Dear Jesse,
I recently watched your interview with Jason Calacanis on This Week in Startups where you said: “If you want to change the policy, you now have to submit a paper to me. Minimum of five pages. I’ll read it. You have one shot.”
Well, I’m not a Kraken employee, and the reason I’m writing isn’t about company policy in the way you probably intended, but I thought I’d take my one shot anyway.
Before I reveal the reason why I’m writing you, let me start by saying I wouldn’t be doing this if I didn’t think highly of you and your work. After watching the interview, reading the hacky NY Times piece about your company, as well as your own Kraken Culture Explained post, I’m confident we share similar values and goals (and even an appreciation for the pirate aesthetic 🤓).
Values like all humans having a fundamental right to free speech, free markets, and currency choice, and the common goal being to “accelerate the worldwide adoption of cryptocurrency”.
Now that I’ve beat around the bush long enough, here’s the reason I’m writing this letter: Because I want you to reconsider listing the eCash project (“XEC”) on your exchange.
I’m sure you get listing requests all the time, but I’m hoping you can read this with an open mind and hear me out. Like you, I see myself as a true believer, not some crypto tourist. As evidence, I started this blog on January 3, 2021, and have already published well over 100 articles. Before this I wrote hundreds of articles across several different crypto blogging platforms dating back to 2017. And I do all this in my free time whenever my day job permits because I believe in the mission.
Now without further ado, here are my top 5 reasons why Kraken should list XEC:
#1 Profit, Profit, Profit
During your interview you said: “You just never know when something’s going to have its moment. Like Dogecoin, we had Dogecoin listed for years, nothing happening, suddenly Elon goes nuts about it and boom, thank god we were there because we would have missed the wave.”
Well, I think eCash is on the verge of having its moment, and I would love nothing more than for Kraken to ride the wave when that moment comes. In case you weren’t aware, XEC is getting closer to announcing the long awaited launch of Avalanche post-consensus. I believe combining Avalanche consensus with Nakamoto consensus will not only be a huge technical accomplishment for the XEC team, but it brings us closer to having a cryptocurrency that can actually be used as money at scale.
The full activation of Avalanche will ultimately make eCash virtually impossible to 51% attack or double-spend, allowing exchanges to safely credit depositors without having to wait for any confirmations. I still remember the disappointment I felt when I made my first Bitcoin transaction back in 2017. Having to wait for several blocks to be mined before seeing my money show up was a horrible user experience. It made me question why this technology was called magic internet money in the first place. Because it didn’t feel very magical at all. Imagine how much the user experience will improve if users don’t have to wait for another block confirmation ever again.
This is what I think will lead to eCash having its moment. Not because of tokenomics, or some lame sponsorship announcement, but because it works as intended as peer-to-peer electronic cash.
#2 Supporting Open-Source Development
When talking about the factors that Kraken takes into consideration when listing a project, one of the things you mentioned was whether or not there was “something novel or especially interesting” about the project itself.
I firmly believe XEC is one of the most interesting projects in all of crypto. It’s the only Bitcoin fork that shares the same genesis block as BTC while also having a self-funding mechanism. Over the years we’ve seen numerous Bitcoin Core developers quit working on the protocol because of a lack of funding. Just recently Wladimir van der Laan wrote about moving on as a contributor to the project, and while he doesn’t say it’s for financial reasons, I can’t help but think it played a role in his decision.
When Bitcoin ABC introduced the idea of including a developer’s fund into the Bitcoin Cash protocol, a large part of the BCH community was convinced this was no different than a tax. But they couldn’t have been more wrong. The truth is what the XEC developers did is an example of free-market capitalism at its best. No one is forced to mine or buy XEC. Anyone who supports this chain does so voluntarily. As far as I’m concerned, all that happened was a group of engineers forked the code and gave the market the opportunity to self-regulate and decide for itself whether or not their work was valuable. This wasn’t done through coercion, but through leadership. There were no men with guns forcing BCH miners to support the new chain, or BCH holders to hang onto their XEC. We were simply given a choice, and in my world, the more choices we have the better.
