Welcome to Cryptomania, the newsletter, a preview companion to my book with the same title, which arrives on August 6. The book traces the pandemic-era rise and fall of cryptocurrency, largely unfolding over 20 short months between March 2021 and November 2022. Pre-order Cryptomania here.
Hey everyone! It’s been a while since I wrote one of these. I traveled to Texas to report on a bitcoin-related story that will be published next week. I’ve been working pretty hard on it, and can’t for it to be out in the world.
The first reviews of Cryptomania have come out! Esquire named it one of the best books of the summer, writing:
In this explosive investigation, Time’s tech reporter unpacks the breathtaking rise and dizzying fall of this billion-dollar bubble, all in the span of twenty months…much like Code Dependent, Cryptomania resists getting lost in the weeds of palace intrigue; rather, it pays close heed to lesser-known players affected by FTX’s crash and burn, like day traders screwed out of the gold rush and digital artists whose fortunes went belly up when NFTs did. Whenever the next big “disruptor” comes around to upend an industry, remember this cautionary tale of greed and corruption.
And Publisher’s Weekly gave it a positive review:
Chow, a tech reporter for Time, debuts with a scrupulous postmortem of how “ego and arrogance” drove the 2022 cryptocurrency crash…Covering the saga through Bankman-Fried’s fraud conviction, Chow provides a more complete tally of his subject’s misdeeds than previous treatments, but he really shines in contrasting the FTX founder with the stories of genuine blockchain idealists…Buoyed by richly reported portraits of well-known and obscure players connected to FTX’s collapse, this is a worthy addition to the crowded field of crypto investigations.
Both of these reviews aptly recognized a crucial distinction that drives my narrative, between crypto’s hucksters and idealists. But the actions of those two camps didn’t produce a dichotomy: sometimes the hucksters ended up inadvertently doing good things, while the idealists ended up making a mess. And sometimes, each camp though they could use the other to further their goals, which lead to some uneasy alliances banding together for mystifying sidequests.
Which brings me to the strange episode of ConstitutionDAO, involving a bid for control of an actual, real life copy of the U.S. constitution, like some bad National Treasure sequel. In honor of July 4, here’s an excerpt of Cryptomania briefly detailing what happened.
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In fall and winter of 2021, crypto pushed into un- charted territory over and over again. Bitcoin hit its all-time high of around $69,000 in November, with the global crypto market cap peaking at almost $3 trillion, surpassing the market valuation of Apple, the world’s largest publicly traded company at the time. Over the course of 2021, $44 billion was collectively spent on NFT marketplaces and collections, up from $106 million (with an “m”) in 2020, according to Chainalysis. Collins Dictionary named “NFT” word of the year.
In November, crypto’s mainstream wave crested in a strange saga known as ConstitutionDAO. When Sotheby’s put an early copy of the U.S. Constitution up for auction, a group of crypto enthusiasts declared their intention to buy it collectively. ConstitutionDAO was a DAO, or decentralized autonomous organization: an organizational structure that came into vogue in 2021 as crypto’s reformulation of the corporation. DAOs, crypto enthusiasts advertised, would be owned and governed by their members, who could vote on decisions that would trigger smart contracts on the blockchain. Compared to traditional companies or organizations, DAOs would be more egalitarian, more streamlined, and allow people from across the world to come together to raise money seamlessly in order to create real-world change.
ConstitutionDAO attempted to fulfill those promises. Its bidding target of the U.S. Constitution was symbolic: It suggested that the rise of DAOs was just as much of a revolution in global coordination as the creation of American democracy. Within a week, about eighteen thousand people contributed more than $47 million in ether to the project.
But the DAO’s public fundraising process also proved to be a fatal flaw, because other bidders could see the exact price—a little over $43 million, after taxes and fees—that would trump the DAO’s war chest. Sure enough, ConstitutionDAO lost the auction to the hedge fund CEO Ken Griffin, who spent $43.2 million after expressing doubt to the Wall Street Journal that “a large decentralized group would be able to manage the responsibilities necessary to protect this rare document.” Earlier in the year, Griffin had become degens’ foremost public enemy for his role in the Wall Street Bets craze: When the hedge fund Melvin Capital bet against GameStop and racked up billions in losses, Griffin simply used his vast fortune to bail them out. Crypto’s “We the People” moment had been crushed by a Wall Street kingpin.
Despite the loss, crypto boosters declared ConstitutionDAO a triumph in crypto coordination, and the harbinger of a new era in which DAOs would replace corporations as the go-to organizational structure. Detractors dismissed it as a quixotic quest which reinforced crypto’s obsession with memes and shallow symbolism while failing to actually accomplish anything in the world.
But the vast, frivolous wealth on display for the ConstitutionDAO project—combined with the proliferation of Lambos and six-figure Swiss watches in the crypto community—betrayed a troubling trend. A growing faction of crypto skeptics questioned whether the crypto boom was really helping to democratize finance, or was just the latest tool to consolidate it. A December 2021 study by professors at MIT and the London School of Economics found that 0.01 percent of bitcoin holders controlled 27 percent of all coins in circulation. To those researchers, it seemed that the main purpose of new bitcoin buyers was to increase the wealth of early investors. Mark, an anonymous crypto exec, agrees. “2021 is the story of everyone in crypto profiting off retail [investors],” he says. Translation: As minnows flooded the crypto market, the sharks went on a feeding frenzy.