Tech Won't Save Us - Crypto Winter Is Coming w/ Jacob Silverman

Episode Date: February 3, 2022

As the podcast celebrates episode 100, Paris Marx is joined by Jacob Silverman to discuss the huge drop in crypto prices, the coming threat (to crypto) of interest rate hikes and regulation, the human impact of crypto schemes, and where things may be going next.Jacob Silverman is a staff writer at The New Republic and writes about crypto with the actor Ben McKenzie. Follow Jacob on Twitter at @SilvermanJacob.Tech Won’t Save Us offers a critical perspective on tech, its worldview, and wider society with the goal of inspiring people to demand better tech and a better world. Follow the podcast (@techwontsaveus) and host Paris Marx (@parismarx) on Twitter, and support the show on Patreon.Find out more about Harbinger Media Network at harbingermedianetwork.com.Also mentioned in this episode:Jacob and Ben McKenzie wrote about Tether. Zeke Faux also wrote an essential article on the stablecoin, and Jacob recommends Crypto Critics Corner.Crypto prices have plunged, and that’s hurt regular people.New York’s Attorney General reached a settlement with Tether last year.VC firm Andreessen Horowitz is making a big lobbying push in Washington, DC to get favorable crypto regulations.Matt Damon and Spike Lee are among the celebrities to take crypto money and help pump the industry.US regulators are looking at crypto regulations, and Biden administration is planning an executive order to move it forward.China banned crypto mining, Russia proposed a ban on crypto, and many countries have suffered power outages due to crypto mining.Stephen Diehl wrote explained how crypto is about arbitraging securities regulation.Diane Jeantet wrote about a massive series of Bitcoin pyramid schemes in Brazil.Support the show

I want to talk about things that are better, but first we have to stop the incoming tide of the bad shit, which is what A16Z is pushing, which is the financialization of everything, which I think is really what Web3 is about. Hello and welcome to episode 100 of Tech Won't Save Us. I'm your host, Paris Marks, and I'm so excited that we are finally hitting this milestone. Over the past nearly two years, the podcast will turn to in April, I've gotten to speak with so many fantastic guests who have such enlightening and critical perspectives on the tech industry and the technologies that we use every single day that hopefully have helped to further inform you

on those topics so you can better understand the impact that these companies and technologies are having on our lives, on our society, and why we shouldn't just stand back and let them do whatever they want, but should be ready to call their ideas and actions into question when they do not serve the public good, as they so often do not. Because, you know, naturally, these are companies that need to serve the bottom line to make profit, and often, maybe even always, that puts those actions in conflict with the social good. And so, personally, I'm not really interested in what is going to make a company a lot of money. I am interested in making the world a better place

and I'm open to how technology can help us to do that. But that also means we need to recognize the technologies and the actions that are not doing that or leading us in the wrong direction. And so I hope that Tech Won't Save Us over these past 100 episodes have helped to inform that and to inform you about this industry and the products and services that it makes. And to continue that, this week, I'm joined by returning guest Jacob Silverman. Jacob is a staff writer at the New Republic, and he writes about crypto with the actor Ben McKenzie. Now Jacob says he wouldn't say this but I think he has really become one of the leading crypto critics going today. I think he

has such an incisive analysis of this industry of crypto, NFTs, Web3 and this whole space and over the past number of months it's been fantastic to see that get more recognition as he's been writing about it more and was recently on the Dig podcast to give that essential critical perspective that we need. But now he's back on the show and there is so much that we could have talked about. But I think that this conversation will provide a really good perspective on where we stand today when it comes to crypto and what is going on with it. Because over the past number of months, the price of many of the major cryptocurrencies have plummeted, almost 50% in many cases. And there are renewed

talks about a crypto winter, basically a long-term stagnation of crypto prices, if not a further fall from where they are today. And there are a number of reasons for that, as we discussed in this interview, whether it is increasing regulation by countries around the world, including outright bans or potential bans that could be coming down the pipe, like in Russia. You can also look at potential interest rate hikes and then what that means for access to capital to flood into these markets. You can look at what's going on with stable coins and also what the United States might be doing with regulation or even investigations into crypto companies moving forward. And so those are some of the topics that Jacob and I talk about in this conversation. But we also link that to the human element of it. What is the effect of this speculative

industry, the scam, this Ponzi scheme on regular people who are buying into it, especially when the price crashes as much as it has over the past number of months. Who is affected by that and what does that mean for them? This is a really important question because it's not the whales who are really going to get hit. As Jacob explains, it's people who likely can't afford to get hit and who have been brought into this space by being duped and sold a lie. So this is a really essential conversation. It's a bit longer than the usual episodes, but I think you are really going to like it. And I think it makes a great conversation to mark episode 100 of the podcast. Tech Won't Save Us is part of the Harbinger Media Network, a group of left-wing podcasts that are made in Canada. And you can find out more about the other shows

in the network by going to harbingermedianetwork.com. If you like this conversation with Jacob, make sure to leave a five-star review on Apple Podcasts or Spotify. You should also share it on social media or with any friends or colleagues who you think would learn from it or need to hear this kind of perspective on the crypto industry. And finally, this episode, as well as the past 99 episodes, are only possible because of the support of listeners like you who help ensure not only that I can make the podcast, but that I can keep every episode free for everybody. So anyone around the world can access these perspectives, whether they can pay or not. And that is something that

has always been essential for me. And so if you like the show and you've always considered, you know, chipping in and becoming a patron, I would ask you to pause the podcast very quickly before we get into this conversation. Hop over to patreon.com slash tech won't save us where you can join supporters like Pat from Nuri bar and Fabricio Waltrick from Sao Paulo, Brazil by chipping in two, five or $10 a month to ensure I can keep having these critical conversations with fantastic guests like Jacob and so many of the other people that I've spoken to over the past nearly two years. So with that said, thanks so much and enjoy this week's conversation. Jacob, welcome back to Tech Won't Save Us. It's an honor to be a return guest.

I'm so excited to chat with you again. And you know, I feel like since last time you came on the podcast, you've become like, I think one of the most prominent crypto critics going right now. So like, congratulations for that. That's a funny thing to hear. Because I don't know, I don't think of myself as a prominent anything. But I would say I'm having fun doing this kind of stuff. And there's a nice sort of network of skeptics out there. And also readers and other people who are receptive to that message. So it's been fun. Yeah, it's obviously great to read your work and the larger kind of community of skeptics that you're in interaction with, you know, some of

which have come on the show as well. So yeah, as crypto has grown and become something that we can't ignore over the past two years in particular, not that it just started two years ago, but the skeptic community has also grown. And I think that's been really important, you know, as we talk about the topics that we're going to be talking about today. Yeah, for sure. And it's been heartening to me as I've dived into this stuff more of the last year to have these people out there who I can turn to and ask questions or just who have paved the way, have been doing this for much longer than I have. And one of the things you hear from Web3 people,

especially the sort of VC class, Chris Dixon says this, is that there aren't good critics of Web3. And I think that's totally wrong. And there are a lot of people out there who are really smart, who work anywhere from bankers to computer scientists to academics to just regular people on the internet who have a lot of great stuff to say about this. You just have to seek them out and be open to it. I completely agree. I think there's great criticism going on and you're just one of those people. And so the topic that I wanted to start with, we're talking about crypto again, is the price drop that we've seen over the past few months, right? In November, the prices started to go down and kind of seem to level out, I guess, last week or in the past couple of weeks, but maybe further drops are coming. It's hard to say for sure.

