Donald Trump was back. And then he wasn’t. In this week’s column we look at the decision by Facebook’s oversight board that the social media company can continue its suspension of the former president’s account. 

Note: This is not to take a view in favor or against Trump’s right to publish on Facebook, or on the veracity of, or harm done by, the posts that got him into trouble with both Facebook and Twitter. Rather, it’s to use those questions as a lens for looking at the broken state of the digital media economy in the Web 2.0 era.

Elsewhere in the newsletter, we look at bitcoin’s (BTC) correlation with U.S. stocks, at Crypto Twitter and Bill Maher’s mutual need for attention and (what else?) at dogecoin’s (DOGE) insane price rally. 

Once you’ve read the newsletter, be sure to listen to this week’s episode of our “Money Reimagined” podcast. Sheila Warren and I bring in Nathaniel Whittemore, host of CoinDesk’s “Breakdown” podcast, and Coin Center’s Neeraj Agrawal, to discuss the importance to the crypto community of memes like “Laser Eyes” and the “Honey Badger of Money” as well as of the shifting narratives about Wall Street, gold and inflation. 

An NFT Fix for Deplatforming

Two seemingly unrelated events this week shone light on the problem of centralized information control that eats at the integrity of the internet economy.

You’re reading Money Reimagined, a weekly look at the technological, economic and social events and trends that are redefining our relationship with money and transforming the global financial system. Subscribe to get the full newsletter here.

While the issues they raised are far from new, they emerged at a time when crypto-inspired Web 3.0 ideas such as non-fungible tokens (NFTs) have become possible solutions. Time will tell if they create a fairer system or reinforce old imbalances.

The biggest of the two news items was Wednesday’s ruling by Facebook’s oversight board allowing the company to extend its suspension of former President Donald Trump’s account but requiring Facebook to decide in six months whether the ban is permanent.

No matter what side of the Trump divide you’re on, you can see that “deplatforming” controversies like this expose the enormous discretionary power that big internet platforms like Facebook and Google wield over which ideas the public gets to hear. 

As CNN’s Donie O’Sullivan noted, Facebook’s effort to “punt” the politically fraught decision to an outside body backfired. In putting the ball back in Facebook’s court until November, the board recognized that the power to decide whose voice is heard ultimately resides with shareholders (whose interests may diverge from those of the platform’s users).
The other relevant event was Reuters’ move to retire the URL “blogs.reuters.com,” which led Felix Salmon, now a writer for Axios, to complain that the 169-year-old news service had “vaporized” his past blog posts, highlighting the irony of something he’d written a decade earlier:

Salmon’s word choice was a tad extreme. It turns out his Reuters posts are still available at this archive link. Still, searches on both Google and Reuters failed to find that page and offered no links to archives of other past Reuters bloggers angered by change, including Jennifer Ablan, Rolfe Winkler and Dean Wright.

This shows that deplatforming is not just about whether published material exists somewhere on the internet; it’s about how easily people find it. And that hinges on the immense curation power enjoyed by the internet platforms. 

Whatever shape the next phase that economy takes, we must address this power imbalance. 

Broken business model

This all stems from the internet business model that emerged with the start of the Web 2.0 era early in the new millennium. 

Web 1.0 made it clear that in slashing the cost of both publishing and accessing information the internet had undermined traditional media publishers’ dominance of content production and distribution. 

In theory, this was a positive, democratizing step enabling a wider, diversified array of information sources and bringing us closer to the utopian ideal of a “marketplace of ideas.” 

The problem was no one could figure out how to reliably monetize content amid that free-for-all. For publishers, audiences became maddeningly fickle, flitting between independent bloggers, websites and mainstream publishers without the predictability advertisers demanded. If media companies couldn’t make money, how would society pay for the production, verification and distribution of trustworthy news and information? 

Enter Google. Its powerful, ever-improving algorithm gave it unassailable leadership over search, creating a massive user base that represented the one thing every publisher wanted: an audience. Then Google learned how to track users’ behavior to create definable, deliverable audiences to sell to publishers and advertisers. So began the age of surveillance capitalism. 

