Back to basics

Gm, everyone. It’s hard to know how to respond to a week like the one crypto just had. That’s in part because so much of this industry’s wealth, influence, and power has been accumulated by a cast of characters who charmed regulators and institutional money alike.

So what happens when those characters fail us like they did this week? We think it presents an opportunity to go back to basics—and to really get at the promise of crypto and decentralization. Today, we’re doing just that with a focus on financial privacy. Let’s dig in.

—Vincent

What Is Crypto After TerraUSD, Celsius, Voyager, and FTX…?

Bitcoin was created in January 2009 as a peer-to-peer digital currency network. Back then, there were no exchanges, broker dealers, lenders, custodians, mining pools, crypto payment and wallet providers, over-the-counter trading desks, crypto-linked debit cards, or digital asset banks.

Before anyone overused the phrase “it’s the wild west” and before the words “monkey JPGs” had any meaning beyond pictures of primates, there was just Bitcoin, a digital asset.

In the early days of that original digital asset, the Bitcoin community was dominated by coders who saw it as a software improvement on money. Later on, economists would view Bitcoin as the reintroduction of private money (but they’d stop short of labeling it as a replacement for fiat).

But at its core, Bitcoin was about financial privacy. It’s that privacy that Satoshi Nakamato had in mind when hatching the plan for a new digital asset. In fact, Section 10 of Satoshi Nakamoto’s Bitcoin white paper lays out how transactions would be visible but anonymized:

• “The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone,” Nakamoto wrote.

• “This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the ‘tape,’ is made public, but without telling who the parties were.”

In the years since that white paper was first published, Bitcoin and its underlying technological theses have evolved in meaningful ways—perhaps most importantly, Bitcoin has become a major tool in global finance…which inevitably introduces complications.

Prior to the crash of TerraUSD, Celsius, Voyager, and now FTX, Bitcoin was on its way to becoming an asset class that global investors would view as a necessary part of their portfolios. And it was different from the stocks and bonds that dominated traditional holdings to its very core—where those assets were designed to maximize returns or pool power, Bitcoin was designed to amplify the importance of financial privacy.

How that privacy took shape looked different depending on your viewpoint. Global financial regulators labeled Bitcoin an asset for evading the eye of the state. Which, in fairness, it can be.

• BTC took its place alongside cash, gold, and plenty of other assets that can be transferred without leaving a paper trail of where it had been.

• Inevitably, this level of financial privacy was attractive to illegal dark web marketplaces and terrorist groups.

But…that same financial privacy ethos also empowered dissidents, such as Nigerians battling police brutality, Belarusians fighting an oppressive regime, or Russians defying Vladimir Putin.

Bitcoin and other cryptocurrencies became useful for sex workers looking to anonymize transactions to circumvent a traditional financial system that consistently left them out in the cold. It became an indispensable tool for expats fleeing oppressive regimes and for citizens looking to avoid a downward currency spirals under unstable governments prone to hyperinflation.

Bottom line: The positive externalities of Bitcoin’s design for financial privacy far outweigh the negative. Those aforementioned examples paired with the recent revelations that crypto isn’t all that great for evading government sanctions suggest to even the non-pilled that the core crypto tenet of privacy is one worth bearing in mind. Our take? Privacy should be the industry’s north star as we navigate through the last several months’ damaging headlines and their inevitable fallout.

Throughout the last bull run in crypto, entrepreneurs and their companies became obsessed with courting institutional investors and their bottomless pockets. But perhaps that was misguided from the start—trying to get rich (and often doing it by building Ponzi schemes) distracts from the real reason we should be in this industry in the first place: to develop more ways for people to take advantage of the paradigm-shifting ability Bitcoin introduced to the world to transact using private digital money.

Big picture: There are still many people living in oppressive regimes or in states where the monetary system doesn’t serve them. As software, decentralized systems have the ability to transform the current traditional financial status quo for them and for so many others. But we can only deliver on that boundless promise when we have the right priorities.

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And that’s what you need on your radar today in crypto. Reply and tell us about a time when Bitcoin was useful for your own financial privacy. Have a good rest of your weekend and see ya Tuesday!