Episode #51: 🍿 But What Do You Really Think About Civil (CVL)?

Aaron & Jay break their longstanding promise to not talk about the failed Civil (CVL) token sale and Tether (USDT) deflates from a buck to 90 cents

Coin Talk
Coin Talk
Nov 2, 2018 · 38 min read

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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 hi@cointalk.show)


Jay Kang: Yeah, yeah. I mean-

Aaron Lammer: Probably our most requested topic.

Jay Kang: But I think it’s the only thing in crypto that you and I are qualified to have any opinion on, and so it makes sense.

Aaron Lammer: I know. Immediately when we had something to actually offer we were like, “Let’s not talk about that.”

Jay Kang: Yeah, exactly. We’re like, “Too close to home. Let’s just pontificate and speculate about things we have no idea about, and do more of that.”

Aaron Lammer: We were like, “Let’s just give more insight into banana coin.” So, we’re not gonna do that now, we’re gonna do that at end of the episode ’cause I feel like it’s gonna get deep, and potentially emotional, and we don’t want to get too far in right out of the gate. But it feels to me like definitively the sale has failed, so we’re not influencing the space/time continuum by talking about Civil now. This is a post mortem.

Jay Kang: Yeah. Just to clarify, it’s not like you and I owned any Civil, so that’s not our hesitance for talking about it in the past.

Aaron Lammer: No. No. I think we owned a little bit of Journalism’s Soul.

Jay Kang: Yeah, and we more just didn’t wanna talk about it because, you and I between us, know a lot of the people who are involved in the project. We didn’t think it would be fair to listeners or even to them for us to try and triangulate what our conflicts of interest and everything would be. But now that everything’s over, I think that we can approach it with the necessary clarity.

Aaron Lammer: And I’ll say, I’m still confused, but maybe we can collectively pick our way through what ended up being one of the more confusing crypto narratives of the year. That’s a surprise in its own right, in my opinion. That we would truly experience our very first coin we knew about, would immediately go down in flames.

Jay Kang: I’m not so surprised. It’s almost like if 95% of coins go down in flame, why not this one?

Aaron Lammer: I feel like most coins go down in flames after they raise. I guess I don’t know that much about failed ICOs. It’s true. We hear about these silly projects that at least sell their tokens. We don’t hear about things that don’t even make it to that level.

Jay Kang: Yeah.

Aaron Lammer: Do we?

Jay Kang: No, I don’t think so.

Aaron Lammer: Before we get to that, our old friend Tether, back in the news. In fact Jay, just a minute ago you were like, “Ah, what happened with Tether?” And I was like, “I don’t know. It’s worth like, 90 cents.” Which is both a very casual thing to say and also pretty bonkers.

Jay Kang: Yeah. This was going back, way back. I think even to the basement tapes for us, where Tether was a daily topic of conversation. Not just on the show, but between us because I think you and I fundamentally disagreed about the insolvency or the problems with Tether. At the time, there was a very influential Twitter account called @Bitfinex’d that was-

Aaron Lammer: Still out there, still doing it.

Jay Kang: Yelling about the sky is falling scenarios, every like, 14 minutes and doing weird YouTube interviews where he disguised his voice. Do you remember we tried to get him on the show and he said he would do it, but he could only use a voice transmogrifier?

Aaron Lammer: No, no, no. You have that story wrong. He said he wouldn’t do it ’cause he had had a bad experience with a voice transmogrification and I was like, “Let me build you a great voice transmogrification.” Then he never wrote back.

Jay Kang: Oh, okay. Well, we tried to have him on the show as well. But I’m not sure if I would be comfortable saying that everything that he predicted came true. Crypto did crash, and a lot of it was shady. His main focus was Tether, and he said that that Bitfinex company, which is like, a exchange that a lot of Europe and Asia uses, I don’t think you’re allowed to use it in the United States. That it was improperly using this Stablecoin Tether, and now it really does seem like that was happening. No?

Aaron Lammer: In a certain way, it almost doesn’t matter if it was happening or not. There’s a Schrodinger’s cat thing, where if the threat that it could be true undermines the entire affair, because you couldn’t supply the sufficient transparency for people to be convinced, in some ways that’s just as bad as if you were just defrauding people in the first place.

The threat with Tether wasn’t just what Bitfinex said was true. It was that we would never know, because Tether was never gonna submit to a real, transparent accounting overview. Audit.

Jay Kang: I was about to say, I don’t think that’s Schrodinger’s cat, but then you brought it around to Schrodinger’s cat territory, so good job.

Aaron Lammer: Some of my analogies are both thin and mispronounce the name of the character in it.

Jay Kang: No, I agree. If you can remember back that far, it feels like five years growing crypto time, but he was demanding that Bitfinex and the Tether company do an audit, and they just didn’t. I think they submitted to some fake audit basically.

Aaron Lammer: Well, I think they had, they like, commissioned an internal audit, but that had no binding principles to it.

Jay Kang: Yeah.

Aaron Lammer: So, it was worthless. And I’ll say… The accusation from Bitfinex was they’re using Tether as a money printer.

Jay Kang: Yeah.

Aaron Lammer: They print more Tether and buy Bitcoin when the market’s going down, and that’s basically artificially building up the entire run that consumed the first half of the show’s run. And basically whenever that’s revealed, there’s no real buyers for Bitcoin above this point. It’s all just Tether money.

Jay Kang: Yeah. As the days go by, seems more and more plausible. I don’t think I would say that it’s probable, but he used a lot of weird… Do you remember his videos? He would put these YouTube videos on where he would be showing a chart as an updated second by second, and he would play this weird trance music behind? And then he would put a bunch of red circles and arrows. And it was like, “I actually can’t follow this. What’s going on? What are you arguing, man?” But I guess he was just too afraid.

