Class warfare

What you need to know today in crypto and beyond

March 3, 2021

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Formerly known as Blockchain Bites, The Node aims to be your daily pulse check for what matters in crypto and beyond. In every issue, you'll find a digestible summary of the day's most important news, a thoughtful take on current trends by one of our writers and, to wash it all down, our favorite trending meme or tweet. It's all part of a balanced information diet.

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Top Shelf

Today's must-reads

'PAL ON THE PROWL: PayPal is in the process of buying Curv, a technology firm that powers secure cryptocurrency storage, according to three people familiar with the situation. One source tells CoinDesk's Ian Allison that Curv could be sold for as much as $500 million. PayPal, which made an entrance into the crypto space last year (another Ian scoop), apparently turned its attention to Curv after talks to buy crypto custody and trading firm BitGo fell through last year.

TOGETHER AT LAST: Amazon Web Services' (AWS) "managed blockchain" service now supports Ethereum out of the box, some two years after the integration was first hinted at in 2018. This should make it easier for users to spin up Ethereum nodes, which augurs well for network decentralization and security – with the caveat that "the cloud" is another way of saying "someone else's computer."

AON FLUX: Aon, a multinational corporation with a $52 billion market cap on the NYSE, is dipping a toe into DeFi. The world's second-largest insurance intermediary has embarked on a pilot with Nayms, an insurtech platform that allows cryptocurrency holders to provide decentralized insurance cover against losses due to hacks or buggy software.

PROMISED LAND? Cryptocurrency wallet Exodus has applied for permission from the U.S. Securities and Exchange Commission (SEC) to carry out a public offering of tokenized shares in the company. Under the terms of the Reg A+ offering, Exodus would accept bitcoin, ether and USDC for its equity tokens at $27.42 apiece.

– M.H.

Sound Bite

Overheard on CoinDesk TV

THE MACRO STRATEGY?

In 2020, MicroStrategy CEO Michael Saylor emerged as one of bitcoin's biggest boosters. He engineered a strategy to turn his enterprise software company into a tradable vehicle for bitcoin exposure. Some would even call it a de facto bitcoin exchange-traded fund (ETF).

The company invested the majority of its cash reserves into the cryptographic asset and even took out debt to acquire at least 90,859 BTC, now worth $4.6 billion. But it doesn't stop there.

Today on CoinDesk TV, Saylor alluded to a continued strategy of putting the company's free cash flow, the money it earns from its actual software products, into bitcoin. On Monday, for instance, MicroStrategy purchased another $15 million worth of bitcoin, right on the heels of a $1.5 billion bitcoin buy. More purchases are to be expected, so long as MicroStrategy is profitable.

The company's stock has jumped to $780 from the $120 valuation MSTR had before Saylor's bitcoin boosterism began. CoinDesk's Lawrence Lewitinn rightfully asked about the $3 billion premium MicroStrategy investors may be paying for bitcoin exposure. (This is calculated by noting MicroStrategy's valuation pre-bitcoin, the value of its bitcoin hoard minus the debt it took on and its current $7.3 billion market capitalization.)

"If you're going to value the company, you have to crank in a lot of expectations," Saylor said.

Working in MicroStrategy's favor, he said: "There are many, many, many pools of capital" that might want to invest in bitcoin directly or gain exposure through an ETF, which has yet to hit the U.S. market. "It's literally impossible or impractical for many of these pools of capital to do it," given the current guidelines.

As CoinDesk's Nikhilesh De noted, President Biden's pick to lead the U.S. Securities and Exchange Commission, Gary Gensler, could put in place a framework for a bitcoin ETF. In fact, VanEck is already making moves on that front.

It's an open question how a greater diversity of bitcoin investment products could affect MicroStrategy in the long term – but it's not unreasonable to suggest it might cut into the company's macro strategy.

As Saylor said: "Everyone is able to make whatever assumptions they like. It's a free market."

- Daniel Kuhn

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Introducing "The Hash," news analysis on CoinDesk TV

From the world leader in crypto news and events, the all-new CoinDesk TV covers the rapidly evolving world of digital finance and its role in the global economy.

We cut through the hyperbole and confusion to explain what's happening in this fast-changing industry and why it matters to investors, companies and governments.

On "The Hash," a daily panel show, CoinDesk journalists Zack Seward, Benjamin Powers and Will Foxley choose five of the day's big stories to hash out and analyze. With a personality-driven, fast-paced, entertaining format, it presents themes ranging from serious to fun.

Watch "The Hash" daily on YouTube or CoinDesk.com.

The Takeaway

Putting the news in perspective

DEPLATFORMING AS CLASS WARFARE

Here at CoinDesk, we use the term "crypto-adjacent" to categorize stories that aren't about cryptocurrency or blockchains per se but illustrate the problems these technologies attempt to solve.

