I was like, oh my god. Who wrote this? Is it somebody in the [inaudible 00:33:40] telegram group? Because this is essentially what they’re saying.
Aaron Lammer: Consider your biases dude.
Jay Kang: Yeah. The people that they’re mad at all the time like the bloggers at FT Alphaville. They would go, they’re biased. We’re like, no they’re reporters and the news is bad. They’re reporting bad news. I’m sorry.
Aaron Lammer: Yeah. I mean forever, most of the interesting news is going to be bad. Forever, most of these dudes are going to be freaking out. I feel like I wish that crypto could get a slightly healthier respect for journalists, not because I think like it’s some horrible thing to not respect journalists or to not be into this kind of coverage but because it would suggest that they understood better what reporters are doing when they do their job which is like …
Jay Kang: Yeah that’s it.
Aaron Lammer: They’re not supposed to report like press releases. This isn’t like a misperception of what a journalist might be interested in about cryptocurrencies.
Jay Kang: Yeah. Yeah, yeah. I don’t know. I think that that’s just like a nationwide thing right now, don’t you? Did you see this person at a police report did a story on Adrian Peterson. Turns out Adrian Peterson after being sort of, you know …
Aaron Lammer: Yeah. Yeah. Yeah.
Jay Kang: It was revealed that after being in a ton of court trouble for beating his kid, he’s still beating his kid. Then, Adrian Peterson at the end was like, oh the reporter got me all comfortable and got me talking when I said this and that’s ridiculous. That’s bad journalism. I was like, what?
Aaron Lammer: That’s a lot of people around crypto too. You’d be like, what? I was just talking to this dude on the phone.
Jay Kang: Yeah.
Aaron Lammer: He seemed cool.
Jay Kang: Or the people who supported him, they were like, this very damning quote must have been coerced out of this person. We’re like, yeah, it is called reporting. I don’t know. I just find that to be so prevalent which is why I am officially not a journalist anymore. It’s just too difficult … I mean I obviously am but …
Aaron Lammer: I don’t think any of this stuff is like going to get … I mean, I do think it actually matters in so far as like people like our parents. There was a period where people I knew were getting interested in Bitcoin. The mainstream medias turned against Bitcoin. It’s dampened any of that enthusiasm, which probably in the long run is not very good for Bitcoin’s price that there aren’t a bunch of retired people who are like, maybe I should have some Bitcoin in my portfolio.
All you need is like a certain number of damning reports and I feel like that dream kind of dies.
Jay Kang: Yeah. Yeah. Yeah.
Aaron Lammer: Do you think that’s short sighted though? Probably it is.
Jay Kang: I don’t know, maybe.
Aaron Lammer: Bitcoin investments are just going to get shoved into their portfolio like through the backdoor by some fund manager through differently named products that obscure the fact they’re really holding crypto, just like universities and all kinds of family offices are holding crypto now. I feel like people are going to end up doing that without even knowing it.
Jay Kang: Yeah. Crypto is going to be like the new South African apartheid investment.
Aaron Lammer: Yeah, people have no idea what the fuck they’re holding. If it continues to be profitable, which it certainly is over like anything except the last year, it’s going to get worked into that stuff. I don’t even know if really like person to person interest matters that much. Do you think it matters if other people are asking about it?
Jay Kang: Yeah. I don’t think that the thing that you are talking about is going to happen.
Aaron Lammer: Interesting.
Jay Kang: I was listening to one of our old episodes recently and I think I had like a solidification of a take. I think I have a full take on this.
Aaron Lammer: Yeah, you’re willing to dip this to a computer?
Jay Kang: Yeah, yeah. I’m lacquering it up and I’m ready to put it on the trophy wall of takes along with other campaigns that have been completely lacquered up. All the market is only itself and nothing influences it. It just moves on its own, as its own autonomous state.
Aaron Lammer: I think my plaque is crypto is for lonely people.