Aaron Lammer: I like Jay, that it’s like, a whistleblower comes to find you and you’re like, “What are you, some kind of a weirdo? Your videos suck.”

Jay Kang: It’s more like, I don’t even know what you’re blowing the whistle on. What am I looking at here, you know?

Aaron Lammer: What happened, as I perceived it from my Blockfolio account, was there was a Tether panic where people started getting out of Tether as quickly as they could. And this in itself was a bit of a surprise to me. It’s like, “I don’t even really understand who’s holding Tether.” I always thought Tether as like, a leapfrog, where you were trying to get from your dollar to an alt coin, and you needed to be in Tether for like, two minutes.

I’ve never used Tether, but if I did use Tether, I would certainly not hold on to it.

Jay Kang: I think it’s for day traders, right? You can’t get money in and out of these exchanges that quickly, and so if you don’t want all of your trades to be pegged to Bitcoin, the way to peg it to the US dollar, in the past, was to peg it to Tether.

Aaron Lammer: I keep money in my Coinbase account in US dollars, so I guess I’m just as guilty. But if the one difference was that it said 500 Tethers instead of 500 US dollars, I would look at that whole thing very differently.

Jay Kang: Yeah, I agree.

Aaron Lammer: And the Stablecoin people basically want you to not look at it differently and just be like, “This is immutably one dollar. Don’t even worry about it.”

Jay Kang: Yeah. They just say you should have faith that this is a dollar, because in this ecosystem, we declared it was a dollar. To their credit, and who knows how this was accomplished, but Tether’s been around for a couple of years now, and up until this week it really was close to a dollar for the entire time.

Aaron Lammer: Yeah. It worked until it failed. Look, it could’ve failed a lot more catastrophically. When I heard about the story, I was expecting Tether to go to like, 40 cents. The fact that it even held at 90 cents, in crypto terms, is not a bad performance.

Jay Kang: Well, I think that goes more to your questions of who actually holds it. Who knows? It went down 10% because people thought that Bitfinex, the exchange was insolvent, and then they started moving hundreds of millions of dollars of Tether around, and people were like, “Oh, well, this must be the end,” and they got out of Tether. But it’s impossible to figure out what the actual price of Tether is, because nobody know who holds it or what it does.

And so, once again, if it goes down 10%, that doesn’t seem catastrophic, especially in crypto, but we don’t actually even know what that means. It could be that 100% of Tether actual users got out, and the price dropped 10% because only two percent of all of Tether is actually held for any reason other than fraud. The point is we just don’t know.

Aaron Lammer: Here’s a fun angle on this. Disturbing, fun angle. My understanding is that Tether is a blockchain. Sorry to listeners for my deep, deep ignorance, but my understanding is that Tether is a, if not a decentralized coin, a coin tracked on a blockchain.

Jay Kang: Yeah, didn’t they have to roll it back at some point or something like that?

Aaron Lammer: Yeah. One big difference between US dollars and Tether is that when huge amounts of Tether moves, everyone can see it. And that injects a very crazy game theory layer to everything, about moving huge amounts of Tether. If we could see all the money moving in and out of the US Treasury and across banks, people would play the game quite differently, I would think.

Jay Kang: Yes, but it would’ve been built up differently as well.

Aaron Lammer: I think what basically set off the panic was the rumor, or the possibly true rumor, that Bitfinex was covering up for hacks, and was basically moving Tether in to cover other losses.

Jay Kang: Yeah.

Aaron Lammer: And this is basically always the FUD around a exchange. It’s not this exchange got hacked, but it’s this exchange got hacked actually at some point in the near or distant past, and everything that’s happened afterwards has been an elaborate coverup for this hack. Which has happened many times.

Jay Kang: I was about to say, it doesn’t seem like a conspiracy or extreme FUD when this is actually, empirically has been the most probable actual explanation for what’s going on. I don’t know. Look, at this point, I think that our conclusion is more or less the same, right? Which is that this just feels like another confirmation of what seems to be a narrative that you and I, despite our best efforts, can’t really deny, which is that a lot of what happened at the end of last year in terms of the price spike and everything like that, it’s just very, very hard at this point to reasonably say that a lot of that was real. Right? This just seems to be more confirmation. ’Cause Bitfinex really did have a large part in pumping up there price. Just ’cause the volume was so high in trading there.

Aaron Lammer: You’re a little bit more of a truth-oriented person than I am. I think I’m a little bit less convinced than you are that the bull run was all a mirage, but I also come back to, it’s another Schrodinger’s cat situation, where if we can’t know whether that was a bull run driven by true buyers or by a Tether printer, in sum, it’s just as bad as if it was fake. Because the public perception, the market’s perception is well, it might have been fake, and that’s putting a huge stumbling block between people believing that Bitcoin is ever gonna get up to $20,000ish again.

Jay Kang: Yeah. And the other problem is that there’s no counter narrative or evidence that has been presented that it was real. That people really do believe in this thing, and that they’re just waiting for this stuff to die down. I don’t know. I don’t think that it is really particular to this story in itself, is particularly damning. Just because I think everybody has already written off Bitfinex, the exchange. It just seems like so much of what they did was shady. If this was about Coinbase or something like that, I think that would be slightly different, even though not that much different.

Aaron Lammer: Well, Coinbase would never get involved in these hijinks, ’cause Coinbase already has a good business. There’s no reason to be particularly shady in crypto when you can just charge people fees and convert their change into your own Binance coin. The exchange business is great. If you’re insolvent, which it appears Bitfinex may have been close to, it’s probably ’cause you’ve been running a pretty bad business.

Jay Kang: Yeah. Yeah, and we will never really know who was running that business, out of where, what it was, because they wouldn’t tell us. The more time goes by, the less people care to figure it out.

