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It’s clear that Musk has big plans for Dogecoin! Unfortunately, this is a ridiculous statement on many levels, as we’ll see below. This is also when Elon is at his proudest, touting his expertise in cryptocurrency technology just as he claims he will bring world-changing innovations to saving submarines, respirators, and public transportation, all of which have ended in some degree of disappointment. Musk isn’t the only one with this bad habit. Successful tech entrepreneurs, or simply lucky investors, seem particularly susceptible to what’s known as the Peter Principle. First posited in 1969 as a business management issue, the principle is based on the observation that successful workers are often promoted beyond their capabilities. Over time, the concept has taken on a broader meaning, whereby successful people expand into new areas until they reach the limits of their abilities and then fail, sometimes spectacularly. Silicon Valley leaders, in particular, often seem eager to push beyond their own knowledge, to prove that their unique insights apply to a wider range of areas. And like Musk, they often make mistakes. Musk can certainly be forgiven for his dabbling, perhaps even more than most tech leaders. He is a legitimate business genius, and I personally think that the benefits to humanity that he created, Tesla and SpaceX, will be so great that we won’t be able to fully comprehend them for generations. His real, history-making success helps explain why Musk’s unique brand of cross-border business often helps his reputation, as when he founded multiple companies to pursue his dubious practical Hyperloop concept. But this time, it may be different. His tweets appear to have been a turning point for long-time cryptocurrency enthusiasts, already worn down by his confusing, self-contradictory inarticulateness, who responded with a barrage of cringe-inducing disdain. But it didn’t help that shortly after Musk posted this tweet, he also dropped a typical hint that Tesla might be selling Bitcoin. (That turned out not to be the case, which could have drawn the interest of the SEC. It’s also worth noting that Musk was replying to an account that has itself been widely accused of being a fraud.) This absurdity triggered a massive sell-off in the crypto markets, with Bitcoin falling a little over 7% over the next 24 hours. Dogecoin fell much less, if you think about it. Most people who followed Musk into Dogecoin didn’t understand the situation, and they still don’t. The drop extended a long losing streak for Bitcoin. But it also appears to be a healthy turning point in the cryptocurrency’s attitude toward a man who thought he knew a lot. Scaling Dogecoin is a myth You have to look elsewhere for nuanced technical rebuttals to Musk’s Dogecoin upgrade proposals, but the response from blockchain experts like Cornell University’s Emin Gun Sirer was overwhelmingly unified: it’s bullshit. In the podcast “What Bitcoin Did,” Peter McCormack, while admitting that he is not a technical expert, took a more detailed look at Musk’s ideas: This isn’t just an academic debate about how reasonable people differ. Musk doesn’t seem to realize that the market has already thoroughly vetted large blocks in the Bitcoin block size war of 2017, with clear results. Both Bitcoin Cash and later Bitcoin SV began pursuing Bitcoin’s larger block vision in 2017, and now BCH is worth about 2% of Bitcoin’s value. In response, Musk reminded onlookers that as one of the founders of PayPal, he might have his own opinions. This is pretty thin technically, given that blockchain currencies are fundamentally different from pure digital banking rails. It also seems to highlight a major political blind spot for Musk, since PayPal is exactly the kind of centralized, heavily censored payment provider that cryptocurrencies are designed to disrupt. In other words, Musk defended himself by doubling down on the Peter Principle. Don't follow blindly All of this is met with relentless disdain by Musk, who is occasionally the richest man in the world, for the crypto community, and who may well have destroyed it if he had any intention of taking a leadership position in it. Admittedly, some people are more than happy for him to continue to be the “Father of Dogecoin.” The response is admirable because it shows that people are not willing to sacrifice the truth to favor a misguided but influential billionaire. In a broader sense, it seems that dismissing Musk is a positive for the industry because he lacks the right character to make a positive contribution. His arrogance has also recently earned him the title of "Tesla's Tech King." This is certainly a joke, but there is always truth in the joke, and crypto has no appetite for kings. You can counter that bravado when your own position is so secure. Even after Musk’s efforts, the price of Bitcoin is higher than it was three months ago. Musk’s venture into cryptocurrency is almost certainly a net positive in the long run, because he raises people’s approval ratings, so few will be sad when he emerges from the revolving door of “amateurs.” In contrast, Bitcoin is crucial to Tesla’s recent earnings growth. “Musk needs Bitcoin, not Bitcoin needs Musk” is not a mantra, but a simple reality. Compare Musk’s behavior to two other big names: Vitalik Buterin and Jack Dorsey. You might not immediately associate Dorsey with cryptocurrency, but he made a big splash by adding bitcoin sales to Cash App in January 2018, and Square has been funding bitcoin development for years. That may be more than anything Musk has ever done in the cryptocurrency space, but Dorsey doesn’t display any Musk-like condescension. (For what it’s worth, Square is eating into PayPal’s market share.) Vitalik Buterin provided a more brilliant example, almost simultaneously with Musk’s show-off. In an obvious marketing stunt, Vitalik destroyed billions of dollars’ worth of altcoins given away by the project. He also warned the token founders not to pull the same shenanigans again, saying, “I don’t want to be that kind of power center.” Unlike Musk’s statement, Vitalik’s gesture was widely praised. Not only was it a rebuke to the generation of spoof-intended junk tokens like Dogecoin, Vitalik’s denial of his own influence was entirely in line with the leaderless, community-driven ethos at the heart of cryptocurrency. This is an example that Musk can learn from. |
