Cryptocurrency Is Garbage. So Is Blockchain.

David Golumbia

Jun 27, 2020·25 min read

Overwhelming evidence shows that the blockchain/cryptocurrency space is mostly fraudulent

Note: Amy Castor and David Gerard provided extensive commentary, editorial help, and in some cases the actual words used in this piece.

I have been writing about cryptocurrencies since at least 2013. From the beginning it has been clear to me how pervaded the entire space is with false claims, conspiracy theories, muddled thinking, and outright fraud of many kinds. It is therefore remarkable to me how much academic, journalistic and popular writing on blockchain accepts at face value dogma that any dispassionate investigation shows to be false, and that has been repeatedly and clearly shown to be false. This dogma serves both those who fraudulently (or at best, out of excessive self-interest) advance blockchain as a solution for… something, and the far-right actors who gave birth to the ideas of cryptocurrency and blockchain in the first place. Repeating these claims only helps to promote their values, the values of those with the deepest vested interest in the “revolutionary” aspects of blockchain, the vast majority of whom span the ideological spectrum from the moderately far right to outright Nazis.

What is especially concerning to me about this is that the material that repeats these claims almost never engages with the clear, public, and what should at this point be very well-known critical work on these topics. I don’t particularly mean my work, although I have tried to show what is wrong with these claims many, many times. I mean the work of major journalists who cover the topic, and major independent commentators — people like Tim Swanson, David Gerard, Amy Castor, Cas Piancey, Bennett Tomlin, and Stefanie Schulte, legal scholars and lawyers Angela Walch, Karen Levy, and Stephen Palley, computer scientists Nicholas Weaver and Emin Gün Sirer, and the reporters for the Financial Times (especially Izabella Kaminska and Jemima Kelly), the global news source that has had by far the clearest-eyed and most detailed coverage of the matter. We could also add the numerous Twitter accounts (such as Trolly McTrollface, Bitfinex’ed, Shit /r/Bitcoin Says) and Reddit communities (especially r/Buttcoin) that routinely debunk blockchain propaganda. I often see academics and popular commentators repeat that propaganda as if it has not been refuted. Yet as a rule those assertions contain no independent verification of those “facts” and no detailed engagement (if there is engagement at all) with the work of those who have refuted them in detail. Not infrequently I encounter a gesture I think of as “yes, but”: “YES, all these criticisms are valid, BUT there is still reason for hope.” But that “hope” is a huge part of the problem.

In what follows I am for the most part not going to do the hard work of demonstrating the following claims, because they have been proven so many times that it is redundant to do it again. The following consists of two lists: falsehoods that nobody who is interested in the world as it really is should ever repeat, at least not without heavy qualification; the second a list of truths and rules of thumb about cryptocurrency and blockchain that have been demonstrated repeatedly (often for many years) but escape notice far too often. After each claim I offer just a brief list of the sources supporting them, but there are many more.

Part I. Outright Falsehoods

These are claims that no responsible commentator should ever repeat, especially without offering specific, detailed, well-grounded explanations for why they are true, along with direct refutations of the arguments offered in the cited sources.

1. Cryptocurrencies are money, cash, or currency

They simply are not. The desire to call them money is found in all of the crypto-anarchist writings on the topic dating at least to the early 1990s. They do not meet any of the standard tests for money (especially the three classic criteria of store of value, medium of exchange, and unit of account). The only accurate sense in which cryptocurrencies can be called cash or currency is in the trivial and reductio-ad-absurdum sense that anything with a price can be exchanged, and therefore can be called cash or currency: but this means that literally everything that can be bought or sold is cash or currency. The major original claim for Bitcoin was that it would soon become widely used for buying and selling goods and services, the “medium of exchange” function, which might in fact have justified calling it currency. That claim has in every way failed to be realized.

Of course, the three terms used here are among the most complicated and polysemous words in finance. Defining them clearly and consistently is difficult, and that has led many commentators to avoid discussing them directly at all. But this fact, as quite a few scholars including Christine Desan and Geoffrey Ingham have shown, cannot lead us to accept even vaguer solecisms about how they “really” work.