Aaron Lammer: Yeah, and I use really dumb pop psychology. I feel like we should have a regular feature on our show, which is like, what would the stupid person do? Which is like, in the early days, it was like, “Oh, buy all the Coinbase coins, then by Ripple.”

Jay Kang: Yeah.

Aaron Lammer: I’m just gonna, ’cause I’m very good at putting myself in the mind of someone stupid, ’cause this is actually how I think, I’m like, “If there were real buyers above 6,000, 8,000, 10,000, they would’ve bought it back up after this crash.” And so the fact that Bitcoin is flat ends up serving as evidence of the Kangian worldview, which is that those gains were artificial anyway.

Jay Kang: Yeah, yeah. At this point, it’s just, with every week that goes by, it just becomes harder and harder to believe that we’re gonna spike back up there by natural means, I guess for lack of a better term.

Aaron Lammer: Well, another question is, why won’t they just turn this Tether printer back on? The only problem with this Tether printer is that it’s been out of ink for too long.

Jay Kang: Yeah. That’s another thing that I don’t quite get, which is that if you are a shady exchange and you are operating a little bit outside of the law, but that nobody can really do anything about it… I don’t think anyone from Bitfinex has gone on trial or have been put in jail, right? Why don’t they just keep doing it? They’ll find more suckers, you know? It’s not like-

Aaron Lammer: Wouldn’t the panic be rolling, though? If this had happened, Tether goes to 90 cents, and then immediately 100 million Tether hit the market. I feel like that would’ve been when Tether went to 40 cents. At this point if they turn the printer on at all, I think people are gonna probably cry foul. I think probably Tether is cooked at this point, in terms of printing new Tethers.

Jay Kang: I have a question. And this is a broader question that I am curious what you think. It does seem like, right now, the entire ecosystem that we bought into, which was Coinbase and then Bitrex and Bitfinex, and then people holding their coins on hardware wallets, and discussing it. It seems like a lot of that is atrophying. Do you think that when Bitcoin does come back, which I still think it will at some point in the next few years-

Aaron Lammer: Yeah, baby. Optimism Kang in the house.

Jay Kang: It’ll probably come back through a totally different ecosystem, don’t you think?

Aaron Lammer: I do. And I’m starting, for the very first time when you started talking about it, I was like, “Oh, that’s gonna be when crypto is like, Fidelity crypto. Robin Hood crypto.” The next wave is not gonna be in crypto native apps, I don’t know. I think it’s gonna be crypto invading the real world.

Jay Kang: Don’t you think that kills it? For me, it kills it.

Aaron Lammer: Yeah.

Jay Kang: I’m not interesting in buying Bitcoin on Robin Hood. I would rather buy a spread of marijuana penny stocks and wait for Jeff Sessions to not be attorney general any more. It’s actually more fun.

Aaron Lammer: Jay, to be fair, you can do both.

Jay Kang: Yeah, that’s true.

Aaron Lammer: Look, I agree with you, except I wanna put one asterisk on that. Nothing in crypto has ever worked out the way I thought it would work out, so probably however this third wave future works out, whether it’s Fidelity and Robin Hood or something else, I expect the unexpected. It may be a totally different thing, or it may end up having really different parameters. It’s quite possible that crypto could become a Fidelity product in which people invest it in what are basically early stage technology projects through tokens that are all managed through some sort of a like, brokerage. Am I as excited about that as living in a vegetable less steak wasteland? No. I think it’s more wild and fun to image these extremist futures.

Jay Kang: But what function does crypto serve in that then? Why not just use the dollar?

Aaron Lammer: It’s a fair question. I would say it probably serves the function of allowing people to do things that are on the very edge of legal. But almost nothing that’s worked in crypto so far hasn’t been people doing things on the very edge of legal.

Jay Kang: Yeah.

Aaron Lammer: The real success cases are like, gambling, and like-

Jay Kang: Drugs.

Aaron Lammer: Maybe certain drugs, and a kind of functional prediction market.

Jay Kang: Passports, yeah.

Aaron Lammer: Yeah. Jay, just as a quick side note, you would be amazed to find out how many people have pitched that they wanna come on the show to talk about their new Stablecoin, during the week in which Stablecoins were crashing to the ground, and none of the pitches addressed this.

Jay Kang: Don’t you think they’re doing that on purpose, though? ’Cause they wanna all hop in right now. Right now, the king is dead. It needs to be replaced by somebody.

Aaron Lammer: Yeah. Well, not of them got a response. You were talking to me before we got going about the idea that maybe there’s something bigger behind the scenes happening.

Jay Kang: Yeah. Well, I think that what there’s probably happening right now, and I use the term probably very, very loosely here. Perhaps happening, in my own imagination happening, is that-

Aaron Lammer: Allegedly.

Jay Kang: There is probably some economy that is running on some sort of cryptocurrency that nobody knows about right now, that is totally illegal and only used for illegal activities, and that in its own way is much more anonymous and much more sexy and a little bit more dangerous than Bitcoin or any of the coins that we know right now.

And I imagine that eventually we will hear about this thing, and that eventually it will become the cool face of crypto. The thing the we’ve talked about in the past-

Aaron Lammer: It’s called Monero, come on.

Jay Kang: I don’t think it is Monero, though. As the months pass and we’re at this flat line part, I just… The one thing I’m having a harder time figuring out is if the future of Bitcoin is through Fidelity or through Etrade or through like, Charles Schwab, what’s the point of it? Why would people get excited about it? It’s just another thing to invest in that will, because of its association with those places, be way more stable and it’ll just be like buying like, GE stock or something like that, or whatever.

I just think that maybe the story of crypto, instead of being a revolutionary technology that takes over the world, might actually just be a story of a series of illegal ways to make digital money to fund dark markets or money laundering, and that once it’s discovered, people get excited about it, it’s regulated to hell, or made illegal, and then it just comes back in another form. Over and over and over again. That’s my idea about it.

