titotal—thanks for a detailed and fairly balanced critique of crypto. You’re accurate in many of these points about the crypto industry as it currently is.
However, I think it’s important to view crypto in the broader historical context of centralization versus decentralization, and the global catastrophic risks of ongoing economic centralization.
A major civilizational challenge we face is that within about 10-15 years, our entire financial ecosystem may be centrally controlled by powerful nation-states and central banks, using central bank digital currencies (CBDCs) that allow them to track every transaction made by every citizen, and that allow them to block any transactions, confiscate any assets, and censor any communications, that they don’t like. This won’t just be happening in China. It will be happening in the US, the UK, the EU, and most other advanced economies that are eager to adopt CBDCs as one of the most powerful authoritarian technologies ever developed.
Within a few years, people in many countries will face the very real possibility that if they post anything on social media that their government’s AI surveillance bots don’t like, their social credit score (or functional equivalent) will be penalized, and their access to all money, assets, financial records, legal records, voting privileges, transport, health care, etc will be curtailed, censored, suspended, or banned.
The only feasible alternative to this CBDC dystopia is, IMHO, crypto. I haven’t seen any other feasible technologies that could challenge CBDC hegemony.
EAs often write about an authoritarian lock-in of bad values and abusive power as a global catastrophic risk. If we’re serious about this risk, we should at least understand that CBDCs will probably play a central role in authoritarian lock-in, and that crypto is one of the only alternatives.
Governments, central banks, and traditional centralized finance institutions understand that a decentralized crypto ecosystem would threaten their existing power, and would undermine this emerging CBDC hegemony. So they’ve fought crypto by every means possible, including legislation, regulation, propaganda, and money supply manipulation. Their attacks have been relentless, and have often been successful.
Everything is at stake for them. If crypto rises and the US government loses dollar hegemony over the world economy, then its ability to print money, to engage in deficit spending, to enforce favorable terms of trade, to project military force, and to spend on domestic social programs, would be severely handicapped. US prosperity depends partly on the US government’s ability to project military, diplomatic, and economic power to force other countries to use the US dollar as a global reserve currency. If crypto threatens the US dollar’s status as a global reserve currency, that’s an existential threat to the US government’s stability and power. The US Federal Reserve banks have been very explicit about this.
So, when we ask questions like ‘Why hasn’t crypto been adopted as quickly as the Internet was?’, its important to consider relative strength of governmental and institutional headwinds against adoption for these technologies. Governments were largely blindsided by the Internet in the 1990s and early 2000s. They didn’t quite understand how the Internet would undermine their control over public opinion, commerce, news, etc. They put up some token resistance against the Internet (framing it as a domain of money launderers, pornographers, tax evaders, scammers, etc.), but they quickly saw the economic growth benefits of e-commerce, and the military and surveillance benefits of the Internet, so they didn’t impose strong headwinds against Internet technology.
However, governments quickly understood that Bitcoin, and then crypto in general, was a serious threat to their monopolistic control over money. Just as secular democracies allowed separation of church and state, crypto threatened to allow separation of money and state. States didn’t want that. Central banks didn’t. Traditional finance didn’t. So they fought back.
The anti-crypto attacks by the government have been relatively light so far in the US, but extremely strong in other major countries such as China. China’s complete ban on crypto mining and trading in Sept 2021 was arguably a major factor in the end of the recent crypto bull run, the subsequent 80% drop in the values of many crypto coins and token, and the intense financial pressures that exacerbated the Terra/Luna collapse, and then the FTX collapse. Crypto’s volatility is partly endogenous to the cyclical nature of speculative bubbles, but it’s partly engineered by nation-states imposing vague, threatening, inconsistent, and/or draconian regulations against crypto—in order to discredit the only alternative to their CBDC hegemony.
So, we shouldn’t be naive about crypto. It’s a weird, young, speculative, volatile industry. But we also shouldn’t be naive about why governments, central banks, and trad fi institutions hate crypto, want it to fail, and will do anything they can to discredit it.
If we’re serious about fighting authoritarian lock-in as a catastrophic risk, then we should be careful not to prematurely reject, avoid, and disparage one of the few technologies (crypto) that could resist authoritarian CBDC control over all of our money, assets, property rights, communications, etc.
Disclosure: I’m a heavy investor in crypto, partly for ideological (libertarian) reasons, and partly out of intellectual curiosity about the psychology and game theory underlying crypto consensus protocols, but partly for financial/speculative reasons. So there’s probably some motivated reasoning going on. I’ve tried to be objective, but would welcome any criticisms and comments on these points.
titotal—thanks for a detailed and fairly balanced critique of crypto. You’re accurate in many of these points about the crypto industry as it currently is.
