Sterlin Lujan, chief risk officer at Cryptospace wrote the following opinion editorial. 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. It has been integrated into culture and finance over the past decade. It’s drastically changing the way we think about money, economics, and human action. But, there are still some skeptical people. These are mostly on the right. Many people hate cryptocurrency, no matter how beneficial it may have been to them.
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. Each of their arguments is bold and numbered. I immediately respond to each argument. 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. This will clarify the context and my argument. Many links have been provided for further research as well as factual proof.
“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. These “digital tokens” have real value, as shown by their market capitalizations and trading activity on exchanges. Podcasters also refer to crypto market’s trillion-dollar value throughout the podcast. This undermines their own claims.
Their perspective is based on the belief that crypto currency and money are not. 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. A quick Google search will reveal that approximately 15,000 companies accept bitcoin payments. This number isn’t small. This is probably because not all businesses accept cryptocurrency. Many retailers will also accept alt-coins. To add an anecdote, I have personally exchanged crypto for goods and services…directly and on multiple occasions. What’s the point in the anecdote then? You can disprove the podcaster’s claims yourself without having to strain too many neurons. You can simply go onto overstock.com to place your items in a cart and then pay for the cryptocurrency.
Another important point. There are two important points. You can purchase crypto goods directly and you can leverage intermediaries to make purchases with crypto. Use purse.io to purchase your products from Amazon. You will receive a discount of 10-15 percent. If you have Dash cryptocurrency you can use the dash direct app to buy gift certificates and purchase at discounts from various stores.
To show the podcasters that they don’t know all there are ways to use crypto to pay for goods and services, or to justify their anti-crypto agenda, I list these alternatives and innovations. I hope it’s the latter.
“Crypto is too volatile to support any kind of major use case.”
The market swings and volatility that cryptocurrency experiences can be quite violent. Podcasters did not find the solution. Crypto is a great example of innovation. It isn’t hampered by slow banking regulators and inefficient bureaucracies. Stablecoin has arrived. The stablecoin was designed to reduce market volatility.
Many people object to stablecoins because they only peg to the US Dollar. While it is true that many stable tokens have been pegged at the US dollar, the good news is that stablecoins may be pegged to any other currency, such as silver, gold or oil. This is what the beauty of programmable tokens is. Stablecoins eliminate volatility and enable crypto to transform into a stable account unit when needed.
As a side argument, some people don’t view the volatility of bitcoin and crypto as a problem. The FX and fiat markets are subject to a lot of volatility. But, capital controls and other government intervention can obscure a lot the volatility. Nature is not stable. There are waves, troughs, tops and bottoms as well sine waves. Early crypto thinker Daniel Krawisz wrote a piece called I love Bitcoin’s Volatility over at the Satoshi Nakamoto Institute. Daniel spoke out poignantly about the volatility issue.
“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. What is the problem with volatility? Bitcoin would have even greater adoption if it was less volatile. 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.”
This claim was refuted earlier when I addressed the notion that cryptocurrency has no intended use as a currency. One could argue that the primary use of crypto is speculation. My opinion is that this argument is mostly a red herring or diversion.
Speculation does not have a specific use. 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. However, speculation can be considered investor activity.
Although cryptocurrency, especially blockchain, has many uses, the primary one is money. This was originally the purpose of bitcoin after Satoshi Nakamoto solved the double-spend issue. For crypto/blockchain, utility tokens serve as governance tokens. These tokens are also used in prediction markets to power predictions, reward tokens for lending platforms, and as an underlying stablecoin. There are many uses for cryptocurrency, so anyone who believes otherwise is completely out of touch.
This link provides additional information on all real-world crypto token/blockchain use cases.
“Productive value of cryptocurrency is none. I can’t see it as a currency. It’s for speculation. This is to allow funds to move from one bank to the next. 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.
Podcasters are concerned about rug pulling and other pump-and dump schemes. These have happened enough to tarnish the crypto brand in certain circles.
The problem doesn’t cause permanent damage to the ecosystem. It’s partially the product of new technology and ignorance. Because newbies become involved in the system and do not educate themselves, scammers are born. These people fall for the hype and are enticed into Ponzi schemes or rug pulling. Once enough time has passed, most scammers will disappear.
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. As the ecosystem develops, we will see this trend continue.
