Signals #34 – A World of Hashes (Final)

When I first started this series, I gave my own personal story with crypto (Disclaimer: I still do not own any crypto, the only tangential holding is through a small position in Square stock which holds Bitcoin on its balance sheet). And to end this series, I wrote a small story about crypto. 

The difference between idiots and geniuses

Once upon a time, there was a kingdom of fabulously wealthy citizens. Their mansions were overflowing with parties. The food was delicious, the wine exquisite, and the bank accounts hefty. Everyone loved their life and their king. Or rather, almost everyone. As with everything, a small portion of the population took a rather cynical view of life. They realized that although people in the kingdom were always in a rush working on one thing or another, at the end of the day, very few could point at something that they had actually done. 

For most people, this wasn’t a problem. Life in luxury was an incredible reward. And while there was a ruling class of elites that always seemed to have things a little bigger, a little shinier, and a little better, that didn’t bother the average joe. This was a kingdom of peace. 

Then, one day, a mysterious merchant appeared in the northernmost city of the kingdom. He claimed that he had a mirror that was blessed by the gods. The mirror had a magical power, it would copy whatever you put in front of it. If you placed a silver coin in front of the mirror and left it overnight, the next day, you would be rewarded with two silver coins. However, there was a catch. You had to believe in the mirror for it to work its magic. 

Unfortunately for the merchant, the people of the kingdom were too busy with their own lives to try something so extraordinary. They had no need for an extra silver coin. They were perfectly content with their lives. And so, the merchant went from city to city, preaching about his magical mirror to deaf ears. Weeks went by with every citizen politely but firmly walking away from the merchant. 

One day, the merchant lumbered by the king’s palace. With a parched throat, he once again extolled the benefits of the mirror. Unfortunately, his praise landed only on the palace guards’ ears and upon hearing the merchant’s words, the merchant was promptly thrown out of the city. 

However, one of the guards took note of the merchant’s speech. He was among the minority, someone not content with his life; more specifically, the guard was ambitious. He wanted to be one of the kings. 

At night, the guard snuck out to find the merchant. Upon finding the merchant, the guard took out a single silver coin and placed it in front of the mirror. Unbeknownst to the guard, the moment he left for the castle, the merchant took out another silver coin from his own pocket and added it to the guard’s silver coin in front of the mirror. 

The next day, when the guard came back, he was speechless when the merchant gave him two silver coins. Leaving the two silver coins with the merchant, the guard rushed back to the palace where he told all of his guard friends about his adventure with the mirror. Rather than be received as a hero, the guard was ridiculed by his friends. They couldn’t believe that the guard fell for the trick with the merchant. 

But the next day, when the guard found the merchant again, his two silver coins had turned into four. The guard was now a believer. Placing the four silver coins with the merchant, the guard once again went back to his friends to talk about the mirror. This time, a few of the guards who were more risk-taking didn’t laugh their friend out. Rather, they each gave the original guard a couple of pieces of silver to place in front of the mirror. 

Back at the merchant, the original silver coin had now turned into eight coins and with the silver from the guard’s friends, the merchant now had 15 silver coins. Soon, the eight coins of the guard turned into 16 but the coins from his friends remained the same. When the guard questioned the merchant about why the coins from his friends didn’t copy themselves, the merchant explained that the mirror’s powers depended on the belief in the mirror. Evidently, the guard’s friends didn’t believe enough in the mirror. 

Going back to his friends, the guard convinced them to believe in the mirror and sure enough, the next day, the merchant had a grand total of 46 silver coins. It was incredible! The overjoyed guards quickly began to spread the word of the mirror. Anyone who didn’t believe in the mirror was quickly labeled as a non-believer and anyone who contributed to the pile in front of the mirror quickly became friends with the guards. That meant that those who gave to the mirror started to have access to the king’s palace with the guards turning a blind eye to their activities. 

Slowly but surely, the pile in front of the mirror grew. It went from dozens of coins to thousands of coins. As everyone from bakers to blacksmiths added to the pile, the believers formed communities. The bakers would give discounts whenever a believer visited their store and blacksmiths were willing to make repairs for free. 

