I worked in tech for 34yrs. I don't own any crypto because it was so obviously a scam from day 1, and even the underlying blockchain tech is still, decades later, a solution looking for a problem*.
That said, much of "modern finance" (derivatives, securitisation, CDOs etc) are also so far removed (or leveraged) from "real assets" that their worth is essentially as fictitious as the worth assigned to crypto. They have value because everyone says they have value, until they don't (cf the GFC in 2008).
The big difference is ubiquity and liquidity.
There are long-established, kinda well-regulated mechanisms, all around the world, for exchanging those tokens of value that trade huge volumes ($trillions) every day, so you aren't locked into a proprietary "exchange" begging for your money back before your wife leaves you and takes the kids. There are also very well-established mechanisms for managing risk (hedging, insurance, etc) AND very well-established mechanisms for clawing value back if you get scammed ie the court system, where the laws and precedent are clear and well-established.
None of these are perfect (see Madoff) but they are "better" than some crypto scheme cooked up and promoted by shady people with opaque pasta who inevitably turn out to be conmen, or rapists, or both.
That said, part deux, the underlying "real assets" that underpin the traditional finance sector, normally shares, are increasingly as fictious and delusional as crypto too, with earnings-per-share that are negative (because the company has never made a profit) for shares with multi-billion dollar market caps, that trade on multiples that are 10x or 100x outside of the long-term multiples for that sector.
Even the valuations for 100yr old blue-chip companies that do make real things with real value are increasingly suspect, due to stock buy-back's that serve little purpose other than to manipulate the stock price so that it aligns with analyst expectations and/or allows the C-suite execs to hit their bonus targets.
Unfortunately, it's a game we all have to play, as we need somewhere to put our retirement savings etc, unless you want to go full prepper and build yourself a compound somewhere and kid yourself that you're self-sufficient, which lasts until you realise you really have no idea how to make antibiotics and those red streaks travelling up your leg from the scratch you got last week really don't look very good or you really need to buy some quality bull semen because your 4 cow "herd" is about 1 generation away from having 2 heads.
"The house of delusions is cheap to build but drafty to live in." A.E. Housman.
the real financial markets have also gone wacky in ways that are highly concerning. i don't see how any of this ends well but in the short term i don't see any reason why it should end: https://x.com/Cryptadamist/status/1856878957439725889
Sorry, I forgot to explain the asterisk * the one area where I have seen some genuinely innovative use cases for blockchain is in the area of decentralised identity. So, rather than handing all your personal information to a 3rd party you use blockchain and related crypto mechanisms to grant rights to access parts of your personal information. Rights that can be revoked on your terms whenever you want.
i'm highly skeptical that that's a good idea in any kind of important context (meaning outside of like, video games). what happens if someone gets your keys?
but crypto does have a real and innovative use case: money laundering. another good one is as a medium of exchange between a small cabal of kleptocratic states, which is where this is currently headed as Iran, Russia, and North Korea all massively ramp up their crypto infrastructure. https://x.com/Cryptadamist/status/1849500845236215874
I think the authentication mechanism is stronger than "just your blockchain key" ie leveraging biometrics, 2FA etc. Like any Web3 solution that has decentralized in the name it's not completely decentralized, it still requires "some mutually trusted certification provider" to attest/sign that "we attest that this digital identity is in fact Stephen Thair", akin to how you have a trust chain for SSL/TLS certificates. In reality that's probably going to be the usual suspects like Experian or national governments.
An important point is that You don't HAVE to link your DID to a "real identity" if you don't want to, and even if you do, you don't have to use that "public identity" for everything you do.
From the white paper:
"Conceptually, DIDs can fall into two classes: public DIDs and pairwise DIDs. Public DIDs
are IDs that users choose to knowingly
link themselves with data intended for the public - for example, a small bio that includes
a photograph and a brief description. Public
DIDs are suitable if you intend an activity or interaction to be linked to yourself in
a way that can be verified by others. But
having everything you do tied to a single
DID and traceable across the web poses
serious privacy and safety risks. This is why
pairwise DIDs are useful. Pairwise DIDs are
generated whenever users want to isolate
their interactions and prevent correlation.
