With help from Derek Robertson
There’s a power vacuum – or at least a hole in the public imagination – at the top of crypto.
Last year, Sam Bankman-Fried made himself the face of crypto in Washington, but now he’s under indictment and his FTX exchange is in tatters, so who will become the face of crypto in 2023?
Well, with crypto, the industry in crisis it may be someone more closely associated with crypto, the idea, using computers and encryption to change the way people interact, rather than the existing constellation of consumer-facing financial businesses that use crypto. A back-to-the-drawing board moment would favor people who like to spend their time at drawing boards, after all.
Of course, there are plenty of high-profile crypto moguls out there, but regulators or market forces have knocked most of them back on their heels of late. Binance founder Changpeng Zhao was both a primary instigator and a primary beneficiary of Bankman-Fried’s downfall. But both he and his exchange are reportedly facing possible criminal charges stemming from a Justice Department money laundering and sanctions investigation.
Coinbase CEO Brian Armstrong can tout the protections that come with a publicly traded U.S. company, but his exchange announced earlier this month that it is laying off 20 percent of its workforce. On Friday, the Federal Reserve Board announced that it had rejected crypto-friendly Custodia Bank’s application for a master account, dealing a blow to founder, Caitlin Long, an ally of Wyoming Republican Sen. Cynthia Lummis.
Yesterday, Cameron and Tyler Winklevoss were hit with a lawsuit in New York by a plaintiff who wants to bring a class action over the halting of customer withdrawals at their crypto lending firm Gemini, which has been battered amid the FTX fallout.
So, to figure out where crypto is headed, it may be time to keep an eye on figures who don’t fit the mogul mold as neatly, having spent more time up in the clouds than down in the trading fray.
In a space as decentralized, global and fast-moving as crypto, it’s hard to know who will shake things up next, but here are three people worth watching.
— Blockstream CEO Adam Back: Before going into business offering support services for the Bitcoin network, the British cryptographer earned a PhD in computer science, invented a precursor to Bitcoin and corresponded with Bitcoin’s pseudonymous inventor, Satoshi Nakomoto.
While many crypto moguls subscribe to the libertarian ethos that suffuses the technology, Back was an important member of the pro-cryptography ‘cypherpunk’ movement that bloomed in the 1990s and was part of the intellectual inspiration for Bitcoin.
Last week, Blockstream announced it had raised a new round of funding at $125 million (though Bloomberg reported last month that the company had been raising the money at a diminished valuation. Blockstream’s president, Erik Svenson, declined to disclose the valuation for the latest round to DFD, saying the company is “not immune to macroeconomic factors” but that it is “very happy” with its latest fundraising terms.)
—Ethereum co-founder Vitalik Buterin: The Russian-Canadian co-founder of Ethereum is famous within the world of crypto, but much less visible outside of it.
In part, that’s because Buterin has been publishing papers about number theory and asking questions like “What even is an institution?” on his personal website while entrepreneurs have been busy making their names building financial businesses on top of Ethereum.
That has also kept him above the fray.
The last time Buterin was all over the news, it was because his brainchild — of which he remains the symbolic head, and over which he continues to wield soft power — successfully completed a complicated upgrade, “The Merge,” in September.
—Algorand founder Silvio Micali: The Italian computer scientist is lesser known than many other crypto founders, though his theoretical bona fides are among the strongest.
In the ’80s, Micali was among the inventors of zero-knowledge proofs, a cryptographic technique that is now being widely deployed to bake even more secrecy into next-generation blockchain systems.
While Micali is just one of many crypto founders who tout their systems — in this case, Algorand — as technically superior to the most popular blockchains, he is the only one who has won both a Turing Award (often called the “Nobel Prize of computing”) and the inaugural Gödel Prize, a computer science honor inspired by Austrian logician Kurt Gödel’s correspondence with mathematician John Von Neumann.
At the dawn of the digital age, thinkers like Alan Turing and Von Neumann ventured from the realm of theory into applications to create the earliest computers — with consequences for the functioning of society and the global balance of power that are still unfolding in unpredictable ways today.
Crypto hasn’t proven its significance on any scale that is remotely comparable to computing itself.
But the technology’s proponents have ambitions that are just as sweeping and potentially unpredictable. If it fulfills them, it will likely be on account of the efforts of figures who are less like the Silicon Valley entrepreneurs so familiar to us today, and more like an earlier generation of tech pioneers who set out from the world of theory into the world of application.
A bit of quietly momentous news from last week that you might have missed: A member of the House of Representatives reading an AI-generated speech into the Congressional record.
Rep. Jake Auchincloss (D-Mass.), by way of hyping up a bill that would create a joint U.S.-Israel AI research center, decided to let ChatGPT have the mic (so to speak). According to Boston’s WBZ NewsRadio, Auchincloss gave it the prompt “You are Jake Auchincloss, a Member of Congress. Write 100 words to deliver on the floor of the House of Representatives. Topic: the importance of the United States–Israel Artificial Intelligence Center Act, which the congressman will re-introduce this term,” leading to the speech in the video linked here.
It’s quite dry and formal, yes. But seasoned POLITICO reader that you are, you have to admit that lends it an extra bit of eerie verisimilitude, no? — Derek Robertson
Just before the weekend, U.S. and Dutch officials struck a deal to further hamper China’s advanced microchip industry.
As POLITICO’s Pieter Haeck, Brendan Bordelon, and Mark Scott wrote, the deal will stop the sale to China of equipment from Dutch company ASML, “one of the few companies in the world able to produce the printers needed to manufacture high-end semiconductors that are at the center of the growing tech war between the U.S. and China.”
The deal was the result of a long campaign of wooing the Netherlands to join in more aggressive efforts to keep such technology out of Chinese hands. (For more on that, the extent to which this trade war truly is a break from modern history’s policy status quo, I recommend this conversation from Friday between the New York Times’ Ezra Klein and the Cornell political scientist Jessica Chen Weiss.) — Derek Robertson
Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Steve Heuser ([email protected]); and Benton Ives ([email protected]). Follow us @DigitalFuture on Twitter.
Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.
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