Aaron Lammer: Alright. Let me make a counter idea. I don’t know why I’m riding for Fidelity here, but I’m gonna ride for Fidelity. What’s the biggest wealth creator in the last couple decades for investors? I would say buying tech stocks was about as well as you were gonna do. No?

Jay Kang: I guess so. If you’re talking about stable ways to make a lot of money.

Aaron Lammer: I’m just saying if you just were a shit coin and Bitcoin buyer in the United States tech markets, IPO tech markets, you did extremely well for the last 25 years. It’s just been pretty good times.

Jay Kang: Sure.

Aaron Lammer: The people in Silicon Valley right now are making even more money than that by basically privately investing their wealth into new ventures. So if there’s a way that moving the primary crypto world to Fidelity makes sense, I believe it’s in shortening the distance between investors and these extremely lucrative technology startups and companies that are probably gonna swallow a lot of the world’s money in the next 25 years.

Jay Kang: Not just money, but also attention and-

Aaron Lammer: Attention.

Jay Kang: Artistic output.

Aaron Lammer: Power.

Jay Kang: Soul. Yeah.

Aaron Lammer: Human data, governments probably.

Jay Kang: Okay, so just philosophically then, right? One thing that I’m interested in is that it’s become much, much more clear to me in the past six months or so since I stopped work at Vice, that my future is going to be some combination of working for one of these big tech companies. It doesn’t matter which one, but it’ll either be Google through YouTube or it’ll be Amazon or Apple or-

Aaron Lammer: Netflix, through Netflix.

Jay Kang: Yeah, Netflix. Any of those things are-

Aaron Lammer: Shouts out to our friend Doug Kim’s show on Facebook Watch. Check that one out.

Jay Kang: Yeah. I guess my point being… I feel somewhat agnostic towards that because I think that in the past, there were also conglomerates called networks and things like that, and they might actually have worse politics than the current things. However, the idea of crypto needs to push against that a little bit and it needs to be an alternative. When you talk to… You and I are negative about the price of Bitcoin, but I don’t think that we’re particularly negative about the promise of all crypto projects.

Aaron Lammer: No, I think we actually crowned, and I will revisit this on New Years, but so far I think we crowned Bitcoin maximalist as the winner of 2018.

Jay Kang: Yeah, or even when we talked to Tony Shang. There’s no doubt that that guy is extremely smart, very creative.

Aaron Lammer: He had a couple really good pieces recently. Subscribe to his newsletter. It’s good stuff. You’re not gonna do better in reading about crypto.

Jay Kang: No, I don’t think so either. He’s somebody who really does believe in these projects. I would not count him out, and I don’t think he would be doing it if the whole thing was folly. But for it to be interesting, it needs to stand outside of that growing monolith that everybody is facing. If you and I can put, instead of running this podcast through Apple or Spotify, if you and I could do something where there was a different business model that didn’t give money to those companies, we would probably do it. Just because of our personalities and what we believe in in general. I think that the closer Bitcoin and crypto gets to companies like Fidelity, the harder it is for that to happen.

Aaron Lammer: I think Tony Shang might agree with you, insofar as… He had a piece last week that was about the first killer way that crypto would be adopted within a truly mass form, would be for in app purchases and games. Like if items in Fortnite say, were tracked on some sort of a blockchain in which they were bought and sold, and basically a economy the size of Fortnite, which is massive, were to be built on top of crypto. That would not only be the furthest that crypto has penetrated into mass consciousness, it would also be bigger than all of the other crypto stuff combined.

Jay Kang: Yeah. I’m actually curious about that. Why a company like Activision or a company like Riot Games or whoever doesn’t… Like with League of Legends, which I think is still the biggest game, even bigger than Fortnite still.

Aaron Lammer: You love League of Legends.

Jay Kang: I have never played League- I actually don’t even understand the [crosstalk 00:27:55]

Aaron Lammer: What’s that fantasy card game that you showed me, what’s that called?

Jay Kang: Oh, Hearthstone?

Aaron Lammer: Hearthstone. That’s the-

Jay Kang: Yeah, I play Hearthstone a ton.

Aaron Lammer: That, Hearthstone is much more achievable in some sort of a blockchain format I think than a Fortnite. ’Cause it’s not super fast, it’s just cards.

Jay Kang: Yeah, but at the same time, way more money is spent on Fortnite.

Aaron Lammer: That game’s huge, though. Look, it’s gonna take a hit. I don’t think the hit is gonna be a pre-crypto hit with crypto tacked on. I think what Tony Shang, he can correct me if I’m wrong, is talking about is something more profound, which is like, a game built from scratch from crypto world.

Jay Kang: Oh yeah, no, no, no. I totally… Look… This is the first I’m hearing about this idea, but-

Aaron Lammer: Jay, let me explain this idea to you that you haven’t read that article of that I keep citing different parts of.

Jay Kang: No, no, no. Just broadly, I think you and I do agree about this, which is that the ways in which you and I work on culture or cultural production, are… We’re like dinosaurs, and maybe we’ll win in the end and not go instinct, but the real culture that is insurgent right now is not like young people trying to do us, it’s actually just young people in gaming culture.

Aaron Lammer: Yes. For the most part. The closest I feel like we’re plugged into non-dinosaur culture is that we’re just two guys sitting around commenting on a bunch of shit. Not actually doing anything. That’s our most youthful quality, Jay.

Jay Kang: Yeah, I know.

Aaron Lammer: And we don’t really know what we’re talking about, but we’re still willing to just talk about a topic for an hour without even basically informing ourselves.

