Why I'm Building on the Blockchain (AKA Crypto is Not Necessarily a Ponzi Scheme)
You might be skeptical about cryptocurrency. It's understandable. People often think all crypto is a get-rich-quick Ponzi scheme.
I am elbow-deep in the blockchain, though, not because of money, but for the technology.
Since the first days of the public World Wide Web I have done the best I can to stay current with the latest tech, and I hope to stay that way for as long as possible.
Unlike the web, however, crypto has people feeling so strongly against it that some accuse me of being unethical, propping up scams, or being scammed myself.
It's not easy to answer these allegations, nor is it clear-cut, especially when trying to respond in the form of a tweet, so I thought I would write my thoughts out in longer form here.
Yes, There Are Scams
Honesty requires that I say upfront that there are many scams. People are being scammed, and scammers are attracted to the entire length and breadth of the world of crypto.
Just as they have been to any bubble.
Ponzi schemes are part of it for sure, but there are also outright frauds, sales of stolen goods, "rug pulls" and "pump and dumps" where a token value is driven up before being sold, founders ghost, holders are left with something worthless. You name it.
Think of all the ways people have been scammed via PayPal, social media, crowd-funding, investment opportunities, heists, and plain old-fashioned grifts. It all happens with a crypto flavor.
It's Not All Bad
We wouldn't say eBay or Craigslist are inherently a scam, even though a lot of people (both vendors and customers) are scammed every day.
Underlying technology doesn't make something a scam any more than choosing Microsoft over Linux makes something sketchy.
The Ape In The Room
I'm on record as being a "personal profile" NFT skeptic.
That said, I don't think they are necessarily evil, even if their aesthetic is almost always the opposite of what I consider "art".
Would you say a baseball card, World of Warcraft sword, pokemon character, "name a star"/"plot of the moon", or internet-acquired Lairdship are inherently evil? They might be value-less to us, but some people like that kind of thing. Who are we to judge?
I'd also draw a line between an NFT that only grants you a profile picture JPG versus one that grants you an exclusive membership, or fractional ownership in an asset.
Three Examples of "Good" Crypto Tech
Now I am in dangerous territory because I am going to upset people who are both for and against crypto, but I think explaining my feelings and ideas about specifics might help you form your own opinion (or cement your existing pre-conceived ideas, which is admittedly more likely).
1. Bitcoin - The OG Cryptocurrency
Just in the last few days, people who swore they would never touch crypto bought and sent their first coins, usually Bitcoin.
Bitcoin has the name recognition, to the point where all crypto is often called Bitcoin by people outside the niche in the same way online auctions are called eBay and people still say they are going to "Xerox it".
It would be nice if this expansion into almost mainstream was because of something like the Olympics advertising, but sadly it was because of the war in Ukraine.
As well as official, Ukraine government-sanctioned wallets where you can donate money via cryptocurrency, individuals in the warzone have found their access to bank accounts, transport, food, shelter, relied on systems they no longer have access to. Individuals have had to turn to crypto for both external support and also to help get their families out of harm's way.
There have been some shady opportunists who have been suckering in well-meaning people to fund fake Gofundme, Western Union, etc. Using the official wallets is a much easier transaction to verify that your money is going to the right place.
This is a good case study for the benefits that crypto can afford people, and will improve on in the future. No, it's not perfect, but it is certainly better than relying on hundred-person lines at empty ATMs and swiping plastic cards that refuse transactions.
As individuals, we can send a fast, borderless, peer-to-peer exchange of value, with low or zero fees. If the recipient has their own wallet, rather than hold their coin with a broker/exchange, then it is much more difficult to intercept or confiscate. It's a myth that it is entirely anonymous, but it is certainly a lot less risky in tumultuous political times than, say, Venmo/PayPal/bank transfer.
You might say that Bitcoin is too volatile to use as a currency. I would say in response
Tell that to Russians who saw their currency drop to be worth below a penny, while interest rates have doubled to more than 20 per cent. Yes, right now it can seem highly volatile (though less than many stocks of the S&P 500), as time goes on it will become less so.
It's not the only cryptocurrency in town, just the best-known - some are pegged (to the US dollar and other assets), so have the technological benefits but will not attract the same level of volatility and speculation.
2. Etherium - Smart Contracts
After Bitcoin, Etherium ($ETH) is likely the second-best known cryptocurrency amongst the general public, though the meme-friendly DOGE is likely up there amongst Reddit/4chan type hangouts and Elon Musk fans.
The huge downside to Ethereum is it is slow and has high fees, so the folks behind that blockchain are working on solving those issues with version 2. In the meantime, lots of people are working on mitigating the issues with various solutions that might or might not become popular.
That said, it is thanks to Etherium that we have the concept of a blockchain as an application foundation and enabled "Smart Contracts".
This makes Ether not just valuable, but useful.
3. IPFS - The Internet File System
You might wonder what IPFS is doing in this list as it is not a currency, or related to currency.
IPFS is the Interplanetary File System but I call it the internet's file system. It's like Google Drive and Bittorrent got married.
What IPFS does is it replaces things like photo storage, Dropbox, etc and makes your files distributed. If you then share a file with someone else, their copy will come from the closest node possible, making the transfer faster, but also preventing downtime and loss of the file at the same time.
While it does not involve currency or the blockchain, it does use cryptography, and is closely related to things like NFTs because those tokens need to link out to a digital asset that you can be sure will still exist, and long into the future.
Bonus Bullet - HIVE
Imagine a blockchain that has the benefits of Bitcoin as a currency, the stability of a national currency such as the US Dollar (without borders or government control), and the technological features of Etherium, but without the fees or developer overhead.
That is Hive.
With Hive, there is developer-friendly technical infrastructure, no usage fees, and the $HIVE token that rises and falls in value paired with the HBD which is actively tethered to be approximately 1 USD (with increasing stability as liquidity increases).
Not many people are aware of Hive right now but they might know the most popular blockchain-based game, Splinterlands, which is built on Hive. Last year Splinterlands exceeded 260,000 Daily Users!
Valuable Attributes of Crypto/Blockchain Tech
Finally, let's discuss the future, the benefits of these technologies that we can look forward to. It might illuminate why I and others like me are optimistic that something big will come from it.
- Smart Contracts - While no technology can make humans more trustworthy, these technologies can help make contracts simpler and easier to implement, document, track, and execute.
- Decentralization - We see all too often the downsides of centralization of attention (monopoly social media sites), money, power, influence. Some centralization will always be necessary but there are real benefits to taking control in our own hands.
- Immutable Ledger - People are working on using the blockchain ledger for transparency, not just in financial transactions, but logistics, and even tracking your food from farm to table. Unlike a database where any record can be hacked, corrupted or otherwise changed, a blockchain ledger is impossible to change without everyone involved knowing about it.
- Peer to Peer and Disintermediation - As in our Ukraine example above, being able to go direct is empowering, reduces friction, and reduces fees.
- Nation/Corporation-Independence - Our buying power does not need to be tied to the whims of the political or banking classes. Might be wishful thinking but we can hope.
- Stake/Voting/Governance - An interesting, and again maybe a utopian idea is the concept of distributed organizations where the direction a project goes in can be based on a fractional ownership stake. Think of it as a 24/7 shareholder's meeting.
Yes, people have been scammed, but that does not mean crypto is a scam.
Crypto and blockchain is a technology, and we have a say in what is made of it.