Jay Kang: Bitcoin 10,000 by the end of 2018. I think the lacquered up take that I have essentially is that I really don’t think that this future is going to be through any … like when crypto comes back, I don’t think it’s going to be through … it might be partially through Bitcoin but I don’t think it is going to be through Ethereum or any existing project and that there will be something new that comes along that solves a lot of these problems that doesn’t have the baggage and that that is something that people are going to get excited about.
Aaron Lammer: You’re talking about initiative cue right now, yeah.
Jay Kang: That’s not a cryptocurrency.
Aaron Lammer: Okay. Sorry. Sorry.
Jay Kang: I don’t think that crypto is going to become this background investment noise. I think that there will be some other craze but the thing that it is has not revealed itself yet. I just have a hard time believing that what it is right now will stabilize at some point, where it will be worthwhile for people to have that in their investment portfolios.
Aaron Lammer: I want to take the other side of that bet. I don’t think it is going to be a big percentage but I think eventually, in the next couple of years it’s going to start being like a … just something like it’s not strange that you get a bundle of tech stocks and some sort of Bitcoin futures as some sort of ETF.
I think it will all eventually come about. It does speak to one of your other lacquered takes which is that all these exchanges in markets are deeply manipulated. I feel like that’s basically what’s being said about why there can’t be an ETF. They’re like, no, we’re not going to have an ETF when these markets are being so widely manipulated and there’s all sorts of wash trading on these exchanges that totally allows for a wild west thing to be going on.
Jay Kang: I understand what they’re saying about that, but I think it is generally unfair given the types of ETFs that exist right now.
Aaron Lammer: That’s true.
Jay Kang: How easy it is to make one. I was talking to a guy and he was saying that if you have a friend who works at a brokerage basically, you can have like an ETF made. We could actually just name our money lottery ETF something different. If we knew somebody who could do that, we could just have it made.
Aaron Lammer: That’s true. All these weed penny stock stuff makes all this like crypto stuff look like official and above board. It’s not like these people’s hands are clean.
Jay Kang: Yeah. There are weed ETFs all over the place. Yeah, there are so many weed ETFs.
Aaron Lammer: It only becomes very problematic when it’s about crypto other like deeply shady financial products that are like totally allowed.
Jay Kang: Yeah. Yeah. For example like allowing a bunch of teenagers to buy short term high volatility options on Robin Hood and play it like a videogame. That is probably worse overall than just having people hold some Bitcoin for a while. That’s all totally legal. I don’t know if teenagers can do it, but they’re just doing it and nobody cares.
Aaron Lammer: One of the futures that didn’t happen that we thought might happen early on was are sort of like South Korea and everyone trading on their cellphones like a video game fantasy that was everyone was going to be like a gaming craze.
Jay Kang: Why do you think that didn’t happen?
Aaron Lammer: Because the thing everyone was trading was crap. That’s what happened it was like … and it turned out they were all crap and they all went down to the toilet all at once at the same time. You weren’t really gambling on which aught you like. You were gambling on are you holding an aught right now as the market crashes?
Jay Kang: Yeah. Don’t you think that something like a place like Bittrex or something like that could have made something? I mean Bittrex was trying to make it in Korea with KakaoTalk, right? Why didn’t they make an app?
Aaron Lammer: I think it’s still a plan. I think they’re building that stuff. I think it’s like in the works. It’s just no one wants to gamify trade in a terrible mirror market. It’s only really fun to be trading that way when the market’s going through the roof.
Jay Kang: Okay. Speaking of going through the roof, I did have a … I have a question for you.
Aaron Lammer: Okay.
Jay Kang: I’m going to assume that you have thrown in the towel on your prediction that Bitcoin would hit $10,000 by the end of this year?
Aaron Lammer: Yeah. I’m not feeling like Warriors good about it.
Jay Kang: Okay.
Aaron Lammer: To me, that’s like a Denver Nuggets to win NBA championship kind of bet.
Jay Kang: I think it’s much worse than that. I think it’s like the Phoenix Suns winning the NBA championship.
Aaron Lammer: We still got a month. It can happen in a month, but yes. It would have to be a two and a half X month. I’m going to say that looks distant at this point.
