Do note that all of these countries may have economies or banking systems that are basket cases but still have, you know, functioning internet infrastructure. Crypto is cool online money but it sits astride a gigantic technological and social edifice that is substantially more vulnerable to circumstance than a good old greenback. And it doesn't do anything an international bank couldn't do in principle; of course, these banks are regulated in PRACTICE, and in the case of crypto, while censorship resistance is theoretically possible, it's quite a bit harder than the blockchain concept makes it seem, and most of its virtues in this regard are a function of its novelty rather than any actual cryptography.
In other words, no, you can't program your way out of society. The metaverse is just a special case of the actual universe.
All of the supposed benefits that cryptocurrency brings the developing world could be solved much more efficiently by letting them use the US dollar, the euro, the yen, the pound, etc. (This was a large discussion in one the last open threads). There already are stable currencies that aren't prone to hyperinflation or confiscation- they're just not widely available to people in say Venezuela for 'regulatory' reasons. (And trust me, people in 3rd world countries really want US dollars- like really really want them).
Maybe crypto will magically their problems. But seeing as its utility has been speculative for a decade now ('in the future crypto will do x!'), I think it's just as reasonable to say 'in the future people in Venezuela or Ukraine or Vietnam will be able to use eurodollars (1) freely, and thanks to [unnamed technological advance] their government won't be able to stop them'.
Or, maybe there's a synthesis where DollarCoin, EuroCoin or PoundCoin blends the two
>If you split $1000 and invested it equally in all the top crypto projects of 2015, you would now have $25,400.
'If you entered this pyramid scheme/speculation bubble 7 years ago, you'd have a lot of money today' is a true statement for many types of pyramid schemes and speculation bubbles.
You have not mentioned the problem of scale. From what I understand every other problem of crypto is downstream from the fact that it does not scale. (And any attempt to make it scale detracts from its main advantage of distribution so as to make it worthless).
Vietnam is super into crypto because Axie Infinity (a once popular Play to Earn game) focused on them for whatever reason. I'm guessing there's some "(amount of people with access to internet) / (income level that makes tens of dollars per day meaningful)" ratio at play
In particular, identity verification and the "hybrid" applications (e.g., voting) are non-obvious, have clear value, and really do make use of the blockchain decentralization in a valuable way.
I think it is important to draw a distinction between crypto-currencies (e.g. Bitcoin, Etherium) and *exchanges* where you give a stranger your money (in US dollars, or Bitcoin, or whatever) and then they run off with it.
Giving your assets to a stranger who runs off with them doesn't make the asset a scam.
I think that Ukraine having high concentrations of crypto use may have more to do with foreign aid being laundered than any type of regular use by the hoi polio.
Crypto is a really cool research project that went viral ~20 years too early.
All of the major issues are either already solved or a path to solving them is somewhat predictable.
But now bitcoin is giant! We can't just say "okay, XCash fixes all the problems we know about, let's play with this for ten years and then release YCash" until we've fixed all the environmental, usability, privacy, safety, contracts, regulations, etc., problems. Because none of the people who use Bitcoin want to lose all their investments, and humans are bad at solving coordination problems.
1) the meta point: a year or two ago, some of us were saying all crypto was basically scams, and a lot of people were saying it wasn't. Since then, it's come out that major crypto projects stole billions of dollars from people. You should be giving us at least some bayes points here.
2) the population - crypto's a well-known scam area, so the sort of people it draws are scammers. Spend any amount of time in crypto -adjacent circles these days and you meet the sort of people who get into it - it's almost entirely empty scammers (SBF and Caroline Ellison were famous for being some of the most honest people in crypto). Even if the underlying tech had good usecases, it being almost entirely run by scammers is still bad.
3) you argue about the government resisting pretty halfheartedly. But governments are only really halfhearted about things they don't really care about. They're a lot more unambiguous about things that actually threaten them. If people started seriously using crypto to try to undermine the CCP, say, the CCP would effectively crush it pretty fast.
My first thought reading this article was "what do crypto do that is both 1) moral and 2) not already done by Western Union.
Which I'll now amend to "what can stable crypto do that is both 1) legal and 2) not done by Western Union".
And it seems the answer is nothing. So basically any evaluation of stable crypto relies on evaluating the utility gains from people in dictatorships more easily breaking laws vs the utility loss of criminal more easily breaking laws.
Great article. I think crypto generally is interesting and has use cases. I think that there will be more convergence on a smaller number and many will go to 0. So, if you hold forever, it’ll be high variance what outcome you get. Might be good to diversify.
Crypto is also easy for a malevolent AI to use, and should be banned/destroyed as an AI safety net (if you believe that a self-directed AI is possible).
Coming from Vietnam, I read your “theories” about crypto use case there and know immediately I don’t have to read the rest of your article. Sure, our government is corrupted. Sure, we don’t trust our banking systems. But no reason to believe crypto is better. And, why bother with choosing which unreliable systems to put your money into when your daily wage could be just several dollars anyhow? And for the rich, the idea of borderless money exchange system makes it tempting because they can use it for money laundering.
Still trying to double check your links (I'm having trouble even *loading the website* for your first project, BitAssets), but I already noticed that you accidentally swapped the links for the list of top exchanges and top stablecoins, and your source lists 13 stablecoins, not 10.
Also even assuming your numbers are accurate, saying "only two out of the top 10 stablecoins failed in the last two years" is **insane**.
A use case I've been hammering for a while is that if you use crypto instead of Visa or PayPal for daily transactions, the payment processors do not have power over you. PayPal can't examine your transaction history for wrongthink. That's a libertarian argument, but the inevitable result of scaling this to a lot of people (absent a crypto ban or a CBDC overthrow of the crypto space or something like that) is potentially profound in another way: The IRS would get full funding.
It is the job of the government to regulate financial transactions, not unaccountable payment processors with political agendas of their own. If the government is no longer able to outsource its responsibilities to industry because citizens are doing an end run around industry, it will have to regulate. I would personally prefer this, not because I enjoy IRS audits, but because the government is, however indirectly, accountable to me as a citizen in a way Visa isn't.
It's also worth noting that cryptocurrencies are centralized in practice, if not in theory. In 2016, the Etherium devs literally hardforked the currency just to freeze one guy's money, and everyone went along with it. The crypto world is (currently) controlled by *different* people than the legitimate economy and they have different views, but they are no less censorious, given the opportunity.
Small quibble re: your analysis of the "Reinventing The Regular Financial System" complaint – I think some who make this complaint are arguing that crypto is reinventing itself out of all its unique advantages. As a cartoonish example:
1. People claim that smart contracts / DAOs / etc remove the need for fallible human administration: "code is law!"
2. Those systems all get hacked.
3. Said people now realize that fallible human administration has some real advantages, and they are even less equipped to implement it than existing institutions are.
To use your metaphor, it's like NASA saying "Turns out that access to a breathable atmosphere makes things much easier; we're going to move the ISS to a grassy field in Virginia."
Of course, many believe in the decentralizing potential of crypto without having "elimination of all fallible human administration" as an end in itself. For those people, this is all part of a learning process, a pendulum swinging back from a noble experiment, a working out of details.
But if you go too far "Reinventing The Regular Financial System", you will in fact reinvent all the fun entirely out of crypto.
This is definitely pure ignorance, but honestly the biggest surprise for me of this article is that developing countries are *most* of the users of crypto. I was aware of the obvious use case there, but I guess I hadn’t realized that the world had come so far in internet access that it was actually possible for so many people to own crypto in the developing world. The fact that more ppl own crypto in Africa than North America is really surprising to me. Its kind of a white pill in a way as well.
If you are in a country with a developed banking system and not in a group that payment processors are likely to act against, crypto is not just some neutral thing that is only of interest to other people. It can still be used to facilitate terrorism and ransomware and have direct negative impacts on you.
Some of the high profile stablecoins that lost their pegs were basically more convoluted Ponzis, or at least very Ponzi-esque.
In that they would maintain the peg by printing and selling tokens, infinitely if necessary, to bring in more capital.
Generally nothing of use seems to have been built by the “builders” in the last couple years.
There were like 900 companies promising 20% interest with ZERO risk, but we still don’t have an actually decentralized prediction market.
I think people are right to conclude “crypto” is mainly a scam, even if the base use case of payments is still useful. People could have built something cool but they didn’t.
> Crypto Is Full Of Extremely Clear Use Cases, Which It Already Succeeds At Very Well
Yep. And in the US a lot of use is driven by people like migrant workers or relatively underbanked communities. A lot of the critics are, to be frank, privileged upper middle class types who basically say, "The system works FOR ME. Why would anyone need to go outside it?" Yeah, okay, if you make six figures at a respectable job and live in a major city then crypto's use cases are less obvious to you. And the ways it does get used are most likely to be concealed back office because customers don't like change. This doesn't mean they don't exist. (You see a similar thing for stuff like check cashing or non-traditional banks.)
I was at a blockchain thing a few weeks ago and there was only one speaker from what I'd call the first world. Most of them were Eastern Europeans, Africans, and South/Southeast Asians. That's not a bad thing.
> Big Crypto Projects Are Very Rarely Scams
Yep. The vast majority of crypto projects are not fraudulent. And the scams are just normal scams that are being done in crypto. That doesn't mean it's not a problem. But it's not anything unique to the crypto space. What's happened is that regulators aren't competent at regulating crypto. Very often the stuff being done is already illegal but the US government just hasn't built capacity to catch it.
Seriously, the government's really bad on this stuff. And it's worse because the credentialed classes are the least likely to be familiar with it or its use cases. I think the government's going to choose to leave it unregulated (eta: or I should say poorly regulated, as in computer programs regulated by a bunch of accounting majors) and wait until people with master's in crypto studies become available to hire rather than give up their hiring standards. But we'll see.
Meanwhile, plenty of people can avoid the fraudulent areas. I have. Now, the issue is that for a market to be safe you shouldn't need a background in it to avoid scams. But that's usually done by the government and see previous point.
> Crypto Is Valuable Insurance Against Authoritarianism. 6259 writes: there are no other rights in substance without the freedom to transact.
Sort of. Decentralized projects CAN be built this way. They don't have to be. China has its own cryptocurrency. And they built in a bunch of monitoring tools. While building separate systems can be a valuable form of support and changemaking the technology does not substitute very well for the social and economic component. At the same time, it moves the needle in what I'd normatively consider the right direction.
> Yes, The Crypto Financial System Is Just Reinventing The Regular Financial System Except Worse In Every Way, And That’s Fine
It's not worse in every way. It's better in some ways, worse in others. It's a tradeoff and having the option is better than not having the option. This is in addition to your further "in space" points which I agree with.
> Crypto is an interesting technology that had one terrible piece of bad luck: its standard-bearer, Bitcoin, went up in value 10,000x over a few years.
Yep. One of my worst failed predictions is I thought cryptocurrency was going to decline relative to other uses ten years ago. I expressed on this very blog a long time ago that the worst thing that happened to crypto was the huge influx of random money. I compared it to someone who inherits a billion dollars at 18 and how that skews their life path. It became trendy and that caused issues.
I agree with you too about the awkwardness that this money did fuel some genuinely good development. But on the whole I'm glad the tide's going out. Assuming things don't get too bad the reallocation is deeply necessary.
I think it would be helpful to go back to just about a year ago, at least as I unreliably remember it. Two relevant things come to mind:
1. If you don't watch sports this won't land as hard, but FTX was a prominent ad buyer of the Super Bowl, and ran ads with about a dozen sports and non-sports celebs endorsing it. They also bought naming rights for the arena where the Miami Heat play (deal now being unwound, I see). Saying "Just FTX" heavily underplays how big their public footprint was. One would be nuts not to, as is said here, "update on that".
2. I notice not a mention of NFTs, which over about six-month period went from idea to controversy to general collapse -- in fact, collapsing so hard that it's barely surprising that we've all forgotten about them. Sure, they're not coins, but they were in the ecosystem. But if you're talking about "what would you have done in the crypto space a year ago", all that stuff would be on the list.
I'd take those claims re Ukraine with a handful of salt. Prior to 2022, you could just send SWIFT without any hassle. In fact, UA banks prior to war were anything *but* sclerotic, copying a lot of useful innovations from European neobanks.
This is awesome. Thank you so much for writing this.
Any thoughts on the claim that “bitcoin is different from the rest of cryptocurrencies” because no one is in charge of it? Even the SEC and CFTC heads seem to agree that bitcoin is different.
Being infinitely anything seems excessive. The more sensible version of this headline is just that you're not hostile to crypto, just as you haven't exhibited hostility toward space tech.
One thing to consider when talking about cryptocurrency: a financial disclosure.
I know you’re not promoting or commenting on any specific technology here, but since this is in the realm of “number-go-up” stuff, it’s generally a good idea to have a general disclosure about holdings/etc. I can imagine reading an essay about meme-stocks by someone I trust, and then finding out later that some significant fraction was of their net worth was in meme stocks at the time, and that eroding my trust somewhat, even if they really had no intention of trying to convince anyone to buy meme stocks.
Similarly here, I’m aware from previous comments on ACX grants that you have held cryptocurrency in the past, and it’s probably worth disclosing in some way here.
(Maybe I missed it, in which case disregard this comment and apologies!)
So I know this isn't the main thrust of the article, but regarding this attempt to get Democrats on side with freedom of contract:
"If you really think January 6 was a close call, where do you think we’d be if Trump had succeeded? Would he have just passed a few more tax cuts and built a few more miles of border wall? Or would he have actually done the fascism thing? And if he actually did the fascism thing, do you think he would have shown more restraint than the Canadians, and backed down from freezing bank deposits as a weapon against protesters?"
As I've said before, I have never, ever, in my entire life, seen this argument work. The people who urge censorship or ostracization of people with Wrong Opinions simply do not think they will ever be on the other end of that sword. No, it's worse than that -- they aren't even capable of visualizing such a situation. You might as well be speaking to them in ancient Etruscan for all that they're going to comprehend what you're saying; you'll just get a confused stare before they shake it off, forget you said anything, and go right back to attempting to get you fired from your job for thinking that men can't get pregnant.
I know this sounds mean and uncharitable, but I swear I'm just describing my personal experience.
I'm trying to figure out what happened to "Gems" another on your list from 2015, and I can't find anything about it. Do you really think that the people who "invested" six figures into Gems back in 2015 are happy now?
It seems like you are using an insanely strict definition of "scam" in order to justify your position, but a neutral observer would come to very different results. The real questions are "did the project succeed? are the people who FOMO'd into the ICO happy now?" Whether the project managers *explicitly* rug-pulled or just quietly walked away or were criminally incompetent and went down in flames, the end result for the so-called investors is the same, and there is no way that you could advise people to invest in the old ICOs with a good conscience.
Can someone explain how crypto as a hedge against authoritarianism works in practice?So if you’re in Venezuela and your government prints too much money, what do you do exactly to get around it? Can you pay a neighbor for a television through Bitcoin?Buy groceries with crypto? How exactly? Do you use an app or what? Or do you just put your Venezuelan currency into crypto and sell when you need money?
Private currencies spring up all the time--think of hawala networks, for instance. They also have the advantage of circumventing corrupt or dysfunctional (or honest and law-enforcing) state financial systems. And they also typically have a private authority who's accountable if the private currency gets looted or otherwise collapses. The relevant question, therefore, isn't, "what's the advantage of private, non-governmental financial systems over governmental ones?", but rather, "what's the advantage of *strongly decentralized, collectively managed* non-governmental financial systems over centralized ones?"
And in fact, this question has a history. When Napster and its descendants became popular as music piracy vehicles, a lot of the same sort of people who now tout cryptocurrencies as the future of financial systems began touting "P2P" as the future of data management systems. What they gradually discovered over the subsequent few years--although it really should have been obvious from the beginning--was that the *only* appeal of decentralized systems over centralized ones is the lack of a legally liable party for the government to target. In every other respect, it's a lot worse--and it turns out that when escaping legal liability is the goal (and all the disadvantages of dealing with a sleazy, beyond-the-law black market are still less bad than the alternatives), there are plenty of simpler solutions than constructing horribly clunky decentralized systems (centralizing in a sleazy out-of-the-way jurisdiction being an obvious example).
P2P networks went away, of course, as soon as the music industry adapted and made their product available at a competitive cost. Western financial systems, like recording companies before them, are naturally slow to give up their old ways (and old profits), but they're ever-so-slowly beginning to catch up--and when they do, cryptocurrency will quickly join P2P on the scrapheap of bad technologies briefly made attractive by a few transitory quirks in legal and commercial circumstances.
I can see how having a currency outside of the one controlled by the current government could be useful, and accept that in particular circumstances that could be crypto, but most of the time you'd be better off getting USD and keeping it under a mattress.
But perhaps your mad government won't let you get USD, but will let you on the internet, and haven't caught up enough to restrict Tor. In that case, crypto could work if you're savvy enough to use it properly, you don't expect unreasonable gains, you avoid the obvious scams and rug-pulls and get lucky avoiding the non-obvious scams, don't engage with the wrong smart contract or DAO, manage to balance the security and accessibility of your keys, you steer clear of NFTs and don't get hit by a phishing attack...
If that's you, you might get some utility out of crypto for... buying... something... that is perhaps more crypto... um...
The list of "best new crypto projects" you've linked contains:
- a spreadsheet
- somewhere to buy NFTs
- a batshit idea for NFTs that represent your ideals in a never-to-be-realised society that will be forgotten about by March
- two projects too complicated for the article to explain
"If Nancy Pelosi’s text messages are any guide, Democrats have joined libertarians in the “actually pretty worried about the government becoming an oppressive dictatorship” club."
That part made my jaw drop, because Bit...sy, you *are* the government. Who the hell do you think is going to be the oppressive dictators? Take a look in the mirror and then work on *yourself*.
(Good grief, I know political parties live on "we are pure angels, our opposition are raging devils", but this takes the cake).
As for the magic beans - if Vietnam can make it work, good luck to the Vietnamese. But so long as it's been treated as 'useful for illegal purchases', the blackmail spam that keeps turning up in that one work email account of ours always demands payment in Bitcoin, and people are treating it as "buy now, make a zillion percent return, then sell before the suckers wise up", I'm going to stick with the currency of my nation, thanks all the same.
I don't know what the regulatory restrictions or implementation difficulties are, but man, I really want DeFi to be a legitimate way to get a loan for a car or a house. I love the idea of the early Local Bank, where the community pooled their money to help each other buy the things they need, and it seems so possible to create that in crypto.
> Crypto is a few hundred interesting projects, plus a long tail of thousands of scams.
I think your arguments fall short.
By calling some of them "not scams" I think you are focusing only on the most blatantly fraudulent aspects and glossing over the pervasive "let's create an asset bubble" vibe that is foundational to all crypto, and that most people are talking about when they say it's all a scam.
Crypto relies on both technological concepts AND collective belief in a particular instantiation of that concept. (E.g. in bitcoin as opposed to some equivalent fork of bitcoin.) It is that collective belief, and the behavior required to maintain it, that can't lose its smell of scamminess, and that people might rightly avoid for ethical reasons.
Personally, although I see some technical value in cryptocurrency, I find it unethical to participate in the MLM-like bubbles of any of them. Doing so is still necessarily trying to profit at the expense of the people who come in later.
I think I'd express even a little bit more skepticism, but I agree with the overall premise that it's not all scams.
On "Crypto Is Full Of Extremely Clear Use Cases, Which It Already Succeeds At Very Well", I think this simplifies down to "Crypto lets you avoid state financial regulations (for now)". Sending crypto to a Russian is easier than Paypal because you don't need to do KYC / Anti-money-laundering checks, which in your specific case is probably a net good, but in general most people in the US don't support removing those checks (I claim). Sending remittances is better using Bitcoin because the government can't tax them / inflate their value away.
I'm generally here for a bit of civil disobedience and think it can be just to ignore unjust laws. And I strongly agree that giving people protection from government incompetence causing hyper-inflation is a positive thing.
On the other hand, (not an economist) I note that most countries consider it very important to control monetary policy. (The EU being a counter-example that sort of proves the point, given the challenges post-2008). While the libertarians / gold standard folks hate this, controlling the money supply is the way to avoid runaway inflation, and so if countries lose control of their monetary policy, it's unclear to me that's a good outcome. So this could be a situation where a little bit of crypto is a good thing, but if we get too much of it, small economies might be dominated by crypto which could be politically destabilizing at the national level.
"Big Crypto Projects Are Very Rarely Scams" seems like a low bar to me, though I think it's a fair point to argue against the "all crypto is Ponzi" position you're explicitly highlighting. Going back and checking out the "Most Promising Crypto Projects Of 2015" is informative; I don't see much that's amounted to anything in there. This is my big complaint about web3; so many projects launched, so few actual meaningful products. (The Pirate Bay and Prediction Markets being the two product categories I do think are meaningful, both in the "avoid government regulation" family.) I do see some solid use-cases for NFTs (I did some prototyping here in 2018 before NFT meant trading "bored ape" GIFs) around digitizing assets that are currently illiquid but which could be traded given a market -- but this is hard. (Houses are a great example of a bad idea that people sometimes think would work for NFTs, but I think there's possiblity around short-term commercial debt for example).
"Crypto Is Valuable Insurance Against Authoritarianism" I think this is the best ethical point to argue on, but I think that politically it's a weak one. No state is incentivised to allow "insurance against authoratarianism" when it also allows you to use the darknet and avoid taxes. If we look at TOR, it's boosted by the US State Department as a weapon against illiberal states, and opposed by just about every other branch of government (CSAM, drugs, etc). _Maybe_ there's a case here that given enough regulation of the on-/off-ramps of domestic usage, the US could come around to considering Crypto as a TOR for finance, weaponizing it to undercut regimes that dont share its values. I haven't thought too much about this.
"Yes, The Crypto Financial System Is Just Reinventing The Regular Financial System Except Worse In Every Way, And That’s Fine" -- recently I have been wondering if there is a more general principle here. Maybe it's a good idea to periodically give a localized exemption to a broad class of laws, and see if the results are dominated by A) the harms we would predict, or B) new value we couldn't predict. For example, I think there's a strong case that Uber/Lyft (in some jurisdictions) demonstrated that taxi medalions were drastically harming consumers, and should be abolished. But we'd have never found that out without someone ignoring the rules and running the experiment.
Similarly, I think the crypto fiascos are very strong evidence that all of the financial regulation we have is actually doing good work, complex and painful though it might be. Without the SEC but with the modern internet, we would have a hellscape of boiler-room scams and ponzi, and everybody would be losing their shirt, instead of collecting a cool 10% per-annum for decades on end.
Without the A/B test though, it can be hard to be sure! The big challenge is getting a meaningful test, without also harming innocent bystanders.
Agree with most of what you said, except that: No, Sillicon Valley Cannot Be Less Than Infinitely Hostile To Crypto.
And the reason is sanity. They can't change their minds on it now, very few people are that strong.
Can you imagine being aware about bitcoin and crypto since close to the beginning, on top of the tech news, understanding the technology, at least at a high level, and deciding to pass? Then watching the number go up year after year after year? Madness. It HAS to be a scam.
And this is not just about missing out on any generic investment opportunities, there are always lots of those that don't drive people crazy, because it's not "their area". They aren't "supposed" to know about it. But with Bitcoin they were indeed supposed to get it. But they didn't :(
For bonus points, can you imagine being very knowledgeable about technology *AND* about finance, and not getting into crypto? Would you become the biggest crypto-hater in the world? It makes me sad every time I see his posts.
Scott probably already knows this, but attributing the "space pen" to the space program is basically apocryphal. Quoting wikipedia:
>The claim that NASA spent millions on the Space Pen is incorrect, as the Fisher pen was developed using private capital, not government funding. The development of the thixotropic ink cost Paul Fisher around $1 million (equivalent to $8.6 million in 2021) [...] NASA never approached Paul Fisher to develop a pen, nor did Fisher receive any government funding for the pen's development. Fisher invented it independently and then, in 1965, asked NASA to try it. After extensive testing, NASA decided to use the pens in future Apollo missions. Subsequently, in 1967 it was reported that NASA purchased approximately 400 pens for $2.95 apiece (equivalent to $24 each in 2021).
One point you don't touch on is that unfortunately Governments, regulators, financial institutions etc. do have tremendous recourse in cutting off crypto, just like they do normal banks. It's a public ledger, so all transactions are visible, and governments could, if they wanted to, Blacklist crypto wallets. Unlike physical currency you fundamentally need an offramp in order to spend crypto on most things, and if your wallet is marked as unspendable evil terrorist money that it is a felony to take money from, it's permanently useless as nobody will ever accept it for cash.
See below an example action taken against the IRGC - I am not a fan of the IRGc but it could be done to anybody.
I don't know much about crypto, which I find difficult to understand well, and--surprise!--that makes me wish it would go away (so I won't feel so left out). My technical understanding is no better now, but this post has made me more aware of how my underlying biases have limited my judgment, and I appreciate the argument.
Brief thoughts from someone (me) who runs a magazine trying to be the 'Wired of web3', called Culture3 (http://culture3.xyz/)
Tether is definitely not 1:1 backed by high-quality liquid assets like, e.g. Circle's is.
