World Investment: History That We Can Trust

Exploring the transformation of value in the digital age

By Michael J. Casey, Chief Content Officer

Mar. 25, 2022

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Both parts of your Friday Money Reimagined experience – the newsletter and the podcast – are about the dangers posed by authoritarian regimes that use misinformation campaigns over social media to undermine democratic freedoms and human rights.

The question before us is whether blockchain technology – whose principles of immutability, censorship-resistance and data persistence make this the first time we've had a record of history that can't be rewritten – can help society arrive more harmoniously at shared truths to make it harder for dictators to manipulate us.

This all stems from a fascinating conversation my podcast co-host Sheila Warren had with Jonathan Dotan, a founder of the Starling Lab at Stanford University's Center for Blockchain Research.

Have a listen after reading the newsletter.

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The Best Blockchain Use Case

Yunha LeeCoinDesk

Doing research in 2017 for "The Truth Machine," the second crypto book Paul Vigna and I wrote together, I scrolled through the feed generated by cryptograffiti.com, which allows people to preserve and read coded messages and images stored in the Bitcoin blockchain.

There, I encountered all sorts of random items: trading tips, motor vehicles for sale, statements about the oil pipeline protests at Standing Rock, the occasional conspiracy theory, and a message that read, "In loving memory of Georges Fraipoints (16/01/1946-19/02/2017). Awesome man, father and friend. We will miss you."

But it is one from October 2016 that struck me most: "Need 30 btc. Please! Dream to leave Syria…Help get out of Syria. I live in Aleppo. I am 14 years old. I do not cheat. Community help!!!!!!!"

Did this young person ever get the donation? (At that time, 30 BTC would have been about $18,000.) Did he or she ever get out of Aleppo? Did they survive?

I knew I'd never get answers to those questions or find out whether the message was a legitimate call for help or some sort of con. But that didn't stop me from being struck by the pathos of what I'd read. In the midst of a brutal war, Bitcoin's immutable ledger had offered someone a means of asserting their humanity, a small but crucial act of defiance against an authoritarian regime hell-bent on denying it.

When you strip everything back from the mania around crypto and the new business models being built on it, its core, most important, idea is that of immutability. A truly decentralized, permissionless blockchain is perhaps the only unbreakable record of history we've ever had. At a time when authoritarianism is on the rise, that's an incredibly powerful concept.

Effectively using blockchain technology as a bulwark against authoritarianism will require the complex integration of many moving parts, including changes in the legal process and the practice of journalism. But a framework for how it might be helpful – in concert with other tools of cryptography – is starting to take shape, partly because of the work being done at the Starling Lab, part of Stanford's Center for Blockchain Research.

Lower down in the column, we'll delve into the Starling Lab's bid to improve how we authenticate and store information to bolster trust in news sources and evidential information, drawing on this week's episode of the "Money Reimagined" podcast, in which our guest was the Starling Lab's Dotan.

Dotan makes clear that this is a challenging task. But God knows it's one we must undertake.

Lies as legitimacy

All authoritarian regimes tend to assert their own, inevitably distorted version of history as part of their strategy for maintaining power. Without the legitimacy of a mandate founded on a free and fair election, they will strive to install some other legitimizing story in the public consciousness.

Think of Pol Pot's Orwellian decree restarting Cambodian history at what he called "Year Zero." These myth creation processes often manifest as historical appropriation, as when Hugo Chavez recast Simon Bolivar as a socialist, even though the 19th-century Venezuelan independence hero died two decades before a young Karl Marx wrote "The Communist Manifesto." And, to be sure, they often fail, which, for now at least, seems to be the fate of former President Donald Trump's "Stop the Steal" movement. (Have @ me, Trump supporters. That was an attempt at an authoritarian flex if ever there was one.)

Right now, we face a front-and-center example of immediate importance. Vladimir Putin is trying to shore up support at home for Russia's invasion of Ukraine by perpetuating the myth that Ukraine is occupied by Nazis and that Russia's soldiers are liberating a neighboring country in the same way that a World War II generation fought back Hitler's armies on the eastern front. Meanwhile, with the shuttering of independent media outlets, the Kremlin is covering up both the atrocities committed by his military and its own massive loss of Russian soldiers' lives.

That this is occurring in an age of deep fakes, of bot-driven misinformation campaigns and of cynically crafted psyop strategies designed to steer our dopamine-triggered minds into amplifying false information makes the issue all the more urgent.

At the dawn of the social media age, Silicon Valley leaders would tout Facebook and Twitter as tools to democratize information and power. No longer. Nefarious uses of social media have generated what social scientists call the "liar's dividend." They foster broad-based mistrust in information generally, including in what might otherwise be seen as incontrovertible evidence that something is untrue.

