Aptos deep dive: Crypto’s duality problem personified
Aptos is the perfect example of crypto's duality problem. It wants morals. It wants ideals. But more than that... it wants money and power.
Why does Aptos draw so much ire?
I’ll tell you.
The people behind Aptos are the same people behind Facebook’s failed Libra (later changed to Diem) project.
That was the project that antagonised basically every government around the world, led to major crackdowns on crypto and launched a race to implement Central Bank Digital Currencies (CBDCs).
Here’s what I wrote about Libra and the havoc it wreaked on crypto back in early 2020:
Why are so many countries rushing to create their own Central Bank Digital Currencies?
One word: Libra.
This all started when Facebook and its cabal announced plans for its own stablecoin cryptocurrency called Libra.
As I wrote at the time in Exponential Investor:
"Libra will be pegged to a basket of currencies and assets. Which currencies it includes in this basket and in what proportions will have huge political consequences.
Think about it, right now the US dollar is essentially the world’s reserve currency. Well what if Libra really takes off, and becomes commonly used by Facebook’s 2.3 billion customers?
All of a sudden Libra is a very important currency, and what it is backed by becomes very important."
Libra really took the political and financial elite by surprise.
Up until its announcement, crypto was seen as something inconsequential.
Sure, some people talked about how it was going to “revolutionise” the financial system. But that revolution always seemed a long way off, and most of the elite didn’t take the people saying those things very seriously.
Then along came Libra, with 2.3 billion Facebook users, ready for adoption and with the backing and investment of Visa, MasterCard, Uber, Spotify, eBay, PayPal, stripe and more.
Suddenly, crypto – or more accurately Libra – was legit… and it was gunning for prime position as a world currency.
Again, as I wrote at the time:
"Within 24 hours of the Libra announcement, political elites all around the world had decried it:
France’s finance minister Bruno Le Maire proclaimed it to be 'out of the question' that Libra 'become a sovereign currency'. 'It can’t and it must not happen,' he said.
The Bank of England governor, Mark Carney, said: 'Anything that works in this world will become instantly systemic and will have to be subject to the highest standards of regulation.'
Markus Ferber, a German member of the European Parliament, said Facebook could become 'a shadow bank' and regulators should be on high alert.
While the chairwoman of the House Financial Services Committee 'requested' that Facebook 'agree to a moratorium on any movement forward on developing a crypto-currency until Congress and regulators have the opportunity to examine these issues and take action.'
And US Senator Sherrod Brown, who sits on the Senate Banking Committee, said: 'We cannot allow Facebook to run a risky new crypto-currency out of a Swiss bank account without oversight.'
And the G7 nations are setting up a working group to 'evaluate the risks of currencies like Libra,' according to the Financial Times."
Six months later, and Central Banks around the world are rushing to create their own national cryptocurrencies… while still trying to stop Libra from ever seeing the light of day.
So, it’s not exactly made by a team that’s won the hearts and minds of the cryptosphere… or anyone else for that matter.
Here’s a rough timeline of events:
Facebook announces its new cryptocurrency, Libra, backed by 28 heavy-hitting companies:
Libra rebrands to Diem to “distance itself” from the mess it created with Libra.
No one is fooled.
Facebook (now rebranded to Meta to try distance itself from its own numerous scandals) orders Diem to shut down operations, “citing continuing resistance from federal regulators”.
Later in February 2022 (wow that was quick!)
Aptos announces itself, with a blog post titled “The Genesis of Aptos”.
In that post it states:
We are not starting from scratch. We are the original creators, researchers, designers, and builders of Diem …
Since departing Meta (formerly Facebook) we have been able to put our ideas into motion, ditch bureaucratic red tape, and build an entirely new network from the ground up that brings them to fruition. We’re now ready to socialize those ideas more broadly and start shipping the infrastructure that we’ve been perfecting.
Aptos will be built in part on the technology we developed in the open over the past three years. Aptos is using Move, the safe and reliable language originally developed for Diem. The ideas we conceived then are still relevant and will serve as an important foundation for a safe, scalable, upgradable Web3.
Aptos’ $200m seed funding round draws investment from PayPal, Tiger Global, a16z, Binance and other big names.
Aptos announces a second $150m funding round led by… FTX Ventures (uh oh).
Binance invests an undisclosed amount into Aptos. Likely because it doesn’t want FTX to have more control over the Aptos network than it does. Well, it doesn’t have to worry about that anymore…
Aptos mainnet launches, to much derision.
Namely because there was still zero information on the project’s tokenomics.
And once the tokenomics were announced, it was clear that they were trying to gaslight retail investors.
Basically the Aptos project and its Venture capital (VC) bros own the entire supply and are able to dump the price at any time they want… even though it looks like they can’t because “in theory” their tokens are locked.
