The Crypto Revolution Was Over Before It Started
A comprehensive dunk on crypto's liberation narrative
For what feels like decades now, the crypto ecosystem has fed us a steady stream of hype, publicity, and narratives over a coming “revolution”, in which crypto will supersede corrupt institutions and the power-hungry elite that controls them.
But nothing could be further from the truth. The opposite reality has emerged. In fact, the possibility of a financial rebellion through cryptocurrency has already passed, and it perished, even before the "liberation narrative" hit the mainstream over six years ago.
By 2016, the very power structures that crypto swore to replace had already carried out the necessary steps to preserve the status quo, silently calling checkmate on any uprising. JPMorgan had already built its own blockchain: Quorum, a copy (or fork) of Ethereum, the second most popular cryptocurrency at the time, and along with other existing power structures, it was time to start building new systems using the so-called enemy’s weapon. While the crypto narrative began to entice the masses into buying Bitcoin and other cryptos in early 2017, elites from Big Tech behemoths, like Google and Microsoft, and Wall Street giants, like JP Morgan Chase and Credit Suisse, joined forces as founding members of the EEA (Ethereum Enterprise Alliance).
Fast forward to 2020, and JPMorgan made a quiet announcement. According to a press release on August 25th, the megabank sold its Quorum blockchain to a company called ConsenSys, which didn't seem like anything out of the ordinary. Only, that was until it became apparent that the founder of ConsenSys, Joe Lubin, was also the co-founder of Ethereum. Crypto elites and megabanks working together? Some financial “revolution” or “liberation” this turned out to be.
And for almost every mainstream cryptocurrency, it’s exactly the same story. Existing power structures have been aiding and sponsoring crypto bros, while they claim to be Che Guevara. Take Bitcoin and its core team, which are both severely influenced by several corporations from existing power structures. The funding rounds never seem to end.
Meanwhile, crypto bros are using the slander “fiat shill” for anyone who uses U.S. Dollars and regular banks to engage in everyday commerce. But if you're claiming to fight the machine then using a currency or system with something like Quorum built-in, Concoda has bad news for you. Why would you want to use a system or currency, partly formed by a leading constituent of the financial elite, if you’re trying to “stick it to the man”?
And if a cryptocurrency is not pledging to create financial liberation, then it's trying instead in some capacity to merge with the legacy system. Among the altcoins, meme-coins, and shitcoins, quasi-cryptos like XRP (Ripple) have been touted to become part of a new global payments system. Though like any other crypto, these are pure speculative plays that will pay out only if existing power structures adopt them, and even so, as Michael Kao (a must-follow on Twitter via @UrbanKaoboy) points out, why must a government or private sector entity adopting a token affect its value? Why must “number go up”?
To become a major cog in this new paradigm of digital money, these cryptos must also defeat competing technology from legacy power structures. The likes of Goldman Sachs, JPMorgan, and other giants have been gobbling up all the outfits that deliver global payments solutions while assembling their own blockchain replicas of the legacy financial system, like JPMorgan's JPMCoin and Onyx blockchain, which Concoda covered back in 2021:
Sucked in by the hype of crypto-mania, existing power structures have thrown a lot of capital at blockchain technology, though they have run into a slight issue. Most of the projects they created have ended up going nowhere, because they have slowly come to realize that blockchain, a glorified append-only database, is nothing new, revolutionary, or even superior to their existing systems. A recent article by CoinDesk illustrated this, reporting that “IBM has cut its blockchain team down to almost nothing”.
“There is not really going to be a blockchain team any longer,” a source “familiar with the matter” revealed. “Most of the blockchain people at IBM have left.”
Over the last few years, there’s been a simultaneous, collective realization from crypto proponents and companies experimenting with blockchain, that it has been vastly overhyped, like “The Cloud,” but even more to an extreme. They also noticed, however, that pumping crypto and “the blockchain” was extremely profitable.
Despite every supposed benefit of blockchain falling apart, and legacy systems outperforming on speed, efficiency, and cost, today's mainstream bubble has still created unfound riches for crypto bros, like “His Excellency” Justin Sun, and “Web3 VCs”, such as a16z. Even though the notion of decentralization, transparency, and efficiency has been thoroughly debunked, everyone involved in the space has overlooked this, because their net worth now relies on crypto and blockchain's survival.
At the first limitation, every crypto paradigm, from Bitcoin to NFTs, has become increasingly centralized. Take “Web3” companies, like Dapper, who’ve hired Google Cloud, a supposed Web2 rival, because they have not found a better way to scale and provide infrastructure to “support their networks”. In other words, they’ve sold out:
What was once a proposed revolution, is now a farce, with almost all Web3 apps using the same two centralized entities, Infura or Alchemy, to communicate with the blockchain. (Because even techies don't want to set up their own servers, let alone the general public). Everytime your web3-crypto wallet interacts with the blockchain, you’re likely using a centralized service. So what’s the point of reinventing the wheel through “decentralization,” if you're not actually doing it in practice?
Attempts to decentralize have fallen apart so quickly because “decentralization” is the starting point of any primitive system. Humans discover they must work together and cooperate, making centralization inevitable. It's just faster and more efficient. All paths lead to a Web2 world, not a Web3 utopian vision.
As for “decentralization, liberation, and equality” in other crypto paradigms: NFTs, DAOs, or just regular trading, these have become a financial sh*tstorm. Alongside problems in the existing financial world, we’ve achieved increased levels of terrorism, fraud, ransomware, tax evasion, physical attacks, armed robbery, kidnapping, torture, and murders.