• Nick Weaver: “Cryptocurrencies don’t actually work as currency”; “they are deliberately incompatible with the rest of the financial system”; “Most merchants who accept cryptocurrency aren’t actually accepting cryptocurrency, they’re using a service that turns it into dollars”; “they are provably inferior to alternative payment mechanisms.” Quoted in Mark Yarm, “The Best Thing to Do With Crypto? ‘Burn It With Fire,’ Says This Super Skeptic” (Breaker Mag, 2019)
• Jay Adkisson, “The Cryptocurrency Paradox and Why Crypto Is Failing” (Forbes, Nov 28, 2018)
• “Why Bitcoin Is Not a Viable Currency Option” (Knowledge @ Wharton, 2018)
• David Golumbia, “Cryptocurrencies Aren’t Currencies. They Aren’t Stocks, Either” (Motherboard, Aug 22, 2017)
• David Golumbia, The Politics of Bitcoin: Software as Right-Wing Extremism (University of Minnesota, 2016), chapter 5
• Tim Swanson, The Anatomy of a Money-Like Informational Commodity: A Study of Bitcoin (Amazon Digital Services, 2014), introduction & chapter 1
• Paul Davidson, “Is Bitcoin ‘Money’? The Post-Keynesian View” (Real-World Economics Review, 2013)
• On definitions of money, cash, and currency, outside and before the rise of cryptocurrencies, see Christine Desan, Making Money: Coin, Currency, and the Coming of Capitalism (Oxford, 2014) and Geoffrey Ingham, The Nature of Money (Polity, 2004). Desan in particular describes the almost unavoidable reliance on metaphors in describing just what money (and cash, and currency) is.

2. “Smart contracts” are contracts

They just aren’t. Not even close. David Gerard writes that “they are small computer programs. In conventional IT jargon, these are called ‘database triggers’ or ‘stored procedures,’ and they are considered bad software engineering that should only be used when you absolutely have to.” Even Vitalik Buterin, co-founder of the Ethereum blockchain on which most “smart contracts” run, stated in 2018 that he “quite regrets” adopting the term, and “should have called them something more boring and technical, perhaps something like ‘persistent scripts.’” But it is easy enough to see that had they been called “persistent scripts,” almost nobody would have gotten excited about their potential to transform everything.

• Avivah Litan, “Smart Contracts are Neither Smart nor are they Contracts” (Gartner Blog, 2020)
• Allen Scott, “Vitalik Buterin: I Quite Regret Adopting the Term ‘Smart Contracts’ for Ethereum” (Bitcoinist, 2018)
• Karen E. C. Levy, “Book-Smart, Not Street-Smart: Blockchain-Based Smart Contracts and The Social Workings of Law” (Engaging Science, Technology, and Society, 2017)
• Jeremy M. Sklaroff, “Smart Contracts and the Cost of Inflexibility” (University of Pennsylvania Law Review, 2017)
• David Gerard, Attack of the 50-Foot Blockchain (2017), chapter 10

3. There are many successful blockchain projects up and running

Blockchains are up and running (and wasting huge amounts of energy). There are many things taking place on blockchains, especially token generation and transaction confirmation on the Bitcoin and Ethereum blockchains — that is, cryptocurrency. But a major part of the blockchain story has long been that the technology will become useful in many other domains. Reading the blockchain press, you’d be forgiven for thinking that these projects are widespread and happily producing results. That’s false. There are essentially no projects that do what is promised: providing immutable property records, or maintaining “self-sovereign identities,” or securing health records, or securing electronic voting. There are no blockchain projects, as that term is generally understood, up and running and providing the services claimed for them, especially at scale.

• Polis, “What Use Is Blockchain for Journalism?” (LSE 2019), focusing on several high-profile journalism projects: “the use of blockchain in production systems is quite low, close to non-existent” (20)
• “IBM’s systems for Walmart and Maersk are completely centralised, but the back-end database is Hyperledger, so they’re trumpeted as ‘GOOD NEWS FOR BLOCKCHAIN’ — the correct perspective is ‘with sufficient thrust, pigs fly just fine,’ and boy are IBM strapping Porky to a rocket.” David Gerard on Twitter (Dec 1, 2018)
• Gerard, Attack of the 50-Foot Blockchain, chapter 12, on music industry
• David Gerard, “The World Food Programme’s Much-Publicised ‘Blockchain’ Has One Participant — i.e., It’s a Database” (Nov 26, 2017), on one of the world’s highest-profile blockchain projects — that turns out not to be a blockchain project

4. It is “early in the day” for blockchain technology and so we need to wait before we judge whether blockchain will produce interesting results

