A friend shared this article by Tim Swanson on Facebook this morning "without comment", and it caught my interest, so I wanted to comment on it:

Eight Things Cryptocurrency Enthusiasts Probably Won’t Tell You

Unlike many Kool-Aid-drinking cryptocurrency enthusiasts, I won't scoff at this post or disregard it. On the contrary, I think it's well-researched and well-written (though it may not get every detail correct). No, this Kool-Aid-drinking cryptocurrency enthusiast will at least attempt some rationality here in my response. :)

I bought my first bitcoin in early 2013. I spent $50 for 2.5 bitcoins. I am biased because I've only ever made money (I don't sell often). If cryptocurrency had personally harmed me more, I may think differently. As it is, I still agree with much of what is said here, but I mostly think it's missing the point. It's almost like saying, "Cars are really a problem because of how little they function like horses."

Much of this article could be summarized by what many in the space have been saying over and over again for years:

Don't Use Centralized Exchanges!

With a subtext that goes something like: The current centralized government-run financial system is completely broken. We're building a better one.

Taking programmable money which requires no third-party trust systems or counter-party risk and putting it into centralized systems of control is stupid. It defeats the entire purpose of this invention created after the massive financial disaster of 2008.

Most exchanges today are based on old-world, banker thinking. Decentralized cryptocurrency exchanges are the future of cryptographically secure distributed ledger money (BitShares, OpenLedger, EtherDelta, etc). We no longer have to give over our control of our own stores of value and most people simply do not understand this. Like children, they are still expecting mommy and daddy government to protect them when the protocols, if allowed to function as intended, could do that directly to prevent fraud before it happens, not respond to it with guns after the fact.

I'll briefly go through the eight things mentioned in the article and give some thoughts.

(1) Bitfinex

I completely agree. They are a centralized exchange which anyone who understands cryptocurrency should be very concerned about. When they still allowed US Citizens to participate, I did play around with their margin funding and made some fun returns on my lending of USD, knowing full well it could all go to zero, and it was a very risky thing to do. I understood the risk and was motivated by the potential for returns while never risking more than I was willing to lose.

(2) Ransomware, Ponzi’s, Zero-fee and AML-less exchanges

This is why people like Andreas Antonopoulos have been arguing for years that service providers should make everything public on the blockchain. I'm okay with regulation, but I want regulation which actually works (i.e. is programmed into the protocol directly) as opposed to approaches which can (and are) manipulated by central authorities with their own skewed motivations.

(3) Initial coin offerings (ICOs)

I agree, this whole space is out of control. As I've written about already, many speculators are chasing quick profits instead of utility. If fiat currency value wasn't bleeding so badly with people flooding into cryptocurrency, maybe this would calm down a bit.

(4) VC-backed entities

This one's pretty far outside of things I'm familiar with, but I do again see the connection with the problems raised and the traditional financial systems this technology is attempting to disrupt (fiat currency, central banking, KYC laws, and AML/CFT regulations "for our protection"). If there's a theme here I'm trying to point out, it's how much these old systems have failed us, stifled innovation, and increased the powers of the State in ways previous generations would not have imagined.

(5) The decline of Maximalism

This point kind of confused me. Is this really a critique? To me, it's a natural example of what happens when people try to centrally control something through primitive tribalistic means. The blocksize debates and those trying to control the Bitcoin blockchain for their own self interests opened the door for competition and value to flow into other more technically advanced projects that aren't stuck in endless rounds of in-fighting. I understand arguments like this one on what gives bitcoin value and why we may not need so many different currencies, but I also see a future as described by Andreas Antonopoulos: Bitcoin: Money as language & the multi-currency future. In a way, point 5 just says "people are tribalistic and tend to back their own team." Yep. Same with goldbugs, silver stackers, nationalists, Statists, USD supporters, anarchists, voluntaryists, etc.

(6) Market caps

I think this is a good point as well. There are plenty of silly coins which sell a fraction of their supply on the "open market" (surely could be some insider trading going on there as well to artificially inflate the price) and then try to claim a massive market cap. You know what's also silly? Trillions of USD literally created out of nothing which we believe has enduring value even though empirical evidence demonstrates massive losses in purchasing power over time. More on that here: USD Scam Coin Surpasses $20 Trillion in Debt, but You're Supposed to Fear Cryptocurrency.