But those locked tokens still generate staking rewards… which aren’t locked. So they can just dump all their rewards (more on this in the tokenomics section of this deep dive).
Or, as @AkadoSang put it on Twitter:
Locked tokens are a meme if they’re used to farm and dump rewards
Just a sneaky way to get liquidity since backers usually hold great deal of supply
Funny enough those same rewards are usually labelled as “community incentives” while going straight to big wallets to dump
Oh, and then when people started kicking off about this on the Aptos Discord server, Aptos temporarily shut the server down “to protect community safety”.
Not the best start.
Aptos exemplifies the “duality problem” of crypto
Crypto has a duality problem.
On the one hand, it wants to embody the ideals of the original “cypherpunk” movement that created it.
You can read “A Cypherpunk’s Manifesto” here.
It’s not that long, around 850 words. It was written in 1993 and it reveals a lot about how and why Bitcoin first came about.
Because while we may not know exactly who Satoshi Nakamoto is (or was), we do know they were a cypherpunk.
If you read that manifesto, you can see that it was calling for Bitcoin 16 years before Bitcoin was created:
Privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary such system. An anonymous transaction system is not a secret transaction system. An anonymous system empowers individuals to reveal their identity when desired and only when desired; this is the essence of privacy. …
We must defend our own privacy if we expect to have any. We must come together and create systems which allow anonymous transactions to take place. People have been defending their own privacy for centuries with whispers, darkness, envelopes, closed doors, secret handshakes, and couriers. The technologies of the past did not allow for strong privacy, but electronic technologies do.
We the Cypherpunks are dedicated to building anonymous systems. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.
Of course in the years between this manifesto and the creation of Bitcoin, we had the great financial crisis.
And if you’ve read my “everything you need to know about crypto” essay, you’ll know this is arguably what led Satoshi Nakamoto to finally create Bitcoin in 2009.
As I wrote in that essay:
Written into Bitcoin’s first ever transaction and preserved for all eternity was the following string of text: “The times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
This was no accident. It was a statement of intent.
We know that Nakamoto wasn’t a can of traditional currency from their writings:
The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts.
In light of the Celsius, FTX, Voyager and BlockFi bankruptcies, that really hits home, doesn’t it? You could even say Satoshi saw all this coming more than a decade ago.
But on the other hand, crypto also wants to be a “legitimate” industry that’s championed by corporate finance, regulated by governments, and used by every echelon of society.
Since crypto blew up in 2017, it’s “gone corporate”. No longer is big finance and big tech the enemy, they’re “partners”.
No longer does cryptocurrency want to be an alternative to the traditional financial system, it wants to become part of it.
No longer do crypto projects Rage Against the Machine… they want the machine to befriend them, give them money and put in a good word about them to its friends.
(Side note: I’m pretty happy I managed to get a Rage Against the Machine reference into this. If you follow the link above, you’ll see the music video they made when they shut down Wall Street in 2000.)
Well, you could say that’s just what happens when you grow up.
You stop railing against the establishment because you’ve inadvertently become the establishment yourself.
Or to use that Dark Knight quote for the millionth time: “You either die a hero, or you live long enough to see yourself become the villain.”
Or, you could say it’s nothing to do with growing up. It’s all about money.
Or more specifically, greed.
I mean, be honest. What are you really in crypto for?
It’s just that these new projects, they have the opportunity to satisfy their greed with $150m funding rounds…
Or in Aptos’ case, they were given $350m+ of funding without even having to write a whitepaper or tell anyone how the economics of their project would work.
Who, honestly, wouldn’t take that money?
And so we have the duality problem of crypto.
It wants to be for the people. It wants to create better, fairer, freer systems. It wants to make the world a better place. It wants to be a punk.
But it also wants money. It wants an easy life. It wants prestige and recognition from the traditional corporate and financial systems. And it wants those $150m funding rounds… even if that means becoming the very thing it set out to destroy in the first place.
And in no project is this duality more apparent than in Aptos.
Up until very recently, most people in crypto were willing to overlook this duality problem because corporate projects were professional, by their very nature.
And because they were making everyone a ton of money.
But, since the collapse of many of these “professional” projects, like Celsius, BlockFi, Voyager and most notably FTX, people are realising that VC-backed professionalism isn’t all it’s cracked up to be.
Lately, it seems the more money a project has, the less likely it is to survive, or to do right by its customers.
With the collapse of FTX, we’re literally having an “2008 moment” in crypto. What an incredible irony that is.
Will this be a turning point where corporate cryptos get crushed by real projects. Or will this be a turning point where the corporates take over once and for all?
I have no idea. But it’s going to be interesting, that’s for sure.
And if the corporates do win, it may well be Aptos leading the charge.
So, with that very lengthy introduction out of the way, let’s get into the deep dive…
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