The following opinion editorial is a Jacobin Podcast review written by the author Sterlin Lujan, the chief risk officer with Cryptospace. The Jacobin Podcast episode called: “Dig: cryptocurrency w/ Edward Ongweso Jr & Jacob Silverman,” touches upon “cryptocurrency, NFTs, Elon Musk, the metaverse, meme stocks, and techno-utopianism amid the crushing reality of our neoliberal hellscape.”
Cryptocurrency isn’t fringe technology anymore. Over the last decade, it has become embedded into finance, culture, and even our social life. It’s drastically changing the way we think about money, economics, and human action. However, some people, primarily on the left, are skeptical of cryptocurrency. Many of them hate it, regardless of how much of a godsend it has been for many.
My friend, thought leader, author, and psychedelic visionary, Daniel Pinchbeck, pointed out a recent podcast episode of Jacobin called “Dig: Cryptocurrency w/ Edward Ongweso Jr & Jacob Silverman.” He asked me if I would listen to the podcast, and take the time to address their claims and concerns.
I would not typically use the time to do this — but Daniel is interested in furthering the discussion around crypto. I also believe a review and critique of the material will benefit others who want an insider’s opinion, as I have been working actively in the industry for 6 years. It’s my hope, then, that this in-depth response will create an evolutionary and freewheeling discussion about the benefits, capabilities, and fears behind crypto.
Notes: Moving forward, I refer to the podcast speakers and guests as the “Podcasters” for simplicity sake. All of their arguments are numbered and in bold. My response immediately follows each of their arguments. I also sometimes separate my use of “crypto” and “bitcoin.” I may use crypto to refer to the ecosystem generally, and I may use bitcoin to address a specific point they made about it. The context of each section and the argument I am addressing will help clarify. I have also left many links for follow-up research and to provide factual evidence.
“Crypto supporters believe these digital tokens are supposed to have value somehow.”
The podcasters believe “cryptocurrency” cannot or does not have value. They attempt to dismiss cryptocurrency by claiming it is not really a currency, but only “digital tokens” or digital faberge eggs.
The reality is these “digital tokens” do have value. They have literal value as demonstrated by their market capitalization and trading activity at exchanges. Even the podcasters reference the trillion-dollar valuation of the crypto markets throughout the podcast, undermining their own claims.
Naturally, their perspective leads them down the rabbit hole of believing crypto is not currency or money. Using semantics, they try to devalue cryptocurrency by dismissing or ignoring its impact, although their critique misses the reality of what’s happening in the world.
“Bitcoin (and other cryptos) are not “currency, because they can’t be exchanged for goods and services”
This claim is patently false. With a quick Google search, we can ascertain that roughly 15,000 businesses currently support accepting bitcoin for payment. This is not an insignificant amount. The number of businesses that accept crypto is also likely an underestimate, because many retailers also accept various alt-coins. To add an anecdote, I have personally exchanged crypto for goods and services…directly and on multiple occasions. So what is the point of the anecdote? You can disprove the podcaster’s claims yourself without having to strain too many neurons. Just navigate onto overstock.com, place some items into your cart, and proceed to pay with the crypto.
Here is another salient point. Not only can you purchase goods and services for crypto directly, you can also leverage various intermediaries to purchase goods with your crypto. With purse.io, you can use a middleman to buy your wares from Amazon and earn a 10 to 15% discount. Or, if you use Dash cryptocurrency, you can download dash direct app, buy gift cards, and then purchase from a variety of stores at a discount.
I mention these options and innovations to demonstrate the podcasters are ignorant of all the ways to purchase goods and services with crypto, or they are lying to support an anti-crypto agenda. I hope it’s the latter.
“Crypto is too volatile to support any kind of major use case.”
Cryptocurrency does suffer from violent swings on the market and seemingly excess volatility. But the podcasters missed the solution. The beautiful thing about crypto is innovation is not hamstrung by inefficient bureaucracies or sluggish banking regulators. In comes the stablecoin. It was invented as a way to mitigate market volatility.
