Our thesis: How to un-f*ck the Bitcoin narrative

Chris Dannen

By Chris Dannen

What is cryptocurrency for? Nobody seems to have a simple answer. As Timothy May recently told CoinDesk, the Bitcoin narrative is "fucked." May says:

There's a real possibility that all the noise about 'governance,' 'regulation' and 'blockchain' will effectively create a surveillance state, a dossier society. I think Satoshi would barf... What I see is losses of hundred of millions in some programming screw-ups, thefts, frauds, initial coin offerings (ICOs) based on flaky ideas, flaky programming and too few talented people to pull off ambitious plans. Sorry if this ruins the narrative, but I think the narrative is fucked.

Without a cohesive story to explain the purpose of Bitcoin, newcomers have walked into "blockchain not Bitcoin" traps laid by corporate marketers and ICO fund hucksters. Bitcoin's blockchain is not really about central banks, or supply chains, or title deeds; these amount to fetishes or suboptimizations. So what is the Bitcoin narrative about, exactly?

Simply put, Bitcoin is an improvement to the process of software development, as compared to the traditional hierarchical approach taken by corporate incumbents. Any of the heralded benefits for Bitcoin participants (trustlessness, decentralization, sound money, etc.) descend directly from organizational design choices meant to attract and retain software developers to the project, by providing freedom and rigor not often found in full-time engineering roles.

May says:

Corporations are showing signs of corporatizing the blockchain: there are several large consortiums, even cartels who want 'regulatory compliance....' the idea that corporations want public visibility into contracts, materials purchases, shipping dates, and so on, is naive."

Why is this naive? Whether new or old, Facebook or Equifax, large "trusted" entities have a tendency to do things with personal data which are bad for customers. Individual incentives at the management level encourage self-interested decisions, which also expose the people closest to the work to moral hazards. Both consumers and workers lose, while the managers collect their bonuses. It's not that corporate products and services are bad by nature; it's that they are subject to perverse incentives when employed as common infrastructure.

Bitcoin presents an approach to building systemically-important systems (eg., a currency system) which can operate at enterprise scale without any opportunity for individual actors to manipulate the participants. Compared to FedWire and SWIFT, it is a superior product at a cheaper price, available to everyone. When full-fledge Bitcoin-based financial services hit the market, competition with legacy systems will be fierce. Building infrastructure this way is not just an admirable goal, it is also a good story.

Approaching with this angle -- that Bitcoin is an innovation in process, an improvement in how to manage things -- is how we "un-fuck" the Bitcoin narrative. To see how the Bitcoin approach to software development emerged, and what its impact might be, read the Iterative Capital thesis located at https://iterative.capital/thesis and let us know your thoughts on Twitter @IterativeCap.

  • Chris Dannen, CIO