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Ethereum Explained • Laura Shin

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Crypto journalist, podcaster, and author Laura Shin joins Niki from New York to talk about her new book, “The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze.” She recounts the origins of Ethereum, the second most important blockchain, and the second largest cryptocurrency by market cap after Bitcoin, and sheds light on the unlikely founder, a teenager named Vitalik Buterin.

 "I did not realize when I started reporting it. However, by the end, it was very clear that this book was also a coming of age story for Vitalik (Ethereum creator). " -Laura Shin

Intro: 

Niki: I’m Niki Christoff and Welcome to Tech’ed Up.

Today’s guest is Laura Shin who was the first mainstream journalist to cover the crypto beat full-time starting more than six years ago. She’s just published a new book on the origin story of Eteherum. 

One of Laura’s superpowers is her ability to communicate complex concepts to normies. New York Magazine defines that as “a skeptic who has stayed out of the crypto market, either from sheer bewilderment or the suspicion that it’s a giant pyramid scheme.” I know that probably includes a number of our listeners. 

So, welcome normies! This one’s for you. 

Transcript

Niki: Today on the podcast, we have a very special guest, Laura Shin. She's a reporter. She's an author. She's a podcaster. She's recently published a brand new book, “The Cryptopians: Idealism, Greed, Lies and the Making of the First Big Cryptocurrency Craze.” Laura is [long pause] she’s the Barbara Walters of crypto. Everybody talks to her, everybody interviews with her.

And I know a lot of people in this podcast are just getting up to speed on crypto. So, I'm so glad we have her today to explain things. Laura, welcome to the podcast. 

Laura: Thanks so much for having me. 

Niki:  So, I would like to talk a little bit about your career. So, we crossed paths briefly at a conference in the summer of 2016 when people didn't even use the word “crypto,” they said blockchain and Bitcoin, and most people didn't know what that was. And you were writing for Forbes, which made you, I think the first sort of mainstream journalist to cover this space. So, I'd love to hear a little bit about how you fell into this rabbithole so long ago and so early. 

Laura: So, there were other mainstream media reporters that were covering it. But, later on, about a year later, I became the first mainstream media reporter that was exclusively covering this as my beat. But in the summer of 2016, I'd been covering it about a little over a year. Before that I was covering personal finance and I just felt like I kind of learned everything and there wasn't much new to learn. And so, my editors at Forbes said, “Hey, we have this idea to do a Forbes FinTech 50 list, would you want to head that up?” 

And so, another reporter and I headed that list up and we just divided the list into subcategories. And I took the category of digital currencies and became completely obsessed. And, from like nearly immediately, it was kind of the only thing that I really wanted to cover. I just, all the time wanted to just learn more and more.

When you and I met, that's when I launched my podcast, actually, it was right there at that retreat. I did the first interviews there and yeah, and I launched Unchained right when I got back and the, in June 2016.  It was Forbes’ 13th podcast, cause they launched a number of them that spring, it was 12. And when I saw that, I said to my editors, “Hey, I want to launch one!” So, they graciously let me be the 13th and I think mine is the only one that continues to this day. 

Niki: So, this is the one of the things, and I don't want to sound overly like a fan girl but actually one of the reasons I think that your writing and your speaking is so compelling is despite the fact that you've been in this space for so long, it's still accessible.

When I read your pieces, you haven't lost the ability to back up and explain things in a clear way because, although you've been covering crypto for six and a half years, a lot of people are just getting up to speed. And the amount of information and the concepts that are evolving happen so fast. And your writing and your speaking is really accessible, which I think gives you staying power because many crypto podcasts, I just can't even keep up with how deep into the rabbithole they are and the amount of jargon. So, maybe that's why you've done so well. 

Laura: Well, thank you. Yeah, I have, so I do a survey every year and I've had people write in things like, “You go deep in  the show. And yet, at the same time, I also know that I can send this to my friends who don't know anything, because you always explain things.”

And I've told this story before, but, something hilarious that I saw one time was that somebody left a review on my show and they said they didn't like it because I was always showing off how much I know about crypto. And I was like, “Whoa, whoa, whoa! You think that's the purpose of that?” And I was like, “No, no, no! I'm explaining things. So, that way anybody who doesn't know can follow along and I was like, okay-”

Niki: [interrupts] That's actually my job! 

