Computer vs. Casino: Crypto’s culture war
For any crypto OG who’s been in this industry for a long time it’s without a doubt that the culture of the industry has changed significantly in the past year.
There’s starting to be a culture war between the early purists (the crypto computer party) and the latecomer tourists (the crypto casino party), which has created a bifurcation among builders in the crypto community.
I’ll explain the positions of both political parties and how we got to this conflict today, and then chart a nuanced path forward for how the crypto industry should resolve its culture war.
Crypto computer
People in this camp believe in the ideals of the industry’s founder Satoshi Nakamoto of decentralizing power away from corrupt institutions into the hands of the people.
They tend to be people who entered the crypto industry earlier. The 2013 cohort were largely hard money libertarians attracted to Bitcoin as a hedge against reckless monetary policy. For these die-hard Ron Paul gold bugs, Bitcoin would be the liquidity sponge soaking up all the excesses of the Federal Reserve money printing.
The 2017 cohort (my cohort) were largely technologists who were perhaps less ideological than the previous generation but were attracted to crypto as a new computing paradigm.1 Ethereum showed decentralized applications (dApps) were possible such that you could now own instead of just read or write data. With that came the notion of web3 and disintermediating Big Tech and the gatekeepers of the Internet.
Today, both cohorts represent the silent majority who still believe in Satoshi’s vision and are optimistic about new use cases and products pushing this space forward. Yet at the same time they are too scared to say anything negative about the current hot ponzi shilled by influencers otherwise get attacked by the online mob of keyboard warriors. As a result they remain silent.
Crypto casino
People in this camp cynically believe crypto is nothing more than a decentralized casino and want to keep it that way. The purpose of building is to add more rooms to the casino – aka find new creative ways to hyperfinancialize everything and speculate – whether that be on friends’ net worths using mobile or on shitcoins using Telegram bots.
They tend to be people who entered the crypto industry later in 2021 and come from trading and finance backgrounds. They are a very vocal minority who are excellent at Twitter engagement farming. As a result they dominate the online discourse and create tensions between early purists and latecomer tourists, similar to how nativists are resentful towards immigrants who don’t assimilate and change the culture.
They also tend to be younger in age. My hypothesis is that this is a second-order effect of a decade of zero interest rate policy (ZIRP) and the legacy financial system failing for Millennials and Gen Z. Young people increasingly feel they need to get rich quick in order to pay off student loans and afford a mortgage for a house. And when people feel like they’re stuck in the rat race forever they turn to the casino to gamble their way out.
How we got here
The casino can be very useful for bootstrapping usage. This is because degens are early adopters. They have the risk tolerance to be beta testers of unproven financial products. It’s easy for outsiders to dismiss degens but they are the lifeblood of crypto. They are the blue collar workers in the trenches getting their hands dirty on every new product.
During a crypto bear market, there aren’t any net new users entering this space. Apps get stuck growing more users and are compelled to focus on the existing degen power user base.2 This is fine in the short-term as volumes are largely driven by power users. For instance, the top 2.2% of OpenSea users are responsible for over half its volume.
However, the problem arises when projects get cynical that mainstream adoption is impossible. With the mindset that crypto will never cross the chasm beyond early degens, the incentive is to e/acc degeneracy of blockchain technology and design zero-sum apps like table games at casinos.3 And so we get ponzi tokenomics, multi-level marketing schemes, and the most distasteful parts of finance.
Ponzis have short-term product-market fit because there’s always going to be a core cohort of a few thousand crypto-native degens who will gamble on every new shiny speculative app. This creates a culture of financially engineered zero-sum money games that influencers shill to lure unsuspecting retail users into buying in, only to get dumped on after. That’s why so many people try desperately hard to engagement farm on Twitter and become influencers because only then does the house odds stack in their favor. In the casino, influencing is a lucrative business model.4
Outside the casino, catering to only degens is repulsive to anyone not in the degen bubble. I don’t blame the general consumer for hating crypto and NFTs. Every time they hear about it in the news it’s related to greed, ponzis, and the worst personalities on the Internet. Designing zero-sum apps alienates more people from entering the crypto space and using on-chain products.5
We need to be thinking about ways to grow the crypto user base like what the Bitcoin ETF did. The Bitcoin ETF was a breath of fresh oxygen in this space because trillions of dollars of retirement account savings that were previously inaccessible to crypto can finally be onboarded to Bitcoin for the very first time.
