As we’ve explored previously on these pages vis-a-vis the Gamestop Saga, those of us in the Millennial and Gen Z camps – those of us who are deeply and structurally disadvantaged by boomer-led-hyperinflation of real estate, health care, education, collectibles, and stocks – aren’t taking this abuse lying down. We’re fighting back!
But what’s funny about our counter-punches is just how revealing they are about our fundamentally shared human nature. It turns out that, regardless of age, sex, or creed, the tactics employed by early adopters in keeping out later adopters is remarkably similar across time and space. In essence, the idea is this: pull the ladder up behind us!
We see this in the boomer-led fiat world with ever-increasing capital gains taxes and income taxes that prevent wealth accumulation but do nothing to divest wealth already accumulated. The advocacy for higher taxes from the likes of Buffett and Gates are great examples of this. We also see this in housing markets with increasingly stringent building codes and zoning regulations (not to mention NIMBYism) that prevent densification and extract maximum value out of new market entrants.i San Fransisco in the last 15 years is perhaps the canonical example of this but Vancouver, Toronto, etc. are all perfectly valid examples as well.
And when the shoe is on the other foot, we see this exact same phenomenon in the Millennial/GenZ-led crypto-world with decreasing block rewards and increasingly sound money principles even in tokens never initially designed to deflate. While the Bitcoin case study is obviously familiar to long-time readers of this blog, the Ethereum case study is probably less familiar, so let’s take this opportunity, shall we?
Since the Ethereum experiment is unfolding in real-time before our very eyes, we can now see that the early adopters in this crypto-laboratory are demanding that what was once just a platform token now become “ultra sound money” in a clear effort to pull the ladder up behind them.ii The Ethereum “ultra sound money” meme starts with EIP-1559, which is scheduled for implementation in July of this year, and proposes to burn fees that would normally be paid to miners, ultimately resulting in actual deflation (not just deflation relative to fiat) wherein total supply is likely to decrease as transactional demand continues to increase, with the side benefit of increasing user fee transparency, if with no guarantees as to reducing currently high gas fees under the new regime.iii Eth2 docking is the next step when the existing Eth1 chain merges with the new Beacon Chain within the next 12 months (plus or minus), which will implement the hallowed Proof-of-Stake (PoS) as well sharding the 7+ TB full chain into 64 bitesize pieces. PoS appears to not only make 51% network attacks substantially more costly,iv but also incentivises saving, generates useful cash flows (coupons!) for said savers, and most importantly prevents johnny-come-latelys from spoiling the party.v
With these proposed changes as well as the myriad other mind-expanding innovations in this exponential space, we now have an increasingly independent crypto-native universe complete with bonds (staking, yield farming), stocks (altcoins), currency exchanges (DEXs), collateralized borrowing and lending (DeFi, nftfi), real estate (Cryptovoxels), art (Beeple, XCOPY), collectibles (Cryptopunks, Meebits), and community (Discord, Twitter, Telegram), all of which is getting harder and harder to keep up with for outsiders, in this case boomers and generally less techy-savvy/gambling-degenerate types. Sound like a familiar story?vi
It should. Because it turns out that people are just people, all reading from the same playbook.
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- Not that densification is the be all and end all of urban planning, as Frank Lloyd Wright was keen to remind us. ↩
- It’s actually fascinating to watch Ethereum development take place before our very eyes. Bitcoin development was pretty much a fait accompli by the time I broke onto the scene in 2013, and BTC’s development was also much more secretive, with good reason admittedly. ETH’s development, by contrast, is not only much slower and arguably more complex, but much more out in the open, which either means that the ancien régime a) doesn’t fully understand it yet, b) understands it and is subverting it in ways not yet apparent, or c) understands it but can’t actually do anything about it. I’m mostly placing my bets on a) and c) but I’m open to discussion on b) if commenters are feeling chippy. At the very least, b) has some legs to stand on from the generally étatist leanings of the ETH community, which really shines a spotlight on the cultural difference between ETH and BTC supporters. The former (at least publicly, and at least those of the American persuasion) are a lot more fussed about taxes and regularly groan about the hundreds of hours spent annually trying to comply with insane tax codes and possible securities laws that were designed by dinosaurs for dinosaurs, not by human beings for spaceships. But hey, maybe sometimes you just gotta say the Lord’s prayer in the morning, even if you’re a Jew? Of course, the smart ones are just quietly side-stepping the crumbling leviathan, as Mark Cuban lamentingly observes. ↩
- A more technical explanation of EIP-1559 and its implications is available from Vitalik on the Ethereum site (archived) as well as from the somewhat more impartial BitMEX Research Team (archived). A/V learners will enjoy this Bankless interview with Hasu (audio, video). All recommended! ↩
- PoS apparently makes 51% attacks >4x more costly that Proof-of-Work (PoW) and easier to circumvent even if such attacks are temporarily effective. Unless you can find holes in Vitalik’s math (archived)? ↩
- There’s also an environmental case for PoS that’s regularly bandied about and while I’m sympathetic to the anti-pollution cause, I’m not entirely sympathetic to the villainisation of PoW. The advantages that PoW brings to the world cannot be underestimated nor downplayed. The ability to turn waste (ie. stranded natural gas) into profit rewards the internalisation of what would otherwise be an environmental externality in a much more intelligent way than, say, carbon taxes. PoW creates a “money battery” of sorts that also allows natural resources to be extracted without costly and politically fraught pipelines and/or other transportation infrastructure, all of which is inevitably lossy. These revenues can then be used to, I dunno, UBI? Create artist grants? But definitely allow for a more geographically concentrated distribution of capital. Alberta under Kenney should obviously be pro-PoW like Texas under Abbott and Miami under Suarez are, but it’s too soon to tell if these cowboys have enough sense of self-preservation.
PoW also drives to cheaper (ie. renewable?) energy sources and incentivises the development and manufacture of more efficient micro-processors, all of which are of clear utility and interest to mankind. Wartime tech for all! ↩
- Aw shucks, you can’t afford an Alien punk for $17 mn (4`150 ETH)? I guess you’ll just have to make do with Bourgeois’ Maman for $5.5 mn (1`340 ETH). Y’know, budget permitting. ↩