Covering the technology, people, and culture of the cryptocurrency and blockchain world

Crypto’s superhero fixation has a dark side

Is plutocracy a bug or a feature?

Bitcoin superhero

Worst. Superhero. Ever. (via Shutterstock)

“The technologies that we are creating today will literally give us super powers,” Adam Draper told a trendily dark, shockingly empty, incredibly large conference room in the Aria Resort in Las Vegas, where World Crypto Con 2018 was being held.

Adam Draper

Adam Draper’s firm’s website literally says, “Not all superheroes wear capes” above his name (via Boost VC).

It was before 11 a.m. on a Thursday, and Adam was standing on stage alongside his father, the well-known venture capitalist Tim Draper (who himself is the son and grandson of venture capitalists).

“We’ll probably live 200 years and I don’t know, will get from one place to another just by thinking about it,” the younger Draper enthused. “And think about like, how people from 50 years ago, if they saw us, you know, they’d be like, ‘oh wow, they’re superheroes.’”

Later in the day, superheroes were brought up once again on the same stage, this time by Brock Pierce, a pretty controversial figure known for his child stardom, his hats, some very unsavory stuff from his teens, and being an early and apparently highly successful cryptocurrency investor.

Pierce, in a slightly better-attended talk, meandered through a maze of topics within a 20-minute period—from the “heartahedron” shape, to the lessons of the tech stock bubble, to the similarities between the words “love” and “evolve,” to the Japanese concept of kaizen, to the risk that the most capable Puerto Ricans are fleeing the island.

Somewhere in this mix, he discussed the potential for “being superheroes” through acts of bold positivity or thereabouts. And in his closing slide, he attempted to recast a word.

“New definition of a billionaire: someone who positively impacts the lives of billions of people.”

Brock Pierce

The header image on Brock Pierce’s Twitter profile page is him appearing heroically on fictitious money (via Twitter)

He also provided a personal definition of “unicorn” (Silicon Valley moniker for a non-public company worth $1 billion or more): “a group or a community that’s positively impacting the lives of a billion people.”

Pierce noted that it’s important to do things to create change—and that as a side benefit, those projects will probably end up making money, too.

The sentiment helped me to make sense of a baffling exchange I had earlier in the day. I was accompanying our enthusiastic cameraman Brian Caputo on a mission to shoot b-roll footage on the convention floor. (“Let’s get shots of all three Lambos,” I instructed).

As we were walking back out with camera in tow, a shorthaired PR handler jogged to a spot directly in front of us.

“Would you like to interview David Kam?” she asked.

Who is that?

David Kam

Would-be blockchain billionaire and concert promoter David Kam (via Earth Dollar).

“David Kam of Earth Dollar. He’s going to be the first blockchain billionaire. He’s been all over the news, getting a lot of press recently.”

What is Earth Dollar?

“Why don’t you ask him.”

I took the bait and she led Brian and I, practically by the hand, to a rotund man wearing an elaborately patterned Mandarin-collared jacket.

As the PR handler filmed our interaction on her phone, David Kam proceeded to explain to us that he will “end poverty through crypto-currency”; amid a wellspring of glossy phrases, he said that he will hold a concert—like “Live Aid”—which 500,000 to a million people will attend.

I stopped him—a million people at a concert?

“Well, it will be like a festival.”

Where will this concert be, I followed up—but my question was interrupted by the PR handler, who insisted that David Kam said one of his glossy phrases wrong, and she wanted him to retake it.

Eventually he answered my “where” question.

“It’s not determined yet. It hasn’t been decided. It’s confidential at this point. We’ll probably have it at Standing Rock—where they had the big protest. They actually have a lot of land.”

The exchange ends there, and as I flip over his business card in my hand, I openly wondered to Brian what happened here and who is the sucker. Perhaps we were Borated, I mused.

He responded with a better question. “So he’s going to end poverty AND become a billionaire?”

Again, Pierce’s conclusion helped shed light on how that could be possible. Some people, according to crypto lore, are just capable of making change on a grand scale, for themselves and for their communities. There’s nothing contradictory about the person who becomes the next blockchain billionaire also being the person who ends world poverty, since the real argument being made is that this person will approach technologically derived omnipotence à la Iron Man (the poster child, of course, for this marriage of personal success and world salvation).

Everyone loves superheroes, and to blame crypto enthusiasts simply for learning from and aligning with one of world’s most dominant cultural forces would be petty.