[both chuckling]

Laura: Yeah. I was like, “I’m not trying to show off. No, I'm just doing my job.” 

Niki: Oh feedback. Oh, the comments. [Laura: laughs] Thanks so much for the feedback. 

So, we've done episodes kind of Crypto 101 episodes. What's the blockchain, what's an NFT. We did one on the case for crypto. We had Commissioner Peirce come on, who was incredibly generous at explaining what the SEC does [chuckling]  and how they're thinking about it. And in Washington-  a subset of people know this stone cold; they're experts, but then there are a lot of Hill staffers and professionals in this town who are, are really trying to just catch up because crypto landed here in the middle of an infrastructure bill out of nowhere [Laura: [chuckles] mm-hmm] in the middle of last summer.

And I'm pretty sure that this time last year, no one was using the term web3. People didn't know what NFTs were. They didn't know what DAOs were. So, it's moving so, so fast. And one of the things about your book that I think is interesting and where I want to start is a lot of people know Bitcoin now. They understand blockchain.

There's a book called Digital Gold that everyone told me to read when I first started really paying attention to the space, which I read. And your book goes into the second, most important blockchain, the second largest market cap. And that is Ethereum, and I'd love you to just tell a little bit about the story. 

Laura: So, [pause] [slowly]  Vitalik Buterin is the creator of Ethereum and he was originally a bitcoiner. He was a young kid, a teenager, and he learned about it and just got interested and decided, you know, I'm going to try to transact a little bit and learn a little bit, a little bit more, and he had done some coding as well. 

And so, he could engage on that level and he went and did a first term at college, or maybe two, but then after that, he decided he was going to take advantage of this kind of co-op program they had, where you could, kind of, alternate terms of study with terms of work. He decided to take that time to travel the world and meet up with different Bitcoin communities around the globe. And the thing is that, at that time, there were a lot of people working on new blockchains that added features onto what Bitcoin was doing.

So, if Bitcoin started as this what they call peer-to-peer electronic cash system, which is the subtitle of the Bitcoin white paper, which means that it was a blockchain built for payments, then people were trying to add on features like, um, y’ know, maybe for derivatives or, or betting, or whatever. He saw that when you build things that way, then anytime a new blockchain came along with additional features, suddenly the previous ones would be sort of outdated. And he thought to himself, “Well, why can't it be more open-ended? Why can't it be more like an app store?” Like, on our phones?  Where for instance, in the Apple app store, you can have a photo app, and a cooking app, and a financial app, and a health app, and they're all different. Right? And it's just whatever developers can dream up, they can upload there

Niki: And so, where Bitcoin is essentially, it's just tokens and those tokens are called bitcoin with a lowercase B and Bitcoin is sort of the ecosystem and the blockchain around it. Ethereum has more than just tokens, many more things than just tokens, including smart contracts. NFTs are traded on the Ethereum, so it's essentially more flexible as a platform. That's the idea? 

Laura: Exactly. Yeah. That's why we've seen just a huge variety of things come out of Ethereum. 

Niki: And your book covers, there's this cast of characters, which it kind of felt like a Tolkien novel to me, like, [chuckling] okay, there's so many people because it's a decentralized group of people working on this. But tell us a little bit about sort of the plot arc of the story. 

Laura: So, the book starts with this idea that Vitalik has, and he's 19 at that time. And he publishes a white paper with the idea and he sends it out to 13 friends on the day that Bitcoin crosses $1,000 for the very first time. So, this was incredible validation for Bitcoin. This was kind of the first moment where Bitcoiners realized, wow, “This could really be a thing. We really could make money from this.”  And a number of people who had believed in Bitcoin early on and had amassed a huge amount of coins suddenly were what people called “Bitcoin millionaires.”

And so, once people noticed, “Hey, there's a pretty promising idea here.” I think a lot of people had dollar signs in their eyes, you know, they were realizing, “Oh, if I get an early on this, the way I got an early on Bitcoin, I could yet ride another train to crypto riches.”  And so, he kind of garnered attention from a mixture of both people who were seriously interested in helping him build it as well as these kinds of opportunists. And, being, not only 19, but also,many people talked to me about what they considered his sort of social awkwardness. He, he probably didn't necessarily have the social skills to deal with this y’know, kind of, group of people, I guess, that he had attracted.

