When Bitcoin Magazine received a cease and desist letter from the Federal Reserve Bank of Chicago in February, 2024, the editor published it almost gleefully.
The FRBC claims that the Federal Reserved-owned FEDNOW trademark published on t-shirts, ball caps, and coffee mugs sold in the Bitcoin Magazine merchandise store constitutes a trademark violation.
FEDNOW is a new platform owned by the Federal Reserve and made available to banks in July 2023. It allows participating banks to make peer-to-peer money transfers, much like CashApp.
Bitcoin Magazine also published a response letter from their own counsel, “We firmly stand by our right to engage in parodic critique,” and an open letter from the editor.
The schwag under contention embroiders the FEDNOW logo, slightly altered by a red surveillance eye inside the O. Some of the merchandise is imprinted with “END FEDNOW,” in case of any misunderstanding.
And then there is the tagline, “The digital panopticon is here.” A panopticon is an institutional design theory, in which a single prison guard can observe all prisons who will not know they are being watched.
The answer to why Bitcoin Magazine took on the Feds last week is that it never stopped.
Behind the dispute is an historic distrust of federal monetary policy in the Bitcoin and crypto culture and a magazine that is the voice of a community licking its wounds. Few magazines have negotiated as seismic an industry meltdown, but Bitcoin Magazine seems to be doing so with confidence.
The editor, who did not respond to interview requests, called its latest issue The Withdrawal issue. In it, one author writes an introspective first-person essay, “Letting go of Fiat is letting go of Bitcoin.” He talks about giving up “worldviews,” first those of his parents when he discovered Bitcoin and then the one he built around Bitcoin. Today, however, he sounds more like a Buddhist than a revolutionary. The sentiment is all too real for the humbled best and brightest who scampered down that fascinating rabbit hole – that is, Bitcoin Magazine’s readers and attendees of its Bitcoin conference, the largest in the world.
The quarterly print magazine sells for $79 annually, with issues designed like collectors’ items. One features Sam Bankman-Fried’s face on the cover, with his nose digitally altered to look like a pig’s. It sells for $21.
Bitcoin itself was created in response to the banking crisis of 2009 and as a rejection of Fiat, government-printed money. An anonymous founder laid out his concepts in a famous essay now considered as much of an ideological manifesto as a technical white paper. The mission was to create a digital, international currency unregulated by any government and not requiring third-party banks. It was a sweeping, libertarian, and technically brilliant ideal.
While its technical concepts still underpin the entire industry today, as the industry evolved, Bitcoin became an outlier. Its currency accounted for around 40% of the total dollars invested in crypto before the meltdown of FTX, but it was no longer considered at the cutting edge of blockchain technology. Tensions between Bitcoin purists and other cryptocurrency holders invariably arose.
Bitcoin’s transaction processing was slower, energy-expensive, and less innovative than alternatives. Its proof-of-work (POW) method requires each transaction to be validated by 51% of a network of supercomputers worldwide.
But it is also safer and more genuinely decentralized, Bitcoin purists contend. There is an existential limit on the number of Bitcoins that can released, creating built-in and predictable scarcity. Mining will end in 2041 when a fixed amount is reached. The process is so airtight that the founder departed from the project in 2010, identity still unknown. Bitcoin’s software runs itself, watched over only by a core team of developers, unempowered or inclined to change the rules embodied in the software.
Many Bitcoin purists who only invested in Bitcoin viewed the rest of the community with a kind of snobbish disdain.
As billions poured into new cryptocurrencies, purists argued that crypto created by companies was just as risky as Fiat created by governments. They held an almost ideological belief that Bitcoin and only Bitcoin actually freed individuals – and their finances – from manipulative systems. While a deep current of distrust for federal monetary control runs through the crypto community, Bitcoin purists were the hardliners; they didn’t trust the rest of crypto either. There was Bitcoin, and there was everything else.
