The NYT published a Blockchain ‘Explainer’, here is what they got wrong
“We’re here to clear things up”, NYTspeak for “Here is some information sprinkled with disinformation”
Let’s first get you to the article in question. Read that, then come back here.
The author, Kevin Roose, also writes for Medium. The TL;DR of this post is that a lot of the explainer is absolutely correct, and explains some aspects pretty well. But some of it is so far off, it looks like it’s intentional. The funny part is the fact that it looks like crypto skeptics are having an absolute tantrum with this article. Sadly, these articles are bereft of actual substantive argument against the use of blockchains and instead just complain about their existence. I guess you win, if you write an article that pisses off opposing groups.
The introduction of Roose’s article is fine and it describes the current crypto atmosphere between skeptics and die-hards pretty well (despite most people being somewhere in the middle). But then Mr. Roose contrives another spectrum: Skeptics and Utopians. While this is not a major plot point in his explainer, I do believe it’s an important thing to understand and why I think Mr. Roose is coming from a place of ignorance or perhaps surrender, and why his self described position of “crypto moderate” is the reason he can’t get behind such an important technology and instead, he will just ride along. It’s also why the crypto skeptic posts completely miss the mark (and the point, and frankly are just a huge miss overall)
Writing in support of dystopia
No die-hard crypto defender is utopian. None of them. Not even the Jack Dorsey article he linked to describes a condition where everyone gets along, every one has their needs and desires fulfilled, and everyone has been lifted out of poverty. He, Dorsey, is describing a situation where powerful governments and corporations are not wreaking havoc on the planet and its inhabitants simply because they have the most powerful weapon on the planet: control of the financial system.
It is not utopian thinking to see that more harm to the planet, and the people on it, has been done by governments and government created entities (like militaries, corporations, and other risk reduced, consequence immune, groups of people as well as subsidized damage like the oil industry, farming, and asphalt heat islands), than any other source of suffering. This has been true for thousands of years, and by removing this tool (the monetary system) from a minuscule group of people (those in power at any one time), it’s clear that will lead to less violence and harm for the overwhelming majority of people. It is not a position that states that crime, offense, and loss will be gone. Believing that the current system is good and right, or even an acceptable lesser evil, is promoting a dystopian system. Blockchain supporters (as opposed to just moderates and investors)are trying to promote a moral, far less harmful, not utopian, financial and governance system.
So, if you are coming from the support of a dystopian system, then blockchain, a financial system governed by the participants of the system itself and not by people who happen to be born within some imaginary lines on the ground, might look odd.
Well, as a blockchain supporter and developer, let me tell you how it looks to me, when you think it’s OK to start the day under threat of violence for doing what you think might be right, but those in power do not, or when hoards of people think everyone else should comply with something because one doddering old fool or another says so. It’s not a good look.
That said, Mr. Roose is not anti-crypto, he is anti-crypto-as-a-currency and even perhaps who-cares-if-it-can-make-governance-more-efficient. He suggests it’s more of an investment you should get into, because it’s subjective value is growing because everyone else is into it. However, he rightly thinks there are diamonds in the rough.
Crypto’s madcap, meme-crazed online culture can make it seem frivolous and shallow. It’s not. Cryptocurrencies, even the jokey ones, are part of a robust, well-funded ideological movement that has serious implications for our political and economic future
What is crypto for?
Roose did a pretty good job in his “What is crypto?” section. But was very terse on the use cases for crypto. He only mentioned some vapid things people do with it now (except Helium, the only project I know of that has a chance to break the corporate control of our cell networks, and democratize its earning potential). But other than that, he really didn’t shed any light on the capabilities of blockchain.
And this is a lucid outlook of the state of crypto right now
What I’m saying, I guess, is that despite the goofy veneer, crypto is not just another weird internet phenomenon. It’s an organized technological movement, armed with powerful tools and hordes of wealthy true believers, whose goal is nothing less than a total economic and political revolution.
It’s like he almost saw the light. All current complaints about crypto revolve around the adamant conviction that the status quo, this dystopian embodiment of society, must be maintained, and everything else is a sideshow. Here is what crypto capabilities could provide right now:
- It could act as the financial settlement layer that is currently (and expensively) handled by FedWire. It could be more reliable, faster, and use less energy and not be controlled by one single government and its vast military.
- NFTs could make individual data sovereign and private, instead of relying on governments to impart extremely convoluted, expensive and changing rules and regulation which will fail to achieve the same goal. You could have car records, medical records, educational records, even tax records, all controlled by you, and permissioned by you for others to see.
- provide cryptographic ownership that transcends a system built by lawyers and rich people and gets all people on level playing grounds for land deeds, intellectual property, or vehicle ownership.
