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The Case Against Crypto
- nathias 5y agoFascinating, like Taleb who has to invent his own private definition of value so he can claim that the value of BTC is 0, Diehl seems to have invented his own private list of real problems, which crypto isn't solving.
- olalonde 5y agoTaleb is also a bit disingenuous about his change of heart. Instead of directly saying he was wrong, he claims something has changed: > I liked the concept until I realized the digital currency w/o govt I had in mind did not pan out: it had mutated into an open-Ponzi sch. That's all good but when exactly did it mutate? What mutated? The concept and protocol have been the same since day 1.
- k__ 5y agoBackground: That guy makes money with private blockchain tech.
- otterley 5y agoBlockchains are useful for things other than cryptocurrencies. And it's not a conflict of interest to say you don't think blockchains should be used for currencies, much like it's not a conflict of interest for the inventor of dynamite to say he doesn't think dynamite should be used to blow people up. (Google "Nobel Prize".)
- yunohn 5y agoCould you source this? What kind of blockchain tech?
- angio 5y agoHe's the CTO at Adjoint, see for example this article about their tech https://medium.com/humanizing-the-singularity/adjoint-distributed-ledger-technology-and-smart-contracts-for-real-world-finance-72a5cd83e063 https://medium.com/humanizing-the-singularity/adjoint-distri...
- yunohn 5y agoSeems only tangentially related to cryptocurrency - but I don’t understand why his arguments in the post are rendered invalid?
- angio 5y agoPublic blockchains are a threat to private blockchains and so he has a conflict of interest. He should disclose that. He's like the CEO of WeWork writing against remote work.
- yunohn 5y agoWeWork is co-working spaces, they embrace hybrid WFH. But regardless, he’s not against “public blockchains”, he’s against cryptocurrencies. They’re not the same thing, as a crypto enthusiast would agree.
- cblconfederate 5y ago> why I support forceful regulation to halt this financially corrosive enterprise from spreading further into market This sounds like a religious crusade. What is so sacred about your 'markets' that needs to be violently preserved? Overwhelming evidence shows that people voluntarily choose something like crypto and they will create something new even if you destroy crypto. This is typical conservativism, oppression and vilification of 'things I don't like'
- redwood 5y agoOut of curiosity do you support removing most financial services and market regulations that exist in the default economy today?
- cblconfederate 5y agoWho said anything about removing? Crypto might supercede them because it's better, but their obsolescense is entirely their own fault.
- dybber 5y agoWhy wouldn’t the regulations apply to crypto?
- eterpstra 5y agoThis is a great answer. Unfortunately the early narratives around bitcoin, blockchain, and cryptocurrency revolved around crushing and replacing the global financial system rather than upgrading or offering a sensible alternative. Critics then point to these early holy rollers and blanket label anyone interested in crypto a a religious zealot (or a criminal masquerading as a zealot).
- redwood 5y agoI assumed you were against regulating crypto and hence wondered if you were keen to see all finserv regulations removed
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- throwaway55421 5y agoI was going to write a comment here, but instead you, the reader can simply extrapolate The Case Against The Case Against Crypto. TL;DR: don't use it then.
- levesque 5y agoHere's your TL;DR: if the author is right, crypto will actually hurt society. Not saying I agree with him, but it wouldn't just be a matter of adopting it or not. Nothing wrong with public discourse on the matter, would be more productive to directly refute his arguments.
- Ygg2 5y agoCorrection: Crypto has already hurt society. From inflating price of GPUs to spending enough energy to power Sweden, without any benefits.
- CryptoPunk 5y agoPeople should be free to spend their wealth on whatever they want, whether it's crypto, high-powered gaming computers, or abstract art. If the environmental costs of crypto mining are genuinely your concern, the best solution is to advocate an agnostic solution, like restricting CO2 generating sources of energy, or energy consumption for ALL non-essentials (e.g. tourism, video games, crypto, etc). Singling out crypto for its environmental costs, and calling for targeted restrictions on it that exempt other non-essential uses of energy, suggests a superficial basis for your position, like a negative emotional association, or dislike of crypto proponents.
- Ygg2 5y ago> People should be free to spend their wealth on whatever they want So, you're saying I should run my unlicensed nuclear testing facilities? Regardless of any consequences and externalities I may cause. And I should have the right to sell whatever I discover to highest bidder (including terrorist organizations)? It's a hyperbole, but Bitcoin suffer from both of those: heavy externalities, and interfacing with black market.
- seibelj 5y agoHN loves to post Stephen Diehl articles because recently he has started an anti-crypto crusade. But FYI - he is a failed entrepreneur who tried to ride the “enterprise blockchain” wave and failed miserably. Now he spends his days writing screeds against crypto. He is a very weird guy https://twitter.com/dystopiabreaker/status/1470126927818067969?s=21 https://twitter.com/dystopiabreaker/status/14701269278180679...
