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Long Reads Sunday - Issue #23

If last week felt like we were settling into the idea of a long, cold crypto winter, this week felt l
Long Reads Sunday - Issue #23
By Nathaniel Whittemore • Issue #23 • View online
If last week felt like we were settling into the idea of a long, cold crypto winter, this week felt like a burst of competing narratives in that new dreary context. Take, for example:
The Mining Death Spiral. As miners turn off their equipment, is this the beginning of a ‘mining death spiral,’ or is difficulty adjustment a feature, not a bug of the system design?
Hedge Fund Shut Downs. The long prophesied comeuppance for vintage 2017 crypto hedge funds seems to have begun. Will we see a return to the VC model, same as it ever was? 
ETH Withdrawals. This ‘death spiral’ narrative has been kicking around for months, although some new research suggests that ICO treasury actions are responding to, rather than causing, market movements. 
There was also a fair bit of regulatory rumblings. In a real shocker, Mayweather and DJ Khalid got dinged for not disclosing financial ties to an ICO they were promoting. Meanwhile, a California court ruled the SEC hadn’t proven that an ICO was a security on the basis of the Howey test. SEC Chairman Jay Clayton spoke about a hundred times, with bad news for Bitcoin ETFs but generally seeming a thoughtful regulatory partner.
And, of course, outside of news & narratives, there were a number of tremendous essays, including this great piece on cryptography’s implications for private property. Happy Long Reads!
-NLW
PS I’m working on the LRS Best of 2018. Please nominate the best essays, Twitter threads and podcast episodes from the year
PPS Schilling Point: If you’re interested in privacy, surveillance, crypto narratives, or seminal east coast hardcore & punk from the 1980s, check out my conversation on the What Bitcoin Did podcast.
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1/ Long Reads Sunday #23. Mining death spirals, token burns, hedge fund shutdowns…As we settle into crypto winter, there is an uptick in explanatory narratives. What’s real and what’s just marketing? Let’s dig in - it’s long reads time. 
2/ Let’s kick off with the bear thread of the week. Primitive Ventures @DoveyWan sums up just about every reason why the poor market might persist - from fallout from a poor Bitmain IPO performance to underwhelming project launches to a potential mining crisis. https://twitter.com/DoveyWan/status/1068573163670261760
3/ There was actually quite a bit of conversation about mining this week. @MartyBent kicked off a great conversation about Bitcoin’s difficulty adjustment - the counterweight to the death spiral narrative. https://twitter.com/MartyBent/status/1068528625308262401
4/ Adding some data to the convo, @CoinSharesCo @C_Bendiksen released an in-depth research report about the costs/ROI of mining. Among other points, it argues that miners shutting down will *not* cause a “death spiral” https://twitter.com/C_Bendiksen/status/1068221424777814016
5/ Maybe the most succinct summary against the mining death spiral argument came from @AriannaSimpson https://twitter.com/AriannaSimpson/status/1068951282872799232
6/ The role of miners in a crypto network is one of the most important conversations in the space - especially as governance conversations heat up. @kyletorpey provides some history this week, writing about what 2017 revealed about the limits of their power in Bitcoin https://www.forbes.com/sites/ktorpey/2017/11/30/2017-was-the-year-when-everyone-finally-learned-bitcoin-isnt-controlled-by-miners/#5947253b4de3
7/ One other interesting Bitcoin narrative from this week has to do with institutionalization, calls of hypocrisy when BTC is adopted by institutions, and the extent to which Bitcoin was designed to upend banks. @nic__carter shared here https://twitter.com/nic__carter/status/1068884708770136064 & @theonevortex also wrote about this https://twitter.com/theonevortex/status/1067422628720259072
8/ Mining isn’t the only “death spiral” that folks have talked about this year, with the relationship between ETH prices and ETH-funded project selloffs being a significant focus. @hashcib, however, finds that, wrt recent sell activity, “ICO projects reacted to the market conditions, rather than dictated them" https://medium.com/@HASHCIB/what-caused-this-drop-and-what-didnt-ce968b6c9911
9/ Another narrative that has been long speculated but seems to be gaining some amount of reality is hedge fund shut downs. @APompliano has been keeping track of both the potential and now sees it starting to happen https://twitter.com/APompliano/status/1068646016629518336
10/ Always thoughtful @jamie247 of @OVioHQ argues that, in the wake of crypto hedge fund changes, we’ll be left with something that looks like traditional venture for the app layer. He also argues that tokenization of startup equity isn’t a good idea - which I tend to disagree with, but requires a full thread elsewhere https://twitter.com/jamie247/status/1067811181614821376
11/ Speaking of tokens, @Travis_Kling highlighted this prediction thread from @twobitidiot about token burning as a strategy to reduce supply and increase value as a potential emergent narrative. https://twitter.com/Travis_Kling/status/1068288091553759238
12/ BTW, congrats to @twobitidiot, @robustus, @QWQiao and the whole team at @MessariCrypto, who have announced the launch of their API as well as their first cohort of transparency partners. https://twitter.com/MessariCrypto/status/1067420099991298050