Jay Kang: I play a lot of video games, too, so that’s part of it. I’ve started playing a lot of Overwatch, which is another huge video game. The second that you slide into those cultures and those microeconomics, you get a sense of how huge they are and all the ways in which people are spending money. And so I guess I kinda agree with Tony, which is just that, at some point somebody is just gonna say, “Hey, we can actually profit more than by funneling all this money through Playstation’s PS, dollar, buy token system.” Nintendo has it’s own thing where you buy Nintendo credits or something like that.

And we can actually just create a functional cryptocurrency that maybe you can use across games, that maybe you can use in different ways. There were some cryptocurrencies that tried to be that. Do you remember that? I think you and I both owned game credits coins.

Aaron Lammer: There’s 100 people who have emailed us trying to do something along those lines. If you’re listening now and you’re thinking, “Oh, that’s what I’m doing. I should send Aaron and Jay an email to tell them about it,” save yourself the email. We know.

Jay Kang: Yeah. I think the difference being, and this is what I imagine Tony was saying, was that you can’t retroactively put a coin into an existing ecosystem. You have to build the game that is going to be wildly popular around the coin and force people to use that coin within that ecosystem. And that makes a ton of sense to me.

Aaron Lammer: A lot of where he went with this topic, and I think he’s right is that right now, you have this massive economy in Fortnite of people buying skins, but there’s no resale market for skins and they can’t be transferred, which is a huge hindrance on the like-

Jay Kang: I think you can sell your account, though.

Aaron Lammer: You can sell your account, which is done on the black market and it’s a TOS violation, so it’s sort of like a gray area tolerated policy. And so you can buy rare things by buying the accounts that they live with, but it’s basically a hacky, non-first rate solution that means that there’s a cap on how much value really can be imbued into these rare items. And where I think it gets into crypto is not just oh, it’s powered by a blockchain, it’s like, yeah, there’s rare items that are going for over a million dollars. They can be transferred anonymously using smart contracts and escrow, and you’re no longer talking about connecting Yeezys and rare Nikes. You’re collecting rare suits that you can wear in some game, and it gets to the point where most of the people aren’t even playing the game. They’re just trading the fashion of the game.

Jay Kang: Yeah, which is what happens now. Without skins… I feel like me at the age of 38, I’m largely impervious to this sort of stuff, like I don’t care. But I will say that, a couple of weeks ago I was playing Overwatch and I got the Dick Tracey McCree skin, which is like, a legendary skin for one of the Overwatch characters. And it was very, very, very exciting to me. So I get it a little bit. But, yeah. Look, if you put that type of stuff on the blockchain, you can also do things like establish uniqueness, right? You can just have one of them, and it doesn’t have to be something that’s accessible to everybody, and can have proof that that thing is real and that it’s yours and that it’s, has a certificate of authenticity from the game maker, et cetera, et cetera. And then the value of all that goes up.

Probably bad for society, but also very interesting for a game economy.

Aaron Lammer: Already, we’re seeing an economy in Fortnite that has become more valuable than the market for charging $60 a game. To just simply give people a game and just sell, sell, sell skins.

Jay Kang: By the way, have you heard about this? The new Assassin’s Creed has this new microeconomy thing that nobody has really seen before. The game is like, a open world thing and there’s all these stupid side missions that are boring and everybody complains that it’s impossible to advance in the game. And the reason why they did it is because as part of their offerings for microeconomy stuff, they allow you to skip large parts of the game that you bought to play.

Aaron Lammer: Hey, baby. Any way works.

Jay Kang: We know this is long and torturous, but how about you… We’ll speed you up a little bit.

Aaron Lammer: I think where I was going with that was just that Fortnite as a game where the money comes from selling items, is already closer to the crypto future than a console game that you buy on a disk. And as we get further and further there, at a certain point I agree with you. I’m surprised we haven’t already seen these games. We’re definitely gonna be talking about this in the next two years, right? Someone’s already pretty deep into this.

Jay Kang: Oh yeah, I think… I think that’s part of what Tony is doing, right? With his Ethereum-

Aaron Lammer: Decantraland could be seen as like a Sims meets that website, One Million Pixels, where that guy sold all the land on his website.

Jay Kang: Yeah.

Aaron Lammer: Kind of idea. I think about that maybe once a week for some reason.

Jay Kang: Yeah. Do you know that game VR Chat where people just make weird avatars and walk around and talk to each other? It’s kinda like Second Life, but even more rudimentary.

Aaron Lammer: I have to admit, this is more your area of expertise than mine. I’m consistently shocked at the kinds of weird video game shit you get into.

Jay Kang: Yeah. Look, I’m trying to adjust so that I’m not left behind as extinct in the nuclear winter that’s coming to all of us in dinosaur media.

Aaron Lammer: You Twitch cast yourself playing games, right?

Jay Kang: No.

Aaron Lammer: You don’t?

Jay Kang: No, I had a day where I-

Aaron Lammer: You did it once.

Jay Kang: I think this is a good idea and I think I’ll keep doing it once I’m a little bit further, but I thought it would be… Honestly, my publisher will probably not go for it, so I might not do it, but I was going to-

Aaron Lammer: Oh, you were doing it with your book, that’s it.

Jay Kang: Yeah, I was gonna Twitch cast myself writing my book. Not that so many people would know who I was, but I was going to just make it, not announce it in any sort of way, which I guess now is not… Thankfully, no one listens to this podcast.

But I was just gonna see if I could build up an audience organically on Twitch of people who weren’t media people. You and I both know that if I got three or four friends to tweet it out, then for like, two days I might have an audience of like, 200 people, which isn’t a lot at all, but that some media people would be interested in that project. But I was gonna see if I could just do it without that. Because there are people who write books on Twitch. Actually there are quite a bit. But they’re mostly like, kind of fantasy type books, you know? So I thought about that, but yeah.

Aaron Lammer: Alright. Should we talk about Civil?

Jay Kang: Yeah, let’s do it.