- Crypto, right now, acts as a huge wall between you and those who disgree with your worldview or ideas. You think it’s just “the other people?”. So did these truckers. These Argentinians had their money frozen because a small fraction of other people withdrew too much money. There are ton’s of instances where governments insert themselves into domestic or religious issues to financially punish people by separating them from their money. God forbid you grow a plant, or speak out against the atrocities your government engages in. Even Mother Teresa wasn’t safe.
- Bitcoin could act as a world reserve currency, thus reducing the harm governments can do on their own people. These Venezuelans watch as the money they have tangibly becomes valueless due to the economic decisions of just a few people in charge. These Cypriots were harmed directly by their government. These Indian people had some valid large bills one day, and the next day they had to describe where they got each bill in order to get a valid one.
- oh, and it’s also good for sending money, in any amount, anywhere, at any time, without middlemen taxing, taking fees, and delaying the transfer along the way.
This is just a small sample, but there are two immensely large impediments to the boon crypto could provide in these areas. One of those impediments is governments themselves. Why would a government release control over a patent system, when the system and all its lawyers can enjoy the financial windfall it provides? But the second, and perhaps larger impediment is the dystopians, who incessantly are trying to justify and fix a fundamentally broken and immoral system.
Crypto is filled with scams
One of Roose’s points is that crypto is filled with scams and nonsense, and he spends a little time generalizing about the possiblity that it isn’t just all scams.
It totally is scam filled. It’s pretty freaking awful. I 100% agree with Mr. Roose and all crypto skeptics that this is true. It’s filled with scams, scammers, awful people, baseless get rich quick schemes, and other terrible things.
You know what else is?
Real estate. Medicine. Alternative Medicine. The Auto Industry. The fossil fuel industry. The renewable energy industry. Banking. Everything regulated, and everything unregulated has a large contingency within its domain filled with scammers and get-rich-quick schemes. This context is important because this issue will come up again in this article. Crypto is money. Money attracts scammers. It also atttracts profiteers. But it also attracts people who want to do important things. Money is the way we move value around the earth. It’s one of the best tools man ever created, and crypto makes it way better.
Crypto is not immune from scammers, and neither is any other industry. Heck social security is the world’s largest Ponzi scheme. Adding regulation just adds to the cost (and rewards) of the scams. In all cases, people get hurt, sometimes the scam goes on for a decade, and sometimes people get caught. Crypto is no different, being unregulated makes no difference in this fact. Getting more regulated, will make no difference, and will only benefit the already wealthy.
Crypto can help, let it
However, crypto can do two major things that dystopia supporters will never be able to do: Provide sovereignty and transparency.
The first is that there are projects working really hard (that link is to one such project, but there are many) to make crypto easy while maintaining financial sovereignty that is impossible with banks. Banks are either in league with the planet wreckers, or are subject to them. Financial sovereignty removes this power, from anyone.
But it also REQUIRES that you are responsible to maintain your sovereignty. In crypto, you can give up your sovereignty, but it has to be by consent, thus you are voluntarily letting someone else custodialize your funds (or NTFs, or any other asset the arises out of blockchain and cryptocurrencies). But while this isn’t required in a fiat system (you can still put cash and gold under your bed), crypto is making this easier than ever before in the history of civilization. You no longer need armed guards and heavies to protect your wealth, you just need cryptographic keys. This is an enormous equalizer as it costs the same for a shoe cobbler to secure his funds as an oil magnate. The tools and education already created can be used to subvert scammers when people understand that they are responsible for their own money. But unlike putting cash in a safe, when you store crypto in a way that provides benefit to the blockchain network, that money is working for you.
But better than this, using a transparent financial system like Bitcoin, means anyone can trace funds. In time more and more addresses will be linked to businesses and people. Already tools are being made to easily trace funds, and these tools should be available to everyone, not just governments and police. Blockchain helps prevent fraud, and also helps trace it.
But I think this is where Roose loses the plot. The rest of the article is simply NPC type, conformist, justification for the status quo.
The dollar is the world’s reserve currency, and dislodging it would be a huge, costly project that isn’t likely to happen any time soon.
Duh. Who said anything about it happening soon? Who said it would be easy? But the simple fact of the matter is that Bitcoin works better than Fedwire in every measurable way. And it does this right now.
The answer isn’t. “Oh, hee hee, sorry Cardi, it’s too hard”. The answer is, without a doubt, the fiat system and central banking should be phased out immediately, and work should begin as soon as possible to embrace a better technology, that is easier on the planet, and arrived at peacefully. By the way, fiat version of crypto (CDBCs) are a terrible idea (govt’s can freeze your money at the bank, imagine if they could freeze the money in your wallet!), and will provide none of the benefits that a decentralized, unowned blockchain would provide.
