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Long Reads Sunday - Issue #14

Much of this week in crypto could be summed up as a reminder of just how early we are. Regulatory int
Long Reads Sunday - Issue #14
By Nathaniel Whittemore • Issue #14 • View online
Much of this week in crypto could be summed up as a reminder of just how early we are. Regulatory intrigue - notably the different interpretations of the SEC/CFTC shutdown of 1Broker and a court decision affirming the CFTC’s definition of cryptocurrencies as commodities - demonstrated that we don’t have any clear idea of how cryptos are even to be classified, much less regulated. A number of conversations around governance, too, showed just how early we are. Should the A16Z-Maker investment be nothing but lauded, or is there room for critique of the decision-making process? Does the Huobi Block Producer collusion mean that all on-chain voting for public funding is doomed to descend into quid-pro-quo-ism? 
Of course, one upshot of that earliness is how much learning and thinking is done out in public. A thread on governance prompted by Vlad from Ethereum is case in point, as is this labyrinthine thread started by Zooko on Proof of Stake. And if that isn’t enough to make the point that, to some extent, we’re living in learners paradise, just check out the rest of these essays on private blockchains, leadership as a liability, and the need for paranoia in decentralized systems to be convinced. Happy Long Reads. 
ANNOUNCEMENT: Long Reads Live begins TOMORROW, Monday 10/1 at 7pm EST. My first guest host will be Travis Kling and we’ll be joined by a few more guest, TBA. Watch here:
1/ Long Reads Sunday #14. Daaaamn crypto, you really went for it. This was a week full of big announcements, market manipulation, regulatory enforcement, and a dash of various other assorted intrigue. Strap in, folks, it’s long reads time. 
2/ One LRS note. Last week I announced that we’re taking this conversation off Twitter and into the realm of live. Well, it’s happening tomorrow evening around 7pm EST. My first guest co-host will be @Travis_Kling and I couldn’t be more excited. More guests announced soon.
3/ Little has gotten our big-little industry yapping like the Bitmain IPO. For weeks, the convo has been intrigue with BCH, but with the IPO filing, we get some actual #s. @katherineykwu hulked out and summarized all the juice - incl that only 3.3% of rev is their own mining
4/ With regard to regulation, Bitmain noted the challenge in keeping track of changing regulatory opinion that includes not only federal bodies but states. Interestingly, for some investors - notably @arrington - this lack of clarity actually means an opting out of US investments entirely
5/ Interestingly, the SEC did get frisky this week, shutting down 1Broker, a site where customers could participate in security-based swaps with Bitcoin (and notably, without KYC/AML). @matt_odell argued it’s the beginning of a giant game of whack-a-mole.
6/ @Crypto_Macro flagged that the 1Broker shut-down was a joint enforcement action with the CFTC and that the CFTC side of the complained could potentially implicate other popular crypto exchanges.
7/ On the other hand, @wheatpond argued that swaps are uber-regulated and that, in fact, the SEC action is in keeping with their hands-off policy for most, enforcement for the most egregious attitude. There is no denying that, post Dodd-Frank, swaps *are* hyper scrutinized.
8/ Speaking of the CFTC, @jchervinsky flagged another case this week in which their assertion that virtual currencies are commodities was held up in court. The lack of clarity around which bodies have jurisdiction is one of the challenges slowing regulatory processes.
9/ Given that a concern of all the regulatory bodies is money laundering, how much is actually happening? The WSJ took a look, made some assertions, and immediately the crypto community pointed out that ML through crypto is actually less by %s than through banks
10/ Still, the potential for market manipulation is real. @AriDavidPaul points out a set of reasons why manipulation is comparatively more likely in a market like crypto - but also argues that it comes with the territory of any nascent market
11/ Without a doubt, the manipulation story of the week was the explosive allegation that Huobi was conspiring with a set of other EOS Block Producers to concentrate power. 
12/ Well, when I say “explosive,” maybe “completely and utterly predictable” is a better way to describe parties with deep financial incentive to get what they want coordinating for their own benefit. @VitalikButerin pointed out that this is a structural problem of coinholder voting for public goods
