I generally enjoy reading Chris' writing and listening to him on podcast interviews, but I do feel like he tries really hard to pattern match and force crypto to fit into his idealized future based on his clearly well-read and well-informed view of technological history. He's also probably made at least a hundred million dollars in the past couple of years based on his Coinbase investment and myriad crypto token investments, so he's most likely viewing all of this through rose colored glasses.
Axie Infinity is given as a "good" case? Axie Infinity is a Ponzi scheme.[1]
Matt Levine, Bloomberg: Doesn’t it feel like the dystopian future we deserve? Like in a decade everyone will make their living by steering colorful blob-like creatures around to acquire coins in a virtual world, but ownership of the colorful blob-like virtual creatures will be concentrated among a hereditary elite of people who, like, bought Dogecoin in 2014, and in order to scrape together enough to live on you will need to indenture yourself to a member of that elite, steering their blob-like virtual creatures around to earn coins for them and getting a few crumbs for yourself. And you’ll work 16-hour days in the Smooth Love Potions mines just to feed your children, but every once in a while in a rare free moment you will stop and ask yourself “wait why do our overlords want all these Smooth Love Potions anyway?”
Meanwhile the overlords will form a leisure class and devote themselves to philosophy and philanthropy. They’ll keep busy collecting non-fungible-token art and putting their names on virtual library buildings in the metaverse and writing manifestos about how cryptocurrency enhances human freedom and levels the playing field for everyone.
And maybe in some virtual library in the metaverse a disaffected philosopher of the overlord class will be busy creating a new theory, a theory about how the relentless accumulation of Axies in the hands of a smaller and smaller elite will lead to an increasingly disaffected proletariat of colorful-blob-like-virtual-creature steerers, who will one day, through the inexorable logic of metaversal history, rise up to throw off their chains and steer their colorful blob-like virtual creatures to tear down the virtual palaces of their virtual oppressors. Blob-like-creature steerers of the world unite, this new prophet will tell them, you have nothing to lose but your Axie Infinity Shards.
Axie is simply another "success" that is enabled by unbridled speculation (or probably, Tether). It's no different to the yields in DeFi at the moment. When I first heard about the insane yields, I inquired to the person who was telling me where the yield was coming from in a world that has comparable zero or negative real yields. I heard the same, tired "disintermediation" story but when I went to actually read the solidity for these mostly EVM projects, it became clear that a huge chunk of yield was coming from earning tokens that had market value for no particularly clear reason. The yield on the actual lending is very small, but the value of the tokens you earn supplements that yield massively.
There are people starting real, large projects (OlympusDAO) that have zero understanding of markets or economics. They are technologists playing around with programmable money. I think this is insanely cool to observe, but also insanely stupid for people to put material capital (often capital they can't really afford to lose) into these experiments which are likely to fail.
One can thank decades of central bank malfeasance for this. I consider crypto in large part just a bit further out on/at simmilar place on the spectrum than DM/EM HY, neg nominal-yielding $ denom soverign/corporate bonds, and neg eps corps equity.
I think those who are clutching their pearls over tether and ignoring the fact that many offshore banks with $ denom "deposits" (no fdic "backstop", that still wont protect against systemic risk onshore, and various amount of rules and regs on paper only [no enforcement powers, very little operations transparency into all the derivatives under then sun, most bilateral]) on their balance sheet are in a weaker position than them and are generally ignorant of the eurodollar system (esp wrt rampant rehypothication of collateral/cashflows denominated in currencies their local jurisdictions cannot mint at will).
> it became clear that a huge chunk of yield was coming from earning tokens that had market value for no particularly clear reason.
Yeah, i hate this about the defi lending (over/under/un -collateralized) space now and I purely focus on what of that yield is actually in stablecoins and ignore the part that isn't (I can always dump that part for stablecoins and put that back in).
> I think this is insanely cool to observe, but also insanely stupid for people to put material capital (often capital they can't really afford to lose) into these experiments which are likely to fail.
I agree, and the same is true in tradfi markets for most speculative actors and those where the cb/gov cannot "afford" to "backstop" everything up to junk bonds when passive global leveraged long-duration trade rolls over occasionally.
> I think those who are clutching their pearls over tether...
No pearl clutching here. Best case, Tether is a MMF and is an absolute catastrophe by those standards. Medium case, Tether is a bank (or hedge fund) and is a catastrophe by those standards. Worst case, Tether is an outright fraud, and is damn impressive by those standards.
But in all states of the universe, Tether is far far worse than whatever sort of off-shore cruft you think the typical bulge bracket is hiding.
> But in all states of the universe, Tether is far far worse than whatever sort of off-shore cruft you think the typical bulge bracket is hiding.