Today, the most popular blockchains — Bitcoin and Ethereum — are slow and inefficient compared with traditional payment networks. (The Ethereum blockchain, for example, can process only about 15 transactions per second, whereas Visa says it can process thousands of credit card transactions per second.)
No. No no no. Roose is being incredibly dishonest here. His knowledge of blockchain and his time spent in it should have prevented him from ever saying that. The fact that he says this leads me to believe he is intentionally being deceitful.
There is no comparison between Bitcoin and Visa. They are fundamentally different things. Credit cards work on top of the fiat system. They are not the monetary system itself. Visa could work on top of Bitcoin, if they wanted. Visa is just a database for short term loans. Does Visa have their own army protecting the value of the currency that they work with? Do Visa executives make deals with militaries and oil suppliers to protect the value of the currency? Do they extract wealth from people by force in order to pay for their programs. Visa has almost nothing to do with the value of a dollar. The correct comparison is between Bitcoin and Fedwire, as I did above.
And, of course, for a cryptocurrency like Bitcoin to replace the dollar, you’d need to convince billions of people to use a currency whose value fluctuates wildly, that isn’t backed by a government and that often can’t be retrieved if it’s stolen.
Yeah, and his article, filled with half truths and status quo thinking, along with a barrage of attempts by the NYT and other outlets to demonize crypto, and keep control centralized, are not helping. The value fluctuates wildly because its a fledgling currency and technology. Let’s talk again about how much it varies when half the world uses it. The entire point, and why the technology is intrinsically good, is because it isn’t backed by a government, it’s backed by thousands of people maintaining its network. If you lose cash, it also can’t be retrieved. Roose has, again, conflated Bitcoin with credit cards. Bitcoin is like cash or gold, not Visa.
While the energy costs of supporting the current reserve currency will rise every year due to policy, population growth, economic growth, etc. There is no reason to expect Bitcoin energy consumption to grow drastically. It could even drop in the way it does near the end of halving cycles. It all depends on how profitable it is to mine, NOT how many transactions there are, and NOT how many people use it.
“But few crypto fans would dispute that blockchains consume substantially more energy than a traditional, centralized database would — just as 100 refrigerators use more energy than one refrigerator.”
This is so wrong, it has fractal qualities of wrongness. Let’s take a visual moment to think about the costs of support the USD reserve currency.
And that’s not near all of it of course. There are servers all over the world (not just one centralized one), banking buildings and institutions, and all the vendors and supply chain stuff just to make banks work. The cost of having the USD as the world reserve currency is 20x higher than bitcoin energy usage. It’s also planet wrecking, never mind just the CO2 emmissions. Roose is being incredibly dishonest by presenting it this way. Fiat not just some database running on a PC somewhere.
Here is something to consider. Residential standby power, the power used for your equipment to do nothing at all is about 124 TWh, globally. That’s just residential. That’s just OECD countries (about 65% of world energy usage). Bitcoin is using about 129TWh (or 220TWh)and it could be the entire basis for the world financial system, as well as the support for it’s intellectual property system, and records system, peacefully. The amount of power used for standby power AND bitcoin mining together, are a tiny sliver, 0.14% of the overall energy production.
Crime and Crypto
Once again Roose fails to mention some important facts.
“Although virtual currencies are used for illicit transactions, the volume is small compared to the volume of illicit activity through traditional financial services.”
Jennifer Fowler, US Treasury.
And that should be the end of that discussion. Crime happens, criminals use money. As crypto becomes more useful, more popular, criminals will use it more.
The rest of the article
I found the rest of the article relatively fair, just perhaps… uninspired. If you are going to write an article catching people up on a technology, a movement, and a paradigm change, then you need to make comparisons to the status quo. How else can you delineate the “whys” of a thing rather than just the boring “what” of the thing.
Instead, he makes fun of crypto-enthusiasts who are out there actually developing stuff. He calls evangelists names like “cryptopilled”. And he calls fundamental debates and corrections to eggregious misconceptions, “quibbles”. All in all making for a truly uninspiring article that reads like a technical manual for a fridge, rather than something that can help people catch up on the greatest tool for wealth expansion and financial equality ever developed by humans.
As I find new links about how blockchain will diffuse into our live and how it is far superior to the status quo, I will put them here. I strongly recommend reading all of them so you can get more of an idea of how blockchains protect you FROM governments and other bad people.
Why Bitcoin Mining Is Great for The Planet
Turns out bitcoin mining can solve our energy concerns rather than contribute to them
The Real Potential of NFTs
Amidst the scams and bubbles, credible scarcity and authenticity will unlock real value in digital markets
Why We Should Be Scared of Central Bank Digital Currencies
CBDCs create more societal problems than they solve
I really think Roose should read this one below: