Today is the second half of our special two-parter on the state of crypto. Yesterday’s theme was the case against. Today we debate the case for.
In the last few weeks, use-cases have become a popular trope in the big crypto debate. Crypto has tens of thousands of people working with dozens of billions of dollars on building new technology. And I think it’s fair to ask: What have they built that is better than the status quo? What, as Monty Python might ask, has blockchain ever done for us?
Today’s guest is Packy McCormick. Packy is the popular author of the Not Boring newsletter. In this episode, we debate use-cases for crypto, talk about whether major products are just Ponzi schemes, and discuss whether all the money sloshing around Web3 has subtly distorted the market and hurt the space.
Packy shares how he got started in crypto. Then he and Derek discuss how much of the hype around crypto was philosophical (i.e., belief in the product) vs. motivated by the massive amounts of money flowing through the space.
Derek Thompson: So I have three goals for the next 30-or-so minutes, and I think it’s worthwhile for me to be totally transparent about what those goals are. Goal no. 1: I want to get an insider’s view on the state of crypto. I want to know how the last nine months have changed your mind and haven’t changed your mind about the promise of this movement and the peril of this movement. No. 2: I want to make sure that I give you space to make the best full-throated defense of crypto’s potential as a technology of mass progress. No. 3: I want to make sure that I give myself space to respond or express my uncertainties and my doubts and my skepticism about crypto, a lot of which has solidified because of the news the last nine months. So does that overall sound like a fair roadmap to you?
Packy McCormick: This is going to be fun. My no. 1 goal is to not have a video clip of me saying something dumb, so I think those goals are aligned.
Thompson: There is no video component to this particular podcast, so right off the bat I think that particular goal is going to be met. So let’s start with an easy one. I do want to know how you got so into crypto. How did you fall down the rabbit hole?
McCormick: I think first things first, I was a skeptic for a while, as well. I bought Bitcoin back in 2013. I read a Fred Wilson blog post about investing in Coinbase. I worked at Bank of America Merrill Lynch at the time. I wasn’t allowed to buy stocks without them knowing about it, so I guess like a lot of people, I came in as a criminal, trying to kind of get around Bank of America’s rules there.
Bought Bitcoin, ended up selling it a few months later at a 50 percent gain to go to Oktoberfest with my friends. They thought I was a genius—though it was, at the peak, like a $2 million mistake, so I avoided it really for maybe next seven years. Every time I looked at the prices going up I was just a little bit bitter about it.
And I didn’t get it. I mean, Bitcoin in particular I didn’t really get as a particularly valuable thing. I see some value now, but it’s not the thing that excites me the most. I think how I got back into it, I started writing Not Boring in the beginning of 2020, didn’t really write about crypto that whole first year. I had more of a finance- and a little bit of tech-oriented audience for the first year. Then I started investing and I talked to a few Web3 entrepreneurs. In one conversation in particular, we kind of just talked about the value chain and how it changes when more value accrues to the creator and the user of the product.
I think one of the things that had kept me kind of on the outside of the space for a while was a lot of the language, like “replacing the institutions” and “cutting out the middleman.” All of that kind of stuff didn’t appeal to me. I don’t think that’s how things work, but just thinking about it in terms of the value chain and just what happens when you take an entity out of the middle to the business models. That’s what kind of started getting me into it.
I remember the first time I wrote about it, I apologized for writing about crypto at the top of the email and said I was maybe going to do it every so often. Then it became every month. Then it became every couple of weeks probably, and I invested a bunch in Web3 startups as well.
Still, I’m not going to be the most full-throated, blind believer in what’s going on. I think there are lots of scams, and there’s certainly lots to be concerned about, but I also think it’s incredibly fascinating and probably being too dismissed right now, so there’s probably an answer that’s somewhere right in the middle that hopefully we’ll agree on by the end of this.
Thompson: Yeah. The hype pendulum has certainly swung very, very far. You mentioned a couple motivations, and I just want to tell you what I see as the motivations and ask you to tell me sort of how you think these motivations are divided among the people that you follow most closely.
No. 1, I see a huge motivation behind crypto that is somewhat philosophical, that there’s this idea that the Web2 internet revolution between 2003 and, let’s say, 2016 empowered a kind of digital behemoth that Ben Thompson called aggregators: Facebook aggregates social media, and Amazon aggregates consumers, and Google aggregates information, Spotify [aggregates] music, and so forth, and these aggregators provided extraordinary value to consumers, but they were often seen as disempowering the creatives.
So Web3 was really interesting, it seemed to me, to a lot of people because they thought, “I’m a creative. I’m just individual. I don’t work at Facebook. I’m not an executive at Amazon. In this new economy where I just make stuff, I can own my own property and I can get rich on it.”
No. 1 was agency, no. 2 is adventure. The frontier of tech, I think, kind of felt closed to a lot of people, like social media was done and cloud computing was being competed upon by Microsoft and Amazon—big, big companies.
And then no. 3 was money. I think we need to foreground the whole money thing. Like Web3 got massive amounts of money from venture capital. Look, doing something new is fun, but doing something new that’s paying you a ton of money is really, really fun. So it was always difficult for me to disentangle exactly how much of the hype is truly philosophical, like sincerely about the product, and how much of the hype is just about all the money is flowing here. So in all honesty, how much, looking at the last few months, do you think the hype around crypto was just about the money?
McCormick: Oh my God, I think a ton of the hype around crypto, probably the most vocal hype around crypto, has been just about the money. Even today, we’re recording this on a day where Ethereum rose 100 bucks, and it’s been doing well finally after crashing for a little while. So much of my timeline is just people drawing charts and making predictions based on the 200-day moving average.
All of that kind of stuff, certainly, I think it was a big motivator for the hype. It’s a really interesting thing, where at the same time it’s a financial instrument, gambling, a new technology, all baked in from the beginning, and probably the first big technological wave that people could talk about on the internet while participating in on the internet.
Things like AI and other things are happening and are interesting, but people can’t get quite as involved, so I think there’s just all of this ... Part of it’s from the fact that money is baked in from the beginning, which is both a blessing and a curse probably, and part of it is just because we’re doing this thing on the internet and people are bragging about making money.
To me that was never—and I’m sure every single person will say this—not what got me interested in the first place. I really approached it almost like an academic thing in the beginning. I talked about aggregation theory in that first post that I wrote about crypto because I do think it’s interesting, not necessarily to take down Facebook, or to take down Twitter or Amazon.
I think those companies are going to survive and do a great job for a very long time, and I’m interested in projects, and I’m sure we’ll talk about them, like Shopify getting involved in something like tokengated commerce. I think a lot of the answers are going to be kind of these hybrid solutions, the kind of decentralized crypto pieces in some spots, and take more centralized pieces where it makes more sense, and more scalable architecture is a valuable thing to have, and where a big organization is a valuable thing to have.
So I do think there is ... Probably among the people who are building real products in the space, I would say it really is very philosophical, even more philosophical than I am, and I’m fairly philosophical on it. Then I think a lot of the noise and hype ends up being on the financial side.
This excerpt was lightly edited for clarity.
Host: Derek Thompson
Guest: Packy McCormick
Producer: Devon Manze
Subscribe: Spotify
