12 votes

The handwavy technobabble nothingburger of cryptocurrency

15 comments

  1. [12]
    cfabbro
    (edited )
    Link
    Beyond even the energy consumption and environmental issues, something about the very core concept of cryptocurrencies has always bothered me, but I could never really put my finger on what that...

    Beyond even the energy consumption and environmental issues, something about the very core concept of cryptocurrencies has always bothered me, but I could never really put my finger on what that was... until this article.

    ...crypto assets are effectively unregistered securities contracts, basically like stock in an empty company that doesn’t do anything except promote the sale of its own stock. Historically these investments would have been called “Blue Sky Contracts” in the era before the Uniform Securities Act of 1956 outlawed such things.

    The only real exception to that being stablecoins, since at least they're (in theory) backed by a reserve of real-world assets, but which suffer from a myriad of other serious problems, as also perfectly spelled out in the article.

    So overall, I still can't shake the feeling that every cryptocurrency so far is just essentially a pyramid scheme scam. And even blockchain technology itself feels like it's just a wildly inefficient solution in search of a problem, to which we have mostly solved already through contract and asset laws, and national/international banking regulations.

    13 votes
    1. [6]
      vegai
      Link Parent
      I think it's fairly well known that the blockchain was not just the best but the only technology that solves distributed concensus in a way that works as digital cash. It might still be, I haven't...

      I think it's fairly well known that the blockchain was not just the best but the only technology that solves distributed concensus in a way that works as digital cash. It might still be, I haven't paid attention in a while.

      Bitcoin might have become a wasteful pyramid, but the core idea was something very clever and could have been useful.

      5 votes
      1. [5]
        cfabbro
        Link Parent
        That's precisely the sort of solution in a search of a problem I am talking about though... distributed consensus of digital asset ownership via blockchain solves nothing that hasn't already been...

        That's precisely the sort of solution in a search of a problem I am talking about though... distributed consensus of digital asset ownership via blockchain solves nothing that hasn't already been addressed through contract and asset laws, and national/international banking regulations.

        8 votes
        1. [4]
          mtset
          Link Parent
          I think we could have built a digital currency ecosystem that allowed people doing legal things which PayPal and Stripe don't like (legal sex work, for instance) to transact business while not...

          I think we could have built a digital currency ecosystem that allowed people doing legal things which PayPal and Stripe don't like (legal sex work, for instance) to transact business while not creating a wildly fluctuating speculative asset. I don't think bwr could now - the well has been thoroughly poisoned - but that's what I was working towards when I got into Bitcoin in 2012 or so.

          9 votes
          1. [3]
            cfabbro
            (edited )
            Link Parent
            Yes, IMO that is the one thing cryptocurrency is actually good for; Exchange of assets in legal but taboo, grey, and black markets. But on balance, overall, I don't see that as a particularly good...

            Yes, IMO that is the one thing cryptocurrency is actually good for; Exchange of assets in legal but taboo, grey, and black markets. But on balance, overall, I don't see that as a particularly good thing even though, IMO, sex work should be fully legalized and regulated, and so should recreational drugs. That's one of the few thing I actually agree with Libertarians on.

            And yes, it really sucks that even though those actually are legal in many places, sex workers and legal dispensaries often still have to rely entirely on cash (which increases risk of violence/robbery), since they can't utilize banks transfers, credit cards, paypal, and the like, due to the puritanical ideals of those companies (and US political pressure forcing them to prevent such transactions). So crypto can and currently does help fill that gap in many places. However, on the opposite end of the spectrum, crypto unfortunately also greatly helps facilitate a whole bunch of other truly, truly awful dealings too. Hence why I think on balance, overall, crypto is still a bad thing (at present).

            8 votes
            1. [2]
              mtset
              Link Parent
              Yes, I agree with you. I'm not saying it's good now, I'm just saying it's not an inherently bad idea to have some kind of less-regulated currency that isn't cash.

              Yes, I agree with you. I'm not saying it's good now, I'm just saying it's not an inherently bad idea to have some kind of less-regulated currency that isn't cash.

              5 votes
              1. cfabbro
                Link Parent
                That's a fair point, well made, using a good example. 👍

                That's a fair point, well made, using a good example. 👍

                3 votes
    2. [3]
      skybrian
      (edited )
      Link Parent
      I think of meme coins as isolating the essence of a pump-and-dump scheme and turning it into a game. This game could be played with any security (as seen with the meme stock phenomena), but with a...

      I think of meme coins as isolating the essence of a pump-and-dump scheme and turning it into a game. This game could be played with any security (as seen with the meme stock phenomena), but with a meme stock there is in theory a fundamental value that’s being ignored, while with a pure meme coin there generally isn’t. The value is indeterminate. In the very long run it’s probably zero, but it can fluctuate wildly for as long as speculators still find it fun.

      Some arguments against are the same as those against gambling, which I generally agree with (I’m not a gambler) but I think also shows that they prove too much. If you can buy a movie ticket with zero expected value and not be considered irrational, why can’t the same be true of a lottery ticket? If you can put coins into a pinball machine with no expectation of return, why not a slot machine? You can win big or lose all your money on a meme coin depending on your skill at timing and a certain amount of luck, but the same could be said of a poker game. People say it’s fun for them and maybe that’s justification enough?

