Wow, so crypto currency has wildly fluctuating values AND transactions take 45 minutes AND every dollar doubles my lifetime carbon footprint AND there’s no recourse if I get robbed? Boy do I feel dumb for relying on money. https://t.co/r8oPTP0w2O
— Reinstated Doorknob Licker (@agraybee) May 23, 2021
Ah, the excitement of life on the edge!
However, comes a point in every frontier saga where the plucky scavengers at the outskirts of empire become an annoyance to the oligarchs. There’s a romantic American tendency to assume that the rebels (a) have Right on their sides, and therefore (b) inevitably triumph. Partially because the successful would-be crime lords don’t advertise, and partially because their victims often don’t, either.
In that light, I found this thread by Maciej Ceglowski, aka Pinboard on Twitter, interesting:
Thank you to @cnbctechcheck for having me on! I realize that "cryptocurrency is a gambling token and pyramid scheme" is a simplistic argument, but… pyramid schemes are not that complicated, and I think it's useful to say it on TV for all those intimidated by blockchain woo
— Pinboard (@Pinboard) May 20, 2021
Let me tweet a little longer for people who want more than a sound bite. By its own criteria, crypto was supposed to be a decentralized currency that no one person or government could control, a safe store of value compared to fiat money. By all those criteria it has failed.
Instead of having no points of control, cryptocurrency is run like middle school—everything is determined by what the popular kids like or don’t like that day. If Elon Musk has a double espresso this morning, the price will go up, if he tweets after bong rips, it will go down.
The decentralized part has failed entirely. Cryptocurrencies are mined by massive operations that concentrate power to such an extent that the raison d’être of the blockchain —no one participant is supposed to be able to monkey with it—gets really shaky.
The promise of crypto as a stable store of value against inconstant fiat currencies has failed, too. The volatility on all time scales is extraordinary, and it’s coupled with illiquidity, particularly in a crisis. If there’s a bank run on crypto, good luck selling!…
The one area where crypto has been genuinely disruptive and innovative is in the field of ransomware. There’s an entire industry around it now that could not exist without an underregulated way of moving large sums of money. That’s the niche crypto fills…
There’s a final, institutional point around the cryptocurrency bubble. My point of view is not original in any way, huge numbers of tech people who understand the blockchain share it. But the investor class is wedded to cryptocurrency and will not brook criticism of it.
I made gentle fun of Bitcoin last week and got myself publicly called an idiot and blocked by one of the most prominent investors in the valley. A lot of people in this industry can’t afford to antagonize deep pockets, and you won’t hear their honest opinion publicly expressed.
But don’t mistake this tacit silence for affirmation that this technology is useful. Nobody tells Pharaoh that pyramid building is a poor use of everyone’s time unless they live safely outside the kingdom.
Link to my CNBC segment for those who asked to see: https://t.co/xTg5gjIKVd
— Pinboard (@Pinboard) May 20, 2021
TBF it's also a fantastic way to launder money.
— Nied (@B_Nied) May 20, 2021
Bitcoin has basically been a speedrun of teaching libertarians how we got all our banking regulations
— yr himbo boyfriend (@swolecialism) May 19, 2021
in engineering you talk about how every safety regulation being written in blood first and then inked over, same is true for things that act like banks
— yr himbo boyfriend (@swolecialism) May 19, 2021
Splitting Image
I often wonder if there is any crossover between the set of people who believe that Social Security is a pyramid scheme and the set of people who believe that bitcoin isn’t.
raven
oops
Kent
Crypto feels like Gold Buggery for Millennials.
Wake me up when you can get a 30-year mortgage or 10-year bond denominated in Bitcoin. Then I will know it is a real currency.
laura
Am I supposed to have sympathy for the too clever by half cryptocurrency douche lords? If so, I have utterly and completely failed. Let them cry into their soylent.
Baud
Also works for the GOP FWIW.
MattF
That tweet is a great summary of what’s wrong with crypto. Every single one of the original motivations for promoting cryptocurrency have not only failed, they’ve been turned upside-down and backwards. The libertarian fantasy world where masterful dick-swingers rule… the key word is ‘fantasy’.
