Can Crypto's Broken Moral Compass Be Fixed? | RSA+DH

Hey, Claystation, we got a David and Ryan Takes episode today, and we're gonna talk about crypto's broken moral compass. Okay, this was a post that was issued this week, and also racist Solana meme coins? What in the world is going on over there uh in crypto on Solana specifically? And the big question, I think, in our minds, the context for this conversation is has crypto lost the plot?

Before we get into this conversation, which I'm pretty excited about, I think there's actually uh more under the hood than what meets the eye. We're gonna talk to our friends and sponsors over at as we get into this conversation. I think there's just some things I I think listeners should know. Uh of course, if you are paying attention to the crypto meta, meme coins have taken a turn for the worst. They are kind of spiraling out of control. Uh, but there are incentives uh that I think are worth understanding as to why. And it goes back to the role of narratives and attention in crypto. Uh, but we're also going to talk about like the purpose and meaning of meme coins, why crypto deifies some of the worst leaders in the industry, which is something that we also saw this week, Ryan, on crypto Twitter. Uh, and then, like you said, crypto's seemingly lack of moral compass. I think there are some data points, some dots that we could all kind of smash together to put in just uh a little bit more understanding as to like why human behavior is the way that it is uh in this part of the market cycle here in crypto.

All right, guys, we're getting right into that conversation. But before we do, we want to thank the sponsors that made this possible. All right, so the context for this is um I think crypto's moral broken moral compass. This was a a post I read from Palenya. And I think stuff like this, what we are looking at on screen, which we have blurred out for the audience because

We bl it's blurred out, we can't even say it. It's it's most things most tokens we cannot read the names. We won't

David, I think tokens like this, meme coins like this, kind of the underlying mania are breaking people. Uh notably our friend and previous Bankless uh podcast guest, Palenya, who's been a long time crypto writer and advocate, wrote a post this week called Um Crypto's Broken Moral Compass. And we'll get to that post in a in a minute and tell you uh exactly what Palenia said. But I think it's stuff like this. So I know it's blurred out, but for the audience, what are we looking at here? What what what is this uh uh air quotes meta right now?

Yeah, so this is some individual's portfolio of meme coins that they have that are all uh themed racist. They're all racist themed um using words that we will not be able to use on the podcast, nor would we ever want to. Uh and the funny thing is, is every single one of these meme coins, this gentleman is up in profit on his meme coins, on their meme coins. And so not only are they racist meme coins, but they're also profitable meme coins. And this is the intersection that um I think many people are finding disenjoyable, the intersection between profitability and racism, or just egregiousness or crudeness, um, things that we would is that normal civilized society would call distasteful. Why is being distasteful also profitable? Why are these two things intersecting at this moment of time? And I think this is people are like, this is a moment for reflection for the industry. Like, how did we get here? Um, my answer for this, Ryan, is well, meme coins very quickly realize that this is a game of attention. Uh, and so when uh 10,000 meme coins are all being born every single like hour in the crypto space because we just had a few meme coins go to a billion dollars. And then all of a sudden, with the tools that we have, you know, the ability to mint tokens, uh, it becomes a very big competition for any amount of attention whatsoever. And so I think over the last two weeks, that meta has been unearthed and people realize that the more egregious, the more crude, the more just like shocking you can name your meme coin, the more attention you can get. Uh, and so this has devolved into like one of the worst metas in terms of like public perception that I think crypto has ever had for itself.

Yeah, a a few things I'll note is actually so the idea of uh people getting rich on like racism

Is like a thing that's happening. And uh plenty has gone like farther than uh than even the comments that that you just made. We'll get to that post in a minute, calling this evil, basically. And I think this is the type of thing that that sets people over the edge is are uh are we just degrading to a bunch of short-term attention games that are now like devolving into racism? Why? Because like we can make a profit off of that. Is that what crypto really is? And people are looking at this as the social layer and they're they're basically saying, this is gross. Like I don't want to be a part of this, right? If this is crypto, then I don't want to be uh part of crypto. And this is kind of like where I think the attention economy can devolve, or at least it has devolved right here. I guess a few things I'll say, which is I, you know, I would say some ironies. One thing for these like racist coin collectors, I will note is that none of this is private. So again, we're not on any like private layer ones here. So you know, like whatever coins you own in your Solana address, that can be AML, KYC, probably linked to you, right? There's like all sorts of chain analysis type.

Your base address too like has nothing to do with Solana.