What do you make of the price drop that we've seen? And what do you think is contributing to that decline? Well, I think there's sort of factors you can point to without saying this is the exact narrative, or at least I'm not confident enough in my sort of economic forecasting skills to give a total narrative, but there are certainly important things to point to. One is that the miners have been kicked out of China

and other places and have been sort of dotting from country to country, though Bitcoin proponents will tell you that in a while, the hash rate, the sort of combined network power of Bitcoin has stayed largely the same, I think. But you have the stock market is not as zooming as well as it was before. I think a lot of people also say, where is Tether? Tether, the stablecoin that for a while has been at the heart of the crypto economy, has been really associated with price pumps of Bitcoin, hasn't printed at all this year. Other stable coins are starting to perhaps take Tether's place. But I think that's one reason.

Another thing you have to point to is declining retail interests. That is just sort of everyday people. That's why you see these dramatic Matt Damon ad campaigns and all these celebrities signing up each week or supposedly buying a Bored Ape Yacht Club guy each week. It's because there's a lot of money going into selling and juicing the market and bringing new suckers through the door of the casino. Because actually retail interest is drying up. A lot of Bitcoin trading is really done between whales now and big wallets. Yeah, so many of those aspects are at play. There are a few things in particular that I was interested in digging into

in relation to that price drop or maybe what might affect it going forward. The first is that I've read a few articles now that talked about who this price drop is actually hitting, right? Is this actually hitting the whales who are heavily invested in this space, who are making a lot of money off of it over the past few years? Or is this hitting a lot of the people who've been pushed into crypto during this bubble who have put money into it? And, you know, there's been ad campaigns and things like that to promote it in particular to marginalized groups to say that, oh, you're

excluded from the financial system, put your money into crypto. Who is actually being hit when this price declines so much? Yeah, that's a good question. I think the concern is really that the people who are left holding the bag, whether it's the price drops of Bitcoin and Ethereum, which are the top two coins by far, well, depending on how you define things, but the top two coins, or whether it's just a classic rug pull where people get scammed in some DeFi arrangement, it's usually average people, so to speak, not to denigrate those or everyday consumer, but it's the people who got convinced by their buddy or by one of these elaborate ad campaigns, or who had a few extra bucks in their wallet and wanted to

make more money, or a lot of folks who got a stimulus check and had some serious bills and were told that, hey, crypto is a risk-free or low-risk way to make some money. I hear those kinds of things all the time. And I think those are the people who are losing money. You see, a lot of this is more anecdotal than kind of quantitative, but you can go on the Reddit page for Coinbase or for any big exchange, and you can find tons of complaints about people having technical problems, not being able to withdraw their money, things like that. My frequent crypto collaborator, Ben McKenzie, and I are working on a piece about a lawsuit against an exchange related to people not being able to withdraw their money or do anything actually during a major price movement. And so a lot of people

end up getting liquidated who otherwise would have been able to close their positions or withdraw their money and things like that. So the whales are still doing well. And what I think people also need to understand, and this may be speaking the obvious to some folks, but these markets are far more anarchic and less reliable than Wall Street, no matter what you think of sort of mainstream commodities or equities markets or stock markets. But there's a lot of market manipulation, some that we know about, some that we can only sort of guess at. There's also just, I think, a lot of backdoor dealings between some of these companies, because really, you could take the crypto industry and perhaps take 10 people and

put them in a room who pretty much dominate all of the price action on Bitcoin and Ethereum and determine how a lot of the industry works. That's not really a conspiracy. I mean, you can see them talking to each other on Twitter, like the Tether guys know the Ethereum people who know FTX, and they all invest in each other's companies. So like Sam Bankman-Fried is a very powerful figure at the heart of the crypto industry, not only because he's really rich and controls FTX and his trading arm Alameda, but also because he influences what happens on Binance and what happens on other markets too. So that's why I think people need to know that even if you're smart or even if you decide to get really into this stuff, you're going up against

people who are like the Sandbankman frees of the world who have tremendous resources, who when Bitcoin falls 50% over three months or whatever it's been, that probably isn't a major concern for the big whales or not to keep going on Sam Bankman free, but hey, he's a big industry figure. You know, a lot of these guys are making money off of volatility the same way that people do on Wall Street with high frequency trading, with complex securities products, with shorting the market, with just basically doing all the complicated financial trickery that we've expected from the big short, but sort of ported to the crypto realm with even less oversight and less awareness of what actually is happening. And, you know, if you decide to put in a little extra money and hold on to Bitcoin for a few years, you might eventually be able to sell it for profit, though, I have my doubts. But if you're doing anything approaching sort of day trading or buying derivatives or futures or trying to really play the market and decipher the market,

you're going to get your pockets picked by these other people. Yeah. So, you know, I think what you're talking about there is so important because we often have these narratives about how crypto is decentralized and it's about empowering these people who, you know, don't have access to traditional financial services. And, you know, there are all these empowering narratives that are floating around it. But really, when we look at it, we can see that like so much of the rest of the economy, there's a bunch of really powerful, influential, wealthy people at the center of it who are controlling so much of what goes on and not only controlling, but then benefiting from it. So why do we get so, I guess, distracted by these narratives when the reality is out there is staring us in the face? You know,

if you really look at it, you can see all the wash trading that's going on and things like that. But there are a bunch of people who just won't accept those sorts of things. Yeah, I'm going to respond to the wash trading thing first, actually, because that's a really good point. And something I think people forget about a lot, which is wash trading is just sort of fake trading or in order to simulate volume, which is kind of good for everyone and helps drive up price. Or it's also a way for, say, if I have an NFT, I can just sell it between accounts that I control and drive up the price with each sale. So that's basically what watch trading is. And on a lot of platforms, watch trading is believed to be 80 to 90% of all activity. Whatever you think about mainstream

capitalism and the New York Stock Exchange, that just is not happening on the New York Stock Exchange. There's probably other bad stuff happening, but the trades are mostly real, I think. And am I right that if we look back at those earlier big trades that got a lot of attention in the press, like Beeple's, I think it was $69 million, a lot of those were kind of wash trades to say, look at all the money that's exchanging hands and that's flooding into this space. Yeah, you really can't trust most of the numbers that you hear related to crypto. I mean, the prices are what they are generally on different exchanges, but anything that's sort of a private deal, like even something like the Beeple thing. So like, none of this is just like Gwyneth Paltrow going to OpenSea.com and clicking on an ape and

deciding to buy it for 500 grand or a million dollars or whatever. All these relationships of this is just like Gwyneth Paltrow going to opensea.com and clicking on an ape and deciding to buy it for 500 grand or a million dollars or whatever. All these relationships are sort of brokered. You don't know even who's paying for what or how much. I'm sorry, we went off on wash trading and all this stuff, which I think is really important. But that was part of an overarching question that I'm not forgetting. That's okay. But you know, I think we can see like Justin Bieber also bought an ape recently. We can see it was similar with him and how it looked like he was getting the money from a different wallet, not actually buying it himself. Same with like Paris Hilton and all these other celebrities

