✨ Novocoin

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Mike Novogratz said something on today’s Empire podcast that I can’t get out of my head.

“ You know what's so interesting about crypto is that, the value proposition of crypto — and I've only come to this in the last year — is community,” Novo told Yano. 

Granted, it’s not a particularly new thought. Memecoins, obviously, tend to be more about community than tech. The market (and everyone watching it) has known this practically the entire time. 

Novo is saying more than that: community is the value proposition of crypto.

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“It’s not the technology that makes Bitcoin worth anything, right?”

“We could fork the technology and call it Novocoin and it wouldn't be worth that much. My kids might buy it, but it's the brand that comes around Bitcoin, and it's the community, so we're trusting ourselves in that community,” he said.

Novogratz then pointed out that big players in equity markets — popular public companies — are harnessing the power of their respective communities, and even elevating them.

“Palantir, it’s about community. Great company, lots of contracts, trades at an insane multiple … MicroStrategy has traded at a premium forever, because MSTR became its own coin, its own community. And so I guess every CEO sees that and says, well, I gotta build some form of that.”

Novo highlighted how far Palantir apparently goes to strengthen the value prop of their community. “I was told by a friend that they really do a real job of cultivating their 500 biggest Twitter followers. They bring ‘em to a conference, they treat them like they’re equity analysts because quite frankly, these guys do as much work on their company as the equity analyst at Goldman Sachs and Morgan Stanley.”

Yano added that he’d heard Robinhood is now starting to do the same thing. And while either company, from what I can find, hasn’t publicly announced these types of initiatives, it certainly tracks. 

“The big $64,000 question is how lasting will this be? Is it a permanent addition to valuation metrics, or is this a phase that we've gone through?” Novo asked.

No question that “community,” in the sense discussed here, is indeed a bedrock for valuing cryptocurrencies. You need stewards to steer the sentiment (vibes) in the right direction. The rise of KOLs alongside the staying power of the LinkMarines and XRP Army are testament to that fact. There are still caveats. 

For coins that are native to purely open source projects like Bitcoin and Ethereum, the term “community” would need to encompass the parts of the ecosystem that actually keep the network online and the software secure: developers, miners, validators, node operators and all the other players working with key permissionless infrastructure supporting what’s happening onchain.

There is no Palantir or Robinhood equivalent for that type of community, outside of, I suppose, the investment banks that sell the stocks to their clients and so on. And the same could be said for coins tied to blockchain ecosystems which aren’t explicitly allowing the broadest set of users possible to directly run the networks themselves: blockchains with delegated or permissioned validator sets, for instance, or with prohibitively expensive setup and overhead costs for full nodes. 

Those ecosystems would probably need a much narrower definition of “community,” as oftentimes there’s a clearer separation of those in charge of the “technology” and those responsible for the vibes. 

So, how much of Bitcoin’s $2.2 trillion market cap has to do with the tech, and how much of it has to do with its community? 

Bitcoin is testing this as we speak. The developer community is increasingly divided over how non-standard transactions should be handled by the network, with the matter coming to a head upon the release of Bitcoin Core v30, expected sometime in October.

At a technical level, it’s not the type of disagreement that could immediately lead to a contentious hard fork, which would split the chain and its community-ecosystem-brand into two competing visions, as was the case with Bitcoin Cash. At worst, a higher fraction of nodes would run alternative clients, such as Knots, diluting the influence of Core somewhat.

If the disharmony grows deeper from here, it’s not impossible that the market would start to wonder whether Bitcoin’s community drama damages the technology’s future or present value proposition.

In that case, it would be a literal case of an old adage coming true: The real technology is the friends we make along the way.

This episode of Empire releases later today, on YouTube, Spotify, and Apple Podcasts.

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