Garrett Camp, the creator and co-founder of Uber, has unveiled “Eco,” a new Bitcoin-like digital currency with elite gatekeepers and unlimited inflation built into its protocol — and he needs a billion-strong email list to distribute it.
On Thursday, Forbes announced the new cryptocurrency — with an introduction straight out of HBO’s Silicon Valley: “In November, Garrett Camp had just returned from his first trip to Africa—an ‘eye-opening’ experience, he said—when he informed the world that he would donate half his riches to charity. What Uber’s cofounder and chairman didn’t mention was that he intended to do more than just give away money. Indeed, he had resolved to invent his own.”
The description of the actual system that follows — and is now publicly available in Eco’s pre-white paper “design proposal” — reads like an especially warped episode of Mike Judge’s sitcom, where bubble-headed, virtue-signaling tech billionaires rip off their peers, then make inimical “improvements” to sound products. The more one reads Eco’s plan, the more contradictions and red flags pop up. The underlying thesis seems to be: The great unwashed are just too stupid for Bitcoin.
These are the features of Eco that the organization touts as upgrades to Bitcoin and its competitors:
Elites Get Most of the Money… and Decide Who Can Participate
Eco is positioning itself as an altruistic, equitable monetary system, with Forbes describing it as “an instant, affordable, and borderless means of payment for the masses.” The proposal paper repeatedly touts that new coins will be distributed as a “collective incentive” to node operators, “rather than individual reward” to miners, and aims for “reduction of economic inequality across the globe.”
Eco will not be permissionless. What that term means in the world of Bitcoin is that anyone is able to participate just by running free software. That software makes your computer a Bitcoin “node,” which checks everyone else’s record of transactions to ensure no one is cheating or spending their money more than once.
With Eco, the network of nodes that confirm transactions and prevent double spending will be “verified” — i.e., the Eco Foundation will select elite institutions, particularly universities, around the world, as its core set of “verified” nodes, and then the existing “verified” nodes will vote on adding or removing “verified” nodes. They spitball that perhaps 80% of nodes will need to agree before “verifying” nominees to join them in their task.
The proposal paper sets off more alarms with loaded language on who can participate; the currency will run through a “verified network of global universities and reputable organizations,” it reads. And the network will leverage “the broad expertise found within academic institutions.”
Is Eco’s definition of “reputable” the same as Middle America’s? Or will it be more like the Silicon Valley social justice groupthink that, just in the past 48 hours, allowed “targeted harassment” because the right women were chased offline, gave a user a “strike” toward a ban for correcting conspiracy theories, purged conservatives and moderate voices without warning, and threatened independent publishers with “reduced distribution” for mocking the wrong news network?
And what about academia’s “broad expertise”? Will Eco allow any accredited university to participate? What about, for example, my alma mater Cedarville University — which, because of its Baptist affiliation, prohibits students from same-sex relationships? Or will the organization rely mostly on public universities that are nakedly hostile to free speech?
The concept and process of “verification” in today’s world is extremely politicized, and Eco’s genesis in Silicon Valley plus its emphasis on the global “collective” should give every conservative pause: Will they need to have Correct Opinions to send or receive their own money? Eco’s proposal paper makes no mention of censorship resistance — whether the network can blacklist certain users or freeze funds, as the banking world often does on behalf of governments. Nor does it address fungibility, an existing issue with Bitcoin where users may refuse to accept coins because their histories can be traced to unseemly or criminal activities.
And if the targets of “collective incentive” and “economic inequality” conjure mental images of socialism, it seems that Eco’s wealth distribution will follow a similar path.
These “verified nodes” will receive 20 percent — or 200 billion — of the 1 trillion tokens that Eco plans to start with. The proposal suggests running the network with “a few hundred nodes,” then expanding “until most geographies have several operational nodes.” If the network grew to Bitcoin’s scale, currently with approximately 11,000 nodes across the globe (an average 56 per country), that reward would split to about 18.1 million Eco per institution running a node.
By comparison, the hoi polloi will get only 500 per head — 500 billion to one billion people. Another 100 billion will go to the non-profit Eco Foundation, 100 billion to other “contributors and advisors,” and another 100 billion to “strategic partners worldwide.” Unless each one of these special groups has 200 million mouths to feed, it seems like wealth inequality will be doing just fine under Eco.
One BILLION Email Addresses… and Even More Data Mining
The emission strategy for Eco seems to be a token giveaway, in the style of other non-mineable currencies, such as Ripple’s XRP, Nano (formerly Raiblocks), Stellar Lumens, and more — a practice known as an “air drop” in the industry. However, their free money will apparently come with a price — your data.
The foundation will create one trillion Eco tokens to start with, half of which will go to the first billion people that they — here it is again — “verify.” It sounds like first come, first served, no? But the paper says later, “Eco plans to distribute 50% of the token supply to the first 1 billion unique, verified human users on the platform (with equitable demographic and geographic representation) [emphasis added] to allocate value created to a large community of users.”
This text suggests that even if one signs up at Eco.com today, its second day of registration, that person is not guaranteed to receive any of the first 500 billion tokens. That sentence suggests that Eco will follow up with applicants to find out their age, sex, race, and location and then evaluate candidates for sufficient diversity — which means Eco seeks to build an email list (a time-tested monetization tool) of more than one billion people.
How much of this data collection will Eco monetize? Given Uber’s track record, probably more than we expect.
No Limits on Inflation
The other pillar of Eco’s value proposition is: It’s too confusing to own a fraction of a Bitcoin, so we will not put any limits on how or when we increase our supply.
That’s not a joke. And only a slight paraphrase.