#3 Kraken’s Own Words
This is what Kraken previously announced regarding how it would handle the BCH/XEC fork: “We will support Bitcoin Cash ABC [XEC] ONLY IF the hashpower on the ABC network is at least 10% of the hashpower on the Bitcoin Cash Node network. It must sustain this level in a reasonably stable way – brief spikes above 10% will not count. We will give the ABC network a period of time after the fork, entirely at our discretion, to meet this condition.”
XEC currently has well above 10% (actually closer to 30%) of the hashpower securing BCH and has been at these levels for over a year. As a believer in free markets, I understand you are free to run your business as you see best. But as stated earlier, I also think listing XEC is in the best interest of your company. It would put Kraken in a unique position by being the only US exchange to list this project, giving you a leg up on the competition while fighting for the same clients.
I also found several things you said in your culture document that were relevant to this discussion:
“We believe that this weaponization of the financial system is immoral. Financial services have often been compelled to deplatform people and organizations with unpopular views.”
By choosing not to list XEC, isn’t this exactly what Kraken is doing? Bitcoin ABC chose to do something that may have been unpopular, but it wasn’t illegal or coercive. They simply did what they felt was necessary to further the mission. If you exclude stablecoins and wrapped coins, XEC is effectively a top-50 cryptocurrency. One that has a solid roadmap while being led by some of the most experienced and skilled engineers in all of crypto. I see no reason why Kraken would choose not to list this project other than for political ones.
You also wrote that Kraken is all about “optimizing for team outcomes above individual feelings”. This aligns with the Bitcoin ABC culture as well and ultimately explains why they forked XEC from BCH.
Furthermore, you go on to say that “Bureaucracy must die! We are hellbent on avoiding the vicious, death spiral of bullshit and bureaucracy that creeps in over time as a company scales (i.e., more people and meetings means more buy-in is required which leads to persuasiveness being rewarded more than building which causes the builders to leave and then nothing gets done).”
This is exactly the death spiral that Bitcoin ABC found itself in as part of the BCH ecosystem. A community that rewarded politics and pandering instead of merit. Despite Bitcoin ABC doing the actual work of maintaining the lead client implementation for years, they were shut out by the community for no other reason than because they refused to get on their knees and beg.
#4 XEC Isn’t BSV
I was around during the BCH/BSV hash war. I remember the Twitter poll that Kraken ran asking whether or not you should list BSV. And I completely supported your decision to not list that project, because while I also support currency choice, I don’t support projects that are happy to use legal threats to get what they want.
While XEC may also be a fork of BCH just as BSV was, that’s where the comparison ends. XEC and BSV couldn’t be more different. In fact, XEC’s founder, Amaury Séchet, has been sued multiple times by the BSV team just as your company was in the past.
XEC would never resort to using the coercion of the state to achieve its goals, and if it did, I’d be the first person to dump my holdings and move on. This project is about earning every achievement by out competing other projects using the best technology, not the best lawyers.
The fact that you even considered listing a project as toxic as BSV makes it that much harder for me to understand what reasons you would have not to list XEC. Kraken also lists other proof-of-work coins that have development funds like Zcash and Dash, so I have to assume it’s not that. The bottom line is the eCash project has earned the right to be on your exchange.
#5 The mission
Last but not least, Kraken’s mission and XEC’s mission are totally aligned. You tweeted: “Our mission at Kraken is to bridge individual humans out of the legacy financial system and bring them in to the world of crypto, where arbitrary lines on maps no longer matter, where they don’t have to worry about being caught in broad, indiscriminate wealth confiscation.”
Well, compare that to the mission statement for eCash: “Crypto development is a technological arms race for the defense of personal freedom. eCash is the technology of financial freedom, and that’s why we’re here.”
