 | | for the week ending August 25, 2019 | | |
 | The latest Faketoshi Nakamoto
The latest effort by someone to present themselves as the creator of bitcoin says a lot about the propensity for drama in the ecosystem, Michael J Casey writes. Read more in THE TAKEAWAY below. | | |
 TOP TRENDS ON COINDESK | | |
Some of the big stories this week on CoinDesk.com...
DOLLAR’S REPLACEMENT? Bank of England governor Mark Carney said a central bank-supported digital currency could replace the dollar as the global hedge currency. Speaking at the Economic Policy Symposium in Jackson Hole, Wyoming, on Friday Carney discussed the need for a new international monetary and financial system (IMFS), noting that while the U.S. dollar has played a dominant role in the world order over the past century, recent developments such as increased globalization and trade disputes may have stronger impacts on national economies at the present moment than they would have in the past. Full story
SATOSHI CLAIM: Craig Wright, the Australian entrepreneur who controversially says he’s bitcoin’s anonymous inventor Satoshi Nakamoto, has made another attempt to cement that claim in the public domain. On Thursday, Wright posted the bitcoin white paper on scientific journal hosting site SSRN, citing himself as the author on Aug. 21, 2008. The self-certified posting of Satoshi’s white paper on the SSRN is unlikely to give his claim to have invented bitcoin any more validity. Full story
ETHICAL BITCOIN: Experts say Hamas is now using bitcoin for cross-border fundraising at an unprecedented rate. Still, even the largest estimates of terror financing in the region are apparently dwarfed by ethical bitcoin usage by civilians in the Gaza Strip, local experts tell CoinDesk. General awareness in Palestine of bitcoin and ethereum has increased since 2018, while freelance payments and remittances are reportedly the leading use-cases for bitcoin transactions in the Palestinian territories. Full story
CHINA PLAY: Tether is planning to issue a stablecoin pegged to the Chinese renminbi, according to a trader with ties to the company. Zhao Dong, an over-the-counter (OTC) trader in China and a shareholder of crypto exchange Bitfinex – which shares managers and owners with Tether – revealed the move on WeChat on Wednesday, saying Tether plans call the stablecoin CNHT. His peer-to-peer crypto lending business, RenrenBit, will support trading and deposits for CNHT when it is launched, he said. Full story
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 QUOTE OF THE WEEK | |  | ...it is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies."– Bank of England chief Mark Carney in a speech about a possible scenario in which the U.S. dollar is supplanted as the world's reserve currency by an entirely digital currency. Read CoinDesk's coverage of his remarks here. | | |
The Takeaway |  | | |
In case you missed it, a new self-proclaimed Satoshi Nakamoto came out of the woodwork last week, this one brandishing a “proof” based on numerology and an obsession with BCCI, the scandal-ridden bank that collapsed in 1991.
The widely debunked “reveal” from Bilal Khalid, aka James Caan – Khalid officially changed his name to that of the American actor – followed a host of equally absurd developments in a Florida court case against the other “faketoshi,” Craig S. Wright. These included a hand-written note to the judge in which yet another person, one Debo Jurgen Etienne Guido, also laid claim to being bitcoin’s secret progenitor.
Sensible minds in the crypto community remind us that this is all a sideshow, that these competing claims to bitcoin’s creation ultimately mean nothing to its value proposition. Still, it begs the question: why does it keep happening? Why do the scammers emerge so readily? What is about the crypto community that attracts a parade of false prophets?
Let’s take the question further: why does crypto generate so much drama generally? Bitter feuds over software forks; relentless conspiracy theories; disputes between maximalists, altcoiners, nocoiners and shitcoiners; competing social media memes; token “armies;” Twitter trolls; fraudsters of all kinds – it’s the crypto circus, and many of us secretly love it, at least in doses.
But why? How did a technology spawned by the most math-driven, nerdy and precision-obsessed fields of computer science give rise to Mexican telenovela-like stream of plot twists?
Other open-source tech communities generate their fair share of drama too, of course. (Type in “Linux community” into a Google search and it auto-completes to “Linux community toxic.”) The leaderless structure of open-source projects means there's no central authority or pooled profit interest policing behavior or managing the external messaging.
Still, the crypto soap opera takes things to another level of madness. Why?
Learning from ancient history
My attempt at an explanation begins with the fact that, unlike other technologies, this is one is fundamentally about money.
“Money has historically been a political process, a process through which people or states or some kind of entity consolidates authority over others,” says Bill Maurer, Dean of Social Sciences at the University of California, Irvine, an anthropologist who has studied the culture and history of money. “So, you have this big paradox with something like bitcoin, where its very idea is that there shouldn’t be any one person or authority in control…But because of that, you get this cacophony of voices, each claiming to have some kind of truth and striving to be the one in control.”
