Blockchain Bites: DOGE, Musk, Robinhood, GameStop and Crypto’s ‘Populist’ Revolution

Three stories

1. Elon Musk changed his Twitter bio to #bitcoin and the crypto jumped 20%, to highs last seen on Jan. 19. The two events are not definitely connected. However, just 15 minutes after Musk made the change, bitcoin climbed 15.7% to $37,050. It’s still ticking up.

Of course, with any rally, celebrity-driven or not, the question comes to stability. Blockchain analytics firm CryptoQuant’s “Exchange Whale Ratio” found that exchange inflows among major bitcoin holders is at an eight-month high, signaling a possible price drop.

• However, “Elon’s tweet overrides all other bearish signals,” Ki-Young Ju, CEO of blockchain analytics firm CryptoQuant, tweeted. In a follow-up tweet, Musk appears to nod to bitcoin, saying “In retrospect, it was inevitable,” a quote later imbedded into the cryptocurrency’s blockchain by mining pool F2Pool.
• The sharp rise to a 10-day high of $38,020 sparked $387 million worth of bitcoin short liquidations on major exchanges including Binance, Bitfinex, BitMEX, ByBit, Deribit, FTX, HuobiDM and OKEx.

Musk has frequently shown support for crypto broadly. Industry publication Protos found nearly every time he mentions a cryptocurrency, it rallies.

• DOGE was the most talked about cryptocurrency on Twitter, including a cryptic picture of a dog in a sweater posing on the cover of a magazine, which Musk posted in the midst of a market rally. (The symbol of dogecoin is a Shiba Inu while the featured dog in Musk’s tweet appears to be an Italian Greyhound.)
• Dogecoin climbed 800% Thursday to a record high of about $0.082 per coin. At one point, the meme coin entered the top 10 cryptocurrencies by market cap.

2. In another story about meme-driven market mayhem, Robinhood has limited cryptocurrency buying due to “extraordinary market conditions.” Traders can “still use settled funds to buy crypto,” a spokesperson said.

• This is the second day in a row that Robinhood trading functionality hit up against the limits of memetic demand. Yesterday, a near-revolution formed after the popular trading app placed limits on stocks favored by the Reddit day-trading community WallStreetBets.
• In what is shaping up to be the biggest trade of the century, a loosely organized group of retail traders attempted to put the squeeze on short-selling hedge funds. It started with GameStop, but spread to other company stocks with less than ideal prospects, like Kodak and AMC. And the mobbed moved markets, even raising questions of whether it was “manipulation.”

Just as the “degenerate traders,” a term often used sympathetically in Discord cesspools and on Reddit, the “man” looked to put its foot down. Lines of communication were cut (sorta) and Robinhood and Webull, the very disruptors that – per their own adverts – were democratizing finance, limited trading in a move that benefited short sellers.

• Both the U.S. House Financial Services Committee and the Senate Banking Committee announced there would be hearings on short-selling and online trading platforms. Traders filed lawsuits.
• The moment has drawn comparisons to Occupy Wall Street, an anarchic protest movement that brought economic inequality to light.

Amid swirling rumors of collusion and political grandstanding, Robinhood said yesterday the pause on trading has been misunderstood. CEO Vlad Tenev said the company wasn’t “directed by a market maker or any other market participant, to pause stocks that had seen triple-digit returns, but made the decision based on a “technical and operational” considerations.

• Turns out, the financial system’s physical and digital plumbing has capacity limits. Of course there have been calls to decentralize. Cryptocurrency company FTX has already listed a WallStreetBets (WSB) index, which will be mirrored on Blockfolio, capitalizing on the whole mess.

3. Coinbase is about 3.5 times the size of Robinhood, which is definitely notable and also a lame way to segue into news that the massive exchange intends to go public through a direct listing.

• Yesterday, the firm confirmed rumors of an IPO through direct listing. Though the official documentation filed with the U.S. Securities and Exchange Commission is not yet available. The firm's announcement Thursday included no details on when the stock would be listed or under which ticker.
• In semi-related news, MicroStrategy (MSTR) CEO Michael Saylor said the firm will “explore various approaches” to continue buying bitcoin. The company holds 70,784 BTC, and has previously used Coinbase as a means to buy.

At stake

Decentralization blooms?
The retail-driven rally across several “meme stocks” has become a narrative opportunity for calls to “decentralize.” Painting with broad strokes, crypto influencers have viewed the week’s events as the power of the masses rising up against centralized gatekeepers and legacy institutions.

Connecting the dots to the crypto industry, noted technologist Balaji Srinivasan said, “Crypto and WallStreetBets have the same spirit: a vision of truly free markets where everyone plays by the same rules.” A disparate group of traders, banned together by social networks like Reddit and Discord, now, conceivably, can have as much influence on markets as Wall Street, Srinivasan argued.