- c7DJTLrn 5y ago(The post is about cryptocurrency, not cryptography)
- MaxBarraclough 5y agoI don't have anything substantive to add, but I find this drift frustrating. I think we're at the point that we have to put cryptography in full every time now. No doubt professional cryptographers are the ones most inconvenienced by it.
- schleck8 5y ago> To contact me via email run one of the following scripts to generate my contact information. I find this is an effective filter against the deluge of emails from recruiters. That's funny
- tjpnz 5y agoWhat's arguably the easiest of the three still requires numpy. That's a nice touch.
- trembonator 5y ago
- kloch 5y agoThe case for crypto in one chart: https://fred.stlouisfed.org/series/WM2NS https://fred.stlouisfed.org/series/WM2NS Nothing can grow exponentially forever. Any guesses as to when this chart goes to singularity? It turns out humans are just not good at running their own money supply. This has been true throughout history, even with a gold standard as coins were frequently debased. In current times, this chart of federal reserve assets is illustrative of the current environment: https://fred.stlouisfed.org/series/RESPPANWW https://fred.stlouisfed.org/series/RESPPANWW The growth in that chart since 2008 is new money that was created not by banks making temporary loans but by the central bank outright printing new money and injecting it into the economy (QE). If the FED balance sheet shrinks the stock market will crash and there will be irresistible political pressure to do more QE.
- go_elmo 5y agoWhile your statement is true, the universe is so big, that exponential growth at our (increasing) rate is still possible for many, many millenia (assuming no apocalypse scenario). Apart from that, money is inflationary by design.
- yunohn 5y ago> the universe is so big I probably missed the memo on humans becoming an interplanetary species, but I didn’t know that we’d also become intergalactic.
- BenoitEssiambre 5y agoInflation and money growth is by design as I explained here (and elsewhere in this thread): https://benoitessiambre.com/specter.html https://benoitessiambre.com/specter.html . It's really about avoiding the bad equilibrium where everyone hoards tokens and few invest in building things to buy with these tokens (which happened during the Great Depression with gold tied currencies).
- csdvrx 5y agoWhich you could say is exactly what happens with the altcoins, then also for technical reasons: when the one crypto that first was didn't do what a young russian bord canadian wanted to do, a very different one got made. AND A BUNCH OF OTHERS NOW! It's as if the market responded to not being provided with what it wanted (in terms of affordability or features) responded in a way where hoarders got fully circumvented...
- CryptoPunk 5y agoCalling for laws that would, under pain of imprisonment, prohibit people from engaging in voluntary economic interactions using software called cryptocurrency, is inexcusable. It's perfectly fine to not use crypto and warn others of its lack of utility. It is not fine to argue that we need centralized gatekeepers monitoring and permissioning private interaction between consenting adults, to keep us safe. It is a fundamentally illiberal position that lends credence to tyranny.
- yunohn 5y ago> centralized gatekeepers monitoring and permissioning private interaction between consenting adults, to keep us safe Welcome to modern society? We have safeguards and laws in place to protect people from other people. Uninformed consent is worse than no consent. People are being duped.
- CryptoPunk 5y agoIf "modern society" means a centrally controlled society without free choice, then modern society should change. What you're advocating is CCP-style subordination to the state and abolition of the right to engage in voluntary interaction with other consenting adults, and it's a travesty if this is what modern society is normalizing. It's utterly illiberal, and corrals people into a handful of centralized companies like Venmo, PayPal and Patreon, who can abuse their monopoly status to de-person individuals on the margins, or make it far easier for an authoritarian government to enforce financial lockdowns to repress opposition. >>Uninformed consent is worse than no consent. People are being duped. Then don't use crypto, and warn other people to avoid it as well. You thinking the risks of crypto outweigh its benefits doesn't give you a right to take away people's choice in the matter.
- solatic 5y agoI largely agree with the author; with that said, > where the only investment opportunity is as an economically corrosive synthetic hedge against all productive assets Elementary finance theory (quoting Tobin's Separation Theorem here) argues that portfolios should be comprised of some weight of nearly all if not all of the available securities, as even assets with poor expected returns can be useful elements of a portfolio in order to improve diversification within the portfolio and reduce the portfolio's risk. Dumb money should be hedged against productive assets. Is crypto a productive asset? The author's argument rests on the presumption of no. People who use cryptocurrency to cheapen and hurry the process of transferring capital across borders, compared to wire transfers, would say yes. Leave aside that international wire transfers could be sped up and made cheaper with a centralized authority in theory, the fact remains that in reality the fees are what they are. There's additional early work in using NFTs to deliver real-world benefits, where the issuer of the NFT derives value in outsourcing the tracking of who holds the rights to the real-world benefits to the miners propping up the backing blockchain rather than running their own centralized system. Is that enough value to justify the costs? Maybe. Hard to say. Too early to tell.