An excuse sometimes floated for the prior fact, this is a claim made since the earliest days of Bitcoin (and to some extent blockchain). It is wild that anyone takes it seriously. The digital world is saturated with new technologies that stand or fail based on their near-immediate uptake by users. The blockchain story is odd in this way because plenty of people (or machines) run blockchain technology but there are no examples of these technologies doing any of the things their promoters claim for them. Blockchain technology has existed for nearly a decade. Contrast it with similar technologies, by which I mean technologies that can, in some or many circumstances, perform the same functions claimed for blockchain. Imagine if someone said that a service like Facebook or Twitter, let alone a fundamental technology like SQL or HTML, was “still too young to be judged” 10, 5, or even 2 years after it was introduced. Other technologies — technologies that also really do things, just not the things that anybody wants, or not better than other technologies — fade away all the time when they don’t meet user needs. People rarely if ever claim that we need to wait longer to see how great they will be, let alone persist in making claims about ground-breaking and revolutionary digital technology that can demonstrate no such accomplishments.

• David Gerard, quoted in Polis, “What Use Is Blockchain for Journalism?”: “The internet was real, based on successes and real people using it. Blockchain uses this argument as an excuse for failure” (18)
• David Gerard, “Debunking ‘But Bitcoin Is Like the Early Internet!’” (Apr 5, 2018)

5. Bitcoin is deflationary because limited supply determines the price/value of things

The only way you can believe this is if you refuse to look at the price of Bitcoin, or you redefine the words “inflation” and “deflation.” The textbook definition of inflation is a rise in prices, which is the same thing as a decline in the purchasing power of a currency. You need more of currency X today to buy a hamburger than you did yesterday. Bitcoin’s limited token supply has no bearing on this. The price of BTC is wildly volatile, and this volatility has nothing to do with the supply. In Dec 2017, 1BTC cost around $20,000, and today it is worth half that, yet the supply has increased in that time. Just as one of many examples, on March 8–9 of this Bitcoin lost “more than 10% of its value in the space of just a few hours.” So if you needed to pay someone 10 BTC for a hamburger, in just a few hours you’d have needed approximately 11 BTC. Now multiply a few hours out by a year, the standard unit for determining inflation. Even if we say Bitcoin inflated by 10% in one day, that would be 3,500% inflation — hyperinflation of a sort that almost no world currency ever experiences.

Word to the wise: don’t talk with cryptocurrency promoters about this, or you’ll soon learn that they have redefined inflation to mean “increased token volume,” regardless of exchange value, one of the major examples of the semantic games they play constantly.

Related to the previous point, the bizarre, gold bug-based illusion that a limited supply of something determines that it remains valuable is a core falsehood among cryptocurrency believers. It isn’t even true with regard to gold; it certainly isn’t true with regard to the many, many things in the world that are both limited in supply and virtually worthless, at least in aggregate. Further, modern financial systems are based on the capacity to create derivatives of underlying assets, something that is common even in the precious metals cryptocurrency promoters claim to love. Once you have derivatives, you have almost entirely lost contact between supply and price. In fact, one of the strange parts of the cryptocurrency world is to watch them demand that Wall Street create Exchange-Traded Funds (ETFs) and options for cryptocurrencies, products the very existence of which bursts the bubble of price being determined by supply.

• No matter how many times and how frequently it is disproven, this fantasy persists as a core tenet of cryptocurrency belief. Even Ethereum co-founder Vitalik Buterin has pointed out some of the incontestable facts that demonstrate this, recently with regard to the so-called “halving” that may (or may not, depending on who you read) cut the supply of available Bitcoin in half. “Halvings make BTC scarcer and scarce assets (BTC, gold, silver etc) seem to have a higher value than non scarce assets,” writes an interested pundit, ignoring the thousands of “scarce” coins that are worth $0 or close to it, in response to Buterin’s tweet noting that the quantity of tokens has little to do with their price: “the last $20k peak was near the halfway point between the 2016 and 2020 halvings.” See Robert Stevens, “Ethereum Creator Vitalik Buterin Shoots Down $280,000 Bitcoin Model” (Decrypt, Jun 15, 2020)
• William Suberg, “Think There Is Only 21M Bitcoin? Think Again, Says Weiss Ratings” (Cointelegraph, May 25, 2020)
• Swanson, Anatomy of a Money-Like Informational Commodity, chapter 9
• Golumbia, Politics of Bitcoin, chapters 4 and 5

6. Central Bank Digital Currencies (CBDCs), if and when they come into use, will be accurately described as cryptocurrencies

CBDCs are legal tender issued by a central bank. They are not cryptocurrencies. Two of the critical differences are that 1) CBDCs do not and obviously cannot run on public blockchains, if they run on blockchains at all, and so 2) do not use the typical blockchain reward mechanism to generate tokens, which means the technology does not need to waste energy to validate transactions. Rather, tokens are typically described as being produced whenever the central bank decides to issue them. As they are currently described, they will use private, permissioned blockchains — if they use blockchain technology at all. Creation and distribution of tokens is entirely up to the central bank, rather than being distributed among the network nodes. China’s digital yuan, the most prominent example of a CBDC, is explicitly not a cryptocurrency.