(7) Buy-side analysts and coin media

This one raises some interesting points as well. There are rules in place for how people should act when they are promoting something they are also an investor in. Do these rules matter so much in today's world of the Internet and open access to information? Or, put another way, does anyone actually believe things online at face value? Maybe some people do and this is an important topic, but for me, I'm not going to solely base my investing decisions on posts which I already know to be from very biased sources of information. These biases are all around us and to pretend we can somehow control them with regulations outside of individuals acting in their own self-interest is a bit naive to me. That said, I applaud the efforts here to expose connections and biases many may not have been aware of. That's valuable journalism.

(8) Analytics

This point gets into some of the fundamental worldview differences between those who are excited about cryptocurrency and those who think it's not worth getting so excited about. Some think centralized, government-run regulation and "transparency" will solve these problems. It's a top-down approach to order. In many ways, it's what we've always known since the beginning of modern, organized civilization. It's not, however, the only way to achieve order. All throughout nature we see spontaneous order emerging out of chaos as the simple actions by individuals lead to much more complex emergent patterns. My argument is simply this:

What We've Done So Far Simply Does Not Work

Instead of eliminating all trusted third parties and the need for trust in general via the use of smart contracts and programmable money, many advocate centralization of trust into government-backed regulation and oversight. Were they not around in 2008 when trillions (with a "t") of dollars were stolen via government approved-processes? Do they not recognize how those who facilitated these massive frauds were never prosecuted by the current financial regulator system? On the contrary, they were rewarded for their efforts with government bailouts and bonuses.

I can't fault the author. They most likely see things from a specific worldview. They seem to see anarchy (as in no rulers, voluntary interactions only) as bad and government as good. I wonder, would they prefer to see cryptocurrency just become another regulated, integrated payment network like PayPal?

Thankfully, the founders of bitcoin had a greater vision than that.

In my opinion, this isn't about rediscovering "a vast framework of securities and consumer protection laws that already exist" but bypassing them completely to build trustless systems which don't rely on laws. Laws are threats of physical force backed by people with guns paid with value taken involuntarily from people ("citizens") who happened to be born in a geographic region. Those people didn't sign up for this voluntarily, it just is. The cryptographic revolution is about taking some of that power back and putting it into protocols which can't be manipulated by bad actors. That's why Bitcoin's greatest achievement was solving the Byzantine Generals' Problem.

This is the first time in modern history where we have a tool to build an alternative mechanism for consensus without introducing counter party risk or threats of force. The irony of criticizing the technolgy is that many of the problems we see relate to how it is being shoehorned into old-world financial systems. It was meant to completely break out of those systems.

That said, I really do appreciate the main point of the author's post which is that we should all be talking about this stuff more. We should all take personal responsibility for exposing fraud. Harry Markopolos (based on a quick wikipedia read) is mentioned in the post but somehow this irony is lost:

In 2000, 2001, and 2005, Markopolos alerted the U.S. Securities and Exchange Commission (SEC) of the fraud, supplying supporting documents, but each time, the SEC ignored him or only gave his evidence a cursory investigation.

The very systems the author seems to be supporting and asking for more of are the very systems which do not work and are inadequate for regulating markets in today's digital age. We need far more advanced approaches than some bureaucrats who spend most of their time worrying about re-election or securing funding for their next budget increase.

Protecting ourselves is our job. Let's do a better job of it.

---

If you enjoyed this write up, you might like related posts of mine as well:

• The Blockchain, Globalism, and National Demonetization
• USD Scam Coin Surpasses $20 Trillion in Debt, but You're Supposed to Fear Cryptocurrency
• Privacy, Identity, and Human Flourishing
• Understanding Blockchain Freedom — Why So Many Smart People Are Wrong About the Value of Bitcoin
• Playing in the Margins: bitUSD and BitShares on Open Ledger
• A Simple Example of Shorting the U.S. Dollar With BitShares
• The Promise of the Blockchain by Vinay Gupta
• The Best Explanation of a Blockchain I've Ever Seen

---

Luke Stokes is a father, husband, business owner, programmer, and voluntaryist who wants to help create a world we all want to live in. Visit UnderstandingBlockchainFreedom.com

_{I'm a Witness! Please vote for @lukestokes.mhth}