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bankless_DEBRIEF_-_Why_Facebooks_Stablecoin_Failed

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Speaker A: I think if people weren't there, don't remember that. I think picture like world coin, when world coin hit and where the community completely rejected it from the immune system, right? You're just like, it's like you eat some food, you got food poisoned and your body just rejects it, just spewing it out. It was like worldcoin only like ten x that. It was just like, Facebook is evil now they're going to do social plus money and they're going to corporate control the whole planet and they're going to crush the rest of free and open crypto. And there was a lot of concern from the Ethereum community that we just incepted this idea. And Facebook was like, all right, guys, the, you know, Silicon Valley will take it from here with Zuckcoin.
Speaker B: And I remember for a straight week, the Ethereum community. And this was like I was, I was like I probably at my most, meh. I was, I was coming into my most technical part of my trajectory in crypto and I was going through the development box that they had move because we as a community were trying to figure out did they have smart contracts or not, because it was not clear for like the first week or so whether DM was going to be able to have smart contracts.
Speaker A: And it turned out they did have smart contracts. And not only did they have smart contracts, they had this new solidity killer called move. And at the time, solidity was just like a kind of a shitty, like Java, pretty shitty, barely used. And then here's this kind of this move, which is Silicon Valley. It really felt like an existential crisis in the midst of existential crises. For Ethereum, it was almost like the finishing blow in the 2019 bear market depression. Ethereum was already dead. And then here comes Facebook being, stepping on us, squashing us.
Speaker B: So move that whole programming language. You know what that turned into?
Speaker A: Didn't they spin that off into a. Another blockchain kind of race startup or. Okay, what are those?
Speaker B: What called diem brother.
Speaker A: That's what Aptos is.
Speaker B: Yeah. The Facebook smart contract team spun out and that's what Aptos is. And I think also sui. So, yeah, we have all these move languages, blockchains, and that's why they have probably is why they have such a valuation that they have. Just because it's like the old Facebook project.
Speaker A: Yeah, well, I mean, that's part of it. That's the narrative part of it. I mean, supposedly it was much easier for native web two developers to kind of program in and develop against. I'm not sure it's above what we typically talk about, but, yeah, that was the context. That's how crypto received it. And the us government, of course. I felt like in 2019, this came at a time when people were also realizing at the same time how. How bad for society social media could be and the incentive mechanisms at play.
Speaker B: Yeah, it was not a good time for Facebook optics. Already in the hole.
Speaker A: Right? It was in the hole because it was Cambridge analytica overturning elections.
Speaker B: This whole thing was the social media ethics guy, Tristan Harris, he had just done it like a documentary on it. Yeah, exactly.
Speaker A: So they base, I feel part of the reason they called them in front of Congress was to shit all over them politically. Right. And so this is very much a political stunt, I think. But there was massive backlash at that time about. About Facebook on kind of this social networking front. And here they are rolling out a white paper. It felt tone deaf to everybody.
Speaker B: It really did. Yeah. What the fuck are you doing? It felt like Mark Zuckerberg was like, I'm the country now. I don't need you.
Speaker A: Yeah. So I think we've spent an entire summer in the crypto news cycle talking.
Speaker B: About we wasted so much energy from 2018 to 2020 fighting such stupid stuff.
Speaker A: What happened with it? Congress just basically said, no, you can't do this.
Speaker B: Okay. So they rebranded to Libra, and there was a Libra consortium.
Speaker A: Didn't they go from Libra to Diem? Or do they go from Diem to Libra?
Speaker B: I can't remember DM to Libra. Libra was the word that I remember. And there was this un style consortium flag looking thing where they had Facebook and eBay and PayPal and Visa as all of these Libra stakeholder consortium people, because it was going to be decentralized. There's new decentralized. And just like over the next six months, you saw one by one just dropping like flies. They were like, you know what? We're out of here. We're gonna this sink. This totally did. And it's just like rats, just like fleeing the ship.
Speaker A: Yeah, that was the story. It was always unclear to me what decentralized meant to. I get that it was open, some of the code is open, but could you run a node on your own? I don't think that was ever, we.
Speaker B: Never got any of these answers because the project just failed to launch.
Speaker A: Yeah. And it failed because the us government basically said no. And then Facebook just pivoted away from that. It took about twelve months time for that to fully sink in that their strategy here is not working.
