Thread by @polotek

This is a thoughtful thread. But I want to say something real simple. Trying to keep people from getting scammed is not a bad thing. This isn’t about ego or “scolding” people. I’m trying to prevent harm. Like I try to do everywhere else.

https://twitter.com/anildash/status/1471138161749381127

Saying “it won’t work” is true in some sense. But it misses the point. You can’t really keep people from jumping on a bandwagon and getting harmed as a result. People are gonna to do what they want. But I believe we can help people see the truth sooner rather than later.

Cryptocurrency and NFTs are not too big to fail. I think the ideas will evolve in a few different ways. It’s not going to die completely. But it is unsustainable in its current form. Because a lot of people are going to get hurt. And at some point, that’s going to come to a head.

Here’s my hot take on the reason crypto has been able to grow grown so big despite not being useful in a real economic sense. It’s the same reason as a bunch of other problems. We are in an unprecedented time of wealth inequality and wealth hoarding.

There is so much investment money out there looking for a home. And at the same time, a lot of people are struggling and looking for alternatives to soul crushing capitalism and labor exploitation. It’s an environment that is ripe for speculation and “get rich quick” scams.

It didn’t actually cost rich people very much money to fund basic crypto platforms. They still put most of their actual investment in real businesses. Most of the effort has gone into creating the hype train. Most of the money in crypto is being scammed from regular people.

Because we’ve created an increasingly connected digital society, it’s more possible than it has ever been to “scale” the scam. It’s like spending $5 on the lottery every week. Except literally a billion people can play. So you can create a speculative market of $5B a week.

We have reached the next worrying stage in this ongoing problem though. It’s not just speculative investors anymore. More and more legitimate businesses are starting to put budget into crypto. That’s going to ballon the market more before it ultimately collapses or corrects.

As near as I can tell. The reason businesses are doing this isn’t because they have real use cases in mind. It’s either because their developers are getting sucked into the technology hype, or because they can’t help but see how effective the marketing is right now.

If you slap the word NFTs on your messaging right now, you can get a bunch of people to pay attention. That is valuable to businesses in and of itself. But eventually everybody will start to realize that very little real business is being done.

Ponzi schemes start to fizzle out when nobody can find the next sucker to pull into it. That’s gonna take a while, because again, literally most of the population is a target. More importantly though, businesses actually expect a return on investment at some point.

As more and more people start to realize that crypto is not going to turn into a real, sustainable profit sector for them, they’re going to cut their losses. That will cause the markets to drop. More people will start to get hurt. Eventually people will realize the party’s over.

There are a few things to watch out for though. Like I said, the crypto hype train is largely enabled by the mainstreaming of tech and social media. Social media companies actually stand to profit hugely from investing in crypto. They’re not going to stop.

I’ve known to be deeply critical of the ethics and motives of social media executives. Even if the platforms have real value to people, we trade that for being manipulated and exploited in deeply harmful ways. Facebook and Twitter are likely to use crypto to continue that trend.

I want to say something again for the record. Because it’s easy to be a naysayer. I believe there could be some real and valuable uses for blockchain technology. It’s not clear how big those opportunities are, because the hype and scammers are drowning everything else out.

Things will eventually settle down to something much more reasonable. People will start producing real value and creating real businesses. Somebody will inevitably pop up at that point and say “See! You were wrong”. But we all understand the way history gets rewritten.

Yeah I hear you. But this is what we mean by speculation. I’m nit trying to be condescending. It’s important to grasp the concept. A speculative environment is where people are putting *real money* into something based on a “desire” rather than real economic results.

https://twitter.com/jlazaroff/status/1471362791261052928