Bitcoin Magazine threaded the needle between the purists, conservative altcoin investors, and lunatic gamblers. It says its mission is to cover all things Bitcoin and “blockchain” – code for “everything else” in the fintech world, studiously avoiding the word “crypto.” Blockchain is a technology. It is not responsible for FTX or any of the pump-and-dump schemes rampant throughout the industry.
Ironically, one of Bitcoin Magazine’s founders, who eventually sold the magazine to Nashville-based Bitcoin event producer BTC Media, is none other than Vitalek Buterin, founder of Ethereum, the largest blockchain network in the world, that competes with the Bitcoin model.
The rivalry between the purists and the rest of the fintech community started when Buterin, then a writer, technologist, and Bitcoin enthusiast couch-surfing through Europe, approached Bitcoin’s core development team with his idea for an open-source network. He was turned down.
He went on to compile a team, build the Ethereum network that launched in 2016, and make essential innovations that are now standard in the fintech world: the DAO, the ICO (the crypto equivalent of an IPO), Proof of Stake (POS, a faster, lighter validation process), and smart contracts (if this, then that-style agreements automatically executed by software).
Although Ethereum is theoretically run by a Decentralized Autonomous Organization (DAO) that allocates voting rights to token holders, a Bitcoin purist will tell you that a small group of token holders, including Buterin, is calling the shots. That faster validation processes, such as POS, are less secure. Ethereum was hacked during its initial offering, losing some $50 million before its lead developers shut off the spigot by buying up the remaining coins in the offering and creating a “hard fork.” Bitcoin has never been hacked.
However, by 2022, 40,000 plus apps had been deployed on top of the Ethereum blockchain. Its founding team had splintered off to create new competing blockchains with nearly instantaneous transaction speeds.
Bitcoin purists were beginning to look like killjoys.
Then came the “Crypto Winter,” when Celsius, Voyager, and FTX crypto marketplaces all went bankrupt in the space of about six months, tanking the market and decimating the savings of many an Average Joe. The most innovative developers and tech entrepreneurs fled the industry for AI projects. Bitcoin purists now looked like geniuses.
Today, Bitcoin Magazine’s tone seems to land more on the side of the purists. This Monday, when the magazine published seven new articles online, six were about Bitcoin, and the other two sarcastically poked fun at the Federal Reserve, including the FEDNOW cease and desist letter.
In fact, the dispute may have given the magazine and its community a chance to blow off some steam.
The Federal Reserve released FEDNOW in July 2023, promising that the government would supply banks with a peer-to-peer network for making inexpensive transactions in real-time, 24-7, and triggering the inner libertarian in Bitcoiners’ DNA. Now, the government would also access every individual’s financial transactions. The enemy is clear, and it isn’t us.
To fuel the fire, FEDNOW also copied some blockchain ideas; though using a different technology, FEDNOW will allow banks to build other functionality on top of its platform. Of the central banks, only Bank of America and Chase have declined to participate.
Editor-in-Chief of Bitcoin Magazine, Mark Goodwin, who penned the open letter to the FDRS’ counsel, Thaddeus Murphy, is clearly having a good time bashing FEDNOW while standing up for freedom of speech.
“On behalf of the entire team at Bitcoin Magazine, I wanted to take the time to thank you for your thoughtful inquiry after having browsed our online store. Doing your Christmas shopping early, you love to see it! Let us know if we can send a box of merchandise to any of the 12 Federal Reserve banks,” he wrote.
“As you may know, our publication and our readership are deeply troubled by the new FEDNOW inter-banking communication system.”
The legal issues, however, are clearly secondary to the cultural ones. Goodwin quotes from the cease and desist letter, “The Federal Reserve has extensively used and promoted the FEDNOW mark and has built up substantial goodwill in this invaluable asset,” and responds.
“For starters, what goodwill has the Federal Reserve built up? Have you seen the state of the working class today?”
He touches on all the recent failures of the banking system: Silicon Valley bank, Silvergate, inflation.
“There is no goodwill, Mr. Murphy.”
