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The Next Major Crypto Narrative
My public bet on what I think will drive the next crypto cycle
If there’s one thing I’ve learned from my years in crypto, it’s that this market is highly narrative drive. The way I break it down from the smallest atomic unit to the macro is as follows:
Stories that people can understand
Beliefs that form around stories
Memes that encapsulate those beliefs
The smallest possible atomic unit has to make sense and be strong so you stack a lot of weight on it. Let’s look back to the past to apply this framework:
There exists a huge market of yield that only banks can take advantage if
Banks are evil and crypto represents an alternative, better system
Crypto is a way to earn high interest rates on dollars
Governments are blocking ordinary people from investing in great companies
Wealth creation should not be limited to accredited investors
ICOs are the new IPOs to make riches
The format is the same, just the characters, narratives, people change. Each cycle also gives you new heroes and villains. Just make sure you don’t become the main character. Your chances of survival get diminished as you draw more attention to yourself.
We’ve had over a decade of crypto now and the question on everyone’s mind is: what’s next? You can’t reuse the same narratives because those stories had bad endings (Terra/Luna/FTX, ICO scams etc). It’s not to say that they weren’t good! Each cycle brings more talent, resources and scale to the crypto economy. It’s just that normies aren’t going to come back to the crypto thing unless there’s a meme that resonates with them and adds to their belief system.
One thing I’ve been somewhat annoyed with myself with in the past is not staking my beliefs to my reputation and then later regretting it. Recently, I’ve received enough confirmation on my thesis and thought that unlike previous times, I’m going to commit to this. Who knows, I could be wrong! But at least I can look back and learn why I was wrong or what I didn’t account for. If I’m right, well you know who you heard it from first ;)
Without further ado, I present to you the bull narrative for 2024 - 2026, being present in the year 2023.
Crypto + AI
What’s surprised me over the past few months is just how rapidly the entire world shifted to embrace AI, especially large incumbents. What that effectively means is that majority of the first world has directly used or encountered AI in a very real way. I probably don’t need to give enough evidence for what these events are since you’re a Google search away from it and your Twitter feed is already filled with it. I have two strong thesis’ for what this will encapsulate so I’ll start off one-by-one.
So given we know the global consciousness of those around us is already being AI-pilled. What do we think happens next? Well right now, you only have AI integrated into your tools.
The next step in this progression is the rise of AI agents. Trained by you, with your data, on your tools. AutoGPT, BabyGPT and the myriad of other projects our there are already heading in this direction. The technology is still a bit basic but it’s impossible for it to not reach this stage given what we know today and what people want. AI agents will allow you to start automating larger parts of a workflow. ChatGPT plugins are already simple versions of agents where you:
Express your intent to the LLM
It finds the appropriate course of action for you
Does the action
Correct me if you disagree, but the above train of logic is relatively sound and has low probabilities of not occurring. Okay, so what’s the most powerful energy people want to express behind their intents? Money. The universal energy adapter. People will want money based intents. Here’s some simple examples in case you’re still struggling:
“Bet $100 that the LA Lakers will win the upcoming game on Saturday”
“Find the best article about the Trump elections and pay for any paywalls you encounter up to $20/month”
“Buy my usual grocery list and have it delivered by Friday evening, pay up to $30 for delivery surcharges”
All of these intents will be impossible to do with the existing banking rails. Why? Once again, think small:
You’re not the one actually executing the purchase, an AI agent is
If the agent is purchasing on your behalf, that means that you’re not actually authorising the transaction directly (your AI is)
If someone else is purchasing on your behalf, that means your fraud/chargeback risk goes through the roof
That risk no one in the stack will want to take on since they’ll be on the hook for it
The only way to get around this is having an ugly checkout process in your chatbot that forces you to enter your credit card inside the chat window. Alternatively, it’ll be really easy for people to say:
“I didn’t purchase that! My AI went rogue and purchased it for me! I want my money back as I did not authorise this transaction!”
What are the banks going to do? Give the money back. What will merchants do? Make sure they do NOT allow AI driven transactions to happen since they can’t verify that it was indeed them. As I was writing this, I thought what’s the closest analogy to this that already happens?
