In a world of economic precarity, crypto’s pitch sounds like freedom

January 31, 2022

Diana Ejaita

By Tressie McMillan Cottom

While I was preparing this week’s newsletter about the cultural economics of cryptocurrency and blockchain, crypto trading tanked. Suddenly, my concerns about how different groups of people have different levels of exposure to risky financial instruments became even more urgent.

Emily Flitter wrote for The New York Times last week that it is difficult to know if the crypto bubble is bursting or what that would even mean: “Bitcoin dropped nearly 13 percent before rebounding along with stocks. Ethereum’s own coin, Ether, was briefly down 15 percent. Their price declines have dragged down other digital asset prices, too.” Despite the sell-off, the world of cryptocurrency is so haphazard and, well, wild that no single measure can definitively say if assets are overheated or melting down. What is clear in Flitter’s analysis and Karl Russell’s graphics is that a lot of people lost money last week.

For Anil Dash, the C.E.O. of the software development company Glitch, the deep questions about financial technologies have always been urgent. Dash was also one of the inventors of non-fungible tokens (NFTs) way back in 2014 and has grappled with the way that the technology is being used now.

This week’s newsletter is the first of a two-part discussion with Dash. We covered a lot of ground. We both admit to naïve hope in digital technology’s power to give marginalized people a fighting chance in a globalized world. Both of us have experienced the ire of internet pile-ons and algorithmic vulnerability that should have beaten that hope out of us. And both of us worry that the platforms and players who are turning blockchain-enabled products into risky shell games will continue to evade regulation.

I start with the question that I ended with last week: What social problems do these blockchain-enabled technologies solve? That question is the hardest and most important to answer.

To understand blockchain-enabled technologies, you have to realize that they are parking lots for venture capitalists. Venture capital companies (VCs) are pulling their enormous piles of cash into these technological blank spaces because, not unlike having dump truck, you have to park that beast somewhere. And the blockchain is alluring to the kinds of people who run venture capital companies.

Ten years ago Dash realized that it was just a matter of time before blockchain became an enormous deal. That was when he attended one of those technology idea-generating conclaves that the industry is fond of. I have attended a couple in my time. The idea is that you get a lot of smart iconoclasts with the right attitude about the potential tech in a room and hack away at a social problem for a few hours. It can be a thrilling experience, if absolutely pretentious and ahistoric. The idea that complex social problems like poverty and failing schools and climate change just need a little technology is seductive, if silly. It was in one of those events where Dash says he knew “blockchain is going to happen. It is just a matter of time.”

But there was no indication that people would be persuaded to use blockchain. That’s because the decentralized ledger that replaces trust with algorithmic documentation in exchanges between two parties is slow and unwieldy. “The one thing about that is to add a line to this database, to this spreadsheet, is two orders of magnitude slower and 10 orders of magnitude more expensive. And who’s going to sign on for that? Why would you do that?” Dash says he asked himself.

The only way a technology that solves a problem that no one knows they have — a “disruptive” technology — becomes culturally powerful is that someone has to subsidize it until it becomes profitable. In the case of blockchain, Dash told me, “it takes pumping in billions of dollars in subsidy to do it. It’s the same as Uber,” and some VCs have invested a lot in making blockchain inevitable. And the amount that VCs have available to throw at investments has ballooned over the past 10 years in a way the average person can’t appreciate. “One check from the real VCs is $20 million, $40 million,” Dash says. “It’s nothing to them. It’s just wealth concentration.”

While I may still be learning some of the intricacies of venture capital and blockchain, I understand wealth inequality just fine. We talk a lot about wealth inequality within the United States but the phenomenon is global. It was bad enough by 2020 but the pandemic has accelerated inequalities, between communities, states and nations. These patterns provide one macro answer to the question of what social problem blockchain solves. Blockchain transforms rising wealth inequality from a problem into an opportunity, for those willing to take the risk of investing.

The pull of any speculative bubble is based in a fact of the world: Somebody somewhere is making a lot of money, and you’re not one of them. A lot of people, like my cousin — a lifelong blue-collar worker with a good pension — believe this. And they are not wrong. That’s one thing my conversation with Dash brought home: There are a lot of people making a lot of money on crypto and NFTs. For those of us who aren’t among the extremely wealthy, the idea that we could join them is a seductive one that has become a cultural phenomenon. And in an atmosphere of economic precarity and wealth inequality, that pull is supercharged. But it is especially powerful among young people. “You talk to anybody under 25, and they’ve been told that crypto is their freedom,” Dash says. It isn’t hard to imagine why.

If you are younger than 45, the internet has been the most powerful institution in your life, hands down. It is more powerful than the government, more intimately experienced than voting, more tangible than a house or a car or a job. You cannot touch the internet but you can feel it. That’s where everything happens, from finding a job to building a social life. When blockchain comes along as schools are closing and then reopening and then kind of closing again, and governments are telling you to Google your closest coronavirus testing site, and your university tells you online orientation is the same as dorm life, and a large number of white-collar people are working from home, and your longest relationships have started on apps and in channels and chat rooms and DMs, blockchain is a reasonable solution to the most basic problems of “What am I supposed to do to survive?”

