The Edited Latecomer's Guide To Crypto
On March 20, 2022, the New York Times published a 14,000-word puff piece on cryptocurrencies, both online and as an entire section of the Sunday print edition. Though its author, Kevin Roose, wrote that it aimed to be a "sober, dispassionate explanation of what crypto actually is", it was a thinly-veiled advertisement for cryptocurrency that appeared to have received little in the way of fact-checking or critical editorial scrutiny. It uncritically repeated many questionable or entirely fallacious arguments from cryptocurrency advocates, and it appears that no experts on the topic were consulted, or even anyone with a less-than-rosy view on crypto. This is grossly irresponsible.
Here, a group of around fifteen cryptocurrency researchers and critics have done what the New York Times apparently won't.
Note: Annotations that are quoted directly are explicitly credited to their authors inline. Annotations without inline attribution are a summary of multiple comments.
Until fairly recently, if you lived anywhere other than San Francisco, it was possible to go days or even weeks without hearing about cryptocurrency.
This is a statement desperately in need of some links. Although Roose has linked to his own writing quite liberally throughout this article, it certainly doesn't show "extreme skepticism", nor for that matter does his optimism seem particularly cautious. This article notably doesn't seem to link to his August 2021 Times article about the "Pudgy Penguins" NFT project, which served to lend the project legitimacy and pump the price before the group later attempted to scam a prospective buyer of the company. No follow-up was ever published—this is a recurring theme for the articles Roose writes about various crypto projects, as you will see throughout this commentary.
Roose has publicly advocated for journalists who write about crypto to be able to buy and sell cryptocurrencies and NFTs, despite himself acknowledging the "strong biasing effect" it would have and that the traditional finance equivalent of this behavior is prohibited by most reputable publications. He holds the
ENS domain (which he bought in October for $21... plus another $136 in transaction fees). He uses the associated wallet for transactions relating to his reporting, including the $500,000 sale of an NFT representing a Times article that he mentions in this piece, the receipt of some Pudgy Penguins NFTs from the creator of the project (later returned), and similar.
- There are cryptos where you struggle to see on-chain activity: Monero/Zcash
- There are layer 2 designs that obfuscate transactions
- There is the ability to bridge between chains to make tracking increasingly more challenging
- There are on-chain obfuscation technologies like Tornado Cash and Samurai
- Part of the nature of the illicit activity that crypto enables is as a pretense for integration in money laundering
Notwithstanding that, yes, competent criminals can absolutely use crypto for illicit activity—isn't the flip side of this argument that blockchain ledgers are fundamentally privacy-less? If the argument is that it's easy to track criminals through crypto ledgers, then it would be easy to track anyone through them. Especially the average person, who doesn't know how to obfuscate their activity.
In what universe is it a good idea for everyone's financial transactions to be publicly available (especially to, as this very sentence implies, to law enforcement)? "Debunking" this anti-crypto argument only forms a stronger, much more critical one.
This guide — a mega-F.A.Q., really — is an attempt to fix that. In it, I’ll explain the basic concepts as clearly as I can, doing my best to answer the questions a curious but open-minded skeptic might pose.
Crypto boosters will likely quibble with my explanations, 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. And if you want to go deeper, each section has a list of reading suggestions at the end.
Crypto will be transformative
Understanding crypto now — especially if you’re naturally skeptical — is important for a few reasons.
While I appreciate Kevin’s attempt to “explain” crypto to the masses, his very introduction is problematic. Why would understanding crypto be of particular importance for the “naturally skeptical?” Wouldn’t it make more sense to posit that understanding crypto was of greater immediate importance to those likely to invest money that perhaps they couldn’t afford to lose? Isn’t it more likely that the “naturally skeptical” are probably more familiar with how crypto works than the “naturally embracing” given the amount of pro-crypto propaganda to which we are constantly bombarded? And even the use of the term “naturally” is itself intriguing and telling—suggesting that skepticism is likely to stem from a certain form of romantic and emotional uniformed resistance to change a la Larry David rather than from the application of reason and the too-rare employment of critical thinking.
To fully explain crypto to the masses, one might be forgiven for thinking that priority number one should be to carefully and fully describe the manifest financial risks, and to explain to the innocent how crypto is anchored in, and supports, a vision of society in which public institutions and functions are replaced by private parties. And how that vision naturally aligns with, and advances, a political agenda that undermines progressive ideas of society and government, regardless of one’s personal views of how it might be employed to advance a particular noble or progressive cause. Kevin wants us to know that not every person that invests in crypto does so out of pure selfishness, or to support regressive frameworks of governance. That is undoubtedly true, but it entirely misses the point.
