Protos recently interviewed Cory Klippsten, CEO at Swan Bitcoin and Partner at Bitcoiner Ventures, to kick off a new series of opinions from big names in crypto. Klippsten has been vocal on social media about his views on cryptocurrencies — previously a fan of alt-coins, he’s taken a staunch Bitcoin-only approach.
Here’s his take on the current market, Ethereum’s Merge, regulation, and more.
Protos: You’ve gained 150,000 followers on Twitter since last year. What are you trying to accomplish by being out in the media? What’s your overall goal?
Klippsten: It’s not necessarily a goal. It’s something that fell into our lap over the past few months because of the calls that I made on Terra LUNA and then Celsius. So LUNA in March and then Celsius in May brought a lot of media attention. I think it’s very much driven by this recent news cycle with the CeFi [centralized finance] lending implosion of the past three months.
When I’m out there talking to media, honestly, I think the number one message that I try to get across is that Bitcoin is not part of the crypto industry. There’s Bitcoin, and there’s other things that call themselves crypto.
It’s in the interest of crypto people to try to put Bitcoin under that umbrella. And it’s clearly in the interests of Bitcoiners in Bitcoin companies to separate Bitcoin from crypto. So that’s the message that I try to convey very clearly with every one of these outlets.
The difference between Bitcoin and other crypto assets is something that crypto publications understand, but the mainstream press? They’re blown away — they thought all crypto people are basically crypto bros trying to grift.
Protos: So what is exactly the difference? Because a lot of people are still confused. They call Bitcoin a Ponzi scheme because the price only goes up if more people buy. How is Bitcoin different?
Klippsten: Well, the price goes up with more money flows into the protocol. It’s a monetary protocol. So if you can get the same people to buy more, that works well. But in general, you’ve got a fixed supply of Bitcoin at only 21 million coins. So obviously, if more people buy and hold it and demand goes up against fixed supply, then you can shift up the demand curve.
However, it doesn’t fit the definition of a Ponzi scheme. Lyn Alden has done the best job of kind of laying out exactly what the definition of a Ponzi scheme is and why Bitcoin doesn’t meet that definition in multiple ways.
Why is Bitcoin not a Ponzi scheme? The big difference is that there is no entity or group of people that control Bitcoin who are marketing Bitcoin to be able to dump it. If anything, most Bitcoiners that promote Bitcoin are just buying and holding as much as possible — and people who love it the most are the people who never sell.
It’s kind of the exact opposite of what you see with the like of Andreessen Horowitz: full frontal assault, marketing through all their channels, executing 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 ⏤ were selling the top in late 2021, while claiming to the world that they were HODLing. So that’s very different from something like Celsius, which obviously blew up, and you’ve got their whole management team with this centralized company.
“Cryptocurrency” in air quotes is really just company scrip. They were telling everybody to hold and telling people they never sell. And then, of course, selling tens of millions of dollars of their coins.
Protos: The number of these scams seems to continue proliferating. How would you suggest the world solve this problem?
Klippsten: I think awareness is the key. I think people need to realize there’s no such thing as a free lunch. Unfortunately, some people get burned during each one of these cycles.
Promising free money and a free lunch? It always implodes. A bunch of people get burned. This educates not just them, but also concentric circles around them ⏤ when people watch from afar so that they won’t fall for these things in the future. As a whole, the population gets slightly smarter each time. As far as regulation, I’m not pro-regulation. I’m anti-hypocrisy.
My stand on these non-bitcoin cryptos that all pass the Howey test (meaning they qualify to be regulated as securities under US law) is that basically you have to be banging the drum of deregulation. Ponzi schemes, penny stock scams, OTCs, pinksheet stock manipulation, all that kind of stuff. You need to deregulate all of that and get rid of all those rules, or you need 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 just that these crypto scammers get away with things that traditional finance is not allowed to get away with. Like, you can’t send stock mailers to nursing homes; you can’t market Ponzi schemes to your grandma.
If the laws had actually been applied all along, there would be none of this nonsense in crypto that all have centralized governance. Almost none of these projects had a fair launch and decentralized their teams. With no central entity, it’s a tiny group of basically just 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 securities designation?
Klippsten: Yeah, I don’t know. We’ll see if they have to battle it out — there’s some degree of uncertainty there. You know, there’s certainly an argument to be made that staking is essentially an investment contract, because you’re getting interest or yield. Right? You’re investing money and then you’re getting paid out.
I don’t know, though. I don’t really care that much. I think in the medium to long run, proof-of-stake is centralizing 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 at AWS in the end. No matter what you do, however 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 of these different proofs? Why is proof-of-work important in your opinion?
Klippsten: If you don’t have a tie-in to 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 gonna end up with humans arguing over things to govern the network, because there’s nothing from the real world that requires work to govern a proof-of-stake network. It’s only money and politics.
The game theory of how proof-of-work operates and how it ties expenditure of energy in the real world to Bitcoin ⏤ that Bitcoin’s network actually pays you to create, to generate, and to expend the energy ⏤ makes all the difference.
We’ve had proof-of-stake in various flavors for hundreds years. It’s essentially the fiat system with centralized elites making decisions about monetary supply. Who gets to decide what we can and can’t use energy for? It’s a march toward totalitarianism and authoritarianism.
Protos: What does decentralization mean to you?
Klippsten: Well, a truly decentralized system means that nobody actually controls it, can change it, or turn it off. Right now, that’s only Bitcoin, and the whole decentralization thing is otherwise marketing buzz. For pretty much everything else where they can shut down the blockchain and restart it and coordinate with the devs… that’s what you see over and over again with Ethereum every two months requiring every fully validating node to upgrade.
You see Solana shutting down and coordinating in invite-only channels with all the block producers to restart the network every couple of weeks and things like that. Those are not decentralized networks the way that Bitcoin is decentralized, or the way that the internet itself is.
Protos: What are your thoughts on stablecoins?
Klippsten: Well, there are two different stablecoins: collateralized and uncollateralized. You can’t have a decentralized, algorithmic stablecoin maintain a peg. You need to have a centralized team conducting market operations, else you will just not be able to maintain the peg in times of stress.
This is something the Basis team discovered in 2018 ⏤ and they were way smarter than Do Kwon or anybody else like at Tron or whatever working on stablecoins today. Basis realized that this stablecoin thing couldn’t be anything other than a security. So they decided to refund the investors’ money.
If your claim is a $1 peg, regulators are probably going to consider that 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 probably going to opt for something that is approved by the government, essentially. I think that’s kind of where we’re headed.
Protos: Any final thoughts?
Klippsten: If there’s anything anyone isn’t clear on, grab me on Twitter or on Swan’s website. We have Swan Private Client, Advisor, and an IRA business. We also created Bitcoiner Jobs, the biggest Bitcoin jobs board. I’m a partner at Bitcoiner Ventures to fund startup entrepreneurs. We host the Pacific Bitcoin Conference, the largest Bitcoin conference on the West Coast.