gettin' my word count up! an incomplete argument against crypto in case anyone but David is interested.
Posted by
mafic
Jul 4 '22, 20:10
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First is that crypto is incompatible with an open liberal democracy. If private money ever becomes a significant player it removes a major lever from the government arsenal and puts it in private hands. Imagine trying to convince a bunch of crypto bros and CEOs that we should sanction Russia. A lot of crypto infrastructure kept operating in Russia under weird "we're helping Ukraine!" rationalisations. The power to sanction and wage economic war then is largely transferred to private hands. It's not gone or decentralised, it's just in the hands of the people with the most money.
Second is that there are irreconcilable contradictions in the technology. Pseudonymous wallets are incompatible with pretty much everyone's money laundering rules. In practise though, if you know someone's private wallet address you have access to every financial transaction they've ever made. So really you're putting vast amounts of private financial data out in the world for everyone to see, or if you're secure/paranoid enough making them entirely invisible, with no middle ground. The only solution to this the crypto world has come up with (so far) is a private permissionless ledger, which then makes it fully impossible to track financial crime and money laundering.
Third is that crypto infrastructure almost always ends up recentralised anyway. It's not reasonable to assume that everyone has the technical capability to manage their own crypto infrastructure. Even with current regular banking where the rule is really "just don't give anyone your password" people get scammed all the time. Throw a bunch of information security protocols on that, and it's totally unworkable. The crypto solution to this is using third-party services, which are indistinguishable from a regular bank, except that they're uninsured, (largely) unregulated, and it's much harder if not outright impossible to get your money back after you get scammed.
Then there are all the little externality and operational problems. Proof of work needs the electricity of mid-sized countries to function, and isn't scalable to the level it would have to get to to be a functional currency. Proof of stake is necessarily deflationary and not decentralised, and looks a lot like a pyramid scheme. All the PBFT or proof of authority stuff is necessarily centralised to a small pool of people. Stablecoins are pegged to regular currency anyway, and rely on the same crypto infrastructure that causes all the above problems.
So unless the technology changes in a way that makes it unrecognisable compared to its current form, it's a bunch of scammy hot garbage. It's a solution in search of a problem, and if you're on board with it you're on the bad side.
And this isn't even getting into the hot mess of smart contracts.
And yeah, some of this is also a problem with the current system, but always much much less of a problem.
last minute addendum is that central bank digital currencies may be a bit different in that they eliminate a lot of the money laundering and centralisation in private hands concerns, but then there's also even less financial privacy.
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