For many users, pairwise DIDs might be the
primary mechanism they use to conduct
identity interactions"
Cryptadamus...Thank you for educating us on the 'clear and present danger' of cryptocurrencies. I think you are quite prescient on this. The magnitude of the disaster is a little difficult to quantify, but it exists. When you hear the Crypto Bros make comments with some variation of "exchange the gold in Fort Knox for Bitcoin to pay off the national debt", you begin to see the level of cataclysm we could be talking about. Perhaps impoverishment awaits us all with this kind of nonsense.
Thank you for republishing this. I also believed in the "Domino Theory" of crypto fraud but started to reexamine this thesis once the BlackRock ETF launched.
It seems we're rapidly on the road to technocratic serfdom instead, where .gov backstops most of these corrupt crypto institutions with Treasurys, soaks up unprecedented amounts of debt, and forces the plebs onto highly-managed payment rails using whatever stablecoins they end up giving a blessing to.
I should've known better when The Blocksize Wars of 2016 kicked off and it was clear that shadowy figures did not want this stuff to have any utility except crime and automated monetary slavery. Shame on me.
Companion piece: https://m.youtube.com/watch?v=YQ_xWvX1n9g “The Line Goes Up”. This is a witty, detailed takedown of NFTs explained by treading the same ground detailed in this blog. TLDR Bitcoin is a grift run by speculators to detach suckers from their (also pretty ponzied) real coin known as the US$. In the end, economies are simple - people make things, save things & consume things. Anything outside this system is an economic rent, a Ponzi scheme, an arbitrage or a genuine market innovation to bridge the gap between planting a seed & reaping the harvest. The West has given up on the basics of a plant, consume, save economy & switched it all for monopolies, speculation & captured digital arbitrage. Trump is the agent of chaos who will collapse it all.
If you haven't heard Thomas Peterffy of Interactive Brokers on Bitcoin & Margin, please have a listen. The interesting part begins at about timestamp 10:15 in this video.
It would not surprise me if this is the future foretold...
fascinating... as the chair of IBKR which allows trading of crypto) he has access to incredibly good data.
fwiw i 100% agree with him. there will eventually be another bitcoin disaster, this one bigger than all the previous ones, maybe big enough to shake the actual financial system which prior to trump was safely walled off from crypto.
Of course, once again, the taxpayers will be called upon to bail out the moneychangers. As Jim Grant says, "the privatization of profit and the socialization of risk." The way Trump is embracing crypto, there seem to be multiple pathways to disaster. It is a headscratcher why a country with a "faith based currency" would want to allow other forms of under fiat the tent.
Like Molly White; great crypto writing but unfortunately her skepticism doesn’t translate to other things like Wikipedia (which is obviously a gatekeeper and not a true objective encyclopedia)
Hahaha 😂 Is Wikipedia anti crypto? It’s the last place I would look for anything authoritative. It’s a starting point for people who don’t know what crypto is, maybe! I doubt that Mollie has such influence. If she does I hope she corrects the article on the Franklin Scandal.
And now everything is infinitely worse. The foxes are running the chicken coop. And a number of chickens have turned turncoat, probably with the idea that their heads will be spared and they’ll get a full belly and possibly all the liquor they can consume.
In this Crypto drama, do you believe that there might be an entity at the center of it with a plan? For example, Lex Luthor might encourage chaos at the perimeter where participants believe they are in control, but Lex knows he is the puppet master and will pull the rug at the time of his choosing for his nefarious ends. Seems like it could be this way, but just difficult to tell.
oh there's definitely a plan for a Final Rugpull: blow up the dollar based international financial order and replace it with a bitcoin based global economy that they can rule over like pharaohs. this isn't even much of a secret; just look at what a lot of these guys say very publicly (in particular Balaji and Thiel).
there's two and a half important factions:
1) the americans (a16z owners marc andreessen and ben horowitz, coinbase CEO brian armstrong, ripple CEO brad garlinghouse, Trump transition chairman howard lutnick, Peter Thiel, Balaji, Emperor Shillbertine (Barry Silbert), the rest of The Nerd Reich, etc.)