Dash calls it a big game of FOMO inflected with the chaos of economic anxiety. “Everybody again has a story,” he says. “This guy got in early on Bitcoin, and he made 50 grand. I mean, even I’ve had FOMO about that. I know a guy — he’s smart, but he’s not that smart — who went all in, and he’s way into nine figures, way in.” To be fair, when you put it that way, buying Bitcoin sounds easier and safer than taking one of my college classes. That is, until the bubble bursts.

Next week, we talk about who is in charge of this whole apparatus. Is anyone watching out for rank-and-file crypto enthusiasts as very wealthy venture capitalists use its promise to park their money?

A lot of you wrote in last week to say that you have been a bit embarrassed about not understanding what cryptocurrency, NFTs and blockchain are exactly. That shame is not for regular people to carry. Speculative financial technologies like these derive a lot of their cultural power from being hard to define. Clear definition is usually a sign that an instrument is well regulated. As we will discuss next week, the ambiguity around what crypto is or how blockchain works or how to buy an NFT is part of what makes them seem “too big to fail.”

If you are feeling better about what these terms mean, you may enjoy this roundup of recent coverage.

Coral Murphy Marcos details how Black and other minority influencers are looking at retirement funds and finance planning. Tech has changed the way we work, so it’s only fitting that it also changes the way we earn and save. Minority creators often lack wealth management resources, and several share advice. Mike Isaac and Kellen Browning explain the culture of crypto in an overview of NFTs and video games. Surprisingly, many aren’t buying it. A great primer on politicians’ use of Bitcoin/crypto and how it’s being used in local politics for various policy initiatives. Crypto start-ups as “get rich quick schemes,” a.k.a. scams. And a good follow-up on the GameStock saga. NFTs Are, Quite Simply, Bullshit BYLUKE SAVAGE JACOBIN 01.26.2022 NFTs are emblematic of capitalism’s growing retreat from productive activity — and the wealthy’s desire to extend their dominion into the digital ether. They’re worse than useless. Sometimes a single image or episode capturing triumph, tragedy, or disaster sums up the spirit of a moment better than prose ever could. In pondering the most iconic frames in American history, several obvious candidates come to mind: the flag raising on Iwo Jima; the beaming face of a relaxed John F. Kennedy seconds before he met an assassin’s bullet; Neil Armstrong moved to tears in the cockpit of Apollo 11 following communion with the infinite on the surface of the Moon. Though it may never be elevated to the same illustrious perch, it’s difficult to think of anything quite so evocative or emblematic of our own stupendously stupid time than this week’s sublimely bizarre segment of The Tonight Show Starring Jimmy Fallon featuring Paris Hilton. True to the genre, most of the conversation between Hilton and Fallon is classic late-night schtick, the kind of mindlessly innocuous banter you idly catch out of one eye while falling asleep or stumble upon after giving up on Netflix for the third time in two hours. Things then quickly take a turn for the weird when Fallon asks about Hilton’s NFT hobby (Hilton, incidentally an early pioneer in the postmodern commodification of the self, is currently ranked at #7 in Forbes’ NFT Top 50), and the two carry out what can only be described as a sort of a scripted infomercial somewhere between low-effort celebrity ad read and probable hostage video. As vaguely dystopian mad libs go, “Paris Hilton Bored Ape Yacht Club NFT” is already about as emblematically 2022 as it gets. Channeled through Hilton and Fallon’s hilariously strained delivery, however — watch the clip for yourself and you’ll see it’s easy enough to imagine that the host is taking his cues from masked gunmen holding placards just off screen — the whole thing soon passes into an entirely new realm of the bizarre. Here’s a short sample: FALLON: [Since you were last on the show] Forbes has named you one of the top 50 most influential people in the NFT space, so congrats on that. HILTON: Thank you, I’m so proud. I love being a part of this community and being a voice and sharing my platform and just getting the word out there. Cause I think it’s just such an incredible thing to be a part of. FALLON: Yeah, I jumped in. HILTON: I know, I heard. I’m so happy I taught you what they were. FALLON: You did, you taught me what’s up and then I bought an ape. HILTON: I got an ape too, because I saw you on the show with Beeple and he said you got on MoonPay so I went and I copied you and did the same thing. There’s plenty more in this vein, the two showing off their respective ape JPEGs before Hilton announces an Oprah-style giveaway for the blockchain era and gifts everyone in the audience with her latest NFT, declaring the moment “iconic” as the show cuts to break. Non-Fungible Bullshit Beginning at some point in 2021, the Non-Fungible Token — the latest cryptocurrency-adjacent fad to sweep the nation — was suddenly everywhere. As if by way of some unknowable alchemic process, it seemed, people were somehow turning a profit by trading thoroughly unremarkable clip art images while others were inexplicably shelling out big to claim their title deeds.NFTS are the latest symptom of a decadent and increasingly post-democratic consensus resting on little more than predatory rent-seeking and boundless commodification. Celebrities and social media influencers also couldn’t seem to shut up about