But this actually becomes much more troubling when one considers the crypto orthodoxy as regards global transactions and monetary policy.

“Bitcoin was intended as the antidote to central banks,” one participant in the “Cryptocurrency and Central Banking” panel declared.

Indeed, one of the most prominent, and convincing, arguments for holding bitcoin is that they contrast favorably with conventional currencies. U.S. dollars in particular continue to lose their value due to the infamous “money-printing” policies of the Federal Reserve (which aims for 2 percent inflation per year), while only 21 million bitcoins may ever be mined. Combine this core concept with the prediction that a much larger amount of the world’s wealth—and a far larger share of the world’s transactions—are liable to be done in bitcoin, and the investment case becomes exceedingly clear.

It’s not my place to weigh in on the merits of that case. And indeed, even a skeptic would have to assign a certain truth valence to the first statement (likely high) and a certain percentage chance to the second statement (likely low) and consequently arrive at some perhaps-sizable expected value of bitcoin.

But here’s what I don’t think is being adequately considered. It’s a point that Mike Green of Thiel Macro brought up in two interviews that Real Vision filmed at the conference, with guests Tim Draper and Charlie Lee, respectively.

Of the 21 million bitcoin that will ever be mined, 17 million have been mined already, and probably 3 million or so have been lost. That means some 80 percent (14 million out of the 18 million bitcoins that will effectively exist) of the bitcoin supply is already being held. And it appears to be quite heavily concentrated, largely in private hands, as could reasonably be expected of what is effectively a collectable asset with a lottery-ticket-like potential payout structure.

If it is true that much of the world’s wealth will be held in bitcoin, that means that 80 percent of a large share of the world’s future wealth is held by a relatively small number of people.

To better explain what this would mean, let’s shift settings to something slightly less controversial.

Imagine that humans collectively decided that much of the world’s worth should be stored in stamps from the year 1978. Instead of gold, central banks held stamps. Instead of credit cards, businesses accepted stamps. What would happen?

1978 stamps

Imagine a world where HODLing (or, rather, hoarding) these very stamps since the Carter era would make you a millionaire (via Whitman Publishing)

Just this: Philatelists would become the privileged class, while the rest of us would see our wealth disappear.

Worse, assuming the world continued to generate economic activity, philatelists would only grow wealthier and wealthier over time—and there would be no way to stop them from doing so, absent breaking the system.

As Mike Green pointed out, it’s useful to consider why the U.S. government conspires to make the dollar lose value over time. Clearly this is bad for savers. But that is a feature of the system, not a bug. Without inflation, there would be little incentive for those who have money to lend it to those who do not. Those who wished to start businesses would have to offer exceptionally high returns to holders of capital. The stock market would be relegated to degenerate gamblers.

In a world without inflation, the only way to lose a dollar would be to spend it. So those who are wealthy now—“the savers”—could rest assured of remaining so in the future, while those with ambitions of becoming wealthy would largely be out of luck.

Again, this imagined world is clearly superior to the current one for the privileged. Even better if the supply of currency does not even keep pace with economic activity, resulting in a severely deflationary environment—i.e., an environment in which one currency unit now is worth many units later. This is a world in which the rich become richer, and the poor are left to collect charity.

It’s also a world in which democracy shifts to plutocracy, particularly if—returning firmly to the example of crypto—wealth is perfectly mobile (“I know how to spend my money better than the government,” someone named Michael Terpin declared from the main stage, to whoops and applause. Apparently he had moved to Puerto Rico for tax purposes, despite his wife’s initial concern that the U.S. territory would be ‘like West Side Story’).

But the attendees of World Crypto Con tend to avoid the issue of how a crypto-dominated world could benefit the privileged. Instead, they are highly focused on the idea that it is a world in which those who are smart enough or brave enough to have invested in crypto early on will end up controlling a huge supply of the world’s wealth. In which Tony Stark will take his rightful place atop the societal food chain.

By this line of thinking, a world dominated by bitcoin is one in which the best will enjoy dominion over the masses. In which building a better world and “ending poverty” is not the responsibility of the architects of the future—but a privilege for its monarchs.

With great power, after all, comes great responsibility.

 

Alex Rosenberg, CFA is the editor in chief of Real Vision, a subscription-based financial media company. He previously served as a writer and producer for CNBC. He holds the Chartered Financial Analyst designation.

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