People know who you are. Like they're going to know who you are. This is actually not super private, right? Pseudonymous, but not private. So maybe there will be some kind of like social cost of for doing some of these activities. Like, can you imagine if if a notable crypto influencer or like a VC firm got caught with things like this in their wallets? It will cost them reputationally and deservedly so. I mean, that's what society sort of does, right? Even if it's not technically illegal, we can like socially pressure people through like mores and norms and just say, hey, we like we don't stand for this. This isn't this isn't cool to do. And I wonder how much of that will come to pass. Also, it presents an interesting um, I think, juncture for not necessarily the base layer of validators uh on Solana in terms of whether they process these transactions, but at least at the front ends, right? If you're a front end and you're like kind of like a like a Jupyter, some sort of exchange with with uh this set of tokens on Solana, do you screen this out? I think probably the the answer is like yes for almost all of them. And uh so that's like a call I'm sure many applications are making today. Do you have any thoughts on this?

Yeah, i I mean it's really a matter of just like how much do we want to guard our public image in crypto? Like we

We like to have permissionlessness. Like we like to have like permissionless open finance that anyone can partake in and enjoy. And so this is like a natural byproduct of that. Um and so, but also at the same time,

we could we we could curate and we could manicure and we could uh like put a more polished

like yeah, sensor. We could do that. I don't think anyone's suggesting that we do that, but then we have this, then this is what's going on as a result.

So let's talk about this this tweet that you included uh in in this section, David, which is like the context of maybe how we got there and why there's some sort of like profit incentive, a number go up incentive to jet to degenerate to the level of like now people are actually trading uh like racist meme coins, and who knows how it'll uh devolve uh from there, right? Like it could get even worse. What it what tweet are we looking at from from Reagan here?

Yeah, so this is actually like kind of in an adjacent uh topic. This is an adjacent tweet thread. The very first tweet in this thread says it's widely accepted that the way to make money in VC is to be contrarian and right. And Reagan continues and says, this is absolutely false in crypto venture. All that matters is your ability to front run the narrative. And so this is actually how a thread about how crypto VC is different than normal VC, whereas in normal VC, you are focused on like cash flows, revenue, fundamentals. But Reagan says in crypto VC, it's actually about narrative. And they they unpack this whole this whole entire thread. They unpack like why this is true. And like halfway through uh this tweet thread in tweet uh 20, we can't read the whole uh thread, really good thread, link in the show notes. Um, tweet number 20 says your your crypto VC terminal liquidity comes from retail.

And something that's nice about crypto is that generally uh startups do a a pre-seed, a seed round, maybe a series A, and then they issue a token. Whereas in the traditional finance world, this, you know, going public on the stock market, it's like series A, B, C, D, E, F, G, and then the retail is left to buy the bag on the open stock market. So at least in crypto, we are going public sooner and retail can get some upside here. But when our terminal liquidity comes from retail, Reagan says you do whatever you do at seed, you need to more or less underwrite that a retail audience is going to be excited about buying that thing on the open market, which is wildly different for terminal liquidity than traditional venture capital. This brings us to the second major distinction between crypto and normal venture. What do crypto markets value? I'll give you a hint, Reagan says it ain't cash flows. Crypto markets value attention. And so this the attention, this focus on the attention economy, where attention is liquidity, really warps the incentive of both crypto VC and you know crypto meme coins. And so this is we're seeing this happen with the warped incentives around crypto VC. And now we're actually seeing it show up in like the form factor that our tokens come in.

Yeah, I think that's the main point. And anywhere where Reagan said uh VC, I think you just substitute uh investor, right? You know, and and it kind of makes sense. But this like it really nails it crypto markets value attention. So what we're seeing in these meme coin markets is basically attention markets, right? And it's not necessarily true that um like these have uh underlying fundamentals as we talked about in the past, but they do have some sort of spotlight on them. It's kind of weird though to have this effect of like

Racism is trending and therefore somebody's making money, or there could be some incentive to actually produce like racist coins or unsavory coins in some way just because you can make a profit. Like that is kind of like I wouldn't say uniquely crypto, but the ability to monetize on top of this uh attention economy is something that crypto is providing sort of out of the box. And that's where I get to we get to, I think this conversation about well, have we lost the plot? Is that all we are? Like all it is here. And I feel like uh almost the the meme coinery of the the you know the past few months, the past six months or so, this uh like prices uh go up in a way that is not necessarily commensurate with all of the fundamentals, probably according to people like Palenya, who are very much looking at like actual use cases of the blockchain. And is it is it helping people out in the real world, you know, all the real world stuff? They look at this and then kind of the you get throw racist meme coins on top of it because why not? And so Baleny comes at this and is like, this industry is broken. I rage quit. So at the end of this post is basically like a rage quit. I'm like not going to write about crypto anymore. And and keep in mind, this is just one individual, but I think exemplifies maybe um some perspective for that a lot of people feel. And also, this is a very talented uh crypto analyst, right? Somebody that I've been reading for um for a very long time. So when they say that we've reached a breaking point, uh crypto is evil, is are some of the words that um in this post, and I'm rage quitting. Like I I paused and I read this on Monday morning, and I was like, wow, okay, what do I think about this? How do I process it? Why why don't we actually get into this post and kind of dissect it a little bit, David?

