The blockchain/cryptocurrency space is mostly fraudulent | Hacker News Reader

The blockchain/cryptocurrency space is mostly fraudulent

davidgolumbia.medium.com

96 pointshudon80 comments

Anyone old enough to remember what the press said in the 90s about the Internet will recognize the similarities.

The Internet is full of fraudulent websites. It's full of porn. Email isn't as warm as a hand-written letter. Communicating online isn't professional. Etc.

Guess what, all those things were true but they turned out not to matter. You can do whatever else you want in a network that also carries porn. You learn to dodge fraud. Email is freaking convenient once everybody is using it, standards of behavior change, etc.

Cryptocurrency may be something or it may not. It's in very early stages. Even those who are interested have trouble following everything that is happening. But it's not even Internet-in-the-90s. It's Internet-in-the-70s. You can be skeptical about it, you can ignore it, but I don't see why someone would spend so much of their time being opposed to it.

Internet-in-the-70s was incredibly, astoundingly useful, and people weren't in it for the potential, but because it was offering them something, _today_.

I'm not seeing a single BTC enthusiast who's out for the utility of it. They are, quite literally, all of them into it for the speculatory potential.

Yup, and it's the one topic where a subset of HN commenters continue to overlook an incredible amount of technical/product deficiencies, just because it could potentially make them rich. If it had actual utility, people would be spending it and not just hodling.

People are spending it. And a lot of it. You need to spend ether to put smart contracts into the Ethereum blockchain and you also pay for transaction fees with it.

> I'm not seeing a single BTC enthusiast who's out for the utility of it.

Isn't that the point of BTC. If you could see them, it would not be `pseudoanonymous` right?

I can tell everyone I use Signal for the privacy aspect without being specific about its contents.

I cannot reasonably believe that there's people actually trading on BTC out of its utility if they don't talk about it. Unless of course all that activity is fundamentally illegal, which is a definitely something I'm willing to entertain.

The same goes for all the other blockchains. Ethereum, EOS — all of them made fabulous promises of applications just around the corner, but nothing has materialized except shitty gambling and Ponzi schemes.

EOS alone raised over $1 billion in its year-long ICO. A startup that spent this much money and delivered so little actual utility would be out of business long ago. But these coins just keep going because end-user value was never the point, they're all about siphoning money from new suckers whenever there's a "crypto boom". The endless refrain of "maybe it's like the early Internet, you never know!" is an important part of this scam.

I am out for the utility of it and I have lamented its volatility before (check my comment history if you'd like, even) so not "literally" all of them. I acknowledge I may be an anomaly but there is defintively a non-zero amount of people out there who do use BTC/crypto for its purported goals and not just for speculation.

And just like clockwork, whenever there are big price swings, these kind of articles attacking cryptocurrency show up on HN.

Maybe dont look into the obsolete tech? BTC isnt going anywhere in case of utility. Thats why the Maxis moved from p2p cash to store of value in just a few years. Also the speculation part is kinda needed its the only way something can have a value which is needed to have utility. It should be more balanced which will eventually happen fore some simply because real utility will drastically reduce volatility and thus makes it less interesting for speculation. Anyway BTC isn't one of them there is no utility in sight and it HAS to stay volatile to attract speculators else it drops to near zero and hashrate collapses.

The internet of 1970s solved a problem.

Other than "easier to buy drugs than with cash", what problem does bitcoin actually solve?

Propping up AMD's revenues during some rough spots?

Let's talk again when PayPal has cancelled your account.

"“Any time the author mentions “central banking”, he seems to only be referring to the “US Federal Reserve” as if that was the only central bank in the world. The fact is that many central banks have failed in the past, and is failing today (see Venezuela). That is not a leftist or rightist position, that is just reality. He also makes a huge and inexcusable omission of the 2008 financial crisis and the Occupy movement under which Bitcoin was created from. This omission is intellectually dishonest as the Occupy movement and “too big to fail” are leftist movements that parallels Bitcoin’s development. In summary, the author’s thesis is incorrect and over simplified. Even if he was correct, the viewpoint is so narrow (looking at Bitcoin in the current American political context) that his analysis has limited use.”