He talked to me about how, when he was younger, he had struggled with loneliness. And so, once people started paying attention to him, he was just happy to kind of have some companionship. And he didn't understand that just because people were nice to him, that didn't necessarily mean that they had good intentions.

I did not realize when I started reporting it, however, by the end, it was very clear that this book was also a coming of age story for Vitalik. But what I, y’know, just to explain about Ethereum during that time, Ethereum really grew into something huge. Like, y’know, as we've discussed today, it's the second largest blockchain and it achieved that pretty quickly after it launched.

Niki:  In the history of the world, someone who's been reporting on a topic for six and a half years is not generally considered a historian [chuckling].  But because this space moves so so fast, you have written a history of this moment in time that sort of explains where we are even today. And I've heard you talk about, I mean, essentially you have the business interests that were getting involved and then you have the idealists who were involved and because…and maybe you can explain this just in a really layman's terms, but those tokens become liquid really quickly, meaning people can make money off of them very quickly.

So you saw, this goes to one of the words in your subtitle, “greed”, and then you have the idealists who were thinking of Ethereum as a platform for things for more than just tokens and currency, right? 

Laura: One of the conflicts that plays out extremely early on, where a number of the developers were unhappy with the current way that many of the tech giants have, kind of, earned their profits and become successful, which is that they take the data of their customers and then they sell it for advertising money and, and they, they make money that way.

And so, early on one of the tensions, is that a number of what are called the “business guys”, they kind of were more in favor of this closed source, for-profit model and the developers really wanted this open source decentralized model. And this actually is one of the things that led to the first, kind of, big drama, which eventually came to be called “The Game of Thrones Day” in Ethereum, where some of the co-founders were booted out.

Niki: So, it's this tension between, I guess, the money guys, the idealist, the libertarians, and obviously here in Washington, the regulators.

So, like all of these dynamics are playing out, but it seems like, whereas the Bitcoin blockchain, it just is what it is. Right? It's really structured and set. And there's only so many blocks and there's only so many things you can do with it. Ethereum is more flexible, but therefore there was more drama.

Laura: Well, there's plenty of drama in Bitcoin. 

[both laugh]

Niki:  That’s true!.Good point! I don't know why I just pretended Bitcoin [Laura: laughs]  is not up to the hilt with drama because it, it for sure is. [chuckling] [Laura: Thank you for that!]  Including people getting robbed of their Bitcoin when their exchange gets hacked. [Laura: Yes. Yes!] [chuckling] I don't even know what I’m talking about! 

Laura: Yes, the various Bitcoin forks and, y’know, the various people who claim that they're Satoshi Nakamoto. And there was this massive war over the so-called Bitcoin block size, and that was just a huge, huge thing for years, literally. 

[both laughing]

Niki: It’s so funny, I guess, because again, as someone who isn't so deep in the space, it feels like “blue chip”. Like, okay, well,  [Laura: laughs]  this is, you know, this is the steady blue-chip and everything you just said is absolutely true. Okay. I retract everything  I just said,  [Laura: laughs] this is why we have you on the podcast, so I don't try to tell you the Bitcoin is not dramatic because it's so dramatic.  [Laura: laughs] 

Niki: So, people should read your book because again, it, it sort of picks up where the Bitcoin story stops and, and frankly, Vitalik Buterin and who's like the, like the Justin Bieber of crypto, people don't really know him as a name yet. Certainly he's gaining a lot more attention daily, but it's still not quite broken through in the mainstream. And you'd do such an interesting job analyzing all of the things you just said about this coming of age story for him. 

But I'd like to talk a little bit about what you think the next fads are going to be, the next trends are going to be, because again, this is evolving so fast.

We met a long time ago. And I was like, “Meh, this seems like a fad. Not sure where it's going to go?”  Meanwhile it became one of the biggest things happening, not just in tech, but economically and globally right now! But where do you think things are going? What would you predict are the next trends? 

