This is the master version (at ioradio.org) – Last Updated 6/16/23

By American Scream – Technology Ethicist

“Commandments” are typically orders given by an authority, often associated with religion. All systems have rules and “commandments” though. For example in the crypto world, their commandments include: “HODL” (hold on for dear life – in other words don’t sell) and “Not your keys, not your crypto” (if you don’t control your wallet, don’t assume that crypto is yours).

We’re going to provide some rational commandments for people both in and out of the crypto industry. These are universal truths that need to be known and accepted. So we’re not telling you to do something specific, other than recognize these 10 facts.

Most hardcore crypto enthusiasts will vehemently disagree with this list, and this is not because they can prove otherwise; it’s because they don’t want people to know these truths. And usually their response to these claims isn’t to even dispute these truths, but to pull an “Appeal to Hypocrisy” fallacy by pointing out falsehoods like, “WeLl The sAmE tHing hApPens wIth StocKs aNd fiAt!” – which is not only a distraction, but false.

Here we go..

1. Crypto Has No Intrinsic Value

Crypto may have “extrinsic” value (value that others arbitrarily bestow on it) but intrinsic value means a specific thing – that it has value based on something material and of substance. Many other investments do have intrinsic value. Crypto does not.

Whether you attribute significance to this or not, it can’t be ignored. Crypto is not like other “investments.”

Don’t compare crypto to stocks or other securities. It’s fundamentally different.

Unlike stocks and other securities that actually represent tangible real world things, like fractional ownership in a company that has assets and income, Crypto has no material use, and no way to generate any income or value to its holder (And a crypto that is used as “DeFi” for leveraged trades that supposedly earns interest is doubling down on its zero intrinsic value. 2×0 still =0).

Even gold has some intrinsic value. Unlike crypto. Even comic books, beanie babies and Magic the Gathering cards have some utility and a reason for people to purchase them aside from a highly-speculative hope that they could be sold for a return.

It is true however, that fiat doesn’t have any intrinsic value, but it does have significant “extrinsic value” (extrinsic value is what other people think of something). Fiat is guaranteed by the government/country in which you live. Crypto has no such guarantees. In order for fiat to become useless, the government would have to fall. If that happened, the value of a dollar would be the least of your worries (the government falling means minor things like running water, internet, cellular and private property ownership is no longer protected and reliable). In order for fiat to become useless, so would the government, and in that case, crypto would be even more useless because the infrastructure upon which it depends, is provided by governments.

The only thing crypto does is wait until you can find a “greater fool” to pay more for it. It creates no value. It provides no utility.

But it’s even worse than that. Crypto is not a zero-sum game. It’s a negative-sum game. Even gold, which is not a very good investment because it too does not create value, doesn’t have any maintenance costs. Once you own gold, you don’t have to pay anything to maintain it. Crypto, on the other hand, requires the existence of the blockchain in order to be recognized. The operation of the blockchain costs tremendous amounts of money and resources. So even if you buy BTC, if the blockchain doesn’t exist; if somebody is not wasting money and energy operating mining rigs, your BTC not only is worthless, but incapable of being recognized, much less transferred. The whole scheme is a black hole sucking more resources while producing nothing.

2. Crypto Fails As A Currency

“If crypto fails as a currency, so does fiat.” NO, crypto is not the same as fiat.

Bitcoin was supposed to be the future of digital currency. Unfortunately, by design, Bitcoin is completely unsuitable for basic transactions, requiring anywhere from 10 minutes to several days for a single transaction to clear. It’s exponentially slower than existing transaction technology, and it uses 700,000 times more energy. As a payment medium, it cannot compete with even 50+ year old finance technology.

Fiat, while it may not have intrinsic value, is mandated by the government to be used “for all debts public and private” and the economy runs on it. Virtually nobody accepts crypto due to its impracticality as well as its extreme volatility. Fiat works. Crypto doesn’t.

And, before you reference Lightning Network or any of the other band-aids, read the next commandment:

3. Any “New Technology” That Relies On Maligning Existing Systems, Or Future Add-Ons Is A Fraud.

If your system is better, explain how it’s better. If you have to misrepresent the integrity of its competition, you’ve failed. If you say, “It’s too early” or, “Just wait until X is implemented”, you’ve failed. Come back when it actually does work.

Crypto enthusiasts will often as a primary argument claim their scheme is better by talking shit about existing systems, whether it’s hyperbolic rants about the Federal Reserve, “out of control money printing”, or evil “centralization”, “government”, “regulation”, “corruption”, etc. They also love to cherry pick absurd social examples like Venezuela, El Salvador or Zimbabwe as indications of what can happen to anybody if you don’t buy what they’re selling.

Fortunately, this horrible system that they often complain about, works pretty well. Your average person isn’t upset their monetary system isn’t more “de-centralized.” The US is unlikely to turn into a banana republic with 1,000,000% inflation.

