With help from Derek Robertson
As the value of cryptocurrency surged to new highs in recent years, so did the political energy of its backers.
But now, the market has crashed.
Crypto markets have tanked before, but this is the first election cycle in which crypto’s backers have been throwing their weight around in politics, as voters, activists and donors. So what will the political fallout be? Where does that political energy go?
Three places to look:
Campaign funding: Most recently, Sam Bankman-Fried, the billionaire founder of crypto exchange FTX, dumped more than $10 million into Tuesday’s Democratic primary in Oregon’s sixth congressional district. It was not sufficient to elect Carrick Flynn, who shares his belief in effective altruism, a utilitarian approach to philanthropy.
That sort of giving might start to look even more quixotic with the market down by more than half over the past six months, but don’t expect it to dry up. A lot of crypto players still have money, and they’re interested in injecting their ideas into the political mainstream. Alexander Grieve, a crypto industry lobbyist with Tiger Hill Partners, said he hasn’t yet seen any signs that the biggest players are scaling back their political giving. “For the most part, the folks giving are all from large, well-capitalized market players,” he said.
Lobbying: On the influence side, by injecting a jolt of urgency into the policymaking process, the collapse last week of the stablecoin Terra is likely to make crypto lobbyists, if anything, even busier.
Citing the collapse, crypto critics, including Sen. Sherrod Brown, D-Ohio, have renewed calls to regulate stablecoins. In a hearing last week before the Senate Banking Committee, Treasury Secretary Janet Yellen endorsed doing so by the end of this year
One sign that influence efforts are going full steam ahead is that the Blockchain Association, an industry lobbying group, continues to add new members, with DeFi firm Chia Network announcing its membership on Wednesday.
“With regulation closer and closer,” Grieve said, “lobbying will increase.”
Ground-level politics: This is a true wild card. Even before the Terra wipeout, the dramatic twists and turns in crypto markets were causing mental health problems for some young investors.
Fans of Terra and its sister coin, Luna, had nicknamed themselves “Lunatics,” a sign of the mania taking hold in that corner of the crypto-verse. Things have taken a darker turn in recent days, with some investors who lost it all on Luna contemplating suicide in online posts. The top of the Terra subreddit, an online forum for users of the stablecoin, now features a link to helplines around the world.
A handful of observers are starting to wonder if this could also fuel a new strain of politics, just as the despair of the Great Depression contributed to the rise of fascism and the spread of communism, and the last global financial crisis led to Occupy Wall Street, the Tea Party and other activated, anti-establishment movements.
There’s an optimistic case. Writing in the New Statesman, a progressive political publication, Portugal’s former secretary of state for European affairs, Bruno Maçães, takes a rosy view of the political consequences of this sort of pain. He predicts it will spur crypto holders to launch a political movement consistent with the ideas of the ancient Greek philosopher Plato, in order to forge “a world where mathematical truth becomes the overriding political authority.”
And there’s a much less optimistic case. Brianna Wu, a progressive activist and former Massachusetts congressional candidate, wrote last week on Twitter: “I am convinced the disillusioned young men that will lose everything in the upcoming cryptocrash will turn to fascism, not socialism, as they look for someone to blame.”
Indeed, much of the despair among holders of Terra and Luna was tinged with outrage over unproven suspicions that the collapse of the stablecoin was the result of a sophisticated financial attack by a large financial player.
And Wu knows a thing or two about the fallout that can result when groups of aggrieved young men congregate online. After wading into an online controversy about misogyny in the world of video games, she ended up on the receiving end of a campaign of harassment, part of a blowup that came to be known as “Gamergate.” The 2014 episode famously prefigured the online culture war dynamics that colored the politics of the Trump era.
By one anecdotal metric, her pessimistic assessment is winning out. In a brief interview, she told me that her prediction had provoked a remarkable backlash.
“That is the worst set of death threats and rape threats,” she said, “I’ve gotten in a long time.”
Kevin Owocki is sort of a throwback — think the Whole Earth Catalog with a twist of crypto-world year-zero-ism. Through his platform Gitcoin, Owocki and his colleagues have raised $60 million to fund various open-source Web3 projects, generating hard receipts for the sometimes ethereal idealism at the heart of the Web3 movement.
His success has made Owocki one of the movement’s biggest celebrities, embodying the optimistic belief that the blockchain can be used to solve big, species-scale problems from our climate change response to pandemic preparedness,
We talked this week about his mission to “greenpill” the world, his love of skeuomorphic design, and the historical reference points for the Web3 movement. Our conversation, edited for length and clarity:
How do you explain Web3 to people outside the community?
We’re taking property rights and extending them into the digital sphere. On Web2 we’re all just serfs on Zuckerberg’s land, right? We don’t actually have property rights. The ability to have property rights in a democracy was so important to the flourishing of capitalism and trade, because you could actually trust that your land wasn’t going to be taken by some lord.
I live in Boulder, Colorado, and every hippie who got a $20,000 bungalow in 1971 is now sitting on a $1.5 million home. Our generation is building out and going west in the digital sphere, as opposed to the physical one.
What is the “green pill”?
Economics is a way of coordinating humans towards an outcome. Ethereum is a multi-billion-dollar network that’s global, transparent, and immutable, so it can’t be corrupted. It’s a programmable substrate for finance and human coordination.
We have global coordination failures on things like climate change, and prevention of worldwide pandemics, and funding our digital infrastructure. So let’s use this global coordination substrate to solve some of these global coordination failures.
Have you heard of skeuomorphism?
Skeuomorphism is asking the question, how much does the old resemble the new?
Venmo-ing your friend is very skeuomorphic. My big idea here is to find the non-skeuomorphic ideas in finance. The ultimate example is how Gitcoin grants work. Have you looked at quadratic funding at all?
Every quarter on Gitcoin, we deploy $3 million of matching funds to a crowdfunding campaign. And we don’t do one-to-one funding, we match with quadratic funding. That means that if one project has 10 contributors that give 10 total dollars, and project two has one contributor that gives 10 total dollars, project one will get way more of the matching funds. So if you give $10, then your contribution can have $100 or $1,000 worth of impact. We’re optimizing for the breadth of support and not the depth of support. It pushes power to the edges away from whales and other central power brokers.
It creates more democracy in how you fund your ecosystem. It’s about what your peers think of your project, as opposed to what some powerful person thinks. — Derek Robertson
As of yesterday, if you’re one of the fortunate few with a ton of crypto still burning a hole in your pocket you can now use it to purchase a TAG Heuer watch, that tried-and-true totem of Swiss luxury.
Given that most of crypto’s value is still predicated on its function as a speculative investment or trojan horse for future tech rather than actually, you know, as a currency, it’s generally notable whenever a major retailer decides to accept it as payment. But there’s a special relevance to its embrace in the world of luxury watches, which itself has an intense, collector-focused, speculative subculture to rival crypto’s.
For example, when the luxury watch world cozied up to the NFT market last year a Jacob & Company token sold for the equivalent of $100,000 in ether — a price comparable to many high-end physical watches. There are plenty of similarities between the two markets: Not just in how the items function as speculative investments, but in their fundamentally ornamental nature as status symbols.
To their most idealistic boosters, crypto and NFTs both have a transformative second function — the former to familiarize people with blockchain technology, and the latter to enable easy proof of ownership on that blockchain. That might be the case in the future, but for now they’re primarily shiny money-making objects, making them a perfect match for the luxury watch world. — Derek Robertson
Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Konstantin Kakaes ([email protected]); and Heidi Vogt ([email protected]).
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