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A Historians Take On Crypto's Bear Market | Josh Rosenthal

Tue Jul 04 2023
CryptoDecentralized TechnologyInstitutional HegemonyFractionalized EquityRenaissanceGlobal RebellionsAmerican RevolutionGovernment ResistanceInstitutional CrackingRegulationVolatilityTransformation
  1. The Evolution of Fractionalized Equity and Crypto
  2. Decentralized Technology and Historical Movements
  3. The Renaissance, Global Rebellions, and the American Revolution
  4. Revolutions, Marginalized People, and the Fight for Self-Sovereignty
  5. Pushback from Institutions and the Fight for Decentralization
  6. Institutional Pushback and Technology Outpacing Institutions
  7. Institutional Cracking and the Evolution of Financial Systems
  8. Regulation and Resistance in the Digital Age
  9. The Fight for Crypto's Success and Its Potential Impact
  10. Crypto's Potential to Transform Finance, Culture, Work, Education, and Governance
  11. The Transformational Power of Crypto Technology
  12. Crypto's Impact on Small Businesses, Governance, and Societal Breakdown
  13. Institutional Pushback and the Volatility of Transformation
  14. Embracing Volatility and Fighting for Crypto's Success

This episode explores the historical context of crypto and its fight against institutional hegemony. It highlights how fractionalized equity evolved into the stock market and modern financial system. The conversation covers the Renaissance period, global rebellions, and the American Revolution as examples of historical movements driven by decentralized technology. It also delves into the cracking of institutions when technology outpaces them, leading to reaggregation of institutional powers. The episode discusses the ongoing resistance from government institutions to technological advancements and emphasizes the importance of embracing innovation. It concludes by emphasizing the transformative potential of crypto in finance, culture, work, education, and governance.

The Evolution of Fractionalized Equity and Crypto

00:00 - 07:02

  • Fractionalized equity eventually became the stock market and modern financial system.
  • The initial reaction from federal regulators was to try to ban fractionalized equity, but that didn't work.
  • This episode aims to highlight how we got to where we are in the crypto space.
  • The conversation will explore the historical context of crypto and its fight against institutional hegemony.
  • Technology, demography, and social impact are key drivers of history.
  • Crypto is a way to prevent re-centralization and ensure widespread decentralized technology.

Decentralized Technology and Historical Movements

06:38 - 13:30

  • Crypto provides visibility into the creation process, which can be uncomfortable for some but offers unique opportunities compared to building in a black box model.
  • Crypto enables a long tail of distribution for small businesses and different business models.
  • Crypto solves the zero to one model of centralization by breaking through aggregation.
  • The Renaissance was driven by communities using decentralized technology like double-entry bookkeeping and printing press.
  • Decentralized technology unlocked finance, increased financial products, and allowed people to set up their own shops instead of being subservient on farms.
  • Print as a communication protocol opened up synthetic worlds and created mass media.
  • Crypto allows ownership and control over what is created, similar to print's proof of humanity and authorship.
  • Communities used new financial and communication protocols to transform their hierarchical world into one with meaningful pluralism and generative capitalism.
  • The unlock of value, communication, and identity through technology was unimaginable before its advent.
  • Participants in historical movements using new technologies were seen as revolutionaries or crazies by institutions trying to tamp down on change.
  • Institutions that tried to clamp down on generative technology ended up legitimizing it as they had no choice but to engage with it.

The Renaissance, Global Rebellions, and the American Revolution

13:04 - 19:32

  • The initial reaction to technology that outpaces society is to clamp down on it, but historically it tends to be legitimized and embraced.
  • The Renaissance unlocked a permissionless world through the printing press and double entry bookkeeping, leading to global rebellions in the 17th and 18th centuries.
  • These revolutions were part of a global phenomenon and pursued religious liberty, civil rights, economic location, and communication freedom.
  • The blueprint for political infrastructure from the edict of Nantes influenced the American Revolution.
  • International support from France, the Netherlands, and Spain contributed to the success of the American Revolution.

Revolutions, Marginalized People, and the Fight for Self-Sovereignty

19:17 - 25:54

  • The American Revolution had international support from France, the Netherlands, and Spain.
  • The pursuit of Renaissance ideas played a significant role in the American Revolution.
  • The French Revolution followed a similar blueprint as the wars of religion and the American Revolution.
  • Oppressed and marginalized people in various revolutions fought against imposed limitations on ownership, communication, and identity.
  • As power reaccumulates, it becomes difficult to take away self-sovereignty over owning things, sharing ideas, and choosing group allegiance.
  • American history is defined by a series of rebellions and revolutions that took different forms.
  • The American experiment continued after the revolution with ongoing rebellion within specific structures.
  • Similarities between the Renaissance and the American Revolution include emphasis on individualism, break from tradition, rejection of authority, focus on human rights and dignity, and global impact.
  • Crypto aligns with these principles fought for during the Renaissance and the American Revolution.