Okay, so I sort of see what he's going for here in his clumsy way. There is a libertarian bent that's sort of meshing with crypto and web3 — crypto has been absorbed into the right wing part of tech.
The wealth could be interesting, but this is also something that is easily questioned.
In the sense that it has made a lot of already powerful and wealthy white men more powerful and more wealthy, this may be true.
And we know how well the discovery of oil in the Middle East did for global politics.
Please explain to me one unifying ideology of cryptocurrency that's also "robust." If it's libertarianism, sure, I actually believe that, but not for the reasons you think — crypto is the dream libertarian society, where people are tricked in a totally legal way into enriching the people that rigged the thing that people are tricked into buying.
If it's literally anything else, well, who knows what it is, he never says.
- "Fraudulent Trading Drove Bitcoin's $150-to-$1,000 Rise in 2013: Paper" (summary, not paywalled)
- "Price manipulation in the Bitcoin ecosystem". May 2018. Journal of Monetary Economics (original paper, paywalled)
- "El Salvador’s Companies Barely Bother With Bitcoin". March 18, 2022. Bloomberg.
- "Six months in, El Salvador’s bitcoin gamble is crumbling". March 15, 2022. Rest of World.
It's difficult to tell exactly how much Bitcoin they have and what their average cost basis is. Protos attempted an analysis several months ago (though it doesn't include the newest buys) that showed Bukele is down 15% on his Bitcoin purchases. The IMF also basically said "no loan if you have crypto", and they have crypto.
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.
This is easily the most egregious "citation needed" yet, because I cannot think of anyone outside of a circle of complete doofuses who would have predicted this before like, 2011?
It's Writing 101 to cite anything you use as an argument. Who edited this?
This whole section seems to oscillate between referring to "pundits," which I assume means media and commentator types, and "skeptics," which could include more researchers, academics, or other experts in the fields. (Where it's referring to anyone in specific at all, that is.) But which of those groups are supposed to have the power to "steer" anything?
Or to quote Max Read on this one: "I'm also increasingly less convinced that a 'better' tech journalism, by any definition of the word, would have made a particular difference in how the internet of the 21st century has unfolded so far. What strikes me looking back at tech journalism of the 2000s is how fast Facebook (to take the most prominent example) was growing: zero to 500 million users in just five years. I'm not sure any analysis or criticism, no matter how damning, could have slowed that kind of planetary momentum — and there was plenty of good analysis and criticism of Facebook at the time. What was missing was a coherent, organized, well-resourced political movement that could have matched Facebook's size, speed, and capital."
The earth-shattering whiplash from "Join a discord server to talk about a thing!" to "Get financially involved in a project with absolutely no information." The previous paragraph described how fun it is to "study up" on crypto. How in the world did this jump happen?
The last near-decade of tech journalism has almost started to do a decent job of questioning the financial incentives of companies that collect massive amounts of user data to profit off its customers. And somehow after years of "If you're not paying, you're the product," NYT is suggesting playing a game that claims you'll financially benefit from playing it, with absolutely no interrogation of how that model works or is sustainable. Just galling.
Crypto is a generational skeleton key
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 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.
This is such a hokey, ignorant, boneheaded way of evaluating both 60s youth culture and today's culture, especially with young people's approaches to money and power.
The reason that young people might feel a grievance toward the systems in place because the systems have been repeatedly proven to be unfair and built to provide for previous generations with no interest in protecting the future ones, with increasingly expensive privatized healthcare, impossibly expensive college with onerous debt, and a massive barrier between the average person and any kind of wealth accumulation.
Knowing about this doesn't explain jack shit about cryptocurrency other than the intentions of some to take advantage of the climate of desperation and sadness from anyone born since, I dunno, 1980. Also, where is the citation or research or proof that young people give a shit about this?
I absolutely hate the idea that crypto is "generational." It flies in the face of everything we know about issues we know the vast majority of young people care about.
Something like half of white millennials and half of white Gen Z voted for Trump, yet no one would classify younger generations as conservative. These are the same demographics at play here, discounting whole swaths of people.
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?”
Let’s start from the beginning: What is crypto?
