2023 Crypto Themes That Intersect With Self Sovereignty

Euro attitudes about money, UK budget woes, Starlink's lifeline, and more

Every year, Ryan Selkis of Messari Crypto publishes a thesis on Crypto markets. He covers the most important topics and where markets are likely to headed.

It's always educational and is a "money maker". And while he does get technical in some areas, he does a great job of keeping it readable for the casual crypto observer.

Below, I've shared themes from the report that are relevant to self-sovereignty.

The bottom line: it's 160 pages of high-level information on where the industry might be heading. It's worth a skim at the very least.

Let's dive in.

#1 Themes From Messari's Yearly Crypto Report Worth Focusing On

One of the more consequential topics from a self-sovereignty perspective is whether or not software code should be considered protected under free speech laws?

And should the ability to transact privately be a protected right?

This is likely to become more of a political issue in the years ahead as crypto adoption increases. It's worth thinking about how a country with strong "software is speech" laws might attract location-independent workers. Especially highly sophisticated software engineers.

Said differently, in a remote work world where people are more selective about where they live and why, how will the evolution of software-related laws impact digital lifestyle choices?

2. Moving forward, not all crypto crimes will be treated equally. Unless code is considered protected speech, we can expect governments to become more hostile towards the developers of crypto projects that promote self-sovereignty.

Historically, when a financial crime is committed in crypto against individuals, governments have been slow to respond. And more recently, when the "criminal" is on friendly terms with government officials, the criminal might even get special treatment. (SBF is allowed out on bail that isn't bail?)

This is in contrast to when financial crimes are perceived to be against a government, ie: like when Tornado Cash was used to launder money. The person deemed responsible for the software code ends up in prison for 8 months waiting for a trial.

The lesson: Moving forward, we can expect government clarity on how they'll treat crypto.

Expect more hostility towards developers that create tools for self-sovereignty because they come at the cost of state control. Developers of these projects are more likely to be treated as enemies of the state while projects that harm individuals are more likely to be treated with kid gloves because that's an outcome that benefits the state.

That's not a surprise but it likely does impact innovation moving forward. This issue will split along new social class lines. ie: location-dependent people are more likely to be anti-crypto than location-independent people. And they'll vote accordingly.

3. On the centralization of cloud infrastructure and the limitations it creates for the crypto industry:

"Technical complexity and economic barriers prevent the average crypto user from solo staking or mining; instead, they usually delegate to a professional validator or mining service. Over half of all staked Ether is controlled by three entities: including exchange giants Kraken and Coinbase. Over half of Bitcoin’s hashrate is supplied by three mining pools: Foundry USA, AntPool, and F2Pool."

"cloud providers AWS, Hetzner, and OVH represent nearly 70% of hosted nodes on both ETH and SOL as of Sept. 2022."

"Our physical survival depends on the decentralization of hardware. The war against censorship will be fought in the cloud, and how effectively we wrest control of that infrastructure from Big Tech monopolies could be the difference, as we hang in the balance between an open internet and a global police state."

The point: Many crypto projects are not nearly as decentralized as we'd like to believe because of the cloud infrastructure they rely on. The physical hardware that enables decentralized cloud computing is both a financial and technical bottleneck for decentralization and is a "space to watch" this year.

"Decentralized Physical Infrastructure Networks (DePIN) help bootstrap decentralized networks of physical hardware. Things like file storage, wireless access, and cloud computing require lots of capital expenditure and operational headaches, and it’s a non-trivial challenge to scale a hardware network to viability. Tokens have proven effective at catalyzing the development of these networks as they coordinate decentralized hardware investment at scale."

"I believe crypto infrastructure will grow exponentially in regions where governments tighten their grip on dissent and crack down on speech, and there is tremendous opportunity for catering to gray market customers."

This fits the broader sovereign individual thesis. The most digitally transformative trends this decade will take root in places with rising authoritarianism and corruption and are less likely to find compelling use cases in places with strong individual rights.

4. Bitcoins Value Persists As Outside Money And A New Form Of Check On Sovereign Authority

"Bitcoin can be used by people we don’t like and that can, at times, be inconvenient and undermine policy objectives. But as a single purpose, commodity money, and secure settlement system, it has held up miraculously. It has proven durability and will continue to serve as a powerful check on absolute sovereign authority."

The point: Bitcoin continues to prove itself an important part of a sovereign individual's technical solution to minimizing the outside influences.

5. But Bitcoin Still Isn't Necessarily Useful As A Currency

"That said, bitcoin’s role as a usable currency will continue to be questionable. You can’t (or shouldn’t) build debt systems around 100 vol assets. You can’t (or won’t) integrate bitcoin into state governable central banks as a primary reserve any time soon."

The point: it's valuable as an outside money but has real drawbacks and cannot be your only solution.

6. Sanctioning Russia at the Central Bank Level was a cross the rubicon moment

"When the U.S. decided to sanction Russia for its invasion of Ukraine, and more importantly, to seize its U.S. Treasury reserves, it was a “cross the Rubicon” moment for crypto" 

De-platforming a nation-state from the US dollar-dominated global system was a warning shot fired across the world. Everyone is at risk of financial de-platforming. And all people and governments would be wise to focus on alternatives.

At the moment, Bitcoin is useful as a neutral global reserve asset to resist financial de-platforming at an individual level but only modestly useful at a nation-state level (ie: Russia was de-platformed by Western Sanctions but bitcoin simply isn't large enough to usefully accommodate Russia's immediate needs).

So, will bitcoin ever have the size and scope to be a primary monetary system for this multipolar global order?

I don't know that I'd make that prediction.

But it is increasingly likely that smaller nation states adopt bitcoin as part of a basket of other neutral global reserve assets to resist financial warfare.

Main point: Ask yourself, what other neutral assets might become valuable in a multipolar world? Then think about how you can take advantage of that information.

7. Privacy of ENS and other "naming services".

"I think it’s problematic that ENS and other wallet identifiers are globally searchable by default, along with every single trade, payment, vote, and other activity you’ve done on chain"

"You are a different person at work vs. at home, and with adults vs. with your kids. There is no reason everyone on the internet needs to know everything about you."

There is value in taking ownership of your name via blockchain ie: johndoe.eth but you may not want to transact with that identifier when its easily traceable. It's better to retain modest levels of transaction privacy via pseudonym.

8. The Importance of Digital Wallets

"Better wallet infrastructure helps users manage the “not your keys, not your coins” problem and turns personal crypto custody from a purity test to an accessibility, safety, and user experience upgrade."

If you're interested in the intersection of crypto and self-sovereignty outside of "bitcoin", then you must pay attention to the digital wallet and how it interacts with traditional web2 infrastructure.

Expect improvements in 2023.

9. He recommends reading The Federalist Papers. I do too.

When you think about multipolarism, the balkanization of the world, and how it all coincides with remote work, crypto, self-sovereignty, digital tribalism and neo medievalism, the more the digital age is likely to rely on federated systems.

Physically local tribes that connect in larger groups digitally along other common beliefs.

There's no better place to learn about federated systems than from some of the key founding fathers of the American constitutional system.

Rapid Fire

Extras

Since 1975, the world population has doubled, and we've added 1 billion people since 2011.

So, it shouldn't be surprising then that our systems and cultures are breaking down. We take these systems for granted as permanent fixtures of society but with population growth like we've experienced, why would any system be permanent?

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