have been doing that. But the bigger question was about the kind of control of this whole marketplace. How there are like really powerful capitalists who are controlling many of these platforms and what's going on and profiting from it, even though the narrative suggests different. One problem with crypto is that a lot of things it says it is, it's basically the opposite. So it aspires towards this very vague idea of decentralization, which we could talk about that and what does decentralization mean, but it's really not. It's pretty centralized. There are a number of important core companies and individuals to crypto. A lot of things are passed through some key industry

stakeholders. And then you have people who are literally pouring billions of dollars into this industry, into the companies and startups and tokens, for example, A16Z or Paradigm, these VC funds with multi-billion dollar funds to invest in crypto companies. I mean, we can talk about that, too. There are people who are very suspicious of what's going on there because now you have what some of these VCs are doing is they invest in these crypto companies, whether it's a new token or an NFT or some online community or put together your buzzwords from Web3. And instead of waiting several years or more for some exit, as they call it, a liquidity event, the company is bought or it goes public or something like that. Now you can have your exit in six months because what you do is if you're A16Z or whomever, you give the company however many million dollars you want

to give them, and they give you a bunch of tokens. And then you have the tokens, you know when the ICO is happening or whatever the equivalent is. And of course, the VC with 10% or 20% of all outstanding tokens is going to be able to play the market right and sell them at the top and then make their mint. So I think that's what people need to realize is that all the sort of plays at decentralization and decentralized power relations are not really happening. You see time after time when the rubber meets the road and say someone's apes are stolen on OpenSea or even Tether, which I have no problem saying is the shadiest company in crypto. Tether the other day froze 160 million, Tether, basically $160 million on behalf of some

unspecified US law enforcement investigation. And Tether is supposed to be decentralized and not supposed to be able to do that. OpenSea freezes assets. Eventually, what you see is people trying to recreate the things that they're ostensibly overturning, which are centralized markets, authorities, figures, institutions, people to step in when the shit hits the fan in forms of insurance, things like that. I mean, it's almost funny in a way that you have however many years of monitoring and kind of capitalist history to develop all these institutions that we have in our current economy many of which are dysfunctional and then these

people are saying well let's blow that up but then also rebuild them and that i think finally gets at one of the real sort of rhetorical or ideological kind of missteps or switcheroos with all this stuff, which is that we have a shitty system, whether you're a leftist, or there are plenty of people of different ideological affiliations who aren't happy with how the economy works. But the solutions proposed by Web3 and crypto are pretty much across the board worse. And that's kind of hard for some people to handle at first. Certainly in my debates with folks, they ask, well, what are you proposing that's better? You know, and I'm open to things that are better and I want to talk about things that are better. But, you know, first we have to stop the incoming tide of the bad shit, which is what A16Z is pushing, which is the financialization of everything, which I think is really what Web3 is about.

And other, you know, moneyed interests and all the scammers and things like that. I mean, we can try to take away a few good things from all this stuff from Web3 and crypto, but first we really need to stem the tide of what's happening because there's so much money coming in from powerful interests. Yeah, I always like to think back to the early PayPal narratives as well and how, in that case, PayPal was going to disrupt the banking system narratives as well and how in that case, you know, PayPal was going to disrupt the banking system and give everyone a bank account that's like, you know, free from all these regulations and that can transfer around the world. And then, you know, when it came time to like make the money and really like capture its market share, it was happy to work with all the

regulators and become part of the system, a new middleman to take its fees and just, you know, become part of that system. And, you know, it's the same thing that we're going to see here when it reaches that point, if we're not already seeing that happen. I want to return to the stable coin and Taylor conversation in just a second, because I think what you were talking about with A16Z and more largely, I guess what these venture capital firms are doing gets to another of the questions that I had around the price drop and kind of what we're going to see moving forward. And that's that I feel like a lot of what has happened in the tech industry over the past more than a decade since 2008, 2009 has been in part due to the incredibly low interest rates

that we've had that has made it really easy for these companies to access capital. And especially during this pandemic period for all this capital to flood into a really that we've had that has made it really easy for these companies to access capital. And especially during this pandemic period for all this capital to flood into a really risky crypto space. And now there's talk about raising those interest rates again. So, you know, borrowing becomes more expensive. Do you think that that potentially has an effect on what happens to the crypto market at that point? Yeah, definitely. Actually, this is something that my co-writer and collaborator, Ben, talks about, that the beginning of this latest crypto boom.

So roughly, you had a 2017, early 2018 boom. That was market grew. There are all these ICOs, many of them scams, Bitcoin expanded in value, Ethereum too. And then you had a bust in 2018 and sort of a crypto winter, as I call it. Now we have a boom that started, I suppose, in 2020, exactly during that time you're talking about when at first, because of COVID, we had all this money sort of flooding into the system from the federal government. Almost ironically, then, if you want to talk about kind of coiner ideology, which is that the latest crypto boom owes a lot to the sort of free flood of capital into the system from the Fed and the easy money

sloshing around that all these venture capitalists and sovereign wealth funds and whoever else had access to it. All that fiat money. Yeah, all the fiat money helped juice the crypto market. And of course, everyone who is in crypto is eventually trying to get back to fiat so they can buy their Lamborghini.

Yeah, I guess Lamborghini is not accepting crypto yet for vehicles. Not that I know of, but they probably should because those crypto guys love Lamborghinis. But in terms of the prospect of interest rates being raised in the next few months, that sounds like what's going to happen.

And it's certainly the talk that I see online. Even diehard crypto people think that there's sort of a further crash or kind of crypto winter coming, partially because they're raising the interest rates. The SEC is looking all over the industry. How much they're going to do remains an open question. Their Department of Justice investigations. There is a lot going on sort of at the investigatory and regulatory level. The question is, you know, how does it materialize into actual government action?

Do people end up in handcuffs? I mean, we know, at least according to Bloomberg, that some people at Tether, the company, are being investigated for criminal bank fraud. And certainly the reports have already come out from the New York AG and the CFTC point to bank fraud. I'm no expert on that, but it sure seems like they've done something indictable among their various antics. So there are a lot of sort of dominoes. This is kind of a weird time earlier, maybe off air, a lot of dominoes that you could kind of point to that might start this whole process. But even Bitcoin maxis and serious crypto people will say, hey, there might be some darkness coming.

