In their article ++“Crypto's shaky foundation++”, academics Bradley S Klein and Scott G. Nelson write about cryptocurrencies, public currencies and their usage. In this post, I am making my response to their views and claims.
Ponzy scheme?
Klein and Nelson write that it is not clear if crypto is a Ponzi scheme, meaning a type of economic fraud. This is not the case because there is already enough scientific and rational evidence of cryptocurrencies and the history of crypto. Research about crypto is done at for example Cambridge and Stanford universities. Thereby, it is not rocket science to know and understand that crypto is not a Ponzi scheme.
FTX scandal is not evidence of “a shaky foundation”
As many other who have written about FTX, Klein and Nelson are making the mistake of interpreting and seeing the scandalous case of FTX as an example of “crypto’s shaky foundation”. However, such interpretations are disproporational and overkilled. FTX is just one company with more than 9 000 cryptocurrencies worldwide, plus many other crypto companies, communities and initiatives. Using FTX as a grand example would be as using Lehman Brothers as an example that all banks around the world are bad and unstable. FTX is an example of a big fraud and immoral behavior, but not an example of how cryptocurrencies are in general.
Samuel Bankman-Fried is not a “real” cryptoporeneur
Furthermore regarding FTX, the writers present the currently accused Samuel Bankman-Fried, also known as Scam Bankrupt Fraud among many crypto users, as a crypto entrepreneur. Despite being officially presented as that, the reality is that SBF has never been “a real” cryptoneur (crypto entrepreneur). His real aim was never to promote more decentralization and alternative finances to the current fractural reserve banking and capitalist behaviors. Instead, ++SBF++ tried to use crypto for other and even centralist interests such as by trying to influence on politicians in USA to make legislation for his own interests.
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Crypto is actually useful
The writers are taking up several true, valid, and problematic points regarding crypto. As they mention, most crypto users are not using crypto to buy goods and services as food and transport. The case is also that many people who use crypto see it as a stock exchange asset to be traded. However, such problems do not mean that “crypto is not useful”. In fact, crypto is very useful for millions of humans worldwide, especially in countries that in the Global South, dictatorships, authirairna systems and poorer compared to the more democratric and wealthier Global North. Crypto is for example popular in Venezuela, Vietnam, Afghanistan, Iran etc. So crypto is useful as for trade, transactions, exchanges, projects, innovation, communities etc.
Flawed and romantic views on national public currencies
According to Klein and Nelson, major currencies as the American Dollar and Euro support whole societies and nations, and are seen as stable stores of value because the governments are behind them. They also write that accepted national currencies tend to be viewed as artificial, questionable, and perhaps even unnecessary stores of value. But such views are not reflecting a more complex and pluralistic reality. Take for example quantitive easing policies also known as “socialism for the rich” when governments or central banks produce money benefiting larger companies and banks. That cannot be seen as an example of “++serving the whole society++”. Also, there is already enough evidence how national currencies and economic policies can be misused and lead to more poverty. Many people around the world do not trust their national currencies since they are seen as weak or even “++colonizing++” as in Western Africa.
Crypto is post-national, true.
Klein and Nelson write that both crypto proponents and critics see crypto as something postmodern and post-digital. They argue that crypto’s value is generated not because goods or services are bought and sold through crypto. Also, they write that crypto acquires value largely through self-fulfilling expectations among speculators about its value. The case is that crypto can be described with “post” terms such as post-national since crypto is global (or glocal) money automatically and can be used worldwide. The value of every crypto is based on similar factors as the value of public money - social relief, trust, community. Even crypto as Bitcoin depends on how users understand, interpret and view it - some see Bitcoin as a cool thing to trade with. astock exchange while some see Bitcoin as real money to be used in stores and restaurants.
Paul Krugman fiction
Klein and Nelson write that crypto supporters have been quite skillful in deflecting attention away from the question of what crypto actually is and that many cannot explain crypto. They mention that even a Nobel Prize-winning economist like Paul Krugman has acknowledged being “mystified by crypto”. The writers are missing an important point: experts can also be wrong and flawed in their judgments and opinions. Different people can, as mentioned in the earlier subsection, have different interpretations of the same thing. Krugman has a history of saying things that did not make sense as in the case of the Internet. Take for example military tanks during World War One when different officers had different views if tanks were only for supporting infantry or could be used as own units. Regardless if many people understand or do not understand crypto, there are already well-established definitions and conclusions, and as more people use crypåto in daily life, a larger number of humans are going to understand crypto.
CBDCs are part of the problem with bad governance and undemocratic control
The authors are taking up central bank digital currencies (CBDCs) as an alternative to crypto. They write that such currencies are government-backed and used for monetary policies “which in democracies the public underwrites and regulates.” However, the truth is that the central banks around the world are not under direct democratic decision-making since they are created to be politically independent from governments and political parties. Central banks are regulated without democratic representation. Also, as I am writing in my recent ++paper/report++, there is already some evidence that CBDCs are based on special political interests and ideas such as forcing citizens around the world to use them. Thereby, CBDCs are an example of how governments want to compete with crypto and a struggle between centralization and decentralization ideas.
In general, Klein and Nelson do have some amount of valid criticism against crytpo but most of their article is based on flawed and even romantic assumptions of reality such as when it comes to public money and governments. Also, crypto is about democracy since crypto can be governed in communities and communities can be created in order to use crypto for botton-up and civic initiatives.
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