But I don't get excited by the argument of 'crypto is a use case, only for developing economies like Vietnam, so I wanted to share a couple more use cases
- NFT ticketing is used by UEFA (eg for the Euro 2020 (2021) football tournament, by singers like Lewis Capaldi, and by Ticketmaster, who have made 5 million NFT tickets so far: culture3.xyz/posts/nft-ticketing
- Decentralised data storage is a data storage solution that will outlast AWS. I admit that today it is expensive (less than 1 terabyte is stored on Ethereum), but it is used today, and the cost is only going down: culture3.xyz/posts/decentralised-storage
- Arpeggi is a company fixing a major problem when it comes to music sampling, which has become problematically concentrated industry: culture3.xyz/posts/arpeggi
- Dequency is a company disrupting the $3bn sync licensing industry, where it takes 9 months minimum for royalty payments to be received: culture3.xyz/posts/dequency
- Golden is basically niche wikipedia, and it is better because, well, imagine if you had an easy way to a) compensate and b) coordinate people documenting research about ivermectin, at scale: culture3.xyz/posts/golden
- Less tangibly, within 15 years, most property deeds will be on blockchains. In the UK, Mishcon de Reya ran a blockchain prototype which reduced the time it takes to transfer a house on the UK land registry from 22 weeks down to 10 minutes. In the real world, American cities are using blockchain companies to manage their land registries: culture3.xyz/posts/nft-real-estate-okada-propy
Fundamentally, these blockchain use cases come down to one thing, in my view: when data should be shared between parties, like real estate, music sampling, any form of licensing, or anything else.... then there is usually an unambiguous use case for blockchain
Separately, and more ambiguously, I think web3 is well-positioned with many cultural trends, that I won't go into (unless requested). There's already enough above for me to be slated for!
An interesting essay from one of the best writers out there. Unfortunately, it's not much more than a magnificent sleight of hand. This essay makes five interesting points which all fail in very interesting ways. I'll pick them out one by one.
I suppose this is the first decent defence of crypto I've read in a while because it simply bites the bullet. It admits all of crypto's flaws straight up and argues not that they are going away (first old trick) or that they are not really flaws (second old trick) but that they are worth accepting in light of crypto's benefits. This is an unacceptable bargain but I'll come to that later.
First off, this essay attacks a very naive view of crypto: it's all a scam. It needs to do this to succeed. But this is not what sophisticated critics of the crypto industry think. This is the filtered version by people who can't grasp nuance. What crypto critics really assert is the crypto industry is fundamentally unnecessary and everything it has come up with is a version of unnecessary: smart contracts and nfts aren't necessarily fraudulent. They just have no actual utility compared to viable alternatives.
Second, the main argument is that crypto is some sort of hedge against authoritarian governments by allowing common people a degree of financial latitude. This is wrong on two counts: the first is that the fact that people in broken financial systems resort to crypto tell us very little about crypto's utility. In the seventies, the Irish used pubs instead of banks and wrote their debts on tissue paper. Venezuelans began to employ jewelry and gold as media of exchange. People have found different solutions throughout human history. Crypto is merely the latest and not a particularly good one.
Second, we have direct evidence, beyond philosophical theoretizing, of a country that went fully on crypto. El Salvador adopted Bitcoin as its official currency last year. The country is now not only at risk of default and in serious financial crisis, Bukele is also more authoritarian. He has used the crypto transition to centralize power and crack down on dissent. There's no reason to think of crypto and authoritarianism as natural antagonists. They are,in fact, well suited for each other. A permanent, public, pseudonymous database which is constantly updated is a dictator's wet dream.
Also, economics is always political. Someone is always in charge. There are no power vacuums. If you surrender your financial sovereignty to crypto, you surrender it to people, hackers, whales, shadow banks, and institutions that have no legal or political responsibilities to give a damn about you. At least a central bank and a government have notional duties to do that on paper.
Third, comparing the crypto industry to space is extremely disingenuous. I'm not a big fan of the space industry: a lot of it in my opinion is people trying to execute crappy science fiction stories in real life. But to dismiss it all as a sort of more expensive, less efficient simulacra of planet earth is to do a great disservice. Because of the space industry,we have gps, we have transformations in the communications industry, we have geostationary satellites. And those are just direct innovations. There are also indirect innovations like treadmills and scratch resistant glasses and better insulation, among many others, that were downstream of NASA fundamental research. Put more obviously, there are things we should be thankful for in the modern world that happened because of the space industry before and without which we had no alternatives. What's the same for crypto. What's the GPS level equivalent for that industry. In thirteen years, what can we point to tangibly and say this happened because of crypto and changed millions of lives forever. Everyone who hasn't pulled the wool so far up over their eyes knows the answer to that question.
Finally, the argument that there's just a small sliver of crypto that's rotten and this is comparable to everything else is a very very generous interpretation. It is Bill Gates foundation level generous. Everything in crypto, strictly defined, is criminal activity of some form or the other. Ethereum and Ripple are unregistered securities. Every major exchange is insider trading and wash trading. Every stablecoin is guilty of legal misrepresentation. And these are the ones that are not engaging in outright fraud a la FTX.
Is our financial system perfect? Nope. Is it great? Nope. But is it infinitely better than crypto? Absolutely. Will that change? I'd put money on Xi Jinping becoming president of the USA before I put money on that. And for all the extreme libertarians out there, there's cash and there's gold. They don't come with possible surveillance. And they are LINDY. Also, be a normal person. It seems to work for some reason.
Vietnam: Has China-like capital controls but has not yet banned crypto. 'Nuff said.
Crypto projects: several other ways of looking at it. The same dynamic exists for pyramid schemes, for example, or successful multi-level marketing schemes. Past performance is not a predictor of future performance.
Ukraine: also a center of cyber crime, including ransomware - which is itself a major cryptocurrency use case.
India/Pakistan: both have capital controls. Hmm - likely your index is describing capital controls resulting in "cryptocurrency adoption". Or a recap of China/South Korea from 2015...
This is the first very good article you've posted in a long while, very happy you knocked it out of the park here.
Small nit though, much of the 'decentralized' aspects of crypto are essentially meaningless because people do things like e.g. letting the exchange own their wallet so they don't have to deal with the hassle of owning their own keys, even though that defeats the entire point of cryptocurrency. The most infamous example of this is NFTs just being URLs to JPGs hosted on some random server somewhere, most often an AWS instance, which detractors of crypto like to point out ad nauseam.
Do your return calculations take into account costs such as transaction costs, holding costs, theft and loss ? Or do they, nonsensically or dishonestly, assume those are all 0 ?
>When something goes up in value 10,000x, it’s hard to think of it in any other context. Whatever it was before, now it’s “that thing which went up in value 10,000x”. And so both crypto believers and detractors have treated crypto primarily as a thing for going up in value
One minor caveat is that Bitcoin was *designed* to make number go up - the increasing difficulty of mining and the hard limit on the number of coins in existence means that it was deflationary from the start. And (speedrunning yet another bit of finance history) deflation means that people hold their money instead of using it.
Someone who's doing cryptocurrency development needs to invent an answer to "how do we algorithmically decide how big the money supply should be?" Or perhaps even more deeply, "how do we bootstrap a crypto project aside from giving a worthless token to people and promising Number Goes Up?"
I didn't see anyone deal with the first graph yet, so if so, they probably got it better than me.
Saying that, I have no idea what that chart is pretending to show. Thanks Scott for the source link, and what follows is not about Scott's commentary, but the graph just confused me more than anything.
Countries are scored on a scale of 0 to 1. All right, that's not a problem, people do that all the time, but...
"Our methodology
The Global Crypto Adoption Index is made up of three metrics, which we’ll explain in detail below. We rank all 154 countries according to each of those three metrics, take the geometric mean of each country’s ranking in all three, and then normalize that final number on a scale of 0 to 1 to give every country a score that determines the overall rankings. The closer the country’s final score is to 1, the higher the rank."
Why is it a geometric mean of three ranks? Why normalize those ranks? Smarter people than me, feel free to let me know.
But my real problem, is they don't actually describe how they weight the data. It's PPP weighted (somehow), I get that, but then suddenly in the third rank its weighted by PPP and internet access. When I first read their methodology I was shocked India was so low. But that makes sense, Indian internet coverage is pretty high. But then looking at their top level results, 'all' of the variation comes from the third category:
Category 1: India - 2 Vietnam - 4
Category 2: India -3 Vietman - 2
Category 3: India - 72 Vietnam - 3
This is not a description of 'regular joes' using crypto as a replacement for banking. This is a description of a very wealthy few not having any other option how to get their money out. Let me know why I'm wrong.
When you discuss the one advantage of Crypto (decentrality), you have to understand that even this one advantage is guaranteed in the same way that regular cryptography is safe from attack through large semiprimes: It's not guaranteed, it's only very expensive. It's security by economics.
As long as one party controls more than 50% of the network's hash rate, they have potentially total control over future entries into the blockchain, which is essentially the key to the entire vault. Controlling >50% is indeed expensive for large networks like BTC so it has held firm, but it's much more feasible (and really happening) for any number of smaller networks, potentially leading to a higher-order of centralization of the big networks getting bigger because they're safe from attack. Also, since BTC is "the thing that went up 10,000x", everybody wanted in on it and bought tons of ASICs, whose price is highly correlated to the price of the coin it's supposed to mine. If and when BTC has gone back down 9,999x, reaches some kind of stable price point, and the Ponzi demographic has lost interest, all that mining hardware can be had for very cheap (you can already check ebay for listings), making such an attack much more attractive. Even today, the 3 largest pools already make up ~60% of the hash rate.
Proof of Stake can be discussed much more easily: The 51% attack is already baked into the design. If you own 51% of a proof of stake coin, you own the entire network.
So that's two levels of decentralization (distributed ledger and multitude of secure networks) secured not by mathematical proof, but by mere economics, which can drastically change on a whim.
I don't think this changes my mind on crypto, but I am mulling it over. Right now, it feels akin to living in a world where I was almost bitten by a snake, I know people who have almost been bitten by snakes, know a few that *have* been bitten by snakes, one of whom died, and many of the people that I know know of someone who knows someone that brings a snake around with them that keeps biting people. It's usually the same dingus doing it, and nobody talks to them because of it.
These are very interesting snake facts. They fit an important ecological niche, which is generally in places that I am not. That has value, and provides a net benefit to the environment. But, I still don't like snakes.
Scott, you know if you lease out your newsletter to a crypto booster, you're supposed to tell us, right? Blink twice if you're being held against your will. More generally, I agree with most of the points, but the opening strawman joke is (slightly) funny because the anti-crypto position is mostly a strawman.
Speaking for myself, I'm only 80-95% anti-crypto. Remittances and working around failed states is valuable, but I question whether you really need crypto for that. Look at Wave in Africa for a great example of a non-crypto fintech for underserved populations. Most of the other use cases seem like BS. There are actually tons of scammers attached to crypto (this running list is great: https://twitter.com/web3isgreat), and I don't think citing scammers elsewhere is much of a defense.
"It used to be 100X worse" isn't very convincing either. The web worked well pretty much immediately, even if only to put up text and blinky tags. We've been waiting what, 12 years since Bitcoin and 7 years since Ethereum launched? When is something compelling supposed to come along?
I'll be interested to see if this all changes over time. Maybe at some point the next generation of crypto or some future version of Ethereum is awesome. But I'm not holding my breath, and I think at this point crypto is a big money sink and a distraction from innovation that creates real value.
Bitcoin's two strongest features are avoiding monetary debasement and protection from payment censorship. You covered the Paypal example for the latter, but I'm not sure you gave enough credit for the former in this post.
“Freedom of speech is hollow if you can’t pay the print costs for your magazine. Freedom of religion is hollow if you can’t pay the rent on your church. The freedom to protest is hollow if you can’t pay bus fare to the protest site.”
In which Scott nearly realizes why civil liberties are better safeguarded under socialism than capitalism.
I think you are ignoring the real world performance of money market funds. It was news when primary reserve fund broke the buck and returned .98 on the dollar.
The other thing to note is banks do two different things: maturity transformation and facilitating transactions. Crypto doesn't really do maturity transformation. Furthermore use in transactions is at odds with being a good investment and capacity is very limited.
The problem isn't that there are some interesting and good use cases for crypto. There definitely are, as you highlight! The problem is that it appears a big reason why people use crypto isn't to actually "use" it but instead to treat it as a growing asset. And when that's the reason why most people are putting money into an asset, we normally call that a bubble.
Think about all the legitimate reasons to buy tulips, and how difficult it can be to use tulips for those reasons when there is a tulip bubble. That's crypto. The legitimate uses are actually harmed by the speculation, and there is an awful lot of speculation. You helped your Russian friends buy plane tickets, and that's great! Except had you done that when Bitcoin was crashing because of the speculators leaving, well, that might've been an additional headache.
I guess what I'm saying is, your second point about how much money you could've made really, really undermines your other two points, and is also not a good reason for supporting crypto (even if it does prove your point they're mostly not "scams" in the traditional sense).
For Americans wondering what it's like having your currency collapse and needing to use crypto, I recommend Robert Kroese's Mammon trilogy (also has asteroid impacts and other disasters).
I think calling cryptocurrencies "decentralized" is inaccurate[1] to a sufficient extent that it papers over the major weakness. It's not like what gold bugs say about gold, in that you've got inherent value in your pocket that doesn't depend on *anybody* else -- no bank, no other individual, no communication network. Cryptocurrencies only work so long as you have sufficiently wide and fast Internet communication that you and the person on the other side of the transaction are in reasonable contact with the blockchain. If you *don't* have that kind of Internet connection, or your connection is compromised (e.g. under goverment control), then your cryptocurrency is useless.
This isn't going to be a problem if you're in a small country with a weak government and much of the Internet infrastructure is controlled by benign or at least neutral governments outside your own, so that can work in Venezuela or small African countries, even Ukraine or Russia. But I'm dubious that this would work if China or the US went full-on fascist and decided to stamp it out. The Internet unfortunately has a delicate fixed physical infrastructure[2] that is trivially easy for the government to control, if it really wants to[3], and it could hardly fail to really want to if cryptocurrency were threatening its grip on political power.
That doesn't take away from your point that cryptocurrency has reasonable somewhat niche use cases, e.g. for small countries with weak governments and disastrous economies, or for uses (like prostitution or gray market drugs) that are more the subject of modest social disapprobation than outright criminalization and zealous prosecution[4]). But extrapolating from there to the notion that if Hitler is cloned and wins the 2024 US Presidential election and decides to nationalize the entire US economy and set up Konzentrationsläger for Untermenschen that you'll be able to laugh it off if you have $100,000 in crypto in a cold wallet is...naive, I suggest. Clone Hitler will not forget to have his new Brownshirts take over the Internet backbone servers before putting Congress under house arrest.
--------------
[1] "Distributed" is more accurate, because it emphasizes the lack of a central authority *but* the crucial requirement of relatively unrestricted communication between the participants.
[2] It doesn't actually have to be that way, IP was originally *designed* to work well with a highly distributed network, but in practice too much of the Internet has become centralized for the sake of efficiency, e.g. Wikipedia lists a mere 15 Tier 1 networks worldwide, and only 6 within the US (AT&T, GTT, Lumen, T-Mobile, Verizon, and Zayo). Anybody think Verizon or AT&T are out of reach by Clone Hitler if he wants them to do anything in particular with respect to the packets traversing their network? It's an old standard of computer security that if the black hats have physical possession of the computer, nothing on it or which passes through it is secure.
[3] Although you could always hope to enlist the amateur radio community to provide TCP/IP over radio. I'd be happy to participate myself -- for a nice cut of your crypto transaction heh.
[4] What happened to Ross Ulbricht is an illustration of how much protection clever Internet technologies give you when the government *really* wants to nail you. He was 100% confident that using Tor and BTC made him untraceable. Oh, and in case any NSA spooks are reading, I totally did not imply that Tor could be broken, nope nosirree bob. Safe as houses.
> Venezuela’s economy has been in slow motion collapse for the past decade. The average inflation rate during the late 2010s was 53,798,500%
I believe this is wrong, that's the consumer price index, not the inflation rate (https://tradingeconomics.com/venezuela/inflation-cpi). Won't claim to really know what a CPI is but they seem to be much bigger numbers, so I think you made a mistake here
As for poor countries, something like Mpesa seems to work better than Crypto at bringing finance to the poor.
I think the only real major use case in the future are going to be getting around copyright protections. As that will become more and more disfunctional. Lifetime of the author + 70 years is way too long. And "similar works" are often way too dissimilar.
My guess is that creative industries will slowly become more decentralized as there will be more and more powerful tools available. And it will be increasingly harder to not be copyright trolled. So to get around it, you release your work and attach crypto adresses to it. Either in music or virtual worlds.
Convential economics claims that you need to force people to pay up, but I don't think that is true. Kickstarter has shown that people can be quite generous. We just don't like abusive greedy corporations treating us like financial pinata's.
Question: What stops traditional international banks from thumbing their noses at the Vietnamese government and developing phone apps that would allow Vietnamese people to do the things they are currently using cryptocurrencies to do, but through a bank that is located outside their country?
Is it that the Vietnamese government has enough leverage against US banks that US banks are scared to do this? Is it that it would be less profitable for the banks than whatever the banks are currently spending their capital on instead? Is it just that it's too weird and banks are run by traditionalists?
(Genuine question, not rhetorical; I honestly do not know the answer.)
People use it to do finance in places with corrupt governments? That's supposed to be a *good* argument?
It sounds unlikeable character Pierce from Community saying, "Somalia has 1,900 miles of coastline, a government that knows its place and all the guns and wives you can afford to buy. Why haven't I heard of this paradise before?"
Just...
I realize I'm not contributing rational counter argument here.
> I’m less than infinitely hostile to crypto. This is becoming a pretty rare position
I don't think this is rare at all IRL.
On the internet, yes. Everyone is in 2 camps. A) Crypto is a scam B) Crypto is the best thing since hot water.
I'm an (ex FAANG) system engineer, I speak with developers, engineers, entrepreneurs and hackers all day. I have _never_ met a person IRL in my social and professional Silicon Valley circles that is in camp A or B.
Everyone I know is camp C: crypto has some promise, the current incarnation is a shit show, DeFi is a house of card, etc.
I think people in camp C have better things to do than fight holy wars in internet comment sections, so they're heavily under-represented.
Why would you help people avoid helping their country defend itself against an existential threat? Would you similarly help Americans not willing to invade a Mexico that was becoming a military and political proxy for communist China? A Mexico that was for good measure violating it's international agreements to not terrorize American communities in Mexico?
It's interesting how some of the commentors comment on things like energy cost of cryptos and so on, as if they are negative. I, for once, find it a positive thing compared to a usual currency like dollar, ruble and so on. The point here is - the currency should have either a REAL mining cost or should be emitted by a known predictable set of rules. It is a good point where there is no organization or indivildual who can say "oh, let's just print a gajillion dollars, because we need them for fighting covid or whatever other weird cause".
I should note that my sample of "most people I know are in camp C" is heavily biased, because I speak about crypto mostly with _technical_ people.
Most people are non technical, and can't even be expected to understand the difference between cryptocurrency and blockchain. Or the more nuanced difference between Bitcoin (the software) Bitcoin (the internet currency) and Bitcoin (the phenomenon).
Setting aside the "is crypto a scam?" question for a second, I'd just like to say that if the NSA/CIA/"Deep State" is really doing some psyops behind the scenes, crypto seems like an obvious target. "Crypto is only used by terrorists and drug dealers", "Crypto is bad for the environment", "All crypto is a scam", etc. Or maybe it's not some extreme sinister psyop but just slight pressure from government institutions and media outlets. People with power don't like technologies like free speech, internet, guns, and crypto. They'd rather keep rolling with the existing power structures.
Admitting that they missed out on the best financial opportunity of their life because they're not as smart as think they are? That would be both soul-crushing AND ego-deflating, both of which would make their lives worse.
It's much cheaper to just convince themselves "It's all scams!!!!!", and then try to convince everyone else too.
The only question is what mental gymnastics they would do if CC actually went 1st-world mainstream. My best guess is try to elect an anti-CC president to bring the CC-rich back down to their level. Crabs in a bucket.
> Conflict of interest notice / I am dumb alert: I do hold some cryptocurrency, mostly Ethereum, mostly because I received it a while ago as crypto, and want to wait until the end of the bear market before selling it.
> There are 8 Ivy League schools in the US, 400 high-quality research universities, and about 1,000 fraudulent diploma mills. Higher education is full of scams! If you’re a knowledgeable person following a normal educational track, you’ll probably be fine. If you click on spam emails that say “GET A PHD IN TWO WEEKS WITH THE UNIVERSITY OF PHEONIX” and wire them your life savings, you won’t be fine.
The University of Pheonix sure sounds like a scam.
A lot of people, though, treat the University of Phoenix the same way, and it isn't clear to me why. They seem to hold themselves out as a school where if you send them money, they will send you curricular materials. I don't see the problem.
A friend of mine at a respectable public university failed Operating Systems, a required class for her major, and made it up by taking University of Phoenix's operating systems class. This was considered acceptable to the administration.
Is the difference that taking a University of Phoenix class for state university credit gets you a diploma from State University, whereas taking the same class without matriculating at State University gets you a diploma from University of Phoenix? Where's the scam? State University has already admitted that University of Phoenix is just as good.
Thank you for this post. I would add that if crypto forces re-evaluation of some aspects of financial regulation, that would be a good thing. The public tends to support financial regulation in the abstract because of a vague sense that 2008 and other crises could have been prevented by "more regulation", but in reality the relevant macroprudential/soundness rules are a small portion of the overall regulatory burden. For example AML/KYC rules make it very risky for financial institutions to provide services to new/smaller companies. It was nearly impossible for our startup to open a bank account, and we only succeeded because I held a securities license (and was therefore considered low risk) from when I ran another firm. Back on crypto, the SEC is focused on picayune issues around what does/does not need to be registered as a security under the 1933 act. The reality of securities registration is that it primarily involves paying a law firm several hundred thousand dollars to produce a document that no one will ever read. So while requiring registration will certainly result in less crypto (because not everyone has that kind of money), it's far less clear how this will benefit the public, unless you are starting out from the assumption that crypto is bad and therefore less of it is always good. Finally, Scott touched on the way that financial regulation has become a way to ban or suppress things without accountability or democratic debate. If the government wants to ban (say) OnlyFans, instead of passing a law or going to court they can simply have the regulator go to banks/payment processors and say "hmm, this business seems risky, mumble mumble some potential future liability". And because the regulator has a ton of discretionary power over banks, and OnlyFans is just one client, they are inclined to comply out of an abundance of caution.
Can you transact with the traditional financial system and have the ability to prove to anyone at any time that you've done so? Can you do the same while hiding that fact from everyone unless you chose otherwise? Can you do something in-between such as proving that you have an account with > 100 dollars in it but without revealing the actual amount? Can you create a virtual asset which is quite reliably tied to the price of onions? Can you create one that's not actually pegged to anything with its own unique monetary policy? Can you build a prediction market? Can you create and deploy something else, some weird financial instrument which no one has thought of yet for whatever purpose you desire? No matter who you are or where you live it's no to most or all of the above, not because it's not theoretically possible but because you won't be allowed to or don't have the resources, this is so much the case that most of that stuff wasn't even imagined until crypto came around. If you value this type of experimentation, then crypto actually has a leg up and the rest of the performance gap has either already been closed or will be shortly. The question is, the one that ought to be central to any good faith argument for or against, do we want this kind of stuff to be possible or not?
Most of my disagreements with this post boil down to: “Did you watch Dan Olson’s video on NFTs?”
What I really, super don’t understand is why you argue that cryptocurrency is decentralized. Didn’t the ETH/ETH Classic fork teach people that proof of stake chains are extremely easy for government to co-opt? Large stakes in the present necessitate either early adoption or large amounts of capital. These large stakeholders have the greatest say in terms of the validation mechanism, meaning all any oppressive government need do is control a small number of powerful stakeholders. The same as authoritarian states have done with crony businessmen everywhere.
Bitcoin, the only one with a slight claim to decentralization owing to its proof of work model, is horribly inefficient in terms of power consumption. It’s unusable as a currency owing to long transaction times and fluctuating value. Today, big capital holders are the only ones with the ability to mine Bitcoin, as proof of work incurs heavy diminishing returns. Again, centralizing control in the hands of capital holders.
Blockchains are not decentralized. They are quite literally a worse version of our current centralized financial system. They duplicate the old system’s problems and put all power in the hands of people who can barely code, let alone create a financial system from scratch.
The link provided in footnote 7 is pretty disappointing from the perspective of being used a concrete prediction about crypto scams. The list has 7 entries:
1. The Merge (not clear how this is is even in the category of things that could "be a scam" since it's just a technical development on a particular chain which has already completed.)