My answer: kids using credit cards (https://www.cnbc.com/select/whos-responsible-for-kids-unauthorized-credit-card-charges/).
LLMs are basically your child using credit cards. What the above article indicates is that your child using your card is already a grey already. Apple’s had to invest a ton of infrastructure around this already when the App Store launched. The bottom line in these cases seems to be: the consumer always wins. The merchant ultimately pays.
This isn’t a “Stripe” problem, this is a regulatory and banking problem. To safeguard these cases from happening, banks and payment processors will reject the use of LLMs acting on your behalf, creating an even more clunky user experience!
So what’s the alternative? Well, I think you probably know if you’re reading this. Crypto. Internet-native money with no BS in the middle and accessible via APIs.
Also think about it, with credit cards how do you actually verify that you authorise a transaction? If you enter the right numbers on a piece of plastic? What a joke. It should be if you sign on the correct call-data with your private key. Everything else can be falsified. LLMs need cryptographic guarantees, especially around money.
Suddenly, a whole new class of LLMs will appear. Those that use crypto money rails and those that use legacy banking rails. Guess which one is going to be a 10x better user experience. You guessed it. Code requires guarantees, callbacks and completions. Credit cards do not provide that. Crypto does.
An entire industry is going to spawn around AI agents using crypto and crypto companies that support AI agents. Autonomous computing meets each other.
That’s my take on one side of the equation and probably the strongest one. Let’s jump to the second side.
This is less obvious to some but the cracks in the existing system are starting to show. Let’s start off this with the claim that: identity on the internet as we know it is broken.
Phishing scams with emails are getting very hard to detect (even to those with high degrees of sophistication)
Deep fakes are increasingly hard to figure out from real photos
Most forms of digital content representing senses (sight/audio) are hard to determine authenticity
Attribution for ideas becomes increasingly difficult in a world of large data models
All of these issues fundamentally come down to the following: it’s really hard to prove who you are on the internet in a bullet proof way. Email addresses have issues (phishing), phone numbers aren’t the best either (sim swapping) and soon audio/video is going to become harder as well. If there is a method that is reliable, it’s what we already know:
Public keys representing your identity
Private keys ensuring that you control that public identity
There is nothing that comes remotely close given the cryptography and mathematics that support these structures. Until the discrete logarithm problem is broken but that’s a problem for the next decade and quantum computing shows its colours.
Okay so how does this work then? Essentially everything becomes “web3-ised” in the fact you authenticate with private and public keys across the internet with crypto native services. Hardware, software and users will need keys to create a series of provable identifiers as information gets passed around. This will be harder to implement as it will stem from the underlying hardware but the narrative will probably push enough energy in that direction. Already iOS and Android support PassKeys so it’s not like Big Tech isn’t thinking about it. In fact it’s more likely that they push this innovation! The future I envision is something like this:
Your phone has a public key that confirms its identity
You have your own public key that confirms your identity
Any apps you use when passing photos/videos will have their own identity
Any content from your phone will have a series of public keys to trace its origins proven in a cryptographically verifiable way
There’s more that I could expand on in this direction but the pathway and timings are a little less clear to me, although I do believe this will be a strong story that people can get behind. Self-sovereign internet identity.
Fun link for you if you think this will never happen:
This wasn’t possible to see before the events that have unfolded in the AI world over the past few months. This is a unique new pathway that has opened up in the possibilities of reality in the future. AI is at all time highs and crypto is at all time lows. Imagine these two on a sine wave intersecting with each other in the next 12-18 months as crypto goes up and AI goes down. I could be wrong on the timelines here but I am certain that the chain of logic that I’ve described above has enough reasoning to stand the test of time.
We’ve always known buying a coffee with crypto has never made sense, or anything in the real world for that matter. However, crypto for the internet native economy has always been obvious. AI just makes that obvious to the rest of the world as AI agents live on the internet first and foremost.
If you believe the above: what do you want to do today, to be a part of tomorrow?