It’s OK to do crimes (not legal advice)

Plus Bitcoin weekly closes at an all time high and we're all gonna buy the constitution

In this issue:

  • Bitcoin weekly closes at an all-time high

  • It’s OK to do crimes (not legal advice) (reader submitted)

  • You can like Bitcoin without being a monster (reader submitted)

  • Get in loser we’re buying the constitution (reader submitted)


Bitcoin weekly closes at an all-time high

As expected the market for Bitcoin peaked last week at $69k/BTC before collapsing in a fit of giggles, first to $64k/BTC and then briefly down as low as $60k/BTC on some exchanges before recovering. Just before the weekly close this week a raft of sudden buying pushed the price up to $66.1k/BTC — the highest weekly close in Bitcoin history. Weekly and monthly close prices are tied to various Bitcoin futures contracts, so the surge of last minute buying this week was probably done by someone with a large long position in Bitcoin futures that closed this week. That suggests the deep pocketed traders are still expecting more movement up.


It’s OK to do crimes (not legal advice)

“Do you really think DAOs are only useful for criminal activity? What about organizing large groups to do (legal) things in more frictionless ways that are difficult in a regular corporate structure?” — several readers

A lot of readers were surprised (and occasionally taken aback) by my claim in the last issue that DAOs are for doing crimes — but I really think on careful examination that the argument holds up. To be clear I don’t mean that as a moral judgement — some crimes are useful and good because some laws are bad.1 We should be clear about what the benefits of DAOs actually are, though! They don’t make organizing easier than traditional organizations do, they just make prosecution harder.

A traditional organization can raise funds, make investment decisions and distribute profits. A decentralized autonomous organization can raise funds, make investment decisions and distribute profits. But the DAO has to do all three of those things over the most expensive communication network in history — the blockchain. It’s like running a company where all the shareholder votes and dividend checks have to be mailed in 24k gold envelopes. DAOs are marketed as lowering barriers to participation but that’s not what making everything super expensive does.

The primary barriers to access and participation in financial markets are legal not technical and the primary innovations of today’s DAOs are also legal, not technical. Consider the top 5 DAOs by market cap today: Uniswap, Aave, MakerDAO, Compound.Finance and SushiSwap. All five of them would be better and more efficient as companies — but they would be illegal.

Uniswap and Sushiswap are decentralized trading exchanges — they are more expensive, slower and much more vulnerable to adversarial trading than traditional exchanges like Binance, Gemini and Coinbase. But DEXs can list more assets more quickly since they don’t need to bother with painstaking legal reviews.

MakerDAO, Aave and Compound.Finance are essentially unlicensed banks that offer different variations on the same two services: you can deposit your capital for yield or you can borrow against your assets for leverage. Those are the same services that Celsius, Block.Fi and Coinbase have been fighting with regulators about. Lending DAOs can operate with lower costs and greater regulatory camouflage.

All of them can also raise funds more easily than traditional organizations (since they don’t adhere to securities investor accreditation and disclosure requirements) and they can reach a wider range of customers (by not asking them for identification). Reasonable people can disagree about the social desirability of various laws and the social desirability of working around them — but that is demonstrably what DAOs are used for today. If there were no laws, there would be no DAOs.


You can like Bitcoin without being a monster

"I’d love to read your thoughts on this thread … " — DD

I am (as I’ve written about before) a political liberal who also believes in Bitcoin. I think we should have hard money and also a broad social safety net. I believe society works best when no one is left behind and that the market works best when no one is in control. There is nothing internally inconsistent about those beliefs. Money is a technology not an ideology.

In fact recent American political debates around cryptocurrency have been refreshingly bipartisan (although predictably disappointing otherwise). Bitcoin is neither left nor right — but it is anti-authoritarian. The cultural coding mapping Bitcoin to politically "right wing" is tribalism masquerading as logic — calling it "fascist" doesn’t even make sense.

Anyway 'disinformation researcher' Dave Troy thinks that since some racists and anti-semites distrust institutions anyone who distrusts institutions is also a racist and an anti-semite. Ergo anyone who owns Bitcoin must also support Eugenics:

I hope it goes without saying (but I’m still going to say it) that I absolutely do not support racism, anti-semitism or Eugenics. Asserting that anyone who disagrees with you about monetary policy is a Nazi is arguing in cartoonishly bad faith. I disagree with Mr Troy about MMT but I don’t assume that means he punches babies.

Funding things through expansionary monetary policy is a stealth tax on anyone whose net worth is mostly cash and future cash wages. It benefits political insiders at the expense of the working poor. I don’t consider it liberal in the slightest.

To be honest Mr Troy’s thread was such a daisy-chain of lazy assertions of authority and accusations of guilt-by-perceived-association that I found it rather more boring than outrageous. I assume his hands are bruised from all the pearl-clutching.

Bitcoin deserves better critics.


Get in loser, we’re buying the constitution

"Please explain this constitution buying thing… is it a joke?" —JL

On Thursday November 18th Sotheby’s Auction House will be selling one of the eleven remaining original copies of the U.S. Constitution - estimated value $15-20M. In response to this occasion a group calling themselves @ConstitutionDAO has started organizing a meme-movement on Twitter and Discord ultimately aimed at fundraising enough money to win the auction and buy the constitution "on behalf of the people."2

So is it a joke? I don’t really know to be honest. It’s certainly funny! But it also seems entirely possible they might actually do it? They have ~$5M in soft commitments and open lines of communication with both Sotheby’s and the Smithsonian. Last year I would have told you a last minute crowdfunded campaign to raise tens of millions for no obvious reason had no chance but this year I almost feel the opposite? Betting against things just because they happen to be insane hasn’t been a winning investment thesis recently.


Other things happening right now:

  • As expected the SEC rejected the VanEck spot ETF late last week. We talked in October about the difference between the futures ETF they did approve and why they are more comfortable with future vrs spot ETFs. By only approving futures ETFs the SEC is effectively outsourcing concerns about custody/theft to the arbitrageurs who supply the futures market. You can’t steal futures for the same reason you can’t steal stock — it’s a centralized ledger.

  • Hey real quick before we end today’s meeting does anyone have absolutely the worst possible idea?

1

You can actually make the argument (as Pierre does later in the thread above) that Bitcoin is a kind of DAO — which is right! But creating Bitcoin was also a crime. There is a reason Satoshi decided to be anonymous — everyone else who tried to create an independent currency was either shut down or prosecuted. DAOs are for crimes.

2

Raising funds this quickly for something absurd is normally impossible because of all the legal constraints around vetting and properly informing investors. If you open a bank account on Tuesday and you have $20M in it by Thursday the bank will have some tough questions for you on Friday. Fortunately DAOs are perfect for doing crimes.