Blockchain and Crypto: What Are its First Principles?

Especially during times like these, it's important for the crypto industry to remind itself of its first principles that started the whole thing to begin with. Every cycle, when the hype gets too much, people tend to forget - but what keeps the movement alive are the fundamentals of what got people excited to begin with.

"No Debt" - The fact that you cannot go into debt in crypto is something that's understated, even now. Satoshi was originally envisioning a world where 2008 and a debt-based economy was literally not possible - and is much more radical than most people give it credit for.

"Not Your Keys, Not Your Coin" - This phrase went away as exchanges got more popular and people started getting lazy with self-custody, but it's still the only real way to protect yourself from outside forces

"Your Wallet, Your Identity" - the bigger aspirations for crypto wallets was to become an identity platform, that was supposed to replace email by making it more secure and portable. True crypto proponents should be encouraging people to use their wallet addresses to build up history/credibility at all times, otherwise the system just doesn't work.

"Verify, Not Trust" - Permissionless systems only work when trust is not needed. Show, not tell.

"Incentives Are Everything" - Crypto was supposed to be a testing ground for alternative economic models, by offering new and innovative incentive structures to make business models more sustainable and efficient.

The challenge for the industry is that these things need to happen all at the same time, or the system will not work. These big picture issues can't be solved with startups working on one thing in isolation - it needs to be "all or nothing" or you might as well not be doing it at all.

A lot of these ideas got watered down during the hype cycle but I'm hoping that people will come back around to it eventually.

