So the cryptocurrency industry has basically two products, one which is relatively benign and doesn't have product market fit, and one which is malignant and does. The industry has a weird superposition of understanding this fact and (strategically?) not understanding it.

The benign product is sovereign programmable money, which is historically a niche interest of folks with a relatively clustered set of beliefs about the state, the literary merit of Snow Crash, and the utility of gold to the modern economy.
This product has narrow appeal and, accordingly, is worth about as much as everything else on a 486 sitting in someone's basement is worth.
The other product is investment scams, which have approximately the best product market fit of anything produced by humans. In no age, in no country, in no city, at no level of sophistication do people consistently say "Actually I would prefer not to get money for nothing."
This product needs the exchanges like they need oxygen, because the value of it is directly tied to having payment rails to move real currency into the ecosystem and some jurisdictional and regulatory legerdemain to stay one step ahead of the banhammer.
Pause here to acknowledge that product two has learned exactly which words to emphasize to product one's audience to borrow their credibility, networks, and talents to facilitate the building of their payment rails and legal entity shellgames. ("It's censorship resistance!")
"Why are Bitcoin exchanges hives of scum and villainy?"

Because if they weren't Bitcoin would be valued at its use value, not its speculative value.

"Why don't we find a bottom in the market?"

Because the use value is, to a reasonably accurate approximation, zero.
Oh to be a character in a Michael Lewis book, seeing the world around him gone utterly mad and being virtually unable to stop it or profitably trade it because of market microstructure. *sigh* Hey narrator, make this book more like the Big Short and less like Flash Boys, please.

More from Patrick McKenzie

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2020 was a game changer for Ethereum.

The vast majority of its success was fueled by #DeFi.

Here's what happened in 5 Tweets 🔽

1) Governance Tokens 🪙

Projects gave complete ownership of billion dollar protocols to their users, often using retroactive airdrops.

Early adopters earned tokens for past usage, and token-based voting now dictates all technical


2) Liquidity Mining ⛏️

Power users were the first to earn on-going distribution by providing liquidity.

$COMP sparked the wave, with $BAL coining the term a few weeks


3) Yield Faming 🌾

Projects coupled liquidity mining and governance tokens to boost 'yields' by combining lending rates with an incentive layer.

APYs peaked as high as 1M% during 'DeFi summer', leading to a 'food coin' craze like $YAM and


4) Fair Launches ✅

Who needs investment when you can launch using yield farming?

@iearnfinance debuted $YFI with no formal funding, seeding a community treasury for self-sustainability.

The notion of a core team and community became one and the
Out of curiosity I dug into how NFT's actually reference the media you're "buying" and my eyebrows are now orbiting the moon

Short version:

The NFT token you bought either points to a URL on the internet, or an IPFS hash. In most circumstances it references an IPFS gateway on the internet run by the startup you bought the NFT from.

Oh, and that URL is not the media. That URL is a JSON metadata file

Here's an example. This artwork is by Beeple and sold via Nifty:

https://t.co/TlJKH8kAew

The NFT token is for this JSON file hosted directly on Nifty's servers:

https://t.co/GQUaCnObvX


THAT file refers to the actual media you just "bought". Which in this case is hosted via a @cloudinary CDN, served by Nifty's servers again.

So if Nifty goes bust, your token is now worthless. It refers to nothing. This can't be changed.

"But you said some use IPFS!"

Let's look at the $65m Beeple, sold by Christies. Fancy.

https://t.co/1G9nCAdetk

That NFT token refers directly to an IPFS hash (https://t.co/QUdtdgtssH). We can take that IPFS hash and fetch the JSON metadata using a public gateway:

https://t.co/CoML7psBhF

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