Rapture #254: The Cypherpunk Era is Over
The beginning phase of crypto is now officially over. The cypherpunk ideals the industry was founded upon are fading away. Replacing these ideals are ones that center around growth, mass adoption, and regulatory viability. While there will still be privacy preserving tech that can be accessed via crypto, most of the user oriented products will not have that privacy tech enabled by default. In essence, I believe one will have to be far more technical in order to achieve a significant degree of privacy, similar to how one has to be quite technical to achieve privacy on the internet.
There have been multiple news items in the past week that signify to me the Cypherpunk era is now behind us. Let's dive into each item.
Nation states entering crypto
While many nation states have likely dabbled in crypto during phase one of the technology, I believe in phase two they will be far more explicit in their involvement.
Lawmakers in Russia are now working on amendments that will enable the launch of an official national crypto exchange. The Central Bank of Russia and the Ministry of Finance support this initiative. The stated reason for the national exchange is the Russian government wants to better tax crypto related revenues. The proposed crypto exchange could be a part of the Moscow exchange. Furthermore, a bill earlier in the month in Russia legalized cryptocurrency mining. Russia is likely interested in fostering crypto development since they are largely excluded from the dollar financial system and consequently view crypto as a way to circumvent those restrictions.
Yet Russia was not the only major nation state to announce significant movement on the crypto front. The Bank of Japan yesterday announced that they will be running CBDC experiments with the country's megabanks. Specifically, the BOJ will be working with private banks and other organizations to check whether their CBDC can operate within areas undergoing natural disasters that do not have internet. The three megabanks working with the BOJ on this initiative are Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc., and Mizuho Financial Group Inc.
Finally, during the latest gathering of the G20, Biden called for there to be international rules to regulate the crypto space since it poses a potential risk to financial stability.
Clearly, governments around the world are now taking crypto incredibly seriously.
Crypto leaders move towards increased monetization
With the fall of FTX and BTC being down 76% from its ATH, every company in the crypto industry is hurting. When companies are fighting for survival, they immediately turn their concerns to generating revenue/profit. Hence, many companies will prioritize the business needs over any values they had (or at least claimed to have).
The biggest move this week signifying this shift has been ConsenSys (where I used to work) changing their privacy policy to explicitly state that MetaMask users' IP addresses will now be tracked. MetaMask by default utilizes Infura, another ConsenSys product, to connect to Ethereum. Collecting a user's IP address will better allow ConsenSys to work with regulators pursuing criminals and also could potentially be utilized for tracking data that will eventually relate to advertising, guiding user flows into certain protocols, or other business related items.
After some feedback, it seems that this policy was always in place and most of the other node operators as a service also work this way.
Personally, I think this move is the correct one for ConsenSys to make from a business perspective. Undoubtedly, the move signifies that nearly all crypto companies are moving away from their cypherpunk ideals in order to embrace the institutionalization and formalization of the asset class.
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