Pushback from Institutions and the Fight for Decentralization

25:37 - 32:13

  • They were familiarly oriented, which wasn't just a bloodline, but by people who opted into these social networks.
  • The American Revolution involved support and assistance from France, Spain, and the Netherlands.
  • The concept of inalienable rights and the pursuit of what is good shaped political theory during the Renaissance.
  • The blueprint for civil liberties and religious liberties in America was influenced by marginalized communities in the 16th century.
  • Revolutions and rebellions continued to shape American history after the Revolutionary War.
  • The Shays Rebellion and Whiskey Rebellion were significant events that led to changes in governance and resistance to unfair policies.
  • The crackdown on the Whiskey Rebellion had a disproportionate impact on farmers' economic viability.
  • There has been an ongoing debate about the nature of the Federal Reserve and its potential overreach throughout history.

Institutional Pushback and Technology Outpacing Institutions

31:50 - 38:49

  • The ongoing debate about the nature of the Fed and when it oversteps
  • Different types of resistance to the Fed, both internal and external
  • The formation of the United States as a democratic and republican environment
  • The bet on building in public with decentralized technologies
  • Expectation of mockery and asymmetric advantage at the beginning
  • Losing the first round but coming back stronger
  • Contextualizing SEC clamp down with historical pushbacks like in Renaissance and American Revolution
  • Pushback from Holy Roman Empire during Renaissance despite technological advancements
  • Internal pushback during American Revolution between Hamilton vs. Jefferson
  • SEC's pushback seen as part of an ongoing experiment in federal republicanism
  • Constant fight between aggregation and decentralization in institutions
  • Control over mindsets, possibilities, personal life, liberty, and privacy as a game played since day one
  • Different forms of overstepping bounds by government institutions or individuals acting against their charter

Institutional Cracking and the Evolution of Financial Systems

38:30 - 44:55

  • The SEC's actions can be understood by looking at its previous actions throughout history.
  • Institutions often try to exceed their charters and implement unfair practices for their own benefit.
  • The cracking of institutions occurs when technology outpaces them, leading to a reaggregation of institutional powers.
  • Examples of this cracking include fractional equity, tech crackdowns, post office running, taxing email, net neutrality, code as free speech, and online payment.
  • In the past, the idea of limited liability companies and fractionalized equity was seen as a social evil but eventually became the foundation of the modern financial system.
  • Federal regulators initially tried to ban fractionalized equity but failed.
  • Regulators also tried to restrict consumer access to certain stocks like Apple during its IPO.
  • The UK's rise in global financial assistance was due to the US's unwillingness to deregulate in the same way.
  • The crypto playbook being followed now is similar to what worked well for the UK in the 90s.
  • An example outside of finance is the post office's attempt to deliver email, which highlights how technology can outpace institutions.

Regulation and Resistance in the Digital Age

44:37 - 51:11

  • The USPS attempted to deliver email by providing every American with an email address, but it failed due to the decentralized nature of technology.
  • Attempts were made to tax and regulate the internet, including introducing legislation to extend expired internet tax moratorium bans and taxing ISPs.
  • Encryption was initially classified as ammunition and there were attempts to ban it, despite its importance in privacy, iPhone security, and e-commerce.
  • Regulation was eventually walked back due to other countries effectively using encryption and the generative economic power it created.
  • Resistance from government institutions is expected in technological advancements, but ultimately society benefits from embracing innovation.
  • The SEC's concerns about chaos and lack of control contribute to their focus on protecting consumers in the cryptocurrency space.
  • Institutions tend to fight against overseas power by nature, which is reflected in American history and political thought.
  • There is a need for ongoing vigilance, reforming institutions over time, and adjusting regulations as technology outpaces them.

The Fight for Crypto's Success and Its Potential Impact

50:54 - 57:18

  • The failure to imagine infinite compounding benefit for citizenry is a nature of historic accretiation.
  • Institutions like the SEC should not have the power to determine what technology or business case is needed.
  • Part of the SEC's charge is to ensure American competitiveness, which benefits the entire crypto market.
  • We are entering an era of exponential technological advancements, particularly in AI and crypto.
  • Crypto is different because it is being built in the open, allowing visibility into the economic model and code.
  • The fight for crypto's success is not just for America but also for global adoption and growth.
  • Speed of adoption benefits everyone in the crypto model as it is generative by nature.
  • Crypto provides individuals with opportunities to place their capital, time, attention, and data into equity and ownership.
  • Crypto represents more than just a coin or digital gold; it enables life, liberty, pursuit of happiness, asset ownership, and free communication.

