The Crypto Comms #63; ‘Web3’ vs Sound Money

The Bitcoin train has left the station. It’s on a one way ticket up and to the right, but that doesn’t mean it’s going alone. Litecoin remains the only cryptocurrency with a realistic shot at competing with Bitcoin; low hanging fruit that’s ripe for the plucking.

In this issue:

• Bitcoin needs competition
• NFT gaming
• You wouldn’t steal a handbag!
• Latest happenings
• Listening material

Bitcoin needs competition

Bitcoin SV, Bitcoin Cash, and all other SHA-256 PoW cryptocurrencies have lost most hashing power to Bitcoin. They are not only vulnerable to 51% attacks, but absolutely compromised. Litecoin remains the only proof-of-work cryptocurrency that stands a fair chance at being a main competitor to Bitcoin; which is desirable for sound-money advocates who value those principles regardless of which protocol embodies them.

As you may know, I am a ‘Bitcoin moderate’. The religious zealotry that comes with many Bitcoiners is not for me. It invites laziness and a tunnel-vision mentality, often confused for some kind of higher state of consciousness. Profit-motives are not wrong, nor are they the only mediating factor as to whether a project is worth putting time and money into.

Yesterday I wrote a Twitter thread explaining why my enthusiasm for this space has nose-dived. Absent progress in the world of atoms, which has lagged behind the world of bits, the crypto space is dooming itself to repeated ponzinomics cycles in the ‘Web3’ space, a future in which everyone is behind a screen trading jpegs, meme coins, NFTs and other trivial data. I shudder to guess what newer generations who are taught to fear the outdoors might think is ‘normal’, these days. It seems more like one generation conning the other (and each other) to me.

People completely understand why someone would cheat in an online game, a boxing match or sport, especially if they’re paid to do it. But when you consider that players might cheat in financial markets, where trillions of dollars are involved, then you’re a conspiracy theorist. Go figure.

NFT gaming

In any case, being someone who was brought up in between worlds (digital and non-digital), it’s not especially hard to appreciate both sides. But since this is all about crypto, let’s look at what NFT gaming has to offer in 2023. Indeed, what do NFTs actually bring to the table that the Steam marketplace does not solve already? High fees (until you reach a working off-ramp), exploits and hacks (happening weekly), and the worst user experience since Windows Vista (meta mask).

One promise of NFT gaming is to tokenise assets in-game and be able to buy and sell these assets in an open marketplace. This tokenisation, that is, registering every asset as an NFT, is something that the gaming world has already discussed ad nauseam (and rejected). The last big rejection came in the previous bull market when Stalker 2 developers announced that the game would include NFTs. The announcement was later retracted due to a massive backlash. But attempts to water down the gaming scene in the same fashion were already present before. For instance, Creative Assembly’s decision to sell literal in-game textures in Rome Total War 2 (2013–2014) was met with a lot of pushback at the time too. It left many wondering if an unfinished product is at all desirable and precipitated the endless litany of half-finished early access games on Steam and similar platforms, many of which were dead on arrival. With NFT gaming introducing a direct ‘monetary’ incentive into gaming, one can only imagine what sort of marketplace this would create, especially in an era where AI bot managers are sure to increase. And I haven’t even mentioned the ‘everything as a service’ subscription trend, where you’d never really own the product.

How one sells this as progress is beyond my comprehension.

Beyond that, it’s no secret that triple A gaming has generally stagnated for a decade or so. Still, crypto investors think that NFTs in games are a fair trade. Either that or they know it’s just a short-term tool for extracting value from arbitrary entertainment data. To my mind, this says one thing loudly and clearly: we’ve run out of ideas, and we’re going to charge more for less regardless. Similar arguments could be made for property markets, cars, packaged food (shrinkflation) etc. And we’re told this is normal, or more egregiously ‘progress’. Jog on.

This is partly why it’s difficult to get excited about crypto narratives. We have too many ‘investors’ and too few genuine products; too many silver-tongued venture capitalists and too few builders. I myself am a word salad connoisseur, but the hustle has to be confined within reasonable parameters, which I’ve tried to honour over the years. When it comes to NFT gaming, the trade-offs do not make sense at the moment. The heart and soul of gaming has been ripped out, and cryptofinance promises to make it worse because it has neither (just like traditional finance).

You wouldn’t steal a handbag!

Beyond that, I do not see how a world where ever-smaller bits of data are ‘tokenised’ and barred behind a verification paywall can be called progress. In any case, this could only be ‘enforced’ by moving the goal posts for fundamental human rights, not dissimilar to what was done to many individuals during the scamdemic. The incremental steps that follow from Web3 logic are reminiscent of a time when online piracy was considered a major problem for entertainment. We all remember the adverts.

If you recall, the solution wasn’t hunting people down individually, but creating better products and services like Spotify and Netflix (besides open mockery of bad ideas). That’s the correct way to play the game. Unfortunately, today’s online verification trend sets a precedent for the former scenario too; it could eventually be extended to internet access, and I see little reason why it wouldn’t be with a largely absent public.

Having said all that, you may have noticed that I’m not enthusiastic about a modest 90% of ‘crypto’. In truth, I think the onset of Bitcoin and Litecoin have ushered in a local peak for the world of bits that has yet to be priced in.

While large language models are great tools that augment workflows, the hype around them has faded somewhat. And considering that the founder of the most widely adopted LLM, Sam Altman, is likely a fraudster in the making, creating tokens out of nothing in exchange for your biometric data, lowering expectations for OpenAI might be a good thing. The cynic in me says that this tool may go far beyond its current use-case and render many people unable to think, because they’ll willingly export their thoughts to an AI, which will be their new God after government.

I can see it already: “bro I fact-checked it with Siri”.

I’m not your bro, dude.

Muscle and mental atrophy are real things. In fact, the brain is just like a muscle. You either use it or you lose it. After the scamdemic of 2020, I fear many have lost it already. And since our brains are programmed to believe that 100% of probabilities for future outcomes involve progress, then that’s all we look for. But an endless search for ‘the next big thing’ does not necessarily translate to progress. In the case of NFT gaming and Web3, it looks like feigned progress that rests upon greater fools coupled with shorter and shorter hype cycles.

All in all, decentralised sound money continues to be the greatest innovation in crypto in my view, and radical repricing ought to correct current distortions were the market pretends otherwise. Freedom technology is a natural extension of the internet’s open communication layers and ethos. Capital flows should reflect that if we want to avoid marching head first into a bifurcated cast-based society.

Cheers.

Latest happenings

• PayPal Stablecoin PYUSD Launches on Ethereum
• Huobi Reserves Slide 30% Amid Insolvency Rumours
• Report: Litecoin Whales Signal Confidence; accumulate 205,400 LTC

Listening material

• Lyn Alden: Money Is ‘Broken’, Markets Face ‘Rerating’ Risks

Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Tuesday. I am not perfect and this is not a science — nor is this newsletter analysis a signals service or financial advice. While I cannot promise perfection I do my best to be honest and transparent.

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