That said, how do we actually get mainstream adoption?
A path forward
I met Steve Wynn back in October who told me about his experience growing his hotel and casino business. One unique insight he had at the time was to focus on the experience outside of gambling. Vegas used to be a place where people only came to gamble and then leave, and there was little reason to stay for anything else.
This sounds crazy given that today it’s table stakes for every Vegas casino to also offer concerts and shows, celebrity chef restaurants, luxury shopping, and more. But it was contrarian at the time The Mirage opened in 1989, and its success quickly forced other casinos to invest in higher-quality amenities and entertainment beyond just gambling.
Wynn played a significant role transforming the Las Vegas Strip in the 1990s from a gambling-focused destination to a world-class entertainment and leisure destination. Good hospitality made the Vegas experience less zero-sum and grew the pie significantly for the number of tourists who visit Vegas every year for a variety of reasons.
Obviously there’s a lesson to be learned here for the crypto industry. We need fewer zero-sum table games and more positive-sum experiences.
One great example of this is prediction markets. Degens love prediction markets because they love the all-or-nothing risk of betting on binary outcome events, just like how they can either 10x or lose all their money gambling on a memecoin. At the same time, countless studies have shown prediction markets to be much more accurate than the mainstream media and experts, by eliminating bias and introducing “skin in the game.”
People using prediction markets don’t necessarily need to be betting on them but can use them instead as a source of news for geopolitical events, just like how people don’t need to be visiting Vegas for the sole purpose of gambling. Even Trump is now regularly posting his Polymarket odds on Truth Social.
There are many other examples too. Using decentralized physical infrastructure networks (DePIN) for WiFi mesh networks or vehicle performance data.6 Using airdrops to incentivize restaurant loyalty or better fitness. Using NFTs such that up-and-coming creators don’t have to go through Hollywood gatekeepers. Crypto degens are the early adopters for all of these but the value they bring to society is positive-sum.
There’s a saying that startups are more likely to die from suicide than homicide. This is also true for a startup industry like crypto, which is more likely to die from within – the degen culture slowly killing itself and people leaving the industry – than Gary Gensler or Elizabeth Warren banning crypto.7 Speculation is always going to be part of the crypto culture; thinking otherwise is completely naive. But rather than accelerate degenerate money games, we should leverage degens to bootstrap new positive-sum use cases that bring more people into this industry.
In 2017 there were also ICO flippers – FBG being the most notorious example – but those folks have all but become irrelevant or left the industry. Unlike the 2021 cohort of speculators in which many have remained in the industry through the bear market.
It is possible to build a profitable business only catering to degens. Friend.tech does ~$7M in annualized revenue from only ~500 DAUs. But you need to have an extremely high CLV for the economics to work.
I have a horseshoe theory of the EA vs. e/acc debate, that they are both very similar to each other and morally questionable at their logical extremes. Effective altruism is extreme utilitarianism, justifying immoral behavior (e.g. stealing money) as long as it’s for the greater good (e.g. donating malaria nets). Effective accelerationism doesn’t care about the moral consequences of new technologies and just accelerates the outcome to the endgame.
Is it just me, or did Elon change the Twitter algorithm to reward sensationalist engagement even more?
This trend is similar to what’s happening with mainstream corporate media right now. As their audience shrinks, they sensationalize the news to get short-term attention and satisfy their advertisers, but long-term it just alienates more and more people. It’s a downward spiraling business model.
Personally I hate the term “DePIN” and think it’s too buzzwordy. Instead I would classify it under a longstanding area of research known as “proof of useful work,” or figuring out ways to bootstrap crypto networks through doing useful work instead of hashing SHA-256 trillions of times.
This reminds me of The Dark Knight trilogy, in which Batman doesn’t kill Joker and vice versa whenever each has an opportunity to do so because they are two sides of the same coin and both need each other to exist in order to become a better superhero/supervillain. Likewise, corrupt regulators are complicit with crypto fraudsters growing big and blowing up spectacularly; without the fraudsters the regulators don’t have an excuse to call for more regulation and government powers to kill the crypto industry.