Computers vs. Casinos: The Crypto-Culture Battle

Author: Richard Chen, Source: Author's Blog; Compiler: Deng Tong, Golden Finance

For any cryptocurrency expert who has been working in this industry for a long time, there is no doubt that this industry The culture has changed dramatically in the past year.

A culture war began to break out between the early purists (the Crypto Computer Party) and the latecomers (the Crypto Casino Party), which created a divide among the builders of the crypto community.

I will explain where both camps stand and how we got into this conflict today, and then lay out a nuanced path forward for how the crypto industry should resolve its culture war.

Cryptocomputers

People in this camp believe in the ideals of the industry’s founder, Satoshi Nakamoto, to devolve power from corrupt institutions into the hands of the people.

They tend to be early entrants into the crypto industry. This group in 2013 was primarily hard money libertarians who were attracted to Bitcoin as a hedge against reckless monetary policy. For these die-hard Ron Paul gold fans, Bitcoin will become a liquidity sponge, soaking up all the excesses of the Fed's money printing.

The crowd of 2017 (my crowd) is primarily technologists who may be less ideological than previous generations but are attracted to cryptocurrencies as a new computing paradigm. Ethereum shows that decentralized applications (dApps) are possible, so that you can now have rather than just read or write data. With it came the concept of web3, and the disintermediation of big tech companies and the gatekeepers of the internet.

Today, both groups represent the silent majority who still believe in Satoshi’s vision and are optimistic about new use cases and products that will drive the field forward. But at the same time, they dare not make any negative remarks about the currently influential and popular Ponzi scheme, otherwise they will be attacked by online keyboard warriors. They remained silent.

Crypto Casino

People in this camp cynically believe that cryptocurrency is nothing more than a decentralized casino and want to keep it that way. Buirted to find new creative ways to hyper-financialize and speculate on everything—whether it’s the net worth of friends using their phones or shitcoins using Telegram bots.

They tend to be people entering the cryptocurrency industry later in 2021 with trading and finance backgrounds. They are a very vocal minority. As a result, they dominate online discourse and create tensions between early purists and latecomers, akin to nativist resentment of immigrants who differentiate and change culture.

Their age also tends to be younger. My hypothesis is that this is a second-order effect of a decade of zero interest rate policy (ZIRP) and the failure of the traditional financial system for Millennials and Generation Z. Young people increasingly feel they need to get rich quick to pay off student fees, loans and home mortgages. When people feel like they're permanently stuck in the rat race, they go to casinos to gamble their way out of it.

How did we get here?

Casinos are very useful for inducing cryptocurrency usage. This is because "degens" are early adopters. They have the risk tolerance to become beta testers of unproven financial products. It’s easy for outsiders to overlook “degens,” but they are the lifeblood of the crypto world. They are blue-collar workers in the trenches, hands-on on every new product.

During the crypto bear market, no new users entered the space. The app is stuck in an impasse, trying to focus on its existing "degens" strong user base. This is acceptable in the short term as trading volume is primarily driven by these strong users. For example, OpenSea’s top 2.2% of users are responsible for more than half of its trading volume.

However,the problem arises when projects become cynical and believe that mainstream adoption is impossible. The motivation is to expand the "degeneracy" of blockchain technology and design zero-sum applications like those at the casino table, assuming that crypto will never cross the chasm beyond early "degens." So we see the economics of Ponzi schemes, multi-level marketing schemes, and the most disgusting parts of finance.

Ponzi schemes have short-term product-market fit because there is always a core group of a few thousand crypto-natives who jump on every new shiny speculative app gamble. This creates a culture of financially engineered zero-sum money games, where influencers trick unsuspecting retail investors into buying, only to be left behind. This is why so many people work so hard to interact on Twitter and become influencers, because only then will the odds in the casinos be in their favour. At casinos, clout is a lucrative business model.

Outside of casinos, catering only to "degens" is disgusting to anyone not in the "degens" bubble. I don’t blame the average consumer for hating cryptocurrencies and NFTs. Whenever they hear about it in the news, it's associated with greed, Ponzi schemes, and the worst characters on the internet. Designing zero-sum applications alienates more people from entering the cryptocurrency space and using on-chain products.

We need to think about how to grow the cryptocurrency user base like a Bitcoin ETF. Bitcoin ETFs bring a breath of fresh air to the space, as trillions of dollars in retirement account savings previously unavailable through crypto can finally be added to Bitcoin for the first time.

That is, how do we actually gain mainstream adoption?

The Way Forward

I met Steve Wynn in October; He told me about his experience growing his hotel and casino business. One of his unique insights at the time was to focus on experiences other than gambling. Vegas used to be a place where people just came to gamble and then left, with little reason to stay and do anything else.

That sounds crazy since every Las Vegas casino these days also offers concerts and shows, celebrity chef restaurants, luxury shopping, and more. But when The Mirage opened in 1989, it bucked the trend, and its success soon forced other casinos to invest in higher-quality facilities and entertainment beyond gambling.

Wynn played a major role in transforming the Las Vegas Strip from a primarily gambling destination to a world-class entertainment and leisure destination in the 1990s. Good reception keeps the Vegas experience from being a zero-sum game, and the number of tourists who visit Vegas each year for a variety of reasons increases the pie significantly.

Clearly, the crypto industry can learn from this. We need fewer zero-sum table games and more positive-sum experiences.

Prediction markets are a good example. Degens love prediction markets because they love the all-or-nothing risk of betting on binary outcome events, just like they gamble on meme coins and either win 10x or lose all their money. At the same time, countless studies have shown that by removing bias and bringing in “stakeholders,” prediction markets are far more accurate than mainstream media and experts.

People who use prediction markets don’t necessarily need to bet on them, but can use them as a news source for geopolitical events, just like people don’t need to visit Las Vegas just to gamble . Even Trump now regularly posts his Polymarket odds on Truth Social.

There are many other examples. Obtain WiFi mesh or vehicle performance data using the Decentralized Physical Infrastructure Network (DePIN). Use airdrops to incentivize loyalty. With NFTs, budding creators don’t have to go through Hollywood’s gatekeepers. Cryptocurrency losers are early adopters of all of this, but the value they bring to society is positive.