It is far more reasonable to see CBDC projects as iterative evolutions of digital tools for managing traditional money (ie, the existing currency as it is usually understood — dollars, renminbi, or pounds), tools that would have come to pass in nearly identical form regardless of whether Bitcoin had ever happened. Central banks often use “blockchain” as an advertising buzzword to make it sound as if they are technologically up-to-date, and to forestall additional FUD from blockchain promoters about cryptocurrencies destabilizing central banks. The ordinary press usually makes this clear in reporting. The cryptocurrency press, on the other hand, frequently does not, perhaps out of its remarkable and pervasive conflicts of interest.

• “CBDCs are traditional money, but in digital form”: Tom Wilson, “Explainer: Central bank digital currencies — Moving towards reality?” (Reuters, Jan 23, 2020)
• Cryptocurrency-industry publication Cointelegraph describing the digital yuan as cryptocurrencies and “blockchain projects” despite pointing out at least some of the ways that it is not: Julia Magas, “Top Facts on China’s Crypto Yuan and Related Blockchain Projects” (Cointelegraph, May 7, 2020)
• “The digital yuan China is planning is in fact a complete inversion of the bitcoin model”: Paul Vigna, “Brace for the Digital-Money Wars” (Wall Street Journal, Dec 7, 2019)
• John Barrdear and Michael Kumhof, “The Macroeconomics of Central Bank Issued Digital Currencies” (Bank of England, 2016), esp. pp 7–8
• “The digital currency could take different forms based on either existing payment infrastructure technology or new crypto technology” (UK Institute and Faculty of Actuaries), p 11
• “Central bank digital currency is different from virtual currency and cryptocurrency”: Central Bank Digital Currency (Wikipedia)

7. Libra is a coherent, realistic cryptocurrency project

Facebook’s Libra is nothing but a whitepaper at this point, so in many ways it’s an exemplary blockchain project. It’s most importantly a political cudgel, arguably one that project head David Marcus has helped to develop to scare governments into backing away from legal oversight of Facebook itself: “let us do what we want, or we’ll start printing our own money.” So far, the most important thing about it is that it does not exist. It relies on the outsize claims made for an existing technology that does not do what it promises to make even larger, government-threatening claims, without providing any clear, detailed account of how we can get from here to there.

Further, many aspects of its vague architecture (especially as outlined in the first version of the whitepaper, but also persisting into its more recent second plan) dispense with core features of blockchains and cryptocurrencies. It is explicitly mooted as a permissioned blockchain whose operators determine who can run a node and can therefore generate tokens, and original plans to transition to a permissionless blockchain have been abandoned as of the second, April 2020 whitepaper. It takes advantage of the blockchain political force (that is, the hype surrounding it) while not in fact taking advantage of the most obvious identifying features of the technology. Even presuming that regulators ever allow Libra to happen, the Libra 2.0 plan looks a lot like PayPal but on Facebook — conventional currencies that you can store on the site.

• “The Libra white paper is an inchoate pile of crypto ideas they thought sounded cool, and contradicts itself a lot — e.g., how do they do a future completely permissionless and decentralised coin that’s also backed by reserves, and can burn coins as the reserve is cashed out? How can Libra promise future decentralisation when they admit that nobody knows yet how to do even cryptocurrency levels of decentralisation, without the stupid wastefulness of Proof-of-Work?”: David Gerard, “Your Questions about Facebook Libra — As Best as We Can Answer Them as Yet” (Sep 10, 2019)
• “Libra could be a social-good venture aimed at “empowering billions of people through the creation of a simple global currency and financial infrastructure” but then again — from the details revealed — it could also be an attempt to gain control of the money supply by a corporation most people think already has more power than it should. As usual, the truth depends on how things are framed. But in this post, we’re going to argue Libra is nothing more than a brazen attempt to override national monetary sovereignty by creating a global-scale Federal Reserve equivalent — within which Facebook’s dominance is veiled by the cunning use of buzzwords like blockchain, DLT, decentralisation and cryptocurrency.”: Izabella Kaminska, “Zuckerberg: The Man Who Would Be Monetary King” (Financial Times, June 18, 2019)

Part II. Home Truths and Useful Rules of Thumb

Much as it is incumbent on responsible commentators not to repeat the falsehoods listed in part 1 without either detailed rebuttal or adequate qualification, it is just as important to keep in mind the facts that have been established by dispassionate investigation.

