It was supposed to be a financial revolution. Instead, crypto has become an environmentally disastrous gift to con artists, says academic David A Banks
For ponzi-schemes, you have to look at the crypto industry’s lesser known feature: Tokens
Long before NFT’s, companies have been manufacturing systems to create “tokens” (usually utility tokens) and trying to sell them to other people. This usually happens through crypto conferences, crypto meetups etc. Typically, the plan is to convince people of their impending value growth by going on a long complicated sounded explanation of how tokens are earned and how many people are buying into them, and then get that person to by a bunch of cheap tokens. The promise is that they can then sell them to others to make more money, or (in quite a few cases), sell tokens to someone who will sell tokens and give the initial seller a small percent… and so on.
Bitcoin did not start with fiat-investment opportunities, but with the way the entire crypto market is operating, that’s the goal now: creating investment opportunities. It’s proven to be a very effective means of making fast-money, so there’s no incentive for the market to move away from pushing crypto as an investment hole rather than focusing on value control and stability to make it a more accessible form of currency.
It also makes me wonder about how functional a lot of these coins even are in terms of utility. How many stores will accept every single kind of crypto?
And nobody wants to talk environment… but it’s a really huge point to bring up, especially now that the environment is worse than ever. I’ve really dug into the impacts on other posts, but I try to at least mention it because this is the one big aspect outside of the “currency” itself that actually impacts people who choose not to participate. The GPU shortages, the giant mining farms, growth-driven-proof-of-concept-difficulty-increases, etc.
I get it, they’re working on something better than proof of work in terms of energy consumption. But look at how many of the damn things exist! And since all crypto currencies work alongside fiat, it’s not like we’re replacing traditional banking.
Sure, the energy consumption and carbon dioxide output is roughly ~50% of traditional banks, but unless everyone suddenly decides that they don’t care about their fiat investments, that output is just going to grow alongside traditional banks
It’s not a Ponzi exactly, it’s called a pump-and-dump. But yes it’s very common and very bad.
I agree that crypto currencies seem to be used much more for cynical investment profiteering, and much less for commerce, that fiat currencies. Probably because they are new. Investors are much faster at exploiting any new thing.
Bitcoin has not failed yet. It might become like company shares, an ostensibly useful thing that in practice is just a money-making game for professional gamblers. Or it might find a real large-scale use in the economy. It depends on so many factors.
The environmental issue really deserves its own discussion. There are several valid ways of looking at it. For example:
Bitcoin’s model was simple and robust and successful. But bitcoin’s value increased too much, too fast, making mining very profitable. It’s a victim of its own success.
It’s easily fixed, for example by borrowing Monero’s proof-of-work algorithm. But the bitcoin devs need to be given an incentive to change it.
This is capitalism - everything gets exploited for profit until it is devastated. It’s not a bitcoin issue it’s sick-society issue.
I personally believe that the GPU and electricity crises are being driven by datacentres (collecting human behaviour data) and AI (finding ways to exploit that data for profit and power) but bitcoin is being used as a scapegoat.
And anyway the solution is not just “ban the bad things”. There are effective ways to disincentivise people from exploiting electricity.
For ponzi-schemes, you have to look at the crypto industry’s lesser known feature: Tokens
Long before NFT’s, companies have been manufacturing systems to create “tokens” (usually utility tokens) and trying to sell them to other people. This usually happens through crypto conferences, crypto meetups etc. Typically, the plan is to convince people of their impending value growth by going on a long complicated sounded explanation of how tokens are earned and how many people are buying into them, and then get that person to by a bunch of cheap tokens. The promise is that they can then sell them to others to make more money, or (in quite a few cases), sell tokens to someone who will sell tokens and give the initial seller a small percent… and so on.
Bitcoin did not start with fiat-investment opportunities, but with the way the entire crypto market is operating, that’s the goal now: creating investment opportunities. It’s proven to be a very effective means of making fast-money, so there’s no incentive for the market to move away from pushing crypto as an investment hole rather than focusing on value control and stability to make it a more accessible form of currency. It also makes me wonder about how functional a lot of these coins even are in terms of utility. How many stores will accept every single kind of crypto?
And nobody wants to talk environment… but it’s a really huge point to bring up, especially now that the environment is worse than ever. I’ve really dug into the impacts on other posts, but I try to at least mention it because this is the one big aspect outside of the “currency” itself that actually impacts people who choose not to participate. The GPU shortages, the giant mining farms, growth-driven-proof-of-concept-difficulty-increases, etc. I get it, they’re working on something better than proof of work in terms of energy consumption. But look at how many of the damn things exist! And since all crypto currencies work alongside fiat, it’s not like we’re replacing traditional banking.
Sure, the energy consumption and carbon dioxide output is roughly ~50% of traditional banks, but unless everyone suddenly decides that they don’t care about their fiat investments, that output is just going to grow alongside traditional banks
It’s not a Ponzi exactly, it’s called a pump-and-dump. But yes it’s very common and very bad.
I agree that crypto currencies seem to be used much more for cynical investment profiteering, and much less for commerce, that fiat currencies. Probably because they are new. Investors are much faster at exploiting any new thing.
Bitcoin has not failed yet. It might become like company shares, an ostensibly useful thing that in practice is just a money-making game for professional gamblers. Or it might find a real large-scale use in the economy. It depends on so many factors.
The environmental issue really deserves its own discussion. There are several valid ways of looking at it. For example:
Bitcoin’s model was simple and robust and successful. But bitcoin’s value increased too much, too fast, making mining very profitable. It’s a victim of its own success.
It’s easily fixed, for example by borrowing Monero’s proof-of-work algorithm. But the bitcoin devs need to be given an incentive to change it.
This is capitalism - everything gets exploited for profit until it is devastated. It’s not a bitcoin issue it’s sick-society issue.
I personally believe that the GPU and electricity crises are being driven by datacentres (collecting human behaviour data) and AI (finding ways to exploit that data for profit and power) but bitcoin is being used as a scapegoat.
And anyway the solution is not just “ban the bad things”. There are effective ways to disincentivise people from exploiting electricity.