Jay Kang: Okay. My question is not that. That one I think is a given. Do you think that Bitcoin will hit 10,000 by the end of 2019?
Aaron Lammer: End of 2019, yes, I do. I think …
Jay Kang: You think it’ll hit 1,000 as well?
Aaron Lammer: No. I think it will probably hit 3,000 but I don’t think it will hit 1,000. I went on Ledger Status’ podcast this week and we talked about this.
Jay Kang: Yeah, how was that?
Aaron Lammer: It was fun. He’s good at easily dispelling my ideas so that we actually can talk about the actual thing, but …
Jay Kang: Wait, that sounds like … that sounds like it would be helpful for our podcast.
Aaron Lammer: He was like look, expect a lot of ranging over the next year or so. It seems like we’re probably going to, at some point, see like a 6,000 kind of stability again. Before that we could easily go down to 3,000. If we go down to 3,000 there’s not a lot of space between there 2,700, 1,800. I am prepared to see all of these things but I do think, yes that we’ll see a 10,000 somewhere in there.
Jay Kang: Okay.
Aaron Lammer: I certainly hope so. I mean I don’t want to sell now if we’re not going to see …
Jay Kang: Yeah. I don’t really have an opinion other than that.
Aaron Lammer: You’re not going to buy a … the 3,300 is no longer a buy, the Kang line is not live?
Jay Kang: No, I’m going to buy it if it has 3,300. It just never hit 3,300.
Aaron Lammer: Are you rooting for it to hit 3,300 or are you preferring sitting this one out?
Jay Kang: I would rather it not hit 3,300.
Aaron Lammer: That’s right. Tell me why.
Jay Kang: Because I am …
Aaron Lammer: You don’t want that drama in your life?
Jay Kang: Okay. Let’s think back to when Bitcoin was around 3,300 or 5,000 or even 7,000. My strategy was always different than yours if you remember. Like I was trying to scout profits and not get wrecked, right?
Aaron Lammer: Yes.
Jay Kang: At some point, I came out and I just bought everything and never sold anything and just kept buying more and more and more, right. I think I’m back in that early stage. I just think that at that point if I bought a 3,300 and got back in and the market went up 30%, I will just sell everything.
Then, I have some sort of tax situation on my hands that I didn’t want to deal with. Then, I would get mad that I had that tax situation on my hands. I just have a feeling that that’s what would happen. I’m not really looking forward to it. I am a man of my word, and I said I would buy at 3,300 and so I will. I don’t think it’s a bad buy point but as we said, none of this is financial advice just because you and I have no idea what we’re talking about and it might be …
Aaron Lammer: Ledger who knows way more what he’s talking about than us also has no idea what’s going to happen. I think we’re all united in kind of having no idea what’s happening. Do you want to talk to this guest?
Jay Kang: Yeah.
Aaron Lammer: Okay. We’re going to call Erik Townsend. He’s actually someone who Ledger Status recommended giving a call. We’re going to see what he’s talking about.
Jay Kang: Welcome, Erik Townsend.
Erik Townsend: Pleasure to be here, thanks for inviting me.
Jay Kang: You have a new book out. I’m going to start a new policy on the show, which is plug the book upfront so I can’t possibly forget it at the end. What is the name of the book and where could people find it?
Erik Townsend: The name of the book is “Beyond Blockchain, the Death of the Dollar and the Rise of Digital Currency.” It’s available now in paperback, audiobook and Kindle. Right now as we speak, Amazon is running a sale on it which was without my consent. I don’t know what’s going on there.
Aaron Lammer: We have no control over that.
Jay Kang: Yeah, is the sale against your consent a form of censorship resistance or a form of censorship?
Aaron Lammer: Is it true that we need to decentralize Amazon?
Erik Townsend: I don’t know. I’m going to let it happen. I wanted to get the book out there anyway but the one thing I did want to mention though is the audio book version is not on Amazon because Amazon kind of rips authors off on audiobooks, so macrovoices.com/BB for Beyond Blockchain is where you can find the link to the audiobook. The Kindle version and the paperback are on Amazon, artificially discounted as we speak. I don’t know how long that’s going to last.
Aaron Lammer: Okay. Everyone go pick those up. Jay and I have read the introduction and skimmed around it which makes us in a perfect place to ask ignorant questions which is something of our schtick on the show. The very first thing that interested me about your ideas is, I’m just going to encapsulate like almost everyone we’ve encountered while doing this show. Almost everyone we’ve encountered believes that government should collapse and be replaced with an entirely new crypto system.
Steak should be eaten widely and that we should basically only consider a Bitcoin maximalist or at least crypto maximalist future. In your writing, you present like a pretty different possible vision for crypto arranged around the idea of governments controlling digital currencies or issuing digital currencies. What does a government issued digital currency look like?
Erik Townsend: First of all, I just want to mention that in a perfect world, I love the concept as a libertarian, the idea of the private sector coining its own money, competing with government issued currency. It just sounds wonderful.
Aaron Lammer: Jay, I thought we had our first non-libertarian guest but we’re still …
Erik Townsend: What are you going to do? Here’s the thing, I’m a realist before I’m a libertarian. As much as the Bitcoin maximalist want to believe that there’s nothing government can do, they think government is powerless to stop it, that’s nonsense. Government is not powerless. Government is clueless. The reason that they haven’t done anything to outlaw cryptocurrency is because they barely even begun to figure out what it is.
They’re slowly starting to wake up. What I realized is we really need to separate the question of how will the invention of digital currency, digital cash, which was invented by Satoshi and the Bitcoin guys, how is that going to change the world. Which I’m convinced it’s going to change the world in profound ways. Separate that from the question of whether or not the cryptocurrency pipe dream, the libertarian pipe dream, of private sector money competing with and winning out over government-issued money is really going to happen or not.
I predict that what happens is government wakes up and recognizes, hey, this is a gift horse that’s been looking us in the mouth for 10 years and we’ve been so slow and stupid, we haven’t figured it out. What we need to do is outlaw Bitcoin and create government issued digital currencies that have probably unfortunately, the exact opposite design goal. Where Bitcoin was designed to take power away from government, feels good, sounds good but technology is a double edged sword. You can equally well design a digital currency to give more power and control to government.
I fear that that’s the direction that we’re most likely to be headed in.
Jay Kang: When I hear you talking about that timeline or that choice that people in cryptocurrency have to make and two diversion path, it does seem to me that there are a few projects that are or updates around central banks, like Ripple for example would be one. Why do you think these two things are mutually exclusive? Because I think that just from listening to you, it does make sense to me that a small dedicated number of people could be working on a project that they want to overthrow the global monetary system.
We can debate whether or not that’s realistic. I tend to side with you that it probably is never going to happen. At the same time, those people are never going to work for the government. Those people aren’t going to work for Ripple. It seems like what you’re describing to me is the current ecosystem in a way.
Erik Townsend: It’s not at all two mutually exclusive paths. It’s actually three competing forces that will influence an outcome that could go in any direction. You’ve got foreign governments that their agenda really is not about digital currency, it’s about getting the dollar out of the center of the global financial system. Digital currency is a means to an end. You’ve got the Bitcointopia guys who’ve got their view. You’ve got a view that the central bankers are just barely starting to wake up to.
It was amazing for me just on the day that my book came out that Christine Lagarde did exactly what I predicted central bankers would do which is to say, hey, we need to start recognizing the digital currency technology. It’s not something we should react to, like do we like the fact that Bitcoin was designed to disempower us. Rather, we should take the bull by the horns and we should design something that empowers us, the central bankers, to be in charge of the global financial system. That’s just getting started.
Aaron Lammer: Can I zoom backwards here? Jay, will you come back with me to our very early days on the show. I think about like what I thought about Bitcoin and the first 10 hours that I thought about it, which is in some ways I think more useful than everything I’ve thought since then. When I first heard about it, I was like, oh, okay. Fake internet money. It’s not the center channel. It’s not the global reserve currency. There’s a side pot that will get bigger and bigger and at some point maybe it’ll be bigger than a medium-sized country and it’ll always be the alternate channel.
What I feel like I think I’m hearing you say is it’s like a battle to the death. Cryptocurrencies, digital currencies can’t co-exist. One of these things will ultimately destroy the other?
Erik Townsend: Bitcoin and other cryptocurrencies are definitely designed as you say as that side pot. They’re not a major global currency system. They are an alternative to government issued money. I think that what’s going to happen is government is going to wake up and say, wait a minute, this technology is really cool not for the reasons that the Bitcoin guys love it but for an opposite set of reasons which is just as …
Aaron Lammer: Wait. I want to clarify one thing here. I have money in a bank account right now that’s not like physically in my possession, how did digital currency issued by the US government look different than, say, US dollars in a bank account? Describe to me what that leap is and what kinds of increased capabilities that currency would have?
Erik Townsend: You can design a digital currency system where government is easily able to trace and monitor and control every single transfer so that for every penny of wealth that exists anywhere in the financial system, the government can tell who’s got it, where they got it from, when they got it and under what conditions it was given to them.
Aaron Lammer: Wait a minute, isn’t that Bitcoin though? I feel like all the crime stuff that’s come out recently has been like you can peer right into the Bitcoin ledger and you can see where every Bitcoin has ever been. Unintentionally, Bitcoin does do a lot of those things, right?
Erik Townsend: The difference is that the Bitcoin system was designed to be pseudonymous to make it more difficult for government to monitor, control and oversee the private affairs of or the financial affairs of private citizens. Though, either way, regardless of how successful they may have been at it, they were trying to take power away from government in order to protect the privacy of the people using the system.
The difference between green dollar bills and let’s say Bitcoin tokens is every Bitcoin token has to exist in some Bitcoin address at any moment in time. It’s difficult to tell who owns that Bitcoin address or it’s a little bit difficult to tell. It’s harder to tell with Monero. If you’re talking about green dollar bill, you don’t know who’s got it. It could go anywhere.
What digital currency technology does is it opens the door for an Orwellian outcome, where we have a government issued currency system and nobody can do anything without the government knowing about it. I don’t think that’s a good thing for humanity. My contention is government issued digital currency is coming whether we like it or not. The choice for the smartest guys in the crypto community is either to say, okay. We may not like this but if we’re involved with it, we can influence the outcome and make it better than it would have been otherwise.
If you don’t do that, what you’re going to get is the result of government doing its own thing without anybody from the crypto movement involved. I think that that leads to a much more Orwellian output potential.
Aaron Lammer: I feel like this is all a good commercial for the coin center.
Jay Kang: Here’s a thing, I don’t disagree with your assessment of what may be coming. I don’t understand why that would not be more incentive for people who have these beliefs to double down on the idea of a separate cryptocurrency that could be used with likeminded people. I don’t think that if you ask, there’s all types of money transactions that happen that people don’t want to tracked.
In fact, if they were tacked that these people would end up in trouble or they would have part of their privacy compromised. Why isn’t that world more of an argument for Bitcoin? Why is it an argument for capitulation?
Erik Townsend: I think it is in many ways. The fact that the cat is out of the bag and that Satoshi’s invention of double spend proof digital cash and distributed ledger, now enables governments to create something very scary that is going to further embolden the crypto maximalist view point for sure. The thing is, I think that they’re going to face some headwinds that they’re not ready for. A lot of people in the Bitcointopia community are convinced that government is powerless to do anything.
The argument they usually make is, look, Bitcoin is a protocol on a network, you can’t outlaw a protocol. It’s true that it would be next to impossible to outlaw the existence of the Bitcoin network. What you can do is you can outlaw the conversion of fiat currency into or out of Bitcoin and other cryptocurrencies. You certainly can’t stop it completely. There will always be a black market for digital currency and I think Bitcoin will exist forever and ever no matter what the government does. Government can be very effective if they outlaw cryptocurrency and all it takes to get a political support to do that is just to announce that it is in the interest of fighting terrorism that …
Jay Kang: Yeah. False flag.
