If you’re into venture capital, pay attention to tech or invest in the sector, you’ve heard of all the buzzwords: Web3, NFTs, DeFi. Has anyone explained to you what they are? Did you understand it? It probably sounded as convoluted as the fat kid’s explanation in summer camp as to why he doesn’t have a picture of his really pretty girlfriend from back home.
Why weren’t these concepts understandable? Because these are all terms that are just nebulous enough to sound sophisticated, while avoiding strict definitions as to avoid scrutiny. They all have this Gnostic quality about them. You really need to be special to see the emperor’s clothes.
So what are these things? What is Web3? What are NFTs? What is DeFi? I’m going to try to save you a lot of time: They’re scams.
I’m a programmer with 24 years of experience, with the last 11 in Bitcoin. Bitcoin is an amazing tool, particularly for saving, which is why I own some. I’ve written several books on the topic, including “Programming Bitcoin” published by O’Reilly, a premier technical book publisher in the U.S. I’ve also taught over 700 programmers and have many former students in all of the biggest companies in the industry. So when I say that NFTs, Web3 and Defi (aka “crypto”) are scams, I’m not saying so flippantly or as an exaggeration to make a point, I’m saying that they’re “scams” in the strictest sense of the word.
If you’re convinced at this point, there’s no need to read further and you can instead go do something more productive, like reading about last night’s episode of “The Bachelor.”
To prove that these concepts are scams is not my intention here. That would take a much longer article and you probably wouldn’t read it. As a paraphrased version of Brandolini’s law states:
“The amount of energy needed to refute bullshit is an order of magnitude bigger than to produce it.”
So in this article, I’m going to take a different tack. I’m going to induce reasonable doubt about these projects, like a good attorney would. And hopefully, as a side-effect, I can bring on a full existential dilemma to the “crypto” bros.
A Note To The Trolls
I’m sure that I’m going to get a lot of pushback for this article. And I’m also sure most of the people pushing back will be non-technical people. The most vehement will be people invested in these projects and I’m sure they’ll get mad at me with all the righteous indignation of a Brony.
As Upton Sinclaire said, it’s hard to get someone to understand something when their job depends on them not understanding it. I’m not interested in debating such people because they’re too far gone. The time to convince someone is before they get in, when they’re a lot more objective about what’s happening, rather than after, when they’re likely to accuse you of bias. But hey, I’m willing to take the counter arguments which have all the sophistication of “so’s your mom.”
So, dear reader, I’m trying to convince you, the person sitting on the fence and thinking about possibly investing in these things, who still has some very basic questions.
The Incentives
Have you ever seen anyone who had a problem in the real world, searched for a solution and found it in Web3/NFTs/DeFi? Unless it was to raise money from gullible people, I’m guessing you haven’t. That’s because these things are like the Rube Goldberg machine at the beginning of “Pee Wee’s Big Adventure.” There are easier ways to make breakfast, damn it! They have the most tortuous, nonsensical reasons to include an unnecessary token that make everything less efficient and more costly.
Have you examined what the code of these supposedly decentralized applications does? No? These things have more bugs in them than the set of “Indiana Jones.” Would it surprise you to know that the marketing departments of the organizations pushing this stuff are exaggerating just a tad bit on their capabilities?
Do you know that the people doing this marketing have huge premines of the coins themselves and have a strong vested interest in getting more people to buy? The venture capitalists that are funding this stuff get a huge number of tokens at a significant discount before the public. Their job is to convince you to buy, regardless of whether it’s useful or not. They spend upwards of 50% of the budget on marketing. That’s a ratio for unhealthy sugar water like Coca-Cola, not a supposedly sophisticated technology.
Are these projects as decentralized as they claim to be? The creators of these coins or protocols can change the rules anytime they want for any reason. This is even worse than Google’s terms of service. At least with Google, you know up front that you’re getting screwed.
Do you know that these projects can be copied? The code is open source, and they’re copied all the time for various reasons. The new coins are technically indistinguishable from the original. So why do they have different prices? Maybe it’s not all about the supposed features of the project, but the marketing dollars going into it.
Have you looked at the people involved in these projects? Many have sketchy pasts, to put it mildly. At best, the founders of these tokens have “successfully” launched another token as their credentials. Did they fulfill their promises on that token? No. But they sure got returns for the early people. These people are like the network news: You know everything they say is heavily distorted to manipulate you.
The Returns
But the returns! Surely, you can’t argue against 500% returns in a few months, right? Well, you can, because those types of returns are common in scams. You could have made money on a bankrupt Hertz stock if you got in and out at the right time. Making money doesn’t make the action right any more than winning with seven, two offsuit.
The returns are the only reason anyone’s interested in this stuff, because the tech certainly isn’t there. What you have in these things are lots of promises. These promises get hyped up by a lot of marketing. A frenzy develops and eventually there’s a crash when the promises fail to materialize. It’s like a bad sequel to a great movie. Bitcoin was great, so let’s go look at this other thing! The tech is bound to be disappointing.
What About Bitcoin?
Bitcoin is the original and very different from “crypto” projects, which are all basically cheap knockoffs. Bitcoin has no central controller, there aren’t misaligned incentives, the people involved have no special rights and there’s no marketing team. The returns on bitcoin have been exceptional because it’s done exactly what it’s promised, which is to be an uncensorable, unseizable, strictly-limited money. This is why Bitcoin is credible where “crypto” is not.
The key property of Bitcoin is that it’s decentralized. There’s no single point of failure and it’s controlled by the community of users, not some governing entity. We’ve observed over and over again people copying the code, but not being able to copy the decentralization. The decentralization is native to the network, not the code. It’d be like trying to duplicate an orchestra by providing the same equipment, but not the same musicians. It’s not going to work.
Bitcoin is better money. It doesn’t pretend to remake the web or remake finance or remake art. It’s been from the beginning a better money because it’s digital, decentralized and absolutely scarce. Bitcoin actually has a use case that people all over the world are using. “Crypto” is not any of these things because its leaders are like politicians, making promises they won’t keep.
The only coin that doesn’t require you to trust someone is bitcoin. Everything else is like borrowing money from Tony Soprano. You’re playing a dangerous game.
This is a guest post by Jimmy Song. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.