The Emperor's New Blockchain
I learned about Bitcoin about a decade ago, and I felt indifferent. I read numerous forum posts and could have absolutely have invested $100 and made a lot of money, but I chose not to because I thought the entire thing sounded like it predominantly benefitted criminals. When I heard about Ethereum, I was somewhat more curious - if only because it sounded like it was more than just moving money - only to find that every product was awkward and expensive to use. Advocates back in 2015 would insist that this was the future of software, that it was “early days” and that I would quickly be proven wrong.
I have yet to be proven wrong. And this does not make me a cynic.
This is because the term “hater” or “critic” or “cynic” is one that’s lost a great deal of meaning, both generally and more specifically, especially when it comes to cryptocurrency. If you are branded as a “cryptocurrency critic,” the stigma is that you are a hater - that you are looking for problems rather than solutions, that you are biased against cryptocurrency, and thus cannot look at it through fair eyes, lest you be driven by your biases and ignore something meaningful. While this is at times fair, many people actively look for something to get pissed off at - using it to unilaterally invalidate criticism is equal parts stupid and dangerous.
How dangerous, you ask? The New York Times published a 14,000-word-long “latecomer’s guide to crypto,” a meandering juggernaut of half-explanations and uncited statements written by Kevin Roose, someone I’ve criticized before for his irresponsible optimism with regards to cryptocurrency. The piece itself is far too long and falls into one of Roose’s more harmful habits - the belief that the remarkable amounts of criticism of cryptocurrency have created an unfair, unbalanced perspective on the industry, one that must be met with open-minded skepticism.
I am not going to tear into the piece line-by-line, as others have (some literally), and Paris Marx has already nailed it:
Conflating criticism with dismissal is a deeply incorrect but also harmful thing to do, especially when it comes to an industry that’s best known for extreme volatility and scams. First impressions are important, but so are second, and third, and fourth, and eigth impressions. It is fair-minded to state that scamming and conning people using cryptocurrency is a significantly more common use case than actually sending money that people can use in the real world. It is reasonable to suggest that blockchain has failed to have any practical mainstream penetration, as awareness is not the same thing as actual real-life use. It is not a dismissal to try any of the popular products on the blockchain - and I am struggling to think of one that exists that isn’t related to trading of some sort - and evaluate them as clunky and awkward. It’s not a dismissal to discuss how the most popular store of value on the blockchain is more than likely a huge scam, one that will eventually detonate and wipe out almost everybody.
It’s also not dismissal to suggest that the blockchain has yet to prove itself better than any other solution out there. Which is one of the many reasons I find Roose’s work so disappointing. Let’s dig into one specific paragraph:
Sure, a lot of it is dumb, shady or self-refuting.
I had originally intended to quote this with the rest of the paragraph it’s part of, but I wanted to single it out because this is a fundamentally disingenuous lede. It suggests that one can simply disregard the negatives because the positives overwhelm them.
If the majority of the thing you are talking about is dumb, shady or self-refuting - if the very foundation of it is rotten - surely that is the context that you should be writing this through. If the goal of your article is to shed light on something, you should consistently be bringing up the context - that whatever kernel of positivity you find in cryptocurrency, it is more commonly associated with crime.
But that’s not really the problem.
But if you can look past the carnival barkers and parse the convoluted jargon, you’ll find a bottomless well of weird, interesting and thought-provoking projects. The crypto agenda is so huge and multidisciplinary — drawing together elements of economics, engineering, philosophy, law, art, energy policy and more — that it offers lots of footholds for beginners.
First of all, what exactly is “the crypto agenda”? Because one does not seem to exist beyond a vague attachment to libertarianism and protecting the wealthy through coopting the desperate.
Take the recent token (ApeCoin) created for holders of the Bored Ape Yacht Club NFTs to control their Decentralized Autonomous Organization (DAO), for example. ApeCoin was distributed to every holder of these NFTs, meaning that those who owned the most now had the most voting rights in the DAO. However, both “launch partners” and venture capital firms Andreessen Horowitz and Animoca received 14% of these tokens - and, by proxy, the ability to affordably buy a large chunk of votes/ApeCoins for a decentralized organization at a price we shall never know that is almost certainly cheaper than the average person will get to buy them for.