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Transcript

SPEAKER_00: 0:00

Hello everyone, this is Ryan from Teya Cafe. So right now the markets in crypto ain't doing so well, if you have noticed. Uh but is it really a surprise, really? Right? I'm there's no one else more deep in this industry than me. And believe me, I'm not too happy about the price right now either. But at the same time, I have to be honest, I am not surprised. Even uh up until like six months ago, I was saying, like, yeah, Tezos might go to a quarter. It was like a dollar at the time, and uh markets were already doing kind of bad already, so you know, people didn't really want to hear that, I'm assuming. But it could go that low. Um, and I'm prepared for it, but it still hurts, right? And part of the reason why is that the market is currently correcting itself, and it does need to hit a bottom before we have any chance of it going back up. Because if you look at FTX, especially, right? That was the most egregious example. But there are still companies out there basically running sponsies, scam, meme coins, rug pulls, you know, all those things. They're still going on, it's becoming less profitable because people are going broke, but that really has dominated the headlines of when people talk about uh crypto these days, and it's not really her uh helping our reputation, so to speak, right? So um, so yeah, when as if as with any other bubble, and this has happened in previous crypto cycles as well. I saw something similar happen during 2016-2018, where people caught the ICO bug, and they did talk about NFTs a bit, crypto punks, crypto kiddies, those sorts of projects. Back then they were very, very novel and interesting. But as with all hype cycles, they take it too far, it sort of hits a limit, and then the bubble pops and it goes back down, right? But it's not necessarily a bad thing because when the markets are doing poor, people often start to reflect on, you know, what what are we doing here? Like, what's the whole point of this to begin with, right? You do you sort of ask yourself those deeper questions about what um the movement was supposed to be. So I feel like a lot of people basically just kind of forgot about it during the hype cycle because it was just like money flying everywhere, right? Especially in like 2021 when everything was shooting up. Uh, the crypto industry was like uh even Wall Street was like nervous because there it was growing so fast that you know it could have been a big threat to them. But as you know how that turned out, uh it kind of culminated with FTX because there's a lot of um fraud and you know, just like not good things going on. So now's a chance for people to revisit why crypto was invented to begin with, and this is gonna accompany a post that I made uh in writing. So I'm just kind of repeating and expounding on some of the things that are you can either choose to read or listen to this thing. So either way, you know. Okay, so um there's I listed, I was looking it up for a little while, but I listed five first principles that I think are basically essential for anyone who claims to understand crypto and actually believe it in, not the grift version that the uh exchanges and the banks and Wall Street has been pushing on people. They just want to milk your money and uh you know at your expense, right? They just want to make a little bit of money at your expense, and that's why they're there. They don't really care about these things. So um I would be very wary of anyone talking about this if they're not actually doing it in practice, right? So I'll start with the first one then. So the first one is no debt. So if you imagine Satoshi trying to build a new financial system, you gotta think about like why and when, right? He started working on Bitcoin right after the 2008 financial crisis, and I don't think it's a coincidence that there was that parallel, because Bitcoin really is sort of a statement against what the banks were doing, especially at the time. And one interesting thing that doesn't get talked about in crypto, it doesn't get talked about enough, because it's maybe it's so obvious that uh people don't bother mentioning it, but the idea that you cannot have negative balances in crypto wallets is kind of a big deal. You know, this is basically Satoshi trying to create a debtless society, and I think people often overlook how radical that notion really was. Because I mean, what will you do with a negative balance on a crypto wallet where you you literally can't like if you don't if it's not in positive, uh you can't uh do a transaction, it will not allow it. It's the system literally will not allow it. Now, there's plenty of people who probably went broke betting on crypto, but the money from that stuff doesn't come from crypto itself, they're doing it through some other means, through a bank or a loan or a loan shark or whatever sketchy source they found, you know, to basically fuel their gambling addiction. But if it's used in the way it was intended, you should have no debt in crypto. So you can earn money by doing sales or maybe doing a task, but you can't borrow money against some other external entity with your wallet, right? So, yeah, I just wanted to kind of remind people of that because I do think it's a big part of why this thing was created to begin with, and it might give people a place to start to start thinking about like what to do next. Because part of the reason why the industry is struggling so much is because they made too many ties with Wall Street and the banks, especially the exchanges, right? When you have a wallet on an exchange, uh that's you're not really it's not really yours, right? You're you're basically trusting them to hold your money for you in a traditional way, and that kind of defeats the purpose. So it's a lot of the uh crypto things that happen over the last few years is really like a watered-down version that's not really uh part of like what was meant to happen. So that's a good segue into the next mantra, and these are things people used to say but don't say anymore. That's kind of a that's kind of basically what what I'm doing right now. So they used to say, not your keys, not your coin. Bitcoin people were actually very famous for saying that phrase because they really encouraged people to do self-custody, which is to hold your own wallet and store it in uh a private key, right? Like a private wallet. Um there's a reason why that got less popular, which is because you have to eventually convert the Bitcoin back to dollars for it to be any use, right? But at the same time, a lot of the uh most useful things about crypto doesn't really come unless you're using a real wallet. So uh how I use my wallet is a good example because I'm involved with arts and um I try to use my wallet for quote forward-facing things. I don't have my life savings on there, of course, right? Nobody nobody carries around their life savings in the wallet, right? But they do use it to like I have my ID card in my wallet, I have some cash, a little bit of cash to spend. I have um credit cards, uh right. That's that's so that's the function the wallet was supposed to serve, but online, and it was actually right supposed to like people were supposed to be able to identify you based on your wallet, based on what's inside of the wallet, right? Uh people but old habits die hard, and uh most people don't really use it like that. They kind of use it as this disposable thing, almost like like uh email, right? Or you can just sign up for a free one, use it for something and just throw it away afterwards. It's become very disposable. But that again, that was not the intention. People should be using wallet addresses to build up history, credibility, right? Otherwise, none of this is gonna really work. So this also segues into the next one, which is your wallet, your identity. So originally the idea of crypto wallets was that when they were feeling more ambitious, they wanted people to replace things like email or other digital ID systems with a crypto wallet because it's more secure, it has a lot more information, uh the transactions are transparent, right? It was supposed to like replace logins for websites, for example. And some places are still doing that, but interestingly enough, the only places that really do that right now are NFTs. You cannot log in to most websites with a crypto wallet unless it has to do something with NFTs. Um there's DeFi, but uh, you know, even that that the use cases are very limited right now because most people are still more comfortable using regular fiat money. So, but that's something a big project that crypto is has yet to fulfill because one of the biggest obstacles for mass adoption is getting people to sign up for a wallet and take it seriously, which is very hard because most of the time their first uh interactions with these sorts of things is through exchanges. And if you have a wallet