- pxue 5y agoToo early to tell is exactly correct. Author pointed to the 13 year time line and pretended the "internet" didn't also take 20 years for it to go from lab to actual wide spread public use. NFTs in theory, are no less productive than fine art. And fine art (or IRL collectibles) are a well accepted form of diversified asset. I'm not bought into the overall hype though. Some toots web3 will change human nature, as if "decentralized" decision making would magically make people less lazy and less selfish. I doubt that. too early to tell is the best we can do right now.
- alex504 5y agoFine art and NFTs are not theoretically the same. With fine art there is only one object, which can only be picked up, looked at, and so forth, in one spot. People go to museums or private collections to go see these pieces because looking at them on a computer or in a print doesn't have nearly the level of detail needed to appreciate them. Seeing a reproduction or a computer image of fine art is like going to a movie theater VS watching a movie on an iPhone SE, or going to the opera VS listening to it on your iPhone. And only one person can own that experience. This is untrue for NFTs. There is basically no value whatsoever to an NFT as far as I can tell VS say an svg of whatever image you downloaded. NFTs don't need to be owned to appreciate them, and "owning" them is basically meaningless insomuch as someone who takes a screenshot has about the same level of ownership as the person who "bought" it.
- BenoitEssiambre 5y agoAs a cryptocurrency skeptic, I like some of Diehl's posts however he seems more sure that the whole thing will collapse than I am. I think it could survive long term as a kind of digital gold, a investment having poor returns used in niche financial use cases. I like this article because it emphasizes arguments about the dangers of deflationary coins going into widespread use (a point I made here: https://benoitessiambre.com/specter.html https://benoitessiambre.com/specter.html). I'd like to add some minor clarifications that might help understand some of the mechanics of these dangers better: > Money exists to exchange for goods and services in an economy. It is created to mediate the exchange of goods so that we have a common unit of account we can trade instead of bartering goods directly. Money needs to have a reliable and stable value compared to a domestic basket of common goods and services, in order to achieve that the supply of the money needs to be controlled by a monetary authority which can expand or contract the supply according to market fluctuations. >A dynamic money supply is a fundamental necessity for a modern economy. A small amount of inflation discourages hoarding and incentivizes investment into productive enterprises which grow the economy and produce prosperity. Conversely a static money supply is inflexible in times of crisis because it does not allow intervention. Economies do not stabilize themselves and require active intervention to curb recessions. What I want to add is that in some broader context, economies do stabilize themselves. Without a standardized government currency, if everyone was relying on barter or volatile coins (resulting in a super inefficient economy), things would usually automatically stabilize. If you want a stable currency, a useful thing to have that helps generate a ton of prosperity, that's when you have to put in place mechanisms that prevents the currency from creating market gridlock and amplifying crises. It's not that markets don't adjust themselves. It's that the existence of a deflationary government stabilized currency can prevent these adjustments. It can prevent them at an economy wide scale, causing untold human suffering through massive amounts of unemployment and destitution. The only solution we have to this (without getting rid of all stable currencies) is to make sure stable currencies are inflationary, that they lose value over time. As I mentioned, this is further explained here: https://benoitessiambre.com/specter.html https://benoitessiambre.com/specter.html and here: https://bessiambre.medium.com/the-world-deserves-a-pay-raise-302f25efd82a https://bessiambre.medium.com/the-world-deserves-a-pay-raise...
- bitcoinmonger2 5y agoAnother salient and damning article by Stephen Diehl. I would recommend anyone who uses cryptocurrency to read through his work and reconsider your position. It's a bresh of fresh air to finally have someone technically literate investigating the technology and distilling the reasons why it's harmful to society. I liquidated my Bitcoin position 16 months ago thanks to Stephen Diehl, and I suggest you do the same. We are literally boiling the oceans. Are you going to continue to be a part of it?
- gorgoiler 5y agoIs it possible to parse the BTC transaction history to get a rough idea of how much USD has been lost, over the years? At some point, when X million retail investors have lost their life savings, presumably the riots will start?
- BenoitEssiambre 5y agoI dunno, people continuously lose vast sums of money at casinos and there are no riots against casinos. Some people just seem to like losing money.
- yunohn 5y agoNobody sees gambling as an “investment” or “business opportunity” - whereas people buy crypto specifically for those reasons.
- dybber 5y agoFrom the raw transactions I guess it’s hard to see whether it was stolen or a transaction by the legitimate owner. More importantly the press should really start to dig these stories up, instead of focusing on every time an NFT was sold for $$$, or how many have become rich by the Bitcoin scheme.
- vanusa 5y ago1. The technology does not solve a real problem. What about money laundering? And does it not make the time-honored profession of ransoming so much more ... frictionless? I am so tired of hearing these sour-grape protestations that crypto does not solve real problems that real people have.