All technology sectors are suffused with hype and overstatement. Neither journalists nor academics have historically been great at resisting them. Yet cryptocurrencies and blockchain present extreme versions of this ordinary situation: the industries were birthed out of a contempt for regulation, governance, democracy, and evidence of a particularly radical sort. Almost nothing blockchain advocates say about the technology, outside of the raw basic facts about how blockchain technology itself runs, is true. There is a point at which being “open to new knowledge” turns into credulousness that is very useful to those who have no intention of being truthful. While some of the following home truths may not be absolutely correct in literally every single instance, they are very solid working principles with which to approach any claims made for blockchain, until and unless proven otherwise. They are also far more likely to be true than the marketing claims promoters use.

1. Cryptocurrency and blockchain projects are so full of frauds and scams that in most cases, “frauds and scams” is a reasonable substitute term to use for them

It is useful — even if not accurate in every single case (just most of them) — to replace “blockchain” or “cryptocurrency” in claims about what the technology “could” do with the phrase “frauds and scams”: “Frauds and scams could help people in the developing world secure property rights.” “Frauds and scams could help the unbanked get access to financial services they need.”

One of the main reasons for promoting cryptocurrencies is that they appear to offer access to services that are typically highly regulated by governments. In the case of financial regulations, these laws exist specifically to protect consumers from… frauds and scams. In the US, bank and credit union deposits are guaranteed against loss up to relatively high figures. By contrast, it is stunningly easy to permanently lose money put into cryptocurrencies. Similarly, most investments in most democracies are subject to strict regulation against self-interest and market manipulation, including using the “press” to manipulate markets. In cryptocurrency, it is no surprise to find that the bulk of activity is made up of exactly these kinds of activities. Further, the much-touted “immutability” of blockchain transactions — the fact that they cannot be changed once completed — means that fraudulent transactions, like ordinary losses, instantly become permanent.

• Cryptocurrency ranked as 2nd riskiest scam in 2019 by the Better Business Bureau (page 11)
• “For all cryptocurrency’s high-tech gloss, many of the related scams are just newfangled versions of classic frauds” (AARP, 2020)
• Nir Kshetri, “How Cryptocurrency Scams Work” (The Conversation, 2019)
• Joël Valenzuela, “Why Crypto Has a Conflict of Interest Problem, and How to Fix It” (DashNews, 2019)
• Nick Weaver, “Cryptocurrency: Burn It with Fire” (USENIX Enigma conference, 2019)
• High Net Security, “The New Gold Rush: A Look Inside Cryptocurrency Fraud” (Feb 5, 2018)
• Golumbia, The Politics of Bitcoin, chapter 6

2. There are (or have been) thousands of cryptocurrencies. Most are worthless and the majority have failed

Most of the arguments in favor of Bitcoin and its offshoots rely on descriptions of characteristics (especially limited token supply) that are found in most if not all other cryptocurrencies. Even among the approximately 20% that have not failed, many are essentially worthless, with a price hovering very close to $0. Yet the fact that statements about Bitcoin and other well-known cryptocurrencies are easily disproved by looking at the universe of failed and near-worthless tokens is almost never acknowledged.

• Gavin Brown and Richard Whittle, “More than 1,000 Cryptocurrencies Have Already Failed–Here’s What Will Affect Successes in Future” (The Conversation, 2019)
• Coinopsy List of Dead Coins (currently 1580)
• Coinopsy List of Live Coins (currently 404)

3. Outright fraud part I: Tethers

The most obvious example of outright financial fraud in cryptocurrency markets is Tethers. Tethers are ostensibly “stablecoins” that are issued by a single entity, Tether Limited. Tethers claim to be cryptocurrencies, and run on the Ethereum blockchain, but they cannot be mined or generated by others. Tethers attempt to maintain a price of $1/Tether, and for a long time Tether claimed that it maintained exactly $1 in US dollar reserves for every 1 Tether issued. Most cryptocurrency trading markets are heavily dependent on Tethers to enable transfer between cryptocurrencies and dollars.

