The unrelenting tidal bore of relentless cryptobullshit

Taken from Découverte des Malfaiteurs by Jacques Callot (1633)

I’m cautious of being sure of something. Going beyond the point of doubt is akin to fanaticism: but, time and again, the digital era has shown us things are always nuanced.

I became convinced that Web3, particularly crypto, was completely and sensationally bad. In its contemporary form, could find not one single merit. So I put some pocket-money down and had a close look, to see if it does indeed behave like a credible market. It does not.

The trouble is that you can’t guarantee stability against an unstable backing; nothing will protect you against the whole market going down. Every algorithmic stablecoin thus far has failed to maintain its peg. Algorithmic stablecoins work until they don’t.

Stablecoins are a modern form of the wildcat banks of the 1800s, which issued dubious paper dollars backed with questionable reserves. These led to the National Currency Act of 1863, establishing the Office of the Comptroller of the Currency and taking away the power of commercial banks to issue paper notes. At the very least, stablecoins need to be as regulated as banks are. But all of cryptocurrency is a less robust version of existing systems and has any advantage only as long as it gets away without being properly regulated.

It’s fragile and massively complicated: a whole bunch of loosely defined, flimsy, inefficient, vulnerable, independently-controlled components that are all the weaker for having become interdependent.

The entire crypto space has been a Jenga stack of interconnected time bombs for months now, getting ever more interdependent as the companies find new ways to prop each other up.

Which company blew out first was more a question of minor detail than the fact that a blow-out was obviously going to happen. The other blocks in the Jenga stack will have a hard time not following suit. 

All this stuff has a seemingly-noble idology, but those who subscribe to those ideas know full-well that they can be used for personal gain at wider and greater harm. It’s kept complex for a reason: to be exploitative. The less people understand it, the more likely they are to be taken in, and taken for ride.

You should not invest in Bitcoin.

The reason why is that it’s not an investment; just as gold, tulip bulbs, Beanie Babies, and rare baseball cards are also not investments.

These are all things that people have bought in the past, driving them to absurd prices, not because they did anything useful or produced money or had social value, but solely because people thought they could sell them on to someone else for more money in the future.

When you make this kind of purchase – which you should never do – you are speculating. This is not a useful activity. You’re playing a psychological, win-lose battle against other humans with money as the sole objective. Even if you win money through dumb luck, you have lost time and energy, which means you have lost.

Things with no real value are touted as assets. They are not. These tokens are simply a means for charging people for something that ought not to have a purchase price, since they are worthless. Just as Facebook et al. commercialised human interaction, web3 synically commercialises hope.

It’s common for NFTs and governance tokens to double as speculative assets that can be bought and sold across crypto or NFT exchanges. But it’s questionable whether they have any fundamental value. Many gaming tokens are at best volatile and at worst worthless.

Yet proponents of crypto gaming try to sell it as the future. Take crypto venture capitalist and Reddit cofounder Alexis Ohanian, who says crypto gaming will allow players to “actually earn value” through accruing assets that have some value in traditional or “fiat” money.

In essence, he says people would no longer need to “waste time” gaming for leisure.

And then there’s the true cost. Signals of wealth are, almost universally, made of carbon. Crypto is no different.

One of the great Bitcoin unknowns has long been the amounts being produced, or “mined,” in what’s believed to be the top locale for mining the signature cryptocurrency: China’s remote Xinjiang region. We got the answer when an immense coal mine in Xinjiang flooded and shut down over the weekend of April 17–18.
The blackout halted no less than one-third of all of Bitcoin’s global computing power.

It’s not just the electricity: the sheer consumption that crypto requires is staggering. It’s significally less sustainable, not to mention less valuable, than the least sustainable wealth-indicators that already existed.

Bitcoin mining requires very specific hardware, designed exclusively to process hashes, and nothing else useful. This hardware evolves very rapidly and is obsolete every 1.5 year.

We estimate that, each year, around 12 000 tons of specific electronic devices are produced and destroyed. More that 80% of the weight is metal (iron, aluminum, copper, …).

This means than around 10 000 tons of metal is extracted and transformed each year only for the bitcoin mining industry. This is 4 times more than the amount of gold extracted each year (around 2500 tons).

Also, the value of bitcoin production is 1/6 of gold production (17 B$ vs 100 B$).

Hence, overall, 1$ of Bitcoin requires 24 times more mining of metal than 1$ of gold.

The vast majority of those involved are inadequately protected. The ideological decentralisation of ‘control’ merely makes it near-impossible for everyone to benefit from the long-standing systems designed to protect their interests.

US copyright law explicitly states that transfers of copyrights and transfers of copies are legally different. Ensuring that NFT owners have the copyrights they think they do is a more complicated problem than it appears.

The technologies are often touted as revolutionary. They are not.

The Ethereum virtual machine has the equivalent computational power of an Atari 2600 from the 1970s except it runs on casino chips that cost $500 a pop and every few minutes we have to reload it like a slot machine to buy a few more cycles. That anyone could consider this to be the computational backbone to the new global internet is beyond laughable. We’ve gone from the world of abundance in cloud computing where the cost of compute time per person was nearly at post-scarcity levels, to the reverse of trying to enforce artificial scarcity on the most abundant resource humanity has ever created. This is regression, not progress.

Where we’ve got to is layer upon layer of flawed idology, fanatical greed and shonky technology. It is one of the truly great embarrassments of our times.

Bitcoiners believe the ETH community is the ‘woke’ alternative to their strange breed of grift and toxic masculinity. ETH does seem slightly less bonkers, under the direction of its demi-god Vitalik Buterin. One reason for the woke accusation is the ETH community’s switch to Proof of Stake over Proof of Work. Proof of Stake is an alternative to validating transactions that doesn’t involve setting fire to the earth slowly.

Ironically, web3 is in part a product of the status quo the fanatics claim to be disrupting. If everyone considered it socialising in a more natural, equal way, it would have been summarily dismissed.

Before we really dive deep into this, it’s worth addressing the elephant in the room: the present interest in this field is because of a dumb speculative bubble that is flowing over from the dumb speculative bubble in cryptocurrencies in general. I really don’t mean to prejudge my conclusion, here, but the cryptocurrency sector has exploded in value for basically the same reason Gamestop did – which is to say, a few people have sincere beliefs that they’re good and valuable, and a lot more people have money kicking around and a desire to get rich.

It’s an appauling mess. The ideology of freedom being used to make people less free. Far from bypassing the olygopoly of Big Tech, web3 is the antithesis of freedom brought about by pure, exploitative greed.

In cryptocurrency markets, every coinholder has a financial incentive to be their own marketer in order to increase the value of their own assets and can resort to any means necessary.

Because of this, much of the Web3 hype being drummed up on Twitter – specifically focused on beginners, those new to Web3 and crypto – is predatory and follows along the lines of a ponzi scheme.

As Aimee Mann might have put it, it’s not going to stop, til’ we wise up.

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