This is the world of cryptocurrency, where buying digital elections and insider trading are a feature not a bug. Andreessen Horowitz is sitting on some sum of millions of ApeCoin tokens that they likely bought for significantly less than the $12 or so cost (as of writing), knowing that it would go on Coinbase (the largest American cryptocurrency exchange) and rocket in value, sold to retail investors that believe they can experience the same level of 10x or 20x returns that cryptocurrency fanatics continue to claim are commonplace.
Casey Newton, Roose’s podcast-mate at the New York Times, also made the very good point that none of that power may even matter, because none of these DAOs actually give anyone any real power over anything - Yuga Labs (the actual owners of the Bored Ape Yacht Club) is not a DAO, and it isn’t obvious what ApeCoin will actually do.
What I am getting at is very simple: cryptocurrency has yet to prove itself as anything other than a means of wealth extraction and deception. While there may be examples of things that aren’t craven ponzi schemes like Axie Infinity, they are drowned out by the easily-citeable stories of exploitation and pain caused by those who were not adequately informed about this cryptocurrency.
And if I were writing a sober look at the cryptocurrency industry, I would work my ass off to prove that this wasn’t just scams. Roose, however, does not agree:
Want to discuss the influence of Austrian economics in Bitcoin development? There’s probably a Discord server for that. Want to join a DAO that invests in NFTs, or play a video game that pays you in crypto tokens for winning? Dive right in.
While I don’t care about Austrian economics, let alone a chat server about its relation to Bitcoin development, I would never be as silly as to cite it without proving that it exists. A DAO for investing in NFTs does exist, even if it’s VC-backed and thus likely not remotely ‘autonomous,’ but the biggest problem I have is the suggestion of playing a video game for crypto tokens.
The problem I really have with this paragraph is the suggestion that you can “just go and play a video game that rewards you in crypto tokens.” Without being too picky about the wording (surely the phrase is “computer game”?), this sentence suggests that one simply goes and plays a game on the blockchain - that it is a smooth process, one similar to playing a game on Steam on a PC, when the actual experience is nothing remotely like playing a game due to the specific nature of how decentralized networks function. Each command you send to the network requires a transaction to occur, which costs something (say, a token) and takes time to confirm that transaction. As a result, any kind of fast-paced game is practically impossible - even if technology were to catch up, you still need to (because you’re using a decentralized network) approve every transaction.
This is my core frustration with Roose (and others’) approach to cryptocurrency - that it deserves the benefit of the doubt, and that the overwhelming amount of cryptocurrency criticism is indicative that it’s an emerging technology rather than a broken and weird system.
Roose’s comparison of cryptocurrency skepticism and the “skeptics who didn’t think social media would take off in the 2010s” is as silly as it is counter-factual. Facebook was absolutely rolling in 2010 (let alone the 2010s!), and Twitter’s skeptics were heavily-focused on the company’s inability to make money at the time. Who was saying that people would get tired of vacation photos, or that advertisers would flee? Why is there no mention of how Facebook was in a strong-enough position that they were able to lie to the media, costing thousands of jobs and millions of wasted dollars?
And why is there no consideration that even in its early days, there was a reason to use social media? When I started using Facebook in 2005, it was obvious what it was for - connecting with college friends and sharing stuff - and while Twitter was hard to define, it quickly grew into the live-reaction platform we either love or entirely avoid today.
It’s also deeply disingenuous to equate any of this to cryptocurrency, especially in a sober evaluation that’s meant to catch people up. While Twitter was struggling to find a revenue-generating product-market fit, they had absolutely found a way to keep people on the platform, even if they weren’t quite sure what it was yet. Cryptocurrency is yet to have anything approaching a moment of success like Twitter’s - because success is not entirely driven by how much money something is made.