- mattwilsonn888 5y agoWhat about scarce asset portability? I am so tired of hearing these sour-grape protestations that crypto does not solve real problems that real people have. Inb4: "How is crypto scarce when you can just make another one?" i.e. "I don't understand the relationship between hashpower and security."
- panarky 5y agoIt's adorable how smart people can write thousands of words making eloquent arguments against something nobody has the ability to eliminate. It's like writing "The Case Against People Gossiping About Other People". Maybe reading your arguments against gossiping persuade a few people to stop gossiping, but gossiping, like cryptocurrencies, is a thing that will never go away no matter how strong your case is.
- mattwilsonn888 5y agoThat's a fair point - it does really make one think about what the merit for "the absolute case against any and all [anything really]" is at all. The people who will do the work which actually alleviates legitimate complaints about crypto will be doing it from the inside, as optimists, who see problems and find solutions, rather than giving up and declaring the problem an irrecoverable caner. You don't like the energy being used for hashing? There is a lot of research and work going on in alternatives, most people know about Proof of Stake (though they mistake it for a sort of oligarchy). There are zero knowledge proofs as well - and this absolutism against hashing comes from the conception that crypto has no value (otherwise you have to do cost-benefit analysis and that is difficult, too difficult for most skeptics). Don't like the insiders scamming newbies? Rather than outlawing the whole market, how about you join people working on presale distributions and contract readability so that investors bear similar or less risk to developers and don't require large initial investments from venture capitalists who are incentivized to dump on retail. And so that understanding what a smart contract does doesn't require decompiling bytecode to an object oriented langauge. My point is - there are two ways to look at problems: optimism or pecimmism. Pessimism is simply the first half of optimism, the second half, the problem solving, is where the money gets made. Ironic the skeptics make it half way yet end up further than the typical Doge investor.
- adamqureshi 5y agook but who cares if crypto is legit or not. As long as you make money from it? I thought that was the whole game. Yes from the next sucker who will pay more than you , once you figure this out you game the system and make a profit. And move to the next game. I like his blog post. Understand the rules of the game and be a better player.
- dybber 5y agoHow do you ensure that you react fast when the market crashes? Do you have some kind of stop-loss setup that pulls you out of the market faster than all the “losers” of the game?
- mattwilsonn888 5y ago> The history of private money is one of repeated disasters that destroy public trust We are talking about crypto currencies, right? This guy is living in the world where the private bank in charge of how many US Dollars get created are holding the assets driven up by their decisions? This feels like a satire piece. How exactly is Bitcoin or a network modeled after it subject to private control? That's never explained, because its a complete farce. Really anyone piling on to this should be embarrassed, as someone whose confidence in their knowledge of crypto currencies grows with every thread I read on HN, and believes in the vision, I could write a much better hit piece than this - the difference of course being that as an optimist who sees the problems, I invest in the solutions. Its no wonder someone with such a warped view of the space sees no value - he's trying to find his car keys through beer bottles. I wouldn't be surprised to learn Mr. Diel's has some short sell positions against various cryptos. I wonder if HN understands the significance of that bias...
- otterley 5y agoCongress, subject to the U.S. Constitution and being our duly-elected representatives, could (in theory) pass a law replacing the Dollar tomorrow as the U.S.’s unit of currency. That’s what makes our currency a Public Thing. Cryptocurrencies are strictly private things because no government—even a legitimate one—or public mechanism can manipulate them.
- mattwilsonn888 5y agoThat's a half definition. The other half of "private" is 'centrally controlled by a single organization.' Are the open seas private because the government doesn't control them? This is all just silly word games anyways. You (should) well know the basics of how at least Bitcoin works and how it cannot be reasonably controlled by anyone (barring state violence against users) if you are to speak on it at all.
- otterley 5y agoPrivate does not mean control by a single entity. I don’t know where you got that from. Ownership of private property is massively distributed across the population. (Consider everyone’s clothing, mobile phones, homes, cars, food.)
- hiidrew 5y agoNo doubt Bitcoin and other's proof of work system is horrible for sustainability. I enjoy reading these contrarian takes, it seems like this year over night my twitter feed previously of a lot of designers has turned into crypto twitter. But I think it's a bit foolish to write off the entire industry as a whole due to some of these problems. I don't see payments use case taking off anytime soon but I find the SSO with Ethereum/data portability interesting. Love seeing the 'connect wallet' on sites and being able to interact with whatever UIs I choose to complete x task some projects working on the above: - https://ens.domains/ https://ens.domains/, https://blog.spruceid.com/ https://blog.spruceid.com/
- jminter 5y agoThe argument laid out in this article is a quite complicated edifice, and requires a large amount of knowledge at the intersection of several fields of study I found this blog post interesting and wish it had a bibliography. Could anyone recommend some approachable sources to read more about the general themes in this post?