Of course, many object to stablecoins as they are just pegged to the US dollar. It is certainly true many stable tokens are pegged to the dollar, but luckily stablecoins can be pegged to anything; silver, gold, oil, leprechauns (that is the beauty of programmable tokens). The point is stablecoins solve the volatility problem and allow crypto to morph into a stable unit of account when necessary.
As a side argument, some people don’t view the volatility of bitcoin and crypto as a problem. There is a huge amount of volatility in the fiat and FX markets. However, a lot of the volatility is obscured by capital controls and other government meddling. In nature, nothing is consistently stable; there are waves and troughs; tops and bottoms; sine waves. Early crypto thinker Daniel Krawisz wrote a piece called I love Bitcoin’s Volatility over at the Satoshi Nakamoto Institute. Daniel elaborated poignantly on the volatility problem,
“To complain that no one will use Bitcoin because it is too volatile is therefore like saying, ‘Bitcoin’s adoption rate is so astonishingly fast that it will never be popular!’ It’s like saying, ‘This oven is heating up so fast that I’ll never be able to cook with it!’ It’s like saying, ‘This novel is so exciting that no one will ever read it!’
There is no evidence that Bitcoin’s volatility is hurting it. Any imaginable indication of Bitcoin’s adoption rate will show that its adoption rate is extraordinarily rapid. So how, exactly, can volatility be a problem? If Bitcoin were less volatile, would it have an even more rapid adoption rate? This is nonsense because Bitcoin’s price has to go up as more people start using it, and if a lot of new people start using it, then it has to go up fast (that is, be volatile).”
“Main use case for cryptocurrency is market speculation.”
I rebutted this claim earlier by addressing the idea that crypto has no use case as a currency. However, one may say the main use case is still speculation. I believe this argument is primarily a diversion or red herring.
Speculation is not a use case. It’s simply a byproduct of emergent technology. Saying that cryptocurrency’s primary use case is speculation is just like claiming the internet’s primary use case was speculation, which is what happened during the dot-com bubble. Of course, speculation is just investor activity, regardless of the merits or faults of that activity.
In reality, cryptocurrency (especially blockchain) has a myriad of use cases, but the main use case is money, which was the original utility of bitcoin as a result of Satoshi Nakamoto solving the double-spend problem. Other use cases (for crypto/blockchain) include utility tokens serving a governance function, as a stablecoin, as a coin powering prediction markets, or as a reward token fueling lending platforms. Use cases in the cryptocurrency ecosystem are legion, and anyone who thinks otherwise is out of touch.
For people requiring additional reading of all the real-world blockchain/crypto token use cases visit this link.
“Productive value of cryptocurrency is none. I can’t see it as a currency. It is for speculators. It is used to facilitate movements of funds from one pocket to another. Pump-up self-dealing assets (AKA rug pull).”
The podcasters continue to harp on the idea that crypto has no “productive value,” except to facilitate scams and pump-and-dump schemes.
I’ve already shown plenty of value and use cases in my previous rebuttals, but I want to address the notion that crypto is largely used for pump-and-dumps.
The podcasters have a valid concern regarding rug pulls and pump-and-dump schemes in the space. There have been enough of these that it has certainly tarnished the reputation of crypto in some circles.
However, this problem does not exist as a permanent scar within the ecosystem. It’s partially the product of new technology and ignorance. Scammers have emerged because newbies get involved in the ecosystem and fail to educate themselves. They fall for hype and get sucked into a rug pull or Ponzi scheme. When enough time passes, the ecosystem will mature and most of the scammers will be weeded out.
Many crypto companies are starting to warn users not to invest in crypto tokens they don’t understand and to educate themselves before diving in. This education mentality is becoming a sticking point in the industry, because — contrary to popular opinion — many industry players actually care about supporting users and customers. We will continue to see this trend grow as the ecosystem matures.
As a final point, I want to reemphasize the fact that crypto has massive “productive value.” Here is one example: The bitcoin cash community started a program called “Eat BCH.” They developed this program to feed the poor and destitute in Venezuela and South Sudan. To date, the BCH advocates have fed thousands of people in Venezuela. It makes sense people in the crypto industry would conduct such charitable initiatives, because fiat in countries like South Sudan and Venezuela are useful as toilet paper due to runaway hyperinflation.