Aaron Lammer: Going back to your idea about the global reserve currency. You present all the reasons people are pissed off about the US being the global reserve currency. All of the ways that someone who creates a digital currency could become the reserve currency. If another nation becomes the reserve currency, won’t we be replicating this problem just like passing the baton off to the CryptoRuble or a Chinese digital currency?
Isn’t the idea that having a country being the global reserve currency is a problem and argument for Bitcoin becoming the global reserve currency?
Erik Townsend: First of all, what makes the definition of what the global reserve currency is the currency that central banks favor for denominating their reserve assets. Reserve assets are like the savings account or piggy bank for an entire country. It’s the emergency money or the emergency assets that they sell in a crisis to raise cash in order to defend their own currency to prevent it from collapsing.
We’re really talking about decisions of central bankers. For Bitcoin to become the global reserve currency, it would require central bankers around the world saying, forget about US treasury bonds, I’d rather have Bitcoin. I don’t see Mark Carney from Bank of England come to that conclusion.
Aaron Lammer: Couldn’t the people who are complaining about the US now like move to Bitcoin almost as a strategic move or maneuver against. I’m not saying this is going to happen like tomorrow but just to project the Bitcoin future. All these people who are fed up with the US hegemony could move to Bitcoin as an attack on the dollar at some point. I know this is crazy but we’re playing like the third degree sequel of this movie.
Erik Townsend: It’s really not crazy but it’s limited in scope. You’re already seeing this where one of the things that you need to do or one of the things that people want to do is not a central bank reserve assets but just for international trade settlement. The SWIFT payment network is basically the world’s global wire transfer network. Even though it is supposedly owned by a Belgian consortium and is supposed to be an independent entity, the US government is able to threaten them and get them to do just about anything that they want.
Jay Kang: I didn’t even know it’s supposed to be independent, I just assumed that it was run by the US government.
Erik Townsend: It’s funny. I’ve actually heard the US officials announce on television, we’re going to withhold access to our SWIFT payment network, it’s like, your SWIFT payment network? It’s owned by a Belgian consortium, dude. What are you talking about?
Jay Kang: Yeah. It felt like when Venezuela or Iran gets kicked off of SWIFT, that wasn’t like decision by a Belgian board that was a decision by the American government, right?
Erik Townsend: It was actually a sequence. It was a decision by a Belgian board of directors to allow Iran to stay in the SWIFT system because they had not been sanctioned by the UN. As far as most countries around the world were concerned, they hadn’t done anything wrong. SWIFT made that decision and immediately the Senate banking committee, the US government said, oh, really? Maybe we need to draft some sanctions against SWIFT itself. SWIFT said, we changed our mind, okay. We’ll play ball. They kicked around out of the system.
It is through coercion and threats that the US government has bullied the SWIFT network to do whatever it says. What was really amazing, Russia and China have been complaining about this for years and years. It’s not just China and Russia anymore, it’s Europe now.
Jay Kang: Erik, I have one last question for you which is, I tend to agree with you that I find it hard to believe that governments will not harness the power of cryptocurrency. In your book, you mentioned that Russia and China are already doing this and that the US is behind. I also find hard to believe is that they couldn’t do this without the help of the Bitcoin maximalists. I also find it hard to believe that the Bitcoin maximalists would capitulate and go work for these governments.
Why do you think it’s necessary for these guys to go work for the US government or for China or for Russia to make an even more Orwellian, as you put it, form of money?
Erik Townsend: I think that there’s a lot of different moving pieces in that question. It’s not an all for one and one for all. First of all, you’ve already got people like, for instance, Mike Kern was a major Bitcoin contributor blockchain inventor. Now, he’s working on permission distributed ledger for R3 three in New York. I don’t know him. I only know a little bit about his background. My point is, some of the early pioneers of blockchain are now working on permission distributed ledger which is the anti-Christ of the ledger technology.
Jay Kang: Is Ripple a permission ledger? Would it qualify?
