Bluesky Proves You Can Do Crypto Without Cryptocurrency

By Jacob Weindling | November 20, 2024 | 5:32pm

Photo by CAPTAIN RAJU, CC BY-SA 4.0 , via Wikimedia Commons

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Bluesky Proves You Can Do Crypto Without Cryptocurrency

I have previously disclosed my past that shall we say, does not align with what a traditional image of a Splinter Editor-in-Chief looks like, as long story short, I bought some crypto in 2017 and wound up getting a Master’s in Finance in 2024 while launching new Splinter. Don’t worry, I’m still a socialist, a market socialist albeit, but that’s a blog for another day. I got into crypto before it was an orgy of VC excess, back in the days when you could just copy/paste Bitcoin’s code and call it a dog coin and ten years later, the dumbest billionaire in mankind’s history could make it his entire personality. I didn’t buy it back in the days of the original Bitcoin faucet, if I did I probably would be on an island somewhere right now, but ever since I saw Bitcoin I thought it was an interesting economics experiment to keep an eye on, and its mission to rage against the machine was compelling to someone who graduated college into the horrific 2009 job market.

While I don’t disagree with really any of the takes about the decrepit state of crypto in 2024, to properly tell the story of cryptocurrency, you must begin in 2009, the year after the Great Financial Crisis, when a headline about bank bailouts was coded into Bitcoin’s genesis block. While this specific form of protest against the system always has had a libertarian lean to it, the dream of a decentralized trustless system controlled by no one entity existed long before Bitcoin did. The notion of using cryptographic decentralization to transfer economic value grew out of the defining event of our era that exposed all the cracks in the system where people weren’t quite sure what anything was actually worth. In a world weighed down by Western imperialism and trapped under the tyranny of a financial system that has functionally sanctioned almost every country in the world, this mission to create networks of value transfer not controlled by governments still has plenty of value.

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That this all largely turned into a low interest rate-driven fever dream propped up by craven venture capital and an endless array of scams, vaporware and idiot YouTube streamers drawing lines on charts of coins like CumRocket says a lot about where crypto went wrong, namely the currency part. As a ten-year observer of this insane space, I am certain that the largest, most positively impactful innovation that cryptocurrency has made since Bitcoin are stablecoins, which is instructive. While the uh, provenance of many of these dollars is dubious, the technology on display to circumnavigate our incredibly slow and inefficient western financial system to deliver dollars to anywhere in the world at any time is a big leap forward (assuming those stablecoins are, yannow, stable).

Which brings me to Bluesky, the social network that’s a better Twitter than Elon’s safe space and is enjoying a tidal wave of activity and new sign-ups in the wake of Trump’s election. Splinter’s Deputy Editor Dave Levitan has long been leading the charge to migrate to this good social network (follow him!) and I finally got out of my routine to move my Twitter following over to Bluesky and I’ve never felt freer (follow me! Follow Splinter and everyone else in the rest of the Paste Magazine family of sites starter pack!).

But one thing I have only learned recently about Bluesky that really got my heart pounding is that it uses cryptography to decentralize its digital structure, scratching that same itch that got me into Bitcoin and made me write an ode to “Hacktivist” Beto O’Rourke back in the Paste Politics years. Digital decentralization, it’s good!

Maybe it’s just an artifact of having my brain switch on during the early days of dial up internet then subsequently watching it become far more concentrated in fewer and fewer hands in the wake of the dot-com bubble. Capitalism is bad for a lot of reasons, but it is a logical fallacy that it supposedly is a democratic system because it very clearly trends towards concentration in the hands of a few as proven by the existence of antitrust laws and **gestures everywhere**

Like Bitcoin, Bluesky uses cryptography to decentralize power so no one entity can control the entire network, but without the built-in financial incentive structure. There’s no Austrian economic theory to parse in descriptions of Bluesky, just a lot of phrases like Merkle trees that I recognize from trying to understand whitepapers for shitcoins that no one winds up using anyway.

Except people use Bluesky. A LOT of people, and there’s no financial incentive to do so. I’d argue more than anything what broke Twitter was Elon democratizing ad dollars and fundamentally changing the incentive structure from thoughtful discourse to hacking attention in people’s replies for money. There’s a lesson on display here.

Cryptocurrency is exhibiting a similar warning of the limits of leaning on financial incentives to drive network adoption. Despite the seemingly impending bull market, per Glassnode data, Bitcoin and Ethereum active addresses on the networks have been flat or down since the mania of 2021. This same trend existed after the 2017 bull market until active addresses on the networks rose in 2021, but I wouldn’t exactly call it a success that in 2024, crypto is still exhibiting usage patterns from 2019 and 2015.

It’s one thing when the line make boing or not make boing and financial cycles based on Bitcoin’s programmed supply shock play out, but people are supposed to actually use these networks and there isn’t a ton of evidence I have seen suggesting that the financial incentive in cryptocurrency fuels activity on these platforms outside of gambling on dog coins. Stablecoins are the only thing that normal people really broadly use in crypto, and a lot of that is unique to Asia and the litany of capital controls that countries like China impose.

The founding altruistic beliefs that the vast majority of cryptocurrency has betrayed in search of pump and dump riches still exist both in the architecture of the web and the hearts and minds of those who build it. Bitcoin does not have a monopoly on cryptography. We need more decentralized networks that have no built-in financial incentive for users, because in a world where authoritarians are only becoming more powerful, finding ways to preserve the web from autocrats’ chokepoints is of paramount importance to maintaining an informed public.