Yeah, I think I'll I'll start reading from this section here. The DeFi Ponzies, the meme coins, the ugly JPEGs of 2021, it's the same story every time. There's some grandiose narrative for what's nothing more than a pure casino. Can't get much worse, right? Sadly, nope. Things have hit an all-time new bottom with 2024. Racists, sexists, and other shitheaded memes, which are merely a vehicle to transfer wealth from the many to the most obnoxious people on the planet. So why has there been such a sharp decline? I think it's pretty simple. The crypto community lacks any moral compass. Uh, the same defensiveness and cope gets on repeated. Everything's a Ponzi is as a justification for what we're doing here in crypto, which Palenia responds, This is obviously false. There are many productive assets worldwide. Organizations that have invented products that led to significant increases in productivity and the quality of life. Uh scammers are everywhere, like claim the crypto people. Crypto's no different, to which Palenia responds, yes. Crypto does not have a monopoly on scammers, grifters, and opportunists. These are in there are industries that are almost entirely free of scammers. And then there are industries in which scams run rampant. Crypto is absolutely on the extreme end of the ladder spectrum. And then there will always be a demand for casinos, to which Pliny responds, yes, but crypto is really a terrible casino. And then they link a talk by John Wu in which John Wu talks about all the ways and that casinos are actually really good casinos, very fair, like legal, compliant organizations that really uh punish cheaters.

Have some checks and balances, whereas crypto you can get completely rugged by

Exactly. Yeah.

like anybody.

And then the latest one, racists are everywhere, to which Palenya doesn't even dignify with a response. So basically saying, like, hey, like, sure, like permissionless open system, fine. Uh scammers everywhere, fine. Uh, but also it doesn't really matter. Any anything that you list is like crypto is always on like the worst end of that spectrum. So therefore, peace, I'm out, says Palenya.

Yeah. So what was your take when you read this, David? I'm not sure when you read it, but uh I think you published this or they published this over the weekend, and I just caught up with it on Monday morning. Those I heard some uh conversation about it. Um what what was your take when you read this?

This one line uh that comes right after the part I was reading. Uh, I thought, like, oh, that's me and you, Ryan. That he's talking about us, which is others clearly know that this is all very, very bad, but we give it a wide berth and we just say, hey, let's just focus on the good and we'll ignore the very, very bad.

That's not only what I say, that's what I do.

It's what I do. Yeah, that's how I that's how I look

Like I wasn't even looking at this corner of of crypto, Twitter, and meme coinery until like, you know, like it was drawn to my attention. So I just ignore it.

one one more sentence or two is uh Pelania says even when the people who are willing to speak up back then, back then, which is like post 2022, after that, all that bad stuff, uh people who were willing to speak up back then then have said nothing about this latest wave of insanity. At this point, this evil in crypto is banal and normalized.

And for me, as I at post 2022, I do personally sometimes just feel quite at quite a loss of all of the terribleness that crypto promotes. And so that's what I've done. I've just kind of like, well, it is what it is. I have no power over it. People are going to do what people are going to do. And I'm going to focus on the parts of crypto that I see good. And that's like,

that's that's what I got

Well, what Pl Pliny is saying though. So yeah, I I remember and and I remember it. I mean, we were right there in the depths of 2022 where um like you were really feeling it and actually had kind of an emotional moment on the on the bankless weekly roll-up. And I think we were talking about like all of the billions of dollars that were lost by retail and specifically like how we're not learning anything from it and sort of this existential wondering of like, uh what are we doing here? Are we on like team good? Or and Palenya is making the case that like at a certain point, if you're involved in this social layer and you're pushing these technologies, then Plenia is saying at a certain point you are culpable. If you are not actively pushing back, uh resisting, I guess maybe like tweeting or creating podcasts or something like this to say that this behavior is like like wrong, is not uh true crypto. It's not enough to merely ignore that. Like I think Palenya is is making the case and focus on the good. Uh, they're saying like you actually have to uh actively try to boost the autoimmunity of the of the system here and the social layer here. And if you're not doing that, you're culpal at some point you have to walk away. That's why I'm walking away. What do you think?

there.