A decade or two ago, the word was generally used as shorthand for cryptography. But in recent years, it’s been more closely associated with cryptocurrencies. These days, “crypto” usually refers to the entire universe of technologies that involve blockchains — the distributed ledger systems that power digital currencies like Bitcoin, but also serve as the base layer of technology for things like NFTs, web3 applications and DeFi trading protocols.
Ah yes, blockchains. Can you remind me, without going into too much technical detail, what they are?
At a very basic level, blockchains are shared databases that store and verify information in a cryptographically secure way.
So blockchains are … fancy Google spreadsheets?
Sort of! But there are at least three important conceptual differences.
First, a blockchain is decentralized. It doesn’t need a company like Google overseeing it. All of that work is done by the computers on the network, using what’s called a consensus mechanism — basically, a complicated algorithm that allows them to agree on what’s in a database without the need for a neutral referee. This makes blockchains more secure than traditional record-keeping systems, proponents believe, since no single person or company can take down the blockchain or alter its contents, and anyone trying to hack or change the records in the ledger would need to break into many computers simultaneously.
- "Bitcoin myths: immutability, decentralisation, and the cult of '21 million'" by David Gerard in 2021.
- David S. H. Rosenthal's EE380 talk at Stanford University in 2022, and his 2018 blog post on "Gini Coefficients Of Cryptocurrencies"
Got it. So blockchains are public, permanent databases that nobody owns?
You’re getting it!
One could just as easily argue that everyone owns it—everyone has access to your data, including those same tech giants that blockchain proponents usually oppose doing data collection.
Roose has inadvertently refuted a point that a lot of blockchain proponents fall back on. "In web3 you will own your own data!" No, no one will own it once you put it out there, including you, because you won't be able to change or delete it.
Now remind me: How are blockchains related to cryptocurrencies?
OK, but can we back up a second? Weren’t tech people telling us, years ago, that crypto was a new and exciting form of money? And yet, nobody I know pays their rent or buys groceries in Bitcoin. So were those people just … wrong?
Many merchants used to accept crypto and then eventually stopped, because no one wanted to use it and the experience was awful. David Gerard has written about it extensively.
The vast majority of places that do still accept it, are immediately selling it and converting it to cash.
Also the taxes for paying with it are brutal.
I have read a lot and found a lot of Kevin's writing frustrating, but this is the first flat-out offensive and irresponsible thing he's said. What a disgraceful thing to say! It has not "historically gone up" unless you also add that it has historically gone down. This is horrendously irresponsible because now any cryptocurrency shitlord can now say that "The New York Times said that BTC and ETH have historically gone up".
Just absolutely unbelievable.
What are the actual uses of crypto, beyond financial speculation?
The cited article states that "Wells Fargo and HSBC Bank said on Monday they will use a blockchain-based product for settling matched foreign exchange transactions." (Emphasis mine). There is no indication that this is actually a current-day use, as Roose claims, and in fact that seems spectacularly unlikely given the agreement was reached four months ago and the banking industry is not exactly known for its speed in technological change.
Clicking through the links to get to the press release also reveals that they are talking about a "blockchain-based solution" and a "shared, private ledger" which "us[es] blockchain technology"—all hallmarks of using pretty standard technology but trying to spin it for a marketing splash because they used the word "blockchain". Regardless, even if the tech they are planning to use could be described as a blockchain and it isn't all marketing fluff, Roose stated above that this article is not intended to discuss private blockchains.
This paragraph is a great example of stuffing a block of text with links to look like there are a lot of credible sources, knowing the reader isn't going to click through them all. Even on its face, none of these make sense as "uses" for crypto (what is a "crypto restaurant" supposed to mean to someone who doesn't stop what they're doing and click through?), but it sure gives the impression there are a lot of uses, right?
In reality, the two of these are basically clubs for crypto people. And the other two are still financial products, one being a job (sweatshop), and the other being a funding mechanism for some wireless hotspots. Calling this an "explosion" of non-financial experiments is bordering on outright deceptive here.
I’ve heard people calling crypto a pyramid scheme or a Ponzi scheme. What do they mean?
Some critics believe that cryptocurrency markets are fundamentally fraudulent, either because early investors get rich at the expense of late investors (a pyramid scheme), or because crypto projects lure in unsuspecting investors with promises of safe returns, then collapse once new money stops coming in (a Ponzi scheme).
There are certainly plenty of examples of pyramid and Ponzi schemes within crypto. They include OneCoin, a fraudulent crypto operation that stole $4 billion from investors from 2014 to 2019; and Virgil Sigma Fund, a $90 million crypto hedge fund run by a 24-year-old investor who pleaded guilty to securities fraud and was sentenced to seven and a half years in prison.
