Last week saw every manner of wailing and gnashing of teeth about the so-called meme coin of the Trump campaign called $TRUMP. It was created three days before the inauguration, soared to a $50 billion market cap, and settled down, with half the owners new to the crypto market.
Another coin is $MELANIA and it followed a similar path.
We’ll see if these have much future but they sure did generate commentary, with even people inside the industry furious that the coin exists at all.
Others described this as nothing short of corruption and a very bad sign that Trump has linked arms with a wealthy tech set and is using those contacts to pad his personal wealth with $TRUMP as the main case in point.
The new tokens were floated by CIC Digital LLC and Fight Fight Fight LLC, both Trump family companies. Yes, Trump stands to benefit but only if the initial investors cash out right now. The market capitalization is not the same as profits.
The high dudgeon of opposition surrounding this product is quite ridiculous, in my view, and telling because nothing else that the Trump team has done has generated this level of frenzy. People rolled their eyes at the gold sneakers, the non-fungible trading cards, and the “Fight, Fight, Fight” cologne. Somehow when the exact same marketing approaches are deployed within the spooky land of crypto tokens, everyone loses their minds.
Let’s take a step back and examine the history of the technology in question. After the digital age kicked off in the 1990s, there were myriad attempts to figure out how to use these new tools to create digital forms of money and finance. The perception was that this was a new age and we needed upgraded forms of payment and finance, and maybe more, to go along with it.
But there were several major problems standing in the way. The Internet as a technology can be seen as a giant and nearly infinite copying machine, whereas money, payments, and finance are all about ownership and title transfer. Without a secure and unhackable record of who owns what at any given moment, the experiment would always fail given the nature of digital distribution.
Sure enough, many attempts to create money and payment systems in that period failed. They were hacked. They were flooded with database calls that crashed sites. And there was always a trust problem because the ledgers were proprietary and lacked any real means of verifying what belonged to whom or even whether the whole company was really a scam.
Many years went by before a group of developers put together all the necessary pieces to make Bitcoin possible. They included double-key encryption, a public ledger, protocol to incentivize the hosting of the ledger, and a strict limit on the pace of token creation. The innovators called it the blockchain, and Bitcoin was the premier product. The result was the creation of a distributed system of data ownership and exchange that operated without any institutional intermediaries.
Bitcoin was not a proprietary technology. It was a headline demonstration of an underlying technology that was advertised as peer-to-peer cash. The original protocol even contained smart contracting possibilities that later came to evolve with the system Ethereum. This is why it immediately spawned other coins and tokens such as Litecoin and XRP among many others. Fifteen years later, there are tens and even hundreds of thousands of such products, including oddities like non-fungible tokens of art and so on.
No day goes by when I do not get pitched another product along with a fancy-sounding white paper. I long ago gave up on all these things because so many were what anyone would describe as “scams.” That such scams exist is not the fault of the technology any more than fake art is the fault of paints and canvases.
In addition, the technology has been used for money laundering for political purposes, as we saw with Sam Bankman-Fried’s FTX. We do not know the fullness of who or what was behind this racket but its so-called investors included some of the biggest names in finance and politics.
That said, among many sketchy projects are many wonderful ones too.
When Bitcoin was released, many people assumed it was just an alternative money and that was all. But we gradually came to realize that the real value was in the underlying technological suite that enabled something else—namely, the democratization of finance too. Blockchain tokens can be used to raise capital outside banks, non-banks, and traditional venture capitalists. The people themselves were suddenly in a position to make a vote of confidence in a venture simply by adding a token to their portfolios.
This realization gave rise to wild joy in the period between 2013 and 2017 concerning the rise of a new method of money, finance, and capital markets all based on blockchain technology that enlisted people of all incomes and classes into the grand project of making prosperity. The rise of these token markets was part of it.
It was also during this period that regulators became ever more involved in the burgeoning sector. They were trying to hammer the new technology into behaving exactly like the technology it was replacing. That was never going to happen but the attempt created a vast and growing regulatory thicket surrounding the crypto market that mostly ended up benefiting armies of lawyers that are now required to do anything in this realm.
This is precisely what Trump has sworn to wipe out, finally embracing blockchain and crypto as a worthy innovation with the hope that the United States will emerge as the global leader in this sector. If he succeeds, it would be glorious for prosperity and freedom in the United States. For those of us who have followed this industry from its inception, this is a very exciting prospect.
If you have stayed with this piece so far, there is another strange feature of this market you need to understand. From the very beginning of this industry, there was a group that believed that instead of a broad-based technology, the innovation in question was exclusively about Bitcoin only. I’ve never understood this argument so I have a hard time recreating the arguments for it other than to say that such people exist and they are very powerful.
Over time, they developed a name for themselves, Bitcoin Maximalists, and they were successful in turning Bitcoin from a people’s money into a restricted token for specialized use, even to the point of railing against any other token or deployments as inherently fraudulent. They pushed all existing holders of Bitcoin never to sell but only buy, which raised the question of what precisely this token is for apart from making money for the people who got into the market earliest. Their answer involves a whole series of claims I won’t go into here. Suffice to say, I’ve never believed that this market would thrive by restricting innovation and competition; indeed the whole point of crypto is to foster both.
The so-called Maximalists have been highly influential in Trump circles, having backed him for president and winnowed their way toward political and regulatory influence. This has always concerned me because their primary interests, so far as I can tell, are less about freedom as such (plus disintermediation, democratization of finance, and monetary entrepreneurship) but industrial success for a single product that they happened to own.
One thing about Trump that we should know by now is that he recoils against any interest group that claims to have a hold on his thinking and decision-making. He is always in a daily and hourly struggle to declare his independence against special interests. He is glad to work with powerful and rich people but resists all attempts by such interests to manage his own judgment about what should happen.
This is precisely why I saw the pre-inaugural creation of the meme coin called $TRUMP as a wonderful thing. The usual suspects within the crypto world condemned the whole episode as terrible for the industry, an opinion happily echoed by the likes of New York Times journalists and so on.
As a long-time observer of the pushes and pulls within this sector, the deployment of $TRUMP as a marketing tool for Trump’s enterprises strikes me as a very good sign. The technology is complicated and subject to mischaracterization but it is best to think of this as the same as Trump cologne, sneakers, and pens. You are free to think such things are tacky but the market is what speaks in the end.
