DeFi Without Defiance. An Ode to Lost Crypto Culture

J.P Morgan says the crypto bottom is in.

The Treasury Department just banned a DeFi protocol.

Jim Cramer says now is a good time to buy Ethereum.

What do all of these things have in common? They’re the latest symptoms of crypto’s troubling Wall-street-ification – more signs that an industry founded in the wake of the worst financial crisis since the Great Depression has veered off its intended course.

Of the top 15 crypto projects by market cap, two are dog coins that do nothing, three are Ethereum-killers that nobody uses, and most of the others are stablecoins. At the same time, crypto YouTubers are sharing clickbait videos with absurd predictions about low-cap coins they plan on dumping on their viewers. And Satoshi rolls over in his grave.

Where has our courage gone? Or is this systematic filtering out of meaning the fate that every new technology experiences? Is there anything we can do about it? Let’s think it through together.

Noble Foundations

This is the first public thing that was ever said about Bitcoin – the asset that finally brought the idea of cryptocurrency to the masses. It was posted just a month before the bottom of the 2008 financial crisis.

Satoshi immediately highlights the problems with conventional currency and central banks. Then he goes on to talk about the importance of privacy for privacy’s sake.

His/her/their vision was immediately clear right from the beginning. Satoshi intended for Bitcoin to be different. It was a middle finger to the establishment from day one, and that remained the predominant spirit of the Bitcoin community for over five years.

2017 – The Beginning of the End

Bitcoin and the other cryptocurrencies that it inspired remained a niche trend until 2017 when the price of BTC exploded to nearly $20,000, and early adopters became rich.

Suddenly, millions of new people were hearing about Bitcoin on the news for the first time. And what began as a punk expression of dissatisfaction with existing financial systems was suddenly being discussed by the very people who maintained and fueled those systems.

Most people who were exposed to Bitcoin for the first time during this cycle saw the flagship cryptocurrency as a way to get rich, not as the artful middle finger that Satoshi envisioned.

Then, like a fire that burned too high, too fast, the crypto market collapsed under its weight and went through a deep, ashen winter from early 2018 until just after the economic collapse spurred by COVID-19.

Ethereum and DeFi

When it was founded in 2015, Ethereum promised to build upon Satoshi’s vision by pioneering the use of decentralized smart contracts. This opened up entirely new possibilities for the world of decentralized finance.

Maker, the protocol behind the decentralized stablecoin DAI, was one of the first key DeFi innovators to take advantage of Ethereum’s network. After that, a string of key DeFi protocols launched during the 2017 market cycle and ICO mania, including:

• Aave – the number one decentralized borrowing and lending protocol
• Synthetix – a liquidity protocol for derivatives
• 0x – an open protocol that allowed for the peer-to-peer exchange of assets

These innovations eventually led to even more impactful decentralized finance applications, like Compound and Uniswap, which sparked DeFi summer in 2020, and introduced the term to the world.

Where Are We Now?

Since 2017, we’ve gone through another full market cycle. Ethereum has continued chugging along to achieve its long-term usability goals. Bitcoin has remained largely unchanged. And a trillion dollars have come in and out of the crypto ecosystem as new participants attempt to stake their claims to the digital age’s gold rush.

There’s an incredible amount of speculation happening.

There are virtual worlds worth billions of dollars that nobody uses.

New DeFi protocols launch tokens that are purposeless and rise by 10,000%.

VC bros are funding new layer 1s with billion-dollar valuations that no one will use— and they know it.

Everybody wants to be first to the next big crypto innovation so they can get rich, too.

Now, OG DeFi protocols like Aave are limiting who can use their “decentralized services” based on arbitrary decisions made by the U.S. government and institutions that Bitcoin was designed to circumvent.

Decentralized finance? Can we really say that anymore?

We’re clearly at an inflection point. The government is starting to take crypto regulation seriously. It’s likely to continue limiting what protocols can legally do. How will they respond?

Early indications point to total and complete compliance. But even if some resist, it’s become abundantly clear that crypto’s OG culture of defiance is largely gone.

It’s been replaced by,

Blackrock and Jay Powell and,

The S&P 500 and hypebeasts and,

NFT scammers and Facebook and,

Anthony Pompliano and Bored Ape Yacht Club and,

KYC requirements and Walmart, and

The perpetrators of the Great Financial Crisis.

Internet Culture as a Measuring Stick

If there’s any point of comparison to be made about what’s happening to crypto culture right now, it’s the invention of the internet. First made available to the wider public in 1993, internet culture has shifted dramatically over time.

In its earliest days, the internet was a way for academics and researchers to easily share ideas with one another. Even then, it was obvious that it would change the world.

People wrote about the internet opening up new channels of communication between economic and geographic borders, and how the open flow of information would spawn a renaissance the likes of which the world had never seen.

That’s happened. The internet has fundamentally changed our culture. It’s enabled people to learn and become masters of things they might’ve never discovered otherwise.

But it’s also been overrun by corporations who prey upon user data and social media platforms that leverage our biology to keep us addicted to continually scrolling even as our health deteriorates from doing so.

There are beautiful pockets of culture and meaning to be found on the internet. But there’s a dark side, too. And it’s up to us, as users, to limit the impact that it has on our minds and bodies.

Where Do We Go From Here?

Crypto culture started as a pure punk expression of anger and disenchantment in the wake of a banker-fueled economic collapse. That’s not what it is today, just like the internet isn’t what it was in its early years.

The lesson, at least to me, is that when new technological networks become widespread, rent-seekers will always demand a cut. They are vultures waiting for an opportunity to wet their beaks on the latest step in humanity’s journey.

But it’s worth pointing out that niche cultures like the early cypherpunks are, by definition, small subsets of the population. When world-changing innovations explode out from these small groups into broader society, people with different views must continue buying in order for them to hit exit velocity.

That leads us to the sad truth, which is that as more and more people join the cryptocurrency industry, its purpose and meaning — the values that it was founded on — will continue diluting.

But that doesn’t mean that DeFi is dead.

It doesn’t mean that crypto is going to zero.

And it doesn’t mean that OG crypto culture is dead and gone.

Crypto is becoming something that everyone can use, like the internet before it – rent-seekers and bankers included. Many of us may not want them here, but a decentralized technology has no method or basis for being picky.

Those of us who value the founding principles of cryptocurrency must fight to keep them alive as the culture expands.

We’ll do that by putting our money where our mouth is and voting with our wallets for protocols and apps that keep Satoshi’s middle finger pointed high in the sky long enough for the next generation to do the same.

Also published here