And are they right?
Well, let’s try to understand the case they’re making.
Unlike buying stock in, say, Apple, a purchase that (theoretically, at least) reflects a belief that Apple’s underlying business is healthy, buying a cryptocurrency is more like betting on the success of an idea, they say. If people believe in Bitcoin, they buy, and Bitcoin prices go up. If people stop believing in Bitcoin, they sell, and Bitcoin prices go down.
I’m sensing a “but” coming on.
None of it does what they claim, all of it is broken, but even if it weren't it would still be terrible.
Literally no interrogation of what that new financial system would entail. Clown shoes.
Is crypto regulated?
Important to note that they're not registered as brokers or market makers. And nothing about their book making is regulated so they can do all sorts of market manipulation and get away with it under US law.
Money transmission, especially in places like Wyoming, is a pay-to-play operation that you can straight up buy. It's the softest touch of all regulation.
- "DeFi: Shadow Banking 2.0?" by Hilary J. Allen. February 18, 2022. William & Mary Law Review (forthcoming).
This question comes from the (apparently crypto-curious) rapper Cardi B: Is crypto going to replace the dollar?
Sorry, Cardi. The dollar is the world’s reserve currency, and dislodging it would be a huge, costly project that isn’t likely to happen any time soon. (To give just one small example of the enormity of the task: every financial contract that is denominated in dollars would have to be re-denominated in Bitcoin or Ether or some other cryptocurrency.
What kind of people are investing in crypto? Is it all — to quote a recent “Curb Your Enthusiasm” episode — “nerds and Nazis”?
My colleague, Tressie McMillan Cottom, has made the case that crypto — because it relies on permanent, irrefutable records of ownership of digital goods and currencies — is particularly attractive to people from marginalized groups, who may have had their property unjustly taken from them in the past.
“If I live in a community where the police absolutely use eminent domain to claim my private property and I cannot do anything about it,” she wrote, “that sense of everyday powerlessness would make the promise of blockchain sound pretty good.”
Crypto in zero ways solves this problem. Now the cops say: "turn over your keys or you go to prison" and then people turn over their keys so they don't go to prison.
The evils of eminent domain and civil asset forfeiture are not curtailed by having it on a thumb drive
Literally everything from these three preceding paragraphs is an argument in favour of extreme skepticism. Okay, it tells vulnerable people what they want to hear, cool, does it actually deliver!?
You can't just say "oh, wow, I bet this is super useful for these marginalized folks" and then never actually dig into how, why, or if it's actually helping them.
Yes. According to the source Roose links here, 0.01% of Bitcoin wallets collectively own 27% of Bitcoin in circulation; in the U.S. the top 1% of households hold about a third of all wealth.
Depending who you ask, Bitcoin may be slightly worse than North Korea as far as the Gini coefficient, though this depends very much on how you crunch the numbers on both Bitcoin and also countries' Gini coefficients (and at what point in time you look). David S. H. Rosenthal has explored this claim in more detail.
And what about extremists? Are they into crypto?
Another criticism I’ve heard is that crypto is bad for the environment. Is that true?
I am going to be empathetic with Kevin here: he is likely writing this as objectively as he can (and veering into both-sidesism) because he knows that if he doesn't write it like this, he will be obliterated in the comments, or on Twitter.
The problem is that he will regardless of what he writes, because these people do not operate in good faith.
Holy moly! How do crypto fans justify that kind of environmental impact?
And are those arguments valid?
Got it. And those benefits, again, are …
While this is far from the most dangerous part of Kevin’s formulation of the “truth of crypto,” it is the one that strikes closest to home for me personally. Decentralization as a theoretical tool for empowering artists has been a feature of the advocacy landscape since the arrival of Napster in 1999. It has proven to be both illusory and wildly exploitative. The tools for decentralization—for bypassing gatekeepers, have existed for more than two decades. There is nothing new about crypto to aid in this putative empowerment. The problem that artists confront is that the asset which they create/own has virtually no value given decades of a dominant idea, peddled by many of the same advocates for web3/crypto, that “information wants to be free.” But capacity to individually create and distribute is not synonymous with empowerment when it fails to produce revenue that sustains creators. And don’t get me started on NFTs. NFTs solve none of these problems. Basically, they’re like telling artists—your music isn’t worth anything, but perhaps you can monetize this unique digital collectible. The NFT is a gimmick, not an asset.