Crypto's Potential to Transform Finance, Culture, Work, Education, and Governance

57:02 - 1:03:31

  • Crypto is not just about digital assets, but also about recreating the world and playing for a new renaissance.
  • Trust in institutions has significantly declined over the years, making it difficult for governments to regain trust.
  • Decentralized technology allows communities to recreate themselves and overcome challenges.
  • There are five key buckets that could be transformed by crypto: finance, culture, work, education, and governance.
  • In finance, crypto offers benefits such as access to global stocks and early-stage companies, as well as the ability to invest with both money and attention.
  • Culture is influenced by crypto through NFTs, memes, and property rights. It rectifies the original sin of outsourcing state to centralized companies.
  • Work can be transformed by crypto through leveling opportunities and turning individuals from products into events.
  • Education can benefit from crypto by providing global access to learning resources and disrupting traditional systems.
  • Governance plays a crucial role in crypto's potential impact on society.

The Transformational Power of Crypto Technology

1:03:02 - 1:09:22

  • The internet's original sin was the lack of ability to persist state, leading to outsourcing of data storage to companies like Google and Apple.
  • Crypto technology allows for rectifying this by providing rails of value capture and transforming work through concepts like DAOs and capital formation.
  • Venture capital often has conflicting expectations and incentives with founders, making it difficult for certain types of businesses to fit into the traditional venture model.
  • Cryptocurrency enables crowdfunding and fractional equity ownership, opening up opportunities for distributed ideas, concepts, and businesses that may not return billions but are still meaningful.
  • Open source software has created significant value in the past decades, but now imagine being paid for your contributions instead of doing it pro bono.
  • Crypto technology allows for opt-in product development with ownership, where users can contribute their data and receive equity in return.
  • Decentralized technology can overcome moats created by aggregated institutions through economic incentives.
  • Education is a medieval institution that can be transformed through peer-to-peer learning, proof of experience, expertise ratings, and eliminating student debt.
  • The meta IRL (in real life) bucket involves using crypto technology to transform small businesses and community spaces.

Crypto's Impact on Small Businesses, Governance, and Societal Breakdown

1:09:02 - 1:15:39

  • Crypto provides a crypto version of cost centers that are not only free but also give access to payment, benefiting small businesses economically.
  • Crypto allows for the freeing up of GPUs for AI training, which can be economically beneficial.
  • Crypto offers governance that is exposed and allows for experimentation and finding what works best.
  • Creating more value than taking is important in bringing crypto into real life and doing public good funding from private entities.
  • The world described by the speaker may require some societal breakdown or unwinding to become possible, but it varies depending on historical precedent and geography.
  • Decentralized computing, decentralized economic generation through entrepreneurship, and AI will likely lead to institutional cataclysm regardless of whether we want it or not.
  • Managing decentralization is crucial, and overplaying institutional hand can lead to pushback and squeeze.

Institutional Pushback and the Volatility of Transformation

1:15:10 - 1:21:38

  • Overplaying your hand and making it egregious is the best possible thing that could happen.
  • Institutional pushback and resistance are necessary to manage decentralization.
  • Threatening physical force is a way for institutional regimes to manage decentralization.
  • The lack of recognition of wrongdoing leads to hegemonic power.
  • Massive institutional overhaul is expected due to demographics, AI, and crypto.
  • The chaotic reconstruction process will be volatile and unpredictable.
  • Preserving perspicuity on chain will be crucial in managing volatility.
  • The Renaissance period was followed by mass chaos and wars for 150 years.
  • Wars were always happening, but now there is visibility into them.
  • There may or may not be more chaos, but visibility will make it feel that way.
  • The recreated world after chaos is uncertain and can collapse or succeed with volatility.

Embracing Volatility and Fighting for Crypto's Success

1:21:17 - 1:25:48

  • The current volatility in the crypto market is expected and should not be a cause for concern.
  • Volatility is a leading indicator of significant transformation.
  • Most people are not aware of the potential positive outcome of this volatility.
  • Crypto is a bet on decentralized technology and communities, which means there will be challenges and fights along the way.
  • Expect resistance from regulatory bodies like the SEC, but their response has been better than anticipated.
  • Crypto is an opportunity worth fighting for, as it can reshape finance, education, and governance.
  • Visibility into the creation of crypto is unique and uncomfortable, but it offers the chance to get in early on something transformative.
  • Failing institutions combined with advancing technology create both disaster and opportunities for entrepreneurs.
  • Don't shy away from the fight; it's worth fighting for now more than ever.