The “Eat BCH” initiative is what I call “productive value,” and it’s these “selfish capitalist crypto bros” engaging in it.
“Currency needs to be tied to the state or some kind of political governance.”
The most asinine argument the podcasters on Jacobin made is that private money is dangerous and money should be tied to a state or political governance.
Currency maintained by governments, politicians, and despots has caused tremendous suffering. When governments control the money supply, they can (and will) print out as much of it as they want to fund endless wars, enrich their friends at the expense of the people, and inflate its value away. In effect, government-monopolized, centrally controlled money is the harbinger of death and destruction. This is not hyperbole. For more understanding of the perils and pitfalls of fiat currency, please read The Fiat Standard by Saifedean Ammous.
When the podcasters make the claim they want to see currency tied to a government, they effectively want to enslave the rest of mankind to a life of inflationary, debt servitude.
Bitcoin was invented on the heels of the 2009 financial collapse as an answer to reckless government spending, bank bailouts, and systemic corruption. It’s my belief if people, especially on the left, are educated on financial matters, they’d be more willing to embrace “private monies” without the fears they apply to them. To date, nothing has been more destructive and unproductive than the monopolization of money by a cartelized governmental system. In essence, currency should never be tied to the State or any organization of violence.
Bitcoin solves all the above problems by being impregnable to hyperinflation, by being peer-to-peer, and by being decentralized enough to prevent monetary censorship.
It’s no wonder the genesis block of the bitcoin blockchain is inscribed with this message:
Chancellor on brink of second bailout for banks.
“Currency side of blockchain is not emancipatory or economically liberating.”
The podcasters not only deny cryptocurrencies are “currency,” but they believe it cannot be emancipatory or economically liberating.
Their “argument” is a falsehood and error; a comedy of errors. It’s not only tragic because the podcasters are wrong, but because they’re ignoring potential economic salvation. They are also misleading others about the liberatory capabilities of crypto.
Let’s look at Africa as a case in point. In Nigeria, the unemployment rate has hovered around 27%, and most people struggle to make ends meet. When bitcoin gained popularity in 2017, a number of people learned how to earn a profit from trading. This foray into the crypto markets helped them escape poverty. Bitcoin directly and intimately impacted them in a financially positive way. It may have even saved them from suffering the pains of abject poverty. For anecdotes and facts about bitcoin in Africa, read this Coindesk article. Similarly, crypto-fueled emancipations have occurred in Venezuela, Sudan, and Colombia.
Some will agree that bitcoin can liberate people in third-world countries, but what about in the U.S.? It is true people are wealthier and have easier access to financial services. However, people in the US have also built themselves a better life as a result of their crypto endeavors. Here is a personal anecdote:
Before bitcoin, I was working as a salaried manager at Walmart — making 38k a year (less with taxes) — and spending hours languishing at work. I was selling my labor to effectively live there. It was grueling. I could have been a poster child for communist resentment. Then I discovered bitcoin and crypto. I learned about emergent tokenized platforms like Steemit.
Steemit provides crypto rewards for publishing content. I was an early adopter, and I posted my thoughts with zeal. I earned Steem tokens galore. I traded what I earned for bitcoin when it was $1200 per coin. This move lessened my debt and pulled me out of workaday 9-5 drudgery. The innovative and novel feature about using Steemit is that I was “working for the community.” I didn’t have a boss or some “evil capitalist” looming over me with a whip. Blockchain and crypto saved me from living a strenuous, check-to-check lifestyle.
The Steem platform still exists, but the platform went through some community drama and ultimately became a Chinese platform. You can still view my posts here.
My story is not unique. A lot of early crypto adopters in the US did not come from a privileged background. They just happened to get into it before everyone else. This is what’s led to one of the largest transfers of wealth that history has ever known, and it is amazing.