13/ At the same time, it’s not like governance is solved. In fact, transitioning from centralized control to decentralized decision making is one of the biggest challenges for protocols. @VladZamfir wrote a long medium piece on the topic, prompting an excellent conversation. 
14/ In one of the best essays of the week, @eiaine argues that “confidence in a network’s decentralization is critical to a cryptocurrency’s value,” and that in fact, that confidence comes not from trust but paranoia.
15/ Governance was also an unexpected star of a fundraising announcement. MakerDAO announced that A16Z would be buying 5% of Maker at a discount. While the deal is a strong vote of confidence in the crowded stablecoin space, some questioned how the decision was made
16/ To me, this reflects a reality we’re still coming to acknowledge: decision-making processes in decentralized systems are political acts, and protocols are likely to see the same campaigning, alliance-building and other tactics from politics ported over.
17/ Speaking of, one of the best recent pieces about just how different blockchains are from companies is “Leadership as Liability” by @libovness, an essay about leaderless protocols, protocol-encoded temporary leadership and what it means to live in the long shadow of Satoshi’s ghost.
18/ Of course, without leaders, how are important decisions made? A fascinating conversation where some project leaders doing their current thinking out in public is Proof of Work protocols considering Proof of Stake design.
19/ The whole thread is a learning labyrinth and could more or less have taken this entire LRS, but for the skeptical-at-a-fundamental-level view, @nic__carter has the must reads:
20/ Honestly, there was so much this week that I can’t even close to capture it all. I want to highlight a few more great long reads, but so you don’t miss the actual news, @APompliano has you covered with a single tweet.
21/ First, Ethereum has obviously dealt with quite a bit of skepticism this summer. That makes @lrettig’s tome on all the good things happening in the ETH community even more impactful. Don’t miss @VitalikButerin adding 6 more in the comments
22/ Next, after years of trying to align the traditional finance and business world with crypto, @anguschampion wonders if private/enterprise blockchains are simply too much of a contradiction to be overcome. Money line: “You can never be half decentralized”
23/ It’s no secret that users are falling in love with centralized services like Facebook (esp. when 50m accounts are compromised & 2FA phone #s are used for ad targeting) & @jarroddicker argues on @tokendaily that one key change from web2 to web3 is a rethinking of reputation
24/ Speaking of the tech giants and their outsized influence on what we see and how we experience the world around us, @TokenHash argues that in the future, a threat to worry about is who controls what sidechains exist and who can build new projects
25/ Because long-thinking narratives are sort of what Sundays are for, how bout 21 tweets on how we go from a currency “first perceived as an internet toy for cypherpunks” to “local monopolies on money” being described by historians as “a relic of the past”
26/ Blockchains are chiseling away the distinction between capital and labor, but this thoughtful thread by @cburniske demonstrates why the capital-but-not-work contributions of investors to ICOs has made cryptonetworks economically stagnant
27/ @brucefenton expanded a short presentation of his from #bh2018 on securities, stocks and the future of security tokens. By expanded I mean 10 videos, 92 minutes of total content. I’ll be the first to say a big Thank You Sir for this awesome content. 
28/ Speaking of #bh2018, one of the highlight talks came, again, from @nic__carter. He published the slides last week, but @woonomic did this great summary making the highlights available without even leaving Twitter. 
29/ And finally, I’ll leave you with this. If you needed a reminder why all of these debates we have and all the thinking and work that goes into this new industry matters, just read this, be grateful, and carry on.
30/ With that, we’re wrapped! As always, please use the comments to share what I missed, and what else had your brain humming this week. To get LRS via email, sign up below. Thanks for reading and catch you tomorrow for the first even Long Reads Live.


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Nathaniel Whittemore

Bitcoin & crypto's most interesting Twitter threads and long-form essays.

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