Of course, what they think should be done or how one should respond varies entirely from what I think. But you should definitely keep hodling, I'm sure, right? Well, yeah, that's what I think is like, oh, keep hodling, I'm sure, right? Well, yeah, that's what I think. It's like, oh, well, there's this common thing, like there are these cycles. This is just going to be a worse dip than 2018. You got to hodl and stay strong, diamond hands, that whole business. Buy the dip, I'm sure, as well. Yeah, there are a lot of people who will keep the faith. The problem is that there are a lot of people who are going to be wiped out or who are going to have to sell at a loss because they have to pay their kids tuition

or whatever. And that's where you have real problems like social problems and people committing suicide, families breaking up, just real issues. I mean, some of this stuff is documented already because you have the occasional piece even on on CNBC or somewhere, about some of the relationship issues attendant to crypto, which crypto has a lot in common with gambling, I think, because we've already seen a trillion dollars in value wiped off the sort of overall crypto market, I believe. Let's see, right now, coin market cap says 1.77 trillion. There's no reason why that can't go down to near zero, because despite what crypto people might say, there's very little productive value underlying this stuff. There are no companies producing things. I mean, there are companies involved in the space, but in the end, a made up digital currency is a made up digital currency. And there aren't that many companies that you can sort of sell for scrap or there

aren't underlying commodities, aren't houses to make the 2008 recession comparison, aren't houses, at least that people were living in for a while before the whole market blew up. So that's why I think in some ways this could be pretty bad because a lot of these coins may just go to zero or become sort of the equivalent of penny stocks and people are going to lose their money. People are not going to be able to withdraw their money. Probably some exchanges are going to collapse in one form or another. I don't know which ones, but certainly there've been problems already with China banning trading from the mainland China.

That's cut off a lot of customers for Binance and other exchanges. So I think that's also worth keeping in mind is just the social effects of what's going to happen here. You're going to have basically millions of gamblers go bust at once and people are going to be really upset and also in dire straits. Yeah, I think it's something to always be paying attention to and keeping in mind, right? As much as we like to criticize the crypto capitalists and the whales and stuff like that. But you know, there are people who are buying into this and being duped into it who are going to lose money in the end. And, you know, just to build on what you were saying there, because I don't think we mentioned it earlier on, but I saw the crypto market cap has dropped $1.3 trillion. And that Bitcoin dropped from about $67,000 in November down to about $38,000 today.

And Ethereum went from $4,800 in November to about $2,700 today. So those are significant drops, right? Almost 50%. And as you're saying, there's a potential for it to go even further. And there are a lot of people who would have bought in at one of those really high prices because of all the enthusiasm that was happening and how so many people were pushing it on Twitter and wherever else. It was in the media, getting glowing profiles, etc., etc. So they're buying in and they're going to get hit if this doesn't go back up. Yeah, there's probably some discrete way to define this, but people will say, oh, the prices are defined by various underlying factors, perhaps, especially when they're tied into other tokens or governance possibilities or DeFi pools or whatever else. You know, take your basic cryptocurrencies.

They're basically prices defined by what someone else will pay for them which in turn is driven by FOMO and kind of virality and the froth of social media and influencers and celebrities like it's a hype economy basically and you gotta keep the hype going I mean that's my theory for one reason why uh MicroStrategy this company that holds a lot of bitcoin um it's one of the top holders of Bitcoin among any company, I think, besides maybe Grayscale or a couple of the other funds. But they're making pretty frequent buys in sort of the eight-figure range, which is obviously a lot of money. But I think they do it to kind of keep the good times rolling, not just to take

advantage of the market or to buy the dip, but to say like, hey, we're still here, we're still doing this. And because that helps drive the market knowing that like Michael Saylor is still committed, he's got diamond hands. And you see this so much more clearly, like with the NFTs, when Paris Hilton is going on TV and promoting her age, she's saying like, this is a thing I own, it's now worth more now, because I'm showing it to you. And I'm talking about it. It's a bizarre kind of quality of this economy. But I might also just be talking about the meme economy in general, or sort of meme assets and meme stocks. So that's why I think also you just can't trust the numbers you hear. And there is, in the wars over political disinformation, we've kind of gone pretty far

astray. And like, you know, there are all these kind of bad faith actors and all these organizations judging what's misinformation, what's not and stuff. But to sort of bracket all that, misinformation and disinformation is a huge problem in crypto, because it's basically information that drives prices. And when there's no real information you can rely on, and when it's just like, who's tweeting about it, who has the the biggest followers who's doing an airdrop of this token that kind of thing when it's all kind of hype and celebrity and incentive and giveaway and lottery based when it resembles really a casino it's very volatile and dangerous to reiterate what we were talking about earlier there are people who bought in at the top like you said and there are people who are buying in now but the people who are largely going to make money are the ones who can play off the volatility. And those are the companies and

the high frequency trading firms and basically the crypto hedge fund type outfits that have appeared that you don't hear a lot about, but they're supposedly making money hand over fist. Yeah. I want to get into the Tether aspect of this because I've heard in the past connections between, okay, Tether is printing a bunch of stable coins, and then you see the Bitcoin price boost after that because all of these new stable coins have kind of flooded in. And people have been noting that Tether hasn't been, I guess, minting as many new coins in the past month or so since this kind of price drop has started to occur. So first of all, what is a stablecoin? What is Tether? And what kind

of effect does it have on the broader crypto marketplace? Stablecoins are tokens or currencies like any other cryptocurrency, but instead they are pegged to an existing fiat currency usually, and are supposed to be at a constant value. So one tether is worth $1. The idea is that tether doesn't really deal with small-time customers because you can buy existing tethers on an exchange. You could go on Coinbase or FTX or something and buy some tether. But tether does deal with big corporate and trading firms who buy like 100 million at a time. And so the idea is if you're one of these firms, or if you're an exchange and you need a lot of liquidity on the exchange, you give Tether $100 million and they give you 100 million Tether

back. And so stable coins, they're kind of like casino chips. You can take them around between tables. You can also take them between casinos. And then you can use them to play games and to buy other chips, basically. So there are a lot of things to say about stablecoins and about Tether in particular. Tether has extraordinarily shady history. There's a lot of good stuff out there in Bloomberg by Zeke Fox, Crypto Critics Corner podcast, or Ben McKenzie and I wrote a piece for Slate that is sort of like an explainer. There's a lot of good sort of up-to-date stuff.

Read the New York AG report or read some of the government reports and learn about how Tether had 29 undocumented banking relationships. And we're talking moving billions of dollars, supposedly, between banks with no paper trail. So there's just a lot of weird stuff. The weirdest thing, probably, which people don't even talk about that much, is that its CEO hasn't been seen or heard from in years, I think close to a decade. So anyway, Tether is really important as the main casino chip, the one that's used the most. You could say its importance is arguably declining because there are other stablecoins emerging. There's USDC. Some people have questions about USDC. I'm not really ready to call bullshit on it, but it's definitely rising in prominence.

