From Dirksen to DeFi
Why I'm leaving Capitol Hill to work in crypto
I’m Out
After nearly seven years of a career in government policymaking - working in the office of United States Senator Cory Booker, with a brief stint on his run for the presidency - I’m leaving Capitol Hill. I started working in the Dirksen Senate Office Building in March of 2016, and have loved every day since. I’ve learned a ton, met more amazing people than I could possibly imagine, and been able to take pride in serving the people of New Jersey and this nation that I love. But I’ve reached a point where I need to take on a new challenge and build a new set of experience, so it’s time for me to go.
Some view a career in government as stable and reliable, and I’m choosing to leave that to go into what is objectively one of the least stable and most unpredictable fields heading into 2023: crypto.
Starting next week I’ll be working as the Head of Policy for dYdX Trading; a venture-backed startup building an open trading platform with the goal of “empowering more traders, in more places, with powerful, transparent, and fair financial products.”
For a variety of reasons, there are people who will see the above statements, and think I’m losing my mind. Many think the crypto (I’m going to use “crypto” as a shorthand for a variety of decentralizing innovations and assets powered by the blockchain) industry is one filled with fraud, scams, and useless toys. I can’t, and don’t want to, refute those assertions. While I think there is a lot more to the story, that sentiment is not wrong. In October of this year, Chainalysis, a leading blockchain data platform, stated that 2022 was well on pace to be the biggest year for crypto hacks with over $3 billion dollars being stolen across 125 hacks.
I wrote an essay earlier this fall analogizing crypto to a 1901 boomtown in southeastern Texas called Beaumont. Beaumont is where the world’s first oil “gusher,” at a hill called Spindletop, was discovered. Following this release of oil, chaos descended. The town population swelled 5x in a month, quickly overwhelming the local facilities, infrastructure, and law enforcement capacity. Crime proliferated. Theft and fighting were omnipresent. Murder became a regular occurrence, with at least two murders taking place every single night for a period of nearly a year. The worst night yielded a sixteen person body count. And while lots of people came for the new jobs or to try and form entrepreneurial ventures, the only people who really made money were the scammers. The town was rife with people devising new schemes and trying - and succeeding - to take cash out the hands of honest hard working people.
I think crypto is in the midst of its own prolonged “Spindletop” moment. But instead of being localized to a remote town in southeastern Texas, the chaos is global, using the speed and ubiquity of the Internet to reach millions of people daily. This is why I think it’s important to engage with good projects in the space, particularly in a policy-focused capacity. Crypto isn’t going anywhere, and the quicker we can legitimize real efforts to create something of value, the better we’ll be able to root out the bad guys.
Legislation and further regulation are coming, and they need to do two things: 1) protect everyday people from bad actors and bad business practices, and 2) enable good actors to innovate and thrive. And that’s something I want to be a part of.
Down the Rabbit Hole
In 2016 I picked up a book at the famous Kramerbooks in Washington, DC’s DuPont Circle called Digital Gold, by Nathaniel Popper. I’d heard of Bitcoin before, but had no real interest in personally speculating or digging deeper. The book made the people behind the early development and spread of Bitcoin, Satoshi Nakamoto, the Cypherpunks, etc. and their goals beyond making money come to life for me in a way that I hadn’t felt before. I recommend this book and a few others (The Age of Cryptocurrency, by Casey and Vigna; The Cryptopians, by Laura Shin) if you are interested in digging in yourself!
I instantly got the concepts of decentralization, pseudonymity, self sovereignty, understood why they might be worthy goals, and saw how the blockchain could be a uniquely powerful tool for achieving them.
Over the following years I went deeper down the rabbit hole, talking to everyone who would listen about these interesting ideas, dabbling a bit in the crypto market, and eventually wrangling a few friends to create a little startup partnership of our own called Lucrum Verus Capital in 2018. Crypto was still somewhat difficult to obtain at the time (one of the significant barriers to growth that’s been changing at a rapid pace), and I wanted to help interested people acquire a diversified portfolio of tokens in as simple a method as possible. This was much easier said than done, and while we made significant progress over the course of a year, we bumped up against the limitations of banking policies and entrepreneurship in a burgeoning and confusingly regulated space. Ambiguity between cryptocurrency’s definition as a currency, commodity, or security became a problem and we would need to register for as a money transmission license in every state in which we did business if we wanted to continue operation. This would have required paying fees and posting bonds of up to half a million dollars per state in six states. Needless to say, this was beyond our capacity and we were forced to shut down.
Since Lucrum Verus I’ve watched as a non-investor as the market has crashed, risen to vertiginous new heights, and crashed again. I’ve watched as frauds were perpetrated and exposed, and paid particularly close attention to the technology, the underlying blockchains of Bitcoin and Ethereum and others, which have kept on ticking.
Late last year, I got the opportunity to start working in a focused and serious way on crypto from a policy perspective on Capitol Hill and have had the learning experience of a lifetime. The barriers and ambiguities I ran into as a small-time entrepreneur still exist. And those issues are not only frustrating for people trying to build interesting things, but potentially dangerous for millions of average people who are curious and susceptible to media driven FOMO when the price of magical internet money starts to go up.
