Don't let Matt Damon neg you into losing all your money
Illustrated | iStock
RYAN COOPER
JANUARY 27, 2022
The biggest cryptocurrencies have had a rough few months. If you listened to Matt Damon's Crypto.com ad implying you're a sissy girly-man for not buying some crypto, which started running at about the market peak, you'd have lost nearly half your money by now. At the time of writing, both bitcoin and ethereum were down by about 45 percent compared to their highs from last November; BNB was down 42 percent.
Now, they may well go back up again at some point — crashes and recoveries have happened before many times. But it's an illustration of the incredible risk of cryptocurrency investment. These things are not a futuristic way to get guaranteed returns through the computer; they're a scammy, useless, and quite possibly doomed hot potato asset.
One amusing thing about the timing of the crypto crash is how it obliterates one of the concept's principal ideological underpinnings. Bitcoin "is ultimately the only long-term protection against inflation," wrote Tyler Winklevoss in a blog post in 2020, arguing that it is a better store of value than gold and predicting that it would eventually soar to $500,000. In reality, right now inflation is spiking to its highest levels in decades, and instead of a rush to crypto "safety," the top coins are all crashing in value — and not by 7 percent but by hundreds of percent on an annual basis.
This is largely because crypto is heavily tied to the functioning of the real economy. In particular, both the big coins eat up abominable amounts of both electricity and advanced computer chips. The "proof of work" system used by both bitcoin and ethereum to create new coins and validate transactions eats up roughly 109 terawatt-hours for ethereum and 204 terawatt-hours per year for bitcoin — or about what the Netherlands and South Africa use, respectively.
Now, ethereum developers have been promising to move to a more efficient "proof of stake" system for years (meaning you would need about $83,000 in ether at current prices to be able to participate as a validator), but they still haven't done it and there's no sign of them starting soon.
Bitcoin miners have therefore been chased all over the globe in search of the cheapest possible electricity, often from old, filth-spewing coal power plants, often in impoverished authoritarian countries where relevant officials can be bribed to look the other way at gigantic power overuse. China kicked them out in late 2021 both to cut down on power use and financial fraud.
The current decline of bitcoin is related to the government of Kazakhstan apparently cutting off its miners and eyeing new controls to cut down on their power usage. (Even a dictatorship is well advised to provide a reasonably consistent supply of electric power to keep its population quiescent.)
Major powers around the world are also cottoning onto the fact that the crypto craze is badly exacerbating the computer chip shortage, and thence the shortage of cars, appliances, consumer electronics, and everything else that needs chips, and thence the inflation that is deeply unpopular among voting citizens. Regulations are likely coming in both the United States and Europe that would address the absolute bonanza of scams and frauds in crypto, the resulting systemic financial risk, and also free up capacity at semiconductor fabs for real industries
That doesn't speak well of the immediate prospects for crypto prices.
It's worth emphasizing that all that electricity and all those computer chips are being used up to do things that are explicitly pointless. The entire idea is to force crypto participants to expend useless effort to make it difficult to attack the system (something that is already accomplished quite well on the internet). Here we have the fire of the gods — a fundamental force of physics harnessed to do the bidding of humanity — being created in unimaginable quantities by burning the dirtiest fuel available. And here we have that power driving some of the most sophisticated objects ever made, wearing them out by the train car-load in order to … guess random numbers a quadrillion times a second.
The waste, pollution, and damage to the climate are beyond nightmarish. It's as if there were a trillion-dollar baseball card or Beanie Babies collecting frenzy, but every time you wanted to create, trade, or sell one, you had to throw an entire litter of kittens into a wood chipper.
And contrary to Winklevoss's arguments about gold: While that metal is hugely overvalued on any rational business basis, it does have legitimate industrial uses, plus thousands of years of history as a real currency, and (most importantly) it actually physically exists in a hefty and eye-pleasing form that is nice for jewelry or decoration.
Cryptocurrencies, by contrast, are imaginary computer funny money with operations that are totally incomprehensible to the layman and a substantial portion of the crypto enthusiast base alike. As Dan Olson argues in a brilliant investigation of the cryptocurrency and NFT space, crypto is not good at anything it sets out to do. As the wildly gyrating value shows today, it is not a good store of value. It is a horrendous medium of exchange: It's very slow compared to the dollar payments system and dramatically more expensive, with just one transaction costing at least a few bucks and up to hundreds of dollars, depending on conditions.
Finally, crypto is exceptionally vulnerable to most kinds of hacking, because it's virtually impossible to reverse a transaction on the blockchain, and most lack elementary security features other services take for granted. For instance, you can "airdrop" a malware NFT into certain kinds of ethereum wallets without needing permission, and if its owner ever clicks on it, you will receive all the contents of the wallet immediately.
Crypto is ultimately a greater fool scam where the only way to profit is by passing off the hot potato to the next sucker. It has a snazzy techno gloss of cryptography that is hooked into libertarian notions about hard money and general suspicion of the financial sector, but that is only a facade. The only reason cryptocurrencies have value is the general conviction that in future, the line will keep going up. That has made a few people rich beyond the dreams of avarice, because scams can be very profitable if you get out in time.