It's definitely also part of a consortium that's playing ball with regulators much more than Tether and other crypto companies. So there are several main stable coins, but right now you have about 78 billion or so Tether in circulation. If Tether is a Ponzi scheme, as many people think it is, meaning that it doesn't have 78 billion dollars to back the 78 billion Tether in circulation, it would be by far the biggest Ponzi scheme in history, bigger than Bernie Madoff. But there are all these other problems, which is that Tether is really important. It's just sort of this glue, this sort of interstitial material for the crypto economy. I mean, 70% of Bitcoin trading is done in Tether, meaning people are using Tether as the currency

to get in and out of Bitcoin. And a lot of that is arbitraging between exchanges by high-frequency trading firms and stuff like that. But just imagine if, well, we don't even have to drop an analog, but imagine though, if you were sitting at a casino table and suddenly you were told your chips were worthless or they're worth half of what they were worth five minutes ago. And so that's the great fear is that Tether will somehow break its peg. It won't be worth a dollar or there'll be a sort of proverbial or kind of literal bank run on Tether where people try to redeem Tethers, either through the exchanges, or through Tether itself, or probably both. And this would happen if there's yet another government action against Tether, which there have already been a couple, arguably slaps in the wrist, or if the Tether people are arrested for the criminal bank fraud that some people seem to think they've committed. But it's a funny thing. You know, I talked to some traders,

and I actually like this attitude in a way, because I think it's very honest, which is they say like, look, we know the risks. Yeah, I deal in millions of dollars worth of tether every day, but I kind a scam that has tentacles all over the industry. And they're also a huge VC. They're part of this company called iFinex, which also owns the exchange Bitfinex, and a relationship that wasn't even revealed until the Paradise Papers came out. And then Tether was like, oh, yeah, we also own this exchange. And all the top executives at Tether are the top executives at the same exchange. And sometimes we loan each other money. this exchange and all the top executives at Tether are the top executives at the same exchange. And sometimes we loan each other money. It's just like shit that would not fly in most corporate

settings. So there's a lot of crazy stuff with Tether. But at the same time, the people who run it sort of act like clowns on Twitter and are very brazen in a way, kind of joking or sort of gesturing at criminality almost. But until people like Paolo from Tether are arrested, which who knows if that'll ever happen, they continue to be the sort of clown princes of the crypto ecosystem in a lot of ways. Just to continue for a second, if you just point to El Salvador, the company that's basically helping run the El Salvador Bitcoin experiment or project is Blockstream. Blockstream is basically a Tether subsidiary via investments, and the Tether people themselves are involved. So like I said, this is a small industry with like a dozen really important people. And a few of those people are the Tether executives, I'd say. You're totally right, though. Tether hasn't printed, I think, this year. And there were

months last year where Tether would print several billion dollars worth of coins a month and it would seem to drive price action. Now you have a lot of printing of USDC, which, again, is sort of the more polite Tether. There are one or two other stable coins that are actually trying really hard to cooperate with regulators. At least the USDC folks show up at congressional hearings. But I'd be remiss if I didn't mention there is a famous paper called Is Bitcoin Untethered? And this was written a few years ago by two scholars. One of them's name is John Griffin. The other one, I'm afraid I'm blanking on his name. But their contention was that large

printings of Tether, which were then used to buy Bitcoin, helped drive Bitcoin price action. And that Bitcoin price is heavily dependent on Tether, on printings of Tether and movements on Tether. I mean, they have more sophisticated kind of forensic blockchain analysis, but you can see forms of this in action when Tether prints a billion dollars worth of Tether. Everyone on crypto Twitter gets really excited and posts memes about pumping the market. And then you can see on this in action when Tether prints a billion dollars worth of Tether, everyone on crypto Twitter gets really excited and posts memes about pumping the market. And then you can see on one of these accounts like Whale Alert, which tracks major transactions, you'll see $400 million worth of Tether go to Binance. I mean, that might be totally above board. That might just be Tether

providing liquidity for Binance. But that helps drive the market like you can see some of what's happening you know we haven't even mentioned the phrase money laundering which of course hovers over everything crypto but to sort of round that out the crypto people and the tether people say that paper's flawed i have my doubts but whatever i'm not really an economics expert but one of the main authors of that paper is named John Griffin. He teaches at University of Texas at Austin, and he has a consulting firm called Integra FEC. And for at least four or five years, his company has had millions of dollars worth of contracts with the IRS, the DOJ, and other government agencies.

You can look up the contracts. It usually says sort of expert witness or forensic work or something like that. But we know what he's doing. He's advising investigatory agencies about Tether and about other cryptocurrency issues, probably some involving straight up criminality. So Zeke Fox of Bloomberg very memorably last year said that Tether is practically quilted out of red flags. It's pretty unbelievable. That's why I say it's brazen. And the brazenness of sort of a lot of things that happen on Twitter is one of the things that keeps bringing me back because

there are all these great stories and people are doing a lot of this crap in public. I mean, Naeem Bukele is like, you know, he's just doing it all in public. He's trading from his phone, or at least he claims to be. And these ridiculous schemes are happening basically in public. You can see the transactions on the blockchain and people brag about it on Twitter. So of course, there's always a difference between what you can prove and what you suspect and what you might talk about as a possibility on a podcast and what I report out in a real piece. But there's beyond smoke here. I mean, and I think that's what people need to understand is both the integral role that these stablecoins play in kind of providing liquidity and juicing the crypto economy, but also how they're easily caught up in all the shadiness that tends crypto, including money laundering and also capital flight.

A lot of people also in repressive countries want to get their money out. And for some people, Tether or other stable coins or other crypto is a conduit for that. Yeah. And just for the listeners, I'll put the links to the stuff that you're mentioning in the show notes as well, so they can check it out if they want to find out more. Cool, cool. But, you know, I think everything that you're talking about there shows just how shady the whole Tether and stable coin and, you know, larger crypto space is. But I think one key piece there is the regulatory aspect, right? And how so far they have largely escaped regulatory scrutiny. And that seems to be changing now. You know, there's talk at the SEC, at the Fed, at the Consumer Financial Protection Bureau, which just brought on Alexis Goldstein, who is a known crypto critic. And, you know, there's even rumor now that the

Biden administration is going to put forward an executive order laying out its intentions, I guess, for crypto regulation. So what do you see happening there? And what is the potential, I guess, effect of this regulation? And, you know, is there any idea of what the U.S. government might actually do with crypto right now? That's the big question is how is this all going to play out? Because, I mean, there's plenty of criticism by the administration for in different areas of policy, but they've hired some good people in consumer protection, the FTC, antitrust, all that stuff. And we know, I mean, I even know based on my own FOIA requests that get denied because they say that they're investigating these companies.

So a lot of these companies are being investigated in one form or another. It doesn't mean they did something illegal or wrong, but you have stuff like Senator Sherrod Brown and Senate Banking Committee sent letters to all the stablecoin companies, including Tether, USDC, all the other ones, asking them some basic questions about their operations and their holdings and their reserves, which are big questions. One little sort of parenthetical, one useful way of thinking about this stuff is like, these are private companies minting money, basically. This happened before in history, like in the 19th century, when railroad companies and other companies in the West were making their own money. It can work for a while, but then

eventually, you know, it's ripe for scams and manipulations. And who says that a McDonald's buck is worth a Pepsi buck or whatever? And that's basically what's happening. So understandably, the government is very concerned about all this stuff. And you do have some people getting very rich and some people losing a lot of money off of all this. So we know that the SEC, Gary Gensler, he does lip service to blockchain. He taught a class about it at MIT, but he wants to do something to rein in what he calls wildcat banking. He speaks about this being the somewhat equivalent of 19th century wildcat banking with private money and things like that. One question is, is there sort of a grand unified strategy across the government? I don't know. That would be nice to think. But even then, how do you respond? Because if you're sort of the Biden administration or Gensler or someone in the White House who's coordinating economic policy But do you want the blame to be just immediately laid

at the foot of the SEC or the DOJ or all the above? Or is that avoidable? Or when is the responsible time to do this? I think those are some questions that are probably going through the air. Some are probably also more practical, collecting evidence on some people, waiting for certain

processes to play out, actually waiting for subpoenas to be responded to and things like that. You have people showing up to congressional hearings. Some people are not. And there's a lot of lobbying. I think that's also important to note. A16Z, there was a great article in the New York Times, which you should also link to. They went down to D.C. and did a whole tour of Capitol Hill and gave out notebooks and sample legislation and talked to all the movers and shakers.