Emojipaste is broken so… emoji face with rolling eyes…."

https://standardcrypto.wordpress.com/2020/07/30/whiny-academ...

Uhh. The author explicitly mentions China's "digital yuan" under the section on central banking.

One point of contention re: inflationary vs deflationary currencies:

When most Bitcoin proponents I've talked to say that Bitcoin is deflationary, they mean in the context of "bitcoin as exclusive currency". I.e. there are theoretically a finite number of coins, so in a world where they're actually used to buy milk and eggs they theoretically would increase in value over time, ergo deflationary.

Unfortunately I find most Bitcoin adherents have at best a partial understanding of monetary theory (not that I can claim total mastery of that subject) in particular when it comes to understanding deflation/inflation. Inflationary systems can survive for many years in relative stability (cf. our current system) whereas in a deflationary system there is a financial disincentive to participate in the economy writ large, because your coins will be worth more if you just let them sit in your bank account. It encourages hoarding behaviour where large piles of coins sit dormant/stagnant and the engine of economic activity shuts down with lack of activity.

I know people who bought 1000 bitcoins for pennies back in 2010 and they seem to be willingly blind to this, because of course bitcoin is not widely used. It's just something you buy for $X hoping to ride the next bubble of speculation and sell for $(10 * X) so you can cash it back into fiat currency and retire at age 35 to your oceanfront property you just bought.

A vanishingly small number of bitcoin enthusiasts seem to actually want btc to replace all fiat currencies.

They want it to replace gold more than fiat.

was ready to give this a shot, but what??

> They do not meet any of the standard tests for money (especially the three classic criteria of store of value, medium of exchange, and unit of account)

That's a really difficult claim to swallow. Especially without further explanation than a wall of citations that I'm not going to bother chasing because I know the claim is false. At least provide a quick synopsis/summary for why crypto fails at any given one of those.

Bottom line: Most cryptocurrencies may not be very good at any of those, but that doesn't mean they aren't used in those capacities at all.

> Especially without further explanation than a wall of citations that I'm not going to bother chasing because I know the claim is false

If you refuse to read the evidence cited, how could you possibly validate or refute your position?

Read carefully: I'm refusing to read it unless you give me a compelling short synopsis. Why? I'm not going to read just a bunch of links that you throw at me. I want you to at least show me some indications that you have spend some effort thinking about it, especially after you've made a claim that is trivially refutable by personal experience.

If a flat-earther just gave you a wall of links, would you read it? No. You would demand at least a short synopsis of why these are compelling reads.

Isn't the article and points made within, the short synopsis?

Many who were even pro-bitcoin like Peter Thiel gave up on the idea that it is a good platform for transactions, and instead argue that it is like "digital gold." A wildly volatile digital gold, of course, given that it has no other uses beyond speculation.

But you are correct. It is bad at transactions but not incapable of them. Just as it is bad at storing value. As for being a unit of account that seems more theoretical, but in theory anything could be a unit of account.

Although to be fair, gold is quite volatile. Over last 9 years - Gone from $1800 an Oz, to $1000, to over $2000

Not something I invest in, but (for example) I'd no idea it was now worth more than platinum and has been for a very long time. Nor platinum seems to be on a slide currently, as gold spikes. Aside from you explaining novel industrial uses, it appears speculative.

If we knew in advance that the price of BTC would gradually decline from $16K to $100 over the next 5 years, nobody would ever talk about it again. It's an obfuscated Ponzi scheme wrapped in a clever (but extremely wasteful) proof of work algorithm.

I'll take a shot at least at refuting the claims in the first bulleted point:

"they are deliberately incompatible with the rest of the financial system"

so is the north korean won (or the venezuelan bolivar, or, on the other side of the "good faith" spectrum, the brazilian real at its inception), but you wouldn't claim that they aren't currencies.

"Most merchants who accept cryptocurrency aren’t actually accepting cryptocurrency, they’re using a service that turns it into dollars"

Arguably the same would be true for certain types of bank notes in the 19th-20th century (like 5k, 10k, notes). Still currency.