Leftists, syndicalists, and communists still tend to be extremely skeptical of crypto. Many of them outright hate it. They see it as another oppressive form of “money,” with the exception of a few blockchain use cases. But as I have demonstrated, people have leveraged cryptocurrency to escape poverty and earn a living. In some cases, they even became wealthy. Crypto has created more economic equality and opportunity than any other technology. Ironically, instead of seeing this as a beautiful tool to fight oppression, leftists erroneously view it as a tool of the oppressors. This boggles my mind, but I believe it is the result of leftists not wanting to work, innovate, or build a path to financial abundance. They’d rather take from others; they’d rather steal bread than bake it. It’s the philosophy of envy, so they can just call all the poor people who pulled themselves out of destitution with crypto the new “rich.” Matter of fact, the podcasters even admitted it when they said all crypto did was “reshuffle power relations.” I find their views intellectually lazy and exhausting.
“Crypto people use utopian rhetoric.”
The podcasters claim a lot of crypto supporters leverage “Utopian rhetoric” when they discuss the benefits of the technology. Their claim is a way to devalue or dismiss the paradigm-shifting implications of the tech. It’s a way to downgrade the utility, benefit, and power of crypto. In reality, people fully engaged in crypto promote it as a way to benefit the world, help equalize the playing field, and eventually stop tyrants from lording over the money supply. This “rhetoric” is not “Utopian.” It’s the language of disruption and decentralization and disintermediation. The term “Utopian” implies the perfection of society or perfect social order. No proponent of crypto believes the technology will perfect society or create a society devoid of anthropocentric pitfalls and problems. Issues will always exist, but the idea is that crypto is provably making society a better place.
“Crypto can’t be overcome. It is firmly embedded in finalization. Most of the use cases solely to advance esoteric forms of commoditization. More ways to launder money. More ways to speculate. Leftists can’t roll it back. Get rid of it altogether?”
There is a lot to unpack, but the podcasters are accurate in the primary point: crypto is here to stay. Pandora’s Box has been emptied; or as Max Borders said, the djinn has escaped the lamp.
The podcasters, however, inject a ton of fear into crypto. They speak about how crypto will be embedded into “esoteric forms of commoditization,” which just means it will be used by the elite to trade or manipulate strange tokens that represent some other asset, I.E wrapped tokens, governance tokens, etc.
These fears are not true, though…unless the nerds in grandma’s basement or the average Joe living in his apartment are the new elites.
What’s actually happening is normal people are learning how to trade crypto, leverage decentralized finance (defi) networks, and play around in various markets. They are participating in an ecosystem that has been traditionally managed and puppeteered by elite financial gatekeepers. Now everyone can play, frolic, and dance in the realm of “high finance” without needing privilege or resources to engage; without needing permission from someone wearing a pompous suit or tacky hairpiece.
So here is the burning question: why would leftists — or anyone else for that matter — want to “liberate” the world from crypto? That would be worse than “rolling back” the internet. Not only is it impossible, but it’s also a puerile notion festering with Luddism.
The podcasters mentioned their concern that crypto is allowing for more money laundering to take place. These are the same kind of arguments people marshaled at the birth of the internet, saying it would only be used by criminals, thieves, pederasts, etc.
Not only are these kinds of arguments wrong, they conveniently forget about other facts. In the case of crypto being used for criminality, naysayers obfuscate the truth that a massive amount of financial crime occurs in the fiat world (substantially more than in crypto). There is a darker side as well. In the fiat system, the elite get to launder money, hyperinflate the currency, type their balance into their bank accounts, and control the credit supply on a whim.
To wit, the detractors only condemn crypto for its criminal uses when it serves their agenda. Luckily, the podcasters don’t have much to worry about. We have facts on how much crypto transactionality is used for criminal or illicit purposes. According to a Chainalysis study in 2019, criminal activity only represented a modicum of crypto transactions. A Forbes article summarised the study:
The majority of cryptocurrency is not used for criminal activity. According to an excerpt from Chainalysis’ 2021 report, in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume (roughly $21.4 billion worth of transfers). In 2020, the criminal share of all cryptocurrency activity fell to just 0.34% ($10.0 billion in transaction volume).
“Crypto is very concentrated in a small number of accounts. Wealth inequality is the greatest. Gestures toward egalitarianism are either facetious or wrong.”