Baud
@MattF:
War is Peace
Freedom is Slavery
Ignorance is Strength
Bitcoin is Money
Sure Lurkalot
My nephew is all in on crypto even while living the paycheck to paycheck lifestyle. He’s a kind and good guy who went down the Elon Musk rathole and unfortunately has not yet detected the difference between having money to lose and money to eat.
WaterGirl
@Sure Lurkalot: It appears that he may get a big lesson in that soon.
Villago Delenda Est
Some obscure Scotsman 245 years ago figured out that all currency is fiat currency. Those who desperately wish that this is not so have been trying like mad to disprove it. Is gold the answer? Ask the Spanish Hapsburgs on that one. Everything else has the same problem; value is relative to whatever human being you’re observing at the moment. The Mongols measured wealth by heads of cattle. Europeans had a thing for gold.
Derelict
I wonder how many Cassandras were calling out the dot-com boom in 1999, only to be ignored by the Masters of the Universe?
And I wonder how many of those same Cassandras were calling out the housing boom in 2006, only to be ignored by the MOTU again?
And here we are today, with lots of Cassandras warning about Bitcoin and the other crypto currencies, and those Cassandras are being ignored by the MOTU yet again. And this after REPEATED instances of people acting as crypto banks and then just stealing all the money!
Villago Delenda Est
@MattF: The Lord of The Rings vs. Atlas Shrugged meme comes to mind at once.
Jeffery
The people scammed could hire a hit man or woman to get revenge.
Villago Delenda Est
@Kent:
Hell, the Bitcoin Foundation only accepted dollars for membership. Not Bitcoin.
Villago Delenda Est
@Baud: “You fucked up! You trusted us!”
Chetan Murthy
@Derelict:
Do you remember the one in Australia, where, afterwards, a bunch of defrauded retail investors were interviewed and they were all “we expected that there’d have been some sort of vetting, some regulation, I mean, it was offered on the open market, wot”. I think we underestimate how
stupid people arelittle time, energy, and attention people have to devote to the careful vetting of these sorts of things.And that includes me, which is why I try to keep my retirement savings in broad-based indexes. B/c ffs, I don’t want to fret over the lies told by some CEO.
Jim, Foolish Literalist
@Chetan Murthy: god bless Vanguard, boring, stodgy, vanilla– not even French Vanilla– Vanguard. I’m reasonably confident they’ll never set up a crypto-currency fund, and if they do, I’ll ignore it.
Chetan Murthy
@Jeffery: In a way, this is the basic contradiction at the heart of all cryptocurrency: you’re depending on a stack of technology that required cooperation on a global scale (e.g. the good-faith cooperation of network operators in managing routing of network traffic worldwide, but also the good-faith of counterparties involved in the global supply chains that produce all the hardware: mining, network, client,etc) that runs the blockchain and YET you expect that the cryptocurrency itself will have no recourse to acts of bad faith: NONE.
It’s ridiculous. I mean, you don’t rely upon systems built on elliptic-curve crypto, and THEN when you get robbed, reach for hitmen. Crrikey.
Mike in NC
@Splitting Image: I’ve heard from Republicans for 10-20 years that Social Security is a Ponzi scheme, even as they collect it.
Villago Delenda Est
@Chetan Murthy: Two words: Mt. Gox.
RSA
DeFi100 is claiming their Web site was hacked, and that while they lost value, there was no scam.
It’s funny how hard it is in the cryptocurrency world to know whom to trust.
Leto
@Kent: my response was always, let me know when you can buy something from the snack bar. *pays for a Snickers and walks away
Another Scott
@Villago Delenda Est: Yup.
ScienceMag – Did New World silver cause Spain’s crippling inflation?:
Kinda buried the lede there.
Anyone who has paid any attention at all to gold prices since the Krugerrand days of the ’70s-’80s knows that commodities don’t have stable value. If the price goes high enough, more production is brought on-line, leading to an eventual fall (or crash). If the world goes into recession or into a boom, the value will change wildly.
Things have value in the economy because people put a value on them. People are manipulative little buggers, so values fluctuate. End of story.
Cheers,
Scott.
NotMax
Defund bitcoin.