Erik Townsend: Yes.
Jay Kang: Yes, okay. Everything from like Ripple to a government currency would be filed under the permission ledger.
Erik Townsend: Exactly. You’re already seeing a few of the guys who were major leaders in the invention of blockchain, refocus their energy on permission ledger. That’s one thing that’s going on. At the same time, I think what you’re saying, China and Russia are very active. Sergey Glazyev giving keynote speeches to a blockchain conference. People’s Bank of China filing more patents related to digital currency than anybody else in 2017.
They’re getting interested in all this stuff because they’re trying to figure out if we want to upstage the US dollar and displace it as the world’s global reserve currency, is there a way for us to use digital currency technology to make that happen? I don’t think they necessarily have some specific grand scheme that they’re working towards. I think it’s more exploration at this point.
Meanwhile, at some point, the US government is going to wake up and I do not predict that all of the Bitcoin maximalists are going to suddenly defect and go to work for them. What I am predicting is that we’re going to get to this beat them or join them question at some point where the people in the crypto space, the brightest engineers that have been involved in designing and building cryptocurrency systems are going to face a choice, which is those cryptocurrency systems, let’s say, hypothetically, are being outlawed by government.
It becomes a felony to build in and launch cryptocurrencies and continue to offer them and so forth. There’s plenty of opportunity, very high paying opportunity, to go work for the private contractors that are building government issued digital currency. The thing I like it too is that back in the late ’70s when I was a teenager spending a lot of time at MIT. The grad students I met there where the Vietnam War was a recent memory, it was over but it was almost everybody that was in the university was anti-war in their personal sentiment.
If you were studying engineering, all the cool jobs were in defense contracting and building weapon systems and so forth. They didn’t want to be part of it but they wanted to work in the cool engineering. I think that what it’s going to come down to for crypto engineers at some point in the future is there’s this illegal stuff that has become outright illegal as opposed to right now it’s a little bit anti-government but it’s still legal. It’s still illegal.
Aaron Lammer: Gray legal. Gray legal.
Erik Townsend: It’s gray legal. When it becomes clear black, no doubt about it you are committing a felony in order to continue working on the stuff you want to be working on. Or, you could take your skills and be very well-paid for it working on a government issued digital currency working probably for a private contractor that’s engineering it. By the way, if you’re there doing that, you might have the opportunity, as a result of being involved with it, to influence the outcome. It’s at least a little bit closer to Satoshi’s view of the world and not George Orwell’s version of what the world could look like.
Aaron Lammer: Wait a minute Erik. We all know Satoshi’s view is represented by the Bitcoin cash Satoshi’s vision fork, so that one’s been settled.
Erik Townsend: I think…
Aaron Lammer: It’s right there on the label. I’ll let you go. Final question here, how does it feel launching a book into a bare market? This book is just coming out and we are, I hope, at the bottom of a massive, massive slide.
Erik Townsend: It’s frustrating as hell and it’s ironic, the reason. One of the things that the book predicts is this slide. In theory, I ought to be celebrating like, hey, my book came out and correctly predicted exactly what’s going on.
Aaron Lammer: Talk to us the nightmare you’re involved in here.
Erik Townsend: It’s not working out that way because what’s happening is most people are incorrectly just from the title, it’s got blockchain in its name and they’re assuming it’s another crypto blockchain book. The book is not about cryptocurrency and blockchain. The book is about why cryptocurrency is not nearly as likely as most people assume to play a large role in the digital currency revolution that most people don’t even understand yet.
I did predict that Bitcoin would continue to sell off dramatically, that has now proven itself true and I don’t get credit for making that prediction.
Aaron Lammer: We have been making fun of Bitcoin for a whole year on this show. We probably brought about this bare market and we’re not getting any credit either. We can have certain solidarity amongst ourselves as people creating quasi crypto media at a time when really people don’t want to hear about crypto. The good thing about the book is it’ll still be on the shelves as we’re re-crossing Bitcoin $20,000 in the near future.
Erik Townsend: Okay sounds good.