In any market, especially technology, there will always be early adopters and investors. That means there will be people who get “luckier” as a result of their financial knowledge and future-scoping acumen. Likewise, there will always be laggards and a late majority who get in at the end as a result of their inaction or ignorance. This is called the technology adoption lifecycle, and it’s typically plotted out on a bell curve with early adopters and laggards making up a small percentage of the total population.
The technology lifecycle adoption explains why some people, especially the few, acquired crypto earlier and became wealthier. It’s natural inequality as a result of investor or entrepreneurial skills. In this sense, it’s not “wrong” or “immoral” for a few to have more than the rest. It’s a function of how the market erupted, congealed, and eventually settled. It’s true a few previously wealthy entities and people bought into the market later, but this is also not a detriment to the space, but rather a boon. When people buy into the market, it benefits the ecosystem as a result of “network effects.”
A network effect by definition denotes that a community or network gains in value as more people use it and as more money pours into it. The larger the network effect, the more the users of that network gain and prosper. So having more people and capital enter the ecosystem represents a net positive for crypto. It means even the “poorer” people gain additional value in their holdings.
Besides “inequality” being a natural function of the market, pointing out “inequality” in crypto behaves like a red herring. Even if the few possess more crypto than the rest, it does not diminish the fact that crypto has raised people out of poverty and improved their quality of life, as I previously argued. So why should anyone focus on inequality when crypto has helped so many people? Why worry about inequality when crypto actually equalizes the playing field? In my mind, the argument from inequality is a tired bromide that is largely based on an envy mentality. It has nothing to do with the facts, especially within crypto, where the benefits are tangibly felt by many people“
“Any sense of decentralization is specious.”
The podcasters make the case that wealth is so centralized in the crypto economy that decentralization is largely a chimera.
The problem with their concern is they are using “decentralization” erroneously. Decentralization does not mean the disbursement of wealth or distribution value. Wealth in crypto does not also automatically equate to control over an ecosystem. Control over a blockchain is dependent upon its governance model and technological architecture.
Decentralization means the networks involved in various blockchains are distributed to the extent they can withstand an attack and they don’t have a single point of failure. It means they are not honey pots susceptible to attack by bad actors. A byproduct of decentralization is censorship resistance.
A person can send crypto from their wallet to another person, and they don’t have to worry about those funds being rerouted, stolen, frozen, or otherwise “censored.” A properly decentralized system is therefore also resistant to censorship.
With that said, not all blockchain infrastructures are created equal. Some of them are indeed scams and lack any kind of decentralization. But the beauty of engaging in crypto is that we can opt-in and out of blockchains we wish to use. It’s a voluntary ecosystem, thanks largely to the beautiful innovation of computerized decentralization.
“Crypto operates like an MLM.”
I often hear people make the claim bitcoin is an MLM scheme or functions like an MLM. This argument is a reach at best, and willful ignorance at worst. The podcasters made this claim as well.
An MLM is a multi-level marketing scheme. In an MLM, a pyramid forms in which an enterprise or business gains revenue from a non-salaried workforce selling its goods. When they sell these goods they typically earn a commission. They also earn money by recruiting others into the organization. Sometimes, these MLMs are fraudulent schemes where no legitimate business or organization exists.
Without getting into the details, it is true some “cryptos” have been pyramid schemes as I have admitted previously. However, I also agree they were detrimental to the ecosystem and have tarnished crypto’s reputation.
The problem is many crypto naysayers want to throw the baby out with the bathwater and generalize the whole ecosystem as being an MLM. They even call bitcoin an MLM.
This claim is demonstrably false. Bitcoin is not a “business” or “organization.” It does not require recruiters. It’s just digital money or digital gold (depending on who you ask). It gains its value from network effects — from developers, entrepreneurs, and visionaries working in the community and allocating capital to innovate in and around the ecosystem. Of course, this entrepreneurial activity is not contingent on any kind of recruitment or similar claims made by any person or entity. It’s not a pyramid either, because no business organization exists. The network is decentralized, peer-to-peer (P2P) and network-driven.
The argument simply lacks intellectual rigor and is typically marshaled against bitcoin by people who have not done ample research and come to understand the technology. It’s almost like a last-ditch effort to throw shade at an innovation that is making tremendous headway into the mainstream economy.
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