Potential and Peril
As I wrote at great length in my 7,000 word piece Satoshi is Black (or The Pursuit of Property: Black Poverty and Prosperity Since 1619 and the Potential Promise of Crypto) minorities, particularly Black people, are already playing a huge role in the adoption of digital assets and have a degree of exposure beyond that of other groups. For a variety of reasons, this is not surprising. Black people have long felt left behind by the traditional financial system and are attracted to the idea of financial independence. Some, like the Black Bitcoin Billionaire Lamar Wilson, whom I personally enjoy and respect, even promote the idea that “Bitcoin is freedom.”
I’m not quite sure that Bitcoin really does equal freedom right now, but I think that the technology, if developed and nurtured correctly, could facilitate pathways toward economic and digital freedom for many people. Using the decentralizing characteristics of crypto it should make it possible for individuals to own and manage their personal data in ways that weren’t previously possible, creating greater privacy and autonomy than ever before.
But please, do not mistake my cautious optimism for the suggestion that vulnerable people put even one cent of their hard earned cash into Bitcoin or any other digital asset! It is still a space rife with fraud, deception, and too-good-to-be-true products that are not ready for mass adoption. As with any other volatile asset…you need to do your own research, and please don’t risk money you can’t afford to lose.
Just this fall, we saw what will likely go down as one of the biggest collapses and frauds in crypto history, with the downfall of the centralized trading firm FTX. The blowup, compared to historical financial calamities on the scale of Enron, is closing out year with a bunch of other epic failures (Terra/Luna, Three Arrows Capital, BlockFi, Celsius). If you follow technology or financial news at all, you’ve seen daily headlines detailing the allegedly fraudulent conduct of the platform’s founder, Sam Bankman Fried, the chaos that’s ensued, and the contagion that’s spreading throughout the sector.
For those who haven’t been following here’s my dramatically oversimplified take on the FTX Collapse: FTX was a centralized crypto trading platform created by hedge fund trader, Sam Bankman-Fried. SBF marketed himself as the golden boy of crypto and rocketed to fame with a massive fortune (over $20B), and high minded ideals to save the world through philanthropy. But it turned out that he was misusing the funds that customers chose to leave on his platform by allegedly funneling them to an investment fund he controlled and making wild bets. With the recent market downturn across all assets, and in crypto in particular, the bets started to fail, leading to the exposure of long term fraud and bad business practices at his firms, and wiping out many people’s money. And FTX had become deeply entwined with other entities across the crypto industry, causing many other firms to suffer, and in some cases, to fail.
While I was as surprised as everyone else by the revelations of the true nature of the world’s second largest exchange, I was not a particular fan of FTX and SBF. I thought his Effective Altruism goals were intriguing and noble, and assumed that he was probably a good person. But I didn’t like how loud and visible he was, and how his products worked against the original goals of crypto.
The paramount benefit of blockchain based technology is decentralization: the disintermediation of entities that only serve to slow things down, discriminate against some parties, and take too big of a cut. FTX was a centralized exchange, allowing people to use their money to purchase and trade digital assets and then store them for safekeeping on the platform. In crypto, this is a somewhat counterproductive process: taking assets from a decentralized and “safe” place (the blockchain) and concentrating them in a central, and more vulnerable location (an exchange). Now, I think that to some degree, this is necessary for adoption and growth, as it is still pretty complicated to acquire crypto, and regular people need an on-ramp (Coinbase was mine). But he took this a step too far by acting like a benevolent savior (earning himself comparisons to J.P. Morgan in the process) and buying up an incredible amount of assets and distressed firms, consolidating ever more of the industry under his umbrella.
Enter DeFi
Trading new assets in old ways is not the key to unlocking the future. If crypto is going to succeed in creating anything like “freedom” we need to use crypto native solutions that enable better outcomes. This presents financial trading as a particularly good proving ground for crypto. Many things will eventually be built with blockchains, from applications across the consumer web, to online identity solutions, through artistic creations, and even legal contracts. So, while I don’t see trading as the be all end all of blockchain based technology, I do think it is the first killer app of crypto. Price and supply transparency (when not hidden within centralized entities), clear settlement, the ability to transact directly between parties, increased privacy and other features yield an incredible potential for trading beyond what has been possible with legacy systems.
But the development of a robust and secure trading ecosystem powered by crypto is far from a guarantee. This is something that has to be built. And I think the right way to do this is via decentralized protocol, like the one the team at dYdX is building today. Protocols are the building blocks of the Internet and its most important applications. For example: email - a now decades old, but still ubiquitously used application - is enabled by a stack of protocols like SMTP (Simple Mail Transfer Protocol) and POP (the Post Office Protocol) that interact with one another to deliver information over the internet. Crypto works kinda like this. Bitcoin and Ethereum and others are decentralized protocols that function to transfer value over the Internet. And I think the best and most logical way to interact with this technology is through decentralized exchanges and other tools. Together these protocols and ideas are referred to as the decentralized finance movement, or DeFi.
A Wild Ride
This is cryptoland, and this is tech startupland. Not exactly a “sure thing.” But I’m not leaving the Hill for a sure thing. I’m joining dYdX and the DeFi community because I believe in the power of a decentralized Internet, and I know that it’s not going to develop in the best way possible without people working intentionally to build it.
Call me, beep me, if you wanna reach me: Rashan@dydx.exchange