Every day, more and more coins were piled in front of the mirror. No one ever wanted to take their coins away from the pile. And the few that did were ostracized by the rest of the community. They were worse than non-believers, they were deserters. One day, the merchant that tended to the mirror suddenly disappeared but the believers paid no mind, the mirror was still there. 

At a certain point, no one could really be sure if the mirror truly copied and made new coins. The pile was so large that everyone had trouble figuring which coins belonged to who. Plus, only those who believed in the mirror were rewarded and it became quite hard to tell which coins were copied. Regardless, the crowd kept finding new believers and adding more and more coins to the pile. 

The pile became so large that even the king was notified of the mirror’s existence. It all sounded so foolish to the king. Why would a mirror produce new money? The king and his advisors laughed at the foolishness of their subjects and went back to their parties.

But left unencumbered, the believers of the mirror started to spread like wildfire. Soon enough, many of the believers were placing their life savings in front of the mirror. The pile was enormous. Along the way, some believers turned into deserters and withdrew their money from the pile. When that happened, everyone saw the pile visibly shrink. So for the remaining believers, desertion was one of their worst crimes. 

A couple of months went by and soon enough, there was a literal mountain of coins in front of the mirror. The mountain contained the savings, dreams, and hopes of the believers. And every day the mountain grew a little bit bigger. The king, at this point, wanted to put a stop to all this foolishness. No one in their right mind would believe that a mirror could somehow copy and produce new coins. But when the king ordered his guards to move the mountain, no one listened to him. In fact, the guards that had once laughed at one of their own had all placed their life savings into the mountain. The king no longer had power over them. 

Enraged, the king fired all of the guards. Yet, when he tried to staff his new force, only a few of his subjects were willing to become guards. These were the non-believers. The non-believers had been belittled by the broader believer society and their unhappiness hardened into hate towards the mirror. These were the men available to the king and so the king hired them. 

Then, one day, the wealth in front of the mirror stopped expanding. No one could quite believe it as they believed in the mirror more fervently than ever. But everyone in the kingdom who could be converted to a believer had already been converted. All that was left were the non-believers and the king. And so after internal turmoil, the believers, led by the original guard, made their charge at the king’s palace. 

Obviously, the king and his non-believer guards were no match for the mob of believers. After brushing aside all opposition, the believers carried out the king’s wealth and placed it in front of the mirror. For a second there, it seemed that the mirror was once again creating new wealth. The pile seemed to grow in front of the believers’ eyes. 

But the original guard no longer cared about the pile, he fished out the crown of the king and gently set it on top of the mirror. Afterward, he took his place to the right of the mirror and ordered the believers to banish the previous king.

Today, there’s a kingdom of moderately wealthy citizens. Parties still occur in the mansions. The food is still quite good, the wine decent, and the bank accounts are now piled in front of the mirror. Everyone likes their life and their mirror. 


And that wraps up my series on crypto. 

I’ve always thought that it was a bit cheesy to explain your own story but since it’s my first short story (ever!) and might be a little cryptic (pun intended), here’s the hash of the story. 

The mirror is the underlying technology underpinning crypto. Whether its SHA 256 or elliptical curves, the premise of crypto has always been laid in real world concepts. The merchant is meant to symbolize the creators of crypto. Starting from Satoshi, the creators of crypto systems have more or less become invisible relative to their products. Vitalik owns roughly 300,000 of 117,849,508 Ethereum. Not a shabby sum but also likely a far cry from the fortune you would expect from the founder of something now worth $421 billion.

The guard on the other hand, is someone who was able to leverage crypto/mirror for his own gain. Somewhat like the recent expose on Tether, the one that benefited most from the mirror was neither the founder nor the king, rather someone who was ambitious and opportunistic. And finally, that brings me to the king. In my mind, the king represented traditional institutions. When crypto first came on the scene, it was literally brought up as a joke. Today, with a market cap of $2.3 trillion (roughly 10% of the US GDP!), it’s a bit harder to write crypto off. 

So, all in all, the story of crypto is still being written. It could be that everyone suddenly wakes up one day and decides to withdraw the money they’ve invested into the ecosystem. Or it could be that crypto continues to grow and gobbles up existing institutions and structures to fuel its growth. 

Either way, it’ll be a heck of a ride.