Splitting Image
@Villago Delenda Est:
Heck, they understood this back in days of Greece and Rome. The entire point of debasing a currency (and the Romans did that a lot) is that the nominal value of a coin had nothing to do with the “intrinsic value” of the metal it was supposed to be made of.
Technically, Europeans had a thing for spices. So much of a thing that they spent hundreds of years and built entirely new technologies to find a way to reach the Spice Islands. It just so happened that for a long time the only way Europeans could get spices was to trade with India and China, and gold was they only thing the Europeans could offer that the Chinese and Indians of the day had any use for. This made gold more valuable than just about anything else in Europe, because if you had it, you could trade with the East and get really wealthy.
Leto
@Villago Delenda Est:
A lot of people I knew in the military were tied into the fiat currency/libertarian mindset, and they were also heavy gold/silver/stupid investors. I always pointed out that those items were only given value because humans assigned them value, and that that value is always flexible. We always said X was valuable… until it wasn’t. I pointed out that if they were planning for the end of the world, all that metal would be worthless because wtf do I need with gold when there ain’t no food/shelter?
*Which, tangentially, always made me wonder how the hell all these super rich dudes expected to keep their security detail when the end of the world came; none of that money would matter, so what power would the rich person have? Idol musings and all.
Ken
Well that certainly calms my fears about the security and reliability of their system.
Ksmiami
@Villago Delenda Est: Will nobody think of the tulips?!! Ugh you people…
Geminid
I am pretty much an onlooker when it comes the digital world. Most of my friends are adept at the practical uses of computers, but are not but so deep into that ocean. But I get the impression that for some people in my generation, and for even more younger folks, the digital world has become an attractive alternate universe. To them, it is as real as the physical world, and has become an end in itself and not a means to an end. For these people, digital creations like bitcoin are all the more desirable for being digital and not physical. I thought about this when that $40 million dollar NFT made the news a few weeks ago. I thought that was weird as shit, but not at all surprising.
Ksmiami
@Jim, Foolish Literalist: jack bogle was a God…
Delk
Has the Franklin Mint issued a commemorative Bitcoin yet?
Another Scott
@Delk: Made me look.
Ooh. Even better!
Franklin Mint Bitcoin Guitar Pick.
Cheers,
Scott.
Ken
@Delk: I’m waiting for the chess set with the white pieces sculpted in the likenesses of the bitcoin pioneers. The delay is probably because they can’t figure out what to use for the black pieces.
Geminid
@Leto: Your tangential musings made me wonder how, in the event of societal collapse, those super rich dudes will keep their security details from just knocking them off and sharing out all the nice stuff.
RSA
LOL. I had a similar thought.
Wag
@Another Scott: The is the stupidest f***ing thing that I’ve seen. This week, anyway.
Another quality Franklin Mint product.
When are they going to release the coin celebrating the 1/6 insurrection?
MattF
@Ken: Both sides will have white pieces and will play rock-paper-scissors for the right to make the next move.
Goku (aka Amerikan Baka)
@Leto:
This. Things like toilet paper, cigarettes, bullets, guns, etc would be much more valuable in a post-apocalyptic world than bars of pretty metal
Ken
@Goku (aka Amerikan Baka): Potatoes are good too, especially since you can use them to make more potatoes.
NotMax
@Goku (aka Amerikan Baka)
Quatloos, however, consistently hold their value.
:)
Bruce K in ATH-GR
Terry Pratchett’s take on the concept of money is informative: Making Money. One of his later novels, but a good one, tackling things like fiat vs. gold-based currency, circulation, inflation, and what gives value to money in the first place.
Steve in the ATL
My 78-year old mother has made a 400% profit in the last year trading Bitcoin. That’s all I need to hear to stay the hell away from it. Sorta like in the 1920’s when shoe shine boys were giving stock tips.
CaseyL
@Steve in the ATL: I hope she took her winnings and cashed out.
ETA: The only people I know personally who’ve gotten involved with Bitcoin and NFTs are not people I would trust on financial matters at all. Which tells me all I need to know about Bitcoin and NFTs.
Steve in the ATL
@CaseyL: she was up more but was smart enough to take a large profit off the table, so she was playing with free money when her “investment” dropped in value last week. She was having fun, but she’s not stupid!