1.5) Michael Saylor (MicroStrategy / MSTR CEO), a John McAfee-esque agent of chaos who nominally looks like he's on Team America but is probably somewhere in the middle.
2) the chinese mafia (whose true prime movers no one I know of has ever fully identified even if Sam Bankman-Fried, Justin Sun, the Crypto.com team, Johnny KuCoin, etc. and the rest of the Tether cartel are the "white gloves" out in front)
The Chinese mafia is as of right now the closest to "in control" if for no other reason than the OG Chinese bitcoin "miners" are sitting on a staggering pile of $100 billion in bitcoin and god knows how much in other cryptocurrencies that they extracted years ago. That's about to change though because unlike Andreessen and the rest of Team America the Chinese mafia's ability to execute The Final Rugpull is somewhat limited by the fact that they did not just buy the American government. While they do have the power of important factions of the Chinese government at their back it's also almost certainly true that those powerful factions are *not* the critical Xi faction, which is why we've seen the PRC start to take dramatic actions against Tether based money laundering and capital exfiltration in China and Southeast Asia in the last ~12-18 months.
FWIW some people think Elon is fully on Team America. i personally think Elon is more of a loose cannon who cares a lot more about the share price of TSLA and SpaceX than he does about bitcoin. YMMV.
(and of course the Russian mafia / Putin faction is real, operating at least in part through the the Russian / Israeli organized crime axis that includes people like Moshe Hogeg and Alex Mashinsky, but it's more of a small time player for now)
This is a great breakdown. Huge percentages of the "hotswap" crypto services are run out of Eastern Europe and settle on Binance behind the scenes. Just the way their operation runs tells you how low they are on the power pyramid.
Do you remember AntBleed, the backdoor in the early S-series mining ASICs on BTC? That was years ago and surely has gotten worse. China can pwn this industry anytime it wants and the American tech bros have to know it, so there's at least some level of cooperation between groups 1 and 2.
Saylor is just a front-man idiot con artist who's allowed to be leveraged to the hilt for some reason. I'm not sure what his role is other than as a holding company that can later deploy liquidity and for PR.
> "Huge percentages of the "hotswap" crypto services are run out of Eastern Europe and settle on Binance behind the scenes"
fwiw this is also probably true of the iranian exchanges. it's definitely true of a bunch of things in asia.
> "Do you remember AntBleed"
before my time but sounds pretty bad. i agree there's clearly some cooperation between the two groups but it seems like that's getting more fraught as coinbase threatens to delist tether.
For sure, there's a lot of sleight of hand going on right now to see who will dominate the stablecoin game. The Thiel (PYUSD), Lutnick (USDT), and Summers (USDC) factions are at each other's throats.
Coinbase has clearly thrown their weight behind the Larry Summers faction.
It seems like the Americans have largely accepted that China manufacturing all the mining hardware means there's an eternal Sword of Damocles hanging over all the Proof of Work coins, including BTC. So they're getting cut into the global game at a lower level on the stack, so to speak.
I worked in tech for 34yrs. I don't own any crypto because it was so obviously a scam from day 1, and even the underlying blockchain tech is still, decades later, a solution looking for a problem*.
That said, much of "modern finance" (derivatives, securitisation, CDOs etc) are also so far removed (or leveraged) from "real assets" that their worth is essentially as fictitious as the worth assigned to crypto. They have value because everyone says they have value, until they don't (cf the GFC in 2008).
The big difference is ubiquity and liquidity.
