Artwork by Crystal Le
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“Trust is one of the greatest economic forces on Earth.”
— Charlie Munger
The only thing I miss about being an equities trader is being around other traders, because the trading desks I worked on were a lot of fun.
They always have been: “Horse-play starts over nothing, and sometimes infects all but the staid oldsters,” a 1920 account of the outdoor “Curb Exchange” on Wall Street reported. “One irrepressible youth furtively knocks off another’s hat. The indignant victim grabs and throws the hat nearest to his clutching hand, and in a minute the air is full of sailing head-gear.”
Crypto, by contrast, isn’t nearly as lighthearted — partly because it’s a WFH industry (it’s difficult to knock off a colleague’s hat over Zoom).
But, it’s also because the founding ethos of crypto is that it’s “money for enemies.”
It’s difficult to have fun around someone you consider an enemy.
Bitcoiners in particular often come across as a bit humorless; perhaps more inclined to mansplain money and banking than they are to go for a laugh.
The rest of crypto, too, can feel like an adversarial, player vs. player and negative-sum place.
That is fun while you’re winning, but most of the time, most people aren’t.
This matters because fun is important in finance.
Even in staid commercial banks, going for laughs helps build the kind of trust that the finance industry runs on.
Nothing would happen in TradFi if people didn’t trust each other.
That is a feature, not a flaw, of both finance and humans.
The evolutionary biologist Joseph Henrich explains that “humans haven’t succeeded because of our raw intelligence. Humans have succeeded because they cooperate.”
In other words, the reason humans made it to the moon and not, say, alligators isn’t because we’re individually smarter than alligators, but that we’re collectively smarter..
Henrich notes that human brains have been shrinking over the millennia as we’ve been naturally selected for our willingness to trust one another, not for our raw computing power.
As our individual brains have shrunk, our “collective brain” has grown.
But trust doesn’t scale over fiber-optic cables alone.
As Henrich puts it, “the collective brain requires trust in strangers,” and trust, research shows, is built through real-life, face-to-face interaction.
That, I think, is why conferences are more valuable than they might seem.
Despite the industry’s dour reputation, crypto conferences are surprisingly fun.
Dunk tank, after parties, free merch and, most importantly, an abundance of actual people to talk to — not just Twitter handles.
I think that’s good news, because if crypto wants to fulfill its promise, it might need a little more trust and a lot more fun.
One good talk: Leo Dorlöchter, Peaq
To the oft-asked question about crypto’s purpose, Peaq founder Leo Dorlöchter offers a sci-fi answer: Crypto will be “the computer of the machine economy.”
Specifically, Dorlöchter sees a near future in which autonomous self-driving taxis recharge their batteries with a “tokenized EV charger” that, in turn, sources energy from “tokenized solar panels.”
Humans might not have much gainful employment in that world (“machines will do most of the work”), but we will be able to invest in the machines.
DePIN, Dorlöchter says, is “creating a new asset class” by allowing people to “earn from autonomous machines.”
We’ve never been able to invest directly in a machine, he points out — only in the companies that own the machines.
That could change with “initial machine offerings,” in which crypto investors have the opportunity to finance the critical infrastructure needed for the fully autonomous machine economy to emerge.
(Don’t tell Eliezer Yudkowsky, though, he might want to bomb us.)
Beyond DePINs, the “good news” for crypto is that “the machines will go onchain” — for payments, identity, sensors, user interfaces and data.
Dorlöchter categorizes these activities as a “trust infrastructure” where autonomous machines will need to cooperate with each other.
Perhaps ironically, it’s only trustless crypto that can provide it.
Another good talk: Tarek Mansour, Kalshi
Kalshi isn’t a crypto company, but its founder Tarek Mansour thinks that’s a distinction that won’t matter for much longer.
“Any kind of fintech company is inevitably going to be a crypto company,” Mansour predicted this morning.
Kalshi, he said, will increasingly do business on crypto rails “because they work better.”
To my surprise, they’re doing a lot of business: $1 billion a month in prediction market betting volume, with millions of active customers and 1,500 live markets, according to Mansour.
I expected that prediction markets would remain a once-every-four years phenomenon, but it’s starting to look like people want to bet on more than just presidential elections.
Mansour thinks it will get a lot bigger, too: “In 10 years, I don’t see any reason why prediction markets wouldn’t be bigger than the stock market.”
I’m not sure that would be good news for the world.
Mansour says prediction markets are the fastest growing “asset class,” but if so, they are a weird kind of negative-sum asset — different in kind from positive-sum stocks, bonds and real estate.
If investors put money into prediction markets instead of productive assets, it seems like that would be a net negative for the world.
But Mansour asks us to “imagine a world where any debate can be settled in prediction markets.”
That might make them a net positive, because one thing I agree with Mansour on is that “financial markets see the future better than anything else.”
If prediction markets help us see the future better, we can all make better decisions.
Also, the markets will be settled in crypto, so that will be fun.
Miscellaneous quotes:
“We really want to reverse engineer into a Pizza Hut franchise.” — Konstantin Richter, Blockdaemon, in satirizing the current craze for crypto SPACs
“USD1 will be the biggest stablecoin…World Liberty Financial will be a household name.” — Zak Folkman, World Liberty Financial (in a moment of Trumpian understatement)
“The first thing in crypto that’s starting to work.” — Ali Yaha, a16z, on stablecoins
“If you want to do great things, you should reach out.” — Luca Prosperi, M0
“Be a human. Write and read code.” — Brendan Eich, inventor of JavaScript, after arguing that LLMs will never be as smart as humans
“We just ate shit for longer than anyone else and worked out.” — Tarek Mansour on the success of Kalshi
“If you sue a regulator, make sure you win.” — Tarek Mansour
“In the next five years almost all financial transactions will be driven by agents.” — Ali Yaha, a16z
Overheard: “I went to a cypherpunk meet up in 1994.”
Crypto conference innovation: Giant beanbags in lieu of chairs. (Bonus tip: Find one up against a wall, it’s less awkward.)
Today’s takeaway: Two slices and a Coke.
See you tomorrow for day three!
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