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. The BCH supporters have already fed hundreds of Venezuelans. Because fiat currency in South Sudan or Venezuela is used as toilet paper because of runaway hyperinflation, it makes perfect sense that people working in crypto would organize such charitable efforts.
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.”
Jacobin’s podcasters made the most absurd argument that private money was dangerous, and suggested money should be linked to political governance or a state.
Governments, politicians, as well as despots, have created a lot of suffering through currency. Governments can control the money supply and will print as many as they like to finance endless wars, enrich themselves at the expense or the people, as well as inflate the value. In effect, government-monopolized, centrally controlled money is the harbinger of death and destruction. This is not exaggeration. Please read the Fiat Standard by Saifedean Ammous for more information about the perils of fiat currencies.
Podcasters claim that they would like to see money tied to a country. This effectively means they are attempting to slave the rest of humanity to an existence of debt and inflation.
Bitcoin was developed in the aftermath of the 2008 financial crash as a solution to excessive 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. The monopolization and control of money by an organized government has proved to be more damaging than any other thing. Currency should not be linked to any state or organization that is violent.
All of the problems above are solved by Bitcoin. It is impregnable against hyperinflation and peer-to-peer. Bitcoin also has enough decentralization to avoid monetary censorship.
It’s no wonder the genesis block of the bitcoin blockchain is inscribed with this message:
Banks on the brink of a second bailout by the Chancellor
“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. The podcasters also mislead others about the liberating capabilities of crypto.
Let’s look at Africa as a case in point. Nigeria has a 27% unemployment rate, which means that most Nigerians struggle to survive. A lot of people discovered how to make a living trading bitcoins in 2017. Their forays into crypto markets enabled them to escape from poverty. Bitcoin had a direct and profound financial impact on them. You could even save them from poverty. This Coindesk article contains facts and anecdotes about bitcoin in Africa. Similar crypto-fueled emancipations took place in Colombia, Sudan and Venezuela.
Many will accept that bitcoin is a way to liberate those in third-world nations, but how about Americans? True, people in the US are richer and more easily able to access financial services. People in the US, however, have also made better financial decisions and live a more comfortable life because of crypto investments. Let me share a personal story:
Before bitcoin, I was working as a salaried manager at Walmart — making 38k a year (less with taxes) — and spending hours languishing at work. It was a way for me to live comfortably and sell my labor. It was hard work. It was a horrible experience. Then I came across bitcoin and crypto. I was then introduced to emerging tokenized platforms, such as Steemit.
Steemit offers crypto rewards to those who publish content. My early adoption was a success, so I shared my ideas with enthusiasm. Steem tokens were my reward. The bitcoin price was $1200/coin, so I converted what I made for Steem tokens. I was able to reduce my debt, and it also freed me from the 9-5 grind. 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. I was able to live a more strenuous lifestyle without the help of blockchain and crypto.
Steem is still in existence, although there was some controversy and it eventually turned into a Chinese platform. My posts can be viewed here.
My experience isn’t unique. Many of the early adopters of crypto in America didn’t come from an privileged upbringing. These people just happened to be the first ones to embrace crypto. This is what’s led to one of the largest transfers of wealth that history has ever known, and it is amazing.
Cryptocurrency is still a controversial topic for leftists, syndicalists and communists. They hate crypto. They see it as another oppressive form of “money,” with the exception of a few blockchain use cases. However, as I’ve shown, many people use cryptocurrency to make ends meet and get a decent living. They have even become rich in some instances. Crypto technology has enabled more equality in economic opportunity and opportunities than any other technology. Leftists mistakenly view this technology as an oppressor’s tool, rather than seeing it as a powerful tool for fighting oppression. It’s a strange thing, but it seems that leftists don’t want to be creative, work hard, and build wealth. 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. They claim this is to downgrade or ignore the technology’s paradigm-shifting potential. It’s a way to downgrade the utility, benefit, and power of crypto. People who are fully involved in cryptocurrency promote it as an opportunity to help the world and level the playing fields, and ultimately stop the tyrants gaining control of 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. The technology is not intended to create an ideal society. While there will always be problems, the concept behind crypto is to make society better.
“Crypto can’t be overcome. Finalization is where it’s firmly embedded. It is used mainly to further esoteric forms or commoditization. You have many options to laundering money. There are more ways to speculate. Leftists can’t roll it back. Get rid of it altogether?”