Aaron Lammer: Alright. So, going back, we had Maria Bustillos. I feel like I heard about Civil backwards. We had Maria Bustillos on the show talking about her publication, Popula, which is built on top of Civil. And Civil itself is a ConsenSys project. Our guest last week, Nick Paumgarten, ConsenSys’s headquarters appears in his New Yorker story. They’re out in Bushwick in this kind of like, industrial, lofty building, and it’s Joe Lubin, who is a founder of Ethereum’s money.

Actually, I thought, quite presciently in the story, Paumgarten asks the question of Joe Lubin, “Is ConsenSys all basically a big way to pump your Ethereum holdings?” He’s the world’s largest Ethereum holder. And he was like, “No that’s absurd. What a ridiculous way of trying to make money that would be.” I’m like, “Yeah, but again, with that question.” So, somewhere up the chain… We met Maria Bustillos, who is a, I think a great writer and editor, and she is like the human face of something that’s a long chain that stretches all the way up to the top of the Ethereum ladder.

Jay Kang: Sure.

Aaron Lammer: Is that important to the story? Not really. They started getting ready to publish. I didn’t even realize when we were first talking about it that Civil was gonna be something that was for sale. I just thought it was some kind of Ethereum journalism scheme. Did you realize it was gonna be for sale?

Jay Kang: Yeah, I did. ’Cause she explained it to us on the podcast that we did with her. I’m not sure if you were listening.

Aaron Lammer: Well, it wasn’t for sale then. I guess it didn’t seem like the sale was a big deal, ’cause it hadn’t happened yet. You couldn’t buy it.

Jay Kang: No, you definitely could not buy it yet. They didn’t really have that much information on how it was gonna be distributed or whether it was gonna be on exchanges or not. Whether you could buy this thing on Bitrex or whatever.

Aaron Lammer: So whether it’s a token sale or an ICO, whatever you wanna call it, the goal was to sell up to $34 million, I think was the max, in tokens using a variable pricing scheme. I think they were priced between 27 and 92 cents. I have to admit, naively, when I heard about this, I was like, “Oh, wow. Well, that’s strange, but it’ll probably work. People buy all kinds of bullshit. They’ll probably buy this.” Right?

Jay Kang: Yeah. But maybe not anymore. Maybe it was a time thing.

Aaron Lammer: That’s what I would be thinking if I was them. I think, to their credit, I would be like, “Woo. Couldn’t have landed at a worse time.”

Jay Kang: It was a bad time, yeah.

Aaron Lammer: It was just as Ethereum was bottoming out and also people like Vitalik were saying, “Price doesn’t even matter.” And it was just kinda like, ehhh, I’m gonna buy… The other part I didn’t really see coming was how hard it was gonna be for people to buy these tokens who were normal people. Which I should’ve seen ’cause we’re normal people, and it’s taken us forever to be able, even able to do basic stuff like get Ethereum into MetaMask. They’re hit with a double whammy of, wow, this is kind of a shitty time to wanna buy Ethereum, and also it’s really hard to then trade that Ethereum into CVL tokens.

Jay Kang: Yeah, and I think that there was also this fundamental miscalculation, in which, I kind of get what the… Look, this is pure speculation. Nobody said this. But I imagine that what they were trying to do was to get some very influential, or somewhat influential, people in media with large social media followings on Twitter or whatever, to discuss this thing to get the public excited about it, but to also get the types of people who have invested in other coins excited about it. Not because they believe that the people who are tweeting about it matter, but almost as sort of like, reverse engineered. Well, if that person is tweeting about it, then more suckers are gonna be into it or more people will know about it, and therefore I should buy into it, too. That type of thing. You know?

I just don’t know if… This is something that happens a lot in our business outside of crypto, which is that it’s a very, very, very bad bet to bet on media people and their Twitter accounts. You can’t base anything on it, and we’ve seen the failure of everything from certain news organizations that were sprouted up in the past five years, to all sorts of things. Media Twitter does not matter. It is a ecosystem unto itself, full of shit. The idea that it would help promote a coin, I get what the idea was behind it, but I wish they had come and asked you and me about it, Aaron, because we would’ve told them, “Listen.”

Aaron Lammer: I think they did ask us about it, didn’t they?

Jay Kang: I know. In a more private moment, they would’ve been like, “Listen. Should we rely on these people, is that gonna actually help?” And I’d be like, “Listen. There is nothing that media Twitter has ever helped.”

Aaron Lammer: I’m not so sure that they really thought that this was gonna go down with media Twitter. My assumption was that they were like… You look at the BananaCoins and the Dentacoins of the world finding buyers, and you’re like, “How could this decently well thought out real thing with an office and ties to ConsenSys and legit people, ish, behind it,” more so in the journalism world than the crypto world. I’m not sure people in the crypto world know who any of these people are. It doesn’t seem like a terrible bet.

The part where it breaks down for me isn’t the lack of influencers. It’s that I would never try to sell a new coin to a bunch of people who’ve never bought any coins before. I would always rather be the project that the guy who buys ICOs, this is his 19th buy, is into. Then Civil seemed like it was trying to appeal to a first time crypto buyer. Whether they’re from the journalism world or Silicon Valley or wherever.

Jay Kang: But that’s what I mean. That’s why I was saying that I think it was more… From what I know about ICOs, and you and I did some research on them at the time when we were going to invest in them, and thank God we didn’t.

Aaron Lammer: Ah!

Jay Kang: Yeah, okay. It depends how early on we’re talking about. In our like, 17 separate attempts to.

Aaron Lammer: It’s possible that we would’ve gone like, 100 X and then lost like, 98 of those X, but still be 2X. Depending on what we bought.

Jay Kang: Yeah. That is true. Or there’s a chance that you and I would have a USB drive full of garbage that we paid a lot of money for.

Aaron Lammer: Or we would’ve ended up being like Ian Balina and we’d be faking getting hacked on the air.