However, I think it’s important to view crypto in the broader historical context of centralization versus decentralization, and the global catastrophic risks of ongoing economic centralization.
A major civilizational challenge we face is that within about 10-15 years, our entire financial ecosystem may be centrally controlled by powerful nation-states and central banks, using central bank digital currencies (CBDCs) that allow them to track every transaction made by every citizen, and that allow them to block any transactions, confiscate any assets, and censor any communications, that they don’t like. This won’t just be happening in China. It will be happening in the US, the UK, the EU, and most other advanced economies that are eager to adopt CBDCs as one of the most powerful authoritarian technologies ever developed.
Within a few years, people in many countries will face the very real possibility that if they post anything on social media that their government’s AI surveillance bots don’t like, their social credit score (or functional equivalent) will be penalized, and their access to all money, assets, financial records, legal records, voting privileges, transport, health care, etc will be curtailed, censored, suspended, or banned.
The only feasible alternative to this CBDC dystopia is, IMHO, crypto. I haven’t seen any other feasible technologies that could challenge CBDC hegemony.
EAs often write about an authoritarian lock-in of bad values and abusive power as a global catastrophic risk. If we’re serious about this risk, we should at least understand that CBDCs will probably play a central role in authoritarian lock-in, and that crypto is one of the only alternatives.
Governments, central banks, and traditional centralized finance institutions understand that a decentralized crypto ecosystem would threaten their existing power, and would undermine this emerging CBDC hegemony. So they’ve fought crypto by every means possible, including legislation, regulation, propaganda, and money supply manipulation. Their attacks have been relentless, and have often been successful.
Everything is at stake for them. If crypto rises and the US government loses dollar hegemony over the world economy, then its ability to print money, to engage in deficit spending, to enforce favorable terms of trade, to project military force, and to spend on domestic social programs, would be severely handicapped. US prosperity depends partly on the US government’s ability to project military, diplomatic, and economic power to force other countries to use the US dollar as a global reserve currency. If crypto threatens the US dollar’s status as a global reserve currency, that’s an existential threat to the US government’s stability and power. The US Federal Reserve banks have been very explicit about this.
So, when we ask questions like ‘Why hasn’t crypto been adopted as quickly as the Internet was?’, its important to consider relative strength of governmental and institutional headwinds against adoption for these technologies. Governments were largely blindsided by the Internet in the 1990s and early 2000s. They didn’t quite understand how the Internet would undermine their control over public opinion, commerce, news, etc. They put up some token resistance against the Internet (framing it as a domain of money launderers, pornographers, tax evaders, scammers, etc.), but they quickly saw the economic growth benefits of e-commerce, and the military and surveillance benefits of the Internet, so they didn’t impose strong headwinds against Internet technology.
However, governments quickly understood that Bitcoin, and then crypto in general, was a serious threat to their monopolistic control over money. Just as secular democracies allowed separation of church and state, crypto threatened to allow separation of money and state. States didn’t want that. Central banks didn’t. Traditional finance didn’t. So they fought back.
The anti-crypto attacks by the government have been relatively light so far in the US, but extremely strong in other major countries such as China. China’s complete ban on crypto mining and trading in Sept 2021 was arguably a major factor in the end of the recent crypto bull run, the subsequent 80% drop in the values of many crypto coins and token, and the intense financial pressures that exacerbated the Terra/Luna collapse, and then the FTX collapse. Crypto’s volatility is partly endogenous to the cyclical nature of speculative bubbles, but it’s partly engineered by nation-states imposing vague, threatening, inconsistent, and/or draconian regulations against crypto—in order to discredit the only alternative to their CBDC hegemony.
So, we shouldn’t be naive about crypto. It’s a weird, young, speculative, volatile industry. But we also shouldn’t be naive about why governments, central banks, and trad fi institutions hate crypto, want it to fail, and will do anything they can to discredit it.
If we’re serious about fighting authoritarian lock-in as a catastrophic risk, then we should be careful not to prematurely reject, avoid, and disparage one of the few technologies (crypto) that could resist authoritarian CBDC control over all of our money, assets, property rights, communications, etc.
Disclosure: I’m a heavy investor in crypto, partly for ideological (libertarian) reasons, and partly out of intellectual curiosity about the psychology and game theory underlying crypto consensus protocols, but partly for financial/speculative reasons. So there’s probably some motivated reasoning going on. I’ve tried to be objective, but would welcome any criticisms and comments on these points.