Speaker B: Just to finish painting the picture of what this bear market felt for the listeners. We had Facebook. Facebook come in and say, hey, we're going to have a smart contract, stablecoin, blockchain. You had bitcoiners yelling at Ethereum, people saying that smart contract, proof of stake will never ship. Your nodes are going to get too large. Like, blah, blah, blah, blah. Like, everyone, like eos somehow actually not doing terribly yet. And so being an etherean, every single knife was pointed at you and the price of ether was $100. And dropping it did not feel good. And so sticking with Ethereum during this time was like, I didn't really, I never questioned it, but, like, looking back, it was like the most contrarian thing I will ever do. Yeah, it's like believing in Ethereum during that context.
Speaker A: I questioned it and then I kept going deep and like, diving into it and being like, you know what, I still don't think I'm wrong. And I couldn't tell whether I was just being stubborn or if I was actually contrarian. Right?
Speaker B: Weeks would happen where, like, murad went on Anthony Pompliano's podcast and gave the biggest bullish take about bitcoin I've ever heard. And I was like, oh man, that's really bullish. And then I would go talk to some Ethereum people, read some articles, be like, no, no, no, we're good. We're good here. Facebook, Liam would be. DM would drop it, be like, oh, fuck, what's, this is a huge obstacle we're gonna have to overcome. And then we would unpunpack and deliberate. It's like, this is why this doesn't work. This is why you build this network for first principles. Like, yes, okay, I remember, I remember now. And so, like, that was what the bear market was.
Speaker A: I was like, a full time job to do that, to, like.
Speaker B: It was like that for, like, two years.
Speaker A: Yeah, it very much felt like that. Wow. Dark times. We are. We are blessed with this bear market, I guess, right?
Speaker B: I don't like, yeah, this is why this bear market is so easy. Is like, we already wonde. It's just now. It's just time.
Speaker A: Yeah, there's a different type of pain with kind of, like, the central.
Speaker B: It was David Martin's coming in. So, like, hey, like, crypto doesn't need to be so tribal. Like, we're all shooting ourselves in our foot. I'm like, yeah, it does. It needs to be tribal.
Speaker A: What do you think about that? I mean, Raoul Paul, when we had him on, made a similar comment, like, nah, it doesn't have to.
Speaker B: Tribalism is a feature, not a bug. It's built into the way these networks are work you. There's no routing around it. Anyone who doesn't understand tribalism and crypto just doesn't understand crypto deep enough.
Speaker A: It doesn't mean you encourage toxicity in your community, and it doesn't mean you encourage burying your head in the sand and religious arguments rather than pragmatic arguments.
Speaker B: Correct.
Speaker A: But I do agree with you that at the layer one, and this is just longstanding, bankless thesis, all layer ones are competing for monetary premium. They're competing as a money, and therefore.
Speaker B: They'Re competing for mind share as money. And there is limited mind share that you can give space to this, too. And you picking your tribe is saying, I have elected to give my mind share to this particular money.
Speaker A: That's why what's interesting, money is moloch.
Speaker B: But in a good way.
Speaker A: So what's interesting? Well, you can in a good way, but only because you can harness it and channel it to create something good out of that, potentially. And what we think we're trading with crypto and with Ethereum, money is coordinated.
Speaker B: You can only coordinate around one money.
Speaker A: Wow, that sounds very bitcoiner of you. I think there can be more than worried about that. I think that there can be more than one money, but that one money will disproportionately receive the network effect. So it's kind of like there can.
Speaker B: Be more than one money, but the growth of one money comes from the ungrowth of another, comes from the detriment of another.
Speaker A: Not to segue and talk about another episode, but I'm really curious, because I listened to your Solana episode with Austin on whether soul is money. How far along do you think that community is to sort of accepting that thesis. I feel like they reject that thesis entirely.
Speaker B: They are not going down the same paths that the Ethereum intellectual community in 2018 to 2020 went down. They have come up with what I consider to be patchwork narratives that don't understand the basement of things.
Speaker A: It's not a soul as money type thing. We're just following ethereums.
Speaker B: No, dude, they are creating duct tape and boards. What is the name up their narratives? Their narratives is that a Solana block space is going to penetrate through ethereums by being cheaper and it's going to onboard all the same use cases, but onto cheaper block space. And they think that their universally shared state by one single network, that they're going to be able to scale to the side to fill the void that web three needs it to be, is going to be better as one homogeneous state.