And it's pretty interesting also because a lot of the blockchain people and crypto people seem kind of new to political lobbying in a way. So they'll talk about it very openly on Twitter, some of the people from the Blockchain Association on Twitter just sort of talk about, oh, yeah, you know, this person, the banking committee is good because X, Y, Z, but we're trying to convince this other person, the banking committee who's not so good. I don't know. I mean, I don't think all lobbyists kind of talk that way. But there's a lot of action going on and talking and a lot of like, well, is anything going to actually happen out of all this? So what will the executive order say? They're saying it's about national security. Well, that means almost anything these days. What's the SEC actually going to do? I mean, you have something like, speaking of shady companies, Celsius. Celsius is the biggest crypto bank. It's heavily involved

with Tether. Tether is one of its lead investors. To show you how some of these sort of Ponzi economics seem to work sometimes, Tether loaned a billion dollars worth of Tether to Celsius, and Celsius gave them back Bitcoin in return. So, you know, fictional currency for fictional currency. And there are obviously more complicated kind of exchanges and trades going on. And there's all kinds of bizarre loan arrangements now happening, not to mention the fact that consumers can take out loans against their NFTs. But to go back to kind of the government, it's like, how much is this going to be coordinated? How much is this going to happen at the same time? I think there's just a lot of questions there. So I'm heartened by the fact that there seems to be a lot of skepticism and people in Congress are asking the right questions and the

SEC and the CFTC. I think Alexis Goldstein, for example, is great. A lot of these great appointments, but how much can they do and what will they do and when? I'm impatient and I think other people are impatient too. I mean, things didn't happen under the Trump administration because first of all, the bubble wasn't this big, but also the Trump administration didn't care about white collar crime. And then we've seen this revolving door in the classic big government style, not limited just to Democrats, but there's been quite a revolving door between the DOJ and other agencies and crypto to A16Z, other VC agencies, the lobbyists, all kinds of firms. And some of these people are just going from minor positions

in the Treasury Department to go work for some forensics company. And that's probably not that big a deal. But there are other people who are career prosecutors who prosecuted financial crimes who are now becoming general partners at major venture capitalists. So we can be cynical about that and say that happens in every damn industry from government, which it does. But it's not reassuring. So I'm kind of in the end of two minds. There's a lot of interesting talk and discontent, perhaps brewing on Capitol Hill of a good of a good kind. People are skeptical.

But in the end, it's all about show me something. What the hell are you going to do? Again, I do think if this is a Jenga tower, tether is the piece you pull out and make an example of and then track the fallout from there. don't think that like jeremy allaire from circle i'm not accusing him of a crime but like i don't think like sort of the more mainstream figures like i don't think sam bankman freed's gonna be charged with a crime even though like who knows what ftx is up to and alameda is up to but i could certainly see as has been floated the tether people kind of being the criminal fall guys, and then seeing how it plays out from there. But what you really need to start is just to say that most of these tokens are securities

and let the SEC start there. And then you can start adding some laws on the books and specific regulatory measures. But people who know this stuff really well, someone like Rohan Gray, he's a great guy to follow on stablecoins and read on this stuff. He'll say, I think that that the government needs to pass. First, they need to pass a stablecoin act that he co-wrote. And then they need to just enforce a lot of the laws that are already on the books. Look at companies who are violating securities laws. Look at companies for money laundering, all this stuff.

I mean, there's a lot of meat on the bone there already. So go eat. Yeah, we can hope that there's something happening. It looks like there's conversations about it. But then at the same time, you see mayors and you know, Congress people and senators, and people at the state level who are like trying to get the attention of the crypto industry in a positive way by like boosting it up. Maybe they've gotten money from it. Or maybe they just think that if they say that, that'll mean stuff will come to their state or their jurisdiction or whatever that will create jobs or whatnot. But then on the other side of things from the US government,

we see China banning crypto mining, we see a proposed ban on crypto in Russia, I believe a partial ban in India. And I think the proposed ban in Russia is one of the factors that are cited for part of the decline in crypto prices recently. I don't know how much you've been paying attention to what's going on internationally. But what do you see there? And how do you see other countries, you know, including those that are dealing with the effects of crypto mining on their power grids responding to crypto in general? Well, I think one thing you have to say is it doesn't make you a sort of an authoritarian for trying to decipher the behaviors and interests of authoritarian countries. So whether you're a democracy or a relative democracy like the United States, or you're Russia or China, far more authoritarian countries, you want some control over monetary policy and the money flowing in and out of your country. I mean, a coiner might stop me here and say, actually, no, look, you are an authoritarian because even a U.S. monetary policy is authoritarian and we're all being forced to submit to the edicts of the Fed and the money in our pockets is constantly losing value and stuff like that.

I'm already thinking of David Columbia's book. Yeah, David Columbia is obviously the man on that kind of stuff and kind of mapping those ideologies and how it feeds into all this stuff. And there are people who say that stuff because they believe it and because they're true believers of crypto. And there are people who say it because it's sort of an ideology of convenience. But all that said, countries want to understand what's going on within their borders with money and want some influence over the economy and monetary policy.

So they want monetary sovereignty. We've seen their real material consequences for Bitcoin and crypto mining, at least for proof of work mining, which is what Bitcoin and Ethereum run on. Ethereum has said for years it's going to move away from that, but it hasn't happened yet. And a lot of the other sort of lesser coins run on proof of work. But Bitcoin is obviously the most important. And that's where you get power outages in Kosovo, in Kazakhstan, in Kyrgyzstan, in Iran. And I assume they've had outages in China. They've at least kicked them out now.

But, you know, there are real material consequences. And I think one thing we're starting to understand is also their potential social consequences. There was a great article actually, in the AP recently about a town in Brazil, I forget the name of the town, but there was a guy who basically ran a Bitcoin Ponzi scheme. And this speaks to some of the issues we've sort of gestured at, but haven't talked about yet, which is like the financial inclusion angle from crypto, which is sort of a more polite version of get rich screen, which is like, we're going to come include the people who have been shut out by the evil traditional banking system, which sounds great, you want that. But then that sort of merges with what David Gerard and other people call

affinity fraud or affinity scams, which is like, you sort of appeal to specific groups, say the US, we're going to talk to people of color in urban city centers who haven't been able to get proper credit or bank loans and stuff. This is Spike Lee commercial, basically. Yeah, things like that. And there are people who speak very well to the kind of ethical and complications of this. And affinity fraud is sort of the term

that I've come upon recently, but David Gerard, I think, is writing about this, which is basically you sort of use the circumstances and kind of vicissitudes and problems and also representatives of a benighted or oppressed group, or even just an interest group. It doesn't even have to be a group that's disadvantaged. And you appeal to those aspects of that group. So in crypto, you have it for everything from Black and Latino crypto groups to queer crypto groups to people who just have an interest that can somehow be cryptified. It doesn't have to be sort of a cultural or class or ethnic identifier.