The @eco whitepaper promises open-ended inflation so that everyone will have multiple whole units of the currency instead of dealing with decimal places. Does not use the word "inflation," though. pic.twitter.com/f1XMcpNe9L
— Ezra Dulis (@ezradulis) March 2, 2018
The proposal insinuates that Bitcoin has lost its way by being a strong store of value before becoming a globally scaled medium of exchange.
Bitcoin was designed to be a p2p payment system, but has trended towards a platform resembling digital gold, with value that cannot be diluted by a single institution. Bitcoin is now held by millions of users, but often treated as a speculative investment rather than used as a medium-of-exchange.
[By contrast,] Eco aims to become a medium-of-exchange as well as a store-of-value, with sufficient token supply to provide good system usability.
This argument was addressed in a very informative essay series published this week — Vijay Boyapati’s “The Bullish Case for Bitcoin” — which said that trying to achieve a medium of exchange before creating a reliable store of value “puts the cart before the horse… Money has always evolved in stages, with the store of value role preceding the medium of exchange role.”
In a section titled “Monetary Policy,” the proposal calls Bitcoin’s fixed supply of 21 million BTC “arbitrary” — but then says Eco will increase its supply to maintain “reasonable token prices,” which creates the threat of both arbitrary and capricious price manipulation.
This highlights a fundamental contradiction in Eco; the proposal boasts that the tokens will be a “store of value,” but it plans to erode their purchasing power via inflation.
And yes, they really do quibble about the decimal places:
In order to enable billions of users to eventually own many Eco tokens each, an initial supply of 1 trillion tokens will be generated over several years. This will enable a future user to have hundreds of Eco in their account, instead of a very small fraction of a more scarce token. For example, future user would find it much easier to pay 1.25-eco for something than 0.000000125-btc.
One Eco token will be divisible into 100 parts, to mimic the familiar concepts of dollars and cents. This will increase overall system usability, by reducing the cognitive load of dealing with very small fractions.
The cognitive load! If only there were a solution for that — say, the Bitcoin Core wallet allowing users to display their balances in smaller denominations — since years ago.
A Better Bitcoin?
I am not a “Bitcoin maximalist,” a person who sees no value in any “altcoins” imitating or inspired by the first and biggest form of decentralized digital money. Most of them are just cheap knockoffs, but some projects do indeed improve on BTC’s features — such as the privacy coin Monero — though they come with their own tradeoffs.
Reading and re-reading the Eco proposal, the “issues with Bitcoin” that Camp hopes to fix aren’t actually problems at all — unless you fear global warming and populism. It reads: “Three issues with Bitcoin are the concentration of resources in the hands of a few, the large amount of energy consumed by the system, and its perception as a complex and unsafe platform.”
Let’s look at these concerns one by one, reviewing our knowledge of how Eco describes its own proposed system:
• Concentration of resources in the hands of a few — Aka the “wrong people,” aka cypherpunks, aka people who don’t trust governments and public universities that rely on massive government grants. Remember, their own distribution scheme is mega-lopsided. It gives a paltry 500 Eco to regular people, tens or hundreds of millions to each university running their nodes, and likely hundreds of millions to themselves, “consultants,” and “strategic partners” (read: gotta grease some palms!).
And Eco’s “solution” to this problem creates a far more dangerous problem — a concentration of power in the hands of a few. That system will be vulnerable to political pressure and thus censorship, blacklisting people’s access to commerce based on ideology.
• Large amount of energy consumed by the system — If you’ve moved beyond the social pressure to believe the fashionable nonsense of manmade “climate change,” it is no problem for people to voluntarily pay what they think it is worth to secure their own wealth.
Further, a non-proof-of-work (PoW) system like Bitcoin’s is far more vulnerable to disruption by malicious actors. A study from Purdue University estimated that tens of thousands of wallets, totaling millions of dollars of value, could be rendered inoperable by disabling only ten “gateway” nodes on Ripple’s minerless XRP network, even after five years of operation.
By comparison, a malicious actor would need to control 51 percent of Bitcoin’s mining hash rate, which would currently require over a dozen exahashes per second. One of the strongest Bitcoin miners, the Bitmain Antminer S9 (currently valued $3,000 per unit), generates around 14 terahashes per second. A malicious actor would need to buy more than 1.7 million of these devices to execute a so-called “51 percent attack” at a cost of $5 billion for the hardware alone — then enough host computers, then enough electricity to run them all. If you’re choosing where to place your savings, do you care more about the security of Bitcoin or the eco-friendliness of “a few hundred nodes” and an email list?
• A complex and unsafe platform — Beyond the discussion of mining security, which safeguards Bitcoin users’ private keys from hackers, the only way that Eco expands this claim is that their foundation will develop “simple web and mobile apps.” Bitcoin and many of its competitors already have a multitude of these. This talking point is purely sales jargon; it is not solving any major issues endemic to cryptocurrencies.
And that seems to be the fundamental issue with Eco: We see the brain trust of Silicon Valley coming in late to a flooded market cooked up an elitist, quasi-socialist, data-mining, wealth-destroying, inflationary token, because, well, the simple people need… more simpler apps.
The Eco Foundation did not respond to an email inquiry raising several of the issues and questions discussed in this article.
A warning and disclaimer to everyone: This article is not and should not be considered financial advice. The value of digital currencies is still extremely speculative and could potentially go to nothing. I own small amounts of the assets mentioned here, such as Bitcoin and Monero — which gives me a financial incentive to root for their continued growth. I do not present myself as an objective analyst but invite readers to consider how my worldview as a populist conservative affects my evaluation of these technologies.