Yeah, I think it gets really, really hard. And crypto Twitter has such a strong, I think, role in this because this is where a lot of the attention games are being played. And maybe to even kind of continue Pulenia's point, um, something that happened this week was a photo of Do Kwan got surfaced coming out of the Montenegro jail as he's like on his way to being extradited. Uh and there was a Laura Shin article uh that was written, and I want to pull out a quote where uh many observers, and I'm assuming these observers are where crypto Twitter is, where the commentary is, many observers suggested that Kwan's buzz cut and hardened visage were noticeable improvements on the embattled crypto founder's looks. And this was kind of the meme of of this week was that Do Kwan has this one photo that came out where uh like people are saying, like, oh yeah, he looks like a hardened Chad and he's gonna run it back and do it all over again because he's been disciplined by jail.

Basically, yeah, they're basically saying, like, this was a great thing. Now he's gonna come back and do a new kind of like blockchain startup, we're all gonna get rich. This is kind of the sentiment, right?

Yeah, then Suzu, another scammer grifter criminal, puts out this tweet saying, I keep telling people that prison is the dopamine rehab slash discipline maxing that you need. And then he says, Don't fade, while he's tweeting out the picture of Do Kwan. He's saying, Don't fade Do Kwan. I would like to remind people, this is not Doquan coming out of jail. This is Do Quan going to jail for the first time. And people are already like, don't fade Do Quan. Like he's getting run it back to

Going for

the ball. He's going to do it again.

Like, no, he's not, he's going to jail for the first time. Yet people are like simping for this man because he like looks chisel. He like lost 30 pounds in jail and now all of crypto twitters in love again.

kinda gross, right?

Kind of gross.

By the way, if prison actually worked, I would contend A16Z would have figured this out and done like prison startup schools. You just send your founder to jail.

If if dopamine rehab was actually a thing.

Yeah, yeah. So like, but okay, let's consider the source here, right? That is coming from Suzu, who is trying to be someone that kind of like normalizes like uh incredibly risky behavior and has 1700.

Hundred likes.

Okay. And so so like again, again, we could get into Twitter bot traffic and like what's real and what's not, but like let's say uh you know portion of this is legitimate. The source is somebody who's trying to normalize this behavior. I just want that to be said because this person, Suzu, is I'm sure entertaining, like going on a Zen retreat, maybe going to jail, maybe not. I don't know what his status is going to be eventually, and then like returning to crypto as a hero. And I think that um like that's the source of this, but.

We put these people on a on a pedestal. And when I say we, I don't mean bankless. Okay. I'm talking about

Polinia's perception would be the crypt crypto at large. And some of you have done this to a greater extent than others, but like you know, like again, back to

Everyone's done it to some degree.

Everyone's done it to some degree, right? And so like we're all kind of complicit in it.

And um

yeah, what about this? What about this idea of I I think your your tweet here was was uh maybe Plenia is right. That's what you said when you were observing like this uh Suzuki take on Do Kwan saying like prison's a good thing.

Yeah, we just don't seem to have very good uh immune immunity, I mean immune system to resist some of this like degeneracy. Like we like we are degens, as in we are taking like leverage and we are taking risk, and that is totally fine. But then we are going even further and being like kind of degenerates with like our moral compass. And we don't seem to be able to resist that.

It seems like if somebody gets rich, at least in the kind of crypto Twitter social layer, then it gives them a pass to do anything because like obviously they were right. And if you speak against that, well, that's just cope and you're jealous. Right. And like, don't you think that is embedded in into some of this underlying

Like the thing that Pliny is really resisting is this just degenerate feeling of just we're putting these basically criminals and grossly irresponsible people on a pedestal. And not only do we do it once, it's just like we never freaking learn. We have like the memory

If it actually becomes like a target, is because it keeps on working, people it becomes a target. Right. Like, yeah, so like like being criminal becomes like something to be like enjoyed so long as you get rich. And of course, this is not the actual norm. It's like blown out of attention by crypto twitter. It's blown out of attention because it's just like a re an egregious thing, and now we're talking about it. But this is like kind of what the attention economy in crypto kind of rewards. And it also, like with the undercurrents of nihilism, like doing unlawful, unsavory, racist, sexist things, so long as you get rich, right? So long as you get out of the rat race, so long as you know you get yours out of crypto, uh, then it's okay.

I don't think this is a problem, by the way, just with crypto. It's just like kind of manifesting in crypto. Like I this is a just a cultural, uh, we've called it before, like financial nihilism, as as has Trev Travis Kling, who's kind of like popularized that term. And this is sort of more of that. But like everything in crypto, it's it's on steroids, right? It's just like it's massively uh amplified by kind of the financial primitives. And so you kind of go back to a plenia, and maybe you go back to a Molly White, and then maybe you go back to some of the other crypto skeptics, um, like we've heard from in the first place, just saying, like, on net, this thing is more bad than it is good, right? And so, like.

Yeah.

That's what you have like that's that's that's the charge. That's that's the criticism.