Protos recently interviewed Cory Klippsten, CEO of Swan Bitcoin and Partner at Bitcoiner Ventures, to start a new series of opinions from big names in crypto. Klippsten has been vocal on social media about his views on cryptocurrencies – formerly a fan of altcoins, he has taken a staunch Bitcoin-only approach.
Here’s his take on the current market, Ethereum’s merger, regulation and more.
Protos: You have gained 150,000 followers on Twitter since last year. What are you trying to achieve by being out in the media? What is your overall goal?
Rockstone: It is not necessarily a goal. It’s something that has fallen into our laps in recent months because of the conversations I did at Terra LUNA and then Celsius. So LUNA in March and then Celsius in May generated a lot of media attention. I think it’s very much driven by this latest news cycle with CeFi [centralized finance] lending implosion in the last three months.
When I’m out there talking to the media, honestly, I think the number one message I’m trying to get across is that Bitcoin is not part of the crypto industry. There is Bitcoin, and there are other things that call themselves crypto.
It is in the interest of crypto people to try to put Bitcoin under that umbrella. And it is clearly in the interest of Bitcoiners in Bitcoin companies to separate Bitcoin from crypto. So that’s the message I’m trying to convey very clearly with each and every one of these outlets.
The difference between Bitcoin and other crypto assets is something that crypto publications understand, but the mainstream press? They are blown away – they thought all crypto people are basically crypto bros trying to grab.
Protos: So what exactly is the difference? Because many people are still confused. They call Bitcoin a Ponzi scheme because the price only goes up if more people buy. How is Bitcoin different?
Rockstone: Well, the price goes up with more money flowing into the protocol. It is a monetary protocol. So if you can get the same people to buy more, it works well. But in general, you have a fixed supply of Bitcoin of only 21 million coins. So obviously, if more people buy and hold it and demand goes up against fixed supply, you can shift up the demand curve.
However, it does not fit the definition of a Ponzi scheme. Lyn Alden has done the best job of laying out exactly what the definition of a Ponzi scheme is and why Bitcoin does not meet that definition in several ways.
Why is Bitcoin not a Ponzi scheme? The big difference is that there is no entity or group of people that control Bitcoin that markets Bitcoin to be able to dump it. If anything, most Bitcoiners who market Bitcoin buy and hold as much as possible – and the people who love it the most are the ones who never sell.
It’s kind of the opposite of what you see with others like Andreessen Horowitz: full frontal attack, marketing through all their channels, doing massive pumps after they bought a bunch of cheap Solana from the centralized team that controls it in the spring of 2021.
They ⏤ and all their VC friends ⏤ sold the top at the end of 2021, while claiming to the world that they were holding on. So it’s very different from something like Celsius, which obviously exploded, and you have their entire management team with this centralized company.
“Cryptocurrency” in air quotes is really just corporate scrip. They asked everyone to hold and told people they never sell. And then, of course, sell tens of millions of dollars of their coins.
Protos: The number of these scams seems to continue to proliferate. How would you suggest the world solve this problem?
Rockstone: I think awareness is the key. I think people need to realize that there is no such thing as a free lunch. Unfortunately, some people get burned during each of these cycles.
Do you promise free money and free lunch? It always implodes. A bunch of people get burned. This not only educates them but also concentric circles around them ⏤ as people watch from afar so they don’t fall for these things in the future. As a whole, the population gets a little smarter each time. As for regulation, I’m not in favor of regulation. I am anti-hypocrisy.
My position on these non-bitcoin cryptos that all pass the Howey test (meaning they qualify to be regulated as securities under US law) is that you basically have to beat the drum for deregulation. Ponzi schemes, penny stock scams, OTCs, pinksheet stock manipulation, all that kind of stuff. You have to deregulate all of this and get rid of all of these rules, or you have to apply the exact same set of rules to crypto.