From the Wikipedia entry on Tether (as are all of the following quotations in this section):

In January 2015, the cryptocurrency exchange Bitfinex enabled trading of Tether on their platform. While representatives from Tether and Bitfinex say that the two are separate, the Paradise Papers leaks in November 2017 named Bitfinex officials Philip Potter and Giancarlo Devasini as responsible for setting up Tether Holdings Limited in the British Virgin Islands in 2014. A spokesperson for Bitfinex and Tether has said that the CEO of both firms is Jan Ludovicus van der Velde. According to Tether’s website, the Hong Kong-based Tether Limited is a fully owned subsidiary of Tether Holdings Limited. Bitfinex is one of the largest Bitcoin exchanges by volume in the world.

Tether’s claims to maintain a full reserve have come under significant scrutiny. Tether claimed it would subject itself to a complete audit, but then backed off:

Tether has repeatedly claimed that they would present audits showing that the amount of tethers outstanding are backed one-to-one by U.S. dollars on deposit. They have failed to do so. A June 2018 attempt at an audit was posted on their website in June 2018 which showed a report by the law firm Freeh, Sporkin & Sullivan LLP (FSS) which appeared to confirm that the issued tethers were fully backed by dollars. However, FSS stated “FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles,” and “The above confirmation of bank and tether balances should not be construed as the results of an audit and were not conducted in accordance with Generally Accepted Auditing Standards.”

Tether has recently been the subject of one of the largest criminal prosecutions so far in cryptocurrency:

In April 2019 New York Attorney General Letitia James filed a suit accusing Bitfinex of using Tether’s reserves to cover up a loss of $850 million. Bitfinex had been unable to obtain a normal banking relationship, according to the lawsuit, so it deposited over $1 billion with a Panamanian payment processor known as Crypto Capital Corp. The funds were allegedly co-mingled corporate and client deposits and no contract was ever signed with Crypto Capital. James alleged that in 2018 Bitfinex and Tether knew or suspected that Crypto Capital had absconded with the money, but that their investors were never informed of the loss.

This isn’t just fraud that benefits Tether: “Research by John M. Griffin and Amin Shams in 2018 suggests that trading associated with increases in the amount of tether and associated trading at the Bitfinex exchange account for about half of the price increase in bitcoin in late 2017”; “Reporters from Bloomberg, checking out accusations that tether pricing was manipulated on the Kraken exchange, found evidence that these prices were also manipulated”; “According to Tether’s website tether can be newly issued, by purchase for dollars, or redeemed by exchanges and qualified corporate customers excluding U.S.-based customers. Journalist Jon Evans states that he has not been able to find publicly verifiable examples of a purchase of newly issued tether or a redemption in the year ending August 2018.”

Anyone talking about any of the financial aspects of cryptocurrencies needs to address Tether; yet I continually read full, complex arguments about cryptocurrency finances, even by academics, that do not mention Tether at all, even when the existence of Tether is directly relevant to the arguments being made.

• “This group of companies has over ten billion in assets as of writing this piece, yet no one can provide a location where you can find executives or even a receptionist… the cryptocurrency community — a community that prides itself on advocating for trustlessness and verification of facts — refuses at every turn to demand that same level of transparency from a company that’s repeatedly promised it and lied”: Cas Plancey, “Finding Finex” (Medium, May 29, 2020)
• Amy Castor, “Nearly $5 Billion in Tethers Were Issued Since January. Why?” (Decrypt, May 22, 2020)
• David Gerard, “Forget the Halvening — Tether Brings You the Doublening!” (May 15, 2020)
• David Gerard, “New York’s Problem with Tether — As Set Out for the Appeals Judges” (Dec 13, 2019)
• Jemima Kelly, “Tether Slammed As ‘Part-Fraud, Part-Pump-and-Dump, and Part-Money Laundering’” (Financial Times, Oct 7, 2019)
• Jemima Kelly, “Wha-Tether Could Be Going on With the Bitcoin Price?” (Financial Times, Jul 1, 2019)
• Izabella Kaminska, “We All Become MF Global Eventually, Tether Edition” (Financial Times, Apr 26, 2019)
• Alice Woodhouse, “US Probe Claims Bitfinex Covered Up $850m Loss with Tether Reserves” (Apr 25, 2019)
• Jemima Kelly, “Has Bitcoin Come to the End of Its Tether?” (Financial Times, Jun 13, 2018)
• “Tether (cryptocurrency)” (Wikipedia)

5. Outright fraud part 2: the cryptocurrency trading markets are thoroughly manipulated by mechanisms that are illegal in regulated markets

One of the best-known investment scams is called the “pump and dump.” Rajeev Dhir describes them in Investopedia:

Pump-and-dump is a scheme that attempts to boost the price of a stock through recommendations based on false, misleading or greatly exaggerated statements. The perpetrators of this scheme already have an established position in the company’s stock and sell their positions after the hype has led to a higher share price. This practice is illegal based on securities law and can lead to heavy fines.