While there are many things to discuss, podcasters agree that crypto will be around for the long-term. Pandora’s Box has been emptied; or as Max Borders said, the djinn has escaped the lamp.
Podcasters however inject much 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. The ecosystem has traditionally been controlled and manipulated 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.
They expressed concern that cryptocurrency allows for greater money laundering. This is the exact same argument people used to argue for the advent of the internet. They claimed it could only be used criminally, by thieves and pederasts.
They not only make wrong arguments, but also ignore important facts. Crypto being used as a weapon of crime is a case in point. Naysayers are unable to see that there is a significant amount of criminal activity in the fiat currency (substantially greater than what happens in crypto). The dark side is not all bad. The elite can use the fiat system to make money, inflate currency and manipulate the credit supply.
The detractors don’t condemn crypto because it is used for criminal purposes, but only when they are able to use it in their favor. Luckily, the podcasters don’t have much to worry about. There are facts about how many crypto transactionsality have been used to criminal and illicit ends. Chainalysis’s 2019 study found that criminal activity was only a small percentage of all crypto transactions. This study was summarised in Forbes’ article
A majority of cryptocurrency are not used to commit criminal acts. 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). The criminal portion of cryptocurrency transactions fell to 0.34% in 2020 ($10.0 Billion).
“Crypto is very concentrated in a small number of accounts. The greatest inequality in wealth is Wealth Inequality. Gestures toward egalitarianism are either facetious or wrong.”
Investors and early adopters will be present in every market, even technology. That means there will be people who get “luckier” as a result of their financial knowledge and future-scoping acumen. The same goes for those who fail to act or are ignorant. 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.
This is why crypto adoption has led to some individuals becoming wealthier and more tech-savvy than others. 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.”
Definition: A network effect is when a network or community gains value due to more people using it, and more money flowing into it. A network effect is a network that allows users to gain more benefits and flourish. This is why crypto sees more people and capital entering the network. 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. It doesn’t matter if some people have more cryptocurrency than others, this does not change the fact that crypto has lifted many from poverty and increased their quality-of-life, which I previously stated. Why should we worry about inequality when crypto is helping so many? When crypto is able to equalize the playing fields, why worry about it? The argument about inequality seems to me a tired one that’s largely built on 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 claim that wealth in crypto economies is so centralized that decentralization can be largely considered a falsehood.
The problem with their concern is they are using “decentralization” erroneously. It does not necessarily mean that wealth will be distributed or value is being distributed. The possession of crypto wealth doesn’t automatically grant you control over the ecosystem. It is dependent on the governance model used and the 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. They aren’t vulnerable to attacks by evil actors. One side effect of decentralization, is resistance to censorship.
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.
However, there are many blockchain infrastructures that do not meet the same standards. Many of these infrastructures are scams, and do not allow for decentralization. However, the best thing about crypto is our ability to choose which blockchains we want. It’s a voluntary ecosystem, thanks largely to the beautiful innovation of computerized decentralization.
“Crypto operates like an MLM.”
Many people claim that bitcoin functions as an MLM or is an MLM. The argument is at best a stretch and at worst a blatant lie. These podcasters also claimed this.
Multi-level marketing schemes are known as MLMs. An MLM is a multi-level marketing scheme in which a business or enterprise gains income from its non-salaried workers by creating a pyramid. These workers typically get a commission when selling these products. The MLMs also allow them to recruit others. These MLMs can be fraudulent and not legitimate businesses or organizations.
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.
Many crypto-skeptics want to dismiss the entire ecosystem and label it an MLM. Many even consider bitcoin to be an MLM.
The claim is clearly 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. This entrepreneurial activity doesn’t depend on recruitment, or similar claims from any other person or entity. It’s not a pyramid either, because no business organization exists. Decentralized, peer to peer (P2P), and network driven.
This argument lacks intellectual rigor. It is usually used against bitcoin by those who haven’t done extensive research on the topic and are not familiar with its technology. It’s almost like a last-ditch effort to throw shade at an innovation that is making tremendous headway into the mainstream economy.
What do you think about Sterlin Lujan’s Jacobin Podcast review? Comment below to let us know your thoughts on this topic.
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