Someone recently asked me what I think of NFTs. I sent them the documentary “Line Goes Up”. If anyone in the future asks me my thoughts on cryptocurrency, DAOs, NFTs, Web3, or smart contracts, I will send them Line Goes Up. It currently only has around six million views, but it deserves more.
Clearly, a lot of work went into it. The information is high quality with plenty of examples. It’s basically one long two hour documentary about how cryptocurrency and everything built on top of it is full of empty promises, fraud, scams, and how the underlying technology fundamentally fails. When I finished watching it, I felt it was two hours well spent. I highly recommend it.
My History With Cryptocurrency
For those of you who have followed my journal for a while now, you know I’ve become increasingly critical of cryptocurrency over the years. I wasn’t always so critical. In fact, I used to be a total sucker.
My cryptocurrency journey started years before I ever conceived of this journal. I was disappointed that I missed the opportunity to “invest” in Bitcoin earlier, so I decided to invest in it. At the time, I was under the impression that altcoins were just Bitcoin clones. They weren’t the original, so why bother with them?
Some time later, I realized that blockchains didn’t scale. So I became enamored with IOTA’s cryptocurrency based on “the tangle”, which is really just a decentralized acyclic graph. I naively believed all their false promises and dumped money into it. I even tried to get other people to invest. I ended up losing big time because I didn’t pull out, even after the price dropped. I thoroughly read the white paper, having more understanding of the technology than most other “investors”, and I started asking questions.
IOTA had a centralized coordinator, meaning that it wasn’t even decentralized. I believe it still has the coordinator as of this time of writing. I joined forums asking what the plans were to remove it. I was met with vague non-answers. It was all smoke and mirrors. Eventually, after losing lots of money and realizing they had no real plan to fix the centralized coordinator, I ditched IOTA for good.
In hindsight, I never should’ve had anything to do with IOTA to begin with. It’s a cryptocurrency with the goal of transacting internet of things data. As a privacy guy, I don’t even like the internet of things. So it made very little sense for me to invest in it.
After IOTA, I still didn’t see the full picture. I thought IOTA was a scam project going nowhere, but there still had to be projects with real promise. So I found yet another ponzi to throw my money at - Safecoin. Safecoin didn’t use a blockchain or a directed acyclic graph. It was entirely new and much more aligned with my goals.
So naturally, I did some careful research and only then invested. Just kidding. No I didn’t. I “invested” (gambled) before doing sufficient research. I did learn a lot about the technology. It’s meant to be an open, decentralized, encrypted data store. They have a distributed hash table for routing and data storage. They developed a novel consensus mechanism. The Safe Network team recognized the scalability problems of blockchain. Self-encryption seemed to make sense.
I even promoted the project on this very journal just last year as a “next-generation cryptocurrency” even though they didn’t even have a functioning network. I understood the details of the technology as well as one could without actually being a developer. Like with IOTA, I started to doubt the project after I began asking questions.
Just like with IOTA, for every question I asked about Safe Network, I seemed to get vague and indefinite answers. Every problem had a solution. And every problem within the solution had a solution. It was like an infinitely recursive gish gallop. I eventually got tired of the non-answers and went to dump my holdings.
Unfortunately for me, almost no exchange accepted Safecoin any more. It was built on the dated Mastercoin protocol and pulling out my funds was a huge hassle. I was glad that at I least realized the mistake I made and pulled out before losing it all though.
I also made a new entry promoting TheHatedOne’s video promoting Monero. In fact, I even accepted Monero as a donation method at the time. I didn’t invest in it. I just found Monero useful for performing anonymous online payments since there was no other way to privately buy things online.
I knew all about the massive energy usage of proof-of-work coins at the time. Like most cryptocurrency enthusiasts, I just dismissed it as “not a waste”. But over the next four months, I realized I had just been making excuses for the energy usage because I found the technology cool. It was the only way to transact privately online, so it would be really inconvenient for me if I also believed it was destroying the planet.
Eventually, I found I could no longer deny the energy impact any more. I decided to remove cryptocurrency as a donation method and make an entry recommending that people don’t use proof-of-work-based cryptocurrencies. I even began criticizing others who promoted proof-of-work cryptocurrency. I reasoned I would accept cryptocurrency again after a mass-adopted proof-of-stake currency was released.
A Cryptocurrency Startup
Then, in the summer of 2021 while I was on vacation with my family, something unexpected happened. We heard a knock on the door of our beachside hotel. It was hotel security. They told us someone ran into our car in the parking lot.
While I was busy in the hotel, my family went down to see what happened. I don’t know exactly what took place, but at some point during the encounter they met a guy who asked if he could use Signal to contact them. Naturally, they introduced him to me and we set up a meeting.
During the meeting, he told me that his team was working on a Polkadot-esque cryptocurrency and that the ex-project-lead was being investigated by the district attorney for financial crimes. How fitting for a cryptocurrency project.
