Is Greed Good For Crypto?

Greed is a trait selected for by evolution — when early humans roaming the Serengeti plains happened upon a fig tree, the ones most likely to pass on their genes were the ones that ate every fig on the tree and then, unsatisfied, immediately set out looking for another one.

Those who shared their figs and then took a nap probably didn’t live long enough to reproduce.

The genetic-coding we inherited from life on the plains is still making decisions for us today, and it doesn’t always translate well in this era of abundant junk food. Twinkies were only invented in 1920 and a century is not nearly long enough for the lizard part of our brains to learn that sugar processed in a factory is not as good for us as sugar grown on a tree.

We also, however, live in an era of free(ish) markets, and the lessons learned on the Serengeti may serve us well there — both individually and as a whole.

Adam Smith argued that individuals seeking to maximize their own well-being through trade and entrepreneurship inadvertently contribute to the economic well-being of society.

Milton Friedman argued that self-interest, when channeled through competitive markets, promotes freedom and democracy.

Ayn Rand believed that selfishness was the moral foundation for capitalism — the only social system, according to Rand, that protects individual rights.

And Friedrich Hayek believed that free markets efficiently harness knowledge dispersed among individuals to make economies productive.

But it was the hedge-fund raider and evolutionary biologist Gordon Gekko who best summed it up for us: Greed is good because it “captures the essence of the evolutionary spirit.”

Crypto markets, being unregulated and permissionless, are perhaps the freest markets in the history of finance. 

By the logic of the fictional Gordon Gekko and his real-life inspirations then, that should also make crypto markets the best markets in the history of finance.

But even crypto's biggest enthusiasts are starting to wonder, as expressed in a recent Bankless podcast titled “Can crypto’s broken moral compass be fixed?”

The current crypto bull market has weirdly negative vibes and I think that’s because we’ve been gorging on memecoins and it’s starting to make us feel sick.

Which begs the question: Are memecoins the junk food of capitalism? 

Panglossian crypto: The best of all possible markets?

A recent cri-de-coeur tweet thread seemed to capture a growing sense of angst among professional crypto investors. With institutional money flowing into bitcoin ETFs and retail money flowing into memecoins, it’s getting increasingly difficult for crypto VCs to sell their tokens to us as at the 10 and 100x markups they’ve come to expect.

Some have decided that, unable to beat memecoins, they’d better join them: The developers behind the Shiba Inu memecoin, for example, raised $12 million from VCs in a private sale of the as-yet-unreleased TREAT token.

Others are hoping that crypto can defy the laws of natural selection by appealing to our better nature: Vitalik recently requested that we only invest in memecoins that channel funds to public goods.

Most despairingly, some believe that, if left to our own devices, we will never, ever do the right thing: “The answer isn’t less regulation — it’s better regulation,” according to Chris Dixon.

I, however, think we all just need to rewatch Wall Street — because the invisible hand of the crypto market seems to be working just fine.

Booming memecoins prices have demonstrated how much demand there is for ultra-high-risk, permissionless assets (a lot) — and now the booming supply of memecoins has hyper-efficiently met that demand.

The supply response in crypto is far faster than traditional markets could ever hope to match and that should, in theory, make free market forces play out faster than they do in traditional markets, too.

I think that’s what’s happening: We’re only six months into this crypto bull market, and token issuers and VCs are already having to work much harder to get our attention.

With luck, issuers will be inspired to create tokens that represent real value by offering a form of equity in protocols that generate real revenue by meeting a real need or offering real utility.

In some cases, that will be memecoins morphing into utility tokens (like TREAT, maybe) and in other cases, it will be VC-backed equity tokens, but with investment cases compelling enough to compete with memecoins for our scarce attention.

With luck, the end result will be better memecoins, better utility tokens and better equity tokens.

There’s evidence that market forces are already pushing in that direction.

Greed may be the defining trait of crypto’s least-productive sector — memecoins — but it’s also an essential ingredient to its more productive ones, like DePin.

The purpose of DePin is to solve cold-start problems and the only way to do that is to convince greedy speculators to buy a token before there is any good reason to.

In cases like Hivemapper and Helium, it’s worked and that’s inspired efforts to speculate on other cold-start problems, like AI computers.

We should soon find out if anything productive comes of that speculation because everything happens faster in crypto, including natural selection.

And that might be what someday makes crypto the best financial market ever.

― Byron Gilliam

The Rising Tide of Digital Asset Adoption in Asia

Join this webinar to learn from some of the top builders, investors, and market makers in crypto about what’s fueling the growth and trajectory of digital asset adoption in Asia.

How to Value L1s, L2s, and Crypto Assets

In this episode of Empire, Jason and Santi are joined by special guest Kyle Samani to dive deep into valuing L1 and L2 crypto assets. The conversation covers the importance of MEV as the primary value accrual mechanism rather than transaction fees, the challenges in standardizing valuations across different blockchain architectures, and the evolving fee market designs. They also discuss the true costs and benefits of token airdrops for bootstrapping ecosystems.

Watch or listen to Empire on YouTube, Spotify or Apple.