Crypto, gambling, drugs, and free speech

Last month, I spent a great deal of time exploring “tokenomics” for a start-up in the crypto space.

Tokenomics is a fancy word for incentive design. It’s a way for you to jumpstart a business by giving certain groups of people “tokens” in exchange for using your product or promoting it. The idea is that:

  • Token holders will receive rewards from your business’s operations; 
  • Tokens become tradeable; and
  • Tokens will appreciate in value over time.

The problem is that “tokens” often look a lot like stock. And stock issuances are governed by the SEC.

Even if you give tokens away for FREE, that is generally still illegal. The SEC may come after you. And the potential punishment is severe.

The state of crypto is such that if you ask for permission, you will be told no. And then you’ve put yourself on the SEC’s radar. What a disaster!

This is why most crypto projects are either completely anonymous, or they domicile outside of the US and restrict US investors from investing. 

I understand the regulators’ reasoning, but this feels silly to me. The US needs a thoughtful framework that protects the public while simultaneously fostering innovation. 

Here is another example of the consequences of US regulatory policy.

I have poker-playing friends who have been banned by Venmo for sending $ to one another and writing “poker” in the description.  Apparently, even writing “fantasy football” on Venmo could get you banned. (So be careful!)

You may be thinking:

“Yishi you are a degenerate. You play poker, you dabble in crypto / NFTs. 

You are the reason why regulations exist!

We need to protect the masses – from people like you 😆

Okay fair perhaps … but what about this next example:

My friend founded a consumer app focused on events.

Last month, someone used his app to organize a movie night, and she wrote things about “weed” and “edibles” in the app.

If you don’t have this event app, you can still use the product via text messages. And you get texts via a 3rd party API run by Twilio.

Twilio is a ~$20B company. Their algorithms recognized that weed was being discussed, and they BLOCKED the texts.

The USA is supposed to be the land of freedom. My view is that:

  • You should be able to talk openly about anything you want, weed included.
  • You should be able to gamble as much as you want with your friends.
  • If you are an early user of a product, the company that made the product should be allowed to reward you with free equity.

What the future might look like:

There is a company called Telegram. It’s a popular messaging app (similar to WhatsApp) and huge in the crypto world. 

Telegram was founded by a Russian political dissident. Privacy is deeply ingrained in the company’s values.

Telegram explicitly will not comply with ANY government request for information–unless it relates to terrorism.

Telegram effectively decides what the limits of free speech are. That is a lot of power, but I don’t think that’s a bad thing. I can see a future where the lines of distinction between countries and corporations become blurry. (P.S. Check out Snow Crash – a great Sci-fi book about a world ruled by corporations. It was written 30+ years ago and is very popular amongst technologists)

Fun hypothetical: Imagine you are the benevolent dictator of Earth. What kind of restrictions on crypto, gambling, drugs and free speech would you impose? What about laws in other areas? Drop a line, I’d be curious to know! 

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June 13th, 2022

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