A Q&A with crypto expert Jeff John Roberts. by Ramsey Khabbaz
Cryptocurrencies are having a moment, to say the least. From Elon Musk’s tweets, to cryptic Super Bowl advertisements, to the freshly rebranded Crypto.com Arena in Los Angeles (formerly known as the Staples Center), blockchain-based digital currencies feel unavoidable — even inevitable — these days.
This momentum seems to be thrusting us toward the next phase of the internet, Web3, an internet ecosystem based on blockchains, crypto wallets, NFTs (non-fungible tokens), and DAOs (decentralized autonomous organizations). And as we hurtle forward, it’s important to pause and consider how we got here — and what these technological developments could mean for business.
To help me understand the origins of cryptocurrencies, think through their present problems, and situate them in a Web3 context, I spoke with Jeff John Roberts, a technology journalist and the author of Kings of Crypto: One Startup’s Quest to Take Cryptocurrency out of Silicon Valley and onto Wall Street. Roberts is also executive editor of Decrypt. This interview has been edited.
Many people hear “crypto” and immediately think Bitcoin — maybe Dogecoin or Ethereum — but obviously the term encompasses much more than that. Help me understand the basics of what crypto is, broadly, and why it’s so important today.
Crypto is kind of an amorphous term. In essence, it’s software that runs blockchains. And blockchains are just ledgers that record every transaction that occurs. This means that they’re tamper-proof, distributed, and immutable. That might sound like a lot of jargon, but it’s really just the notion of running the same computer program on multiple computers, verifying its accuracy along the way.
Bitcoin is the first and most famous blockchain, and it does all those things. It also comes with a currency that can be spent. And that’s part of what the Bitcoin blockchain ledger maintains: a tamper-proof record of transactions — who’s paying whom.
Now, there are literally thousands of blockchains with varying levels of quality and security. Bitcoin stands out because it’s the first, has never been hacked, and has sort of proved to the world the promise of blockchain technology.
Do we know exactly how many cryptocurrencies there are? Or is that hard to pin down?
There are literally thousands of cryptocurrencies. Most of them are kind of fly-by-night hustles that don’t have the underlying technology to make them valuable. But since cryptocurrencies attract so many speculators, if you create one, someone out there will be willing to buy it.
What can you tell me about the origins of cryptocurrencies?
They grew out of a movement called cypherpunks, which originated in the 1980s. Cypherpunks were a collection of privacy-obsessed cryptography fans and programmers in the San Francisco Bay area. These people experimented with how to create a new form of money that didn’t rely on a central bank, a government, or other intermediaries.
Their goal came to fruition with the Bitcoin white paper in 2008, which put out this new proof of concept. It’s a fundamental theory of a private, decentralized form of money that could not be hacked and did not require trusted authorities to maintain.
So, cryptocurrencies — and bitcoin being the first — are the first application of this blockchain technology.
Yeah. And since it’s clear that it does work, it’s secure, and it’s valuable, people are now building all sorts of other things on top of it. You can think of it as a sort of operating system. And now there are various applications of the technology. Creating currency and spending money is just one.
Who is the person or group behind that 2008 paper — the Benjamin Franklin of the technology, so to speak?
The Benjamin Franklin of Bitcoin and blockchain would be the anonymous author Satoshi [Nakamoto]. It’s almost impolite in the world of Bitcoin to speculate on who Satoshi is — but I don’t really observe those niceties. I think Satoshi is a mix of those early Bay Area programmers. Namely, a guy named Hal Finney, who died of ALS several years ago, working closely with a guy named Nick Szabo, a polymath programmer, lawyer, and libertarian. And it’s pretty clear from the early records and listservs that those two guys, if they’re not Satoshi, are indispensable to the success of the project.
So, Satoshi is somewhere between the Benjamin Franklin and Banksy of Bitcoin.
Exactly. Great analogy.
Today, there are billions of dollars of crypto in circulation. It’s a huge system. Who governs it?
That’s a fantastic question, because when you talk to crypto people, the first thing they always tell you is “Decentralized, decentralized, there are no leaders, there’s no bank, there’s no authority.” But every project needs some sort of leaders, for lack of a better word. And even in the case of Bitcoin, which is by far the most decentralized blockchain, there’s still a clique of insiders who are responsible for maintaining the code.
Bitcoin is software, and just like your Apple software updates periodically, or your Chrome browser updates, Bitcoin receives updates. Most of them are quite minor, but they’ll expand the functionality of it and improve the security of it. There is a core group of developers who are the guardians of Bitcoin. But they don’t control it.
Other blockchains are much more centralized. Usually a handful of people control a lot of the money behind it and have an outsized influence. So, decentralization is a spectrum. Bitcoin is the most decentralized — but even it’s got influential people who are the guardians of its code. A lot of the newer blockchains (Cardano and TRON, to name two) are not decentralized at all.
I’m interested in decentralization as it relates to who’s able to own and profit from cryptocurrencies. How can we reconcile the concentration of crypto wealth at the moment, when that’s really the opposite of the goal of this technology?
There’s a term in crypto, “whales,” which refers to people who own an outsized amount of bitcoin or ether or something similar. By virtue of owning most of the money, they can have an immense influence on the value of the currency and other governance decisions.
Defenders of crypto would say that whales have a big stake in making it work — it’s not in their interest to “pump and dump” it, because then people would lose trust in its value. Although that’s the nature of many new blockchains: Spin it up, urge suckers to buy it, then get out. That’s been endemic since the early days of crypto.
But the more successful currencies are becoming increasingly decentralized — in the case of Bitcoin and Ethereum especially — in terms of who actually owns the allocations of coins tied to each blockchain……..continue on part 2