13/ Another Messari superhero is @katherineykwu, who has started doing brief recaps of news from the Chinese crypto environment that haven’t been prominently translated. This edition shows investment in blockchain R&D happening simultaneously with ongoing regulatory consideration https://twitter.com/katherineykwu/status/1068581766833848320
14/ One of the biggest pieces of news of the week also involved the international context of Bitcoin, with the US Treasury placing two BTC addresses on its sanctions list. Read the original press-release here https://home.treasury.gov/news/press-releases/sm556 or this excellent analysis thread https://twitter.com/msantoriESQ/status/1067843160041082880
15/ The regulatory sphere was actually kind of busy this week. In a huge friggin shock to literally no one, the SEC came out with charges (and resolutions) against Floyd Mayweather and DJ Khlaed for promoting an ICO without disclosing their financial involvement. @Melt_dem puts it in the larger context of social-media-powered promotions https://twitter.com/Melt_Dem/status/1068273809478828033
16/ SEC head Jay Clayton also spoke a number of times. @cburniske summarized and analyzed his read. Chris’ notes reinforce the perception of an SEC that is carefully considering cryptoassets as their own phenomena and wants to find the right solutions without stopping innovation https://twitter.com/cburniske/status/1068515982006763520
17/ Of course, Clayton’s statements aren’t all roses for crypto. In particular, there seem to be serious questions around a much-desired Bitcoin ETF. Check out this conversation from @Coindesks Consensus Invest event, feat @CaitlinLong_ @Stephendpalley and @NYcryptolawyer https://twitter.com/jchervinsky/status/1067636707720396800
18/ Quick aside, the reflections on the vibe at Consensus Invest - especially as compared to the Consensus event in NYC 6 months ago - really capture the different in mood. Check out @_jillruth’s summary as an example https://twitter.com/_jillruth/status/1067674765995974661
19/ Back to regulation-villa, while a Bitcoin ETF may seem far off, we did see the launch of a Swiss crypto ETP from @hany @AmunAG. @TheBlock__ has the summary https://www.theblockcrypto.com/2018/11/26/traders-are-going-crazy-over-switzerlands-new-exchange-traded-product/
20/ In an interesting twist back here in the US, a federal court in CA just ruled *against* the SEC, saying that it hadn’t been able to prove that a particular ICO had passed the Howey Test to qualify it as a security. @msantoriESQ with another great summary thread https://twitter.com/msantoriESQ/status/1068246911533092866
21/ One of the wrinkles to the regulatory landscape is how the government will react to the emergence of stronger privacy technology. That conversation picked up this week when @Coinbase announced the listing of @ZCashco. I used the occasion to riff on privacy and surveillance more broadly https://twitter.com/nlw/status/1068516052064264192
22/ Speaking of privacy & surveillance, one of the narratives I’m most interested in is the idea of cryptos providing recourse and opportunity to marginalized populations outside the state and traditional avenues. @jon_choi_ rightly asks whether this is, currently, real or just idea https://twitter.com/jon_choi_/status/1068312263520485377
23/ The crypto-as-liberation thesis is certainly about to have an interesting test, as @theairtm prepares to airdrop $1,000,000 of various cryptos directly to 100,000 Venezuelans. I am all for large scale experiments that get us off Twitter and into the real world. H/t @zooko https://twitter.com/rubengsp/status/1067672509116530688?s=21
24/ A couple more big think pieces then we’ll wrap. First, highly recommend this piece by @hugohanoi on how cryptography redefines private property. (Key) “For the first time in history, a form of private property exists that is completely independent of jurisdiction or the law” https://twitter.com/hasufl/status/1067221009592393728
25/ While much of the focus on the crypto conversation is around new money, I continue to be interested in the notion of crypto networks as new forms of organization. If that’s interesting to you as well, highly recommend this long read from @ramonrecuero @izqui9 http://blog.aragon.one/the-future-of-organizations/ 
26/ Internet historian of the year @backus jumped on the excellent Venture Stories with @eriktorenberg and @tonysheng to discuss how decentralization evolves https://twitter.com/backus/status/1067119090173652992
27/ @Eriktorenberg also kicked off this massive thread about future skills that seem weird now, but which will be mainstream in the future. I’d maybe add virtual prospecting - speculating on assets in virtual worlds with the idea that they’ll start to compete for our time with physical worlds https://twitter.com/eriktorenberg/status/1067507837390213121
28/ On the topic of podcasts I was excited to see @amandapfrankel⁩ and @DavidJN79 get in the game with Base Layer - a new one aimed at educating family offices and HNWs https://twitter.com/DavidJN79/status/1068536262234124289
29/ And, of course, a little self shill for this podcast I did with @PeterMcCormack @WhatBitcoinDid. We discuss everything from how advertising provides a business model for surveillance to seminal 80s and 90s east coast hardcore punk. https://twitter.com/PeterMcCormack/status/1068503106781097984
30/ Finally, some fun: LRS BEST OF 2018 NOMINATIONS! I’ve spent a good chunk of 2018 curating crypto thinking, and now I’m interested in what you think are the *BEST* essays, threads, and podcast eps. Nominate here and then we’ll put it to a vote: https://goo.gl/forms/iSZIuR11LrpbcQrg2

 

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Nathaniel Whittemore

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