The Google model became the modus operandi for Facebook and other social media platforms, attracting advertising dollars that would otherwise have gone to the publishers. 

Tapping increasingly complex user data to curate content with which to corral audiences into advertiser-ready interest groups, the algorithms evolved toward behavior modification. We’ve all had experiences where Google or Amazon starts suggesting products related to some topic in which we’ve shown interest. There are also stories of the YouTube recommendation algorithm taking people down rabbit holes that begin with video game tutorials and end with allegiances to white supremecist groups. 

There’s clear evidence these audience curation models shaped our politics. Cambridge Analytica exploited Facebook’s to build voter support for Brexit. Social media echo chambers helped deepen the United States’ political divisions.

We went from the utopian vision of a marketplace where ideas compete on their merits for public acceptance to a nightmare in which they compete for acceptance by a secret algorithm and are vulnerable to doing “Facebook jail time” if they cross some arbitrary, ill-defined line of acceptability enforced by company contractors.

Can NFTs help?

The solution: Upend the business model. This is where NFTs might be useful because they represent a first, modest step toward solving one of the core problems of Web 2.0: digital replicability. 

As content moved online where it could be easily copied at near-zero cost and then disseminated by anyone under the cloak of anonymity, traditional media companies lost control of both their product and their revenues.

They tried to solve it with digital rights management (DRM). But as media companies wedded themselves to litigious copyright enforcement, Facebook and Twitter created a more open environment that encouraged posting, sharing and engagement by general users who were happy to give their content away. By inserting blanket waivers into their terms and conditions, they encouraged an explosion of content and captured an audience. Media companies couldn’t afford to ignore those audiences so they, too, had to play by the platforms’ rules. 

Eventually, the largest publishers figured out how to survive as paywalls for news sites slowly became acceptable. But not only did those barriers undercut the idea of an open “marketplace of ideas,” they were viable only for big firms that had earlier weathered the heavy legal and production costs required to compete in those early difficult years. It took the deaths of thousands of smaller newspapers to get to this point. 

Then, along came NFTs. 

In establishing digital scarcity via one-of-a-kind tokens, and in holding out the promise of peer-to-peer digital media exchanges, NFTs hint at new approaches for media companies and brands to engage directly with their audiences without the intermediation of the platforms. 

NFTs pose their own ownership issues. Many buyers are discovering they don’t really own the art or content to which they are attached.

And, as Khloe Kardashian’s bikini photo saga shows, it’s very hard to stop the replication of content, especially when it’s going viral. NFTs can’t physically stop or control the copying of digital content. 

However, we can establish standards assuring that special rights to NFT-associated content are not controlled by a separate custodial platform but are assigned to the token owner and  cryptographically bundled with the token itself so they can be easily transferred to the buyer with each downstream sale.

Among other design features, this model will require storing the content’s genesis version in a permanent location that no centralized entity – be it a media company, a social media platform, a hosting service like AWS, or a government – can ever take down. And to ensure the future market for digital content has no shortfalls requiring the kind of centralized fixes that grow into Google-like monopolies, it will also need self-sovereign identity, decentralized token exchanges and interoperability protocols. When combined, these technologies could completely transform the digital media economy. 

People are hard at work on these big ideas, all of which deal with the problem of trust in a decentralized environment. There’s the decentralized storage models of Filecoin and Sia. And there are big ideas around decentralized web infrastructure at the Web3 Foundation, with its interoperability protocol Polkadot, and at Cosmos.

We must take lessons from the first two phases of the internet, when the network routing architecture was decentralized but developers overlooked the “double-spend problem” (which the Bitcoin white paper solved) holding back digital money, identity and content. 

If we rush into these new solutions without thinking through all the interconnected pieces, we’ll end up in the same place.

Off the Charts: Converging divergence

Today’s chart offers a reminder to put conclusions based on anecdotal observations to the rigor of statistical analysis.