There are long-established, kinda well-regulated mechanisms, all around the world, for exchanging those tokens of value that trade huge volumes ($trillions) every day, so you aren't locked into a proprietary "exchange" begging for your money back before your wife leaves you and takes the kids. There are also very well-established mechanisms for managing risk (hedging, insurance, etc) AND very well-established mechanisms for clawing value back if you get scammed ie the court system, where the laws and precedent are clear and well-established.
None of these are perfect (see Madoff) but they are "better" than some crypto scheme cooked up and promoted by shady people with opaque pasta who inevitably turn out to be conmen, or rapists, or both.
That said, part deux, the underlying "real assets" that underpin the traditional finance sector, normally shares, are increasingly as fictious and delusional as crypto too, with earnings-per-share that are negative (because the company has never made a profit) for shares with multi-billion dollar market caps, that trade on multiples that are 10x or 100x outside of the long-term multiples for that sector.
Even the valuations for 100yr old blue-chip companies that do make real things with real value are increasingly suspect, due to stock buy-back's that serve little purpose other than to manipulate the stock price so that it aligns with analyst expectations and/or allows the C-suite execs to hit their bonus targets.
Unfortunately, it's a game we all have to play, as we need somewhere to put our retirement savings etc, unless you want to go full prepper and build yourself a compound somewhere and kid yourself that you're self-sufficient, which lasts until you realise you really have no idea how to make antibiotics and those red streaks travelling up your leg from the scratch you got last week really don't look very good or you really need to buy some quality bull semen because your 4 cow "herd" is about 1 generation away from having 2 heads.
"The house of delusions is cheap to build but drafty to live in." A.E. Housman.
the real financial markets have also gone wacky in ways that are highly concerning. i don't see how any of this ends well but in the short term i don't see any reason why it should end: https://x.com/Cryptadamist/status/1856878957439725889
but even that pales in comparison to the fact that DogeCoin is now worth more than the vast majority of S&P 500 companies: https://substack.com/@cryptadamus/note/c-76743050?
Sorry, I forgot to explain the asterisk * the one area where I have seen some genuinely innovative use cases for blockchain is in the area of decentralised identity. So, rather than handing all your personal information to a 3rd party you use blockchain and related crypto mechanisms to grant rights to access parts of your personal information. Rights that can be revoked on your terms whenever you want.
i'm highly skeptical that that's a good idea in any kind of important context (meaning outside of like, video games). what happens if someone gets your keys?
but crypto does have a real and innovative use case: money laundering. another good one is as a medium of exchange between a small cabal of kleptocratic states, which is where this is currently headed as Iran, Russia, and North Korea all massively ramp up their crypto infrastructure. https://x.com/Cryptadamist/status/1849500845236215874
Ah yes, I'm sure it's very useful for criminals and oligarchs!
The DID stuff is definitely worth a look at e.g. https://identity.foundation/ or https://aka.ms/didwhitepaper
I think the authentication mechanism is stronger than "just your blockchain key" ie leveraging biometrics, 2FA etc. Like any Web3 solution that has decentralized in the name it's not completely decentralized, it still requires "some mutually trusted certification provider" to attest/sign that "we attest that this digital identity is in fact Stephen Thair", akin to how you have a trust chain for SSL/TLS certificates. In reality that's probably going to be the usual suspects like Experian or national governments.
An important point is that You don't HAVE to link your DID to a "real identity" if you don't want to, and even if you do, you don't have to use that "public identity" for everything you do.
From the white paper:
"Conceptually, DIDs can fall into two classes: public DIDs and pairwise DIDs. Public DIDs are IDs that users choose to knowingly link themselves with data intended for the public - for example, a small bio that includes a photograph and a brief description. Public DIDs are suitable if you intend an activity or interaction to be linked to yourself in a way that can be verified by others. But having everything you do tied to a single DID and traceable across the web poses serious privacy and safety risks. This is why pairwise DIDs are useful. Pairwise DIDs are generated whenever users want to isolate their interactions and prevent correlation.