Cryptocurrency markets love pump-and-dump schemes. They are often actively advocated by cryptocurrency “investors.”

Pump-and-dump is the most obvious, but if you can name a typical securities/investing fraud, you won’t have to look far into cryptocurrency markets to find it.

• Crypto promoters advocating pump-and-dump: “How to Profit from a Cryptocurrency Pump and Dump” (Coin and Crypto, Nov 20, 2019)
• Adrian Zmudzinski, “Researchers Find Thousands of Crypto Pump-and-Dump Groups on Messaging Apps” (Cointelegraph, Dec 19, 2018)
• Paris Martineau, “Inside the Group Chats Where People Pump and Dump Cryptocurrency” (The Outline, Jan 23, 2018)

6. Cryptocurrency discussion, including cryptocurrency “journalism” and even to some extent academic writing, is permeated by people with a vested interest in cryptocurrency

Nearly all “journalism” outfits devoted specifically to cryptocurrency are funded and run by people who profit off of cryptocurrency price moves. This is not parallel in any way to the ordinary interests anyone has in their own opinions or the “prevailing system” or whatever. Bitcoin “journalists” are frequently being paid by Bitcoin operators to promote cryptocurrency, in exactly the way that, say, Wall Street financial journalists are prohibited from doing. Financial Times journalists are required to be independent and it shows. Many if not all of the major crypto news outlets are either owned by cryptocurrency firms or serve as press release services for them, often without much if any disclosure of conflicts of interest that are not allowed in most reputable financial and even technology publications. This certainly does not mean everything in these publications is dishonest — I’ve quoted more than a few of them here — but it is reason to treat their pieces, especially their pro-cryptocurrency pieces, with skepticism.

• CoinDesk, the best-known cryptocurrency news site, is owned by Digital Currency Group, a cryptocurrency venture capital firm (“CoinDesk,” Wikipedia)
• Even some of the crypto publications with some reputation for editorial independence are directly funded by the industry: Decrypt (for which Amy Castor writes) is funded by ConsenSys, a crypto incubator; the now-defunct Breaker Mag was funded by SingularDTV, a ConsenSys venture
• Bitcoin Magazine was co-founded by Ethereum creator Vitalik Buterin and describes itself as “owned by BTC Media LLC, which is the media and publishing subsidiary of BTC Inc,” a crypto incubator
• Technology company IOHK creates a “Blockchain Technology Lab” at the University of Edinburgh (2017) and a “research and authentication center” as part of the University of Wyoming’s Blockchain Research and Development Lab (2020)
• Elaine Ramirez, “Is It Ethical for Journalists to Own Cryptocurrency?” (Medium, Jan 17, 2020)
• Corin Faife, “We Asked Crypto News Outlets If They’d Take Money to Cover a Project. More Than Half Said Yes” (Breaker Mag, Oct 25, 2018)
• Jemima Kelly, “Universities of Britain: Cozying Up to Crypto Is a Bad Look” (Financial Times, July 10, 2018)
• Jemima Kelly, “Hey Crypto Bros! Journalism ≠ Advertising” (Financial Times, May 1, 2018)

7. When cryptocurrency and blockchain promoters say that the technology “might” or “could” or “has the potential to” do something, a reasonable substitute for those words is “doesn’t.”

David Gerard: “I sat in on one presentation by a Big Four accounting firm on the Blockchain in health care: three blokes (one with a tie, two without) talking about the hypothetical possibilities a blockchain might offer health care in the future, all of which was generic extruded blockchain hype, and much of it Bitcoin hype with the buzzword changed. When an audience member, tiring of this foggy talk, asked if there was anything concrete that blockchains could offer the NHS, they responded that asking for practical uses of blockchain was ‘like trying to predict Facebook in 1993.’ The main takeaway for the health care sector people I was with was swearing never to use said accounting firm for anything whatsoever that wasn’t accounting.” (from Gerard, Attack of the 50-Foot Blockchain, chapter 11)

Related: blockchain whitepapers are worth exactly the inherent value of the paper they are printed on.