on an exchange, you're not really in control of it, right? It's in the agreement. So until people start taking the idea of their wallet seriously and are willing to attach their identity to it, it's gonna be a very hard uphill battle, but it's something we just can't avoid if you wanna uh for this to like get get places. Okay, the other part is actually these are all sigwing very nicely into each other. Uh verify not trust. So there's been a lot of projects out there, and I won't name names Solana, but uh they're not really blockchains, you know, and um they claim to be, but when you look at how just stuff works, uh it's just really not true. And the fact that uh Solana experienced several shutdowns and there was like some very sketchy things going on with the team and the way they uh quote rebooted things, right? Um yeah, and and uh it's just like there's it's there's been a disappointing trend towards a lot of crypto projects really kind of abandoning the idea of permissionless networks because yeah, I mean the short story is that they just basically sold out. There are there are people with fiat money willing to give them a lot of money just to not do the thing that they were supposed to do, right? Ethereum's kind of a good case of that because uh one, they don't have on-chain governance, so when they make decisions, you don't know when or where that's happening, they're not transparent about it in that way. But I've heard people just flat out say we have to trust Vitalik. Look at him, he's such a nerd, he doesn't have ulterior motives, you know. And that might have been true like some years ago. Like I was in the Ethereum ICO, so I remember Vitalik from back then versus now. He is not the same person anymore. And he used to be more hands-on, he used to be builder, he used to code things directly. And you know, uh when I decided to get in, I was like, yeah, that's the kind of nerd I want, you know. I want someone who cares about the tech. And at the time it was true, but now um it's a very different story. So so yeah, so uh when I hear him talk these days, he just kind of throws off this word solid that means doesn't mean much, and he makes a lot of promises that he probably knows not is not gonna happen, you know. It's probably not gonna happen. Are they gonna get on-chain governance? He's opposed it pretty much throughout his whole career, so why would it change now? All right, so there's all these things going back in the background, and uh they're just being basically trust me, bro. You know, it's a trust me bro model. If they're trustworthy, maybe it can work, but um the whole point of crypto is that you shouldn't have to have that trust. Everything should be transparent as is, and with the blockchain, that should be very easy. The technology to do it is already there. It really is a uh culture problem, it really is a people problem. So that's something that the industry is going to have to contend with as well. Okay, so for the last one, uh incentives are everything. And um the last couple years, there's a few models out there that people have tried out. The most interesting part of crypto is actually NFPs, even now, because you can argue whether or not art is a real product per se, but it is something. It is a product, it is something by people buy and sell, and and they did create platforms and models, auction systems, like those things are not easy to build, you know. But they they did. So it was supposed to be this big like experiment in trying out different incentives, but unfortunately, the vast majority of crypto projects outside of a few NFT projects were basically just Ponzies get in early, hope it goes up, cash out before it crashes, right? And that's kind of a meme coin motto that has run most of the industry up until now, at least financially. And um, where did uh that all the other stuff go, you know? People really didn't put a lot of thought into a lot of the projects that was coming out because, like, for example, my hope for smart contracts was for it to be a model for independent musicians to form teams around themselves and have the payments distributed evenly or fairly, right, based on their agreement. So normally people hire expensive lawyers to do that for them, and then the uh the courts keep things in check. But for you know, a random indie musician just trying to to get by that like something like a working smart contract where you can distribute, say, record sales between yourself, your manager, your agent, uh, the guy that carries your gear around, you know, those sorts of things like can be very, very helpful. Because even in normal situations, I've seen a lot of bands just fall apart because they get uh into arguments about what they're owed. And sometimes it's intentional, there are you know bad people out there, but a lot of times it's due to miscommunication. Maybe they didn't write it down, maybe they did not do proper accounting, and that sort of work is not zero, right? Like administrative work is still work, and between like a musician trying to practice juggling their career and having to do that all at the same time is not that easy. So, smart contracts were supposed to make it easy. For those sorts of things to occur. But again, you have to have the buy-in, right? Everyone needs to have a wallet. They need to agree that this is the agreement. This is where the sales are going to go in. This is how the revenue is split. And uh verify not trust, right? Like you just get a receipt at the end of the process, and it should be pretty straightforward. But it's not straightforward when you have all these things that you have to do. But in theory, it's still better, right? In theory, this is still better than what people were doing before. So I do think like we need to start doubling down on these ideas and sort of remind people why this technology exists to begin with. Because if you look at it without all the hype and the scams and all that stuff, it's actually a pretty cool technology that can do very useful things. If only we would do it. So we need people working on this stuff to have a more holistic view because this is a sort of thing, like a complex product like cryptocurrencies and the blockchain. It needs all these parts working in tandem and they have to be built in parallel. And that's hasn't really happened yet. So the folks that had the resources to do this sort of thing are often in big corporations where they're not really incentivized, see, like incentives, right? They're not really incentivized to see this thing work because it's actually a threat to the current way of things. A lot of people like making decisions behind closed doors, they're totally fine with that. That's part of the reason why, even though uh even Bjork was experimenting with uh crypto for a while, um, the music industry as a whole did not adopt it because there are people out there that don't want people knowing what they're actually doing. So it goes back to the verify not trusting. And and so getting getting regular people to like go through all these hoops and try this new thing out, especially when there's so much uncertainty, is gonna be very, very difficult. It's not only asking for them to take a chance, but it's also asking for a lot of work, right? Setting up and maintaining a wallet for yourself is still fairly difficult. And the practice of like safeguarding your keys and other sorts of things, especially with some of the hardware wallets having issues, let's say, um, it's a hard sell. But what we can do, if you're still here and even listening to this, you're probably into deep, just like me, and are wondering what can we do to save this market because oh my god, you know, I believe in crypto, but I just don't know what to do next. But really, though, the only thing we can do is like set an example and doing it the right way. And if we can get these sorts of models working, even on a small scale, someone will eventually notice. But to get there, we have to the markets need to become a little quieter, and that's where we're kind of moving towards right now. So, not easy during markets like these, but I would like to encourage people to try to stay optimistic. If you're a builder, keep on building, if you're part of the community, keep on talking. Because yeah, now might actually be the best time to start asking these questions, especially as uh people start leaving. They had been leaving for a while. But at the same time, when people leave, new people do come in at the same time. People are always looking for something new. And when you look outside in the economy as a whole, uh there's not much to look at right now, huh? At least nothing pleasant. So yeah, so that's really the where the source of hope comes from. Why I'm still here. And I do I hope that there are still people around who share the same visions, you know. Okay, well, that's it. And uh thanks for hearing me out and see you in the next one. Take care.