I asked our data visualization guru Shuai Hao to compare a chart of the S&P 500 index (SPX) with one capturing the correlation coefficient between bitcoin’s price and the value of that same index. My hunch was we’d find the latter rising because both stocks and bitcoin had seemed to move in unison of late, in particular when both fell after Treasury Secretary Janet Yellen warned that interest rates may rise to address market overheating, and then jointly recovered when she wound back those comments. The chart Shuai gave me shows how wrong I was.

I figured that when stock investors go into “risk off” mode, they treat bitcoin as a correlated risk asset and sell it along with equities; whereas in calmer moments, or when bitcoin itself is being affected by factors unrelated to stocks, the correlation falls as bitcoin is viewed in isolation at those times. 

The chart does hold up that idea for certain moments in time – notably during the big COVID-driven market rout in March 2020, when both stocks and bitcoin plummeted before the Federal Reserve’s quantitative easing buoyed investors. But it takes extreme moments such as that for the correlation to increase. Mostly, bitcoin lives in isolation.

Over the past two years, the correlation coefficient between bitcoin and the SPX has remained low, oscillating between positive or negative readings that suggest no consistent pattern. Right now, when investors are responding to the utterings of the Treasury Secretary but by no means freaking out, the correlation is, literally, zero. For those looking for an uncorrelated asset with which to diversify a portfolio, that’s pretty compelling.

The Conversation: Bill Maher roils Crypto Twitter

Bill Maher became the latest baby boomer to earn the “Old Man Yells at Bitcoin Cloud” label from Crypto Twitter. The comedian dedicated his monologue last Friday evening to mocking cryptocurrencies and the people who develop the technology.

Maher went after the “nerds” who invented cryptocurrencies, noting that “one of them, in 2008 … made up Bitcoin out of thin air using the fake name Satatoshi (sic) Nakamoto, which I think are the Japanese words for ‘monopoly money.’” Crypto Twitter was not amused. 

There was mockery from podcaster Peter McCormack:

There was a “stay humble” appeal to the crypto “fam” from Matt Odell:

And there was this earnest outreach from “Pomp”:

Look, Maher’s piece was boring, predictable and based on the tired logic of many, many ill-informed people over the years. But it was just comedy. Bad comedy, maybe. But nothing to get worked up over. 

The impression one gets in these moments, where critics say something provocative and the Crypto Twitterati respond with indignation, is that both sides quietly need each other. As discussed above, the digital media economy runs on a system that’s deliberately designed to encourage endless engagement and sharing. Maher’s personal “currency” is bolstered as much by angry replies as by “likes.” The same goes for that of many of Crypto Twitter’s personalities. It’s a symbiotic relationship. 

Relevant reads: Doge debate

Despite ourselves, we can’t stop talking about dogecoin. A currency that has increased around 10-fold the past month alone and whose market cap earlier this week surpassed that of Lloyds Banking Group and yet was founded, quite literally, as a joke, is, frankly, unignorable. The good news is that, as CoinDesk’s coverage revealed, there are plenty of angles, some quite serious, others less so, to this phenomenon.

• The rally was boosted early in the week by decisions from eToro and Gemini to list the cryptocurrency on their exchanges, as reported by Sebastian Sinclair and Omkar Godbole.
• That resulted in a two-day surge that on Wednesday pushed the Shiba Inu-themed currency beyond the 69-cent mark, a threshold the doge community had hoped to break on April 20, “National Stoner Day.” Sinclair’s coverage of that dubiously historic moment includes a rundown of the Galaxy Digital team’s deep-dive research report into “The World’s Most Honest S**tcoin.”
• What if all goes south? So asks Daniel Kuhn in a piece for The Node newsletter, which ponders what might happen if a collapse in dogecoin leads to a regulatory crackdown.
• But it’s too early to worry about such things. Leave that for Monday. For now, all you need to know is that dogecoin buyers are hoping Elon Musk will utter the “D” word during his “Saturday Night Live” appearance this weekend. As CoinDesk’s Ollie Leach notes, “Only in the looking-glass world of 2021 could a late-night comedy show have the potential to move markets.”