"they are provably inferior to alternative payment mechanisms."

this is basically a concession that it is a payment mechanism, if a poor one.

So theoretically it may be a currency, but pragmatically it is not.

Only a medium of exchange. Too volatile with no source of trust to be a store of value or a unit of account.

Fiat money relies on the trust generated by the central bank. Non existent in crypto.

So is not money.

No, it (specifically BTC) is not a medium of exchange, according to the author. And, really, how many people out there are actually buying and selling things using BTC? From the article:

> The major original claim for Bitcoin was that it would soon become widely used for buying and selling goods and services, the “medium of exchange” function, which might in fact have justified calling it currency. That claim has in every way failed to be realized.

I don't follow the blockchain world very well, but he makes an interesting point about it. Are there any projects, other than a few cryptocurrencies, that have impacted any industries significantly?

I feel like we are all still waiting for blockchain to be adopted by something that makes it really useful.

There aren't. There just aren't, and I am constantly amazed at how crypto enthusiasts have this level of cognitive dissonance.

There are some Proof of Authority systems like Hyperledger making inroads in the physical supply chain.

FinTech will likely adopt some form of blockchain tech, there is interesting research and some usefulness to clearing trades, but not likely public / permissionless systems.

Some gov'ts will likely digitize their currency for different reasons

The important CryptoKitty industry is almost entirely blockchain based.

Hard to argue with the lack of meaningful blockchain projects outside of cryptocurrency even though untold billions were invested.

It might be worth noting that one of the authorities the author refers to, Emin Gün Sirer, has started his own cryptocurrency project, Avalanche. His critiques of the blockchain space are thus presumably a bit more nuanced that the author's own.

Re: BTC is not money

In addition to attacking the "BTC is money" argument by claiming it isn't really a medium of exchange, I would take exception at saying it's any sort of "store of value," either.

As I understand it, 1 BTC is born after somebody cracks a specific SHA-256 hash. Okay? Big deal. That means all you can really say is that whoever successfully mines said BTC came up with the answer to a very specific math problem.

Granted, that does require a significant expenditure of resources (electricity to power mining equipment), but, who cares? Just because I put time and work into creating something does not make it automatically worth anything.

As far as I can tell, there is nothing else that gives BTC its value other than "proof of work," and the fact that enough people believe it's worth money. I have mentioned how "proof of work" clearly does not imply any particular value to a thing. So, that basically leaves the idea that BTC is worth something because people believe it is, and that sounds an awful lot like those dirty fiat currencies BTC and crypto people in general like to deride.

I see where you're coming from, but what is there that is valuable, absent people believing it is valuable?

Things or raw materials that are useful automatically have value.

Our human bodies and minds have objective necessities to stay alive and thrive. The value of art may be abstract in most contexts, but if I'm hungry an apple is valuable, and if I'm cold, wood is valuable.

Cryptocurrencies are an innovation and they have value. We can debate the extent of this and what practical applications can really be built. However, outright dismissing them as garbage does no justice to the debate.

Bitcoin is a good , fairly decentralized expression of digital scarcity at the very least and can be a store of value.

Good? Good for buying drugs on Silk Road (back in the day)

Also good for utterly wasting an enormous amount of power and contributing to global warming.

Crypto is just a digital asset that is very damaging to the environment and it is not like fiat currency because there is no exclusive market under it.

> very damaging to the environment

That's not accurate: not all cryptocoins are secured by an ever-escalating proof-of-work.

proof-of-work is supported by value of cryptocurrency, and does not something of inherent value. Contrast this with stocks, for which trading value depends on technical analysis and is slightly random, but in the end it is supported by some concrete thing.

Proof of work provides the man hours equivalent of security for the cryptocurrency, much the way that a standing military provides the man hours equivalent of security for a centralized national currency.

No, value of stocks is independent of "technical analysis".

TA does not work, except in special circumstances, and then only until the "secret" is revealed.

Is it true by market value? Bitcoin itself is worth something like $200 billion. What's the biggest counter-example?