I know some greasy pedant is going to claim that I’m conflating cryptocurrency and blockchain. I am doing so because Ethereum, Solana, and other dominant decentralized networks are built on cryptocurrencies. If you want me to separate them out, give me a reason to - show me a non-cryptocurrency blockchain product that actually matters.
Because that’s going to be a big problem.
One of the more frustrating parts of consuming the media is the liberal fear of bias. Right-wing demagogues are never afraid of appearing biased, because they know their base doesn’t care about how accurate or balanced their opinions are other than how useful those things are for acquiring more power. The right has successfully engineered a massive anxiety within liberal media about gotcha questions - that you missed something, which they want you to believe utterly invalidates your argument.
This creates the ugly world of both sidesism - that we must accept and consider both sides of an argument even if we have reasonable evidence to suggest that one of them isn’t acting in good faith. You see this a great deal in any situation where someone is canceled and the headline is whatever reason the person in question said they were fired or had to quit for - which, of course, is usually some sort of extremely annoying culture war garbage that usually seeks to endanger people based on republican policy.
This all comes from, I’d argue, a good place - that writers want to do a good job, that we want to invite all voices into a conversation, that anyone who disagrees with us is just one correction away from agreeing, and that making accommodations for someone in an argument will prove to them that you respect them.
The tech media adds two industry-unique problems - the fear of being wrong, and the fear of not being right. While one might be reasonable for wanting to avoid the next Theranos, one also does not want to be the person who said that social media would become boring and that people would leave it en masse. This is the nature of career journalism - you want to be right all the time, which means taking risks and believing both your sources and your own domain expertise - but it is a nature that cryptocurrency has taken advantage of at scale.
The problem is that cryptocurrency is both extremely valuable and completely devoid of purpose. As a software product it’s painfully inefficient and bad for the environment. As a store of value it’s too volatile and open to manipulation. It has no meaningful use cases that are not done in a better, cheaper and safer way somewhere else.
Yet the total market capitalization of all cryptocurrencies is nearly two trillion dollars. And it’s very reasonable to ask why.
It’s also deeply irresponsible to take the lack of something as proof there is a reasonable, logical reason that something is worth money. If I had to guess - and it’s only a guess - cryptocurrency has grown as a result of endless speculation, creating a grotesque combination of a casino and an unregulated Wall Street.
People are attracted to this unregulated nightmare because of the illusion of proximity to wealth. The volatility of the markets works as both as a deterrent and a marketing exercise, because a world that can suddenly destroy the value of your coin is one where it can also increase exponentially.
All of this neatly dovetails with how brutal society is for the average person. Most people can’t afford college, so they go into onerous debt. Housing prices are so significant (and mortgages are so difficult to get) that buying a house (and thus accumulating wealth) is borderline impossible for most people. As a result, people are desperate for some new way to create wealth - some way to escape a world that seems custom-rigged to suppress those without money, one that arbitrarily awards capital and resources to people who don’t seem to work for it.
The world of cryptocurrency is a natural fit, especially considering how it grew out of the great recession. It’s a vaguely counter-cultural system that seemingly has opportunities for everybody to get rich, constantly flirting with “guaranteed” wealth based on spurious analyses of history. It features demagogues that frame empty platitudes as facts - things are “going to the moon,” charts show “really good movement,” and so on - and no real way of verifying whether a particular project is legitimate, on top of having no real recourse if your money is stolen.
That’s why all of this is so loathsome. People just want a chance - the old ways of societal advancement no longer reliably work, and now there’s this big, seemingly ever-growing money machine that seems to make everybody rich. So why wouldn’t they want that? And why wouldn’t those involved in that industry continue to push them lie upon lie about almost-but-not-quite-certain wealth?
On the other hand, Roose has (had?) the ability to, in one of if not the single most important newspaper in the world, speak to the public about the reality of cryptocurrency. He chose this path instead:
It’s fun to laugh at the (often cringeworthy) ways crypto fans try to entertain and inspire each other. But focusing too much on their behavior and customs might mean missing what’s genuinely novel — and, depending on where you sit, either exciting or dangerous — about the technology itself. Which is why, when my friends ask me how to talk to their cryptopilled relatives, I advise them to start by trying to understand what’s gotten them so excited in the first place.