But as we see today, the line does not in fact always go up. And if a critical mass of crypto owners ever lose faith at once, bitcoin, ethereum, and all the rest are toast.
Why Experts Think This New Crypto Is A Scam
by Emma Newbery | Published on Jan. 28, 2022
Image source: Getty Images
A new LGBTQ token called MariCoin raises concerns.
Key points
- A new LGBTQ token in Spain promises to create an ethical and transparent form of payment.
- Critics have raised a number of concerns, such as the lack of a whitepaper.
One of the many potential benefits of cryptocurrencies and blockchain technology is it can empower marginalized communities. Cryptos can build communities, increase financial accessibility, and help people escape stigma.
Unfortunately, the lack of regulation and proliferation of scams also means there's little to stop unscrupulous players attempting to exploit those potential benefits. Which is exactly what some fear a new Spanish LGBTQ token called MariCoin could be trying to do.
MariCoin isn't the first LGBTQ crypto project
Before we get into the reasons experts are concerned about MariCoin, let's touch on some positive ways cryptocurrency and blockchain could help the LGBTQ community.
- There's a blockchain marriage certificate project that helps couples in countries where same-sex marriage is illegal.
- Launched in 2021, the Pride token (PRIDE) wants to create a payment system capable of funding meaningful change.
- The LGBT Token (LGBT) that launched in 2018 aims to harness the economic potential of the LGBTQ economy and put some of the proceeds back into the community.
- The anonymous nature of the blockchain could help people who live in countries where same-sex activity is criminalized to move money freely and avoid having their assets frozen by authorities.
Why MariCoin raises red flags
According to its website, MariCoin will be, "A social, ethical, transparent and transversal means of payment." The idea is the tokens would work as a form of payment in various businesses that have signed up to an equality manifesto. The coin completed a week-long pilot in Madrid before it launched in 2022.
Co-founder Juan Belmonte told Reuters, "Since we move this economy, why shouldn't our community profit from it, instead of banks, insurance companies or big corporations that often don't help LGBT+ people?" The idea itself sounds great. But as a potential investment, it raises a lot of red flags.
1. The name plays on a homophobic slur
The name MariCoin comes from an offensive homophobic word in Spanish. Now, it could be an attempt to reclaim the term -- as the founders told CoinTelegraph it was. But if that's the case, given the token's mission and the unfavorable responses on social media, it seems misguided.
2. It doesn't have a whitepaper
When you're evaluating a cryptocurrency, one of the first ports of call should be its whitepaper. This is where you'll find information about what problems the token plans to solve, and how it plans to do it. Responding to criticisms, on Jan. 7, MariCoin's co-founder Juan Belmonte promised CoinTelegraph the first version of its whitepaper would be available "next week." But over two weeks later at time of writing (Jan. 24) there's no sign of the whitepaper.
3. There are errors on its website
The website is pretty basic. In fact, there's really only one page and you'll get more information from the Reuters and CoinTelegraph articles than from the site. Even the basic navigation doesn't add up. For example, there are three 'waiting list' buttons. One goes to a Google form where you can sign up to the new extended waiting list, and the other two go to a page that says the waiting list is closed. Moreover, Google Forms is not the most professional way to do a token pre-sale.
The other links go to a Change.org petition that hasn't yet received 200 signatures and an email contact form. Given the project says 10,000 people signed up to the initial pre-sale waiting list, this itself is suspect -- it means less than 2% of them signed the petition. Though this could be because it isn't clear what the petition is trying to achieve.
The slightly odd English can be attributed to sub-optimal Spanish translation. But, there's also no information about the team, no details on how the token will work -- such as how many will be issued, and no info on which merchants will accept the token. Finally, it claims to be the first coin aimed at the LGBTQ community, but it isn't.
Buyer beware
MariCoin raises a number of red flags, even if you're trying to give it the benefit of the doubt. On the plus side, it received an Algorand (ALGO) accelerator program grant, which gives it more legitimacy. It could be a genuine project run by people who aren't super familiar with the crypto world. There's a chance they've rushed to get something to market, and not realized a crypto token with no whitepaper and a poor website would cause concern. However, there's also a chance there's something more concerning going on.
Its website says the coin will be released on main cryptocurrency exchanges in February and offers people the chance to reserve MariCoins beforehand at the starting price of $0.025 by joining the extended waiting list. This seems like an extremely risky proposition. Nobody knows what will happen to MariCoin's price when it (and if) is released on crypto exchanges. There's no info about how many tokens will be issued, how many are owned by MariCoin's founders, and where it might be traded.
If you want to support MariCoin, the best bet is to wait until there's a lot more information available. You need to see its whitepaper and understand the details of how the token works before you spend a cent. Try not to get blinded by the project's ideals and evaluate it as an investment. If it didn't promise to do something good for the LGBTQ community, would you give it a second glance? I know I wouldn't.
ABOUT THE AUTHOR
Emma owns the English-language newspaper The Bogota Post. She began her editorial career at a financial website in the U.K. over 20 years ago and has been contributing to The Ascent since 2019.
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