them. From Serena Williams and Logan Paul to Matt Damon and William Shatner, the NFT craze quickly transcended generations and swept up an eclectic cavalcade of the rich and famous in its wake. (Jimmy Fallon, incidentally, spent more than $200,000 on the Bored Ape NFT that now graces his Twitter profile.) Beeple, name-dropped by Paris Hilton in her Fallon segment, fetched more than $3.5 million in an NFT auction. Ape NFTs have been “stolen” in digital heists. One B-list reality star has even gotten in the action by monetizing her own farts (these NFTs, incidentally, come with the tagline: “Be part of history with the first ever generative Fart Jar NFT collection — Imagine the smell!”) If you’re not already immersed in this glorified Pokémon card ponzi scheme, it’s all a little perplexing, and you may be wondering what any of it actually means. In essence, an NFT gives you exclusive ownership over a digital object of some kind (images, songs, tweets, and virtually anything else can be turned into an NFT). On its face, buying one can be a bit like buying an original artwork, though with digital usage rights and stored on a blockchain. You can’t, in other words, actually hold it in your hands like a poster or painting. The NFT market being a kind of property rights Wild West, some have been converted into tokens without their author’s knowledge or consent. Still more incredibly, the original media object almost always remains totally accessible to anyone online — essentially rendering the whole premise of exclusivity moot (except in the abstract sense of “bragging rights”). In a word, NFTs are bullshit. And, like most forms of bullshit in America — think WeWork, the Fyre Festival, or any number of other venture capital-hatched disruption rackets — they’ve come packaged in a phony populist language of community and an even phonier rhetoric of innovation. Like cryptocurrency, it’s hard to make a case for their actual use value and, like the very dumbest Silicon Valley startups and multilevel marketing scams, they’re best understood as speculative investments in which a privileged few can wring money from something of no redeeming social benefit. The majority, in fact, are about as useful as trash. As Vulture’s Rebecca Alter put it, most NFTs “are about as valuable as a QR code on a Coke bottle cap that sends you to a dead link to an mp3 download.” Value in any recognizable sense, suffice it to say, is not really the point. Decadence and Boundless Commodification The NFT boom, fittingly enough, has coincided quite directly with a period of particularly grotesque collective hardship and surging inequality. As both a threat to public health and an historic economic disruption, the COVID era has been an extraordinarily difficult time for many working and middle-class Americans, but a veritable land of milk and honey for its corporate overlords and lumpen bourgeoisie.Like most forms of bullshit in America, NFTs have come packaged in a phony populist language of community and an even phonier rhetoric of innovation. Events of recent years have arguably represented the best occasion in decades to reimagine the fundamentals of American society and transform the economy into something other than a handful of hedge funds and tech monopolies sitting on top of each other inside a trench coat. Instead, the country’s bipartisan ruling class opted to greet mass death with a dollop of inadequate and temporary social protections while its criminally undertaxed ultrarich were left to seek out novel ways of profiting from their own money and new totems of their elite status. Nothing has been more symbolic of this trajectory than NFTs, the latest symptom of a decadent and increasingly post-democratic consensus resting on little more than predatory rent-seeking and boundless commodification. As the New Republic’s Jacob Silverman put it last year: NFTs reflect a view of the world in which anything can be monetized, even if its value is entirely specious. Having exhausted traditional investments like property and stocks — as well as boutique services like concierge doctors or privileged access to the COVID-19 vaccine — the country’s idle elites are now seeking to expand their financial footprint to cover, well, anything to which they wish to lay claim. . . . It’s the financialization of everything, with practically anything eligible to be tokenized, chopped up into tranches, converted into securities that intrepid day traders could buy and sell. In effect, a political economy that has eschewed even the thinnest notions of social contract or public good in its elevation of the market — along with a manufacturing base that once actually built things — is laying the groundwork for a new and more expansive kind of post-materialist commodification. In this latest incarnation of our second gilded age, speculative bubbles based in the digital ether will help affix an ersatz version of innovation and progress to a top-heavy economy structurally incapable of delivering the real kinds. As digital commodities, NFTs thus signal the ongoing descent of capitalism into pure simulacrum and the growing remove of its greatest beneficiaries from anything even resembling productive activity. As a civilizational metaphor on the other hand, they’re perhaps the perfect symbol of a political order so dismally unjust and a regressive culture so thoroughly exhausted that even the rich people brandishing them on late-night TV struggle to do so with any conviction. ABOUT THE AUTHOR Luke Savage is a staff writer at Jacobin. People walk by a Bored Ape Yacht Club NFT billboard in Times Square in New York City. (Noam Galai / Getty Images)