So I just don’t think you can have it both ways. Probably the right thing is just to see the rules applied evenly across the board. Not only that these crypto scammers get away with things that traditional finance is not allowed to get away with. Like, you can’t send stock records to nursing homes; you can’t market Ponzi schemes to your grandmother.
If the laws had actually been applied all along, there wouldn’t be any of this nonsense in crypto that everyone has centralized governance. Almost none of these projects had a fair launch and decentralized their teams. With no central entity, there is a small pool of basically only proof-of-work coins.
Protos: That brings up a good question about Ethereum’s proof-of-stake transition and the Merge narrative. Do you have any views on the transition to ETH2 and its security designation?
Rockstone: Yeah, I don’t know. We’ll see if they have to fight – there’s a degree of uncertainty there. You know, there’s certainly an argument that stakes are essentially an investment contract, because you get interest or returns. Right? You invest money and then you get paid.
I don’t know, but. I don’t really care that much. I believe in the medium to long term that proof-of-stake will be centralized over time. So I think anything that chooses proof-of-stake will just end up in a kind of race to the bottom for transaction speed, centralization, control and manipulation. Essentially, you end up on AWS eventually. No matter what you do, no matter how long it takes to play out, any proof-of-stake crypto is doomed in the long run.
Protos: Can you explain to someone who doesn’t understand all these different pieces of evidence? Why is proof of work important in your opinion?
Rockstone: If you don’t have a bond with the real economy that guarantees security, then you’re going to end up with the political process. You’re going to end up with governance. You’re going to end up with people arguing over things to manage the network, because there’s nothing real-world that requires work to manage a proof-of-stake network. It’s just money and politics.
The game theory of how proof-of-work works and how it ties real-world energy consumption to Bitcoin ⏤ that Bitcoin’s network actually pays you to create, generate and use the energy ⏤ makes all the difference.
We’ve had proof-of-stake in various flavors for hundreds of years. It is essentially the fiat system with centralized elites making decisions about the money supply. Who will decide what we can and cannot use energy for? It is a march against totalitarianism and authoritarianism.
Protos: What does decentralization mean to you?
Rockstone: Well, a truly decentralized system means that no one actually controls it, can change it, or turn it off. Right now it’s just Bitcoin, and the whole decentralization thing is otherwise marketing. For pretty much anything else where they can shut down the blockchain and restart it and coordinate with the developers… that’s what you see over and over again with Ethereum every other month requiring every fully validating node to be upgraded.
You see Solana shutting down and coordinating in invite-only channels with all the block producers to restart the network every two weeks and things like that. These are not decentralized networks the way Bitcoin is decentralized, or the way the internet itself is.
Protos: What are your thoughts on stablecoins?
Rockstone: Well, there are two different stablecoins: collateralized and uncollateralized. You cannot make a decentralized, algorithmic stablecoin maintain a peg. You need to have a centralized team doing marketing operations or you just won’t be able to maintain the pin in times of stress.
This is something the Basis team discovered in 2018 ⏤ and they were way smarter than Do Kwon or anyone else like at Tron or whatever working on stablecoins today. Basis realized that this stablecoin thing couldn’t be anything but a security. So they decided to refund the investors’ money.
If your claim is a $1 stick, regulators will probably consider it a digital dollar and they’re going to regulate it. I think that’s probably what’s going to happen. That would mean that any exchange is likely going to choose something that is approved by the government, essentially. I think that’s kind of where we’re headed.
Protos: Any final thoughts?
Rockstone: If there’s anything anyone isn’t aware of, hit me up Twitter or on the Swan’s website. We have Swan Private Client, Advisor and an IRA business. We also created Bitcoiner Jobs, the largest Bitcoin job board. I am a partner at Bitcoiner Ventures to finance start-up entrepreneurs. We host the Pacific Bitcoin Conference, the largest Bitcoin conference on the West Coast.
This interview has been edited for clarity – all views expressed belong to Klippsten. For more, follow us further Twitter and Google News or listen to our investigative podcast Newly created: Blockchain City.