Now it’s all fine and good for Kevin to say that “some proponents will say” that decentralization will empower artists. That’s a true statement. Some people will say that Trump was the greatest president in US history. That is also a true statement of the views of “some people.” But it is beyond irresponsible to fail to interrogate this claim, and the lessons of history in demonstrating its failures.
It is and always has been possible to do this since the internet started. Artists take commissions and exchange digital assets all the time. Artists design tattoos, musicians create soundtracks, 3D modelers build assets, etc. There is absolutely nothing stopping an artist from setting up a website where they charge $250 to draw a custom picture of a rabbit or whatever.
Artists (to a certain extent) want those "gatekeepers" because they are platforms that bring in an audience or automate some complicated task like inventory management or product hosting. But if you really want to cut out the middleman, it's more than possible. For example, MST3K just announced their own streaming platform just to host their newest season.
How is this not selling "directly to fans"?
It is true that one of the common use cases of cryptocurrency is in those places where one has a corrupt government and a broken economic system.
But you don't build a global system for the outliers, you do it for the masses.
Oh really? A million?
This guy wrote for a major newspaper???
How do you actually use crypto? Is it like sending a payment over Paypal or Venmo?
But many crypto users prefer setting up their own “wallets” — secure places to store the cryptographic keys that unlock their digital assets.
Once you’ve got some crypto in your wallet, the process can be pretty simple — just type in the recipient’s crypto wallet address, pay a transaction fee (if applicable), and wait for the payment to clear.
One of the best traits of a good tech reporter is someone who is able to evaluate something in terms of a regular person and translate a complex topic into simple terms. Kevin is actually good at this — he really is — and I'm disappointed that this is not on its own a huge deal.
It takes literally seconds from me grabbing my phone from my pocket to send $5 on Square Cash, with maybe 3 actual "buttons" (and bits can be done via Face ID) — that is the speed of the actual work I have to do, and the transaction, again, takes seconds.
In the case of a crypto transaction, it's incredibly important to add that "sending money" can mean a lot of things, and that you are "sending" it and have to pay to send it, and then once it's sent, it has to be recorded and depending on how they received it may take more confirmations before you can actually receive the money.
The comparison here is different because the experience of using money is different. When I receive $5 from Square Cash, I can get that in my bank in a second using the same refund mechanism that Coinbase uses. If someone sends me $5 of Eth on Coinbase, I need to wait for confirmations.
It's just so much more wonky than he's making it seem.
I’m ready to dive into the rest of your explainers. But first, I have one final question about crypto’s culture: Why is it so weird and insular?
- Matt Binder – a reporter and researcher who hosts the crypto-critical podcast Scam Economy
- Grady Booch – a computer scientist and software architect about whom you can DYOR
- Amy Castor – an independent journalist and researcher who writes a crypto-focused blog
- Stephen Diehl – a software engineer and the author of several essays on crypto-related topics
- Dirty Bubble Media – the mind behind the publication Dirty Bubble Media
- Dr. Catherine Flick – a senior researcher in the ethics of emerging technologies at the Centre for Computing and Social Responsibility, De Montfort University, UK
- David Gerard – an analyst and author of two books about blockchains and related topics, as well as numerous blog posts on the same
- Geoffrey Huntley – a developer advocate and software engineer who is also behind The NFT Bay. He publishes more of his writing on his website.
- Bennett Tomlin – an independent cryptocurrency researcher and host of the Crypto Critics' Corner podcast
- Neil Turkewitz – a consultant and copyright activist, who is President at Turkewitz Consulting Group and a member of the Artist Rights Alliance. He was previously an executive at the Recording Industry Association of America (RIAA) and served on the Board of the Chamber of Commerce's Global Intellectual Property Center. More of his writing can be found on Medium.
- Molly White – a software engineer and the creator of Web3 Is Going Just Great , who has also written some essays about crypto-related topics
- Ed Zitron – an author, journalist, and media relations company CEO, who also writes on Substack
- ...and several contributors who would prefer to remain anonymous.
Copyright to the New York Times article belongs to the Times, and the article can be read in its original form in full at nytimes.com. It is republished here for the purposes of critical commentary. Copyright of the annotations belongs to their respective authors, as noted inline. Those without authors noted inline are combined commentaries from several annotators.
Molly White has a cryptocurrency disclosure. Some of the other contributors do as well, on their personal websites.
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