If you believe crypto is the future, or if you believe it is a pyramid scheme, please read this entire post so that you understand my current opinion on crypto. I hope I articulate it well enough.
Also, I want to state at the outset, almost every blog post or tweet about crypto ends up sounding like people are experts in currency, economies, financial services, markets, etc. I am not an expert in anything. At all. I made myself a coffee this morning and left it on the table as I drove to work this morning. I know nothing. OK, on we go.
In 2017 I wrote, in short, that I was bullish on blockchain technology but that I didn’t know which cryptocurrency would win the day – if any – and that there would be a ton of money burned figuring it out.
In March of this year I wrote, in short, that NFTs waste an enormous amount of energy but that I believed there were now enough players in the market to incentivize massive effort in correcting that particular problem.
In mid-May the Ethereum Foundation wrote a post describing how switching from a Proof-of-Work method of verification to a Proof-of-Stake one will substantially reduce the energy needed to run the network. A giant leap of progress with more work to follow to help reduce energy consumption. NFTs all use a blockchain stack either directly connected to, or branched from, Ethereum.
The proof will be, as they say, in the pudding. If in the coming months Ethereum can successfully pull off “The Merge” and reduce the network’s energy use by enormous factors, and all of the NFT minting services and other services surrounding NFTs implement those updates successfully — one of the main complaints that people have with NFTs (and a lot of crypto built on Ethereum in general) will be less of a problem.
Energy use isn’t the only issue that people have with blockchain or digital tokens. Some believe that some of the coins (or perhaps all of them?) are downright scams. People whose opinion I highly respect like Maciej Ceglowski, Seth Godin, and Jeremy Keith (and others, I should have kept a list) have railed against the entire industry. And I have to say, some of what they’ve written has me really scratching my head.
In a recent tweet thread Maciej really drove the knife in:
I think most of us in the industry gave cryptocurrency a long leash because it’s full of technical cleverness and seemed innovative just on those terms. But it’s time we recognize that cleverness is being used as bait to defraud more people and perpetuate a con.
I urge you to read his entire thread.
His main point, if I read it correctly, is that crypto is being used in fraudulent schemes and that the technology is ripe for that sort of thing. So it should be abolished. Maciej is an amazing communicator. Probably one of the best I know. If you don’t read his blog posts or watch his amazing presentations, you should. I do not think he’s mincing words or doing a poor job at explaining his position. I just don’t think I’m capable of grasping the specific ways in which crypto is defrauding people.
Money is used to defraud people all the time. Cash, credit, loans, markets (see GameStop) – all of these monetary mechanisms seem to be wrought with fraud all the time. That doesn’t mean that the lion’s share of transactions aren’t on the up-and-up.
Here is my current opinion on crypto via a sort of self Q&A:
Do I own any crypto currently and how do I use it? Yes. I own several different coins. While I have done a very, very small amount of speculating I mostly hold coins that I can transact to understand the technology, the services surrounding it, etc. I’ve paid friends back for food with it (which has made several people a fair amount of money let me tell you). And I’ve used it to explore different wallets and services. In 2019 I had the stated goal of transacting $10,000 worth. That was a short lived dream. Most crypto was/is too volatile to do that (for me). If I lost all of my crypto tomorrow I wouldn’t care.
Do I think crypto is a scam? No. While many have lost money on betting on crypto it isn’t because they were duped into it. The way the current price is calculated is out in the open and you can read it for yourself. If people purchased, say, Bitcoin or Doge, because their friend said they made $1,000 in a day or because Elon Musk tweeted – I really don’t have a lot of pity. In the same way that if someone went to a horse track and bet on a particular horse because they overheard some local guy at a bar say something about how good that horse runs in mud… I wouldn’t feel much pity. Speculating on crypto will likely lead to many losers and only some winners. Don’t look at crypto as a get rich scheme no matter how many stories you read of people doing so.
Do I think crypto is the future of all currency? I don’t know. As the world shrinks, each independent nation having their own currencies – and the difficulty and expense at moving that around and converting it – sure seems antiquated at this point. In this day and age, why do I need different money to buy coffee in Spain than I do here at home? And why does it cost me anything to send a friend in South Africa money? It doesn’t need to be crypto that solves these particular issues but something needs to. Also, use cases like NFTs are very interesting uses of the technology to me. Even more so than money.
Am I still bullish on blockchain? Yes. I believe there is an enormous utility in blockchain as a whole and also in Ethereum’s smart contracts. But I do believe there is still a long, long way to go. And it will be a bumpy road.
Do I hope crypto continues or fails? I hope it continues, but I wouldn’t care if it all went away tomorrow either. I do believe that there will be some good generated from the work being done. So I do believe the world will see some value in the waste we’ve seen. This may be a tough line to draw – but follow me here – for many years I’ve been so upset that so many billions of dollars and human hours have been spent on things like Facebook, Snapchat, TikTok, etc. because I see very little good coming from those efforts and resources. But I do think some good has come from the work done at those places. Facebook’s open source projects have, undoubtedly, helped many organizations. Snapchat’s AR tech will hopefully find some practical application. TikTok… well, I have no idea what value it may bring. So I sort of lump the waste that crypto has had into that category. Huge amounts of time and economic resources are thrown at seemingly valueless projects… but hopefully something good comes of them. Perhaps this is a bad or unpopular position to take. I don’t know.
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I hope this post has done a fair job at describing my current opinion. The people I’m linking to in this post that have a contrarian view to mine are brilliant, well researched people. If I were you I’d take their position and not mine. But I’m an optimist and perhaps that is why I am trying to see the bright side of this particular debate. I believe in general the big issues will be worked out if for only the reason for those that have so much to lose will want to make sure that happens.