2. DEX Screener (a free website showing a list of DEXes, I suppose it could be developed into a scam by having it mark DEXes as "screened" when they aren't, but I would say the base rate on this is low anyway, so it's not very telling to bet that it won't become a scam)
3. Sudoswap (an NFT marketplace, I can see how this could become a scam)
4. Soulbound tokens (this is an idea rather than a concrete project today. I could see many people running with this idea and producing projects. Do all of them have to be scams for this to "be a scam")
5. Arbitrum (a rollup, I could see how a rollup project could be parlayed into a scam, though rollups are supposed to be visible on the chain, so it wouldn't be easy)
6. Layer 2: zkEVM and zkSynch (zkEVM is another one which is a technology rather than a specific project. zkSynch is a specific rollup.)
7. Across Protocol (A bridge.)
So 1,4,5a are really technologies rather than projects, and 5b, 6, 7 are layer 2 projects, not really the type of thing that can easily become a scam while remaining very visible, because the code should all be public.
"Crypto" is about 10 different things living under the same tent of "a lot of people saying their technology does things that it doesn't, or will never, do".
Who remembers ICOs? Those were wild. Do those count as well regarded projects given they were taking people's money in exchange for misrepresentations?
One of the more concrete things that actually happens is avoiding financial regulation to transfer money. Avoiding regulation isn't a novel use case. It's just building a gray market. Gray markets are usually useful because they allow people who have trouble accessing markets access credit and other financial products. >99% of emigrants made their journey without crypto. And circumventing currency export controls isn't some sort of virtuous feat either.
I guess if the bar for useful is "1% of users of the product actually use it for money laundering so we can ignore all the other speculation, seediness, and charlatans" then sure. But maybe have a bar proportional to the amount of hype and capital involved?
I think it's sad that you had to guard yourself by saying "less than infinitely hostile". Crypto has legitimate use cases. Thanks for pointing that out.
My guess, based on living in African countries for the last 13 years, is that most of the crypto in Africa is owned by wealth types who wish to avoid capitol controls and taxes. I'm not a big fan of capitol controls, but I understand why they exist in poor counties where most of the wealth is in the hands of a few. Crypto further weakens governments and strengthens the wealthy who control assets. Solid use case yes, but not for the betterment of humanity.
> If Nancy Pelosi’s text messages are any guide, Democrats have joined libertarians in the “actually pretty worried about the government becoming an oppressive dictatorship” club.
While I don't dispute the truth of this sentence, we can be confident that Nancy Pelosi's text messages are in fact not a guide and Democrats are not worried about this.
I think Scott's article basically argues that *stablecoins* have plenty of great use cases but fails to make even a small case for crypto as an investment. Crypto is great money, but terrible for making money.
I've been saying for a while "crypto as a transaction medium isn't a scam; crypto as an investment is almost entirely Ponzis some of which haven't failed yet".
Lex Fridman interviews Coffeezilla. I've just gotten to the bit where Coffeezilla says he doesn't do any deals in the crypto space because it's too hard to tell what isn't a fraud. I think he he's talking about advertising deals rather than any investments he might be making.
I've read all of the comments here and they are plenty of threads on various details, but almost no one (except for Sean McCarthy) is talking about the *fundamental* flaw of cryptocurrencies like bitcoin: they are a liability with no creditor. The claim that "bitcoin has value because people believe in it" is like saying "(literally) pull yourself up by your bootstraps". I've tried to make the point in a non-technical way here...
Note that I think this is a weak claim, but at least it is a logically possible one.
We are currently in an transient where, yes, there are people who will give you money in exchange for adding a transaction to a bitcoin blockchain that miners currently append blocks on, but this is only because those people do not understand what they are paying for. Eventually this phase will be over - with hard time limit imposed by bitcoin's own halving rules.
All that aside, there also happen to be plenty of bitcoin technical problems that would eventually catch up to it even if the delusion were to linger on. If you believe in the myths that bitcoin is decentralized, inflation proof, non-confiscatable, etc then I'd be happy to go as deep as you are willing to go to rebut these claims. There are very few people who really understand bitcoin past the marketing materials, and most of them are highly invested in not talking about these problems publicly.
And finally, if you are one of those people predicting that bitcoin is going to $100K or $250K or $1M, then I'd love to publicly take your bet here! My only requirement is that the payout can not be in crypo if I win! :)
I mean, isn't this just another point that the only use of crypto is inherently illegal? Like you say it nicely that is is solving "regulatory issues", but these are literally laws enacted by the sovereigns where your physical presence lies. Yes, it's a not a good situation for these people, and it's kind of great that they now have the ability to sidestep these sovereign controls technologically, however it is a TERRIBLE business.
THIS is why people are infinitely hostile to crypto - as an anarchistic distributed middle finger to sovereign control of weath it's great. However, AS A BUSINESS, and any business purporting to be 'legitimate', you cannot get away from the fundamental issue that use cases are illegal.
The word "scam" needs to be re-understood within the context of crypto. There are huge "vulnerabilities" with tokens. The main one I see is that you can create your own token, hype it TF, and then partially cash out whilst liquidity is high. You can claim that your holdings of your own token, whilst it's riding high on the exchanges (or your own exchange), represents real capital and attract real money in, or reinvest in looking super cool and rich, getting a hype feedback loop established.
None of this is strictly a scam. But you can't really do it with traditional money. It's a vulnerability. And one that most people don't understand because we engage a defensive mode of attitude when our money is threatened. Thus people hurl words like "ponzi" around, yet don't understand the differences between crypto and trad money. And so nothing really changes.
If more people in the scene, for example, understood just how Bitconnect worked, back in 2017, and why it was not a Ponzi, it's unlikely that FTX would have gotten as far as it did.
> NYT describes its banks as “so sclerotic that sending or receiving even small amounts of money from another country requires an exasperating obstacle course of paperwork”, and this guy says that if you deposit more than $100,000 in a Ukrainian bank, “the chance that you get it back is very slim”.NYT describes its banks as “so sclerotic that sending or receiving even small amounts of money from another country requires an exasperating obstacle course of paperwork”
That's not my experience and the article is extremely biased against trad banking. Among me and my friends, we've compared availability of services and convenience of online banking between Ukraine, Poland, Estonia, Germany, Hungary - everybody agrees that Ukrainians banks win. There were no major disruptions caused by the war in any bank, evren.
From the Verge article
> the way the people of Ukraine do savings is not that they carry money to the bank and deposit it. It does not work like that. We do not trust the banks. I told you. If we have a lot of money — by a lot of money for Ukraine, I mean probably $100,000 and above — the last thing you will think about is actually bringing it to the bank.
This is what the attitude was in the 90s. Its a different country now. Some people do store money in USD, because of the multiple crises making the dollar go up (2008, 2014), but its not a minority.
This guy - the guy interviewed by both NYT and the Verge - is lying for his own benefit, to prop crypto up as they tend to do.
To get an approximation of the utility of crypto you need only look into a general history book. There you will see that one of the main achievements during antiquity was the invention of coinage. Crypto is precisely that, coinage for the digital realm. Its utility should be obvious.
One could argue that we do not use much classic coinage either these days. Technology has given us credit cards and instant bank transfers. There is truth in that, of course. But most of these technologies are centralized on some level. And one of the defining features of coins is that they are decentralized, usable by anyone at any scale.
In fact, coinage is a surprisingly late invention considering how simple the technology is. In Europe/Mediterranean coins were not introduced until a good way into the iron age. There is logic to that. The Bronze Age was characterized by empires and other large entities. These empires were perfectly able to trade in kind anything they needed. For that they only needed good book-keeping (which is a Bronze Age invention). The Iron Age is characterized by smaller entities, more or less independent villages populated by farmers and artisans with their own agency. These people could not trade in kind since they traded so very little. They needed a stable medium of exchange and for this coins were introduced.
Crypto, likewise, has its greatest utility in the interactions between individuals. No matter how fancy your credit card you cannot use it to transfer funds to the person next to you. For that you need some sort of system that allows the two of you to interact with each other directly. Centralized systems like Paypal or instant bank transfers can do the job, but something decentralized will do it better, cheaper and more securely.
As long as people are interacting digitally it is obvious that there is a use case for a digital medium of exchange. The real question is if crypto is up to the job. I am not really following this arena any more. But the fact that I still do not see options for paying with crypto at webshops or people asking to be paid in crypto in Facebook Marketplace ads tells me that crypto still has some way to go before it lives up to its potential.
Paypal also doesn't have to prove you are a sex-worker, they can just accuse you and steal your money. You would then have to prove a negative to get the money back. I believe there already were cases where someone sent the lunch money with the note "for sexual favors" as a goof and then the accounts got frozen. If this happens to a business it might be bankrupt before you even get a court date.
First off, I'm sorry if anything I've written in your comments has contributed to you writing this. I've tried to express some nuance, but I am out of practice. I actually find it fascinating how much I agree with Mark P Xu Neyer on this, but it's the places where we disagree that seem to matter most.
I would like to push back slightly on two parts here:
> I don’t think it would have been possible without crypto.
A number of years ago, I did something vaguely comparable using Western Union, a 170-year-old company based on a 190-year-old technology. I admit that, if we had used cryptocurrency, this probably would have been faster and cheaper and would have involved less walking on both our parts. Also, this was to someone in China, which at the time was vastly more stable than Russia is this year, so possibly WU wouldn't even have worked for you. Still, the point is that this is a known financial niche that was filled almost as soon as human technology allowed for it (and that's not even getting into bank notes), and what you're talking about is a technological improvement. It is definitely useful to be able to do the thing in cases where access to banks and WU is blocked but access to the internet isn't. Perhaps I simply lack perspective on how revolutionary that is.
> The saying goes: a book is a mirror; if a monkey looks in, no apostle looks out. Cryptocurrency is like this too. If people are looking in and only seeing the monkey gifs, that’s not crypto’s fault.
Sometimes, when you're standing in a blasted post-apocalyptic wasteland dying of radiation poisoning, you look in the mirror and see a blasted post-apocalyptic wasteland inhabited by some disgusting mutant that might once have been human. It's not particularly your fault, though.
In what way are you not a true believer? Reading this post and the comments, it seems like you truly believe in the core argument of crypto as a replacement for currency. Your opening says that you aren't a true believer but also aren't infinitely hostile. Was there some sarcasm that I'm missing?
Interesting. just one thing: the NYT is silly. I sent my son in Ukraine money for years; in days sometimes in minutes. Yes, to his account at the ukrainian "privatbank" (even though that bank itself turned out kinda scam), yes, using wise/transferwise - but other services work just fine, too. When I put several k of my own money in Ukrainian banks, I always got it back just fine. (OTOH: when I finally tried to sell my shares in an energy-company, there was only one bank (ie. one building) in the whole country who could do that - and it took 3 (three!) flights to Ukraine in person to get it done. A few k. And my worst investment. Share-issues are historically often scam-schemes, at least as much as crypto. So: "NYT describes its banks as “so sclerotic that sending or receiving even small amounts of money from another country requires an exasperating obstacle course of paperwork” is just another fail of NYT. - Kudos for helping out the Russians. Upgrading to paid shall be the most EA-thing I'll do in 2023.
"So why do people think everything in crypto is a scam?
[...]
Crypto is a few hundred interesting projects, plus a long tail of thousands of scams.
This isn’t so different from other fields like education. There are 8 Ivy League schools in the US, 400 high-quality research universities, and about 1,000 fraudulent diploma mills."
Except in education, it's fairly clear which is which, and in crypto a regular user has no way of telling the difference.
What's the last time an Ivy Leagy university turned out to be, in actual fact, a fraudulent diploma mill before they shut down and ceased operations overnight?
In contrast, what's the last time a major crypto company turned out to be fraudulent and declared bankruptcy? ...oh, three weeks ago. And before that? Four months ago. And before that? Five months ago.
To quote the famous "Line goes up" video on the author's experience with NFT projects: "The market is just absolutely lousy with fraud and deception. [...] If you just look at the pitch package and the sample product, there's very little material difference between a project that's going to sell out 10000 tokens in six hours and one that's going to become a trash fire as the project leader has a nervous breakdown and burns the mint three days post-launch after only selling 800 tokens."
1. Nobody's *infinitely* hostile to crypto. What would that even mean? Yes, this is obvious hyperbole, but it has the usual problem with hyperbole that it leaves the readers to work out what the non-hyperbolic claim being responded to actually is. This seems a bit of an un-SSC move. The obvious reading would be that you're less than *maximally* hostile to crypto, but that's still a straw man, because most crypto opponents would agree that it could be worse. It's clearly wrong to say it's a "pretty rare position" to be non-maximally hostile.
Later you say "people think everything in crypto is a scam". But if people believe that, I don't think they mean what you call "outright rug-pull-style scams". They don't mean that the people buying tokens won't get the tokens, but that the tokens aren't worth having. It's the difference between selling shares in a company which doesn't exist and selling shares in a company which has no prospect of ever making money. Selling shares in the South Sea Company wasn't strictly a scam, because the sellers probably genuinely believed the hype, but the purchasers were still deceived.
As a side note, people label all sorts of things as Ponzi schemes, but the label ought to require a Ponzi figure who is engaged in deliberate fraud. It seems possible that FTX will turn out to have been a Ponzi scheme in that sense, but unlikely to be true of crypto as a whole. But it can still be a bubble, and in my view it probably is. I mean the coins of course: I think it quite possible that in 20 years' time (if the singularity has not occurred) we will regularly make blockchain-type transactions, but most currently circulating coins will be valued close to nil.
All of this is to say that this would have been a compelling post if it had responded to the best criticisms of crypto instead of some nebulous sense of what everybody thinks.
2. I think crypto probably does have use cases, but I don't find your post very helpful in understanding them. The Chainalysis data is "based on three metrics", and I don't have any sense of what it's measuring. As others have pointed out, it's normed to Vietnam being 1, so it's impossible to say whether it's a lot or a little. Maybe everyone in Vietnam is using BTC to buy hot-dogs, maybe it's an artifact of some particular high volume activity being based in Vietnam: I have no way of knowing.
3. It's pretty unconvincing to quote the president of the Blockchain Association of Ukraine on the problems of conventional banking Ukraine. I doubt that this is a fair characterisation, not least because the Ukrainian government would be unable to function if the banking system were that bad, and it clearly is able to function.
Your source for crypto as a means for Westerners to send money to Ukraine states, "The funds raised in cryptocurrency are a just small part of the overall donations that Ukraine has received... cryptocurrency donations have tapered off..." Clearly there are no problems sending ordinary money to Ukraine. On the other hand, there are problems sending ordinary money to Russia, and this is genuine use case for crypto, but not necessarily one we would encourage.
I'm not sure if it's correct to say that Ukraine "legalised" crypto, because I don't see that it was *illegal* before. What seems to have happened is that Ukraine passed a law regulating crypto and requiring crypto dealers to register in order to operate legally. While that might be consistent with a crypto-enthusiast country faciliating use by ordinary people, it would also be consistent with a concern that crypto was being used in malign ways and required a higher degree of oversight. Whether the Ukrainian government actually is able to exercise effective regulatory control of course remains to be seen.
4. People in countries with poor financial norms absolutely are unusually susceptible to Ponzi schemes. Consider the case of Albania.
5. The fact that people are using crypto to meet real needs makes it worse not better if the whole thing is a house of cards. If Venezuelans hold a significant portion of their wealth in crypto because they rightly don't trust the bolivar, then a general crypto crash is going to cause the country real harm.
It's completely astonishing to me that supposed rationalists are so willing to fly the flag for cryptocurrency, one of the more obviously terrible ideas that humanity has dabbled with in recent decades.
Thanks to FTX (and, I guess, the entire history of crypto) this article aged poorly before it was even posted, but in a few years will look even sillier.
I'm surprised that there's no mention of the rise and collapse of NFTs, but then the main defences of crypto are that "they use it a lot in Vietnam, no we won't look into whether or not that was a localised Ponzi game that took off" and "I googled some projects and didn't find articles calling them scams, no we won't look into whether or not those projects succeeded at anything materially useful", so outright ignoring one of the few crypto concepts to make it into mainstream consciousness seems about right.
It's interesting that this article was apparently motivated by Silicon Valley turning against crypto - does the entire tech community learning from experience not count as evidence against crypto? Or are they all simply mindless sheep who can be dismissed without deeper thought? (A fun thought experiment might be to wonder if "Silicon Valley thinks crypto is great" would have been used as evidence in crypto's favour in an alternate universe version of this article, or if the Valley would have been consistently dismissed by the author whether or not they happened to agree.)
Serious question: if the claim is that a significant number of people in poor countries are "using crypto" - what blockchain are they using, and what are they using it for? Ethereum processes less than 20 transactions per second, Blockchain less than 10. 20 Transactions per second corresponds to some 52 million transactions per month. That's enough for the inhabitants of one medium-size country to pay their monthly utility bills... and that's it.
(I know that Ethereum plans major scalability upgrades - that's not the issue. I just have doubts that claims of "lots of poor folks need and use crypto, why do you priviledged people want to take it away from them?" pass sanity checks.)
I'm not sure footnote 3 is right - most people who invest in Ponzi schemes do make money, its only the last cohort of investors who get stung. This applies to bubbles as well, which is the better comparison for proper, BTC-like decentralised crypto. The "buy my token from me" cryptos look a bit more like Ponzi schemes, but are really more analogous to pyramid schemes. You don't buy the token to sell it back to the creator; you buy it in the belief that there will then be a market of new/other investors that you can sell it on to.
"Crypto" should really be three things:
1. Large-scale decentralised Schelling-point blockchains (I'd say really just BTC, but you could make a case for ETH); this could become a proper currency, but only if more people use it as a medium of exchange than for speculation to bring down its volatility.
2. Large-scale backed/"pegged" tokens (Tether and a handful of others); these should really just be thought of as an alternative to Paypal (aka a medium to transfer/store dollars). Given someone has to back them/defend the peg, and that person needs an address and a bank account, they will eventually be subject to Paypal-like regulation and become to Paypal what Paypal is to Western Union in the great cycle of birth and decay. My guess will be this happens in the course of the post-Tether-collapse litigation.
3. Everything else; worthless scams. You can make money out of them in exactly the same way you can make money out of penny stocks, but they're pure-speculation instruments. The difference with BTC is that BTC derives underlying value from the extent it is/should become a genuine medium of exchange for goods and services. Tron and Landcoin are not, and will never be, genuine media of exchange for goods and services.
I want to briefly add a perspective that I don't often see - how much better stablecoins are than banks for running a business.
I've been running a Swiss-based crypto-related business, and while some of our business can be handled in stablecoins like USDC, plenty of it has to go through the traditional banking system.
While banks work OK for smaller personal accounts, they're really not great for running an international business. International transfers are opaque, take days, cost an unknown amount of money and sometimes get returned because someone along the way didn't like something. They will blatantly overcharge you for currency conversion unless you work out a deal with them not to. Want to interact with them programmatically through an API? Each bank has their own mess of a design if any at all.
Just the other day they told us that transfers of USD to non-US based recipients can no longer be guaranteed and will only be processed on an exceptional basis. Why? Who knows, they can do whatever they want.
Meanwhile transfering USDC takes a couple of minutes and costs a dollar - a lot for a 3rd world remittance, basically free for a business transaction. You can instantly send proof from Etherscan that the transfer is complete. Want to integrate these systems into your business backend software? Go right ahead, the whole system was built from the ground up for programmatic access. With the more advanced business facing custodians you can set up an advanced system of rules and checks for who can transfer what, where and who needs to approve. If you want to get more advanced with financial engineering, in DeFi you can get a loan, buy options, earn yield without having to ask anyone's permission.
It's not all free lunch, you're taking on a different set of risks and responsibilities, but as a software engineer it's painfully clear which system is the future and which is the past.
While these advantages don't strictly require the underlying system to be decentralized, I would ask - why wasn't any of this built before crypto? I believe it's because for anyone to commit the kind of resources it took to build this all out, there has to be a neutral base layer where many parties can work together. As a bank, you're not going to be building your products on your competitor's walled garden platform.
If you think all of this could be better done as a centralized system, go right ahead and build one - from the perspective of running my business, I don't have a strong ideological commitment to decentralization, I will happily use the best tool for the job.
I think that the framework of "infinite hostility towards crypto" or "less than infinite hostility towards crypto" is unfruitful. Essentially, it's about being outraged. And while it's understandable why Scott frames the question this way, considering how much outrage is currently happening very close to him, this is not an interesting question. An actually interesting and important question is whether crypto is net positive or net negative in utility. Recently I've finally updated that it's net negative. FTX crash contributed here, but less as a new evidence and more as a reason to reevaluate the current evidence that I have.
Basically nearly for every positive use case that crypto has, there are mirroring it negative use cases which create more problems for the same issue, that the positive use case contributed to solving. For example, I live in Russia. And I can't say that crypto here is a big thing. Noone of my friends is actively using it as a means of exchange. It's also pretty hard to turn crypto into fiat currency in Russia. This brings up the suspicion that the reason the numbers in the graph are normalised is because the absolute values of numbers of transactions are embaracingly low. There are good uses of crypto in Russia - donate to Navalny team or Medusa, or send money from abroad to help individual Russians who are now in a terrible situation for nearly no fault of their own. I think this are a very good uses of crypto! That said there is a very very bad use of crypto, so bad that it completely annihilate the utility of financing Russian opposition and helping individual Russians survive. Crypto can be used to overcome the economic sanctions that were imposed on Russia and help Russian goverment keep financing the war in Ukraine.
For all the insurance against authoritarianism crypto can be just as well used to benefit authoritarianism. A group of noble rebels can theoretically use crypto to finance their efforts to overthrough the despotic goverment and bring the light of democracy to the people. However just as well a group of domestic terrorists can use crypto to finance their efforts to overthrough the democracy and install the fashist dictatorship. Crypto is a tool to overcome conventional coordination mechanisms and replace them with its own. As long as traditional coordinations mechanisms are net positive in utility, crypto is net negative. As long as the coordinational mechanism of crypto is worse than the conventional one, it's net negative in utility.
The idea of decentralisation and zero trust are interesting and inspiring. But in practise there nearly no use cases that actually need it in practise. People keep doing crypto projects not because this new technology is the best tool for the job but because it's hyped. So again and again it's an attempt to find a problem to the solution. A worse house but in space is worth the effort and the inconvinience. A worse financial system but decentralised is not.
As the kind of commentator who often strives to approach infinite hostility towards many things (including crypto), I can say that this was exceptionally well-written and persuasive. If it's a defense of crypto broadly, it's the best I've ever read anywhere.
It also doesn't change one aspect of the social construction of value that drives much of the overall hostility to crypto, which is social proof. Given that I'm an American, the people I encounter who like crypto trend heavily towards the "most detestable and obnoxious people you'll ever meet" end of the spectrum, to the extent that when crypto was at the top, if someone annoying-seeming started excitedly talking to me and a few sentences in I discovered he was a Mormon, a conspiracy theorist, or genuinely schizophrenic, I would have felt actively relieved. I've met zero Vietnamese-speaking crypto users, and even if I did we'd probably have many other things to talk about than methods of sending remittances. I know plenty of Ukrainians, but none of them have ever brought up crypto.
Yes, I'm aware that this is bias, but it's also how products work.
But crypto only exists because of regulation. The advantages it offers are basically numbered accounts without chargebacks or know your customer laws.
If world governments didn't make it illegal (and effectively illegal to just do it offshore) all your favorite tech and investment bank companies could offer much better products with the same advantages but without slow transactions, technical complexity/impossibility of retrieving lost keys (but you'd have to identify yourself for that) and no massive waste of energy.
I believe the benefits to the third world of these kind of products are quite real. One can also make a case for the kind of KYC laws that prevent numbered accounts without clawback. But it's absurd to have both.
Moreover, crypto isn't really regulation resistant. If the western world just made it illegal it would disappear. Sure, maybe the Blockchain itself survives amoung a few hackers but if you can't xfer money in and out legally or setup a crypto mining company the whole thing falls apart. And if you don't make it illegal useability will increase so it's just crazy to leave the version of the product with massive negative externalities legal but not the one without.
I think this post ignores a salient point: "crypto" writ large isn't just about reinventing wildcat banking, it's supposedly going to disrupt the world (TM) in various unspecified but heavily touted ways.
Wildcat banking is a known thing. It's the original and design use case for blockchain, it's basically the subject of the original white paper, and it's been around long enough to have gotten a cool animal name. Basically every current benefit and problem of cryptocurrency as a theoretical currency has a very close parallel in wildcat banking and wildcat currencies. (in my Ted talk I will examine...) This is all well upstream of any technological issues.
However, all the other applications being proposed for blockchain are just, well, shit. Let's call a spade a spade! Legal applications like a registry of deeds or some public facing government database? Logistics and transit applications? The "programmable blockchain" and some fairy tale of "automatically executing contracts without oracles"? All of it is broken in fundamental ways, be it from needing Oracles in the first place, to the ability to correct / edit and force / reverse transactions, to total data throughput (sharding has a VERY long way to go to approach what a single IMS instance can handle), and etc. These are huge, 10,000' problems and the way the greater Crypto-not-currency community has handled them is quite telling.
Blockchain / crypto has become like snake oil everywhere outside of wildcat banking, and it's really just better to assume ill intent there until proven otherwise.
> Remember the story of that special astronaut pen that cost $1 million? We already have pens on earth, for like $0.10, and they work better!
This is mostly an urban myth; in particular, the money was spent by a private company, not by NASA or something. And it turns out pencils are not great in a high-oxygen zero-gravity atmosphere (e.g. due to flammability). Or put differently, we already have pens on earth and maybe they do work better... on earth.
A better way to state my position is that crypto is only more resistant to regulation because the public doesn't see it as real banking done by big corps but as a kind of toy .
To avoid this regulation you'd have to convince ppl of this argument and if you could do that then couldn't you convince ppl to support companies just offering numbered, no id accounts that don't allow clawback of transfers.
Murtaza Hussain had a nice article a month ago that echos Scott's first point:
"A few years ago, though, I had a little experience that briefly gave me a taste of what the world could be like if things were simply fair. In the early months of the pandemic, I needed to send some money across borders to a family member in a country that is subject to financial controls and has an underdeveloped banking sector. Usually, this is an exhausting and costly chore of figuring out who is soon going to be traveling there or to a nearby country and is willing to take cash with them, or seeing whether the recipient themselves can travel outside and receive a wire transfer. It’s expensive, cumbersome, and insulting to the dignity of innocent people who have done nothing to deserve this level of suspicion.
This time though it went differently. I’m a wordcel and am usually aloof from tech, but this person (smarter than me) walked me through how to send them Bitcoin, which, they assured me, would mean something to them and could be converted to a local currency upon receipt. After messing around with it for about half an hour, I figured out how to buy Bitcoin and clicked send to transfer it to their wallet. And it worked, the money moved. They got it and were happy. No big deal. This may sound like nothing to you, but after an entire lifetime of watching good people treated as presumptive criminals by the global financial system it was practically revolutionary."
That is all cute. The problem with this "minimalist" defense of crypto is that it is not the position of almost any of its advocates. And if you do take it to be the position, the whole thing will collapse to a tiny fraction of where it is now because all the interest is from much more grandiose visions when it isn't just rampant speculation on an asset bubble.
Was it the media or crypto companies that bought Super Bowl ads with celebrities with the message that this is something normie American consumers should get on?
It was crypto companies. And if, people perceive that crypto is a get-rich-quick Ponzi scheme rather than helping poor Vietnamese farmers.
Also, most normie Americans have interactions with the higher education system other than diploma mills. They don't with crypto. So, for most normie Americans "Crypto = scam" is probably not a terrible heuristic.
Scott you have identifies the one use case for crypto that has some good to it. Allowing the subjects of tyrannical regimes to store some assets out of the reach of their oppressors.
Of course that use will only last as long as the regimes don't catch up to it. Such regimes can blunt the use of crypto by cutting their people off from the global internet. The low tech method open to thos regimes is to throw people into the gulag and torture them until they give up the goods.
The good should be weighed against the evil. Financing hackers, drug smugglers, and terrorists is a negative. Channeling savings into unproductive uses is a negative. Turning energy into pure entropy is a negative. Disrupting the financial system that governments depend upon to provide welfare for billions of people is a negative.
In my judgment, the evils far out weigh the benefits and crypto should be banned.
Hey good on you for helping people out of a bind and being a little bit clandestine. That’s awesome. I know you don’t need to hear this but it’s a good thing to say and a good thing for a culture to see being said.
> If Nancy Pelosi’s text messages are any guide, Democrats have joined libertarians in the “actually pretty worried about the government becoming an oppressive dictatorship” club.
Off-topic, but this is pure propaganda. I don't think Nancy Pelosi cares one whit about your ability to support unpopular (American) political causes with crypto and will zealously attempt to regulate it out of existence the moment you try to support something she deems "dangerous."
You're wrong about bank account freezes having been an effective tactic against the Ottawa trucker protests (which were in 2022). Nothing changed about the protests until police moved in and started arresting people. This happened only a few days after federal government invoked emergency powers, including the banking stuff, so it's hard to tell what the counterfactual is if the bank account freezes had the chance to play out, but it was very obviously the direct police actions not any financial issues that ended the protest.
Scott, are you retracting your statement from Meditations on Moloch, implying that that time has not yet come, or still hostile to cryptocurrency for this reason (just "less than infinitely")?
>In the links post before last, I wrote:
>>The latest development in the brave new post-Bitcoin world is crypto-equity. At this point I’ve gone from wanting to praise these inventors as bold libertarian heroes to wanting to drag them in front of a blackboard and making them write a hundred times “I WILL NOT CALL UP THAT WHICH I CANNOT PUT DOWN”
>A couple people asked me what I meant, and I didn’t have the background then to explain. Well, this post is the background. People are using the *contingent* stupidity of our current government to replace lots of human interaction with mechanisms that cannot be coordinated even in principle. I totally understand why all these things are good right now when most of what our government does is stupid and unnecessary. But there is going to come a time when – after one too many bioweapon or nanotech or nuclear incidents – we, as a civilization, are going to wish we hadn’t established untraceable and unstoppable ways of selling products.
I find the hostility to crypto these days quite reminiscent of the hostility to the internet following the dot-com bubble. Like crypto today, the internet in 2000 was quite limited in many important ways, but it had a very high ceiling and was getting consistently more powerful. The same goes for crypto today.
I would love it if you would add some concrete predictions to test your intuitions about how viable / fraud-ridden the crypto landscape will be in the next 5 years. From reading the comments I feel quite confident that most of your readers are way too pessimistic about the space, and will be very surprised when the space (1) doesn't go away completely (2) keeps testing interesting ideas and (3) produces real-world use cases beyond the narrow ones contemplated in this essay.
Now I'll lay out my own views, even though I know from reading others' comments that people will dismiss them out of hand:
Crypto is both a fully general computing platform and a novel way to align incentives. The design space is simply too rich to be limited to sending cash in countries with bad financial systems. The financial system today is basically sclerotic, riddled with expensive middlemen, and building new products on it requires wading through miles of red tape. Contrary to popular belief the regulatory burden ultimately falls largely on users, because it makes it impossible to compete with incumbents.
Any product that exists in our financial system can be replicated in crypto (in a slower and more expensive way — for now). Crucially, once these primitives exist others can build on top of them, and like in other software systems the layers of abstraction will build up. As an interesting aside, crypto projects are subject to natural selection because they satisfy the requirements: they reproduce with heredity through forking, and the child projects have variable fitness levels.
What people perceive as crypto's biggest issue – that bad projects are failing – is in some sense its biggest strength, because it creates a more robust system in the long run. Security flaws are exploited ruthlessly, but the next generation of engineers learn to avoid them.
1. The headline says 'not infinitely hostile' whereas the content is a restricted endorsement.
2. Header 1 - "Crypto Is Full Of Extremely Clear Use Cases, Which It Already Succeeds At Very Well" - This graph has information, but the assumptions included don't seem to align with the claims being made - for instance, only P2P trades? That's not a representative sample in any way? And the 10k 'retail transaction' assumption would seems to go against 'alternative banking' and place extra weight on small transactions like crypto games. Also, variance such as "China fell from 53rd in this component to 155th, while the U.S. fell from 16th to 109th." over the course of a year should indicate any assumptions about the results are best taken lightly. (Also, Vietnam appears to have over 60% adoption of GameFi according to Statista, which seems to indicate it has little to do with banks or anything)
3. Header 2 - "Big Crypto Projects Are Very Rarely Scams" - What about a similar but different claim? 'Big Crypto projects are very often narrowly held and profits are narrowly gained'. What exposed FTX was a major player making a negative call. There is a negative incentive for users to sell large quantities of coins as the value shrinks to 0. Even if it isn't explicitly a 'scam' it is something where the utility is the ability for a small group of owners to slowly divest of an asset for large personal profit. That doesn't really align with either the 'it's an alternative to currency' or the 'line goes up' reasons to use crypto. It's more scam adjacent than directly a scam though.
4. Header 3 "Crypto Is Valuable Insurance Against Authoritarianism" - Isn't this more 'crypto is valuable against laws? [Even if, yes, authoritarian governments love a bad law] And if the premise of a currency is that it can circumvent governments - there is a strong incentive for 1. Hostile regulatory structures - which will ensure that it will always be worse than normal financial instruments and 2. A haven for bad actors - which makes costs of trust, risks of purchases, etc. higher than other venues.
What is my incentive to ever use this in a non-crime scenario? If there isn't one, then the assumption will also be that having crypocurrency is tantamount to 'will to commit crime'.
5. Header 4 - "Yes, The Crypto Financial System Is Just Reinventing The Regular Financial System Except Worse In Every Way, And That’s Fine"
Yeah, that's fine. I'm not saying crypto should be illegal. But I don't see your article saying 'I'm less than infinitely hostile to unicycles'. You're promoting unicycles in a world where bikes and cars exist.
6. Header 5 - "You, Too, Can Be Less Than Infinitely Hostile To Crypto" - And here is the sales pitch. Cool. Maybe just title it "I like crypto and would feel better if you did to".
7. You have several claims for what it can be used for - everyday purchases, remittances, illegal activity, stores of value, etc. - however, deflationary currencies are bad for everyday use and low trust/high risk currencies are bad as a store of value. Rather than making a diffuse argument about every cryptocurrency and every possibility - it would be more useful to examine a specific one. What is it good at? Why is it good at it? And where is it effectively doing that? The breadth of your example strains critical analysis.
This is interesting but a bit verbose, no? To crystallize the concept: crypto is extremely useful for black markets, and you're coming out in favor of black markets.
I'm sure that some people who are inside Russia have used crypto to get out of Russia. But I can assure you that there are many other people inside Russia who are using crypto for...different purposes. It is not very hard to find information about what organized crime in Russia looks like, at least not to get a general sense of the vibe. I'd encourage you, when you do your utilitarian calculus, to consider both sides of the scale. On one plate you have Russian émigrées, on the other plate you have Russian drug and sex traffickers who partake of violence of a degree that I don't think it's possible for a comfortable American to exactly fathom. I don't have a good sense of how big the two plates are, do you?
Well said. My short version of this is, “I like Ethereum mainly for tilts smart contract potential, rather than its currency.” It sounds a bit like getting Playboy for the articles, but I’ve never spent a penny on crypto currency, while I have spent many hours reading about smart contracts. I also suspect that, if I lived some place other than the US, the cryptocurrency aspect might interest me in a practical sense.
It feels like the range of years for biggest crypto projects starts after Mt Gox (super popular exchange, turned out to be a huge scam) and ends before sufficient popularity of FTX (super popular exchange, turned out to be a huge scam). With this slightly expanded reference class, choosing an exchange seems super hard because neither of these were expected to be scams up front. This seems greater than the risk of investing more conventionally in stocks or bonds, as it’s highly unlikely your broker will secretly steal or your shares or be robbed of customer assets in a way that can’t be investigated or reversed.
Thanks for this Scott. I had taken functioning banking for granted and completely missed the developing world use case, which left me mistakenly treating crypto as a way for bitlockers to collect ransom whose 'legitimacy' came from being attached to a pyramid scheme - exactly as you describe.
I think there's a mistake I keep making here, where I think of the developing world as being like the West in the past, when in fact they have 21st century electonics combined with an infrastruture from about 1800.
There's this saying, "Your keys, your bitcoin. Not your keys, not your bitcoin."
So in the glorious crypto future where we all live by that rule, if someone steals a bunch of bitcoin, and then disappears out of physical reach, we just have to let him keep and spend them?
If so, then it's likely that a large fraction of bitcoins end up being held by very unsavory criminals.
You'd have your hackers and scammers of course. But also, gangs of kidnapping torturers would roam the land, attacking holders one after the other. They would have an incentive to keep a reputation for never letting their victims go without getting paid. So if you get caught by them, you either give up the amount of coins they guess you have, or, if you have an iron will or don't have that many coins, you and your whole family die.
Having an iron will wouldn't fully deter the gangs from attacking you, because killing you would still be an opportunity to demonstrate that they never let their victims go. The only thing that would deter them is if almost *all* holders had an iron will.
And all along their ownership over their ill-gotten coins would be considered as legitimate as any other. It's their keys after all.
Aren't you just saying that you're in favour of financial transactions that are outside of national laws? In which case the question is just whether 'good' law breaking such as escaping authoritarian regimes outweighs bad law breaking such as organised crime. Whether that's true is really a contingent question and needs evidence to solve.
I think some of us would be a lot more open to things like crypto if they didn't seem to always come with a such a load of quasi-objectivist rhetoric. ("Someday soon, there will be only two types of people: the awesome, kick-ass crypto users who will raven across the land, and the pathetic mud-golems.")
Crypto's only advantage over a developed countries banks is that developed countries don't ban or discourage its usage by people without addresses within a certain geographic region. That same property has allowed it to be used for ransomware and other crimes.
Can you name crypto projects that are actually useful, aside from ones that facility the usage or trading of crypto? Everyone I have heard of, including helium, has been debunked.
If you want to count Stablecoins--those are really just very lightly regulated banks that allow people to evade US banking laws. What is the reason we should require the usage of inefficient blockchains (ethereum is still inefficient even with proof of stake) rather than let entities with centralized and efficient databases fill that need?
The way I think about this is by asking "what is the cost of creating an institution that I trust enough to transfer billions of dollars of value through it regularly?" For traditional institutions like banks it's something like a century of tenure, billions in capital requirements, and existing within a very complicated bureaucracy of checks and balances where I know I’ll only be fleeced in arduous, obfuscated ways. For currencies it’s a military and a revolutionary war at least, and centuries of slavery and colonialism if you want a good one. All very expensive and out of reach for an upstart country. Bitcoin, on the other hand, derives it’s trustworthiness from the perfect reliability of math. This is what people are on about when they say Bitcoin eliminates “counter party risk”; your counter-party is an immutable algorithm. This is not to say that things can’t go arwy, it’s just much less likely than a human counter-party screwing you over since other humans like money too. This greatly decreases the cost of bootstrapping a nation. You can afford passable beuracracy-driven counterparties in the first world so we aren’t forced to pay the upfront costs of integrating crypto such that it’s useful, but it would be way cheaper if we did.
As far as the electricity requirements of Bitcoin go, they tend to be renewables since those, when strategically placed, are the cheapest option. Otherwise, a lot of the electricity used is so-called ‘stranded energy’. A power plant needs to over-produce electricity to be able to reliably deal with demand-spikes and the otherwise wasted energy powers much of Bitcoin’s mining. I personally think that Elon Musk is actively trying to make crypto seem useless/frivolous with his strategic tweets and backing of doge because a big part of his battery development efforts at Tesla are for storing this stranded energy. He has already deployed mega batteries in Australia and every electron of stranded energy that ends up there is priced against the opportunity cost of using it to mine Bitcoin.
I decided to do a follow-up on this blog post with a different slice of the blockchain story. For people that are unconvinced by the economic, regulatory, and libertarian arguments on the topic, the research curiosities might give you a new perspective.
I am highly sceptical of the headline numbers reported here. "69% of Vietnamese have no bank access"? That number really surprised me so I tried to find the source. The company https://merchantmachine.co.uk/ provides no information on where these data come from. I live in Vietnam: there are banks everywhere, including in the very rural parts. I work with a lot of non-elite Vietnamese who have very advanced access to mobile phone banking! The numbers for Thailand (20% with no bank access) also look very dodgy. I would guess it's around 5%
It's obvious both why they hate it and why we need it - it's a tool against the (cultural) establishment, which's game they are deeply indoctrinated into; otherwise, they would not be able to exist in woke valley. But it's fine, they can kvetch the whole day about it, we're here to stay.
Each programmer they cancel for refusing the ritual scarification of their own rational faculties is a new worker on our side. There is only one way this is going to go.
But what if I think prostitution is wrong? What if I think it is immoral to buy sexual consent? Is it okay for me to criticise crypto's ability to allow people to bypass a government's ability to crack down on that behaviour?
(And before you bemoan that the prostitutes are losing their livelihoods, I would recommend that the state put them in a shelter rather than turn a blind eye as they allow themselves to be raped just to get by.)
Crypto's high cost per transaction makes it a very poor substitute for traditional electronic payments and inherent high price volatility in the short term also makes it an awful substitute for fiat currency as a way to hold value.
This is an example of a topic where Scott, who is a good blogger, would benefit immensely from a blogosphere existing. This post, and his arguments on the topic, would benefit a lot from a critical dialogue with an informed and compensated skeptic. Speaking as someone who respects the effort but is not convinced.
I got interested in crypto several years ago listening to Nick Szabo on the Tim Ferriss podcast. After playing around with DEFI in the $ATOM and $AVAX ecosystems ($ETH fees are too expensive to use $ETH as a play-around-to-learn platform) my biggest disappointment is that there aren't enough "real-world" projects which is what Szabo predicted would eventually disintermediate much of the make-work and bureaucracy built into conventional finance, insurance, real estate, etc. With only a handful of exceptions, all I see is a lot of DEFI derivative projects vying for (and passing around) the same ecosystem liquidity.
I wrote this email in reply to my girlfriend, who said crypto was only good for vice and speculation, and that it couldn't be a bulwark against authoritarianism because guys with wrenches can always beat the password out of you:
I like that XKCD comic about the $5 wrench cryptanalysis!
Vice and speculation is a big part of it but I think bitcoin is a lot more than that. Right now in some poor countries it's an important safe harbor. $5 wrench attacks work, but it's impractical to go around doing that to millions of people. A bank is so much easier for a dictator to steal from because the money is so much more concentrated and visible. Meanwhile a safe announces the presence of wealth and gives burglars with wrenches ideas of something specific to ask for. But a bitcoin wallet can be held as 12 memorized words which leaves no physical evidence anywhere (I have one of those). Someone could even memorize a decoy wallet with a small portion of the funds to give to the wrench guy. So I think bitcoin can be more secure than keeping your money in a bank or a safe, especially in countries that don't have good banks or good law enforcement right now.
I also think that in very long term expected-value terms, bitcoin is a 4-6%/year better store of value than dollars in a safe. If we suppose a constant fraction of the global economy will be transacted in bitcoin at a constant velocity, and the supply of bitcoin is constant, then in the limit the value of bitcoin will grow at the same rate as global GDP, which will be positive 2-3% instead of negative 2-3% from USD inflation.
International payments can be a pain in some countries, and I think bitcoin has a role there. A lot of poor countries, and even middling countries like China, have capital controls that function as a sort of financial Berlin Wall to keep people locked in. Richard Munchkin has a story about how he won tons of money at casinos in Poland in the 90s, but then he couldn't get the money out of the country so he just kept it there in a safe for a year while he tried to figure out a way to move it. Eventually he just smuggled it out. My other friend who imports a lot of stuff from China says the factory owners there create burner accounts in Hong Kong and get paid in fiat there, and then they can use that money anywhere outside china. But crypto could also be a good option if China starts cracking down on Hong Kong banks.
Crypto is being used in Ukraine mostly because it's how Ukrainian scammers launder money. I suspect the rest of the third world uses crypto for that exact reason as well.
You sent cryptomoney to Ukraine? Congratulations! You got scammed!
great article, tho i disagree w/ "Yes, The Crypto Financial System Is Just Reinventing The Regular Financial System Except Worse In Every Way ..."
smart contract chains offer big decentralized computing systems, with a built in (tho slow and expensive) mechanism for compensating those who offer up cpu resources to the system. As of today, these are not very good computing systems, but they have benefits beyond just avoiding govt and megacorp censorship:
1) shifts financial burden from creator onto users, allowing for lower startup costs. If i want to create an online game or something, that stores peoples' game state serverside, I dont have to buy up a bunch of expensive server space without even testing the market to see if anyone wants to play my game. Users pay a-la-carte for each game action, and if they actually like your game they won't mind doing so because they're paying like a hundredth of a cent for each action
2) scaling "for free". Of course, if eth gets too busy, then prices go up and there's congestion and it's a huge mess. But at least you don't have to pay amazon or google a monthly fee to run your service, and either have to make excessive payments or outage in the case that there is a usage spike, and you don't have to worry about getting DDOSd (trolls can't afford the txn costs to DDOS a major chain)
3) One versatile tech system means that if you can get it right once, you don't have to have every online retailier do their own code and screw things up. Ticketmaster has a number of bugs, but ethereum probably has very few. If you had an NFT smart contract for concert tickets, teh contract might have bugs, but it probably won't because it will probably a small modification of the basic NFT smart contract which has been rigorously tested a gillion times. On the topic of ticketmaster, they charge exorbitant fees (like 5-20% i think) for everything. OpenSea (the biggest and oldest NFT exchange) takes a 2.5% cut of every transaction, and I think there's a good chance that will decrease in the future if they get any major competition
5) financial contracts settled with code execution are more objective, predictable, cheap, simple and straightforward than legal contracts. They aren't perfect, and there are plenty of cases where a legal contract is preferable or inevitable. But there are also plenty of cases where you'd much rather have a well verified, publicly published computer program execute your financial agreement than have some legal agreement written in english-variety-legalese whose adjudication will be achieved two years after a dispute by twelve randos who are being corralled by the better paid attorney (and both attorneys are very expensive).
tl;dr: crypto is not a strictly inferior financial system whose one merit is that it can exist at all in one extreme niche environment, it is as of today delivering options in a broad array of niche or not-all-that-niche subareas of the finance, computing, and contracts worlds in ways that have different pros and cons compared to the conventional options. and it's definitely improving a lot, as new smart contract chains come up with major tech innovations over the existing ones
I love your article, it is one of the best on crypto I've read, it gets close to realizing a fundamental point about what crypto solves. This fundamental feature is the reduction of economic transaction costs of trust for a common set of economic transaction types. I wrote my own here: https://7174.substack.com/p/the-fundamental-economic-value-of
Calling the people blocking roads and making noise with their horns loud enough to cause hearing damage in Ottawa "protesters" is disingenuous/inaccurate the same way calling J6ers and people who robbed businesses under cover of BLM protests "protesters" is. I think a better approach would have been arresting and charging those people, but what they were doing was not part of liberal political debate but more akin to rioting.
Is there evidence of what people in Vietnam are using cryptocurrency for?
My understanding is that hard cash has a lot of value as a means of transaction, and usually carries no fees.
Is it possible that less developed countries have more cryptocurrency volume because, unlike many other industries, the rewards of running a cryptocurrency scam aren't scaled down compared to the developed world, but are on an even footing with running a cryptocurrency scam from a developed country?
This article makes the startling claim that, "An estimated 25% of Filipinos and 23% of Vietnamese have played a play-to-earn game". Makes sense that it would be in a place where labor is cheapest.
Not sure about any of the explanations for why cryptocurrency is popular there, but there are a lot of good explanations and we should probable see what they're using cryptocurrency for before assuming it is for normal banking.
Do note that all of these countries may have economies or banking systems that are basket cases but still have, you know, functioning internet infrastructure. Crypto is cool online money but it sits astride a gigantic technological and social edifice that is substantially more vulnerable to circumstance than a good old greenback. And it doesn't do anything an international bank couldn't do in principle; of course, these banks are regulated in PRACTICE, and in the case of crypto, while censorship resistance is theoretically possible, it's quite a bit harder than the blockchain concept makes it seem, and most of its virtues in this regard are a function of its novelty rather than any actual cryptography.
In other words, no, you can't program your way out of society. The metaverse is just a special case of the actual universe.
All of the supposed benefits that cryptocurrency brings the developing world could be solved much more efficiently by letting them use the US dollar, the euro, the yen, the pound, etc. (This was a large discussion in one the last open threads). There already are stable currencies that aren't prone to hyperinflation or confiscation- they're just not widely available to people in say Venezuela for 'regulatory' reasons. (And trust me, people in 3rd world countries really want US dollars- like really really want them).
Maybe crypto will magically their problems. But seeing as its utility has been speculative for a decade now ('in the future crypto will do x!'), I think it's just as reasonable to say 'in the future people in Venezuela or Ukraine or Vietnam will be able to use eurodollars (1) freely, and thanks to [unnamed technological advance] their government won't be able to stop them'.
Or, maybe there's a synthesis where DollarCoin, EuroCoin or PoundCoin blends the two
1. https://en.wikipedia.org/wiki/Eurodollar
>If you split $1000 and invested it equally in all the top crypto projects of 2015, you would now have $25,400.
'If you entered this pyramid scheme/speculation bubble 7 years ago, you'd have a lot of money today' is a true statement for many types of pyramid schemes and speculation bubbles.
You have not mentioned the problem of scale. From what I understand every other problem of crypto is downstream from the fact that it does not scale. (And any attempt to make it scale detracts from its main advantage of distribution so as to make it worthless).
Any "exchange risk" discussion that manages to exclude both Mt. Gox and FTX is cherry-picking, regardless of whether you intended it to be or not.
Beyond that, all of your "use cases" boil down to either "money laundering" or "using money in a way the government disapproves of" more generally.
Vietnam is super into crypto because Axie Infinity (a once popular Play to Earn game) focused on them for whatever reason. I'm guessing there's some "(amount of people with access to internet) / (income level that makes tens of dollars per day meaningful)" ratio at play
Complementary to this, Vitalik has a recent list of blockchain applications that seem exciting https://vitalik.ca/general/2022/12/05/excited.html
In particular, identity verification and the "hybrid" applications (e.g., voting) are non-obvious, have clear value, and really do make use of the blockchain decentralization in a valuable way.