Obvious Russian Troll
@CaseyL: There are worse things you could invest your money in.
Which should be in no way taken as an endorsement of cryptocurrency; bitcoin is great for money laundering and making illegal transactions and not a lot else.
Ceci n est pas mon nym
@Sure Lurkalot: There’s always a next bubble. My grandpa was a struggling musician who decided to put his money in the stock market in the 1920s because every little guy was going to get rich.
Suffice it to say the 1930s were pretty rough on them.
Geminid
@Bruce K in ATH-GR: Warren Buffett said something funny about gold. He posited some Martians with powerful telescopes who observe Earth and discover a perplexing phenomenon. They watch Earthlings putting great effort into bringing some stuff out of holes in the ground. Then, after processing, the Earthlings take the material to more elaborate holes in the ground and hide it. The Martians wonder, what the hell are those Earthlings up to?
Capri
@Goku (aka Amerikan Baka): I’ve heard that broad-spectrum antibiotics will be prized. Unfortunately they have a shelf life. Gentamicin stocked up now won’t be any good in a few decades.
West of the Cascades
@Steve in the ATL: tips like, “jump, you fucker!”?
Mike in NC
In the back of Parade magazine today, some outfit is selling a set of gold coins featuring America’s “Ten Greatest Presidents”. You’ll never guess who made the cut!
sdhays
What could the US government (Congress) do to stop cryptocurrency? The climate change aspect really makes it unconscionable.
Urban Suburbanite
https://www.cbsnews.com/news/bitcoin-wall-street-crash/
The headline is kind of misleading here – nothing in the piece really seems indicative of a looming crash. But it does show signs that the finance types who moved into cryptocurrency and helped boost it are losing enthusiasm for it. And that China (where there are a lot of bitcoin miners) has effectively locked cryptocurrency out of its financial systems is a big deal.
I doubt this cult is going away anytime soon (the criminal applications and techbro fantasies can keep it going, just in a much, much smaller form). But it’s failed to change anything beyond wasting a lot of time, power, and money, and it’s looking we’re hitting the peak and the downward slide is coming up fast.
rikyrah
OT:
Does anyone have experience with a portable ice maker?
Is it worth the purchase?
CaseyL
@Obvious Russian Troll: Heh – I wonder if someone could make money selling Confederate currency (other than as a collector’s item) or selling investments in the return of Confederacy currency.
The people I mentioned aren’t untrustworthy because they’re financial illiterates; they’re untrustworthy because they’re scammers who stay just.this.side of the law. They’d love the Dinar Guru, and would want to be part of that action.
tybee
@rikyrah:
is it worth it? depends on how much ice it produces per hour/day and how much ice you need during that time span.
they’re nice to have on hot weekends for fishing trips or cookouts or camping trips when you have several coolers that need cooling but 20lb bags of ice at the grocery store aren’t that expensive…unless they’re 20 miles away.
JaneE
Money works because enough people agree on its value. Number one on the list of importance is governments. If they accept a currency to pay for taxes it is worth something, if only in that country. Ever since currencies began to float, and de facto before that, exchange rates have changed to reflect the perceived relative worth of different forms of currency. Bitcoin et al. are just the more extreme cases.
Buying bitcoin, or gold, or anything else for that matter, means that if you sell it in the future you may make or lose money on the deal. The fluctuations in crypto just mean that the risk is higher.
At least with the stock market the things you invest in should have some intrinsic value if the market drops. Not always, perhaps. Crypto – a file on a storage device whose only value is that someone else may want it enough to give you something for it.
Kent
Carbon tax
Kent
My grandfather was a farmer in Oregon in the 20s and 30s. He got doubly burned by 1930s farm foreclosures and something to do with nationalization of gold that I never quite figured out. But he was still butt hurt about it into the 1980s.
HalfAssedHomesteader
It’s all so… libertarian. (⊖_⊖)
Geminid
@sdhays: How could Congress stop (or degrade) crypto currencies? Place a heavy tax on electricity used for the purpose of crypto currency mining? Encourage state electricity regulators to set rates that discriminate against the miners? Amend our extensive securities laws to make cryptocurrencies regulated products? The industry would fight such reforms, but there would be a demonstrable public interest behind them, and I think the laws would withstand legal challenges.