But again, concealing this reality is the crypto liberation narrative, which acts as a type of techno-dystopian propaganda machine, and there's an entire cartel, a crypto elite, surrounding the ecosystem, who survive by pumping it. They do so by diverting as much attention away from the status quo of crypto as possible, since this exposes every assumed benefit as a failure. That, and all the insiders, influencers, promoters, and exchanges rely on the “liberation narrative” for their survival.
The major support propping up this narrative is Tether, the global “wildcat bank” which accounts for over 70% of all cryptocurrency volume. It’s run by crypto cartel members, mostly convicted criminals and associated shady individuals, who have engaged in, among other things, software piracy, fraud, and money laundering.
Tether also is in bed with all the major crypto exchanges like FTX, Kraken, and Binance, as they provide most of the liquidity in the crypto ecosystem. These exchanges are practically casinos posing as traditional brokerages.
With traditional brokerage accounts, it's estimated that 95% of day traders lose money. Not only that, but brokers tend to replicate their clients' trades to juice profits, betting against Group X (95%) and copying Group Y (5%).
With crypto exchanges, of course, it's worse. Most remain unregulated, so they have free reign to exploit anyone, especially those under 18, by manipulating prices, liquidating positions unfairly, and "front-running" their own clients. And guess what? Nobody can stop them. Not even regulators, it appears. And, of course, up to 90% of trading volume on these exchanges is wash trading or “painting the tape”: an illicit form of trading where a broker and trader collude, profiting from feeding deceptive info to the market.
Put differently, we have a wildcat bank, Tether, facilitating 70% of all crypto trading volume, while remaining best buddies with crypto exchanges that manipulate up to 90% of their trading volume. And we're supposed to believe that crypto is the future of finance.
Concoda is a reader-supported publication. To receive new posts and support my work, consider becoming a subscriber.
As for NFTs (non-fungible tokens), they have enabled more wash trading than traditional art markets. On the platform LooksRare, 80% of the volume is wash traded. A Nature study also found that the market consists mostly of insiders trading among themselves, with 10% of traders making up 85% of the volume:
Still, holding several bags, crypto insiders won’t give up. To cover for the subpar reality of the crypto ecosystem, their publicity machine has created various coping mechanisms, the first being that “we’re early”.
But as Paul Krugman points out (and from the title of that article we can’t imagine why he remains unpopular with libertarians), “Twelve years is an eon in information technology time.” There’s an astonishing difference between what Big Tech has achieved in comparison to blockchain technology in 12 years. While Apple, Microsoft, Amazon, Google have boosted standards of living (while getting a few down marks for privacy and mental health), crypto has failed to deliver any meaningful use cases, other than rehashing existing ones and adding a blockchain on top. (As we write this, Ukraine has asked for donations via cryptocurrency as well as through traditional means, so we’ll count this as one).
Next, they mention the “innovation” that comes out of chaos or bubbles, specifically referring to the dot-com “internet” bubble. For context, around 80% of dot-com companies that went public ended up going bust. Yet the underlying tech and innovation spurred an epoch of efficiency and prosperity.
With blockchain, however, it’s extremely hard to pinpoint a meaningful use case in 13 years, which has become an inside joke among technologists. At least, the ones who have yet to jump onto the blockchain bandwagon.
As for the “chaos out of order” element, compare blockchain or crypto to how the global commodity markets came about. Without the trader vigilante companies of the 1970s, like Marc Rich + Co and Philipp Brothers, we would not have a global market for oil, grains, etc. These individuals skirted soon-to-be nation-state laws, doing the dirty job of connecting autocrats and despots with the private sectors of democracies, which ultimately provided citizens with key commodities. Something good came out of it. But with blockchain, there appears to be no benefit in using something that enables unfettered free-market tomfoolery while creating no unique, impactful use cases.
They say: “Well, after this crypto crash, everyone will learn from their mistakes, no longer engaging in fraud and speculating on Ponzi schemes. Only then will true innovation become apparent!” But that’s wishful thinking. Barely any innovation has emerged after thirteen years, and as long as regulation of crypto remains nonexistent, bad behavior will persist. There's no such thing as a “self-regulating market”. Bad actors exploit weaknesses, as Tether has proved. And, of course, if you regulate a technology, which has been specifically designed to evade regulation, this removes any use case for it.
Crypto is ultimately a rework of old tech posing as the next big thing, but in reality, it just enables us to repeat every financial mistake we've made over the past 5000 years, and as Grady Booch aptly stated, “all at once”. We're empowering a technology specifically designed to subvert societal institutions and laws, and it's unclear how this will reorganize society to the benefit of humanity, or even a boon at all. Plus, anyone promoting this vision can't coherently describe it.
For now, though, that doesn't matter. As Concoda reported recently, the Web3 grift continues. Regulators remain unwilling to act fast while lobbying efforts from outlets such as Andrew Yang’s Lobby3 promote crypto schemes at the government level.
We appear to be moving closer towards the 1990s Albanian model: encouraging lax regulation and ignoring bad behavior, only to watch half the economy evolve into pyramid schemes, offering 100% returns in no time. Sound familiar?
It's abundantly clear by now that crypto is a liability, not a revolution. Minus a few niche use cases, all that's left is Ponzinomics, gambling, and criminality, papered over by a perma-bullish publicity machine.
It’s the creeping democratization of financial tomfoolery, on steroids.
Thanks for your honest outlook on this 😄.