The unfortunate reality is that while decentralized, blockchain-based monetary systems restrain political or corporate influences over those systems, this restraint only exists on-chain. There’s no way to stop the power plays – the politics – that emerge whenever someone wants to upgrade or fork the software or when different coins compete for users. There is no escaping the politics of money; it doesn’t disappear just because there’s no government in charge of the monetary policy.
Powerful people have always imposed their ideas of money onto others to reinforce their wealth and dominance. Maurer notes that the emergence of gold and silver as dominant currencies in the ancient world stemmed because of the fact that wealthy elites had previously acquired status objects composed of precious metals. As they consolidated their power over government and laws, they made those metals currency standards.
Bitcoin has its equivalents of those ancient elites. Big mining firms, early adopters/investors, and core developers all have an oversized interest in promoting it. The same goes for the “whales” of Bitcoin Cash, Bitcoin SV, ether and other cryptocurrencies.
This isn’t to say the crypto elites don’t deserve rewards for being early to the game or for helping to develop and secure an ingenious new form of money. Nor can one equate the power they wield – all within a system that doesn’t actively prohibit anyone from mining, owning or contributing code to bitcoin – with that of governments that use military might and judicial threats to control access to their money. I raise it simply to point out that these influential players are both incentivized and financially enabled to aggressively push and promote their positions.
Believers gonna believe
These competing, financially enabled voices are battling for the minds of users, which means they’re appealing to people’s passions and emotions.
It’s unavoidable. You can be as nerdy and detached as the most cerebral cryptographer, but if you want your favored currency to grow to the point that it becomes money, you must engage in cultural production. You want a shared story of belonging to develop around it, one that’s widely accepted enough that your currency is widely held and used.
Of course, you also need your currency to have intrinsic qualities – those of scarcity, fungibility, transportability, durability and divisibility are common to both gold and bitcoin, for example. But in and of themselves, they aren’t sufficient. For something to become money, it needs belief.
Here we enter into the realm of myths and storytelling, the foundations upon which the most powerful systems of human organization are built – nations, religions, brands and, most of all, money.
Think of the importance attached to the unknown identity of bitcoin’s founder. It not only denied critics a target to accuse of running a get-rich-quick scheme; it gave the bitcoin community its genesis myth. That, in turn, has fed the posturing over Bitcoin Cash and Wright’s Bitcoin SV, the latter’s name alluding unabashedly to the prophet-like notion of “Satoshi’s Vision.”
But here’s the thing: “believers” are vulnerable to manipulation. (Just look at how the powerful have gotten religious communities to do their dirty work through the ages, from priests and mullahs stirring up “ethnic cleansings” to America’s televangelists fleecing their congregations.) Sadly, the increasingly wide communities interested in cryptocurrencies are similarly vulnerable – the thousands hoodwinked into BitConnect, for example.
And in a situation where specialized knowledge about the complex workings of cryptocurrency is limited, those vulnerabilities are heightened for the many who don’t fully grasp the tech.
“Because it’s supposed to be about the code and the mathematics, and not everyone understands the code and the mathematics, people take advantage of that to try to sell you whatever they want to sell,” says Maurer. “People are desperate to have a firmer foundation for their beliefs. So, it’s easier to fall for someone that offers that to them.”
I’m not saying the “trust in code” mantra isn’t useful when applied to the decentralized management of a cryptocurrency’s monetary policy or payments system. But it’s naïve to believe the human networks gathered around this technology are somehow immune to the failings of humanity itself. Worse, that belief enables the scammers.
So, if we want to rid ourselves of the faketoshis, snake oil salesmen, and general cultural chaos of crypto, it’s up to we humans, not the code or the coders per se, to come up with ways to mitigate those failings. Human governance matters.
Alternatively, we could just leave things as they are. Sit back, grab some popcorn. Enjoy the circus.
-- Michael J Casey |
 BEYOND COINDESK... | | |
| FORBES: A legal spat is currently ongoing between two firms that used the words “blockchain” and “capital” to title their business entities. Yes, there are two Blockchain Capitals, and the one in the U.S. is suing the one in the U.K. for trademark infringement, according to a Forbes piece. They may struggle to win though, the article suggests, as trademarks are territorial. Further, there may be issues over the generic terms used in the name. |
 WHAT WE'VE BEEN UP TO | | |
So many crypto introductions start with this question: what?
That’s an important question, essential to fully understanding the asset class – but in our first report aimed at institutional investors, we decided to look at “why?”. Our aim is to provide a glimpse of why this asset class is compelling and worth a further look.
In Crypto in Context, we talk about the value proposition, who is buying bitcoin, and correlations with more traditional assets. We don’t tell you how a blockchain works, what a hash function does or the secret of Schnorr signatures. We look at the opportunities of and the barriers to crypto investing. We don’t try to convince you that bitcoin is what your portfolio needs – that’s up to you.
If you’d like to find out more, the report is free and you can download it here.
And watch this space – there’s more coming! |
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