Digital Replica Edition
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Digital Replica Edition
By Kevin Roose, The New York Times Company
Until fairly recently, if you lived anywhere other than San Francisco, it was possible to go days or even weeks without hearing about cryptocurrency.
Now, suddenly, it’s inescapable. Look one way, and there are Matt Damon and Larry David doing ads for crypto startups. Swivel your head — oh, hey, it’s the mayors of Miami and New York City, arguing over who loves Bitcoin more. Two NBA arenas are now named after crypto companies, and it seems as if every corporate marketing team in America has jumped on the NFT — or non-fungible token — bandwagon. (Can I interest you in one of Pepsi’s “Mic Drop” genesis NFTs? Or maybe something from Applebee’s “Metaverse Meals” NFT collection, inspired by the restaurant chain’s “iconic” menu items?)
Crypto! For years, it seemed like the kind of fleeting tech trend most people could safely ignore, like hoverboards or Google Glass. But its power, both economic and cultural, has become too big to overlook. Twenty percent of American adults, and 36% of millennials, own cryptocurrency, according to a recent Morning Consult survey. Coinbase, the crypto trading app, has landed on top of the App Store’s charts at least twice in the past year. Today, the crypto market is valued at around $1.75 trillion — roughly the size of Google. And in Silicon Valley, engineers and executives are bolting from cushy jobs in droves to join the crypto gold rush.
As it has gone mainstream, crypto has inspired an unusually polarized discourse. Its biggest fans are wild-eyed fanatics who think it’s saving the world, while its biggest skeptics are convinced it’s all a scam — an environment-killing speculative bubble orchestrated by grifters and sold to greedy dupes, which will probably crash the economy when it bursts.
I’ve been writing about crypto for nearly a decade, a period in which my own views have whipsawed between extreme skepticism and cautious optimism. These days, I usually describe myself as a crypto moderate, although I admit that may be a cop-out.
I agree with the skeptics that much of the crypto market consists of overvalued, overhyped and possibly fraudulent assets, and I am unmoved by the most utopian pro-crypto sentiments (such as the claim by Jack Dorsey, the crypto-obsessed former Twitter chief, that Bitcoin will usher in world peace).
But as I’ve experimented more with crypto — including accidentally selling an NFT for more than $500,000 in a charity auction last year — I’ve come to accept that it isn’t all a cynical money grab and that there are things of actual substance being built. I’ve also learned, in my career as a tech journalist, that when so much money, energy and talent flows toward a new thing, it’s generally a good idea to pay attention, regardless of your views on the thing itself.
My strongest-held belief about crypto, though, is that it is terribly explained.
Recently, I spent several months reading everything I could about crypto. I found that most beginner’s guides took the form of boring podcasts, thinly researched YouTube videos and blog posts written by hopelessly biased investors. Many anti-crypto takes, on the other hand, were undercut by inaccuracies and outdated arguments, such as the assertion that crypto is good for criminals, notwithstanding the growing evidence that crypto’s traceable ledgers make it a poor fit for illicit activity.
What I couldn’t find was a sober, dispassionate explanation of what crypto actually is — how it works, who it’s for, what’s at stake, where the battle lines are drawn — along with answers to some of the most common questions it raises.
This guide — a mega-FAQ, really — is an attempt to fix that. In it, I’ll explain the basic concepts of crypto as clearly as I can, doing my best to answer the questions a curious but open-minded skeptic might pose.
Crypto boosters are likely to quibble with my answers, while dug-in opponents may find them too generous. That’s OK. My goal is not to convince you that crypto is good or bad, that it should be outlawed or celebrated, or that investing in it will make you rich or bankrupt you. It is simply to demystify things a bit.
Understanding crypto now — especially for skeptics — is important for a few reasons.
The first is that crypto wealth and ideology is going to be a transformative force in our society in the coming years.
You’ve heard about the overnight Dogecoin millionaires and Lamborghini-driving Bitcoin bros. But that’s not the half of it. The crypto boom has generated vast new fortunes at a clip we’ve never seen before — the closest comparison is probably the discovery of oil in the Middle East — and has turned its biggest winners into some of the richest people in the world, essentially overnight. Some crypto riches could vanish if the market crashes, but enough has already been cashed out to ensure that crypto’s influence will linger for decades.
Crypto’s madcap, meme-crazed online culture can make it seem frivolous and shallow. It’s not. Cryptocurrencies, even the jokey ones, are part of a robust, well-funded ideological movement that has serious implications for our political and economic future. Bitcoin, which emerged out of the ashes of the 2008 financial crisis, first caught on among libertarians and anti-establishment activists who saw it as the cornerstone of a new, incorruptible monetary system. Since then, other crypto realms have fashioned similarly lofty goals, like building a decentralized, largely unregulated version of Wall Street on the blockchain.
We are already starting to see a swell of crypto money headed toward the U.S. political system. Crypto entrepreneurs are donating millions of dollars to candidates and causes, and lobbying firms have fanned out across the country to win support for pro-crypto legislation. In the coming years, crypto moguls will bankroll the campaigns of crypto-friendly candidates, or run for office themselves. Some will peddle influence in the familiar ways — forming super PACs, funding think tanks, etc. — while others will try to escape partisan gridlock altogether. (Crypto millionaires are already buying up land in the South Pacific to build their own blockchain utopias.)