Yeah, I had someone get mad at me because I wouldn't express any interest in a series of queer NFTs that would like by the NFT space. And I was like, no, but there's still shit, even if they're queer. Yeah. And, you know, there's a question's still shit, even if they're queer. Yeah. And, you know, there's a question of who should kind of criticize that and speak against that. Like, you know, I'm a cis white guy. I don't need to criticize every sort of example of affinity fraud, but it certainly happens. And so the story in Brazil was that this guy sort of used a mix of just classic Ponzi stuff, get rich quick and a little bit of affinity fraud because he was this sort of mover, this hustler in this town in Brazil. But he really

found his speed or whatever with Bitcoin. It represents all the cult-like aspects that can attend this stuff, the multi-level marketing stuff, the desire to sort of transcend one's circumstances, to pull something over on the authorities and on the powers that be, especially the economic powers that be, especially the economic powers that be. That's something that I'm very sympathetic to, which is that I hate the banks. I don't wake up praising Jamie Dimon or the Fed for that matter. And I would love to see some sort of even revolutionary change in the system. But again, we have a crappy status quo, but what's being proposed is worse. And what you saw in this one story in Brazil, this one kind of Ponzi king sort of precipitated all these competing

Ponzi schemes that other people were running because he became so popular and people were having their relatives send in money and people were offering better interest rates. You know, it was a classic Ponzi scheme in that he was promising great interest rates via the magic of Bitcoin and became violent. People were killed. And this is what I mean where I think we're only starting to see some of the social costs of this stuff, because I've seen some people on Twitter actually speak rather intelligently about this. But there's something when you sort of deputize yourself or corporations to print money, that is sort of undermining a certain part of the social contract or contract one expects with the state.

I'm not saying it's a contract that is sacrosanct or is beyond reform or change, but it changes the social dynamic. And I think there are other sort of social influences that we see. And it's when we see the decline in trust, we see the rise of fraud and scams, we see the decline in trust in existing authorities because people think, well, why don't I just go for Bitcoin? And then when Bitcoin goes south for someone, they don't trust their neighbor because their neighbor just ripped them off. And then you have the material consequences of people losing their money, of electric grids

going bust. And so, I mean, honestly, there are probably academics who have studied this to great effect. But one thing actually that my writing partner, Ben, says to me sometimes is like, there are a lot of people in academia, people who you and I talk to, I think, activists and other people who are making these arguments and deserve to be listened to and heard. But there's also a sense in which these arguments have been made for a number of years. And so we need to kind of elevate their work and the work of people like David Columbia or whoever else we're talking about, the many people we've cited on this call, but also find kind of other ways to tell people, like, this stuff is dangerous. This is gambling. I mean, we don't need to oversimplify it, but there's a lot of manipulation and there's a lot of reasons why we shouldn't trust this stuff. I mean, it is sort of my hope that in five years or 10 years or however many years, hopefully not too long, we'll look back on crypto as this weird tulip mania type aberration that we all went through for a host of understandable social and cultural and economic reasons, some of which we've discussed in this call. But obviously, the danger is that this isn't just an aberration, that this is part of this larger financialization of everyday life that Web3 is really pushing for. And that we're not going to just look back on this and laugh at like,

you know, FTX was like a pets.com or something like that. Or remember when crypto.com arena was a thing. Remember when LeBron James was partnering with crypto.com to run a curriculum for a school? Man, that was a weird time or a weird couple of years. I don't know. Maybe that will be the case in a few years, or maybe we'll still be banging this drum and shouting, what are you all doing? Yeah. If people want to know more about the scam aspect of it, they can go listen to my episode with Steven Deal, where we talk about the pyramid and Ponzi scheme aspects of it. They can go listen to my episode with Stephen Deal, where we talk about, you know, the pyramid and Ponzi scheme aspects of it. And what you were describing in Brazil sounds a lot like the Albanian pyramid scheme crisis, obviously not as bad. Stephen's excellent. Yeah. This isn't a question I had for you, but it's what comes to mind when I hear you describe that is really,

you know, I feel like one of the arguments that we have against some of the things that you're describing and some of the issues that we're talking about is that, oh, yeah, but you also need to think about the marginalized people who crypto is benefiting and in particular the people in the global south who crypto is benefiting. But I think as you're describing there, like these are really misleading arguments that serve these companies, because in saying that, you very narrowly look at maybe the way that some people can send some remittances home with fewer fees or something like that, but miss this whole larger scale of the problems that this is creating that you're

completely ignoring because you want to find something positive to justify promoting these things and not saying, actually, the whole thing should be wiped out and gotten rid of? Yeah, the global south and remittance issues and sort of countries with unstable governments, unstable markets, unstable economies, that is a challenging rhetorical, intellectual landscape. And some people try really hard to say, this is why we need Bitcoin, or even this is why we need Tether. There's a dissident government in Myanmar that's proclaimed Tether as its currency. And as much as the junta that governs Myanmar is terrible, I mean, do you want to push for them to use this kind of privately printed digital currency by these people that are wholly unreliable and should not be trusted with anyone's

economic future? Probably not. And there are know, there are different ways to look at this. Like, look at the example of El Salvador, which is important and will continue to be important for everyone, I think, as a model of what not to do. But, you know, even the crypto maxis, a lot of them think, hey, El Salvador is where it's at. But there's all kinds of corruption going on there. And you can't trust anything Bukele says.

And the people he's wrapped up with are totally sketchy. And even just look at the numbers, the Chivo wallets don't work. There's constant technical problems. Recently, there were some numbers out there was an increase in remittances. A small portion of them are via Bitcoin. Most of them are still via dollars and via other networks, traditional sort of cash networks that people use to send remittances. And I'm not an expert on remittances, but from my understanding, in some cases, they can be hard to send and you can get gouged depending on your circumstances. But remittances are not the sort of desperate situation that require the cure-all of crypto. And then when you talk about other countries like Argentina, there's some inroads being made there by Bitcoin,

by sort of the tether network of people because they've had inflation problems. Again, I think you want to ask, do you want the solution to a country's economic instability to potentially be sort of a competitive currency from a private company that can't be trusted? And that's probably leaving out a lot of other issues that one could point at. But it doesn't seem like a wholesale solution by any means. I mean, this is possibly an example of one of the spectrum, but I have an elderly relative. She's my grandmother's cousin who I talk to a lot. I cannot explain to her what Bitcoin is. She'll never understand. And maybe we'll just have to wait for the old people to die out. And all the young people, because they grew up in Eric Adams schools, will understand what the blockchain is and stuff like that.

