Crypto has only ever cared about “number go up”
“Number go up”: an increase in asset price
It is time to dispense with the notion that the cryptocurrency industry cares about the movement’s founding principles. Though their marketing keywords still play-act at it, the sector’s embrace of the Trump administration extinguishes our last little hope the original soul remains.
The Trump family has launched a crypto company, multiple memecoins, allied with a crypto-shilling millennial dictator jailing his countrymen and others without due process, and most recently launched a stablecoin that an Emirati company is using to invest in Binance, an exchange under U.S. federal supervision after previous a money laundering conviction.
The conflicts of interest and potential for corruption presented by Trump and his allies’ ventures into crypto are staggering. What’s not one bit surprising is that the crypto industry by and large supported the Trump campaign. This is because all they have cared about since growing from hobby to industry is number go up.
The crypto industry’s $245 million in campaign support for this administration and subsequent participation in performative White House gatherings quite plainly reveals they do not really care about personal liberty and privacy, freedom from government coercion or unfair taxation, or democratizing the financial system.
On account of the clever design of the bitcoin protocol (Austrian economic foundations aside) I’m going to attribute a degree of earnestness to its inventor(s), Satoshi Nakamoto. The concept and the message encoded in its first block are a call for independence from the nexus of big government and big banking.
I think these founding principles miss a lot of the complexity and compromises that lurk in the edifices of modern finance, government, and regulation, but there they are nonetheless. They are right there in the title: “a peer-to-peer electronic cash system.” Bitcoin is very difficult to censor, pseudonymous, and open-source.
These principles made Bitcoin, the first working cryptocurrency, appeal first to a mix of anarchists, libertarians, cryptographers and computer scientists, curious or unorthodox economists, political dissidents, and foresighted criminals.
Unfortunately for those first users attracted by principle or intellectual curiosity, something started to happen that was inevitable once a sufficient number of people found bitcoin credible or useful. The number started to go up.
Bitcoin’s design awarded many, many, coins to early adopters—you could mine new coins on a home PC, or simply visit a ‘faucet’ website that would drip free bitcoin fractions into your wallet. The hard limit of 21 million tokens plus its persistently decelerating schedule of new mining rewards means it delivered outsized rewards to early adopters, who self-bootstrapped as ardent evangelists who conveniently stood to gain most from any rise in value.
The movement started in primarily text-based forums like bitcointalk. People gambled coins on dodgy sites, stole from each other, discussed cypherpunk and anarcho-capitalist theory, and generally had a good time with their new hobby.
But the number, in fits and starts, went up some more. And like any hobby that gets popular enough, eventually the hucksters, scammers, and finally the suits showed up, once it became clear you could trade bitcoin for dollars. They never left. In fact, they’ve more or less run the show ever since.
Bitcoin’s design decisions and trade-offs (some ideological, some to foster decentralization) meant that it would fail as a peer-to-peer cash system after widespread adoption. The more popular it became, the higher transaction fees would climb, thanks to limited space for transactions on-chain.
With bitcoin destined to fail as cash, crypto needed a new narrative, and the community found one: digital gold. This narrative emerged as a force some time around the 2017 “ICO craze,” the first real cryptocurrency bubble to hit the mainstream in a big way.
The ICO craze was an entertaining clown show and largely unaccountable crime wave that involved selling unregistered securities for vapourware projects, transmuted by a digital magic wand into blockchain tokens. Around this time, it became popular to think of the ‘blue chip’ cryptocurrencies as digital gold—not just cash you spend, but a bearer asset you acquire and hold to become wealthy. This narrative has some truth to it. Bitcoin’s supply cap and the ever-increasing difficulty of mining new coins mimics gold’s supply properties.
In every generation, some proportion of people will be gold bugs, so this was a great narrative. I now believe that a good part of my generation’s latent gold bugs are instead crypto holders.
Bloomberg’s Tracy Alloway correctly says that one of bitcoin’s strengths (and crypto’s, by extension) is that it can easily and organically adapt its narrative to suit market conditions and metagames. These narratives can overlap and combine. First there was digital cash as the killer app, then dark markets, digital gold, NFTs, and now stablecoins.
But the founding narrative, the one coded into bitcoin and every cryptocurrency that followed and the primary reason for blockchains and decentralization in the first place, is a healthy (or paranoid) distrust.
Crypto does not even trust other participants on its own network, let alone governments and central banks that could abuse their powers for corrupt, conspiratorial, or repressive ends. Governments are the ones that unjustly tax citizens, bloat the ineffective bureaucracy, and dispense spoils to connected elites in smoke-filled rooms, to say nothing of more violent oppression.
By its own design (and the industry’s marketing) crypto is as much an ideological project as a financial one, meant to empower citizens, shrink governmental power, and disintermediate traditional financial elites. Has it done so? Does the industry even care to?
The most nakedly corrupt U.S. government in modern history is now here, before our eyes. Examples of its intersection with the worst of the crypto world abound. Justin Sun, a wealthy schemer with a history so shameless he isn’t even respected in much of the crypto community, made a $75M purchase of Trump’s World Liberty Financial tokens this year, and his troubles with the SEC coincidentally went away. Now, the top Trump memecoin holders like Sun had a not-very-delicious dinner with the President, with one company explicitly saying they were trying to buy influence.
The Trump sons, Commerce Secretary Lutnick’s co-CEO sons at Cantor Fitzgerald, and Special Envoy Witkoff’s son, to name a few, have all found themselves involved in lucrative crypto deals with counterparties who just so happen to be getting favourable government treatment.
Any news reader has witnessed the administration’s attacks on civil liberties, free speech, and the rule of law these past 100 days. Let’s be honest with ourselves: beyond the ‘Ctrl+F’ keyword-based cuts to wrongthinking agencies and funding programs, and Trump’s promised tax cuts and deregulation, could what we’re seeing be called “small government” or libertarian?
As for sticking it to the banksters, Wall Street has embraced crypto, with dozens of exchange-listed products and Fartcoin ETFs probably coming soon. After years of dismissal, TradFi types took another look at the bid-ask spreads in thin crypto markets and decided they were too good to pass up. Banks are not done for, and were never going to be, because they are useful institutions in myriad ways.
In short: how can the crypto industry support what is happening? Because the administration’s not-very-implicit promise is that they will take action to make number go up. And the bulk (not all) of the industry is willing to discard the founding principles for that, as they have been for some time now.
This is not a bitcoin or a crypto obituary piece. I may be a critic, but I believe speculation, gambling, and esoteric finance that most people think asymptotically approaches the ‘practically useless’ line should all be legal. They’re entertaining and intellectually stimulating for some, and their ruinous tendencies are manageable with good regulation. Crypto more or less falls into the same bucket. To pull a line from online flame war discourse, we should “let people enjoy things.”
Why rag on crypto in particular, then, when plenty of other corporate lobbies scramble to do deals with the administration? The difference with crypto is that the founding principles are the raison-d’etre. Take those away and you’re just running a slow, expensive database.
After 16 years, though, the burdensome principles have been jettisoned from the crypto rocketship. Various words remain, printed on the side: decentralization, freedom, transparency, responsibility. The lone and violent void stretches all around.
Even before Trump converted from skeptic to salesman, the crypto industry correctly ascertained that there was no bargain he and his party wouldn’t make for enough money and power. In pursuit of the number going up, they have embraced this toxic, authoritarian administration. Liberty and justice for all will be traded for the one thing that matters most.
The number? It’s higher than ever.