I guess Ripple (XRP) is the biggest non-PoW blockchain at $11B. Ripple is also mired in criticisms of every kind.

this "crypto is bad for the environment" meme is a zombie meme.

https://www.coindesk.com/the-last-word-on-bitcoins-energy-co...

I worked for a blockchain startup that was not in the ICO space -- they had a compelling pitch if you didn't examine it too closely.

Now that I'm gone I think it was a "well intended" venture that could only survive on milking the flush VC market.

I've never seen centralization as such a bad thing. We need a human to fix things when they go wrong. If my bank account or my visa card get stolen, eventually there is somebody I can talk to to get this fixed. If there is an economic crisis or runaway inflation, people smarter than I am are at least going to try to mitigate it. When the shit hits the fan for unprecedented, unforeseen reasons, we can resolve that with judgment and fairness. This centralized human factor can go terribly terribly wrong, but it's no less necessary for it.

This is a good example of gish gallop: https://en.wikipedia.org/wiki/Gish_gallop

Nobody is "overwhelmed" by the points in this article as there is no time frame limiting any response. Indeed, nobody has agreed to respond at all. Therefore, "Gish gallop" is not applicable here.

This is a dumpster fire of bad (often self-quoted!!) arguments against crypto.

I think it took about 13 years for Beanie Babies to rise and fall, but it was really only on the market for about 6 of those years.

Are you suggesting beanie babies disappeared after 6 years? Or only that the speculation did? Because the former is demonstrably false, Beanie Babies continue even now as an available product still interesting collectors. They, of course, aren't really a speculation product anymore, but, they definitely didn't stop existing on the mark after 6 years.

Any critique of blockchain should mention git.

It should start with: "how is this better than the global information tracker?"

https://archive.is/dS7YE

If cryptocurrency had the "money" aspect removed, we wouldn't be having these arguments, as it's indefensibly bad from a technology standpoint. It doesn't scale, wastes energy, encourages fraud, has buggy/immutable "smart" contracts, is "anonymous" yet a public blockchain, etc etc.

It's been a "startup" for 10 years and the only product-market fit so far is for speculators, darknet sellers, tax evaders, betting/gambling sites, and straight-up Ponzi fraud. However, it's like catnip to a certain section of libertarians and get-rich-quick types - who want to replace the Fed with an early-adopter oligarchy.

"the vast majority of whom span the ideological spectrum from the moderately far right to outright Nazis."

Honest question, is blockchain now another category in which political affiliation now decides how you are supposed to feel about it? I don't really understand why that would be.

It's more the history of the thing but they enable people to trade without government control and hence people who dislike government control tend to be bigger fans.

Of the two biggest currencies Bitcoin is kind of associated with right wingers like Nick Szabo who is a bit libertarian / Trump and Ethereum with Buterin who is more democrat / Obama in outlook.

>cryptocurrency is fraught with fraud

Ya know, unlike fiat markets with marketcaps 100x the entire crypto space. Those are 100% legitimate.

>literal Nazis

Nazis use currency? :O jfc Nazis drank water too. The sooner Reductio ad Hitlerum gets invoked, the sooner I stop reading.

"Overwhelming evidence shows..." - the whole article is a great example of many of the tactics journalist employ to manipulate people's opinions.

Anything from the article you'd like to mention then?

It's too tiresome. One of the strategies is the "overwhelming" part - listing an "overwhelming" amount of anecdotes or other articles, that give the impression of overwhelming evidence, but is really irrelevant. To address them all would be an overwhelming amount of work.

For example it is irrelevant that there are many shitcoins and many scammers. What matters is if there are non-shitcoins. Bitcoin seems to be doing well.

In the dot com aera, there were also many scams and bad startups, but I think nobody would want to cite that as proof now that the internet is bad.

Just observing that every time this guy publishes a paper about crypto, there's a bull market.

* David Golumbia, “Cryptocurrencies Aren’t Currencies. They Aren’t Stocks, Either” (Motherboard, Aug 22, 2017)

* David Golumbia, The Politics of Bitcoin: Software as Right-Wing Extremism (University of Minnesota, 2016), chapter 5

Almost nothing about the technology itself. Some juicy quotes from the author:

> [...] and the far-right actors who gave birth to the ideas of cryptocurrency and blockchain in the first place. Repeating these claims only helps to promote their values, the values of those with the deepest vested interest in the “revolutionary” aspects of blockchain, the vast majority of whom span the ideological spectrum from the moderately far right to outright Nazis.