The engineers behind this project are some of the biggest true believers you will ever find in this industry. I’ve had the good fortune of not only getting to know many of them over the years, but more importantly, I’ve seen their proof of work. They not only talk the talk but walk the walk. Why else would they still be doing what they’re doing?
XEC could have died when the vast majority of the hash power supported BCH. But they refused to give up because they believed in what they were doing and the importance of their work. They aren’t interested in making a quick buck. They’re interested in building a new financial system that will protect us against corrupt governments and the rise of central bank digital currencies.
One of my greatest disappointments in crypto is the lack of progress that’s been made over the years. I’ve watched as most of the people entering this space have gotten distracted by dog tokens and ponzi schemes while people who are actually trying to build something to further the mission are mostly ignored and left to fight tooth and nail just to survive. But that’s exactly what Bitcoin ABC has been doing for the past six years.
Maybe you don’t believe in on chain scaling. Maybe you think layer 2 solutions like the lightning network are the way to go. But I believe in diversity of thought, and that the more experiments being worked on to further the mission the better.
If you truly believe in decentralization, shouldn’t that also apply to protocols and projects as well? The whole point of decentralization is to not have a central point of failure. And while I get that most of your revenue comes from the top coins like Bitcoin and Ethereum, I think it’s a mistake to assume that investing in a project like XEC can’t also bring value to your exchange.
My argument isn’t that Kraken should list every coin on CoinMarketCap.com. I’m not even saying it should list every coin in the top 100. But what I am saying is that if you really do believe in the mission “to accelerate the worldwide adoption of crypto”, it would best serve you to list projects that are actually trying to push the technology forward.
I believe the real innovation of crypto is that for the first time in history, we have a technology that allows us to have a form of money that can simultaneously act as a good store of value as well as a good medium of exchange. But so far the biggest challenge has been scaling these platforms to serve billions of people.
eCash is taking a novel approach to solving this problem by combining Nakamoto and Avalanche consensus. This will enable XEC to take advantage of the strengths of each while minimizing their weaknesses. For example, Nakamoto consensus is slow but robust. It allows anyone to participate in the network in a trustless manner, but it takes way too long to reach consensus to be used in daily transactions. On the other hand, Avalanche reaches consensus within a couple of seconds, but its weakness lies in the fact that boostrapping a network only using Avalanche requires trust. By combining the two, you get the best of both worlds.
But perhaps the most significant advantage of adding Avalanche to a Bitcoin based blockchain comes in regards to scaling. We all know that one of the biggest bottlenecks to scaling is related to block propagation. Block propagation times must remain miniscule compared to the overall time it takes to find the next block or the chain becomes vulnerable to selfish mining attacks.
Without Avalanche, block verification is slow and cumbersome because the moment a new block is found, all the nodes have to get busy verifying the transactions in that block are valid before propagating it to their peers. But what if most of the nodes already knew what transactions were in the block before the next bock was even found? It would reduce that verification time drastically, and this is exactly what Avalanche makes possible.
Let me conclude by saying that I obviously can’t see the future. But what I do know with absolute certainty is that eCash deserves recognition as a cryptocurrency project with a concrete roadmap led by an experienced team that not only knows what it’s doing but is committed to fulfilling the mission.
I believe the support of a company like Kraken will only improve XEC’s odds of achieving the project’s goals. Engineers are standing by ready to help facilitate implementing this project to your platform and answer any questions you may have. Because it is a Bitcoin fork, XEC should be relatively easy to add to your exchange without creating too much work for your employees.
Since I’ve now fulfilled the five page minimum requirement, I want to thank you for reading, and no matter what your decision ends up being, I wish you and your company the best of luck in your fight to bring more economic freedom to the world. With that said, I hope that in the near future I will have a reason to finally open a Kraken account and can stop using the likes of Coinbase and Gemini for all my cryptocurrency needs. 😀😊🤗
Sincerely,
Cain