Russ: So, let’s talk about Xapo. Tell me what service it’s trying to provide that’s not available right now.
Wences: We look at the biggest obstacles that people have to use bitcoin and focus on those. Xapo is like a Bitcoin bank.
Mkay. So way back in ancient history times, back almost before man developed the written alphabet and very nearly before man constructed the first multi-story structure, man had the idea of giving away his private key to people he’d never met and whom he had no meaningful recourse against, or hell, just posting it somewhere for the world to see.
I mean, why not ? What’s the worst that could happen ? It’s not like “trusted third parties” a.k.a. banks have ever gone bust in our lifetimes, leaving us high and dry ; at least not in our direct personal experience and at our direct personal expense, right ?i So why not trust your bitcoins to Wences and his team at Xapo ? Not like this is the new Wild West or anything, where early classical revival websites pretend to be Fort Knox one day only to disappear under the cover of
darkness haxxing the next. Not like Bitcoin empowers the individual to lift himself above the group as never before in human history if and only if he takes ownership of his private keys. Moving along.
Russ: But in theory I don’t need a bank.
Wences: [Xapo] is different from a bank in a very important way, which is, when you put $100 in Bank of America, you are really giving that money to Bank of America and it is in their balance sheet. And then they turn around and they do things that you may or may not know with it. When you give us $100 bitcoin, it’s very, very different in that that is not in our balance sheet. We do not own it. We just safekeep those bitcoin for you. So, it’s equivalent to–we look like a big parking garage, a big building that is a parking garage. The parking garage structure is ours. You bring your car and you park it there. The car is yours. We cannot use it, touch it, lease it, sell it, anything. It’s not ours. We just provide the parking garage structure.
Wences is right about fiat banking : keeping your money with banks, as opposed to as cash in a home safe, is in point of fact loaning it to them – that is, entering into a long-term contract with Spa Lady times a million,ii and allowing them to run a fractional reserve with all its perversions.iii But for Wenny to say that “Oh we don’t publicly keep track of your coins except to advertise that we do so as to induce other technically incompetent puddles of mud to give us their coins as well” is “very, very different” from fiat banking is little more than a trompe l’oeil extraordinaire. Not accounting for things doesn’t change facts ! Not saying “faggot” doesn’t make boys have less buttsex with each other, nor even feel less guilty about the act. This whole charade of papering over the world with sanitised words in the hopes that no one will notice the dead body under the living room rug is an awful, nasty habit.
Besides, Wences isn’t just providing a parking garage with his “Bitcoin Vault” service Xapo, he’s taking the car keys, the insurance AND THE TITLE! and exchanging all that for a boatload of counterparty risk and a healthy dose of the sense of security.iv Even Russ sees right through this thin red herring of an analogy. And the best part is that Russ calls his bluff!
Russ: So the question then is, why don’t I park it in my own garage? Why do I need a third party to park my car? Because part of the appeal of Bitcoin is I don’t need this third party.
Wences: Okay, I agree with that, friend ;v I don’t want to offend you,vi so I am going to use my mom as an example.vii I trust my mom. Maybe more than I trust most people. But I do not trust my mom to keep her private key safe. That requires quite a lot of know-how and expertise.
Myeah no. If your mother can’t keep track of a piece of paper, and you’re too lazy or too cool or too busy to be a good son and keep track of it for her, then fuck your mother. Who needs that much dead weight ? If you don’t give a shit about her, what makes you think a lightning does ? Don’t try to fill in the gaps in your own skull with wallet inspectors. We all know how that inevitably goes.
Wences: What we do is make [storing bitcoin] invisible for people. So, we want you to have certainty that these bitcoin are yours. We’re just safekeeping them. So it’s not like putting them at risk like you would in a bank. But we really go to extraordinary length to make sure that those bitcoin are safe. Things that for most individuals and institutions are sort of unthinkable to do on their own.
So banks don’t just safekeep money why now ? Because they pay their depositors some nominal amount of interest on their account balance every month ? Because they also offer other financial services like credit and brokering ? Mhm. Right. See that’s not gonna fly, Wenny. Xapo is every bit as dangerous and every bit as risky as a fiat bank – if not vastly more so given that it has a sub-two-year track record compared to, what, 150 years for major Canadian banks. Lindy Effect, y’heard.
Plus, any “individual” and any “institution” that can’t think their way through to securing their own coins, keys, and wallets is no such thing to begin with. The only extant definitions of “individual” and “institution” are precisely the ability and willingness to do what’s unthinkable for fiatards. Nothing less.
Russ: And you recently, to a lot of fanfare, got a second $20 million investment?
Wences: We’ve raised a total of $41 million.
Russ: And when did that come in? That second one?
Wences: The second one in July of last year.
Russ: Okay. So about a year ago. And, are you done? If you can talk about it? Wences: Yeah.
Russ: You think you are good, going forward?
Wences: Yeah. That was more capital than we were looking for.
Russ: So, you’re good.
Here’s the kicker, here’s the death knell, the upshot, the signal in the noise, the hallmark of a soon-to-be failure, and what’s every bit as toxic as excessively fast growth, it’s this : too much money. Xapo and Wenny are in a tight spot as a result, left making up shitty analogies and trumping up reasons why anyone should trust them with their coins, knowing full well that businesses outside the WoT have a dismal track record of survival, much less success.
You can just smell it, can’t you ? The burn. Oh, the burn.
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- Implicit backing of banks by taxpayers and the creation of a morally hazardous environment doth not count, y’know. The sublimated violence of the bezzle is like a slow-drip poison compared to the firehose blast of watching your life savings go up in smoke in an instant when a bank robber successfully holds up your local Savings & Loan before riding off into the bone-chilling sunset.
That’s why giving control of the money supply to the State is such a hard lesson for citizens to learn, and therefore such a hard lesson for them to pass down to the next generation, and therefore the reason why you’re repeating the same mistakes that your father made, and his before him.
The aversion to banks and bankers, by comparison, is far more natural and widespread. It’s only in historically aberrant times such as these that such a large number of citizens so blindly and completely trust banks to NOT fuck them over ; idem with trusting states. It’s quite the trick, really. I mean illusion! (A trick is something a whore does for money, Michael.) ↩
- Spa Lady is a women-only fitness chain that’s infamous in these parts for making clients jump through 37 hoops in order to cancel their contracts. A series of e-mails, phone calls, and written letters are required before the multi-month cancellation period even commences. It’s pretty offensive behaviour from a company selling a pretty offensive idea. Seriously ladies, shame is motivational. You should try it sometime.↩
- This is quite the opposite of Bitcoin companies, such as BitBet, which run double reverse fractional reserves.↩
- You’ll often see this “sense of security” referred to as “security theatre” because that’s what it is : a show.↩
- Classic scammer line #1.↩
- Classic scammer line #2.↩
- Classic scammer line #3.↩