I've seen whats on some bank balance sheets that are non public on some SEA and NG banks for $ deposits after briefly working for a few fintech's and doing intergrations (and prob will never see the light of day [and most wont blink an eye because its not crypto to clutch pearls about, esp some failures _pre_ covid global lockdowns that could fall under any of your classifications for cases, that were mere footnotes in the public eye wrt financials unlike tether which is still operating I might add to the chagrin of many]) information unlike what we have _seen_ for tether in _public_, and this very much hyperbole… ssdd in eurodollar land… even as far back as 1975[0] from Richard Debs, FRBNY’s Chief Administrative Officer:
"Finally, for the sake of logic, I should mention the legal framework of the Euro-dollar market, since I included the Euro-dollar market in my working definition of international banking from the point of view of the United States. However, I’m afraid that I can’t do much more than just mention it. The Euro-dollar market itself is not easily definable, and its legal framework, if any, is even less so. The market grew rapidly without the assistance, or burdens, of an integrated or even coordinated set of laws. It is an international—or multinational, or transnational—phenomenon, but it is regulated only to the extent that the Euro-dollar activities of the institutions operating in that market—the Euro-banks— are subject to regulation and supervision by the national jurisdictions in which they operate."
The author's interpretations of Chris's points (the Spotify example is a clear one) keep trying to reinterpret Web3 as a set of incremental improvements ("let's cut the take rate") rather than create a new set of opportunities to replace (and sometimes invert) the old business models.
Here's my example for Spotify: music shouldn't be monetized by taxing distribution; instead, let artists directly monetize through myriad new ways where they don't take platform risk — ever. NFTs, social/community tokens, direct ticketing + access to secondary sales, and so many more methods are all being explored now.
It's great to dig in here and continue the dialogue, but most crypto critiques on HN feel like tourism.
As someone who's been involved at a short distance with the music industry, I have not fricking clue what people are smoking with regards to NFTs and monetization.
Musicians can already monetize their work through a myriad methods. There's a ton of independent labels, larger labels, Bandcamp and Bandcamp-like websites for purchasing music, managers who can help you get gigs and promote yourself, etc.
The problem is not, and has never been, that the big bad labels are taking all the money.
The problem is that it's just not fundamentally profitable to have a sustained business as a musician at the price point most people are willing to pay for content and products made for fan consumption.
You can't really automate promotion; it's an extremely human-intensive task, and managers/promoters cost money. Venues have an upper bound on how much money you can make because owning a venue is already a money-losing proposition. Merch? The vast majority of music fans are young and don't have much disposable income, with the exception of some very large acts where fans continue to spend money on concerts and albums into middle age and beyond.
Music just isn't profitable because for the vast majority of people it's a labor of love, where monetary incentives just don't play the way they do in other industries, and where the most enthusiastic fans don't have much money to spend and have a thousand other alternatives.
There is not a single proposition in the NFT space that alters any of these mechanics. If you're not willing to spend two bucks to buy a track on Bandcamp you sure as hell aren't gonna do so with an NFT.
Isn't part of the problem that promotion is a zero-sum activity, and the very existence of well-capitalized actors in the space means that everyone has to sign up with one or be drowned out by the noise? It's a self-reinforcing cycle.
You spent a lot of time explaining this and I agree with everything you said. But that's a really long-winded technologist's way of putting it. I'd personally phrase in a simpler way: music is useless and has no value. It serves no purpose besides entertainment. It can be made trivially for literally zero cost by anyone who has working hands or vocal cords, no technology or investment is required. NFTs certainly don't and can't change this. (Disclaimer: I am a musician and I've spent a lot of time working on music apps. It's a hard sell out there for everybody)
I'm endlessly amused by some people in the crypto sphere attempting to force Web 3 / Web 3.0 onto crypto. It's an absurd hype attempt.
That term was already used for the semantic Web and what it was supposed to unleash, beginning over a decade ago. It was still being used for that as recently as a few years ago (although increasingly being shifted to include AI/ML, since the old premise of a semantic Web is no longer considered cool). For example:
"Semantic Web" didn't make a lot of sense. The current Web3 thinking isn't being forced onto crypto: "Web3" has (for years) been part of a grassroots effort within crypto to explain and expand crypto's impact on the internet beyond financial applications.
Yes, a post-hoc rationalization of trying to create demand for something that solves no practical problem.
It's as if these people weren't around when DeviantArt was created; their complete lack of aesthetic taste shows how little they are interested in making a viable medium for artists.
He left out that NFTs hardly have a low take rate. OpenSea is the number one earner of fees every time I look at Etherscan. They have taken 18% of the fees in the last 24 hours for 1,065 ether (which they immediately turn into dollars, because they view ether so highly), and 24% in the last 3 hrs
The take rate is 2.5% on OpenSea, which is very low for the art world, low for many crypto on-ramps, and a bit high for a centralized exchange's retail interface. It's not outrageous and will likely drop with time.
