Cryptocurrencies are digital currencies that are made scarce by defining transactions on an immutable blockchain.

Crypto use cases

There are some legitimate use cases where it can - but does not currently - provide a better economic value than centralized counterparts, such as market-making, contract enforcement, and (to an extent) privacy.

Abuse of crypto

I am very disappointed that the silliness, tech-forwardness, and gambling-esque nature of some platforms (especially NFTs) allow people to handwave away the seriousness of fraud and theft. Economic violence can be just as damaging as physical violence.

Example: significant amounts of activity on crypto exchanges is wash trading, which is fraudulent and skews volume information in markets. 1

Effect on society

There are too many uninformed market participants in the market. There will be people who are comfortable using that to their advantage. I am not.

There is a tendency for people to treat crypto transactions differently from other economic activity. People can have extremely liberal views in “real-life” but extremely libertarian (even anarchistic) views in crypto-land. Similarly, people can have very Keynesian economic views but subscribe to Bitcoin which is effectively the gold standard. The dissonance is palpable.

Creating a better alternative to fiat money

The better alternative to centralised, government controlled currencies doesn’t stop at being decentralised; it has to actually deliver better value to users.

Reversibility of transactions (righting economic wrongs), fixing hacks and fatal flaws in a decentralized blockchain, and the whole idea of a stable, usable currency, are not yet realized.

There’s a lot of activity on the 3rd but feedback loops are too slow on 1st and 2nd.

  1. Cong, L. W., Li, X., Tang, K., & Yang, Y. (2019). Crypto Wash Trading. SSRN Electronic Journal. doi.org/10.2139/s… ↩︎