Speaker A: But what if they don't need a narrative? What if they don't need a narrative for that? What if, as a byproduct of Solana, like onboarding millions and hundreds of millions of people, right. This is again, like what the I bulls would say about this, that those in the community, just in this Solana community just get exposure to soul as a money. They didn't even have to have a narrative around soul being money for millions of people to just buy soul because it's convenient, right? And for it to become a money. That way they could figure out that soul is money. Like some future cycle. What do you think about that?
Speaker B: Then? It goes back to, I think, at least half of the arguments that I hear about Solana are crafted as a direct juxtaposition to Ethereum. Like, half of the Solana community exists to oppose Ethereum, as in, just like, they just want to be contrarian about something. And that's not because the Solana attracted them there. It's that their contrarian nature just pushed them there. So this is like what I've been talking to Anthony Cezanne about recently, like the layer zero of Solana. It's like it's. It's much more purposeless than it is, than what bitcoiners feel about bitcoin.
Speaker A: Well, the purpose is transactions, right?
Speaker B: Yeah, yeah. It's sheet block space. It's scale block space to scale up to the entire Internet.
Speaker A: Well, it's interesting because I had thought that perhaps Solana would go down the path that Ethereum basically went down in, you know, 2019, 2020.
Speaker B: Yeah, see, they can't do that because they need to re. They need to be a reaction to Ethereum so the Ethereum culture followed bitcoin down the path of money. We followed bitcoiners down their path in addition to also doing our own things with like layer twos and smart contracts and defi and stuff like this. And Solana, I think it is just kind of like its vision for itself is just like this weird mutated version thats again somewhat defined by being in Ethereum shadow but also a rejection of Ethereum in the first place.
Speaker A: Well, its interesting. Ive always viewed the Ethereum project. I think Vitalik said that when he said this, defining it back in 2017, 2019, moderate bitcoin values. You said this in 2017 2018 during my, some of my formative years and tried to figure this out. Right. I've always just thought of Ethereum as it's like bitcoin but with smart contracts and it's planning to scale and it has a smarter monetary schedule.
Speaker B: Excuse me, pluralism.
Speaker A: Yeah, I mean that's. And so it was always the derivative of bitcoin, but it was like bitcoin as it should have been. Right.
Speaker B: Bitcoin, if it actually started with bitcoin and then added more.
Speaker A: Yeah.
Speaker B: And I think also prunes some crazy stuff.
Speaker A: Solana is basically smart contracts. It's sort of a follower of Ethereum on that. And the one thing that's different about it is cheap block space. So that's kind of what they're going with, right? It's not, I guess maybe is it trying to be Ethereum with cheap block space? But you're saying they're not trying to be like money in the way that Ethereum has kind of adopted money. I just feel like, why wouldn't they embrace that as a kind of a narrative?
Speaker B: I don't think they, I think I was also talking to Anthony. Anthony and I can have to hop on a show and like fully suss this out. I think, like if you can understand maybe 60% of what makes crypto crypto, like if you go down 60% of the rabbit hole, but then you're kind of blind to the social layer and the money ness about crypto, you can fit Solana into your investment thesis there. And I think being blind to the social layer and to the money layer, like those, the social layer and the money layer about crypto are like really adjacent to each other. Like social consensus, money is social consensus, blah, blah, blah, blah.
Speaker A: I completely agree. Yeah, they're adjacent.
Speaker B: And I think that's a blind spot that the Solana community has. One of the things that I learned from that Austin episode is thinking about how the Solana people think about ethereum, which is divergent from the way that Ethereum people think about ethereum.
Speaker A: Oh, interesting.
Speaker B: And so Solana's perspective about its own network is one homogeneous shared state. So one protocol knows everything about itself at all times, one single state. That's the benefit of Solana.
Speaker A: That's incredibly attractive, by the way, if you can keep it decentralized, is what I've always thought.
Speaker B: Sure. And then when they take that perspective and they apply that lens to the Ethereum, and the Ethereum roll up centric roadmap. Austin said this in the episode, like, okay, so Ethereum, no Ethereum nodes. Not that crazy. But then you have to start running an optimism node and an arbitrum node and a polygon node and a Zk sync. Well, because layer twos are Ethereum, so they, they apply their universal state of Solana.