For many users, pairwise DIDs might be the primary mechanism they use to conduct identity interactions"
Cryptadamus...Thank you for educating us on the 'clear and present danger' of cryptocurrencies. I think you are quite prescient on this. The magnitude of the disaster is a little difficult to quantify, but it exists. When you hear the Crypto Bros make comments with some variation of "exchange the gold in Fort Knox for Bitcoin to pay off the national debt", you begin to see the level of cataclysm we could be talking about. Perhaps impoverishment awaits us all with this kind of nonsense.
we do what we can.
Thank you for republishing this. I also believed in the "Domino Theory" of crypto fraud but started to reexamine this thesis once the BlackRock ETF launched.
It seems we're rapidly on the road to technocratic serfdom instead, where .gov backstops most of these corrupt crypto institutions with Treasurys, soaks up unprecedented amounts of debt, and forces the plebs onto highly-managed payment rails using whatever stablecoins they end up giving a blessing to.
I should've known better when The Blocksize Wars of 2016 kicked off and it was clear that shadowy figures did not want this stuff to have any utility except crime and automated monetary slavery. Shame on me.
Companion piece: https://m.youtube.com/watch?v=YQ_xWvX1n9g “The Line Goes Up”. This is a witty, detailed takedown of NFTs explained by treading the same ground detailed in this blog. TLDR Bitcoin is a grift run by speculators to detach suckers from their (also pretty ponzied) real coin known as the US$. In the end, economies are simple - people make things, save things & consume things. Anything outside this system is an economic rent, a Ponzi scheme, an arbitrage or a genuine market innovation to bridge the gap between planting a seed & reaping the harvest. The West has given up on the basics of a plant, consume, save economy & switched it all for monopolies, speculation & captured digital arbitrage. Trump is the agent of chaos who will collapse it all.
Line Goes Up is an absolute masterpiece.
Hi Mr. Cryptadamus...
If you haven't heard Thomas Peterffy of Interactive Brokers on Bitcoin & Margin, please have a listen. The interesting part begins at about timestamp 10:15 in this video.
It would not surprise me if this is the future foretold...
https://www.bloomberg.com/news/videos/2024-12-11/thomas-peterffy-talks-trump-m-a-cryptocurrencies-video
fascinating... as the chair of IBKR which allows trading of crypto) he has access to incredibly good data.
fwiw i 100% agree with him. there will eventually be another bitcoin disaster, this one bigger than all the previous ones, maybe big enough to shake the actual financial system which prior to trump was safely walled off from crypto.
the only question is when.
Of course, once again, the taxpayers will be called upon to bail out the moneychangers. As Jim Grant says, "the privatization of profit and the socialization of risk." The way Trump is embracing crypto, there seem to be multiple pathways to disaster. It is a headscratcher why a country with a "faith based currency" would want to allow other forms of under fiat the tent.
they've already drafted legislation to transfer most of a trillion dollars from american taxpayers into the hands of crypto bros
https://www.washingtonpost.com/business/2024/11/27/trump-strategic-bitcoin-reserve-plan/
Fantastic piece. 🫡
Like Molly White; great crypto writing but unfortunately her skepticism doesn’t translate to other things like Wikipedia (which is obviously a gatekeeper and not a true objective encyclopedia)
the bros on twitter are constantly accusing molly of forcing wikipedia to be anti-crypto
Hahaha 😂 Is Wikipedia anti crypto? It’s the last place I would look for anything authoritative. It’s a starting point for people who don’t know what crypto is, maybe! I doubt that Mollie has such influence. If she does I hope she corrects the article on the Franklin Scandal.
And now everything is infinitely worse. The foxes are running the chicken coop. And a number of chickens have turned turncoat, probably with the idea that their heads will be spared and they’ll get a full belly and possibly all the liquor they can consume.
I’m just sitting down reading this piece and hats off to you, sir. The metaphor and allegory are all supreme.
Good Stuff. Keep it up.
the “Nerd Reich” 💀💀
weak men bring hard times.
