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Where Some Ideas Are Stranger Than Others...

No, Cryptocurrencies Should Not Be Saved (2022-10-31)

Commonly used artwork used to illustrate cryptocurrencies on the web, version quoted here from gww.com, september 2021. Commonly used artwork used to illustrate cryptocurrencies on the web, version quoted here from gww.com, september 2021.
Commonly used artwork used to illustrate cryptocurrencies on the web, version quoted here from gww.com, september 2021.

There have been no shortage of crazes and bubbles associated with clever pieces of software intended to magic money out of thin air. "With a computer" has probably been one of the greatest gifts to the crooks trying to persuade the unwary or just plain unlucky into pyramid schemes and other such money draining set ups ever devised. I have never been quite sure why so many people have been taken up with the hype around "cryptocurrencies" because apart from use as tools for money laundering, I couldn't see any purpose to them. The utility of cryptographic signatures and cryptography more generally for safety, security, and privacy were quite obvious to me, as did making sure those things take too much time and energy to be worth breaking. But cryptocurrencies just sounded ridiculous. Banking is already based predominantly on "virtual currency," in effect a whole complex net of promises to pay, and the origins of that practice goes right back to at least ancient Sumer. So it seemed to me that what cryptocurrencies were was a clever speculative fad with a long fading time because they could be used for money laundering, and tech bros never give up on something done with a computer until they've been thoroughly drubbed by real life. All that skepticism expressed, I am also aware that when it comes to money matters, I am deeply risk averse. Other people with better tolerance for risk than me are all over the stock market, and that speculative exchange has been going for some time. So I could also see that perhaps there is something more like the stock market that cryptocurrencies could do.

Then I dug a bit more into how a person actually gets and spends cryptocurrency, and things got far more murky. At first glance they are at least analogous to an internal online community currency, where members may trade in-kind goods for the most part, and have an exchange of real world currency for a certain amount of within community goods to get started. But the key issue for the cryptocurrencies that have been taking off on the speculation front is the implied convertibility from cryptocurrency to currency spendable anywhere because acceptable anywhere. Understandably, the people most committed to cryptocurrencies really want to open up its wider convertability. Then the wide-eyed excitement when bitcoin soars would make serious real life sense, because if there was a guaranteed way to convert it at the height of its value in a standard currency, the holder could become an instant million- or billionaire just by investing a few thousand dollars in computers and absurd electric bills. Or, a person could try using cryptocurrency in the way many people in countries where things are looking scary use gold, gems, or a currency that they expect will not lose value. That last use is probably the big one that many of the so-called cryptominers in "the west" are actually interested in, because the united states is staggering in a scary and punch-drunk manner. I certainly sympathize with the desire for insurance against poverty!

Unfortunately, the practical impact of "cryptomining" is an environmental shitshow. Jurisdictions from china to north america have had to take steps to curb it, because the level of electricity used to carry out "proof of work calculations" and other such nonsense are competing invidiously with other practical day to day uses. Yes, it was reading about the "proof of work calculations" in the end that did in my respect for cryptocurrencies. They fundamentally depend on being able to prove that you have enough real money to waste on generating them or being able to figure out how to steal the electricity to make them from somebody else. Hence now malware has a whole genre of programs meant to generate some cryptocurrency in the other that savvy computer users have to protect their machines from. Heedless of the dream of magic money that bears no stubborn serious relation to the real world, cryptcurrencies are no realization of that dream. If anything, they might be a great illustration of how cryptocurrencies are a highly obfuscated version of putative perpetual motion machine that is only convincing as long as we don't understand how it works.

So no, contrary to some banner appeals I have seen on a few sites, cryptocurrencies should not be saved, and don't let the attempts of some of those appeals to conflate this specific use of cryptography with cryptography as a whole fool you. If there turns out to be a way to generate cryptocurrency without helping drive planetary global warming and the collapse of the ecologies that we humans depend on to live, I would have no argument with them. But that is not what cryptocurrencies are built from at this time. Nor can we solve the socio-political problem of preventing arbitrary seizure of our goods by despotic governments, because the possibility of such a seizure is a symptom of the disease, not a cause.

Copyright © C. Osborne 2023
Last Modified: Friday, February 03, 2023 01:53:05