Laura:  The one that is, kind of already, becoming a trend and it's, it's just getting going, but I'm definitely watching it very closely is what are called DAOs, which is D-A-O. And that stands for decentralized autonomous organization.

And DAOs actually been around for a long time. And if you want to get really meta about it, you could say that Bitcoin was the first DAO because Bitcoin is decentralized. It's, I mean, despite [chuckles] the fact that there is no CEO, no board, you know, there's never been any employees hired to work for Bitcoin. It has at times achieved a market capitalization of $1 trillion. I think now it's somewhere in that ballpark. I think it's lower, but I, I'm not sure of the price right when we're recording. And, but the fact that they've done that when so few companies have done that, that's incredible, y’know? And they all did that, Bitcoin did that, with just the coin being designed a certain way that it attracted people to Bitcoin, just the incentives built into the coin did that. 

And so, when you, just think, in general, about these crypto networks or these blockchains or these decentralized organizations, many of them are built that way, where the coin has these incentives built in and that will attract different people to add services to the network, whatever it is that the network wants to incentivize the behaviors that wants to incentivize. And so, when it comes to DAOs, DAOs or just more formal versions of this now, and there are many small DAOs. 

And a good description would be, I mean, well, well, first of all, I just want to let people know again, it’s so similar to what I was just describing, with the decentralized applications on Ethereum. Because you can have any kind of DAO. And I actually have this show that runs now on my podcast called the chopping block. It's like these different investors just get together and they chat about things in crypto. And in the most recent episode, they were laughing about how there's a fries DAO, which has something to do with french fries [chuckling] and there's one that, there's a DAO where they're trying to buy the [questioningly]  Broncos. Which, I think, is an American football team? [Niki:[chuckling]  It is!]   And yeah, and so- .But one of the DAOs that recently broke through, into public consciousness was this one in the fall called Constitution DAO. And, they just sprang up saying, “There is a copy of the U.S. Constitution that's going on sale at Sotheby's in a week. And we would love it if we could just buy it and help display it.” Y’know? And they, literally, amassed $50 million in the span of a week. And yes, they did participate in the bidding. They were one of the final two bidders, but ultimately they did not win. And hilariously II mean, you, you just can't even make this stuff up. Ken Griffith, who is, or at least was an anti-crypto, CEO of Citadel Securities, he purchased it. And, y’know, it was just sort of this, like, you know, villainous move, I guess, because he had previously, y’know, since he pooh-poohed crypto so much, it was just sort of this perfect moment.

There are so many different kinds of DAOs. And many of those systems are moving to DAOs which, what they do is, they issue what's called a governance token. And so, people can purchase those tokens and that gives them a right to vote on the different proposals that come in front of the DAO. And people will use their tokens to vote, y’know, this way or that way. One thing that's very fascinating is because these DAOs are sort of considered to be little democracies and yet the voting is by coins that can mean that “whales” can dominate the votes. But, there's a number of DAOs that do what's called quadratic voting, which is a way of weighting the votes so that if a proposal gets votes from many different entities, it will be weighted more than if it's a proposal that has a few number of entities who have contributed a large number of coins. 

So, there's so many different flavors of DAOs and it's just getting started, but it's definitely something I'm keeping an eye on. 

Niki: So, first of all, you said something really interesting that I'm going to repeat.

You essentially said that in some ways the Bitcoin blockchain was the original doubt and with no command and control without being the Apple store, with just by design and the incentive structures built into it and including scarcity and including how people were rewarded for mining. It reached a trillion dollar market cap, which is a really interesting point because the only other organizations that have been able to do that have been highly, highly centralized and power is held by shareholders and a handful of executives.

So, I think, DAOs are really interesting. They're tapping into this overall trend toward not just decentralization but democratization.  All of this, NFTs, non fungible tokens, DeFi, DAOs, Ethereum, smart contracts, Vitalik Bukerin…Like, all of this is breaking into mainstream financial press and mainstream pop culture, press and mainstream events press.

And frankly, right now, as of the last, unfortunately, a couple of weeks into national security press. And so, you have been on the beat as long as anybody has. You've seen it. You've predicted a lot of things. And this book really tells a crucial part of the story around one of the, the second most important and potentially could be maybe the most important blockchain at some point.