This sounds like someone justifying their participation in a cult. I apologize if this makes me a “cynic,” but there should be nothing fun or exciting about cryptocurrency while it is so consistently dangerous and harmful. And in this endless, meandering “explanation” article, Roose fails to cite any meaningful proof that there is anything to be excited by - even Helium, a crypto-based wireless network company, is yet another ponzi scheme…and even then, it’s just more internet connections!
I understand the need to try and see both sides - to try and logically reconcile with something that’s “worth” so much money based on nothing - but not the need to continually whitewash every terrible thing in cryptocurrency with “but it could be good, you know?”
Cryptocurrency is such a weird, ugly and confusing thing to many people - journalists included - because it has gained such an incredible fiscal value for almost no reason. There is no clear-set explanation as to why things are so volatile, other than market manipulation, and no real reason why any of this stuff should be worth as much as it is beyond “lots of people bought it,” other than…well, more market manipulation.
Weirdly, Roose’s piece does not seem to discuss wash trading, or market manipulation, or the fact that Bitcoin is highly centralized (making it easier to manipulate as a result), or that a small group of insiders makes the most money off of NFTs. This isn’t me being a hater - these are well-known, well-documented, often-discussed problems with this industry, and are essential discussion points if you’re trying to tell someone the truth about this industry.
And really, what is this industry, other than the world’s largest collection of vaporware? What product has blockchain or cryptocurrency created that has any real meaning or utility? What actual products do people use on the blockchain? What does the blockchain do better?
Somehow, in 14,000 words, the Times has failed to provide an answer to any of these questions:
These non-financial uses are still fairly limited. But crypto fans often make the case that the technology is still young, and that it took the internet decades to mature into what it is today. Investors are pouring billions of dollars into crypto start-ups because they think that someday, blockchains will be used for all kinds of things: storing medical records, tracking streaming music rights, even hosting new social media platforms. And the crypto ecosystem is attracting tons of developers — an auspicious sign for any new technology.
And that’s the almighty problem - why does this industry deserve the benefit of the doubt? What makes cryptocurrency or blockchain different from any other startup huckster that’s raised money promising the world, other than how many people cryptocurrency has hurt and how many wealthy people it’s further enriched?
I’d argue that cryptocurrency has been given a more than adequate amount of time to show us even one meaningful utility or superiority to other technology, and it has failed. We are not in the “early days” of cryptocurrency or blockchain, and to claim otherwise is lying even if you’re doing so using someone else’s opinion.
Seeing The Future
Despite everything I’ve written, I am generally easily excited when it comes to new technology - I am always curious to see things done better, or cheaper, or smarter, or to see things automated that were once annoying manual tasks. I am also excited about anything that truly allows people to make money from their craft, and any (morally sound) ways in which someone who hasn’t had a chance to generate income that they didn’t before. I also was early on social media - I messed around on Compuserve and Usenet and saw the early days of community-building and was inspired and enthralled by this digital world that I could exist in.
In short, I am absolutely the perfect person to sell these dreams to, except cryptocurrency has no dream. There is no substantive goal, no product, no purpose, no agenda. Once you remove the monetary aspect, cryptocurrency is a bleak landscape of half-ideas executed at the slowest speed possible, where venture capitalists fund ideas based on how quickly they’ll be able to reach liquidity through some sort of token sale.
Outside of broken simulacrums of other products, the industry has dedicated itself to building centralized products to serve a decentralized audience. There is no practical way to build a real company entirely on the blockchain. While Andreessen and other venture capitalists tell people to “just build,” cryptocurrency products have become a quicksand of engineering talent, playing the same game that the industry has with the media - that the future isn’t here yet, but when it is, you’ll know that you were early. It’s the perfect kind of con - one that plays to the arrogance and intelligence of the mark.
I feel as if I’m repeating myself, because I am so deeply frustrated - where are the products? What is the point? And why does this industry get so many chances to prove itself as worthwhile?
It’s probably because it’s worth a lot of money. Even if there’s no real explanation as to why.