Jay Kang: Yeah, exactly. Well, okay, so… When Ian Balina was a more influential part of our lives, you and I looked at a lot of ICOs and I think we came to the same conclusion, which is that almost all of them were bullshit, right?

Aaron Lammer: Yes.

Jay Kang: And that the way that they tried to hook people into it was to give some reason why other people would be excited about this thing. Not necessarily saying why this thing was revolutionary or why it was amazing, but like, hey, there’s gonna be a little bit of hype about this for this reason, right?

Aaron Lammer: Yeah.

Jay Kang: That’s why you have like, Floyd Mayweather and Paris Hilton and Steven Seagal and all these celebrities-

Aaron Lammer: The Floyd Mayweather/DJ Khaled one was literally a fraud. Those dudes are in jail now. Centra.

Jay Kang: Yeah, I know, but that’s what I mean. It’s just like, how do you build hype?

Aaron Lammer: Yeah.

Jay Kang: And I do think that if you ask the people who were behind this, that they would probably say that they didn’t expect, at the very beginning, for a lot of the investors to be readers who liked the work of Tom Scocca or any of the journalists who were involved in any of this. That they would expect that the types of people who buy ICOs would see that real people… These are all real journalists and a lot of them are very good journalists. Actually, I would say, I don’t know anyone who is involved in Civil who I would not say was a good journalist.

Aaron Lammer: There’s also dozens and dozens of newsrooms. It’s already, before it was even funded, it’s already made itself into a sprawling apparatus.

Jay Kang: Yeah, yeah.

Aaron Lammer: Which is to me a little bit like a, whoa, maybe we should’ve done this in the opposite order, kind of a question, but-

Jay Kang: Well, that’s what I mean. Your question of, okay, empirically, we know that the people who buy ICOs will buy anything as long as… So why wouldn’t they just buy this thing that is more real, that has real people attached to it?

Aaron Lammer: I have a hot take. It’s too real.

Jay Kang: I actually agree with you, yeah.

Aaron Lammer: It is to your disadvantage to have a real product here. I think the realer, the better written, the more thought out, the more that a rational person can read what it says and criticize it, the worse. They did too good a job.

Jay Kang: Yeah, it was too real. Yeah. They could’ve just been like, “Do you hate the news? Here’s the fake news coin,” and that’s it. That literally… And then cut and paste a bunch of different white papers in it, and just be like, “This is the inner layer solution to such and such and such.” That might’ve been better. Maybe it was too real. Maybe they went through it in too good faith.

Aaron Lammer: It’s a little strange that there was already real publications on it that you could go see. That’s unusual for an ICO.

Jay Kang: Yeah, and some of those publications are good. There’s good writing on these things. Maybe it is too real.

Aaron Lammer: I would expect someone selling a journalism ICO, to ICO buyers, here’s how I would pitch it. I would be like, “It’s uncensorable media. Media newsrooms that you can fund based on your own beliefs.” That is how crypto people think about this. They don’t think about it in terms of microtipping your favorite nonfiction, prose stylist.

Jay Kang: Yeah. Or you could just make it totally insurrectionary and be like, every dollar that you invest into this is somehow leaching money out of the New York Times or something like that, you know?

Aaron Lammer: Well, I think there’s a very realistic… If you really looked at what publications would be funded by their readers using some sort of a decentralized token, you very quickly end up in like, Daily Stormer territory. That’s the audiences that are majority crypto to begin with. The audience for this project seems like they’re all like, “Ethereum what? I get a Coinbase account? And then I transfer it to my MetaMask?” And it’s like, okay.

Jay Kang: Yeah. And also they’re like, “Isn’t crypto bullshit?” I feel like that’s their first question.

Aaron Lammer: It’s not a judgment. I’m not like, “Oh, they made the wrong choice by trying to do high quality work and do something real.” I applaud them. Everyone I know who is an interesting, smart person in crypto, I haven’t heard a single person be like, “I wish Civil ill.” I think they should be lauded for the nobility of their vision and we should note that that vision is currently incongruous with Ethereum ICO maneuvers.

Jay Kang: Oh yeah, and here’s the other thing, which is that it could’ve just been bad timing, it could’ve been the fact that the launch didn’t work. And what ended up happening, for those who don’t know, is that ConsenSys had to buy like, 82% or something like that, of the coins that didn’t sell.

Aaron Lammer: I think they put in like, a $500,000 buy to juice the market, and then that was reported, which was even I feel like further dampening the market, ’cause it was like, we’re not gonna make it, and even what we have, was kind of phony.

Jay Kang: Yeah, was not real.

Aaron Lammer: And they’re giving up. That’s the end of that story.

Jay Kang: They gave the money back. They refunded it, and they’re gonna try again to do a sale with a sort of mechanism to distribute coins that’s a little easier. And I guess, I would just say that my general thought about this is that, at first I was very doom and gloom about it, but I think I’ve come around to something that you said a few weeks ago, which is that… It’s actually probably a positive story for crypto that you and I, who are inside this world and know all these people, we can at the very least vet the sincerity of the products that were being put out there. Maria Bustillos was not trying to capitalize on some scam moment. Like the people who wrote the pieces for Civil publications were not trying to capitalize on a scam moment. They weren’t trying to scam the public.

It just didn’t work ’cause we’re at an early phase of all of this. I think you’re right, in the end. I think that the problem that they had was that they played it too close to the vest. If they had gone in full scam mode, they probably could’ve figured out some bullshit way that this thing could’ve worked. But it is a little bit distressing that so much of the market doesn’t exist. That they fell this short of it. And I think that probably says something about the health of crypto and what people think about crypto more than Civil itself.