If your tech only looks good in the context of a completely collapsed economy, that doesn’t bode well for your tech. You know what works even better in these collapsed economies? Bartering and fiat from other countries. That’s what most of them use, not crypto.

Likewise, crypto adherents like to deploy what I call, “The Argument From Future Crypto Fantasyland.” “Just wait until Lightning network comes out!” “When Proof-of-Stake is implemented the energy problem will be fixed.” “It’s still in its infancy. The Internet took 10+ years to become ubiquitous, too!” Etc. None of those arguments hold water. From the day the Internet was unveiled, it clearly did certain things better than existing technology. And from there it got better. Crypto can’t promise a single thing it actually improves upon, and asks us to buy into it and wait. Also, a crypto-currency solving a problem it actually created (which is the case with almost every smart contract, NFT or other add-on) is not an improvement to what we have.

4. Crypto as an investment, is a Ponzi Scheme

Crypto only creates a return if you can continue to recruit ‘greater fools’ to buy in at higher and higher prices. This is the de-facto definition of a Ponzi scheme.

See the SEC’s definition of a Ponzi. Crypto ticks off almost every characteristic listed (see a reply in this thread for more details).

The only way to profit from investing in crypto is if the price continually rises. Since crypto represents nothing tangible, the only way price can rise is by creating demand through marketing/popularity/recruitment. It’s a vicious circle. Unlike other traditional securities, holding a stock can create value, so regardless of whether a stock is popular, if the company it represents has assets and makes money, it will be worth something and create value. Crypto is fundamentally different. It’s only value is predicated on creating continued demand. This model is mathematically unsustainable. If a stock price collapses, it doesn’t necessarily affect the company’s ability to do business. But if crypto prices collapse, the entire market becomes insolvent. Even the blockchain network upon which it operates will collapse if there isn’t a way for miners to profit and cover their expenses. In crypto, price is everything, and the only way you increase price is through recruitment. That’s a ponzi. Early adopters get paid by later people coming in. The moment that process stops, everybody loses everything.

5. Not Your Fiat, Not Your Value

Until you sell your crypto, you own nothing; you have no value.

Crypto enthusiasts love to look at the price of their crypto (not realizing how manipulated the market actually is) and imagine that’s how much money they have. Ironically, they measure the value of things like Bitcoin in actual dollars or euros (because, of Commandment #2: crypto’s failure as a currency). But the painful reality is: until you sell your bitcoin, you don’t have any value. The crypto model is mathematically un-sustainable – it requires constant growth and constant demand and higher prices. If that is not achieved, then the model begins to collapse. It is an inevitability the market will implode, and when it does, everybody still holding crypto will realize, they never had anything of value. All the money that went into the market, was already taken out by people who cashed out earlier. Without a constant, ever-increasing infusion of liquidity, the market collapses. There’s never been enough liquidity in the market to cash out even 1% of crypto holders (which is why it’s so important to promote the “HODL” meme… the moment people try to make a run on the bank, they’ll realize the truth).

So don’t tell us how much money you’ve “made.” If it’s still in Bitcoin or ETH or another crypto, you haven’t made anything. There’s no guarantee these exchanges will let you cash out. You won’t know until you try, and we’ve seen every time there’s a hiccup in the market, all the exchanges go offline.

6. Crypto Exchanges Are Unregulated Casinos with very little transparency or oversight. They are not subject to consumer protection rules like banks or brokerage houses. Do not believe any published trade activity/pricing/transactions are real.

Crypto exchanges are shadowy web sites located who-knows-where, run by people who have more a history of schemes, scams and fraud, than any actual experience in finance or disruptive technology. There’s also ample evidence they manipulate prices. Especially NFT exchanges — Most NFT sales are likely fake.

A lot of people are under the foolish assumption a crypto exchange is similar to a bank or stock exchange. This couldn’t be farther from the truth. Crypto exchanges are often located offshore, in areas where there’s minimal regulation and oversight. They’re also run by shady, often anonymous people who don’t have much experience in finance. These exchanges are not subject to the same kind of regulatory oversight as other financial institutions. Even one that recently went public, “CoinBase” hasn’t been fully formerly audited. The SEC has had a chaotic approach towards crypto exchanges, sometimes taking action in certain circumstances (mainly against unregistered ICOs and celebrity spokespeople) but largely not getting very involved. As a result, there’s been tons of fraud in the industry and calls for more regulation — pretty ironic from a group that claims one of the advantages of crypto is being outside regulatory boundaries.

7. The Only People Who Want “Trustless Transactions” Are UnTrusworthy People

Perhaps one of the biggest myths in all of crypto is the idea that most people don’t want to deal with trusted authorities. This is based on the phony myth that, “government is corrupt and can’t do anything right”, despite the fact that 99% of all the useful services we depend on every day wouldn’t exist without government oversight, maintenance and outright control (not the least of which are all the radio frequencies virtually all modern communication relies upon).

Trust is the by-product of accountability, not “code.”