But the idea of saying that fiat is going to zero or that fiat needs to be replaced with Bitcoin or some other crypto, but usually it's Bitcoin. And that we need to have a wholesale economic revolution and complete currency transformation. And that somehow we're going to educate everyone and empower everyone in society to be part of this. It's just lunacy. And besides being beyond impractical. And just as the eyeball scanning thing that Sam Altman wants to do with WorldCoin is, besides being totally creepy, just total lunacy. There's very little sense of practical creepy, just total lunacy. There's no, there's very little sense of like practicality, even by revolutionary standards. Like if you want to revolutionize

people's sort of economic relationships with one another, again, if, if our friend David Columbia were here, he would say that like, well, these people want the right wing exit from society. So they don't care about the average person, but people like us might say, look, you need higher taxes on the rich, you need wealth taxes, postal banking, access to the kind of banking and credit services that everyone can, but through nonprofit means, kind of state banking they have in North Dakota, more credit unions.

They're very simple, not without sort of capital requirements, but there are existing solutions to a lot of the things that ail us. And there's also existing socialist and leftist solutions to a lot of things that ail us that could be applied. And so that's why I ultimately think whatever revolution might come via hyper-Bitcoinization or mass adoption of crypto is going to be a really unequal and ugly one. And I don't think there's really any way around that. Fortunately, I think it's so ultimately impractical that it probably won't come. It will just leave a lot of wreckage along the way, like in El Salvador, I expect.

Yeah, I think essential points. And Jacob, I appreciate you giving me this much of your time. I have one final question for you before we end this conversation. I think we've talked about many aspects of this based on where it is right now with the prices having dropped significantly since November, but also the other potential issues that are coming down the pipe, whether it is higher interest rates or regulation or potential issues with stable coins or any number of other things. Where do you think, and I think you sort of touched on this, but where do you think we're going from here? What do you see happening in the next little while? What should we expect to be seeing from here and what issues still exist that you think we might end up having to grapple with moving forward?

Well, I think there are a couple of things. One, you mentioned earlier, I believe, which is that crypto is becoming more of a political force. We talked about legislation, regulation, stuff like that, stuff like, you know, the DOJ or SEC might do. But, you know, there are all these Republicans and some Democrats, it's pretty interesting, if a little disheartening, who are sort of pledging their allegiance to Bitcoin because they can get money. It's very simple. And also, it kind of dovetails with this kind of right wing republicanism that we have now of guns, God and freedom and stuff like that. Josh Mandel from Ohio is doing that. It's ridiculous, but there'll be more of that. But just because some kind of clowns in Congress are getting crypto money doesn't mean that the SEC has to stop doing what it's doing. But the other thing is, you know, I think the thing that crypto still struggles with, and I speak more broadly also about Web3 here, is its use cases, proving its usefulness. Speculation, fine. If you want to try to risk some money and ride the markets and buy increasingly complicated financial products and get into DeFi, which we haven't really talked about, but that's where all the arcane financial products are happening where you can stake stable coins and get impossible interest rates, but then some guy with a fake name might steal all your money. There's just rug pull after rug pull in DeFi, but that's where the innovation, so to speak, is happening. But in terms of like, look, what does

crypto or NFTs or a lot of the web3 infrastructure solve for people on a day-to-day basis not much it gives people a place to speculate a place to dream and risk money like in any casino and also it creates some new companies that venture capitalists can make bets on but there are very few real problems that are going to be solved by crypto, Web3, or even blockchains. I mean, this is why you see the declining retail interests in crypto trading, and why you see the relentless advertising, and why also you have the salesmanship on Twitter constantly. And TikTok, of course, but frankly, I'm not a big TikTok consumer, but TikTok is certainly part of this. It's part of everything. But Facebook or Uber is always, I mean, these are malevolent companies, we can easily say. I mean, all the gig companies are highly exploitative and they've sold themselves

and kind of whitewashed their labor records in the case of Uber or their data practices or labor records in the case of Facebook. But they didn't have to sell themselves so much. Uber, you know the value add, basically. You know what you're getting. You get a car and some poor person drives you for a cheap rate. And then you leave and they suffer the indignities of the next customer and everything. And we know what Facebook does. Some people may think I'm ridiculous, but what does all this stuff do that actually fixes a problem? And I think also one thing I cite is like, this stuff

is not just controversial among people like you and me, or some Democrats in Congress, or whoever else. I honestly think that crypto and Web3 are more controversial within tech by people who really know their shit, software engineers, technologists, programmers, whoever, engineers, than previous sort of innovations in consumer technology. I'm speaking a little broadly, but even surveillance capitalism, there are a lot of people who bought in, basically. There are plenty of people who took the juicy jobs at Facebook and either believed what Facebook was doing or just didn't care. But Web3 itself has maybe a higher barrier to entry or just more divisiveness between people in tech. There are people who are doing it because

it's a job and it pays well and you can get in on the pre-mine on the tokens and make all this money via the tokens. And there are people who are true believers that it's going to reform the economic system. There are a hell of a lot of Stephen deals. I mean, we like Stephen. He's very strident, of course. I like his stridency. But there are a hell of a lot of people who are less strident than him, but who have a lot of questions and will vocalize them, who I've talked to, you see writing articles on Twitter or elsewhere, who have questions, who work for, some of them work for the big incumbents. That's what the Web3 people say, like, oh, you work for Microsoft, you're just afraid of because you're an incumbent.

Even at the game developers, you see that as well people who are opposing these plans to put nfts and stuff in games yeah and the gaming industry is interesting example too because you see the pushback quite readily and there's reasons why people don't want everything to have a price tag attached to it people don't want to gamble all the time you don't want to be enmeshed in these speculative manipulated markets that they don't really want to have a role in. The other thing with crypto that needs to be emphasized or just repeated periodically is that these markets are open 24-7. That creates a weird effect. Imagine tracking your portfolio all the time or being able to. It kind of creates a weird psychic thing. One thing I say is you don't want to be thinking about your money all the time.

Of course, people want more money and money can be stressful. I have financial stresses, but at the same time, I don't want to be thinking about my bills or my money or my bankroll all the time or however you want to define it. So I think the jury's still out in a lot of ways in terms of crypto and Web3 proving their use and actually getting beyond salesmanship and hype and celebrity hype and viral infamy or whatever, and getting beyond the apes and showing us like, make my life better. Like besides making a friend or two of mine rich, which I do have a couple of friends who've gotten rich on crypto, but they're already well-to-do tech people who are just like, well, I guess I'll

put some money here. And there they went. But, you know, the use cases aren't there yet. The sort of widespread adoption isn't there yet. And we're basically just fetishizing a form of a database called a blockchain that might have a few uses, but is also 30 years old. There's a reason why it hasn't changed the world yet, I think. Yeah, I think that this whole interview has illustrated the issues that exist in this marketplace, I guess, in this space. But I really appreciate you taking the time to come on, to catch up, to talk about what has been happening recently. I really appreciate it. Thanks so much. Oh, sure thing. I love your show and I could talk forever about this stuff. So glad to do it. Jacob Silverman is a staff writer at The New Republic, and he writes about crypto with the actor Ben McKenzie.

You can follow Jacob on Twitter at at Silverman Jacob. You can follow me at at Paris Marks, and you can follow the show at at Tech Won't Save Us. Tech Won't Save Us is part of the Harbinger Media Network. You can find out more about that at harbingermedianetwork.com. And if you want to support the work that goes into making the show every week, you can go to patreon.com slash techwontsaveus and become a supporter. Thanks for listening.