Aaron Lammer: Can I say one negative thing? I’ve tried to keep is positive here and I applaud their vision, but… When I got that Instagram ad that was like, “You can now buy CVL with Fiat.” I was like, “Oh. They did go low.” It’s not like they didn’t pull out all the stops and try to sell it like a scammy ICO. Even when they did that, the market didn’t really budge. And additionally, I do feel like, when I read that Joshua Benton piece in Nieman Labs and some of the more skeptical coverage, I feel like there’s a little bit of, you can’t drop all this vague language and expect journalists to just take all the buzzwords and react positively. This was a hard audience for a product like this, and therefore they’re sort of stuck between the dumbness of crypto and the demands of actually explaining things, which is what someone who covers the media, for someone like Nieman Labs, it’s their job to do.

Jay Kang: That’s right, yeah.

Aaron Lammer: I guess what I’m saying is, it’s gonna be a lot harder to sell crypto to journalists than it is the rest of the world.

Jay Kang: Yeah. I do wonder how much they thought journalists would buy this stuff. The other thing is, journalists don’t have any money.

Aaron Lammer: Yeah. That’s one miscalculation. I assumed that they were trying to sell it to like… Okay, so have like, a Laurene Powell Jobs putting a ton of money into The Atlantic. If you see a successful model for decentralized newsrooms on the Civil chain-

Jay Kang: Wait, she gave a bunch of money to The Atlantic?

Aaron Lammer: She bought The Atlantic, didn’t she? Or she’s like, the new investor.

Jay Kang: Oh, good. I’m happy for The Atlantic. They have good journalists there and it’s good that somebody is stabilized.

Aaron Lammer: Well, so here’s my point. Obviously, these are not profiteering like stakes that people are taking into these media companies. I think for the most part, rich people take a loss on the media, on average. Certainly like Chris Hughes did on the New Republic.

Jay Kang: That’s a whole other thing, but yes, I agree, yeah.

Aaron Lammer: If you could show that good work was being done and funded with these tokens, I can see a person taking, let’s say, just buying 50% of the Civil tokens and holding to them, almost as an owner of all of this stuff. There are models where someone could become a whale in this ecosystem, or several startup venture kinds of funds could be like, “We’re buying a bunch of Civil.” That’s what’s happened with a lot of these crypto projects. Just no one wanted this one.

Jay Kang: Yeah. Maybe the will in the future, I don’t know.

Aaron Lammer: Yeah. Look, if this happened during a bull run, do you think it works?

Jay Kang: Yeah, I think so. ’Cause everything works during a bull run. My biggest regret in crypto, Aaron, is that all the funny crypto, funny to us at least, dumb crypto ideas that we had for ICOs at conferences and stuff, we should’ve just done them during the bull run. We’d be so much richer than we are now.

Aaron Lammer: I feel like that’s always the kicker of crypto, though. If you start planning during the bull run, you catch the absolute bear moment by the time you’re actually doing it.

Jay Kang: You’re right. Okay, so what we should do now is that we should be planning our conference right now.

Aaron Lammer: That’s also kind of like the social-

Jay Kang: Con Con.

Aaron Lammer: Con Con. Con Con is coming in 2019. If we have to just invite like, nine listeners to come sit on the floor of the Crypto Cave and listen to [inaudible 00:54:48] that will be Con Con. That’s how miners think about this stuff, right? If you’re buying mining equipment during a bull run, you’re gonna get fucking crushed. Mining equipment’s super expensive, it’s super competitive. If you’re buying in a bear market and you get your equipment and it comes online just during that bull run, you do really well. So you’re kind of like always timing that cycle.

There’s some pretty crazy stuff that’s come out. I’ll let you get out of here in a second, but did you see the stuff about the tariffs on miners under the Trump China deal? It’s kind of a big deal. 27% tariff on miners. That’s totally skewing the economics of mining if you’re paying 27% on top of the already very expensive new Bitmain products. What do you think this does?

Jay Kang: It probably just means that mining will stay in China, right?

Aaron Lammer: This whole thing with Ripple, where it’s like the Trump White House is being pushed towards Ripple because of threats of Chinese mining centralization. I realize that’s not an actual narrative, that’s just something I read on CoinDesk or something. But it’s pretty crazy. Or I think Nuriel tweeted it out or something. In the mining war between the US and China, it’s gonna tip pretty heavily towards China if every US miner is paying that tariff.

Jay Kang: Yeah. The thing that won’t happen is that the United States, without Chinese labor at all, will be able to create a price competitive miner. There’s no way. There’s no, I guess, grassroots option here.

Aaron Lammer: Do you think there could ever be an American Bitcoin movement where it’s like, “Only buy American. I only buy Bitcoin mined in America.” Or like people-

Jay Kang: No.

Aaron Lammer: Or if someone just creating a clone of Bitcoin that’s just American Bitcoin.

Jay Kang: No. Well, there is a Trump coin, so I imagine that’s close to what they were trying to get at.

Aaron Lammer: But that is what would happen if our economies were really deep in Bitcoin, is that people would be wanting to create crypto variants that were more advantageous to their own national situation, right?

Jay Kang: Yeah. Like the ruble Ethereum or whatever is coming.

Aaron Lammer: Oh yeah. And whatever happened to that Bolivar coin?

Jay Kang: I don’t know. Venezuela, at this point, seems so much like the novel that would be written about that type of political situation, that I can’t even tell what’s going on there anymore. It’s just insane.

Aaron Lammer: I feel like these weird holes of history opened up Venezuela right now, and one level, I’m like, that could be the beginning of the like, Bitcoin takes over all of these developing economies story, or it could be like, “And then Venezuela and Bitcoin both vanished from the earth.”

Jay Kang: Yeah, no, I think it’s either gonna be one of the two.

Aaron Lammer: Alright, Jay, this has been a pleasure. I’ll see you next week.

Jay Kang: Yep.

Aaron Lammer: Later.

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

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