The movement is much bigger than what’s happening with a few stocks. Similar references to decentralization were made after social media giants, including Twitter and Facebook, took the unprecedented step to ban now-former President Donald Trump from their platforms while he was still in office. 

In short, the battle lines are being drawn around private companies – which were once seen as democratizing forces but have trended towards “illiberalism” – versus open-source platforms that anyone can use, indisputably and in perpetuity.

The problem isn’t necessarily about companies curating their platforms, like Robinhood temporarily limiting trading of a few overheated stocks or Twitter removing QAnon conspiracies, which, as we’ve covered before,  is a First Amendment right, but about who gets to make the call. 

The internet was envisioned as an open platform. It still is. But the World Wide Web we have today, the actual system that is so often conflated with the internet itself, is primarily mediated by a few tech giants. These companies – Google, Facebook and other household names – have become the interface people see when they log on. Their dark-house algorithms also surface the majority of content that is consumed online. 

Decentralizing this stack, removing the “walled gardens,” is the work of the crypto movement, which is rapidly advancing towards Web 3.0, envisioned as a user-owned network. Twitter CEO Jack Dorsey is perhaps the highest-profile proponent of creating open protocols for social media.

A project he announced in late 2019, Blue Sky, recently released a report on the current state of the decentralized web. The obvious conclusion: There is much work to be done. One effort not covered in the Blue Sky report is a pretty clear example of this. 

Revolution Populi announced the launch of its testnet today. It’s a blockchain-based solution meant “to decolonize the internet.” Developed by Yale computer science professor David Gelernter, sometimes credited as the creator of the first internet social network, and ex-Goldman Sachs Vice President Rob Rosenthal, Revolution Populi hopes to create an open source foundation where “a thousand social nets can bloom.”

It’s an ambitious goal, and one that faces numerous obstacles. When pitching itself as a “Facebook killer,” its founders told Forbes in 2019 it was eyeing a “billion-dollar” initial coin offering. That offering has yet to materialize, caught up in legal questions, Rosenthal said in an interview with CoinDesk’s Blockchain Bites yesterday. 

Though Rosenthal said the project is “well capitalized” through private funding, there are other concerns. As experimental as experimental gets, the project is using a consensus algorithm, called random Delegated Proof Of Stake, which builds on the standard used in the EOS blockchain. Then there’s the project’s crypto clearinghouse to match trades. 

“The cryptocurrency industry is screaming – screaming – for some measure of backstop against the spiraling crisis of counterparty risk,” Rosenthal said. It’s an infrastructure Rosenthal proposed as a way to monetize the system, though it is still being built. There are a few examples of clearinghouses already being used, like ErisX. 

And as Messari notes, a blockchain already functions like a clearinghouse. “The Ethereum blockchain acts as the decentralized clearinghouse for transactions involving tokens and smart contracts. Ethereum currently settles billions in transactions every day without requiring a corporation like the [Depository Trust and Clearing Corporation] to ensure a transaction is completed.”

That said, crypto is inherently forward-looking and foundational technology across the ecosystem is still being laid out. Just weeks ago, for instance, Revolution Populi integrated with the decentralized app friendly Matic Network. 

In some sense, what matters most in crypto is intention. The core idea being is to empower individuals, to flatten hierarchies and to lay a technological foundation that could never be co-opted by governments or corporations. 

I was curious about Rosenthal’s take on the Robinhood dilemma, given his 19-year career at one of the world’s most powerful investment banks, one that Matt Tiabbi referred to as “a great vampire squid.” If RevPop wants to kill Facebook, what’s next for Goldman?

There will be no bloodshed, the gray-haired former punk rocker said diplomatically. 

“The point is, we’re on the right side of history, which is a populist revolution. It’s a philosophy of decentralization, an idea around people controlling their own lives,” he said. 

Whether it’s an alternative worth considering, I leave to you, dear reader, to decide. 

Quick bites

LAUNCHING STARGATE: Cosmos looks to lead in blockchain interoperability with its coming release. (CoinDesk)

CRYPTO EXCHANGE: Japanese financial giants SBI and SMFG are eyeing 2022 for the launch of a “digital stock exchange.” (CoinDesk)

BITCOIN CORE: Marathon is backing developer Jonas Schnelli’s work, with a year-long $96,000 grant, payable in bitcoin. (CoinDesk)

SPEAKING OUT: “Madison Campbell’s DIY Rape Kit has kicked up a storm, not least because it’s backed by Silicon Valley VCs.” (Decrypt)

BINANCE SURVEY: Crypto buyers 4 times more likely to regret missed opportunity. (Modern Consensus)

THIN DETAILS: “Visa’s Q1 earnings call reveals details about its crypto strategy.” (The Block)

Who won Crypto Twitter?