Back in the real world, we humans almost unilaterally prefer to conduct transactions with people and institutions we trust, who have a track record of being reliable. I fly commercial air flights because the FAA is pretty darn good at monitoring the safety of America’s air fleet. I would certainly prefer that over “Bitcoin Airlines” where the fleet mechanics are “de-centralized” and anonymous.

What do you think is safer? A sandwich from a chain that has locations all over, or a pop-up down some dark alley where you have no idea where they got their meat? The only people who prefer “trustless” transactions are those who are not worthy of trust, those who can’t cultivate a good reputation, those who want to take advantage of you.

As a result, it’s no surprise how rampant criminal activity is within the crypto industry. Adherents will argue there’s more “dirty money” in fiat, and in total that may be true because there’s exponentially more fiat in use, but per-capita, the percentage of crypto transactions that involve criminal activity is much, much higher. And due to the lack of regulation, it’s very easy to exit-scam, rug pull, wash trade, front run, and engage in all sorts of unsavory activities.

8. Blockchain Is Not Innovative Technology And Has Not Yet Found Any Practical Use-Cases

Adherents constantly talk about “blockchain”, an implementation of a technology (Merckle Trees) that has been around for 50 years. It’s a fairly straightforward idea based on very old and obsolete technology: A relational database where each added record cryptographically authenticates the previous record, making the database difficult to change. Blockchain takes this old idea, and instead of limiting it to one computer, spreads the database across random multiple computers in different locations. The fact that this database is de-centralized doesn’t make it better in any meaningful way. The fact that this database is “immutable” doesn’t make it terribly useful for most types of applications. The ability to update/correct data is important, especially in the world of business and finance. So why is blockchain so seemingly popular? There is no rational answer beyond it being powered by hype and advertising. What applications can really benefit from blockchain? There are very limited scenarios, most of which average people have no use of. But a write-once, immutable ledger than records money transfers does have appeal to one group: criminals. Imagine if there was no such thing as “chargebacks” on credit cards? A lot more criminals would be stealing and using credit cards. This is why blockchain is so appealing to criminals. No take-backsies.

I’ve compiled a large list of technological claims of blockchain you can examine to confirm the reality that blockchain really doesn’t solve or fix anything better than what we already have in place.

And if anybody suggests otherwise, ask them to prove it? See if they can give you any argument that makes sense, that isn’t based on misinformation or distracting technobabble. Imagine if someone asked you to explain why credit cards are useful? Would you need to sit them down in front of some 45 minute YouTube video that talks about the collapse of money in order to demonstrate the utility of credit cards?

9. Scarcity And De-Flation Don’t Guarantee An Increase In Value

Crypto people love to talk about the deflationary nature of bitcoin. “There are only 21 million BTC that will ever be in existence!” This is supposed to make the average person salivate with excitement. 21 million things that you can’t do anything with other than pawn them off on somebody else. Same thing goes with “rare” NFTs. Guaranteed to go up in value? If that were the case, look around at the thousands of other tokens based on the same code that are completely worthless. Any token’s value is completely arbitrary, and based on popularity. In fact, every time a celebrity, company or government makes a statement about crypto/NFTs/etc, the price experiences rapid changes. There’s no stability because there is nothing stable about crypto. And there are other coins being developed that are designed to even more rapidly deflate (like $SAFEMOON) which again, have no intrinsic value regardless of how many are in existence. The moment their popularity wanes, their value completely disappears — this doesn’t happen with fiat (guaranteed by the government and heavily regulated), gold (will always have some intrinsic, industrial use — if it no longer becomes popular it will fall in price, but never be 0 due to its unique utility as a non-corrosive, conductive element), stocks (have the capacity to create value regardless of their trading price). All crypto has going for it is popularity. Unless that’s feverently maintain, however scarce it is, is irrelevant.

10. Crypto Ultimately More Resembles A Religion Than A Financial Or Tech System

At the end of the day, the crypto industry is more cult-like than it is business-like. It shares more in common with a church than a bank, requiring regular routine indoctrination sessions (often substituting memes, social media circles and conventions for sermons, rituals and reverent holidays)

Like religion, Crypto has to justify its value by convincing people the status quo is evil and corrupt.

Like religion, Crypto adherents are evangelical in their zeal and dismissive of any facts or evidence that contradicts their beliefs.

Like religion, Crypto invents solutions for problems it creates (such as “smart contracts” which only have value in blockchain’s highly limited platform — the rest of the world has been using much smarter infotech systems for decades).

Like religion, Crypto promotes activities that are significantly less effective than traditional systems: Prayer as an alternative to actually doing something. NFTs as an alternative to actually owning artwork.

Like religion, Crypto adherents liken their adoption of the tech as a unique world view that adds meaning to their lives. When was the last time you got angry at somebody because they didn’t have the same brand of tennis shoes or credit card as you? Crypto people get as upset with those who don’t subscribe to their philosophy as a religious person might view an atheist. Not merely another option, but some kind of threat to their very existence.

SUMMARY

Know what you’re dealing with.