Read the rest of this column here.

Off the Charts

Whales Return?

Bitcoin has had a pretty good week. So, having last week investigated the impact of waning institutional interest in the cryptocurrency, I thought it might be worth looking at oft-cited measure of large players' activity to see if it can tell us anything about the sustainability of this rally: the accumulation of addresses holding more than 1,000 BTC.

Unlike the CME futures, which we looked at last week, a derivative product that tends to attract traditional institutions, this is a measure of direct bitcoin ownership. When stripped of exchanges and other large crypto businesses, the measure tends to capture the activity of wealthy individuals with a firm belief in Bitcoin's future. These are the "HOLD whales" I referred to in last week's newsletter, a group that tends to wait until the institutions have capitulated to start accumulating bitcoin at low prices.

So, what are we seeing right now? I asked CoinDesk's Sage Young to pull data from Glassnode, and he came back with two charts: The first (above) is a six-month chart of the number of such addresses mapped against the bitcoin price. The second is a two-year chart of the same.

The first chart shows there has been a pickup in March of whale addresses. And if you look at the second one you'll see that in advance of the big price run-up in 2021, there was a dramatic increase in whale accumulation.

Are we seeing the beginnings of the same trend? Certainly bitcoiners would hope so. But the juxtaposition of the two charts also gives reason for pause. When put into that two-year perspective the recent gains are very small indeed. We'll have to wait and see.

The Conversation

UST's Bitcoin Standard

One driver of bitcoin's price this week – and possibly of whale address accumulation – is the plan by Terraform Labs to build up a bitcoin reserve worth $10 billion to underpin its dollar-pegged stablecoin $UST.

In announcing the plan on Twitter, founder Do Kwon said he was "opening up a new monetary era of the bitcoin standard."

Such a colossal commitment prompted a flood of questions. Blockstream CEO Adam Back voiced one that was on everyones' mind: "Where is the $10bil coming from?"

Kwon was quick to reply that Terra only has $3 billion right now, which will be deployed when a bridging mechanism to attach the bitcoin reserves to the Terra ecosystem is built. Over time, the full $10 billion will be deployed as fresh, incoming funds are deposited into UST.

Kwon jumped on a podcast recording with Anthony Pompliano, in which "Pomp" announced in a tweet that said he and Kwon discussed "why this is good for everyone." There and in other interviews, the Terra founder talked of bitcoin's value as the only truly "neutral asset" and that holding it would protect against the kind of systemic risks that could challenge UST's algorithmic stabilization mechanism.

But while such reviews helped stoke a view of this move as a deft way to both curry favor with bitcoiners and attract funds into the Terra ecosystem, which would boost its native token, LUNA, others were skeptical of maneuvering to manipulate markets. One issue: the uncertainty surrounding how bitcoin would be incorporated into UST's stabilization design, since it is based on an algorithmic adjustment rather than a reserve model.

Someone with the handle @muddream wrote that until that model is properly explained, the announcement "sounds like the most epic rug pull of all time."

Web 3 investor and developer Tyler Reynolds offered a somewhat tongue-in-cheek prediction that after driving up the price of bitcoin, Terra could now buy BTC put options, which give the holder the right to sell at a certain price, and then "take out a massive short" on the cryptocurrency to book profits in dollars as its price falls. "And boom," he wrote, "UST is now fully collateralized (in dollars)."

But Kwon suggested his biggest problem was he was driving up the price at a time when he needed to buy. So, perhaps only half-jokingly, he called on Crypto Twitter to "Please short $BTC…for me familia."

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Relevant Reads

Mining Week

Once again, the team at CoinDesk's Layer 2 has taken a topic that might seem one-dimensional to the uninitiated and dug up a trove of different takes and angles. Here's a sampling of what was in the Mining Week package:

CoinDesk reporter Aoyon Ashraf delved into the need for bitcoin miners to explore innovative new financing as they strive to deploy machine arrays that are big and fast enough to keep up with Bitcoin's rising difficulty at a time when the price of bitcoin is well off its highs.
Contributors Alison Mangiero and Evan Weiss looked at the implications of a high-profile case in which crypto investor Josh Jarrett has sued the Internal Revenue Service, posing the novel idea that his staking rewards should be treated as property, not income.
CoinDesk reporter Eliza Gkritsi weighs in on the cat-and-mouse game between cloud vendors whose servers are being hijacked by fraudsters who use them to illegally mine tokens such as Monero's privacy coin, XMR.
George Kaloudis and Sage Young present 10 charts that show just how big a year the past 12 months have been for the mining industry. My favorites: the ones showing the now vastly more diverse geographic spread of mining after last year's exodus from China.