The concept he proceeded to describe to me during our chat was so vague as to be impossible to implement. I asked for a sample of the code. There wasn’t any. Not even a website. He just insisted to me his team, who I never met, were just getting started. He claimed to be very well connected and seemed to have some knowledge of cryptocurrency.
He started mentioning cryptocurrency projects which by that time I knew were pure vaporware. He was very enthusiastic and seemed to care a lot about privacy. He was convinced cryptocurrency could empower the poor and unbanked, something no cryptocurrency has ever done. Given his unrealistic ideals and lack of code to show for them, I concluded whatever he had in mind would go nowhere and I shouldn’t get involved.
At the end of September 2021 after vacation, I submitted a vulnerability report for getsession.org, the website of a cryptocurrency project I was paying attention to. They fixed the vulnerability the next day after receiving my email.
After the report, the Oxen team emailed me saying they read my journal entries and I seemed like a good fit to work there. I didn’t believe so. I didn’t have much experience programming security software, I was already involved in Haketilo, and the Oxen Privacy Tech Foundation wasn’t committed to free software. Nothing came of it.
Future-Proof Digital Timestamping
In November of 2021, I wrote an entry titled Future-Proof Digital Timestamping, where I explained how decentralized, future-proof digital timestamping could be performed using the Bitcoin blockchain. I timestamped this journal in order to prove to future readers that it isn’t synthetic media.
A month later in December 2021, I stumbled across the blog of Stephen Diehl, where I found extremely harsh criticism of cryptocurrency which I’d never heard before. Here’s an excerpt:
“Crypto is a cesspit of people swapping claims on non-economic nonsense in one giant orgy of internet memes and fools trying to screw each other playing mutual harm negative-sum games while chanting “we’re all going to make it”. All this while the house takes an enormous rake and changes the rules of the game to its liking whenever it likes.” - Stephen Diehl, The Internet’s Casino Boats
Pretty much all of his blog posts about cryptocurrency are this critical. I read several of his posts and found myself largely in agreement. I actually started to feel dumb that I ever put money into cryptocurrency or even considered being a part of a cryptocurrency project.
The culmination of this story happened just recently when I found Line Goes Up. I watched the documentary all the way through and found it highly informative. Thanks to Line Goes Up, I finally feel like I have the full picture when it comes to cryptocurrency, blockchain, and everything built on top of it. Now that I’m fully informed, I want nothing to do with it.
Unfortunately it’s not going to be easy for me to stop using it entirely. Ponzi as it may be, it’s still the only way to buy certain things online anonymously. I’ll have to figure out ways around that. For online services where I identify myself anyways, I can switch to a credit card. But acquiring a VPN anonymously without cryptocurrency is going to be tricky. I’ll have to come up with a solution.
I would say the two overarching lessons I learned from my experiences in cryptocurrency are:
- Never invest in something you don’t fully understand
- Always question your own motives
Assuming people come to their senses and cryptocurrency loses its value, there will still be a need for anonymous online payments. GNU Taler is working on that.
It’s not another cryptocurrency ponzi scheme. It doesn’t try to fulfill the anarchist/libertarian fantasy of a fully decentralized, unregulated digital payment system that promises the world but delivers next to nothing.
While I haven’t done enough research on Taler to wholeheartedly endorse it, its goals already seem more realistic than any cryptocurrency. It’s simply a digital payment system that works with banks to offer users truly private transactions using digital fiat money. That’s it. It’s not unregulatable. It aims to be fully auditable, efficient, fault-tolerant, libre, and usable while protecting buyer privacy using blind signatures.
Given a lot of engineering effort and work with banks and policymakers, Taler’s goals actually seem achievable. No, Taler isn’t going to overthrow the banking industry and empower the poor, but neither is cryptocurrency. At least Taler can potentially give us all something that’s desperately needed right now: a truly private digital payment system. It offers digital cash without the insanely high transaction fees, glacial transaction throughput, and environmental destruction.
I see potential in GNU Taler because it aims to tackle the common types of fraud banks and their customers are actually concerned about like chargeback fraud, unlike cryptocurrencies which create a global energy-wasting competition to solve problems created by the currency itself.
In an ideal future, I imagine all cryptocurrencies becoming worthless and GNU Taler succeeding. That would be nice. Maybe it’ll happen. We’ll just have to wait and see.
1: Line Goes Up - The Problem With NFTs
4: SAFE Network
5: The New Internet Shouldn’t Be Blockchain-Based
6: On Blockchain
7: Gish Gallop
8: [Video] Monero More Anonymous Than Cash
9: Avoid Using Cryptocurrency
11: Oxen Security Fail
12: Future-Proof Digital Timestamping
13: Stephen Diehl
14: GNU Taler