_{Brought to you by:}

"Optimistic people will see opportunity in suffering and pessimistic people will see suffering in opportunity."

— John D. Rockefeller

Thursday premium mailbag

Q: Is bitcoin a special snowflake?

"Special snowflake" is redundant because the whole thing with snowflakes is that they’re each unique, right?

But the phrase seems to be catching on nonetheless and I think that’s instructive — in two directions: Crypto people are accepting that bitcoin really is a memecoin and non-crypto people are accepting that bitcoin really is digital gold.

These things can be true because gold itself is a meme; it just happens to be a really old one. 

But people haven’t always thought so.

JPMorgan famously said, "Gold is money. Everything else is credit" — and Ludwig von Mises’ "regression theorem" stated that gold’s value as money could be traced back (ie. "regressed") to its original utility value as a commodity.

I think that bitcoin’s big contribution to economics might be that it’s shown both of these ideas are incorrect: Monetary "premiums" don’t have to be a premium over and above some original utility value. 

Money, it turns out, can just be money. 

Q: Does bitcoin even have a monetary premium? Or is it a speculative premium?

That’s just semantics — which is my favorite thing, so thanks for the question!

Gold has earned its "monetary premium" by holding its real-world value over 2,000 years — by some measures, its purchasing power is exactly what it was in Roman times.

Still, you can’t buy anything directly with gold, so (contra JPMorgan), it’s not money. But it is "money-like" because holding it will maintain the purchasing power of your savings.

Bitcoiners, however, are more ambitious than that: They want bitcoin to increase their purchasing power — by a lot, not just maintain it — and they want it to happen in years or decades, not millennia.

So if gold has a "monetary premium" because people buy it to preserve their purchasing power, I’d argue that bitcoin has a "speculative premium" because people buy it to increase their purchasing power.

If you’re thinking, tomayto, tomahto, I wouldn’t blame you — but as long as we’re rewriting economics, we might as well be precise, right?

Q: Are my ETFs safe?

Yes — except for your crypto ones!

The FBI issued a public service announcement this week warning that "North Korean malicious cyber actors conducted research on a variety of targets connected to cryptocurrency exchange-traded funds (ETFs) over the last several months." 

That’s noteworthy because no one ever worries about hackers stealing their stocks, for good reason: Hackers wouldn’t normally bother with your brokerage account because US equities exist in a Hotel California-like ecosystem (the DTCC), from which they can never leave.

There’s no point stealing something you can’t take with you.

Bitcoin and ether ETFs, however, are different because they are receipts for crypto that you can take with you.

It wouldn’t be easy, but if a North Korean hacker could gain access to an ETF issuer’s systems (probably by posing as a developer not from North Korea) and then somehow convince the issuer’s custodian to send some crypto somewhere, there’d be no retrieving it.

We like to mock regulators for fretting that crypto introduces new attack vectors on traditional finance, but this time it really has.

Q: What do I do if I suspect a developer is secretly North Korean?

Ask them to say something mean about Kim Jong Un — if they decline, you probably have your answer.

Q: Will crypto’s fate be decided in November?

That is increasingly the consensus. Early hopes that Harris would adopt crypto seem to be fading at the same time Trump seems to be even more all-in on it. 

On the latest episode of 1000x, Jonah van Bourg said he expects crypto to go "directly into banana zone trading" (aka, trade parabolically higher) if Trump wins and Crypto Twitter is filled daily with warnings that crypto will go parabolically lower if Harris wins.

Directionally, I agree, but I’m not sure about the parabolic part. 

Would Trump really be that good for crypto? 

Getting Gensler out of the way would, of course, be incredibly helpful, but even with Trump, there will still be an SEC that thinks some cryptocurrencies are securities, and it’ll be years before we know which ones.

Also, however friendly regulators might be, the industry will still have to build things people want — and it’s not obvious to me that the SEC is the primary thing that’s been preventing the crypto industry from doing that.

If elected, Trump would make it easier for crypto builders, yes, but they’ll still have to build things and building things will still be hard.

And would President Harris really be that bad for crypto? 

She might be. Her silence has been deafening, especially for beleaguered crypto democrats hoping for a kind word or two. So it increasingly feels like a Harris SEC wouldn’t be much of an improvement over the current one.

Either way, though, crypto is meant to be permissionless, right? 

If so, isn’t saying it can only succeed with the permission of US regulators tantamount to saying it was never going to amount to very much anyway?

I’m enough of an optimist to think that if crypto is genuinely valuable, it will find a way…no matter who’s in the White House.

So I’d fade the current election consensus — in both directions. 

Q: Could a Harris administration be good for crypto?

Maybe by accident?

Like a cactus growing in the desert, a crypto industry that develops in a hostile regulatory environment might turn out to be more resilient than one that develops in a friendly regulatory environment.

Because if creating a permissionless financial system is the goal, wouldn’t developing without permission be the best way to get there?

I wouldn’t expect anyone to volunteer to live in a crypto desert, but if it comes to that, there might be opportunity in the suffering.

— Byron Gilliam

Tired of panels? We got you covered at Permissionless. Hear from the leading voices across different ecosystems on the design debates that will shape the future of the crypto space.

Intents Trading: Why AMMs Are Going out of Style

Joshua and Roee discuss Aori’s based architecture and ways to onboard and incentivize solvers. Tune in to see how they compare limit orders as intents and AMMs, and what Aori’s end goal is.

Watch or listen to 0xResearch on YouTube, Spotify or Apple.

Blockworks Research is conducting a survey to gain insight into the institutional staking landscape. This data will help industry leaders adopt their strategies as the industry matures.

If you're an institutional staker, we want to hear from you (and if you’re new to Blockworks Research, get 20% off of our service while you’re at it!)