> David Gerard writes that “they are small computer programs. In conventional IT jargon, these are called ‘database triggers’ or ‘stored procedures,’ and they are considered bad software engineering that should only be used when you absolutely have to.”

> It may seem improbable at first glance to think that there might be connections between the pursuit of artificial general intelligence (AGI) and white supremacy. Yet the more you examine the question the clearer and more disturbing the links get. (from another article)

I leave you to decide whether the article is worth reading...

Right off the bat it shows three bad things about crypto-currency. And yet each of those three have been steadily and consistently improving. But apparently rather than iterating it’s better to just stop?

Ah, then the author shows their true colors. “Conspiracy theory”, “nazi”, “right wing”. This is an unserious hit piece meant to bully left-leaning people into sabotaging research and development in the web3 space.

A Bitcoin hit piece with no sound footing? Sounds perfect for the HN front page!

Also, BTC isn't a decent "store of value" and was NEVER meant to be. It is, at the title states, a peer-to-peer digital cash. For that it needs low fees and fast reliable transactions. Bitcoin Cash is one of the only projects following the rules laid out in the Bitcoin White Paper. The BTC chain was hijacked years ago by people with corporate interests like Greg Maxwell and Adam Back.

> "the web3 space"

Are the Ethereum people still trying to make that moniker stick? Oh dear.

I was not referring to Ethereum lol

Some folks just dont get it and it shows.

The mental gymnastics these salty nocoiners will go through, show how much they actually do get it, deep down inside.

My experience the last 10 years is that HN will hate on Bitcoin every chance they get. I've never gotten a clear answer on why this is other than jealousy and a lack of understanding. I'm surprised your comment is even still viable. But of course any non-sense anti-Bitcoin article will jump straight to the front page.

Yeah, HN ironically has a deep hate for any Crypto. Quite frankly a lot of HN probs missed out/dismissed BTC earlier years and now it just continues to trend up whilst the best money managers in the world/companies are adding it to their portfolio...the denial is real.

https://youtu.be/_L3gNaAVjQ4?t=8307

Describes HN comments and attitude towards next level/pushing boundaries tech.

Enjoy the sidelines.

I don't know if it's jealousy but it really feels like a disdain for plebs. Cryptocurrencies gives access to stock-like exchanges and financial tools to plebs and that's something that should be reserved to coastal elites. You can also see it in how hard they pushed for ICOs being regulated by SEC, getting a chance to get rich by investing in early ventures is for billionaire VCs only, not plebs!

Also, many coastal elites missed the crypto boat and therefore would rather treat it as a scam they were right to ignore rather than admit their mistake even when mainstream financial institutions invest billions in it. They will deny it to the end.

> Part I. Outright Falsehoods

> Cryptocurrencies are money, cash, or currency

> They simply are not.

OK, but on the other hand, they are?

> They do not meet any of the standard tests for money (especially the three classic criteria of store of value, medium of exchange, and unit of account).

I followed the link, did the reading, and came to the opposite conclusion.

Over the last several years I've come to the realization that most "cryptocurrency is garbage" posts boil down to the author underestimating or ignoring the financial realities of those living in other countries or circumstances.

There are those that live in countries with hyperinflation or US sanctions that don't think that cryptocurrency is garbage.

That's an interesting point of view. How are cryptocurrencies being used by citizens in those countries?

Sorry for the delayed reply! As a hedge against a hyperinflationary currency or as a medium of exchange.[1]

[1] https://news.bitcoin.com/report-use-of-cryptocurrencies-for-...

It feels like people don't understand the development curve of technology. This reminds me of that famous 1995 Clifford Stoll article on why internet is terrible. https://www.latimes.com/business/hiltzik/la-fi-mh-actually-t...

Things take a while to develop.

Reply on news.ycombinator.com