Since penning a post on the libertarian ideology of Bitcoin, and the inherent unfairness of a deflationary currency (Bitcoin is the thin end of a far-right libertarian wedge), I’ve come across more articles on the subject that articulate the problems with crypto-currencies far better than I every could.
First up, the Folding Ideas video Line Goes Up – The Problem With NFTs, is a must-watch for anyone remotely interested in the space, or considering an investment in any form of crypto. Despite the headline being NFTs (you thought crypto-currency was bad? wait till you see this dumpster fire), it goes fairly deep into crypto-currencies and blockchains in general. At 2 hours and 18 minutes, it’s a very long video by YouTube standards, but the presentation is excellent, the research solid, and it never drags. Since it was posted 5 days ago, it has racked up 2 million views, so it’s certainly having an impact.
If two hours is too long though, I strongly recommend reading The Case Against Crypto, by software developer Stephen Diel. He nicely summarises the anti-crypto argument under 4 headings:
- The technology does not solve a real problem
- “cryptocurrencies” aren’t actually currencies, and cannot fulfill the function of money
- The history of private money is one of repeated disasters that destroy public trust
- Crypto assets are all unregistered securities
As Stephen admits in the article, understanding these arguments “requires a large amount of knowledge at the intersection of several fields of study”. So I may write more on the subject, but more for the benefit of my own understanding than any of my (extremely tiny) readership. I feel a lot of people, including myself and many close to me, don’t have the knowledge to reach these conclusions on their own. Indeed, while I’ve always been fairly sceptical of Bitcoin as a currency, I once thought the ideas behind crypto were interesting, and have done some mining in the past. Unfortunately, I bought in to the Ethereum hype of a distributed network, which is absolute bullshit when you consider that globally it has several orders of magnitude less processing power than a Raspberry Pi 4. And, I need to stress this, the problems are not fixable by issuing new tokens on some future blockchain, they are inherent to the very design features that make it popular.
One thing I can say though, is that other than some electricity, I’ve never put money in to the crypto ecosystem, I’ve only ever withdrawn. By definition that money came from a greater fool buying in, but any remorse I could ever feel about that is completely dwarfed by the billions being made by crypto CEOs. That money is coming directly from the pockets of investors, that pay real cash for their tokens, while the crypto companies and networks return nothing but negative externalities – industrial-scale electricity consumption, market distortion, and the eventual crash when it happens will inevitably fuel populist rhetoric, and destroy trust in society and the actual financial system.
The more I read about cryptocurrencies, the more I am convinced that they are a cancer on the face of society. With what I know today, attempting to profit from crypto would not only be stupid, but highly immoral as well.
- Amy Castor and David Gerard are both journalists covering crypto and financial fraud
- The Web3 Fraud by Nicholas Weaver – linked above but also worth emphasising as he takes a look at the promises of crypto companies
- The Handwavy Technobabble Nothingburger, also by Stephen Diel, goes into some of the problems with blockchain technology
- The asymmetric mechanics of Tether, by Frances Coppola, a journalist investigating the “stablecoin” Tether. Tether is a crypto token pegged to the price of 1 US dollar, and is adding fuel to the crypto dumpster fire by providing liquidity, while being backed by very little in the way of real reserves.
- Tether’s smoke and mirrors, also by France Coppola, is also worth a read
- The “dunning-krugerands” tag, on the blog of Mozilla co-founder Jamie Zawinski, is an entertaining and often hard-hitting take, that regularly wades in to crypto
Update: In retrospect, the profit comment in the last paragraph may come across a bit strong. To be clear, I don’t think that everyone who invests in crypto is immoral or stupid, just that my current beliefs would make it both stupid and immoral for me to invest. I could well be wrong, and the crypto-future may shake out in a better way than I can foresee. Heck, it’s not like our current system is brilliant, so anyone striving for better should be applauded. That said, I can’t shake the feeling that current web3 and crypto tech is a big step backwards from today’s institutions.