8. Most nation-based currencies are largely digital already

The word “cash” is a particular problem in this cryptocurrency discourse. Like “currency” and “paper money,” the word is sometimes used to refer to physical currency (such as paper US dollars), but sometimes used to refer to national currencies in toto, and to many other vaguer concepts as well. When non-blockchain people talk about a “cashless society,” they generally just mean that physical currency will be less important or go away entirely. In blockchain circles, the phrase is reinterpreted to mean that national currencies will go away and that efforts like the digital yuan somehow enable this. They don’t. One of the reasons this part of the discussion is so confounding is that most transactions today are already digital. This happens with the current infrastructure and the world has not been upended. Compare, for example, stock markets, which 150 years ago actually required the physical delivery of shares of stock (or their representation on paper). Today nearly the entire infrastructure is done digitally, without a blockchain in sight. Yet the technologies that enabled this, all “revolutionary” (small-r) in their own way, all working, all robust, all more or less secure, are hardly ever discussed in the press.

• Cash makes up 13% of transactions in Japan (JP Morgan, 2019)
• “cash payments in the UK have dropped from 63% to 34% in 10 years” (Access to Cash Review UK, Dec 23, 2018)
• Kenneth Rogoff, “Should We Move to a Mostly Cashless Society?” (Wall Street Journal, Sep 25, 2017)
• “there is no innovation in the provision of an electronic form of money, as the vast majority of money in a modern economy is already electronic and has been for some time. In the United Kingdom, for example, physical currency (notes and coin) in public circulation represented only 4% of broad money balances”: John Barrdear and Michael Kumhof, “The Macroeconomics of Central Bank Issued Digital Currencies” (Bank of England, 2016), p4

9. Cryptocurrency discourse relies on constant prevarication over the definition of core terms

Especially “money,” “currency,” and “cash,” but also “inflation,” “fiat,” “contract,” “gold standard” and many others, including “blockchain” and “cryptocurrency” themselves

• Adrianne Jeffries, “‘Blockchain’ Is Meaningless” (The Verge, Mar 7, 2018)
• Angela Walch, “Blockchain’s Treacherous Vocabulary: One More Challenge for Regulators” (Journal of Internet Law, 2017)
• Gerard, Attack of the 50-ft Blockchain, chapter 11
• Golumbia, Politics of BItcoin, throughout

10. The major claims made in support of cryptocurrency as a means for transacting payments and transferring funds are fraudulent

Blockchain is not faster than other money transmission mechanisms, but slower. It is not cheaper than other transmission mechanisms, but much more expensive. It is not scalable. (Note that some of the links below argue in favor of cryptocurrencies other than Bitcoin in pointing out Bitcoin’s weaknesses. But so far none of the competitors have been able to translate their purported overcoming of those weaknesses into anything like popular adoption.)

• “Bitcoin Scalability Problem” (Wikipedia)
• Detailed analysis, including links to earlier close analysis, of claims that cryptocurrency is a good idea for money transfers (it isn’t): “Does Bitcoin/Blockchain Make Sense for International Money Transfers?” (Save On Send, Mar 1, 2020)
• Ofir Beigel, “The Complete Guide to Bitcoin Fees” (99 Bitcoins, May 1, 2020)
• “Bitcoin Cons” (Reddit, July 2019)
• Intuit Consultants, “Bitcoin Will Lose Its Dominance Because It’s Slow and Expensive” (Jun 1, 2019)
• Usman W. Chohan, “The Limits to Blockchain? Scaling vs. Decentralization” (SSRN, February 20, 2019)
• Ben Dickson, “Why Bitcoin Is Struggling to Become a Mainstream Currency” (PC Mag, Oct 8, 2018)
• C. Edward Kelso, “Global Data Report: Cryptocurrencies are Expensive, Slow, Unspendable, Cannot Scale” (Bitcoin.com, Jul 6, 2018)
• Julian Bajkowski, “Bitcoin Slow, Expensive, Doesn’t Scale: RBA [Royal Bank of Australia]” (IT News, Jun 26, 2018)
• Jonald Fyookball, “Why Does Bitcoin have Ridiculously High Fees and Slow Confirmations?” (Medium, Aug 30, 2017)

9. There are no thorough, detailed, robust defenses of the major claims made for blockchain and cryptocurrencies.

No matter how deeply you read in the pro-blockchain literature, you will ultimately find people taking at face value claims made by some of those with vested interests in the stuff — including many of the claims listed in the Falsehoods section above. Claims that “Bitcoin is money,” for example, almost exclusively rely on question-begging, semantic, and/or outright conspiracy-theoretical claims. Critiques of the proposition, like other parts of cryptocurrency dogma, on the other hand, rely on a vast array of scholarly and professional literature.