Blockchain? Bah!
Why the cryptocurrency experiment has failed.
After one decade of blockchain, I’m perplexed. It’s not that I haven’t had a gas of a good time on Crypto Twitter. I’ve met great people and even caught a pump or two. But today, I’m uneasy about this most trendy and oversold community. Visionaries see a future of global financial inclusion, decentralized financial instruments and an objective “source of truth” for trust-less interactions without intermediaries. They speak of decentralized autonomous organizations and borderless digital currencies. Monetary policy will shift from central banks to immutable distributed ledgers. And blockchain will make government more democratic.
Baloney. Do our computer pundits lack all common sense? The truth is no distributed ledger will replace your central bank, no trustless e-cash can take the place of credit card companies and no blockchain will change the way organizations operate.
Consider today’s crypto world. Ethereum, a smart contract platform, allows anyone to instantly raise funds for an idea. Tokens go out cheaply and instantly, leapfrogging financial regulators. Everyone can do it. The result? Shitcoins. The cacophony of scams more closely resembles the Tulip mania, complete with FOMO, shilling, and exit scams. When everything is a scam, almost everbody gets “rekt”. How about paying with crypto? At best it’s an unpleasant chore: The psychedelic colors of RadWallet replace the friendly swipe of a credit card. And you don’t get to collect any bonus points either. Yet Andreas Antonopoulos, author of several blockchain books, predicts that we’ll soon pay for coffee straight with crypto. Uh, sure.
What the crypto hucksters won’t tell you is that the blockchain is one big ocean of uncensored transactions, without any pretense of oversight. Lacking central authorities, blockchain has become a wasteland of unfiltered transfers of value. You don’t know what’s a useful transaction and what’s spam. Whenever I try to transfer Bitcoin, hundreds of other transactions show up, and it takes 10 minutes for the transaction to be confirmed. Lightning Network is faster, but my node periodically crashes with messages like “database corrupted” and I lose my Bitcoin.
Won’t the blockchain be useful in governance? Ethereum addicts clamor for decentralized autonomous organizations (“DAO”). But when the Ethereum community launched a DAO, how long did it take to get hacked? 1 month.
Not a good omen.
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Then there are those pushing crypto into finance. We’re told that blockchain will make financial instruments accessible to anyone. Users will happily take out loans and trade tokenized assets on decentralized exchanges. Who needs loan sharks, banks and centralized exchanges when you can do everything on the blockchain? Bah. These decentralized apps are slow, insecure and difficult to use. Even if there were a trustworthy way to interact with other users on the blockchain — which there isn’t — blockchain is missing a most essential ingredient of finance: The human element. Can you remember even one smart contract you used in the past decade? I’ll bet you remember one or two great bank clerks who made a difference in your life.
Then there’s e-commerce. We’re promised instant payment with low fees — just point and click for great deals. We’ll pay for airline tickets with crypto, pay restaurant bills and settle sales contracts. Credit cards will become obsolete. So how come Visa does more transactions in a day than the entire Bitcoin blockchain handles in a month?
What’s missing from this decentralized wonderland? A controlling entity. Discount the fawning techno-burble about decentralized governance. A immutable monetary policy is a limp substitute for an expert group of central bankers. No peer-to-peer e-cash comes close to the safety and comfort offered by Visa and MasterCard. Decentralized networks give too much control to the common people. And who’d prefer a stagnating economy to a constantly growing one thanks to quantitative easing? While the blockchain beckons brightly, seducingly flashing an icon of economic freedom, this nonplace lures us to disenfranchise all our most trusted allies in central banks and government institutions. A poor substitute it is, this decentralized reality where the people are legion and where — in the holy names of freedom and privacy — benevolent corporations and banks are relentlessly devalued.
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