sid
@siddani
While establishing a U.S. Crypto Strategic Reserve might legitimize crypto assets, doesn’t government ownership fundamentally undermine the decentralized ethos that drew us to crypto in the first place? Curious to hear how the community sees this potential paradox.
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Cassie Heart
@cassie
Arguably, it depends on the asset. Bitcoin's decentralization is a function of miners competing for block rewards, not accrued holdings. even still, microstrategy (the largest individual holder of BTC) is in the low single digit percentage of total bitcoin and it's unlikely another will outcompete them. There is concern of price action, which does have second order effects with miners, but bitcoin has larger threats to miner abandonment moving forward even without this consideration. 1/
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Cassie Heart
@cassie
Ethereum and Solana maintain consensus via staked assets, in other words, machines on the network are pledging a quantity of the asset (based on whatever rules the protocol has in place) as part of the process. In return, they receive a reward in new tokens. If they cheat, fail, or otherwise misbehave, there is some kind of penalty, typically referred to as slashing. In terms of decentralization, most proof of stake protocols have around 2/3 majority requirement for consensus, so you'd have to control 66.7% of all staked tokens to cheat and get away with it. That being said... it's probably better to not think too hard about the fact that over 50% of all staked eth is split between Lido and Coinbase. 2/
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Cassie Heart
@cassie
There are also other kinds of protocols which have permissioned structures for being a validator, but i won't dive too deep into that, because those protocols are by consequence not actually decentralized. There are also some protocols that are layer 2s, which rely on another protocol (thus, a layer 1) for foundational consensus. Some of these layer 2s use the parent protocol's token as the native token, some don't. Ownership of tokens has a more complicated relationship in terms of impacts in this case, because sometimes the L2 is decentralized, sometimes (most of the time), they're not decentralized at all and completely lying about it. I hope that helps, but happy to answer any more questions if you wanted to deep dive something specific. 3/3
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sid
@siddani
If I’m understanding correctly, you’re saying that government ownership of Bitcoin through a reserve doesn’t fundamentally threaten its decentralization because Bitcoin’s security hinges primarily on distributed mining power rather than token ownership. For Ethereum and Solana, you’re suggesting that while the government’s direct stake does pose some centralization risk, the built-in slashing mechanisms and consensus requirements would help mitigate improper behavior, keeping the decentralized integrity largely intact. That makes sense practically. But philosophically, how do we justify the U.S. government using taxpayer dollars to become potentially the largest holder of decentralized assets? Doesn’t that fundamentally conflict with the original ethos of cryptocurrency, and how can we reconcile decentralization ideals with direct government investment?
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Cassie Heart
@cassie
In terms of general cypherpunk philosophy, a crypto reserve is essentially the ultimate victory — crypto has been legitimized as a value bearing asset that has inflation resistance compared to one of the largest economies in the world. That is incredibly profound. However, if you mean, would Satoshi be happy with this? The answer is probably no. Satoshi created Bitcoin to be p2p digital cash. Bitcoin failed that mission, and miners converged on the retcon "store of value" story. So specifically for that aspect, it is enshrinement of defeat. But that is assuming that Satoshi considers a pivot in the original mission to be material. And that, we'll never know.
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sid
@siddani
I agree with your analysis on how this move legitimizes crypto from a cypherpunk perspective—it’s significant. But where I remain conflicted is whether it truly helps us move away from dependence on centralized currencies like the US dollar. By treating cryptocurrencies primarily as tradable reserve assets rather than promoting their intended use for p2p transactions and genuine economic utility, aren’t we ironically reinforcing our reliance on USD-based valuation? Without substantial progress in crypto’s application and product layers (like Farcaster and other decentralized platforms), I’m concerned this reserve may deepen crypto dependence rather than diminish it in the long run
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Cassie Heart
@cassie
At the moment, this reserve does not actually have a relationship to the U.S. dollar, but if that changes to something like the gold standard before, it gets a lot closer. Of course, a complete endgame would be converting the entire currency to the reserve assets, but realistically that couldn't happen even if they desired to do so, because at least as of right now, the entire market cap of crypto is smaller than the current money supply.
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