So I'm really grateful for you coming on the show. Is there anything you'd want to leave people with?

Laura: Well, there's one thing, which is that I often hear in mainstream media that crypto is full of crime and there's all kinds of illicit transactions. And, y’know, the facts are that actually, at least for last year, the percentage of all crypto activity that was illicit was 0.015% and in traditional finance, it's 2 to 5%. Y’know, orders of magnitude different. 

And, one other thing is, that because most of these blockchains are what is called “public,” meaning the, the transactions are transparent and can be followed by anybody, my sources and I, in the course of reporting and writing my book actually figured out one of the biggest whodunnits in crypto.  Actually, in my opinion, the biggest whodunnit. And, there was a hack of the original [chuckles] DAO in 2016, on Ethereum and people were so excited about it, that it actually became the highest crowdfunded project in all of history at that, at that time. So, it raised $140 million. Within a span of a few weeks, somebody hacked 31% of the ether in it. At the end, we were able to figure out who it is and, or who we believe, who it is. Y’know, this person sent me a statement saying that “My statement and conclusion is factually inaccurate.” And then they said that I could get more details from them if I liked. And I asked for them and they did not respond. 

Niki: [interrupts] The life of a reporter. [Laura: chuckles] And by the way, when you, if you listen to Laura's, the audible version of her book, the first several minutes are about your fastidious reporting for this exact reason [chuckling], because you were really, really fact checking the snot out of this book.

Laura: Yes, yes! That, that really took something out of me last year. Let's just put it that way. I've never been through something like that in my life. But, I did want to say, y’know, it took six years, I guess, or five and a half, but ultimately, y’know, technology will catch up. And so, blockchain forensics did and that's how we were able to pinpoint what we think is a very strong case for who this person is. 

Niki: And I think that's, I think that's actually a really, really important point, especially for many of the people listening to this show, which is here in Washington, there is this narrative that so much of, of crypto is used for nefarious purposes, but at the end of the day, even with ransomware attacks, we are now seeing the government get much more skilled at finding and tracking down criminal activity.

And actually, if you add to that, some of the human sources, which they often do, you, you can figure it out because it is all by definition, transparent and tracked. You just have to figure out who's who. So, you did break the case, which is a juicy bit of the book. 

And the last thing I'm, I'm actually going to say is, I want people to buy this book because your TEDx talk in 2018, you talk about being your own boss. And there's something about supporting someone who, you have left mainstream reporting. You're no longer a senior editor at Forbes. You are your own person with your own podcast, Unchained, your own book that you just published. You're doing these things in a very entrepreneurial way where no one's bossing you, which is both extremely complementary to the space that you cover and something we should all support. 

Laura: Thank you! Yes. I did spend a lot of time on it and I am, I am proud of the effort. I do think it gives a good picture of what, y’know, happened during those years.

And I do have to say that a number of people that I know who knew nothing about crypto, whatsoever, learned a lot and definitely understand crypto now and actually became fans. Which is kind of funny because there's a lot of,  let's say Ethereum and crypto don't always look good in the book and yet yeah, at least one of them definitely became a crypto person [chuckling]. 

Niki: It happens! You just fall right down. I mean, I think this has happened to me as soon as I bought my first NFT, I thought, “Oh, here we go!” I mean, I say that I'm doing it so I can just learn how it goes. But then the next thing you know, I've got my [chuckling] , ugh, I've got all of it.  [Laura: chuckles]

I've gone right down the rabbit hole myself.  Laura, thank you so much for taking the time to come on the show. I'm really grateful. 

Laura: Yeah, it's been really fun. Thanks for having me.

Outro: 

[music plays] 

Niki: In the show notes, you can find information to purchase Laura’s book, listen to her Unchained podcast, and follow her on Twitter. I’ve also included a link to Friendly City Books, founded by a former Salesforce colleague who left Big Tech to start an independent bookstore in her Mississippi hometown. 

If you’re enjoying Tech’ed Up, please consider giving the show a rating on Spotify or a review on Apple podcasts – it really helps other listeners find the content. 

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Niki Christoff

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