Crypto and Trustless Society
How lack of trust is exploited by crypto and how it further atomizes our society.
A con game has a rich tradition in the United States and carries an almost mythical significance in the national ethos and self-image. We introduced to the world P.T. Barnum, Wizard of Oz, prosperity gospel, televangelists, and multi-level marketing. If you’re a businessman in America, and you hear about a profitable but shady scheme, your first thought is not “this is horrible and should be stopped,” but “how can I jump on it?” Because of this spirit of entrepreneurship, because of the constant need to hustle and to elbow others, most Americans are unprepared to tackle the resulting damage that the scams inflict on society.
Before I get to crypto, it’s worth describing the already existing landscape on which the various DeFi schemes landed. A recent article in WaPo described the proliferation of low-tech phone and email scams that target the old, the sick and the isolated – the most susceptible demographic. When you’re someone going through chemotherapy, or an old person living alone, and you have to field dozen of scam attempts a day – from your phone, from your email – it takes a toll on your psyche. You become suspicious and distrustful. Now for those people, once burned, every phone ping, every word from a stranger, every human interaction will be suspect. This suspicion, although totally justified, has a rotting effect on a broader society. The exhausted and emotionally distressed population will retreat from public life, bringing about further atomization of society and the crumbling of social bonds.
The blockchain technology was touted as the supposed solution to such lack of trust. The technology advocates told us that blockchain would allow us to entirely bypass the problem of mistrust by not having to trust anybody at all. They defined the problem as one of the unreliability of a transactional record, susceptible to manipulation – and they successfully solved it. Now, if you own crypto, you can be sure that the record of your ownership is unique and no one can tamper with it – as if the unreliability of records (and not someone preying on your emotional vulnerability) was a real problem to begin with. Did the immutability of the crypto records protected the depositors of the crypto exchanges? The records of their ownership of BTC was there and was immutable, but then they ‘lent’ it to some guy, and that guy lent it to some other guy and he went under, and no amount of blockchain wizardry will get them their money back. Just because the record of your ownership is ironclad and on blockchain, it doesn’t mean you can’t be parted with it through other means.
But back to mistrust. While solving the nonexistent problem, the technology created other, much more insidious one. The blockchain’s solution to mistrust is not about rebuilding back the trust; it’s about co-opting the mistrust by conceding that “yeah, everybody is basically a scammer,” and building a business model around that sentiment. Atomized, distrustful society is a nation of marks, and is not something to be cured, but something to be leveraged for profit.
Such gleeful erasure of social norms by novel technologies, and our collective inability to make the distinction between something that cures the problem and something that builds on it can be traced back to the above-mentioned American conman ethos. We’ve been conditioned to see any novel product as a miracle and a panacea. But what particular problem did Uber solve? What problem did delivery apps solve? Was it hard to get a taxi and food deliveries before? The utility of booking a service using a smart phone as opposed to a dumb phone, to me, is quite marginal, especially considering the externalities. Last summer, in Texas, during 100-degree heat and rolling blackouts, the crypto-miners who flocked to the state for its business-friendly posture siphoned about 5-6 GW off of the public grid, enough to power more than a million homes. When people complained, the miners, in a grand gesture of *magnanimity*, turned off their operations for a short time and demanded praise for such *selfless* act.
I was suspicious of blockchain and the adjacent projects from the first time I heard about them. My main complaints about those were: questionable utility, lack of security, environmental damage, unaccountability, unscalability, non-existent recourse (and that was before the fraud of all forms began to proliferate on the DeFi platforms), but I still felt these were just surface complaints and that there was a much deeper problem, and I wanted to identify and describe it. And now I have: It’s the furtive, insidious, but hiding behind a happy face, destabilization of social order. Blockchain technology needs public distrust to justify its existence. I also think that anarcho-capitalists and anarcho-libertarians too, like me, felt that *that* was the underlying essence of this new invention, although, unlike me, they embraced the lack of trust and the resulting chaos as a welcome feature. Chaos is a ladder.
This brings me to an unsettling but necessary conclusion: We have lost the use of our judging muscle; we were led to believe that everything is cool and good, especially if it makes money. So now, when we face a situation where a shady entity makes money by illegal means and we see the fraud and we’re upset, we are left without appropriate tools and vocabulary and ethical framework to address it. “But it’s bad and unfair,” our inner voice tells us, but our entrepreneurial, hustling mindset overrides it with: “Jump on the bandwagon, you fool!” Can one live now and NOT be either a conman or a mark? Can you call bullshit when you see it without being accused of intolerance?
Exercising judgement is good. Judging people, situations, business practices is good and necessary. To be unjudgmental is to allow dark (but, more often, stupid) forces to proliferate; we have to call ugliness and fraud for what it is. One has to be able to say this is art and this is fart; this is a coup and this is a protest, this is a war and this is a special operation. The refusal to judge isn’t a sign of open-mindedness and sophistication, but rather a cowardly stance, a timid acquiescence to chaos, an inability to make a stand, to take a position, so to speak.
We have to exercise that muscle if we are to survive as a democracy.