I think sooner or later governments, collectively and individually, will crack down on crypto currencies. These enable too much money laundering, tax evasion, and public and private corruption, not to mention basic fraud.
And currency has traditionally been the prerogative and monopoly of governments. There have been exceptions to this, but I think they tend to prove the general rule. I would guess that for governments, the question isn’t so much whether to impose limits and regulation upon crypto currencies, but how. I would bet there are some smart national treasury officials around the world quietly discussing the how..
HalfAssedHomesteader
@Baud: That is beautiful.
HalfAssedHomesteader
@Villago Delenda Est: All currency is fiat currency but not all fiats are the same. The nice thing about having government able to decree the amount of money in circulation is that it can respond to needs of the economy. It also invests the real value of our money in the integrity of government. And while that poses a huge risk, making integrity in government consequential is overall a Good Thing.
Splitting Image
@Geminid:
My guess is that the combination of the length of time it takes to process a transaction coupled with the wildly fluctuating market will sooner or later lead to an accusation of fraud when somebody buys something with bitcoin, then 1) realizes that he paid more for it than he expected because bitcoin went up in value before the transaction went through and 2) that a middleman skimmed off the difference.
Where exactly the case takes place doesn’t matter that much. It will establish a court’s legal jurisdiction over the market, and regulation will quickly follow.
Steve in the ATL
@Splitting Image:
So pretty much like making a stock trade
Splitting Image
@Steve in the ATL:
Pretty much. At this point, they might be more honest if they started calling Bitcoin a cryptostock instead of a cryptocurrency, since it’s behaving a lot more like a share of stock than it is a kind of money. Specifically, share of stock in a company that doesn’t make a product and has it in its mission statement that it never will make a product.
That kind of honesty might give the game away though.
Geminid
@Steve in the ATL: It can be argued that crypto currencies already are securities covered by Securities Exchange Act. With a well-drafted amendment, Congress can definitively settle this argument.
The Pale Scot
@rikyrah:
How many MPH (Margaritas per Hour) are needed?
Ken
@rikyrah: Do you mean is it worth it now, or in some post-apocalyptic scenario where roving gangs fight over the dwindling glaciers?
Villago Delenda Est
@HalfAssedHomesteader: Ayup. Winston Churchill once said that putting the UK back on the gold standard was the dumbest thing he ever did (more so that Gallipoli, which is saying something) but glibertarian/goldbug types refuse to believe this. Because they are essentially utter idiots.
Villago Delenda Est
@Mike in NC: They know a 74 million strong pool of suckers when they see one.
John Revolta
@Geminid: This reminds me of what I imagine my dog thinks when we’re out on walks. “This guy picks up my shit every day, every little bit like it’s gold or something. Then when we get home he changes his mind and throws it in the garbage. Every time! What an idiot!”
Chris Johnson
@Ken: Can’t be done, the bitcoin pioneer is a mystery man whom nobody knows who it is.
Not making that up.
so confidence, much trustworthy, wow
Hoppie
@Derelict: Cassandra’s problem, as Keynes pointed out, is that markets can remain irrational a long time, so that even being right may not be remunerative. Also, market timers are fundamentally gamblers.
Ken
@Chris Johnson: My personal theory is that “Satoshi Nakamoto” is an NSA/CIA team that’s been tracking every transaction since day 0 to identify the players.
different-church-lady
Crypto currency is incredibly stupid.
Therefore, I have no doubt that 10 years from now everyone will be using it.
Geminid
@Ken: If the CIA created Bitcoin, it probably is skimming a fee off of every Bitcoin. How would anyone know? A slick private creator could do this too.
Uncle Cosmo
@Villago Delenda Est: It occurred to me just now, after reading your post, that 6/i/21 could be succinctly summarized as Witless Slugged…
janesays
@NotMax: It appears to be happening.
MontyTheClipArtMongoose
@Mike in NC: zachary taylor!!!
otmar
@sdhays: see https://arstechnica.com/tech-policy/2021/05/crypto-payments-above-10000-would-be-reported-to-irs-under-treasury-plan/
IMHO: just applying the same controls vs. Money laundering that apply to cash would put a big dent in it.