Speaker A: We have cryptography that's solved for that. We don't have to run all of these.
Speaker B: They consider layer twos to be an enshrined.
Speaker A: Oh, they don't know that. They don't know about fraud proofs or ZK proofs.
Speaker B: They know about them. Well, they. Well, first they'll say that optimism doesn't have fraud proofs, which they're technically correct.
Speaker A: Yeah, I mean, right, arbitrage, same thing.
Speaker B: Like bitcoiners. When bitcoiners critique Ethereum, they just could critique it in its current state of place in the world. And doesn't adaptations of Ethereum, which is, which is dumb because markets price in the future. But like they say, if you are going to run Ethereum, you need to also run every single node for every single layer too, as well. You don't. Right. And so this is a difference between Ethereum's roll up centric roadmap and Solana's homogenous layer. One is that, like Ethereum is a network of asynchronous networks, and it scales via asynchronicity, whereas Solana is one single synchronous network. And they think that they can get a synchronous network to the scale of the Internet, which I think is such a fundamental obvious miss, that it blows my mind that a synchronous state of Solana can scale to the size of an asynchronous system, which is the Internet, by the way. The Internet is asynchronous. It has different protocols that move at different speeds. And they think Solana, as a synchronous state, can scale and permeate as far into the Internet as possible. Meanwhile, you have Ethereum, with its any number of layer twos that can exist in any particular way, shape and form, that is asynchronous. So a layer two can do whatever it wants and find a different corner of the Internet that other layer twos cannot. And the reason why it has that flexibility and adaptability is because if you choose to be on that layer two or not, or you choose to validate that layer two or not is your choice, but that layer two will still do what it wants. And so I don't think they appreciate the asynchronicity between layer twos and the layer ones.
Speaker A: And what that does, Solana, is not going down a roll up path at all. Not even a member, really.
Speaker B: They can't say the words roll up on Solana because it's all about one single state.
Speaker A: You got to double down on the monolithic thing. It's almost been two years since David, since we came out the episode Ultra scalable, Ethereum, modular versus monolithic blockchains. And I don't think my thesis has changed since that episode.
Speaker B: No.
Speaker A: And it's just kind of playing out.
Speaker B: Yeah.
Speaker A: You know, unless we're completely wrong.
Speaker B: Perfect ethereum fashion, which is slowly, very slowly.
Speaker A: And by the way, I think Solana will have an incredible psyche. Actually. This cycle is my prediction.
Speaker B: In the same way that, like, sailors tripling down on bitcoin, like salon's, it's going to do like a minimum ten.
Speaker A: Across and there's going to be a massive. Like. That community has not left, which is pretty impressive.
Speaker B: Right. Of all the alternative layer ones that have come and gone, Solana actually does register on my radar.
Speaker A: It's also not as demagoguery as some of the others. Right? There's. Of course, there's Anatoly and that, but it's not like that, really.
Speaker B: I don't know about that. Come on, getting that more.
Speaker A: Compare to. Compare it to Cardano, compare it to Charles.
Speaker B: I would like to compare it to Terra Luna. And you see very similar flavors in the way that that community engages and argues and debates. They are a mean bunch and they don't care about intellectual honesty, in my opinion. They will go for the dunk. They love to ratio, they love to. What's the word? Brigade? Brigand. Brigandhenne. They love to all show up. And like their fellow Solanians comments on Twitter, they like to show up in force. And that is exactly the way that Terra Luna was in that very short, acute time. But now it's just like you've been doing.
Speaker A: Solana. Hot take.
Speaker B: Solana. Solana. Half of this Solana community exists to be not Ethereum like. And that is just not a way to define a community. They just exist to be in contrast to Ethereum.
Speaker A: Do you think there was an element of. That's what bitcoin. That's what Ethereum was to bitcoin?
Speaker B: No, not for me personally. My big aha moment for Ethereum was apps. It was a blockchain with apps.
Speaker A: I agree. Well, but maybe we're just not getting it. I think that would be a first.
Speaker B: Brother David.
Speaker A: Oh, my God. Victory lap in the. In the ro. Well, so in the debrief, you guys got two debriefs? Actually, yeah.
Speaker B: This is the longest debrief we've ever.
Speaker A: Done on of the Austin episode bankless listeners. We hope you enjoy. Thanks for being a citizen. Thanks for subscribing. See you later.