      Of course with gambling we do know that addiction is a problem and there are some safeguards against it. A problem with cryptocurrency may be that people don’t realize they’re gambling and spend more than they can afford to lose. This doesn’t seem to be all that true of cryptocurrency speculators, but maybe there would be a lot more victims’ stories after a crash?

      As someone who doesn’t believe in gambling I have to come to terms with the existence of Las Vegas, which isn’t going anywhere. It’s unclear how long cryptocurrency speculation will remain popular, but I think we might have to come to terms with it as an enduring form of entertainment. Possibly, it might be contained by having a legalized version that’s strictly regulated, mach as casino games are in Nevada. Maybe there could be pump-and-dump games with low power consumption and that can’t be used for ransomware?

      Could a more-regulated game be made more fun and accessible than its competitors to reduce the damage? This is sort of like the strategy the music industry took against file sharing. It never went away but people were somewhat convinced to sometimes pay for music in a way that artists can make some money from.

      3 votes
      1. [2]
        cfabbro
        (edited )
        Link Parent
        Good point. Even though I understand addiction from having first hand experience struggling with it myself, I still really don't understand the appeal of gambling. But despite that I have already...

        Good point. Even though I understand addiction from having first hand experience struggling with it myself, I still really don't understand the appeal of gambling. But despite that I have already made peace with the fact that gambling is here to stay, so I should probably just accept that crypto trading (essentially another form of gambling) is too. However, the one thing I don't think I can ever make peace with is the insane hype over it; E.g. people claiming it's the inevitable future of all financial transactions, and that it's also somehow going to solve the world's ills.

        IMO, blockchain tech may eventually get utilized by governments and central banks in a more tightly controlled form, but crypto as it is right now (privately operated, highly volatile, not backed by anything tangible, etc) is definitely not the future of transactions... or at least I hope to God that it's not. And as for solving the world's ills, IMO it has so far only made a lot of those ills much much worse by making them easier to get paid for, harder to prevent, and more difficult to track down and prosecute those that commit them.

        3 votes
        1. skybrian
          (edited )
          Link Parent
          The hype is definitely a big part of why people want to play the game. If there were fewer believers it would be harder to keep the game going. It doesn't have to be sincere though. People can...

          The hype is definitely a big part of why people want to play the game. If there were fewer believers it would be harder to keep the game going.

          It doesn't have to be sincere though. People can play ironically, as I did in the early days of Dogecoin - it's satire, right? - or cynically.

          The mechanics of a game can outlast people's reasons for playing. People come and go (the joke got old) and the memes evolve. There were people rooting for Dogecoin to "go to the moon" on Reddit even back then and I never knew how sincere they were, but clearly that meme outlasted the others, and eventually they were right. For how long? Who knows.

          2 votes
    3. NoblePath
      Link Parent
      There’s some hope that the science/research coins could help make effective use of otherwise idle cpu cycles. But otherwise, yes, largely a solution in search of a problem.

      There’s some hope that the science/research coins could help make effective use of otherwise idle cpu cycles. But otherwise, yes, largely a solution in search of a problem.

      1 vote
    4. stu2b50
      Link Parent
      As an example of an exception to the rule, take a look at something like bedrockdb, which uses a "blockchain" to maintain consensus among several database nodes. Of course, since there's only a...

      And even blockchain technology itself feels like it's just a wildly inefficient solution in search of a problem

      As an example of an exception to the rule, take a look at something like bedrockdb, which uses a "blockchain" to maintain consensus among several database nodes. Of course, since there's only a handful of known nodes you can just do BFT instead of mining or whatever.

      It was created in 2007 and is used in production, so not even a byproduct of bitcoin hype (since it predates it).

      1 vote
  2. Eric_the_Cerise
    Link
    I miss the old cypherpunk days of cryptocurrency, when it was govt-toppling Fight Club-esque radical regime change end-of-banking future-of-money stuff. The current pyramid scheme-ish era makes me...

    I miss the old cypherpunk days of cryptocurrency, when it was govt-toppling Fight Club-esque radical regime change end-of-banking future-of-money stuff. The current pyramid scheme-ish era makes me sad, makes me feel like we, somehow, missed a real, society-changing opportunity ... though I'd be hard-pressed to say when/where/how it went wrong.

    4 votes
  3. [2]
    Wulfsta
    Link
    To bring up a use that is more of a hack of a blockchain than the intent of one - massively duplicated public data storage. I haven’t seen this done for practical purposes, but a proof of concept...

    To bring up a use that is more of a hack of a blockchain than the intent of one - massively duplicated public data storage. I haven’t seen this done for practical purposes, but a proof of concept was written as a blog post some time ago. This is certainly a double edged sword, since that data is effectively permanently published - but could also be useful to activists if utilities were created to put documents onto various blockchains.

    2 votes
    1. DataWraith
      Link Parent
      There's a blockchain called Arweave that does it for practical purposes. In order to mine a block, you have to prove that you have a randomly selected block of data that was stored in the past....

      There's a blockchain called Arweave that does it for practical purposes. In order to mine a block, you have to prove that you have a randomly selected block of data that was stored in the past. Theoretically, that incentivizes all miners to hold onto all data blocks forever.

      I like the concept in theory, but then it occurred to me that I don't have any data I actually want to store for 200 years... also, it's obviously kind of expensive to store data forever, so in practice you can only store smallish files.

      There's an add-on that allows you to store git repositories; that might be worth investigating further.

      3 votes