I think it is important to draw a distinction between crypto-currencies (e.g. Bitcoin, Etherium) and *exchanges* where you give a stranger your money (in US dollars, or Bitcoin, or whatever) and then they run off with it.
Giving your assets to a stranger who runs off with them doesn't make the asset a scam.
I think that Ukraine having high concentrations of crypto use may have more to do with foreign aid being laundered than any type of regular use by the hoi polio.
Crypto is a really cool research project that went viral ~20 years too early.
All of the major issues are either already solved or a path to solving them is somewhat predictable.
But now bitcoin is giant! We can't just say "okay, XCash fixes all the problems we know about, let's play with this for ten years and then release YCash" until we've fixed all the environmental, usability, privacy, safety, contracts, regulations, etc., problems. Because none of the people who use Bitcoin want to lose all their investments, and humans are bad at solving coordination problems.
Three arguments against this:
1) the meta point: a year or two ago, some of us were saying all crypto was basically scams, and a lot of people were saying it wasn't. Since then, it's come out that major crypto projects stole billions of dollars from people. You should be giving us at least some bayes points here.
2) the population - crypto's a well-known scam area, so the sort of people it draws are scammers. Spend any amount of time in crypto -adjacent circles these days and you meet the sort of people who get into it - it's almost entirely empty scammers (SBF and Caroline Ellison were famous for being some of the most honest people in crypto). Even if the underlying tech had good usecases, it being almost entirely run by scammers is still bad.
3) you argue about the government resisting pretty halfheartedly. But governments are only really halfhearted about things they don't really care about. They're a lot more unambiguous about things that actually threaten them. If people started seriously using crypto to try to undermine the CCP, say, the CCP would effectively crush it pretty fast.
My first thought reading this article was "what do crypto do that is both 1) moral and 2) not already done by Western Union.
Which I'll now amend to "what can stable crypto do that is both 1) legal and 2) not done by Western Union".
And it seems the answer is nothing. So basically any evaluation of stable crypto relies on evaluating the utility gains from people in dictatorships more easily breaking laws vs the utility loss of criminal more easily breaking laws.
Great article. I think crypto generally is interesting and has use cases. I think that there will be more convergence on a smaller number and many will go to 0. So, if you hold forever, it’ll be high variance what outcome you get. Might be good to diversify.
Crypto is also easy for a malevolent AI to use, and should be banned/destroyed as an AI safety net (if you believe that a self-directed AI is possible).
Coming from Vietnam, I read your “theories” about crypto use case there and know immediately I don’t have to read the rest of your article. Sure, our government is corrupted. Sure, we don’t trust our banking systems. But no reason to believe crypto is better. And, why bother with choosing which unreliable systems to put your money into when your daily wage could be just several dollars anyhow? And for the rich, the idea of borderless money exchange system makes it tempting because they can use it for money laundering.
"Less than infinitely hostile" is such a minor qualification. That's very funny.
Still trying to double check your links (I'm having trouble even *loading the website* for your first project, BitAssets), but I already noticed that you accidentally swapped the links for the list of top exchanges and top stablecoins, and your source lists 13 stablecoins, not 10.
Also even assuming your numbers are accurate, saying "only two out of the top 10 stablecoins failed in the last two years" is **insane**.
A use case I've been hammering for a while is that if you use crypto instead of Visa or PayPal for daily transactions, the payment processors do not have power over you. PayPal can't examine your transaction history for wrongthink. That's a libertarian argument, but the inevitable result of scaling this to a lot of people (absent a crypto ban or a CBDC overthrow of the crypto space or something like that) is potentially profound in another way: The IRS would get full funding.
It is the job of the government to regulate financial transactions, not unaccountable payment processors with political agendas of their own. If the government is no longer able to outsource its responsibilities to industry because citizens are doing an end run around industry, it will have to regulate. I would personally prefer this, not because I enjoy IRS audits, but because the government is, however indirectly, accountable to me as a citizen in a way Visa isn't.
It's also worth noting that cryptocurrencies are centralized in practice, if not in theory. In 2016, the Etherium devs literally hardforked the currency just to freeze one guy's money, and everyone went along with it. The crypto world is (currently) controlled by *different* people than the legitimate economy and they have different views, but they are no less censorious, given the opportunity.
Small quibble re: your analysis of the "Reinventing The Regular Financial System" complaint – I think some who make this complaint are arguing that crypto is reinventing itself out of all its unique advantages. As a cartoonish example:
1. People claim that smart contracts / DAOs / etc remove the need for fallible human administration: "code is law!"
2. Those systems all get hacked.
3. Said people now realize that fallible human administration has some real advantages, and they are even less equipped to implement it than existing institutions are.
To use your metaphor, it's like NASA saying "Turns out that access to a breathable atmosphere makes things much easier; we're going to move the ISS to a grassy field in Virginia."
Of course, many believe in the decentralizing potential of crypto without having "elimination of all fallible human administration" as an end in itself. For those people, this is all part of a learning process, a pendulum swinging back from a noble experiment, a working out of details.
But if you go too far "Reinventing The Regular Financial System", you will in fact reinvent all the fun entirely out of crypto.
I have a Fisher Space Pen in my pocket. According to this Scientific American article, it took zero public money to develop. https://www.scientificamerican.com/article/fact-or-fiction-nasa-spen/
This is definitely pure ignorance, but honestly the biggest surprise for me of this article is that developing countries are *most* of the users of crypto. I was aware of the obvious use case there, but I guess I hadn’t realized that the world had come so far in internet access that it was actually possible for so many people to own crypto in the developing world. The fact that more ppl own crypto in Africa than North America is really surprising to me. Its kind of a white pill in a way as well.
If you are in a country with a developed banking system and not in a group that payment processors are likely to act against, crypto is not just some neutral thing that is only of interest to other people. It can still be used to facilitate terrorism and ransomware and have direct negative impacts on you.
> So why do people think everything in crypto is a scam?
Because it’s the last car wreck they saw.
Some of the high profile stablecoins that lost their pegs were basically more convoluted Ponzis, or at least very Ponzi-esque.
In that they would maintain the peg by printing and selling tokens, infinitely if necessary, to bring in more capital.
Generally nothing of use seems to have been built by the “builders” in the last couple years.
There were like 900 companies promising 20% interest with ZERO risk, but we still don’t have an actually decentralized prediction market.
I think people are right to conclude “crypto” is mainly a scam, even if the base use case of payments is still useful. People could have built something cool but they didn’t.
> Crypto Is Full Of Extremely Clear Use Cases, Which It Already Succeeds At Very Well
Yep. And in the US a lot of use is driven by people like migrant workers or relatively underbanked communities. A lot of the critics are, to be frank, privileged upper middle class types who basically say, "The system works FOR ME. Why would anyone need to go outside it?" Yeah, okay, if you make six figures at a respectable job and live in a major city then crypto's use cases are less obvious to you. And the ways it does get used are most likely to be concealed back office because customers don't like change. This doesn't mean they don't exist. (You see a similar thing for stuff like check cashing or non-traditional banks.)
I was at a blockchain thing a few weeks ago and there was only one speaker from what I'd call the first world. Most of them were Eastern Europeans, Africans, and South/Southeast Asians. That's not a bad thing.
> Big Crypto Projects Are Very Rarely Scams
Yep. The vast majority of crypto projects are not fraudulent. And the scams are just normal scams that are being done in crypto. That doesn't mean it's not a problem. But it's not anything unique to the crypto space. What's happened is that regulators aren't competent at regulating crypto. Very often the stuff being done is already illegal but the US government just hasn't built capacity to catch it.
Seriously, the government's really bad on this stuff. And it's worse because the credentialed classes are the least likely to be familiar with it or its use cases. I think the government's going to choose to leave it unregulated (eta: or I should say poorly regulated, as in computer programs regulated by a bunch of accounting majors) and wait until people with master's in crypto studies become available to hire rather than give up their hiring standards. But we'll see.
Meanwhile, plenty of people can avoid the fraudulent areas. I have. Now, the issue is that for a market to be safe you shouldn't need a background in it to avoid scams. But that's usually done by the government and see previous point.
> Crypto Is Valuable Insurance Against Authoritarianism. 6259 writes: there are no other rights in substance without the freedom to transact.
Sort of. Decentralized projects CAN be built this way. They don't have to be. China has its own cryptocurrency. And they built in a bunch of monitoring tools. While building separate systems can be a valuable form of support and changemaking the technology does not substitute very well for the social and economic component. At the same time, it moves the needle in what I'd normatively consider the right direction.
> Yes, The Crypto Financial System Is Just Reinventing The Regular Financial System Except Worse In Every Way, And That’s Fine
It's not worse in every way. It's better in some ways, worse in others. It's a tradeoff and having the option is better than not having the option. This is in addition to your further "in space" points which I agree with.
> Crypto is an interesting technology that had one terrible piece of bad luck: its standard-bearer, Bitcoin, went up in value 10,000x over a few years.
Yep. One of my worst failed predictions is I thought cryptocurrency was going to decline relative to other uses ten years ago. I expressed on this very blog a long time ago that the worst thing that happened to crypto was the huge influx of random money. I compared it to someone who inherits a billion dollars at 18 and how that skews their life path. It became trendy and that caused issues.
I agree with you too about the awkwardness that this money did fuel some genuinely good development. But on the whole I'm glad the tide's going out. Assuming things don't get too bad the reallocation is deeply necessary.
I think it would be helpful to go back to just about a year ago, at least as I unreliably remember it. Two relevant things come to mind:
1. If you don't watch sports this won't land as hard, but FTX was a prominent ad buyer of the Super Bowl, and ran ads with about a dozen sports and non-sports celebs endorsing it. They also bought naming rights for the arena where the Miami Heat play (deal now being unwound, I see). Saying "Just FTX" heavily underplays how big their public footprint was. One would be nuts not to, as is said here, "update on that".
2. I notice not a mention of NFTs, which over about six-month period went from idea to controversy to general collapse -- in fact, collapsing so hard that it's barely surprising that we've all forgotten about them. Sure, they're not coins, but they were in the ecosystem. But if you're talking about "what would you have done in the crypto space a year ago", all that stuff would be on the list.
I'd take those claims re Ukraine with a handful of salt. Prior to 2022, you could just send SWIFT without any hassle. In fact, UA banks prior to war were anything *but* sclerotic, copying a lot of useful innovations from European neobanks.
This is awesome. Thank you so much for writing this.
Any thoughts on the claim that “bitcoin is different from the rest of cryptocurrencies” because no one is in charge of it? Even the SEC and CFTC heads seem to agree that bitcoin is different.
Being infinitely anything seems excessive. The more sensible version of this headline is just that you're not hostile to crypto, just as you haven't exhibited hostility toward space tech.
One thing to consider when talking about cryptocurrency: a financial disclosure.
I know you’re not promoting or commenting on any specific technology here, but since this is in the realm of “number-go-up” stuff, it’s generally a good idea to have a general disclosure about holdings/etc. I can imagine reading an essay about meme-stocks by someone I trust, and then finding out later that some significant fraction was of their net worth was in meme stocks at the time, and that eroding my trust somewhat, even if they really had no intention of trying to convince anyone to buy meme stocks.
Similarly here, I’m aware from previous comments on ACX grants that you have held cryptocurrency in the past, and it’s probably worth disclosing in some way here.
(Maybe I missed it, in which case disregard this comment and apologies!)
So I know this isn't the main thrust of the article, but regarding this attempt to get Democrats on side with freedom of contract:
"If you really think January 6 was a close call, where do you think we’d be if Trump had succeeded? Would he have just passed a few more tax cuts and built a few more miles of border wall? Or would he have actually done the fascism thing? And if he actually did the fascism thing, do you think he would have shown more restraint than the Canadians, and backed down from freezing bank deposits as a weapon against protesters?"
As I've said before, I have never, ever, in my entire life, seen this argument work. The people who urge censorship or ostracization of people with Wrong Opinions simply do not think they will ever be on the other end of that sword. No, it's worse than that -- they aren't even capable of visualizing such a situation. You might as well be speaking to them in ancient Etruscan for all that they're going to comprehend what you're saying; you'll just get a confused stare before they shake it off, forget you said anything, and go right back to attempting to get you fired from your job for thinking that men can't get pregnant.
I know this sounds mean and uncharitable, but I swear I'm just describing my personal experience.
I'm trying to figure out what happened to "Gems" another on your list from 2015, and I can't find anything about it. Do you really think that the people who "invested" six figures into Gems back in 2015 are happy now?
It seems like you are using an insanely strict definition of "scam" in order to justify your position, but a neutral observer would come to very different results. The real questions are "did the project succeed? are the people who FOMO'd into the ICO happy now?" Whether the project managers *explicitly* rug-pulled or just quietly walked away or were criminally incompetent and went down in flames, the end result for the so-called investors is the same, and there is no way that you could advise people to invest in the old ICOs with a good conscience.
Can someone explain how crypto as a hedge against authoritarianism works in practice?So if you’re in Venezuela and your government prints too much money, what do you do exactly to get around it? Can you pay a neighbor for a television through Bitcoin?Buy groceries with crypto? How exactly? Do you use an app or what? Or do you just put your Venezuelan currency into crypto and sell when you need money?
Private currencies spring up all the time--think of hawala networks, for instance. They also have the advantage of circumventing corrupt or dysfunctional (or honest and law-enforcing) state financial systems. And they also typically have a private authority who's accountable if the private currency gets looted or otherwise collapses. The relevant question, therefore, isn't, "what's the advantage of private, non-governmental financial systems over governmental ones?", but rather, "what's the advantage of *strongly decentralized, collectively managed* non-governmental financial systems over centralized ones?"
And in fact, this question has a history. When Napster and its descendants became popular as music piracy vehicles, a lot of the same sort of people who now tout cryptocurrencies as the future of financial systems began touting "P2P" as the future of data management systems. What they gradually discovered over the subsequent few years--although it really should have been obvious from the beginning--was that the *only* appeal of decentralized systems over centralized ones is the lack of a legally liable party for the government to target. In every other respect, it's a lot worse--and it turns out that when escaping legal liability is the goal (and all the disadvantages of dealing with a sleazy, beyond-the-law black market are still less bad than the alternatives), there are plenty of simpler solutions than constructing horribly clunky decentralized systems (centralizing in a sleazy out-of-the-way jurisdiction being an obvious example).
P2P networks went away, of course, as soon as the music industry adapted and made their product available at a competitive cost. Western financial systems, like recording companies before them, are naturally slow to give up their old ways (and old profits), but they're ever-so-slowly beginning to catch up--and when they do, cryptocurrency will quickly join P2P on the scrapheap of bad technologies briefly made attractive by a few transitory quirks in legal and commercial circumstances.
Scott: Sure there are scams in crypto but there are also valuable use cases.
Commenters: *lists scams* QED
Eh, not convinced.
I can see how having a currency outside of the one controlled by the current government could be useful, and accept that in particular circumstances that could be crypto, but most of the time you'd be better off getting USD and keeping it under a mattress.
But perhaps your mad government won't let you get USD, but will let you on the internet, and haven't caught up enough to restrict Tor. In that case, crypto could work if you're savvy enough to use it properly, you don't expect unreasonable gains, you avoid the obvious scams and rug-pulls and get lucky avoiding the non-obvious scams, don't engage with the wrong smart contract or DAO, manage to balance the security and accessibility of your keys, you steer clear of NFTs and don't get hit by a phishing attack...
If that's you, you might get some utility out of crypto for... buying... something... that is perhaps more crypto... um...
The list of "best new crypto projects" you've linked contains:
- a spreadsheet
- somewhere to buy NFTs
- a batshit idea for NFTs that represent your ideals in a never-to-be-realised society that will be forgotten about by March
- two projects too complicated for the article to explain
These are not things to get excited about.
"If Nancy Pelosi’s text messages are any guide, Democrats have joined libertarians in the “actually pretty worried about the government becoming an oppressive dictatorship” club."
That part made my jaw drop, because Bit...sy, you *are* the government. Who the hell do you think is going to be the oppressive dictators? Take a look in the mirror and then work on *yourself*.
(Good grief, I know political parties live on "we are pure angels, our opposition are raging devils", but this takes the cake).
As for the magic beans - if Vietnam can make it work, good luck to the Vietnamese. But so long as it's been treated as 'useful for illegal purchases', the blackmail spam that keeps turning up in that one work email account of ours always demands payment in Bitcoin, and people are treating it as "buy now, make a zillion percent return, then sell before the suckers wise up", I'm going to stick with the currency of my nation, thanks all the same.
I don't know what the regulatory restrictions or implementation difficulties are, but man, I really want DeFi to be a legitimate way to get a loan for a car or a house. I love the idea of the early Local Bank, where the community pooled their money to help each other buy the things they need, and it seems so possible to create that in crypto.
> Crypto is a few hundred interesting projects, plus a long tail of thousands of scams.
I think your arguments fall short.
By calling some of them "not scams" I think you are focusing only on the most blatantly fraudulent aspects and glossing over the pervasive "let's create an asset bubble" vibe that is foundational to all crypto, and that most people are talking about when they say it's all a scam.
Crypto relies on both technological concepts AND collective belief in a particular instantiation of that concept. (E.g. in bitcoin as opposed to some equivalent fork of bitcoin.) It is that collective belief, and the behavior required to maintain it, that can't lose its smell of scamminess, and that people might rightly avoid for ethical reasons.
Personally, although I see some technical value in cryptocurrency, I find it unethical to participate in the MLM-like bubbles of any of them. Doing so is still necessarily trying to profit at the expense of the people who come in later.
I think I'd express even a little bit more skepticism, but I agree with the overall premise that it's not all scams.
On "Crypto Is Full Of Extremely Clear Use Cases, Which It Already Succeeds At Very Well", I think this simplifies down to "Crypto lets you avoid state financial regulations (for now)". Sending crypto to a Russian is easier than Paypal because you don't need to do KYC / Anti-money-laundering checks, which in your specific case is probably a net good, but in general most people in the US don't support removing those checks (I claim). Sending remittances is better using Bitcoin because the government can't tax them / inflate their value away.
I'm generally here for a bit of civil disobedience and think it can be just to ignore unjust laws. And I strongly agree that giving people protection from government incompetence causing hyper-inflation is a positive thing.
On the other hand, (not an economist) I note that most countries consider it very important to control monetary policy. (The EU being a counter-example that sort of proves the point, given the challenges post-2008). While the libertarians / gold standard folks hate this, controlling the money supply is the way to avoid runaway inflation, and so if countries lose control of their monetary policy, it's unclear to me that's a good outcome. So this could be a situation where a little bit of crypto is a good thing, but if we get too much of it, small economies might be dominated by crypto which could be politically destabilizing at the national level.
"Big Crypto Projects Are Very Rarely Scams" seems like a low bar to me, though I think it's a fair point to argue against the "all crypto is Ponzi" position you're explicitly highlighting. Going back and checking out the "Most Promising Crypto Projects Of 2015" is informative; I don't see much that's amounted to anything in there. This is my big complaint about web3; so many projects launched, so few actual meaningful products. (The Pirate Bay and Prediction Markets being the two product categories I do think are meaningful, both in the "avoid government regulation" family.) I do see some solid use-cases for NFTs (I did some prototyping here in 2018 before NFT meant trading "bored ape" GIFs) around digitizing assets that are currently illiquid but which could be traded given a market -- but this is hard. (Houses are a great example of a bad idea that people sometimes think would work for NFTs, but I think there's possiblity around short-term commercial debt for example).
"Crypto Is Valuable Insurance Against Authoritarianism" I think this is the best ethical point to argue on, but I think that politically it's a weak one. No state is incentivised to allow "insurance against authoratarianism" when it also allows you to use the darknet and avoid taxes. If we look at TOR, it's boosted by the US State Department as a weapon against illiberal states, and opposed by just about every other branch of government (CSAM, drugs, etc). _Maybe_ there's a case here that given enough regulation of the on-/off-ramps of domestic usage, the US could come around to considering Crypto as a TOR for finance, weaponizing it to undercut regimes that dont share its values. I haven't thought too much about this.
"Yes, The Crypto Financial System Is Just Reinventing The Regular Financial System Except Worse In Every Way, And That’s Fine" -- recently I have been wondering if there is a more general principle here. Maybe it's a good idea to periodically give a localized exemption to a broad class of laws, and see if the results are dominated by A) the harms we would predict, or B) new value we couldn't predict. For example, I think there's a strong case that Uber/Lyft (in some jurisdictions) demonstrated that taxi medalions were drastically harming consumers, and should be abolished. But we'd have never found that out without someone ignoring the rules and running the experiment.
Similarly, I think the crypto fiascos are very strong evidence that all of the financial regulation we have is actually doing good work, complex and painful though it might be. Without the SEC but with the modern internet, we would have a hellscape of boiler-room scams and ponzi, and everybody would be losing their shirt, instead of collecting a cool 10% per-annum for decades on end.
Without the A/B test though, it can be hard to be sure! The big challenge is getting a meaningful test, without also harming innocent bystanders.
Agree with most of what you said, except that: No, Sillicon Valley Cannot Be Less Than Infinitely Hostile To Crypto.
And the reason is sanity. They can't change their minds on it now, very few people are that strong.
Can you imagine being aware about bitcoin and crypto since close to the beginning, on top of the tech news, understanding the technology, at least at a high level, and deciding to pass? Then watching the number go up year after year after year? Madness. It HAS to be a scam.
And this is not just about missing out on any generic investment opportunities, there are always lots of those that don't drive people crazy, because it's not "their area". They aren't "supposed" to know about it. But with Bitcoin they were indeed supposed to get it. But they didn't :(
For bonus points, can you imagine being very knowledgeable about technology *AND* about finance, and not getting into crypto? Would you become the biggest crypto-hater in the world? It makes me sad every time I see his posts.
Scott probably already knows this, but attributing the "space pen" to the space program is basically apocryphal. Quoting wikipedia:
>The claim that NASA spent millions on the Space Pen is incorrect, as the Fisher pen was developed using private capital, not government funding. The development of the thixotropic ink cost Paul Fisher around $1 million (equivalent to $8.6 million in 2021) [...] NASA never approached Paul Fisher to develop a pen, nor did Fisher receive any government funding for the pen's development. Fisher invented it independently and then, in 1965, asked NASA to try it. After extensive testing, NASA decided to use the pens in future Apollo missions. Subsequently, in 1967 it was reported that NASA purchased approximately 400 pens for $2.95 apiece (equivalent to $24 each in 2021).
https://en.wikipedia.org/wiki/Space_Pen
Great article, I largely agree with you.
One point you don't touch on is that unfortunately Governments, regulators, financial institutions etc. do have tremendous recourse in cutting off crypto, just like they do normal banks. It's a public ledger, so all transactions are visible, and governments could, if they wanted to, Blacklist crypto wallets. Unlike physical currency you fundamentally need an offramp in order to spend crypto on most things, and if your wallet is marked as unspendable evil terrorist money that it is a felony to take money from, it's permanently useless as nobody will ever accept it for cash.
See below an example action taken against the IRGC - I am not a fan of the IRGc but it could be done to anybody.
https://beincrypto.com/treasury-department-blacklists-more-bitcoin-wallets/
I don't know much about crypto, which I find difficult to understand well, and--surprise!--that makes me wish it would go away (so I won't feel so left out). My technical understanding is no better now, but this post has made me more aware of how my underlying biases have limited my judgment, and I appreciate the argument.
Brief thoughts from someone (me) who runs a magazine trying to be the 'Wired of web3', called Culture3 (http://culture3.xyz/)
Tether is definitely not 1:1 backed by high-quality liquid assets like, e.g. Circle's is.
But I don't get excited by the argument of 'crypto is a use case, only for developing economies like Vietnam, so I wanted to share a couple more use cases
- NFT ticketing is used by UEFA (eg for the Euro 2020 (2021) football tournament, by singers like Lewis Capaldi, and by Ticketmaster, who have made 5 million NFT tickets so far: culture3.xyz/posts/nft-ticketing
- Decentralised data storage is a data storage solution that will outlast AWS. I admit that today it is expensive (less than 1 terabyte is stored on Ethereum), but it is used today, and the cost is only going down: culture3.xyz/posts/decentralised-storage
- Arpeggi is a company fixing a major problem when it comes to music sampling, which has become problematically concentrated industry: culture3.xyz/posts/arpeggi
- Dequency is a company disrupting the $3bn sync licensing industry, where it takes 9 months minimum for royalty payments to be received: culture3.xyz/posts/dequency
- Golden is basically niche wikipedia, and it is better because, well, imagine if you had an easy way to a) compensate and b) coordinate people documenting research about ivermectin, at scale: culture3.xyz/posts/golden
- Less tangibly, within 15 years, most property deeds will be on blockchains. In the UK, Mishcon de Reya ran a blockchain prototype which reduced the time it takes to transfer a house on the UK land registry from 22 weeks down to 10 minutes. In the real world, American cities are using blockchain companies to manage their land registries: culture3.xyz/posts/nft-real-estate-okada-propy
Fundamentally, these blockchain use cases come down to one thing, in my view: when data should be shared between parties, like real estate, music sampling, any form of licensing, or anything else.... then there is usually an unambiguous use case for blockchain
Separately, and more ambiguously, I think web3 is well-positioned with many cultural trends, that I won't go into (unless requested). There's already enough above for me to be slated for!
An interesting essay from one of the best writers out there. Unfortunately, it's not much more than a magnificent sleight of hand. This essay makes five interesting points which all fail in very interesting ways. I'll pick them out one by one.
I suppose this is the first decent defence of crypto I've read in a while because it simply bites the bullet. It admits all of crypto's flaws straight up and argues not that they are going away (first old trick) or that they are not really flaws (second old trick) but that they are worth accepting in light of crypto's benefits. This is an unacceptable bargain but I'll come to that later.
First off, this essay attacks a very naive view of crypto: it's all a scam. It needs to do this to succeed. But this is not what sophisticated critics of the crypto industry think. This is the filtered version by people who can't grasp nuance. What crypto critics really assert is the crypto industry is fundamentally unnecessary and everything it has come up with is a version of unnecessary: smart contracts and nfts aren't necessarily fraudulent. They just have no actual utility compared to viable alternatives.
Second, the main argument is that crypto is some sort of hedge against authoritarian governments by allowing common people a degree of financial latitude. This is wrong on two counts: the first is that the fact that people in broken financial systems resort to crypto tell us very little about crypto's utility. In the seventies, the Irish used pubs instead of banks and wrote their debts on tissue paper. Venezuelans began to employ jewelry and gold as media of exchange. People have found different solutions throughout human history. Crypto is merely the latest and not a particularly good one.
Second, we have direct evidence, beyond philosophical theoretizing, of a country that went fully on crypto. El Salvador adopted Bitcoin as its official currency last year. The country is now not only at risk of default and in serious financial crisis, Bukele is also more authoritarian. He has used the crypto transition to centralize power and crack down on dissent. There's no reason to think of crypto and authoritarianism as natural antagonists. They are,in fact, well suited for each other. A permanent, public, pseudonymous database which is constantly updated is a dictator's wet dream.
Also, economics is always political. Someone is always in charge. There are no power vacuums. If you surrender your financial sovereignty to crypto, you surrender it to people, hackers, whales, shadow banks, and institutions that have no legal or political responsibilities to give a damn about you. At least a central bank and a government have notional duties to do that on paper.
Third, comparing the crypto industry to space is extremely disingenuous. I'm not a big fan of the space industry: a lot of it in my opinion is people trying to execute crappy science fiction stories in real life. But to dismiss it all as a sort of more expensive, less efficient simulacra of planet earth is to do a great disservice. Because of the space industry,we have gps, we have transformations in the communications industry, we have geostationary satellites. And those are just direct innovations. There are also indirect innovations like treadmills and scratch resistant glasses and better insulation, among many others, that were downstream of NASA fundamental research. Put more obviously, there are things we should be thankful for in the modern world that happened because of the space industry before and without which we had no alternatives. What's the same for crypto. What's the GPS level equivalent for that industry. In thirteen years, what can we point to tangibly and say this happened because of crypto and changed millions of lives forever. Everyone who hasn't pulled the wool so far up over their eyes knows the answer to that question.
Finally, the argument that there's just a small sliver of crypto that's rotten and this is comparable to everything else is a very very generous interpretation. It is Bill Gates foundation level generous. Everything in crypto, strictly defined, is criminal activity of some form or the other. Ethereum and Ripple are unregistered securities. Every major exchange is insider trading and wash trading. Every stablecoin is guilty of legal misrepresentation. And these are the ones that are not engaging in outright fraud a la FTX.
Is our financial system perfect? Nope. Is it great? Nope. But is it infinitely better than crypto? Absolutely. Will that change? I'd put money on Xi Jinping becoming president of the USA before I put money on that. And for all the extreme libertarians out there, there's cash and there's gold. They don't come with possible surveillance. And they are LINDY. Also, be a normal person. It seems to work for some reason.
Vietnam: Has China-like capital controls but has not yet banned crypto. 'Nuff said.
Crypto projects: several other ways of looking at it. The same dynamic exists for pyramid schemes, for example, or successful multi-level marketing schemes. Past performance is not a predictor of future performance.
Ukraine: also a center of cyber crime, including ransomware - which is itself a major cryptocurrency use case.
India/Pakistan: both have capital controls. Hmm - likely your index is describing capital controls resulting in "cryptocurrency adoption". Or a recap of China/South Korea from 2015...
This is the first very good article you've posted in a long while, very happy you knocked it out of the park here.
Small nit though, much of the 'decentralized' aspects of crypto are essentially meaningless because people do things like e.g. letting the exchange own their wallet so they don't have to deal with the hassle of owning their own keys, even though that defeats the entire point of cryptocurrency. The most infamous example of this is NFTs just being URLs to JPGs hosted on some random server somewhere, most often an AWS instance, which detractors of crypto like to point out ad nauseam.
Do your return calculations take into account costs such as transaction costs, holding costs, theft and loss ? Or do they, nonsensically or dishonestly, assume those are all 0 ?
_Revised & Expanded List of Things that Make Sense iff you Live in a Failed State_
* Male genital mutilation
* Cryptocurrency
>When something goes up in value 10,000x, it’s hard to think of it in any other context. Whatever it was before, now it’s “that thing which went up in value 10,000x”. And so both crypto believers and detractors have treated crypto primarily as a thing for going up in value
One minor caveat is that Bitcoin was *designed* to make number go up - the increasing difficulty of mining and the hard limit on the number of coins in existence means that it was deflationary from the start. And (speedrunning yet another bit of finance history) deflation means that people hold their money instead of using it.
Someone who's doing cryptocurrency development needs to invent an answer to "how do we algorithmically decide how big the money supply should be?" Or perhaps even more deeply, "how do we bootstrap a crypto project aside from giving a worthless token to people and promising Number Goes Up?"
I didn't see anyone deal with the first graph yet, so if so, they probably got it better than me.
Saying that, I have no idea what that chart is pretending to show. Thanks Scott for the source link, and what follows is not about Scott's commentary, but the graph just confused me more than anything.
Countries are scored on a scale of 0 to 1. All right, that's not a problem, people do that all the time, but...
"Our methodology
The Global Crypto Adoption Index is made up of three metrics, which we’ll explain in detail below. We rank all 154 countries according to each of those three metrics, take the geometric mean of each country’s ranking in all three, and then normalize that final number on a scale of 0 to 1 to give every country a score that determines the overall rankings. The closer the country’s final score is to 1, the higher the rank."
Why is it a geometric mean of three ranks? Why normalize those ranks? Smarter people than me, feel free to let me know.
But my real problem, is they don't actually describe how they weight the data. It's PPP weighted (somehow), I get that, but then suddenly in the third rank its weighted by PPP and internet access. When I first read their methodology I was shocked India was so low. But that makes sense, Indian internet coverage is pretty high. But then looking at their top level results, 'all' of the variation comes from the third category:
Category 1: India - 2 Vietnam - 4
Category 2: India -3 Vietman - 2
Category 3: India - 72 Vietnam - 3
This is not a description of 'regular joes' using crypto as a replacement for banking. This is a description of a very wealthy few not having any other option how to get their money out. Let me know why I'm wrong.
When you discuss the one advantage of Crypto (decentrality), you have to understand that even this one advantage is guaranteed in the same way that regular cryptography is safe from attack through large semiprimes: It's not guaranteed, it's only very expensive. It's security by economics.
Proof of work crypto has a 51% attack scenario:
https://www.investopedia.com/terms/1/51-attack.asp
As long as one party controls more than 50% of the network's hash rate, they have potentially total control over future entries into the blockchain, which is essentially the key to the entire vault. Controlling >50% is indeed expensive for large networks like BTC so it has held firm, but it's much more feasible (and really happening) for any number of smaller networks, potentially leading to a higher-order of centralization of the big networks getting bigger because they're safe from attack. Also, since BTC is "the thing that went up 10,000x", everybody wanted in on it and bought tons of ASICs, whose price is highly correlated to the price of the coin it's supposed to mine. If and when BTC has gone back down 9,999x, reaches some kind of stable price point, and the Ponzi demographic has lost interest, all that mining hardware can be had for very cheap (you can already check ebay for listings), making such an attack much more attractive. Even today, the 3 largest pools already make up ~60% of the hash rate.
https://btc.com/stats/pool?pool_mode=day3
Proof of Stake can be discussed much more easily: The 51% attack is already baked into the design. If you own 51% of a proof of stake coin, you own the entire network.
So that's two levels of decentralization (distributed ledger and multitude of secure networks) secured not by mathematical proof, but by mere economics, which can drastically change on a whim.
I don't think this changes my mind on crypto, but I am mulling it over. Right now, it feels akin to living in a world where I was almost bitten by a snake, I know people who have almost been bitten by snakes, know a few that *have* been bitten by snakes, one of whom died, and many of the people that I know know of someone who knows someone that brings a snake around with them that keeps biting people. It's usually the same dingus doing it, and nobody talks to them because of it.
These are very interesting snake facts. They fit an important ecological niche, which is generally in places that I am not. That has value, and provides a net benefit to the environment. But, I still don't like snakes.
Scott, you know if you lease out your newsletter to a crypto booster, you're supposed to tell us, right? Blink twice if you're being held against your will. More generally, I agree with most of the points, but the opening strawman joke is (slightly) funny because the anti-crypto position is mostly a strawman.
Speaking for myself, I'm only 80-95% anti-crypto. Remittances and working around failed states is valuable, but I question whether you really need crypto for that. Look at Wave in Africa for a great example of a non-crypto fintech for underserved populations. Most of the other use cases seem like BS. There are actually tons of scammers attached to crypto (this running list is great: https://twitter.com/web3isgreat), and I don't think citing scammers elsewhere is much of a defense.
"It used to be 100X worse" isn't very convincing either. The web worked well pretty much immediately, even if only to put up text and blinky tags. We've been waiting what, 12 years since Bitcoin and 7 years since Ethereum launched? When is something compelling supposed to come along?
I'll be interested to see if this all changes over time. Maybe at some point the next generation of crypto or some future version of Ethereum is awesome. But I'm not holding my breath, and I think at this point crypto is a big money sink and a distraction from innovation that creates real value.
Bitcoin's two strongest features are avoiding monetary debasement and protection from payment censorship. You covered the Paypal example for the latter, but I'm not sure you gave enough credit for the former in this post.
“Freedom of speech is hollow if you can’t pay the print costs for your magazine. Freedom of religion is hollow if you can’t pay the rent on your church. The freedom to protest is hollow if you can’t pay bus fare to the protest site.”
In which Scott nearly realizes why civil liberties are better safeguarded under socialism than capitalism.
I think you are ignoring the real world performance of money market funds. It was news when primary reserve fund broke the buck and returned .98 on the dollar.
The other thing to note is banks do two different things: maturity transformation and facilitating transactions. Crypto doesn't really do maturity transformation. Furthermore use in transactions is at odds with being a good investment and capacity is very limited.
The problem isn't that there are some interesting and good use cases for crypto. There definitely are, as you highlight! The problem is that it appears a big reason why people use crypto isn't to actually "use" it but instead to treat it as a growing asset. And when that's the reason why most people are putting money into an asset, we normally call that a bubble.
Think about all the legitimate reasons to buy tulips, and how difficult it can be to use tulips for those reasons when there is a tulip bubble. That's crypto. The legitimate uses are actually harmed by the speculation, and there is an awful lot of speculation. You helped your Russian friends buy plane tickets, and that's great! Except had you done that when Bitcoin was crashing because of the speculators leaving, well, that might've been an additional headache.
I guess what I'm saying is, your second point about how much money you could've made really, really undermines your other two points, and is also not a good reason for supporting crypto (even if it does prove your point they're mostly not "scams" in the traditional sense).
For Americans wondering what it's like having your currency collapse and needing to use crypto, I recommend Robert Kroese's Mammon trilogy (also has asteroid impacts and other disasters).
I think calling cryptocurrencies "decentralized" is inaccurate[1] to a sufficient extent that it papers over the major weakness. It's not like what gold bugs say about gold, in that you've got inherent value in your pocket that doesn't depend on *anybody* else -- no bank, no other individual, no communication network. Cryptocurrencies only work so long as you have sufficiently wide and fast Internet communication that you and the person on the other side of the transaction are in reasonable contact with the blockchain. If you *don't* have that kind of Internet connection, or your connection is compromised (e.g. under goverment control), then your cryptocurrency is useless.
This isn't going to be a problem if you're in a small country with a weak government and much of the Internet infrastructure is controlled by benign or at least neutral governments outside your own, so that can work in Venezuela or small African countries, even Ukraine or Russia. But I'm dubious that this would work if China or the US went full-on fascist and decided to stamp it out. The Internet unfortunately has a delicate fixed physical infrastructure[2] that is trivially easy for the government to control, if it really wants to[3], and it could hardly fail to really want to if cryptocurrency were threatening its grip on political power.
That doesn't take away from your point that cryptocurrency has reasonable somewhat niche use cases, e.g. for small countries with weak governments and disastrous economies, or for uses (like prostitution or gray market drugs) that are more the subject of modest social disapprobation than outright criminalization and zealous prosecution[4]). But extrapolating from there to the notion that if Hitler is cloned and wins the 2024 US Presidential election and decides to nationalize the entire US economy and set up Konzentrationsläger for Untermenschen that you'll be able to laugh it off if you have $100,000 in crypto in a cold wallet is...naive, I suggest. Clone Hitler will not forget to have his new Brownshirts take over the Internet backbone servers before putting Congress under house arrest.
--------------
[1] "Distributed" is more accurate, because it emphasizes the lack of a central authority *but* the crucial requirement of relatively unrestricted communication between the participants.
[2] It doesn't actually have to be that way, IP was originally *designed* to work well with a highly distributed network, but in practice too much of the Internet has become centralized for the sake of efficiency, e.g. Wikipedia lists a mere 15 Tier 1 networks worldwide, and only 6 within the US (AT&T, GTT, Lumen, T-Mobile, Verizon, and Zayo). Anybody think Verizon or AT&T are out of reach by Clone Hitler if he wants them to do anything in particular with respect to the packets traversing their network? It's an old standard of computer security that if the black hats have physical possession of the computer, nothing on it or which passes through it is secure.
[3] Although you could always hope to enlist the amateur radio community to provide TCP/IP over radio. I'd be happy to participate myself -- for a nice cut of your crypto transaction heh.
[4] What happened to Ross Ulbricht is an illustration of how much protection clever Internet technologies give you when the government *really* wants to nail you. He was 100% confident that using Tor and BTC made him untraceable. Oh, and in case any NSA spooks are reading, I totally did not imply that Tor could be broken, nope nosirree bob. Safe as houses.
Scott!
> Venezuela’s economy has been in slow motion collapse for the past decade. The average inflation rate during the late 2010s was 53,798,500%
I believe this is wrong, that's the consumer price index, not the inflation rate (https://tradingeconomics.com/venezuela/inflation-cpi). Won't claim to really know what a CPI is but they seem to be much bigger numbers, so I think you made a mistake here
1.) how much crypto do you own?
2.) crypto is x% hype and the hype is all negative now.
I think use cases are extremely niche though.
As for poor countries, something like Mpesa seems to work better than Crypto at bringing finance to the poor.
I think the only real major use case in the future are going to be getting around copyright protections. As that will become more and more disfunctional. Lifetime of the author + 70 years is way too long. And "similar works" are often way too dissimilar.
My guess is that creative industries will slowly become more decentralized as there will be more and more powerful tools available. And it will be increasingly harder to not be copyright trolled. So to get around it, you release your work and attach crypto adresses to it. Either in music or virtual worlds.
Convential economics claims that you need to force people to pay up, but I don't think that is true. Kickstarter has shown that people can be quite generous. We just don't like abusive greedy corporations treating us like financial pinata's.
Question: What stops traditional international banks from thumbing their noses at the Vietnamese government and developing phone apps that would allow Vietnamese people to do the things they are currently using cryptocurrencies to do, but through a bank that is located outside their country?
Is it that the Vietnamese government has enough leverage against US banks that US banks are scared to do this? Is it that it would be less profitable for the banks than whatever the banks are currently spending their capital on instead? Is it just that it's too weird and banks are run by traditionalists?
(Genuine question, not rhetorical; I honestly do not know the answer.)
People use it to do finance in places with corrupt governments? That's supposed to be a *good* argument?
It sounds unlikeable character Pierce from Community saying, "Somalia has 1,900 miles of coastline, a government that knows its place and all the guns and wives you can afford to buy. Why haven't I heard of this paradise before?"
Just...
I realize I'm not contributing rational counter argument here.
But I'm too gobsmacked.
> I’m less than infinitely hostile to crypto. This is becoming a pretty rare position
I don't think this is rare at all IRL.
On the internet, yes. Everyone is in 2 camps. A) Crypto is a scam B) Crypto is the best thing since hot water.
I'm an (ex FAANG) system engineer, I speak with developers, engineers, entrepreneurs and hackers all day. I have _never_ met a person IRL in my social and professional Silicon Valley circles that is in camp A or B.
Everyone I know is camp C: crypto has some promise, the current incarnation is a shit show, DeFi is a house of card, etc.
I think people in camp C have better things to do than fight holy wars in internet comment sections, so they're heavily under-represented.
Why would you help people avoid helping their country defend itself against an existential threat? Would you similarly help Americans not willing to invade a Mexico that was becoming a military and political proxy for communist China? A Mexico that was for good measure violating it's international agreements to not terrorize American communities in Mexico?
It's interesting how some of the commentors comment on things like energy cost of cryptos and so on, as if they are negative. I, for once, find it a positive thing compared to a usual currency like dollar, ruble and so on. The point here is - the currency should have either a REAL mining cost or should be emitted by a known predictable set of rules. It is a good point where there is no organization or indivildual who can say "oh, let's just print a gajillion dollars, because we need them for fighting covid or whatever other weird cause".
I should note that my sample of "most people I know are in camp C" is heavily biased, because I speak about crypto mostly with _technical_ people.
Most people are non technical, and can't even be expected to understand the difference between cryptocurrency and blockchain. Or the more nuanced difference between Bitcoin (the software) Bitcoin (the internet currency) and Bitcoin (the phenomenon).
Setting aside the "is crypto a scam?" question for a second, I'd just like to say that if the NSA/CIA/"Deep State" is really doing some psyops behind the scenes, crypto seems like an obvious target. "Crypto is only used by terrorists and drug dealers", "Crypto is bad for the environment", "All crypto is a scam", etc. Or maybe it's not some extreme sinister psyop but just slight pressure from government institutions and media outlets. People with power don't like technologies like free speech, internet, guns, and crypto. They'd rather keep rolling with the existing power structures.
Admitting that they missed out on the best financial opportunity of their life because they're not as smart as think they are? That would be both soul-crushing AND ego-deflating, both of which would make their lives worse.
It's much cheaper to just convince themselves "It's all scams!!!!!", and then try to convince everyone else too.
The only question is what mental gymnastics they would do if CC actually went 1st-world mainstream. My best guess is try to elect an anti-CC president to bring the CC-rich back down to their level. Crabs in a bucket.
> Conflict of interest notice / I am dumb alert: I do hold some cryptocurrency, mostly Ethereum, mostly because I received it a while ago as crypto, and want to wait until the end of the bear market before selling it.
This should be at the top of the article.
> There are 8 Ivy League schools in the US, 400 high-quality research universities, and about 1,000 fraudulent diploma mills. Higher education is full of scams! If you’re a knowledgeable person following a normal educational track, you’ll probably be fine. If you click on spam emails that say “GET A PHD IN TWO WEEKS WITH THE UNIVERSITY OF PHEONIX” and wire them your life savings, you won’t be fine.
The University of Pheonix sure sounds like a scam.
A lot of people, though, treat the University of Phoenix the same way, and it isn't clear to me why. They seem to hold themselves out as a school where if you send them money, they will send you curricular materials. I don't see the problem.
A friend of mine at a respectable public university failed Operating Systems, a required class for her major, and made it up by taking University of Phoenix's operating systems class. This was considered acceptable to the administration.
Is the difference that taking a University of Phoenix class for state university credit gets you a diploma from State University, whereas taking the same class without matriculating at State University gets you a diploma from University of Phoenix? Where's the scam? State University has already admitted that University of Phoenix is just as good.
Thank you for this post. I would add that if crypto forces re-evaluation of some aspects of financial regulation, that would be a good thing. The public tends to support financial regulation in the abstract because of a vague sense that 2008 and other crises could have been prevented by "more regulation", but in reality the relevant macroprudential/soundness rules are a small portion of the overall regulatory burden. For example AML/KYC rules make it very risky for financial institutions to provide services to new/smaller companies. It was nearly impossible for our startup to open a bank account, and we only succeeded because I held a securities license (and was therefore considered low risk) from when I ran another firm. Back on crypto, the SEC is focused on picayune issues around what does/does not need to be registered as a security under the 1933 act. The reality of securities registration is that it primarily involves paying a law firm several hundred thousand dollars to produce a document that no one will ever read. So while requiring registration will certainly result in less crypto (because not everyone has that kind of money), it's far less clear how this will benefit the public, unless you are starting out from the assumption that crypto is bad and therefore less of it is always good. Finally, Scott touched on the way that financial regulation has become a way to ban or suppress things without accountability or democratic debate. If the government wants to ban (say) OnlyFans, instead of passing a law or going to court they can simply have the regulator go to banks/payment processors and say "hmm, this business seems risky, mumble mumble some potential future liability". And because the regulator has a ton of discretionary power over banks, and OnlyFans is just one client, they are inclined to comply out of an abundance of caution.
Can you transact with the traditional financial system and have the ability to prove to anyone at any time that you've done so? Can you do the same while hiding that fact from everyone unless you chose otherwise? Can you do something in-between such as proving that you have an account with > 100 dollars in it but without revealing the actual amount? Can you create a virtual asset which is quite reliably tied to the price of onions? Can you create one that's not actually pegged to anything with its own unique monetary policy? Can you build a prediction market? Can you create and deploy something else, some weird financial instrument which no one has thought of yet for whatever purpose you desire? No matter who you are or where you live it's no to most or all of the above, not because it's not theoretically possible but because you won't be allowed to or don't have the resources, this is so much the case that most of that stuff wasn't even imagined until crypto came around. If you value this type of experimentation, then crypto actually has a leg up and the rest of the performance gap has either already been closed or will be shortly. The question is, the one that ought to be central to any good faith argument for or against, do we want this kind of stuff to be possible or not?
Most of my disagreements with this post boil down to: “Did you watch Dan Olson’s video on NFTs?”
What I really, super don’t understand is why you argue that cryptocurrency is decentralized. Didn’t the ETH/ETH Classic fork teach people that proof of stake chains are extremely easy for government to co-opt? Large stakes in the present necessitate either early adoption or large amounts of capital. These large stakeholders have the greatest say in terms of the validation mechanism, meaning all any oppressive government need do is control a small number of powerful stakeholders. The same as authoritarian states have done with crony businessmen everywhere.
Bitcoin, the only one with a slight claim to decentralization owing to its proof of work model, is horribly inefficient in terms of power consumption. It’s unusable as a currency owing to long transaction times and fluctuating value. Today, big capital holders are the only ones with the ability to mine Bitcoin, as proof of work incurs heavy diminishing returns. Again, centralizing control in the hands of capital holders.
Blockchains are not decentralized. They are quite literally a worse version of our current centralized financial system. They duplicate the old system’s problems and put all power in the hands of people who can barely code, let alone create a financial system from scratch.
The link provided in footnote 7 is pretty disappointing from the perspective of being used a concrete prediction about crypto scams. The list has 7 entries:
1. The Merge (not clear how this is is even in the category of things that could "be a scam" since it's just a technical development on a particular chain which has already completed.)
2. DEX Screener (a free website showing a list of DEXes, I suppose it could be developed into a scam by having it mark DEXes as "screened" when they aren't, but I would say the base rate on this is low anyway, so it's not very telling to bet that it won't become a scam)
3. Sudoswap (an NFT marketplace, I can see how this could become a scam)
4. Soulbound tokens (this is an idea rather than a concrete project today. I could see many people running with this idea and producing projects. Do all of them have to be scams for this to "be a scam")
5. Arbitrum (a rollup, I could see how a rollup project could be parlayed into a scam, though rollups are supposed to be visible on the chain, so it wouldn't be easy)
6. Layer 2: zkEVM and zkSynch (zkEVM is another one which is a technology rather than a specific project. zkSynch is a specific rollup.)
7. Across Protocol (A bridge.)
So 1,4,5a are really technologies rather than projects, and 5b, 6, 7 are layer 2 projects, not really the type of thing that can easily become a scam while remaining very visible, because the code should all be public.
"Crypto" is about 10 different things living under the same tent of "a lot of people saying their technology does things that it doesn't, or will never, do".
Who remembers ICOs? Those were wild. Do those count as well regarded projects given they were taking people's money in exchange for misrepresentations?
One of the more concrete things that actually happens is avoiding financial regulation to transfer money. Avoiding regulation isn't a novel use case. It's just building a gray market. Gray markets are usually useful because they allow people who have trouble accessing markets access credit and other financial products. >99% of emigrants made their journey without crypto. And circumventing currency export controls isn't some sort of virtuous feat either.
I guess if the bar for useful is "1% of users of the product actually use it for money laundering so we can ignore all the other speculation, seediness, and charlatans" then sure. But maybe have a bar proportional to the amount of hype and capital involved?
I think it's sad that you had to guard yourself by saying "less than infinitely hostile". Crypto has legitimate use cases. Thanks for pointing that out.
My guess, based on living in African countries for the last 13 years, is that most of the crypto in Africa is owned by wealth types who wish to avoid capitol controls and taxes. I'm not a big fan of capitol controls, but I understand why they exist in poor counties where most of the wealth is in the hands of a few. Crypto further weakens governments and strengthens the wealthy who control assets. Solid use case yes, but not for the betterment of humanity.
> If Nancy Pelosi’s text messages are any guide, Democrats have joined libertarians in the “actually pretty worried about the government becoming an oppressive dictatorship” club.
While I don't dispute the truth of this sentence, we can be confident that Nancy Pelosi's text messages are in fact not a guide and Democrats are not worried about this.
I think Scott's article basically argues that *stablecoins* have plenty of great use cases but fails to make even a small case for crypto as an investment. Crypto is great money, but terrible for making money.
I've been saying for a while "crypto as a transaction medium isn't a scam; crypto as an investment is almost entirely Ponzis some of which haven't failed yet".
https://www.youtube.com/watch?v=hi9Rf0oLdHk&ab_channel=LexFridman
Lex Fridman interviews Coffeezilla. I've just gotten to the bit where Coffeezilla says he doesn't do any deals in the crypto space because it's too hard to tell what isn't a fraud. I think he he's talking about advertising deals rather than any investments he might be making.
I've read all of the comments here and they are plenty of threads on various details, but almost no one (except for Sean McCarthy) is talking about the *fundamental* flaw of cryptocurrencies like bitcoin: they are a liability with no creditor. The claim that "bitcoin has value because people believe in it" is like saying "(literally) pull yourself up by your bootstraps". I've tried to make the point in a non-technical way here...
https://wp.josh.com/2018/03/25/a-man-walks-into-a-bank-a-bitcoin-parable/
I've only recently come up with a way that bitcoin can possibly escape from this circular argument by seeing it as an NFT...
https://wp.josh.com/2022/11/15/how-bitcoin-could-potentially-have-value/
Note that I think this is a weak claim, but at least it is a logically possible one.
We are currently in an transient where, yes, there are people who will give you money in exchange for adding a transaction to a bitcoin blockchain that miners currently append blocks on, but this is only because those people do not understand what they are paying for. Eventually this phase will be over - with hard time limit imposed by bitcoin's own halving rules.
All that aside, there also happen to be plenty of bitcoin technical problems that would eventually catch up to it even if the delusion were to linger on. If you believe in the myths that bitcoin is decentralized, inflation proof, non-confiscatable, etc then I'd be happy to go as deep as you are willing to go to rebut these claims. There are very few people who really understand bitcoin past the marketing materials, and most of them are highly invested in not talking about these problems publicly.
And finally, if you are one of those people predicting that bitcoin is going to $100K or $250K or $1M, then I'd love to publicly take your bet here! My only requirement is that the payout can not be in crypo if I win! :)
I mean, isn't this just another point that the only use of crypto is inherently illegal? Like you say it nicely that is is solving "regulatory issues", but these are literally laws enacted by the sovereigns where your physical presence lies. Yes, it's a not a good situation for these people, and it's kind of great that they now have the ability to sidestep these sovereign controls technologically, however it is a TERRIBLE business.
THIS is why people are infinitely hostile to crypto - as an anarchistic distributed middle finger to sovereign control of weath it's great. However, AS A BUSINESS, and any business purporting to be 'legitimate', you cannot get away from the fundamental issue that use cases are illegal.
The word "scam" needs to be re-understood within the context of crypto. There are huge "vulnerabilities" with tokens. The main one I see is that you can create your own token, hype it TF, and then partially cash out whilst liquidity is high. You can claim that your holdings of your own token, whilst it's riding high on the exchanges (or your own exchange), represents real capital and attract real money in, or reinvest in looking super cool and rich, getting a hype feedback loop established.
None of this is strictly a scam. But you can't really do it with traditional money. It's a vulnerability. And one that most people don't understand because we engage a defensive mode of attitude when our money is threatened. Thus people hurl words like "ponzi" around, yet don't understand the differences between crypto and trad money. And so nothing really changes.
If more people in the scene, for example, understood just how Bitconnect worked, back in 2017, and why it was not a Ponzi, it's unlikely that FTX would have gotten as far as it did.
> NYT describes its banks as “so sclerotic that sending or receiving even small amounts of money from another country requires an exasperating obstacle course of paperwork”, and this guy says that if you deposit more than $100,000 in a Ukrainian bank, “the chance that you get it back is very slim”.NYT describes its banks as “so sclerotic that sending or receiving even small amounts of money from another country requires an exasperating obstacle course of paperwork”
That's not my experience and the article is extremely biased against trad banking. Among me and my friends, we've compared availability of services and convenience of online banking between Ukraine, Poland, Estonia, Germany, Hungary - everybody agrees that Ukrainians banks win. There were no major disruptions caused by the war in any bank, evren.
From the Verge article
> the way the people of Ukraine do savings is not that they carry money to the bank and deposit it. It does not work like that. We do not trust the banks. I told you. If we have a lot of money — by a lot of money for Ukraine, I mean probably $100,000 and above — the last thing you will think about is actually bringing it to the bank.
This is what the attitude was in the 90s. Its a different country now. Some people do store money in USD, because of the multiple crises making the dollar go up (2008, 2014), but its not a minority.
This guy - the guy interviewed by both NYT and the Verge - is lying for his own benefit, to prop crypto up as they tend to do.
"It's sometimes useful to be able to launder money" isn't as bad a take as it initially appears but it did catch me off guard.
To get an approximation of the utility of crypto you need only look into a general history book. There you will see that one of the main achievements during antiquity was the invention of coinage. Crypto is precisely that, coinage for the digital realm. Its utility should be obvious.
One could argue that we do not use much classic coinage either these days. Technology has given us credit cards and instant bank transfers. There is truth in that, of course. But most of these technologies are centralized on some level. And one of the defining features of coins is that they are decentralized, usable by anyone at any scale.
In fact, coinage is a surprisingly late invention considering how simple the technology is. In Europe/Mediterranean coins were not introduced until a good way into the iron age. There is logic to that. The Bronze Age was characterized by empires and other large entities. These empires were perfectly able to trade in kind anything they needed. For that they only needed good book-keeping (which is a Bronze Age invention). The Iron Age is characterized by smaller entities, more or less independent villages populated by farmers and artisans with their own agency. These people could not trade in kind since they traded so very little. They needed a stable medium of exchange and for this coins were introduced.
Crypto, likewise, has its greatest utility in the interactions between individuals. No matter how fancy your credit card you cannot use it to transfer funds to the person next to you. For that you need some sort of system that allows the two of you to interact with each other directly. Centralized systems like Paypal or instant bank transfers can do the job, but something decentralized will do it better, cheaper and more securely.
As long as people are interacting digitally it is obvious that there is a use case for a digital medium of exchange. The real question is if crypto is up to the job. I am not really following this arena any more. But the fact that I still do not see options for paying with crypto at webshops or people asking to be paid in crypto in Facebook Marketplace ads tells me that crypto still has some way to go before it lives up to its potential.
Paypal also doesn't have to prove you are a sex-worker, they can just accuse you and steal your money. You would then have to prove a negative to get the money back. I believe there already were cases where someone sent the lunch money with the note "for sexual favors" as a goof and then the accounts got frozen. If this happens to a business it might be bankrupt before you even get a court date.
I'm a long-time Scott reader from Russia, with mental disease (so it's extremely unlikely i get drafted) and I want to ask for help in some form...
thought I suspect most people here would like me to stay as is to be a drain, albeit small, for Russian state.
First off, I'm sorry if anything I've written in your comments has contributed to you writing this. I've tried to express some nuance, but I am out of practice. I actually find it fascinating how much I agree with Mark P Xu Neyer on this, but it's the places where we disagree that seem to matter most.
I would like to push back slightly on two parts here:
> I don’t think it would have been possible without crypto.
A number of years ago, I did something vaguely comparable using Western Union, a 170-year-old company based on a 190-year-old technology. I admit that, if we had used cryptocurrency, this probably would have been faster and cheaper and would have involved less walking on both our parts. Also, this was to someone in China, which at the time was vastly more stable than Russia is this year, so possibly WU wouldn't even have worked for you. Still, the point is that this is a known financial niche that was filled almost as soon as human technology allowed for it (and that's not even getting into bank notes), and what you're talking about is a technological improvement. It is definitely useful to be able to do the thing in cases where access to banks and WU is blocked but access to the internet isn't. Perhaps I simply lack perspective on how revolutionary that is.
> The saying goes: a book is a mirror; if a monkey looks in, no apostle looks out. Cryptocurrency is like this too. If people are looking in and only seeing the monkey gifs, that’s not crypto’s fault.
Sometimes, when you're standing in a blasted post-apocalyptic wasteland dying of radiation poisoning, you look in the mirror and see a blasted post-apocalyptic wasteland inhabited by some disgusting mutant that might once have been human. It's not particularly your fault, though.
In what way are you not a true believer? Reading this post and the comments, it seems like you truly believe in the core argument of crypto as a replacement for currency. Your opening says that you aren't a true believer but also aren't infinitely hostile. Was there some sarcasm that I'm missing?
I think every article like this should have information if the author has any active investment in crypto. I bet 99% would have.
Interesting. just one thing: the NYT is silly. I sent my son in Ukraine money for years; in days sometimes in minutes. Yes, to his account at the ukrainian "privatbank" (even though that bank itself turned out kinda scam), yes, using wise/transferwise - but other services work just fine, too. When I put several k of my own money in Ukrainian banks, I always got it back just fine. (OTOH: when I finally tried to sell my shares in an energy-company, there was only one bank (ie. one building) in the whole country who could do that - and it took 3 (three!) flights to Ukraine in person to get it done. A few k. And my worst investment. Share-issues are historically often scam-schemes, at least as much as crypto. So: "NYT describes its banks as “so sclerotic that sending or receiving even small amounts of money from another country requires an exasperating obstacle course of paperwork” is just another fail of NYT. - Kudos for helping out the Russians. Upgrading to paid shall be the most EA-thing I'll do in 2023.
"So why do people think everything in crypto is a scam?
[...]
Crypto is a few hundred interesting projects, plus a long tail of thousands of scams.
This isn’t so different from other fields like education. There are 8 Ivy League schools in the US, 400 high-quality research universities, and about 1,000 fraudulent diploma mills."
Except in education, it's fairly clear which is which, and in crypto a regular user has no way of telling the difference.
What's the last time an Ivy Leagy university turned out to be, in actual fact, a fraudulent diploma mill before they shut down and ceased operations overnight?
In contrast, what's the last time a major crypto company turned out to be fraudulent and declared bankruptcy? ...oh, three weeks ago. And before that? Four months ago. And before that? Five months ago.
To quote the famous "Line goes up" video on the author's experience with NFT projects: "The market is just absolutely lousy with fraud and deception. [...] If you just look at the pitch package and the sample product, there's very little material difference between a project that's going to sell out 10000 tokens in six hours and one that's going to become a trash fire as the project leader has a nervous breakdown and burns the mint three days post-launch after only selling 800 tokens."
I have some difficulties with this.
1. Nobody's *infinitely* hostile to crypto. What would that even mean? Yes, this is obvious hyperbole, but it has the usual problem with hyperbole that it leaves the readers to work out what the non-hyperbolic claim being responded to actually is. This seems a bit of an un-SSC move. The obvious reading would be that you're less than *maximally* hostile to crypto, but that's still a straw man, because most crypto opponents would agree that it could be worse. It's clearly wrong to say it's a "pretty rare position" to be non-maximally hostile.
Later you say "people think everything in crypto is a scam". But if people believe that, I don't think they mean what you call "outright rug-pull-style scams". They don't mean that the people buying tokens won't get the tokens, but that the tokens aren't worth having. It's the difference between selling shares in a company which doesn't exist and selling shares in a company which has no prospect of ever making money. Selling shares in the South Sea Company wasn't strictly a scam, because the sellers probably genuinely believed the hype, but the purchasers were still deceived.
As a side note, people label all sorts of things as Ponzi schemes, but the label ought to require a Ponzi figure who is engaged in deliberate fraud. It seems possible that FTX will turn out to have been a Ponzi scheme in that sense, but unlikely to be true of crypto as a whole. But it can still be a bubble, and in my view it probably is. I mean the coins of course: I think it quite possible that in 20 years' time (if the singularity has not occurred) we will regularly make blockchain-type transactions, but most currently circulating coins will be valued close to nil.
All of this is to say that this would have been a compelling post if it had responded to the best criticisms of crypto instead of some nebulous sense of what everybody thinks.
2. I think crypto probably does have use cases, but I don't find your post very helpful in understanding them. The Chainalysis data is "based on three metrics", and I don't have any sense of what it's measuring. As others have pointed out, it's normed to Vietnam being 1, so it's impossible to say whether it's a lot or a little. Maybe everyone in Vietnam is using BTC to buy hot-dogs, maybe it's an artifact of some particular high volume activity being based in Vietnam: I have no way of knowing.
3. It's pretty unconvincing to quote the president of the Blockchain Association of Ukraine on the problems of conventional banking Ukraine. I doubt that this is a fair characterisation, not least because the Ukrainian government would be unable to function if the banking system were that bad, and it clearly is able to function.
Your source for crypto as a means for Westerners to send money to Ukraine states, "The funds raised in cryptocurrency are a just small part of the overall donations that Ukraine has received... cryptocurrency donations have tapered off..." Clearly there are no problems sending ordinary money to Ukraine. On the other hand, there are problems sending ordinary money to Russia, and this is genuine use case for crypto, but not necessarily one we would encourage.
I'm not sure if it's correct to say that Ukraine "legalised" crypto, because I don't see that it was *illegal* before. What seems to have happened is that Ukraine passed a law regulating crypto and requiring crypto dealers to register in order to operate legally. While that might be consistent with a crypto-enthusiast country faciliating use by ordinary people, it would also be consistent with a concern that crypto was being used in malign ways and required a higher degree of oversight. Whether the Ukrainian government actually is able to exercise effective regulatory control of course remains to be seen.
4. People in countries with poor financial norms absolutely are unusually susceptible to Ponzi schemes. Consider the case of Albania.
5. The fact that people are using crypto to meet real needs makes it worse not better if the whole thing is a house of cards. If Venezuelans hold a significant portion of their wealth in crypto because they rightly don't trust the bolivar, then a general crypto crash is going to cause the country real harm.
It's completely astonishing to me that supposed rationalists are so willing to fly the flag for cryptocurrency, one of the more obviously terrible ideas that humanity has dabbled with in recent decades.
Thanks to FTX (and, I guess, the entire history of crypto) this article aged poorly before it was even posted, but in a few years will look even sillier.
I'm surprised that there's no mention of the rise and collapse of NFTs, but then the main defences of crypto are that "they use it a lot in Vietnam, no we won't look into whether or not that was a localised Ponzi game that took off" and "I googled some projects and didn't find articles calling them scams, no we won't look into whether or not those projects succeeded at anything materially useful", so outright ignoring one of the few crypto concepts to make it into mainstream consciousness seems about right.
It's interesting that this article was apparently motivated by Silicon Valley turning against crypto - does the entire tech community learning from experience not count as evidence against crypto? Or are they all simply mindless sheep who can be dismissed without deeper thought? (A fun thought experiment might be to wonder if "Silicon Valley thinks crypto is great" would have been used as evidence in crypto's favour in an alternate universe version of this article, or if the Valley would have been consistently dismissed by the author whether or not they happened to agree.)
I'm less than infinitely hostile to murder. Sometimes it arguably makes sense e.g. assisted dying
Serious question: if the claim is that a significant number of people in poor countries are "using crypto" - what blockchain are they using, and what are they using it for? Ethereum processes less than 20 transactions per second, Blockchain less than 10. 20 Transactions per second corresponds to some 52 million transactions per month. That's enough for the inhabitants of one medium-size country to pay their monthly utility bills... and that's it.
(I know that Ethereum plans major scalability upgrades - that's not the issue. I just have doubts that claims of "lots of poor folks need and use crypto, why do you priviledged people want to take it away from them?" pass sanity checks.)
I'm not sure footnote 3 is right - most people who invest in Ponzi schemes do make money, its only the last cohort of investors who get stung. This applies to bubbles as well, which is the better comparison for proper, BTC-like decentralised crypto. The "buy my token from me" cryptos look a bit more like Ponzi schemes, but are really more analogous to pyramid schemes. You don't buy the token to sell it back to the creator; you buy it in the belief that there will then be a market of new/other investors that you can sell it on to.
"Crypto" should really be three things:
1. Large-scale decentralised Schelling-point blockchains (I'd say really just BTC, but you could make a case for ETH); this could become a proper currency, but only if more people use it as a medium of exchange than for speculation to bring down its volatility.
2. Large-scale backed/"pegged" tokens (Tether and a handful of others); these should really just be thought of as an alternative to Paypal (aka a medium to transfer/store dollars). Given someone has to back them/defend the peg, and that person needs an address and a bank account, they will eventually be subject to Paypal-like regulation and become to Paypal what Paypal is to Western Union in the great cycle of birth and decay. My guess will be this happens in the course of the post-Tether-collapse litigation.
3. Everything else; worthless scams. You can make money out of them in exactly the same way you can make money out of penny stocks, but they're pure-speculation instruments. The difference with BTC is that BTC derives underlying value from the extent it is/should become a genuine medium of exchange for goods and services. Tron and Landcoin are not, and will never be, genuine media of exchange for goods and services.
You refer to the twitter user 6529 as 6259. This is a minor typo, but you might want to correct it.
I want to briefly add a perspective that I don't often see - how much better stablecoins are than banks for running a business.
I've been running a Swiss-based crypto-related business, and while some of our business can be handled in stablecoins like USDC, plenty of it has to go through the traditional banking system.
While banks work OK for smaller personal accounts, they're really not great for running an international business. International transfers are opaque, take days, cost an unknown amount of money and sometimes get returned because someone along the way didn't like something. They will blatantly overcharge you for currency conversion unless you work out a deal with them not to. Want to interact with them programmatically through an API? Each bank has their own mess of a design if any at all.
Just the other day they told us that transfers of USD to non-US based recipients can no longer be guaranteed and will only be processed on an exceptional basis. Why? Who knows, they can do whatever they want.
Meanwhile transfering USDC takes a couple of minutes and costs a dollar - a lot for a 3rd world remittance, basically free for a business transaction. You can instantly send proof from Etherscan that the transfer is complete. Want to integrate these systems into your business backend software? Go right ahead, the whole system was built from the ground up for programmatic access. With the more advanced business facing custodians you can set up an advanced system of rules and checks for who can transfer what, where and who needs to approve. If you want to get more advanced with financial engineering, in DeFi you can get a loan, buy options, earn yield without having to ask anyone's permission.
It's not all free lunch, you're taking on a different set of risks and responsibilities, but as a software engineer it's painfully clear which system is the future and which is the past.
While these advantages don't strictly require the underlying system to be decentralized, I would ask - why wasn't any of this built before crypto? I believe it's because for anyone to commit the kind of resources it took to build this all out, there has to be a neutral base layer where many parties can work together. As a bank, you're not going to be building your products on your competitor's walled garden platform.
If you think all of this could be better done as a centralized system, go right ahead and build one - from the perspective of running my business, I don't have a strong ideological commitment to decentralization, I will happily use the best tool for the job.
I think that the framework of "infinite hostility towards crypto" or "less than infinite hostility towards crypto" is unfruitful. Essentially, it's about being outraged. And while it's understandable why Scott frames the question this way, considering how much outrage is currently happening very close to him, this is not an interesting question. An actually interesting and important question is whether crypto is net positive or net negative in utility. Recently I've finally updated that it's net negative. FTX crash contributed here, but less as a new evidence and more as a reason to reevaluate the current evidence that I have.
Basically nearly for every positive use case that crypto has, there are mirroring it negative use cases which create more problems for the same issue, that the positive use case contributed to solving. For example, I live in Russia. And I can't say that crypto here is a big thing. Noone of my friends is actively using it as a means of exchange. It's also pretty hard to turn crypto into fiat currency in Russia. This brings up the suspicion that the reason the numbers in the graph are normalised is because the absolute values of numbers of transactions are embaracingly low. There are good uses of crypto in Russia - donate to Navalny team or Medusa, or send money from abroad to help individual Russians who are now in a terrible situation for nearly no fault of their own. I think this are a very good uses of crypto! That said there is a very very bad use of crypto, so bad that it completely annihilate the utility of financing Russian opposition and helping individual Russians survive. Crypto can be used to overcome the economic sanctions that were imposed on Russia and help Russian goverment keep financing the war in Ukraine.
For all the insurance against authoritarianism crypto can be just as well used to benefit authoritarianism. A group of noble rebels can theoretically use crypto to finance their efforts to overthrough the despotic goverment and bring the light of democracy to the people. However just as well a group of domestic terrorists can use crypto to finance their efforts to overthrough the democracy and install the fashist dictatorship. Crypto is a tool to overcome conventional coordination mechanisms and replace them with its own. As long as traditional coordinations mechanisms are net positive in utility, crypto is net negative. As long as the coordinational mechanism of crypto is worse than the conventional one, it's net negative in utility.
The idea of decentralisation and zero trust are interesting and inspiring. But in practise there nearly no use cases that actually need it in practise. People keep doing crypto projects not because this new technology is the best tool for the job but because it's hyped. So again and again it's an attempt to find a problem to the solution. A worse house but in space is worth the effort and the inconvinience. A worse financial system but decentralised is not.
As the kind of commentator who often strives to approach infinite hostility towards many things (including crypto), I can say that this was exceptionally well-written and persuasive. If it's a defense of crypto broadly, it's the best I've ever read anywhere.
It also doesn't change one aspect of the social construction of value that drives much of the overall hostility to crypto, which is social proof. Given that I'm an American, the people I encounter who like crypto trend heavily towards the "most detestable and obnoxious people you'll ever meet" end of the spectrum, to the extent that when crypto was at the top, if someone annoying-seeming started excitedly talking to me and a few sentences in I discovered he was a Mormon, a conspiracy theorist, or genuinely schizophrenic, I would have felt actively relieved. I've met zero Vietnamese-speaking crypto users, and even if I did we'd probably have many other things to talk about than methods of sending remittances. I know plenty of Ukrainians, but none of them have ever brought up crypto.
Yes, I'm aware that this is bias, but it's also how products work.
> and this guy says that if you deposit more than $100,000 in a Ukrainian bank, “the chance that you get it back is very slim”.
This is something of a minor misquote. The original says "get it all back":
> The likelihood that you are going to get it all back is very slim.
Which is a small difference in phrasing but could be a big difference in practice.
But crypto only exists because of regulation. The advantages it offers are basically numbered accounts without chargebacks or know your customer laws.
If world governments didn't make it illegal (and effectively illegal to just do it offshore) all your favorite tech and investment bank companies could offer much better products with the same advantages but without slow transactions, technical complexity/impossibility of retrieving lost keys (but you'd have to identify yourself for that) and no massive waste of energy.
I believe the benefits to the third world of these kind of products are quite real. One can also make a case for the kind of KYC laws that prevent numbered accounts without clawback. But it's absurd to have both.
Moreover, crypto isn't really regulation resistant. If the western world just made it illegal it would disappear. Sure, maybe the Blockchain itself survives amoung a few hackers but if you can't xfer money in and out legally or setup a crypto mining company the whole thing falls apart. And if you don't make it illegal useability will increase so it's just crazy to leave the version of the product with massive negative externalities legal but not the one without.
I think this post ignores a salient point: "crypto" writ large isn't just about reinventing wildcat banking, it's supposedly going to disrupt the world (TM) in various unspecified but heavily touted ways.
Wildcat banking is a known thing. It's the original and design use case for blockchain, it's basically the subject of the original white paper, and it's been around long enough to have gotten a cool animal name. Basically every current benefit and problem of cryptocurrency as a theoretical currency has a very close parallel in wildcat banking and wildcat currencies. (in my Ted talk I will examine...) This is all well upstream of any technological issues.
However, all the other applications being proposed for blockchain are just, well, shit. Let's call a spade a spade! Legal applications like a registry of deeds or some public facing government database? Logistics and transit applications? The "programmable blockchain" and some fairy tale of "automatically executing contracts without oracles"? All of it is broken in fundamental ways, be it from needing Oracles in the first place, to the ability to correct / edit and force / reverse transactions, to total data throughput (sharding has a VERY long way to go to approach what a single IMS instance can handle), and etc. These are huge, 10,000' problems and the way the greater Crypto-not-currency community has handled them is quite telling.
Blockchain / crypto has become like snake oil everywhere outside of wildcat banking, and it's really just better to assume ill intent there until proven otherwise.
> Remember the story of that special astronaut pen that cost $1 million? We already have pens on earth, for like $0.10, and they work better!
This is mostly an urban myth; in particular, the money was spent by a private company, not by NASA or something. And it turns out pencils are not great in a high-oxygen zero-gravity atmosphere (e.g. due to flammability). Or put differently, we already have pens on earth and maybe they do work better... on earth.
See here: https://www.snopes.com/fact-check/the-write-stuff/
A better way to state my position is that crypto is only more resistant to regulation because the public doesn't see it as real banking done by big corps but as a kind of toy .
To avoid this regulation you'd have to convince ppl of this argument and if you could do that then couldn't you convince ppl to support companies just offering numbered, no id accounts that don't allow clawback of transfers.
I support that but it should replace crypto.
Murtaza Hussain had a nice article a month ago that echos Scott's first point:
"A few years ago, though, I had a little experience that briefly gave me a taste of what the world could be like if things were simply fair. In the early months of the pandemic, I needed to send some money across borders to a family member in a country that is subject to financial controls and has an underdeveloped banking sector. Usually, this is an exhausting and costly chore of figuring out who is soon going to be traveling there or to a nearby country and is willing to take cash with them, or seeing whether the recipient themselves can travel outside and receive a wire transfer. It’s expensive, cumbersome, and insulting to the dignity of innocent people who have done nothing to deserve this level of suspicion.
This time though it went differently. I’m a wordcel and am usually aloof from tech, but this person (smarter than me) walked me through how to send them Bitcoin, which, they assured me, would mean something to them and could be converted to a local currency upon receipt. After messing around with it for about half an hour, I figured out how to buy Bitcoin and clicked send to transfer it to their wallet. And it worked, the money moved. They got it and were happy. No big deal. This may sound like nothing to you, but after an entire lifetime of watching good people treated as presumptive criminals by the global financial system it was practically revolutionary."
https://mazmhussain.substack.com/p/what-bitcoin-and-crypto-are-for
If the government becomes fascist, being able to use crypto to buy... something (possibly/presumably illegally)... is the least of my concerns.
That is all cute. The problem with this "minimalist" defense of crypto is that it is not the position of almost any of its advocates. And if you do take it to be the position, the whole thing will collapse to a tiny fraction of where it is now because all the interest is from much more grandiose visions when it isn't just rampant speculation on an asset bubble.
Another day, another crypto exchange goes bust. https://twitter.com/whalechart/status/1600967259161497600
“Yeah, it’s mostly scams and memes when you get down to it,” she wrote.
Caroline Ellison, math whiz and Newton native, was bound for success. Then she got into crypto.
By Anissa Gardizy, The Boston Globe | updated on December 7, 2022
https://www.boston.com/news/the-boston-globe/2022/12/07/caroline-ellison-ftx-alameda-research/
Was it the media or crypto companies that bought Super Bowl ads with celebrities with the message that this is something normie American consumers should get on?
It was crypto companies. And if, people perceive that crypto is a get-rich-quick Ponzi scheme rather than helping poor Vietnamese farmers.
Also, most normie Americans have interactions with the higher education system other than diploma mills. They don't with crypto. So, for most normie Americans "Crypto = scam" is probably not a terrible heuristic.
Scott you have identifies the one use case for crypto that has some good to it. Allowing the subjects of tyrannical regimes to store some assets out of the reach of their oppressors.
Of course that use will only last as long as the regimes don't catch up to it. Such regimes can blunt the use of crypto by cutting their people off from the global internet. The low tech method open to thos regimes is to throw people into the gulag and torture them until they give up the goods.
The good should be weighed against the evil. Financing hackers, drug smugglers, and terrorists is a negative. Channeling savings into unproductive uses is a negative. Turning energy into pure entropy is a negative. Disrupting the financial system that governments depend upon to provide welfare for billions of people is a negative.
In my judgment, the evils far out weigh the benefits and crypto should be banned.
Hey good on you for helping people out of a bind and being a little bit clandestine. That’s awesome. I know you don’t need to hear this but it’s a good thing to say and a good thing for a culture to see being said.
> If Nancy Pelosi’s text messages are any guide, Democrats have joined libertarians in the “actually pretty worried about the government becoming an oppressive dictatorship” club.
Off-topic, but this is pure propaganda. I don't think Nancy Pelosi cares one whit about your ability to support unpopular (American) political causes with crypto and will zealously attempt to regulate it out of existence the moment you try to support something she deems "dangerous."
You're wrong about bank account freezes having been an effective tactic against the Ottawa trucker protests (which were in 2022). Nothing changed about the protests until police moved in and started arresting people. This happened only a few days after federal government invoked emergency powers, including the banking stuff, so it's hard to tell what the counterfactual is if the bank account freezes had the chance to play out, but it was very obviously the direct police actions not any financial issues that ended the protest.
Scott, are you retracting your statement from Meditations on Moloch, implying that that time has not yet come, or still hostile to cryptocurrency for this reason (just "less than infinitely")?
>In the links post before last, I wrote:
>>The latest development in the brave new post-Bitcoin world is crypto-equity. At this point I’ve gone from wanting to praise these inventors as bold libertarian heroes to wanting to drag them in front of a blackboard and making them write a hundred times “I WILL NOT CALL UP THAT WHICH I CANNOT PUT DOWN”
>A couple people asked me what I meant, and I didn’t have the background then to explain. Well, this post is the background. People are using the *contingent* stupidity of our current government to replace lots of human interaction with mechanisms that cannot be coordinated even in principle. I totally understand why all these things are good right now when most of what our government does is stupid and unnecessary. But there is going to come a time when – after one too many bioweapon or nanotech or nuclear incidents – we, as a civilization, are going to wish we hadn’t established untraceable and unstoppable ways of selling products.
There's so much blind rage against crypto. Much of it is uninformed, unjustified, or misguided.
Thanks for posting a solid take on why it's not all bad.
I find the hostility to crypto these days quite reminiscent of the hostility to the internet following the dot-com bubble. Like crypto today, the internet in 2000 was quite limited in many important ways, but it had a very high ceiling and was getting consistently more powerful. The same goes for crypto today.
I would love it if you would add some concrete predictions to test your intuitions about how viable / fraud-ridden the crypto landscape will be in the next 5 years. From reading the comments I feel quite confident that most of your readers are way too pessimistic about the space, and will be very surprised when the space (1) doesn't go away completely (2) keeps testing interesting ideas and (3) produces real-world use cases beyond the narrow ones contemplated in this essay.
Now I'll lay out my own views, even though I know from reading others' comments that people will dismiss them out of hand:
Crypto is both a fully general computing platform and a novel way to align incentives. The design space is simply too rich to be limited to sending cash in countries with bad financial systems. The financial system today is basically sclerotic, riddled with expensive middlemen, and building new products on it requires wading through miles of red tape. Contrary to popular belief the regulatory burden ultimately falls largely on users, because it makes it impossible to compete with incumbents.
Any product that exists in our financial system can be replicated in crypto (in a slower and more expensive way — for now). Crucially, once these primitives exist others can build on top of them, and like in other software systems the layers of abstraction will build up. As an interesting aside, crypto projects are subject to natural selection because they satisfy the requirements: they reproduce with heredity through forking, and the child projects have variable fitness levels.
What people perceive as crypto's biggest issue – that bad projects are failing – is in some sense its biggest strength, because it creates a more robust system in the long run. Security flaws are exploited ruthlessly, but the next generation of engineers learn to avoid them.
OK, so reading the article -
1. The headline says 'not infinitely hostile' whereas the content is a restricted endorsement.
2. Header 1 - "Crypto Is Full Of Extremely Clear Use Cases, Which It Already Succeeds At Very Well" - This graph has information, but the assumptions included don't seem to align with the claims being made - for instance, only P2P trades? That's not a representative sample in any way? And the 10k 'retail transaction' assumption would seems to go against 'alternative banking' and place extra weight on small transactions like crypto games. Also, variance such as "China fell from 53rd in this component to 155th, while the U.S. fell from 16th to 109th." over the course of a year should indicate any assumptions about the results are best taken lightly. (Also, Vietnam appears to have over 60% adoption of GameFi according to Statista, which seems to indicate it has little to do with banks or anything)
3. Header 2 - "Big Crypto Projects Are Very Rarely Scams" - What about a similar but different claim? 'Big Crypto projects are very often narrowly held and profits are narrowly gained'. What exposed FTX was a major player making a negative call. There is a negative incentive for users to sell large quantities of coins as the value shrinks to 0. Even if it isn't explicitly a 'scam' it is something where the utility is the ability for a small group of owners to slowly divest of an asset for large personal profit. That doesn't really align with either the 'it's an alternative to currency' or the 'line goes up' reasons to use crypto. It's more scam adjacent than directly a scam though.
4. Header 3 "Crypto Is Valuable Insurance Against Authoritarianism" - Isn't this more 'crypto is valuable against laws? [Even if, yes, authoritarian governments love a bad law] And if the premise of a currency is that it can circumvent governments - there is a strong incentive for 1. Hostile regulatory structures - which will ensure that it will always be worse than normal financial instruments and 2. A haven for bad actors - which makes costs of trust, risks of purchases, etc. higher than other venues.
What is my incentive to ever use this in a non-crime scenario? If there isn't one, then the assumption will also be that having crypocurrency is tantamount to 'will to commit crime'.
5. Header 4 - "Yes, The Crypto Financial System Is Just Reinventing The Regular Financial System Except Worse In Every Way, And That’s Fine"
Yeah, that's fine. I'm not saying crypto should be illegal. But I don't see your article saying 'I'm less than infinitely hostile to unicycles'. You're promoting unicycles in a world where bikes and cars exist.
6. Header 5 - "You, Too, Can Be Less Than Infinitely Hostile To Crypto" - And here is the sales pitch. Cool. Maybe just title it "I like crypto and would feel better if you did to".
7. You have several claims for what it can be used for - everyday purchases, remittances, illegal activity, stores of value, etc. - however, deflationary currencies are bad for everyday use and low trust/high risk currencies are bad as a store of value. Rather than making a diffuse argument about every cryptocurrency and every possibility - it would be more useful to examine a specific one. What is it good at? Why is it good at it? And where is it effectively doing that? The breadth of your example strains critical analysis.
This is interesting but a bit verbose, no? To crystallize the concept: crypto is extremely useful for black markets, and you're coming out in favor of black markets.
I'm sure that some people who are inside Russia have used crypto to get out of Russia. But I can assure you that there are many other people inside Russia who are using crypto for...different purposes. It is not very hard to find information about what organized crime in Russia looks like, at least not to get a general sense of the vibe. I'd encourage you, when you do your utilitarian calculus, to consider both sides of the scale. On one plate you have Russian émigrées, on the other plate you have Russian drug and sex traffickers who partake of violence of a degree that I don't think it's possible for a comfortable American to exactly fathom. I don't have a good sense of how big the two plates are, do you?
Well said. My short version of this is, “I like Ethereum mainly for tilts smart contract potential, rather than its currency.” It sounds a bit like getting Playboy for the articles, but I’ve never spent a penny on crypto currency, while I have spent many hours reading about smart contracts. I also suspect that, if I lived some place other than the US, the cryptocurrency aspect might interest me in a practical sense.
Bye.
Yep. Crypto is worse at everything except decentralization. But, in the long run, this may be the one thing that matters most.
It feels like the range of years for biggest crypto projects starts after Mt Gox (super popular exchange, turned out to be a huge scam) and ends before sufficient popularity of FTX (super popular exchange, turned out to be a huge scam). With this slightly expanded reference class, choosing an exchange seems super hard because neither of these were expected to be scams up front. This seems greater than the risk of investing more conventionally in stocks or bonds, as it’s highly unlikely your broker will secretly steal or your shares or be robbed of customer assets in a way that can’t be investigated or reversed.
Thanks for this Scott. I had taken functioning banking for granted and completely missed the developing world use case, which left me mistakenly treating crypto as a way for bitlockers to collect ransom whose 'legitimacy' came from being attached to a pyramid scheme - exactly as you describe.
I think there's a mistake I keep making here, where I think of the developing world as being like the West in the past, when in fact they have 21st century electonics combined with an infrastruture from about 1800.
If everybody hates crypto because it has no utility, why is still trading at 500B$ evaluation? Shouldn't we expect to go to zero very quickly?
It seem to me that the persistently high market evaluation is a strong evidence that crypto has some utility after all.
”Crypto: it’s really bad, but not Government of Venezuela bad” seems like a fair position.
Here's a question for crypto advocates.
There's this saying, "Your keys, your bitcoin. Not your keys, not your bitcoin."
So in the glorious crypto future where we all live by that rule, if someone steals a bunch of bitcoin, and then disappears out of physical reach, we just have to let him keep and spend them?
If so, then it's likely that a large fraction of bitcoins end up being held by very unsavory criminals.
You'd have your hackers and scammers of course. But also, gangs of kidnapping torturers would roam the land, attacking holders one after the other. They would have an incentive to keep a reputation for never letting their victims go without getting paid. So if you get caught by them, you either give up the amount of coins they guess you have, or, if you have an iron will or don't have that many coins, you and your whole family die.
Having an iron will wouldn't fully deter the gangs from attacking you, because killing you would still be an opportunity to demonstrate that they never let their victims go. The only thing that would deter them is if almost *all* holders had an iron will.
And all along their ownership over their ill-gotten coins would be considered as legitimate as any other. It's their keys after all.
Are we supposed to be OK with that?
I am mildly bullish on https://dfinity.org/ which is basically using crypto to do distributed hosting.
Aren't you just saying that you're in favour of financial transactions that are outside of national laws? In which case the question is just whether 'good' law breaking such as escaping authoritarian regimes outweighs bad law breaking such as organised crime. Whether that's true is really a contingent question and needs evidence to solve.
The article takes a premise that crypto is decentrlaised, but nothing in crypto beyond bitcoin is decentralised.
I think some of us would be a lot more open to things like crypto if they didn't seem to always come with a such a load of quasi-objectivist rhetoric. ("Someday soon, there will be only two types of people: the awesome, kick-ass crypto users who will raven across the land, and the pathetic mud-golems.")
NASA did NOT spend $1M on a space pen. A private company invested $1M to develop them and then sold them to NASA for a few dollars a piece.
This is way better than using pencils, for a whole host of reasons.
The story of the space pen is of American ingenuity and a triumph of capitalism, much more so than a failure from administrative bloat.
https://astralcodexten.substack.com/p/why-im-less-than-infinitely-hostile
https://astralcodexten.substack.com/p/why-im-less-than-infinitely-hostile
Crypto's only advantage over a developed countries banks is that developed countries don't ban or discourage its usage by people without addresses within a certain geographic region. That same property has allowed it to be used for ransomware and other crimes.
Can you name crypto projects that are actually useful, aside from ones that facility the usage or trading of crypto? Everyone I have heard of, including helium, has been debunked.
If you want to count Stablecoins--those are really just very lightly regulated banks that allow people to evade US banking laws. What is the reason we should require the usage of inefficient blockchains (ethereum is still inefficient even with proof of stake) rather than let entities with centralized and efficient databases fill that need?
If you don’t think derivatives played a role in 2008, the conversation won’t go anywhere, but thanks.
The way I think about this is by asking "what is the cost of creating an institution that I trust enough to transfer billions of dollars of value through it regularly?" For traditional institutions like banks it's something like a century of tenure, billions in capital requirements, and existing within a very complicated bureaucracy of checks and balances where I know I’ll only be fleeced in arduous, obfuscated ways. For currencies it’s a military and a revolutionary war at least, and centuries of slavery and colonialism if you want a good one. All very expensive and out of reach for an upstart country. Bitcoin, on the other hand, derives it’s trustworthiness from the perfect reliability of math. This is what people are on about when they say Bitcoin eliminates “counter party risk”; your counter-party is an immutable algorithm. This is not to say that things can’t go arwy, it’s just much less likely than a human counter-party screwing you over since other humans like money too. This greatly decreases the cost of bootstrapping a nation. You can afford passable beuracracy-driven counterparties in the first world so we aren’t forced to pay the upfront costs of integrating crypto such that it’s useful, but it would be way cheaper if we did.
As far as the electricity requirements of Bitcoin go, they tend to be renewables since those, when strategically placed, are the cheapest option. Otherwise, a lot of the electricity used is so-called ‘stranded energy’. A power plant needs to over-produce electricity to be able to reliably deal with demand-spikes and the otherwise wasted energy powers much of Bitcoin’s mining. I personally think that Elon Musk is actively trying to make crypto seem useless/frivolous with his strategic tweets and backing of doge because a big part of his battery development efforts at Tesla are for storing this stranded energy. He has already deployed mega batteries in Australia and every electron of stranded energy that ends up there is priced against the opportunity cost of using it to mine Bitcoin.
I decided to do a follow-up on this blog post with a different slice of the blockchain story. For people that are unconvinced by the economic, regulatory, and libertarian arguments on the topic, the research curiosities might give you a new perspective.
https://paperclip.substack.com/p/blockchain-history-the-trilemma
I am highly sceptical of the headline numbers reported here. "69% of Vietnamese have no bank access"? That number really surprised me so I tried to find the source. The company https://merchantmachine.co.uk/ provides no information on where these data come from. I live in Vietnam: there are banks everywhere, including in the very rural parts. I work with a lot of non-elite Vietnamese who have very advanced access to mobile phone banking! The numbers for Thailand (20% with no bank access) also look very dodgy. I would guess it's around 5%
You always have an interesting and informative take on your subject. Thanks.
It's obvious both why they hate it and why we need it - it's a tool against the (cultural) establishment, which's game they are deeply indoctrinated into; otherwise, they would not be able to exist in woke valley. But it's fine, they can kvetch the whole day about it, we're here to stay.
Each programmer they cancel for refusing the ritual scarification of their own rational faculties is a new worker on our side. There is only one way this is going to go.
But what if I think prostitution is wrong? What if I think it is immoral to buy sexual consent? Is it okay for me to criticise crypto's ability to allow people to bypass a government's ability to crack down on that behaviour?
(And before you bemoan that the prostitutes are losing their livelihoods, I would recommend that the state put them in a shelter rather than turn a blind eye as they allow themselves to be raped just to get by.)
Crypto's high cost per transaction makes it a very poor substitute for traditional electronic payments and inherent high price volatility in the short term also makes it an awful substitute for fiat currency as a way to hold value.
You have successfully changed my mind! Thanks!
This is an example of a topic where Scott, who is a good blogger, would benefit immensely from a blogosphere existing. This post, and his arguments on the topic, would benefit a lot from a critical dialogue with an informed and compensated skeptic. Speaking as someone who respects the effort but is not convinced.
I got interested in crypto several years ago listening to Nick Szabo on the Tim Ferriss podcast. After playing around with DEFI in the $ATOM and $AVAX ecosystems ($ETH fees are too expensive to use $ETH as a play-around-to-learn platform) my biggest disappointment is that there aren't enough "real-world" projects which is what Szabo predicted would eventually disintermediate much of the make-work and bureaucracy built into conventional finance, insurance, real estate, etc. With only a handful of exceptions, all I see is a lot of DEFI derivative projects vying for (and passing around) the same ecosystem liquidity.
I wrote this email in reply to my girlfriend, who said crypto was only good for vice and speculation, and that it couldn't be a bulwark against authoritarianism because guys with wrenches can always beat the password out of you:
I like that XKCD comic about the $5 wrench cryptanalysis!
Vice and speculation is a big part of it but I think bitcoin is a lot more than that. Right now in some poor countries it's an important safe harbor. $5 wrench attacks work, but it's impractical to go around doing that to millions of people. A bank is so much easier for a dictator to steal from because the money is so much more concentrated and visible. Meanwhile a safe announces the presence of wealth and gives burglars with wrenches ideas of something specific to ask for. But a bitcoin wallet can be held as 12 memorized words which leaves no physical evidence anywhere (I have one of those). Someone could even memorize a decoy wallet with a small portion of the funds to give to the wrench guy. So I think bitcoin can be more secure than keeping your money in a bank or a safe, especially in countries that don't have good banks or good law enforcement right now.
I also think that in very long term expected-value terms, bitcoin is a 4-6%/year better store of value than dollars in a safe. If we suppose a constant fraction of the global economy will be transacted in bitcoin at a constant velocity, and the supply of bitcoin is constant, then in the limit the value of bitcoin will grow at the same rate as global GDP, which will be positive 2-3% instead of negative 2-3% from USD inflation.
International payments can be a pain in some countries, and I think bitcoin has a role there. A lot of poor countries, and even middling countries like China, have capital controls that function as a sort of financial Berlin Wall to keep people locked in. Richard Munchkin has a story about how he won tons of money at casinos in Poland in the 90s, but then he couldn't get the money out of the country so he just kept it there in a safe for a year while he tried to figure out a way to move it. Eventually he just smuggled it out. My other friend who imports a lot of stuff from China says the factory owners there create burner accounts in Hong Kong and get paid in fiat there, and then they can use that money anywhere outside china. But crypto could also be a good option if China starts cracking down on Hong Kong banks.
Crypto is being used in Ukraine mostly because it's how Ukrainian scammers launder money. I suspect the rest of the third world uses crypto for that exact reason as well.
You sent cryptomoney to Ukraine? Congratulations! You got scammed!
great article, tho i disagree w/ "Yes, The Crypto Financial System Is Just Reinventing The Regular Financial System Except Worse In Every Way ..."
smart contract chains offer big decentralized computing systems, with a built in (tho slow and expensive) mechanism for compensating those who offer up cpu resources to the system. As of today, these are not very good computing systems, but they have benefits beyond just avoiding govt and megacorp censorship:
1) shifts financial burden from creator onto users, allowing for lower startup costs. If i want to create an online game or something, that stores peoples' game state serverside, I dont have to buy up a bunch of expensive server space without even testing the market to see if anyone wants to play my game. Users pay a-la-carte for each game action, and if they actually like your game they won't mind doing so because they're paying like a hundredth of a cent for each action
2) scaling "for free". Of course, if eth gets too busy, then prices go up and there's congestion and it's a huge mess. But at least you don't have to pay amazon or google a monthly fee to run your service, and either have to make excessive payments or outage in the case that there is a usage spike, and you don't have to worry about getting DDOSd (trolls can't afford the txn costs to DDOS a major chain)
3) One versatile tech system means that if you can get it right once, you don't have to have every online retailier do their own code and screw things up. Ticketmaster has a number of bugs, but ethereum probably has very few. If you had an NFT smart contract for concert tickets, teh contract might have bugs, but it probably won't because it will probably a small modification of the basic NFT smart contract which has been rigorously tested a gillion times. On the topic of ticketmaster, they charge exorbitant fees (like 5-20% i think) for everything. OpenSea (the biggest and oldest NFT exchange) takes a 2.5% cut of every transaction, and I think there's a good chance that will decrease in the future if they get any major competition
4) publicly verified transactions increase transparency
5) financial contracts settled with code execution are more objective, predictable, cheap, simple and straightforward than legal contracts. They aren't perfect, and there are plenty of cases where a legal contract is preferable or inevitable. But there are also plenty of cases where you'd much rather have a well verified, publicly published computer program execute your financial agreement than have some legal agreement written in english-variety-legalese whose adjudication will be achieved two years after a dispute by twelve randos who are being corralled by the better paid attorney (and both attorneys are very expensive).
tl;dr: crypto is not a strictly inferior financial system whose one merit is that it can exist at all in one extreme niche environment, it is as of today delivering options in a broad array of niche or not-all-that-niche subareas of the finance, computing, and contracts worlds in ways that have different pros and cons compared to the conventional options. and it's definitely improving a lot, as new smart contract chains come up with major tech innovations over the existing ones
Wow, well said, ser!
Absurd how many commenters don't read the article.
I love your article, it is one of the best on crypto I've read, it gets close to realizing a fundamental point about what crypto solves. This fundamental feature is the reduction of economic transaction costs of trust for a common set of economic transaction types. I wrote my own here: https://7174.substack.com/p/the-fundamental-economic-value-of
Calling the people blocking roads and making noise with their horns loud enough to cause hearing damage in Ottawa "protesters" is disingenuous/inaccurate the same way calling J6ers and people who robbed businesses under cover of BLM protests "protesters" is. I think a better approach would have been arresting and charging those people, but what they were doing was not part of liberal political debate but more akin to rioting.
Is there evidence of what people in Vietnam are using cryptocurrency for?
My understanding is that hard cash has a lot of value as a means of transaction, and usually carries no fees.
Is it possible that less developed countries have more cryptocurrency volume because, unlike many other industries, the rewards of running a cryptocurrency scam aren't scaled down compared to the developed world, but are on an even footing with running a cryptocurrency scam from a developed country?
This article makes the startling claim that, "An estimated 25% of Filipinos and 23% of Vietnamese have played a play-to-earn game". Makes sense that it would be in a place where labor is cheapest.
Not sure about any of the explanations for why cryptocurrency is popular there, but there are a lot of good explanations and we should probable see what they're using cryptocurrency for before assuming it is for normal banking.
https://e.vnexpress.net/news/economy/vietnam-crypto-trading-second-highest-in-asean-4514602.html