Crypto doesn’t like or want kings. Elon Musk is finding that out the hard way.
Elon Musk has big plans for dogecoin (DOGE, -3.49%), everybody!
Unfortunately this is an absurd statement on quite a few levels, as we’ll get into.
It’s also Elon at his most Elon, asserting his expertise in crypto just as eagerly as he claimed he would bring world changing innovation to rescue submarines and respirators and public transit – all of which ended in some degree of disappointment.
Musk isn’t alone in this unfortunate habit. Successful tech entrepreneurs, or even just lucky investors, seem particularly vulnerable to what’s known as “The Peter Principle.” The principle was first laid out in 1969 as a corporate management problem, based on the observation that successful workers were often promoted beyond the level of their own abilities. The concept has over time taken on the broader meaning that successful people will expand into new arenas until they hit the limits of their ability and fail, sometimes spectacularly. Silicon Valley leaders, in particular, seem frequently eager to reach beyond what they know and prove that their unique insights apply more broadly. Like Musk, they’re frequently wrong.
Musk, of course, can be forgiven for dabbling, maybe even more than most tech leaders. He is a legitimate business genius, and personally I believe that his creation of Tesla and SpaceX will have benefits to humanity so big that we won’t fully grasp them for generations. His real, history-making successes help explain why Musk’s particular brand of overreach has so often helped his reputation, as when multiple companies were founded to pursue his dubiously practical Hyperloop concept.
But this time, he may have tried to technologically revolutionize the wrong hornet’s nest. His doge-scaling tweet seems to have been the breaking point for crypto long-timers already exhausted by his confusing, contradictory glibness, and they responded in a fusillade of withering scorn.
It didn’t help that, shortly after the doge tweet, Musk also made a typically bull-in-a-china-shop intimation that Tesla might sell its bitcoin (BTC, -3.45%). (That turned out to not be true, which could wind up being of interest to the U.S. Securities and Exchange Commission. It’s also notable that Musk was replying to an account that has itself been widely accused of scamming.)
The absurdity helped trigger a big crypto market sell-off, with bitcoin dropping a bit over 7% in the following 24 hours. Doge dropped much less, which makes perfect sense when you think about it. Most of the people who followed Musk into doge didn’t know any better, and still don’t.
The drop extended a longer losing streak for bitcoin. But that also seems like it might be a healthy turning point in crypto’s attitude toward a man who knows less than he thinks he does.
Doge scaling is a myth
You’ll have to look elsewhere for a nuanced technical rebuttal of Musk’s doge upgrade proposal, but the reaction from blockchain experts like Cornell University’s Emin Gun Sirer was overwhelmingly unified: It’s bullsh*t.
Peter McCormack of the “What Bitcoin Did” podcast, while admitting he’s not a technical guru, delivered a more detailed takedown of Musk’s musings:
And this isn’t merely an academic debate about which reasonable people can differ. Elon seems unaware that big blocks have already been thoroughly vetted by the marketplace in the bitcoin Block Size Wars of 2017, with clear results. Bitcoin Cash and later Bitcoin SV both pursued a bigger-blocks vision for Bitcoin starting in 2017, and while BCH (-2.06%) has stuck around, it’s worth about 2% of bitcoin’s value.
Elon responded to all this blowback by reminding onlookers that, as one of the creators of PayPal, he might have some insight.
This is pretty thin gruel on technical grounds, given how fundamentally different blockchain currencies are from mere digital banking rails. It also seems to highlight a big political blind spot for Musk, because PayPal is precisely the kind of centralized and censorious payments provider crypto is dedicated to upending.
In other words, Musk defended himself by doubling down on the Peter Principle.
Don’t follow leaders, check your parking meters
To the genuine credit of the crypto community, all of this has been met with withering scorn toward Musk, occasionally the richest man in the world. If he had any designs on taking a leadership position in the crypto community, he has likely destroyed them.
Some, admittedly, are more than happy to let him remain the “dogefather.”
This response is admirable simply because it shows no willingness to sacrifice the truth to coddle a misinformed but influential billionaire. More broadly, negging Musk seems positive for the industry simply because he lacks the right character to positively contribute. His embrace of arrogance extends to recently taking the title of “Technoking of Tesla.” That’s of course a bit of a joke, but there’s always truth in a joke – and crypto has no appetite for kings.
You can push back against that sort of empty swagger when your own position is so strong. Even after Musk’s rug-pull, BTC and doge prices are still above where they were just three months ago. Musk’s adventures in crypto have almost certainly been a long-term net positive simply by virtue of raising awareness, and so there’s little mourning as he files out the revolving door marked “dilettantes.”
Compare Elon’s behavior with two other figures who could rightly declare themselves king of something or other: Vitalik Buterin and Jack Dorsey. You might not even immediately connect Dorsey to crypto, but he made a huge splash by adding bitcoin sales to the Cash App in January 2018, and Square has also been funding bitcoin development for years.
That’s arguably more than Elon Musk has ever done for crypto, and yet Dorsey hasn’t shown anything close to Elon’s yen for philosopher-king mountaintop declarations. (And Square, for what it’s worth, is in the process of eating PayPal’s lunch.)
An even more sterling example was provided by Vitalik Buterin, nearly simultaneously with Elon’s peacocking. Vitalik Buterin, co-founder and figurehead of Ethereum, simply destroyed billions of dollars’ worth of altcoins he had been “gifted” unwillingly in an apparent marketing stunt. He also warned token founders not to pull the same shenanigans again, saying “I don’t *want* to be a locus of power of that kind.”
Vitalik’s gesture, unlike Elon’s declarations, was met with widespread praise. Not only was it a seeming rebuke of the same spammy token-generation that doge itself was intended to spoof, Vitalik’s disavowal of his own influence is fully in line with the leaderless, community-driven ethos at the core of crypto.
It’s an example Musk could stand to learn from.