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crypto grump

Sunday,  01/08/23  01:02 PM

Hi, I'm Ole, and I'm a crypto grump.  I know how it works - better than most people - and I understand blockchains and cryptography and all the tech, and I appreciate the potential for having a digital currency used as a value exchange intermediary which isn't backed by physical assets like gold.

But.  The crypto fad of the last few years doesn't have anything to do with any of that.  It's a distributed pyramid scheme, and as an official crypto grump I do not see any value being created.  Tell me all about ICOs and NFTs and DAOs - go ahead.  Extol Web3 to me.  No. Value. Created.  Watch the video linked at right - it's excellent - and see if you don't agree.

So I'm watching the Rose Parade and in the middle of all the floats from big companies and cities and charities, there's a float from nouns.wtf*.  Maybe you've heard of them?  If not, let me tell you - it's a beautiful example of the whole scheme in action.

You might think a noun is a part of speech, but also, it's a 32x32 pixel caricature of a little person, formed from a random combination of features like head shape, glasses, body, etc.  At right is Noun #563, which was "minted" on Jan 1, 2023.  Every day a new Noun is born and auctioned off, and every day someone wins the auction and buys one.  This particular Noun was bought for 35.0 ethereum (ETH), which on Jan 1, 2023 was worth about $47K.  Huh. 

So what did that person get for their money?  The rights to the image, amazing and beautiful as it is?  Well no, Nouns are open and available to everyone.  You could use it yourself, right now, for $0.  All they got was an entry in the ethereum blockchain, which they could potentially sell to someone else.  So far about 570 Nouns have been created, and 126 transactions have taken place after the initial auction, so it would be hard to say that they are in demand.  But every day there's an auction for a new one, and people bid, and someone wins.  No. Value. Created.

What about that parade float?  Well if you auction off 570 Nouns at $47K or so each, you can pay for one.  Just now the Noun treasury contains 28,580 ETH, worth $38M.

My favorite part of this "project" is that there are ten "nounders", and every tenth Noun goes to them.  They are paying themselves each about $5K every ten days.  And they're proud of it ...  Such a deal!  It's good to be living on the tip of the pyramid.

There are hundreds of such scams operating in parallel.  Everyone is buying tokens for X today hoping they'll be worth more than X tomorrow.  And they will be for a while.  Just get out fast, because the whole thing is unsustainable.  No. Value. Created.

So, what about all the VCs who are investing in crypto?  Well VCs always live at the tip of the pyramid, this is perfect for them.  They are smart people, they are not confused.  They will get paid in tokens, they will sell their tokens, and they will get out early, before the stuff hits the fan.  When the music stops it will be ordinary retail investors who end up owning those entries in the blockchain and desperately trying to find buyers.

As a final note, for some reason some people choose to compare AI to crypto, maybe because they're related in time.  But don't be confused.  As Miguel de Icaza notes: AI is hyped because it is useful and shows a lot of promise.  Crypto was hyped because scammers and swindlers found they could make a killing.  They are not the same thing.

* BTW yeah, there is a "wtf" TLD, who knew?  Perfect for crypto projects!