Crypto is poised to soon become one of a handful of true wedge issues, with politicians all over the world forced to pick a side. Some countries, like El Salvador — whose crypto-loving president recently announced the development of a “Bitcoin City” at the base of a volcano — will go full crypto. Other governments may decide that crypto is a threat to their sovereignty and crack down, as China did when it outlawed cryptocurrency trading last year. The divide between the world’s pro-crypto and no-crypto zones could end up being at least as big as the divide between the Chinese internet and the American one, and maybe even more consequential.
In America, we have already seen how crypto can scramble the usual partisan allegiances. Former President Donald Trump and Sen. Elizabeth Warren, D-Mass., are united in crypto skepticism, for example, while Sen. Ted Cruz, R-Texas, is in the same bullish camp as Sen. Ron Wyden, D-Ore. We have also seen what can happen when the crypto community feels politically threatened, as happened last summer, when crypto groups rallied to oppose a crypto-related provision in President Joe Biden’s infrastructure bill.
What I’m saying, I guess, is that despite the goofy veneer, crypto is not just another weird internet phenomenon. It’s an organized technological movement, armed with powerful tools and hordes of wealthy true believers, whose goal is nothing less than revolution.
Crypto Could Be Destructive
The second reason to pay attention to crypto is that understanding it now is the best way to ensure it doesn’t become a destructive force later.
In the early 2010s, the most common knock on social media apps like Facebook and Twitter was that they just wouldn’t work as businesses. Pundits predicted that users would eventually tire of their friends’ vacation photos, that advertisers would flee and that the whole social media industry would collapse. The theory wasn’t so much that social media was dangerous or bad; just that it was boring and corny, a hype-driven fad that would disappear as quickly as it had arrived.
What nobody was asking back then — at least not loudly — were questions like: What if social media is actually insanely successful? What kind of regulations would need to exist in a world where Facebook and Twitter were the dominant communication platforms? How should tech companies with billions of users weigh the trade-offs between free speech and safety? What product features could prevent online hate and misinformation from cascading into offline violence?
By the middle of the decade, when it was clear that these were urgent questions, it was too late. The platform mechanics and ad-based business models were already baked in, and skeptics — who might have steered these apps in a better direction if they had taken them more seriously from the start — were stuck trying to contain the damage.
Are we making the same mistake with crypto today? It’s possible. No one knows yet whether crypto will or won’t “work,” in the grandest sense. (Anyone who claims to know is selling something.) But there is real money and energy in it, and many tech veterans I’ve spoken to tell me that today’s crypto scene feels, to them, like 2010 all over again — with tech disrupting money this time, instead of media.
If they’re wrong, they’re wrong. But if they’re right — even partly — the best time to start paying attention is now, before the paths are set and the problems are intractable.
The third reason to study up on crypto is that it can be genuinely fun to learn about.
Sure, a lot of it is dumb, shady or self-refuting. But if you can look past the carnival barkers and parse the convoluted jargon, you’ll find a bottomless well of weird, interesting and thought-provoking projects. The crypto agenda is so huge and multidisciplinary — drawing together elements of economics, engineering, philosophy, law, art, energy policy and more — that it offers lots of footholds for beginners. Want to discuss the influence of Austrian economics in Bitcoin development? There’s probably a Discord server for that. Want to join a DAO (decentralized autonomous organization) that invests in NFTs, or play a video game that pays you in crypto tokens for winning? Dive right in.
Mind you, I am not suggesting that the crypto world is diverse, in the demographic sense. Surveys have suggested that high-earning white men make up a large share of crypto owners, and libertarians with dog-eared copies of “Atlas Shrugged” are most likely overrepresented among crypto millionaires. But it’s not an intellectual monolith. There are right-wing Bitcoin maximalists who believe that crypto will liberate them from government tyranny; left-wing Ethereum fans who want to overthrow the big banks; and speculators with no ideological attachments who just want to turn a profit and get out. These communities fight with one another constantly, and many have wildly different ideas about what crypto should be. It makes for fascinating study, especially with a bit of emotional distance.
If you do learn some crypto basics, you might find that a whole world opens up to you. You’ll understand why Jimmy Fallon and Stephen Curry are changing their Twitter avatars to cartoon apes, and why Elon Musk, the richest man in the world, spent a decent chunk of last year tweeting about a digital currency named after a dog. Strange words and phrases you encounter on the internet — rug pulls, flippenings, “gm” — will become familiar, and eventually headlines like “NFT Collector Sells People’s Fursonas for $100K in Right-Click Mindset War” won’t make you wonder if you’re losing your grip on reality.
Crypto can also be a kind of generational skeleton key — maybe the single fastest way to freshen your cultural awareness and decipher the beliefs and actions of today’s young people. I might argue that, just as knowing a little about New Age mysticism and psychedelics would help someone trying to make sense of youth culture in the 1960s, knowing some crypto basics can help someone perplexed by emerging attitudes about money and power feel more grounded.
Again, I don’t really care whether you emerge from these explainers as a true believer, a devoted skeptic or something in between. Participate or abstain as you wish. All I’m after is understanding — and possibly, a little relief from the question that has consumed my social and professional life for the past several years:
“So … can I ask you a question about crypto?”
This article originally appeared in The New York Times.
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