Blockchain isn't a Solution for Everything

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Square obtains NY State cryptocurrency license

What's the Story?

  • Square has obtained a BitLicense from the state of New York
  • Square is the ninth firm to obtain a license
  • Square's Cash app allows users to buy and sell Bitcoin

Why Does This Matter?

Square, a payments company, is joining the trend of fintech companies moving into cryptocurrency. Square started as a credit card processing company, but Jack Dorsey, Square's CEO, believes that Bitcoin and cryptocurrency will play a prominent role in the future of the payment industry. When companies like Square introduce cryptocurrencies to their platform, it benefits the whole cryptocurrency ecosystem. Some of Square's customers are traditional businesses such as a family-owned restaurant who might not have heard of Bitcoin or have an unfavorable opinion of it. Square's "stamp of approval" by adding it to their platform might help those owners form a favorable opinion of it. Square also provides competition to existing companies such as Coinbase and Gemini. More competitors are better for the ecosystem because it'll help drive down trading fees and improve liquidity. Most of Square's revenue related to Bitcoin will most likely be from trading and not from transaction fees related to businesses accepting Bitcoin.

Regulated Crypto Custody Is (Almost) Here. It’s a Game Changer

What's the Story?

  • Regulated cryptocurrency custody is close to becoming a reality
  • Startups to traditional banks are working on creating a regulated cryptocurrency custody
  • Experts expect a regulated custody product to boost cryptocurrency prices

Why Does This Matter?

I was one of those people who said regulated custody would bring institutional capital and thus boost prices. I have moved away from this position in recent months. While I expect regulated custody to be a critical piece of the puzzle, it's no guarantee that it'll cause an influx in institutional capital. Simply because institutional capital doesn't want to do anything that is perceived as risky. If you are a pension manager, you are measured against your peers. Maybe, you are paid a bonus for beating certain milestones, but the upside is nothing like a hedge fund manager. Why would a pension manager take unnecessary risks like buying Bitcoin when it's peer aren't doing it? Why would they risk getting fired? My view is cynical but held with firm conviction. We need the reputation around cryptocurrencies to change. We need lay people to believe it's not just a speculative investment, but an important technology that deserves our attention not only because it'll be a profitable investment, but because the underlying technology will impact our lives. Yes, cryptocurrency custody is essential, but the most critical barrier to investment is changing the narrative. We must let institutions know that cryptocurrency isn't some speculative investment, but a necessary part of their portfolio.

Goodbye, Denver Post. Hello, Blockchain.

What's the Story?

  • The staff of the Denver Post is leaving the newspaper to join a blockchain startup
  • The startup, Civil, is trying to disrupt the media industry
  • Denver Post staff have accused ownership of interfering with the paper's editorial process

Why Does This Matter?

Blockchain doesn't fix every problem. The newspaper industry is dying. This is a fact, not an opinion. I don't think Civil is going to change this by adding a blockchain solution. Civil will sell X amount of tokens in its token sale. These tokens are going to have voting rights which allow holders to influence the publishing process. If someone controls a significant amount of the tokens, then they can vote against proposals that negatively affect them. For example, let's say that many Civil holders use Binance to custody their tokens. Civil is going to publish an editorial that is critical of Binance. Binance can vote against the story. I don't know if the process will be this simple, but you can see how token holders can corrupt editorial independence. A user on HackerNews wrote

"This features the worst elements of public (e.g. the BBC), private (e.g. the Wall Street Journal) and patronage (e.g. the Washington Post) media.

Letting token owners “vote on whether...websites violate the company’s journalism standards” explicitly removes editorial independence. Worse, it ties editorial control to tokens/votes which are bought with money. Worse still, since ownership is pseudonymous, there is no way to detect someone (e.g. a wealthy individual, company or foreign government) amassing control across disparate wallets. Pseudonymity also makes shaming owners for bad behaviour difficult or impossible."

We will continue to see new use cases for blockchain and while I would love to see Civil succeed. I don't expect adding blockchain to the media industry to produce any impactful results.