Mr. Cryptadamus...So, a question.
In this Crypto drama, do you believe that there might be an entity at the center of it with a plan? For example, Lex Luthor might encourage chaos at the perimeter where participants believe they are in control, but Lex knows he is the puppet master and will pull the rug at the time of his choosing for his nefarious ends. Seems like it could be this way, but just difficult to tell.
oh there's definitely a plan for a Final Rugpull: blow up the dollar based international financial order and replace it with a bitcoin based global economy that they can rule over like pharaohs. this isn't even much of a secret; just look at what a lot of these guys say very publicly (in particular Balaji and Thiel).
there's two and a half important factions:
1) the americans (a16z owners marc andreessen and ben horowitz, coinbase CEO brian armstrong, ripple CEO brad garlinghouse, Trump transition chairman howard lutnick, Peter Thiel, Balaji, Emperor Shillbertine (Barry Silbert), the rest of The Nerd Reich, etc.)
1.5) Michael Saylor (MicroStrategy / MSTR CEO), a John McAfee-esque agent of chaos who nominally looks like he's on Team America but is probably somewhere in the middle.
2) the chinese mafia (whose true prime movers no one I know of has ever fully identified even if Sam Bankman-Fried, Justin Sun, the Crypto.com team, Johnny KuCoin, etc. and the rest of the Tether cartel are the "white gloves" out in front)
The Chinese mafia is as of right now the closest to "in control" if for no other reason than the OG Chinese bitcoin "miners" are sitting on a staggering pile of $100 billion in bitcoin and god knows how much in other cryptocurrencies that they extracted years ago. That's about to change though because unlike Andreessen and the rest of Team America the Chinese mafia's ability to execute The Final Rugpull is somewhat limited by the fact that they did not just buy the American government. While they do have the power of important factions of the Chinese government at their back it's also almost certainly true that those powerful factions are *not* the critical Xi faction, which is why we've seen the PRC start to take dramatic actions against Tether based money laundering and capital exfiltration in China and Southeast Asia in the last ~12-18 months.
FWIW some people think Elon is fully on Team America. i personally think Elon is more of a loose cannon who cares a lot more about the share price of TSLA and SpaceX than he does about bitcoin. YMMV.
(and of course the Russian mafia / Putin faction is real, operating at least in part through the the Russian / Israeli organized crime axis that includes people like Moshe Hogeg and Alex Mashinsky, but it's more of a small time player for now)
This is a great breakdown. Huge percentages of the "hotswap" crypto services are run out of Eastern Europe and settle on Binance behind the scenes. Just the way their operation runs tells you how low they are on the power pyramid.
Do you remember AntBleed, the backdoor in the early S-series mining ASICs on BTC? That was years ago and surely has gotten worse. China can pwn this industry anytime it wants and the American tech bros have to know it, so there's at least some level of cooperation between groups 1 and 2.
Saylor is just a front-man idiot con artist who's allowed to be leveraged to the hilt for some reason. I'm not sure what his role is other than as a holding company that can later deploy liquidity and for PR.
> "Huge percentages of the "hotswap" crypto services are run out of Eastern Europe and settle on Binance behind the scenes"
fwiw this is also probably true of the iranian exchanges. it's definitely true of a bunch of things in asia.
> "Do you remember AntBleed"
before my time but sounds pretty bad. i agree there's clearly some cooperation between the two groups but it seems like that's getting more fraught as coinbase threatens to delist tether.
For sure, there's a lot of sleight of hand going on right now to see who will dominate the stablecoin game. The Thiel (PYUSD), Lutnick (USDT), and Summers (USDC) factions are at each other's throats.
Coinbase has clearly thrown their weight behind the Larry Summers faction.
It seems like the Americans have largely accepted that China manufacturing all the mining hardware means there's an eternal Sword of Damocles hanging over all the Proof of Work coins, including BTC. So they're getting cut into the global game at a lower level on the stack, so to speak.