Editorial: Crypto Skepticism Reaches Absurd Heights in Recent Congressional Letter
A recent letter to Congress flagrantly mischaracterized how crypto works and what’s it’s about. We refute it.
Readers of this site may know of our disdain for crypto skeptics at this stage of the technology’s development. More specifically, the type of criticism that holds at its core that programmable money and distributed permission less systems shouldn’t be allowed to exist. Healthy skepticism is welcome, just as it needs to be clearly said, this is not 2014.
It was therefore saddening but not surprising to read the letter to Congress this week from 26 “computer scientists, software engineers, and technologists” who are urging politicians to adopt a deeply flawed and aggressive view of crypto and web3. While there are no actual policy prescriptions in the letter the vigor with which it is written, and its overall misunderstanding, are so bad we feel it necessary to take it apart to expose the willful ignorance and fear that motivated its creation. (Read the letter.)Read More: Why DeCential? Why now?
The letter starts with the claim that the crypto industry views assets such as digital coins and web3 protocols as “unreservedly good.” That same industry is applying pressure from its financial, lobbying and cheerleading sectors to “create a regulatory safe haven for these risky, flawed and unproven financial instruments,” it goes on to say.
At least the strawman arguments were put up front. Anyone who has spent a week in crypto knows of the factionalism, infighting, jealousies and distrust amongst protocols such as Ripple, Ethereum, Bitcoin, EOS and Cardano. The list goes on. People have been screaming their heads off for years about being careful of scams and what seems too good to be true (please for the love of God follow @tayvano_ on twitter if you’re not already doing so). We can’t think of anyone who’s taken seriously in crypto espousing that it’s “unreservedly good.”
Likewise, no one is asking for a “regulatory safe haven.” Those three words have the ring of something that might make Goldman Sachs’s vampire squid’s blood funnel get aroused. As in, what financial services firm wouldn’t love a safe haven for their activity. Rather, crypto lobbyists and leaders simply want regulatory clarity. A set of rules they can follow, or not, and take their business out of the U.S.
The idea of a safe haven for defi right now under the leadership of Gary Gensler at the Securities and Exchange Commission makes this accusation laughable.
The letter goes on, “We strongly disagree with the narrative — peddled by those with a financial stake in the crypto-asset industry — that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans.”
There could be a point here if we restrict this argument to Americans only. But crypto is global and always will be, so we think a holistic approach is best to keep in mind. More broadly, Axie Infinity, an NFT-based game where players can earn cryptocurrency that can be converted to fiat, has changed countless lives in the Philippines. A DeCential story this week reported on people there being able to buy rice and help afford health care for their kids because of their earnings from the game.
In El Salvador, which adopted Bitcoin as legal tender last year, there’s now a significant part of that population that has hope for the future for the first time in many years. While of course Bitcoin is volatile, it also has the ability to appreciate, rather than the ever-losing value of the U.S. dollar. Rather than buy cement cinder blocks as a store of value, a common practice in rural El Salvador, people there now have a reason to save their Bitcoin.
The letter takes a few rather absurd turns. One such: “we dispute the claims made in recent years about the novelty and potential of blockchain technology.”
The novelty of Bitcoin, first and foremost, is that it works. Many earlier attempts failed to do what Satoshi Nakamoto accomplished. Hashcash, B-Money, Bit Gold, and DigiCash all failed to crack the difficult question of trustless payments tethered to a fixed monetary supply. Nakamoto answered that question and make no mistake, the authors of the letter to Congress are most concerned that crypto works. It's as simple as that.
The last two points to address are linked. The first is that “[b]lockchain technology cannot, and will not, have transaction reversal mechanisms because they are antithetical to its base design.” The letter declares the consequence of this to be that “by its very design, blockchain technology, specifically so-called ‘public blockchains’, are poorly suited for just about every purpose currently touted as a present or potential source of public benefit.”
On reverselessness, this is the beating heart of why Bitcoin and following protocols succeeded where past efforts failed. Only by knowing every single Bitcoin transaction ever done can the network be assured that new transactions are valid. Going back into that record and reversing orders kills that ability.
There is also a very good reason for this reverselessness – without it, a third party intermediary would be empowered to control a network, to block entrants or expunge current members. This is the exact reason blockchain, decentralized systems and permissionless networks have developed and flourished, for their robust lack of censorship.
And finally, about this idea that public blockchains “are poorly suited for just about every purpose currently touted as a present or potential source of public benefit.” There is an enormous amount of privilege and tin-eared tone deafness in this statement.
Crypto offers the ability for individuals to invest directly in an entirely new technology from the get go. That’s very different from the Internet era where investors needed access to initial public offerings, something only available to very few. It’s hard not to come away from reading the letter thinking that a huge driver of this bitter counter-narrative is because blockchain and web3 has made millionaires and billionaires out of creators and early adopters and people who would never have access to the traditional financial system.
The industry wants good-faith partners to ensure proper regulation is adopted. Pursuing and prosecuting scammers is imperative. This industry is not going away, it’s growing and much of it works. There is and always will be room for improvement.
But it must be asked if the signers of this letter have the same reservations about the broad financial market, the one that brought us Bernie Madoff, the 2008 financial crisis, the Savings & Loan scandal and market manipulation through rigged benchmarks like Libor and ISDAfix.
A global payment network outside the control of banks and governments is a revolution. Programmable money is a revolution. Refuting willfully ignorant views on crypto is part of this revolution. That work is only now beginning.