By covering these stories, we are not necessarily claiming Bitcoin, crypto or blockchain "fixes this" (it may well not, given scaling and other challenges). But they disprove the canard that decentralization is "a solution searching for a problem." As I often say, blockchain may not always be the answer, but it asks the right questions.

In that spirit, I'd like to turn readers' attention to two passages I consider crypto-adjacent in a recent essay by Scott Alexander, the polymath whose return to blogging is one of the highlights of 2021 so far. Inferior writers to whom I will not link have taken sadistic delight in referring to him by the government name he failed terribly at keeping a secret. But he will always be Scott Alexander to me.

For context, the essay's conceit is Alexander offering the U.S. Republican Party unsolicited advice: It should build on Donald Trump's legacy by emphasizing the class differences between his blue-collar Middle American supporters, who now make up the GOP's base, and the coastal elites who now define the reigning Democrats. One suspects that Alexander is trolling his fellow Biden voters more than the opposition party.

But the mire of object-level politics is not why his essay matters to us. For our purposes, it's just the MacGuffin.

Free the prediction markets!

The first crypto-adjacent part comes when Alexander proposes a policy agenda that would undermine the power of bogus experts who use fancy university degrees as a justification to lord it over the masses. He writes:

Your solution will be prediction markets. Yes, really. Repeal all bans on prediction markets and give tax breaks for participating in them, until they have the same kind of liquidity as the S&P500. You'll get a decentralized, populist, credentialism-free, market-based alternative to expertise.

Alexander goes on to make it clear that this part of the essay, at least, is not trolling:

I'm serious about this one. ... Prediction markets - an un-biasable, decentralized form of aggregating expert and non-expert opinion correctly - are the only solution I can imagine working.

What makes this crypto-adjacent, you may ask? As CoinDesk's Ben Powers and Brady Dale wrote last year, prediction markets "have much in common with those interested in cryptocurrencies and decentralized technology – a distrust of hierarchical systems, a penchant for iconoclastic thinking and the questioning of assumed authorities." Plus, some fledgling PMs either run on blockchain systems (like Augur) or at crypto exchanges (like FTX).

As far as I can tell, there's no Beltway think tank or trade group lobbying for prediction markets – so it wouldn't be crazy for Coin Center or the Blockchain Association to diversify into this area. Alexander has already written the bare bones of a policy proposal for you!

A Louboutin, stamping on a human face forever

The other salient passage for CoinDesk's audience comes when Alexander counsels Republicans to lean into their distrust of the mainstream media (which he impishly suggests they refer to as "upper-class media"). From there it's a quick segue to egging on an ever-more-populist GOP against the big centralized internet platforms:

Insist that working-class people have the right to communicate with each other without interference from upper-class gatekeepers.

What a great line! It makes a delicious retort to the people who not only loathe and avoid forums like Gab or Parler (as is their right, and as Alexander almost certainly does) but go out of their way to prevent anyone else from using them. They do this by pressuring mobile app stores, payment processors or even web infrastructure providers to sever ties with the forums.

Granted, this is not violating anyone's First Amendment constitutional rights. For all their outsized power, Twitter, Facebook, Google and their ilk have the right to freedom of association, even if they exercise it for the most spineless of reasons, and even if the modern-day Terri Rakoltas badgering them would not extend the same right to devout religious bakeries.

But as Alexander slyly suggests, much of the deplatforming that's happened lately, viewed through the lens of America's ongoing political realignment, is arguably a form of class warfare.

Protecting our democracy from misinformation and hate speech? Nah, dude, you're preventing working-class people from communicating with each other.

Does crypto fix this? Well, platforms like Twetch are trying to use the technology to that end. We shall see. This much is clear: Bitcoin is the only way Gab gets paid, apart from old-fashioned checks.

If bitcoin is there for Gab today, it'll be there for Antifa or BLM or Planned Parenthood if any of them need it the next time the pendulum swings. – M.H.

Join CoinDesk Research today, March 3, at 12:30 p.m. ET for a look at bitcoin and ether from an investment perspective.

In this 30-minute webinar, research analysts Christine Kim and Damanick Dantes will give an overview of the investment case and some key metrics for the two largest crypto assets by market capitalization.

This discussion will dive deeper into the topics featured in the CoinDesk Research report "Bitcoin + Ether: An Investor's Perspective." Download the free report now on the CoinDesk Research Hub.

Off-Chain Signals

What others are reporting....

Four years ago, CNBC's Seema Mody attempted to live off bitcoin for a week. Here's an accounting of how much she "overpaid." Ouch!

Jarod Dicker and friends on DAOs, NFTs and the new "ownership economy" of media.

When NFT mania becomes NFT... amnesia.

Did Satoshi commit suicide? A sobering read, either way.

- D.K.

The Chaser...

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