"The ultimate distillation of the golden age of fraud"

If you're new to Web3 and the hype economy in general (a phrase I apparently no longer have exclusive rights to) this New Republic overview by Ben McKenzie, Jacob Silverman is a good place to start.

In the golden age of fraud, grift sits comfortably alongside the general sense of unreality permeating the American economy. JPEGs sell for millions of dollars and are denominated as a new asset class, despite the many practical and philosophical problems accompanying them. Ephemeral meme stocks and dog-themed crypto tokens outperform deep-pocketed companies that actually, you know, make things. The world’s richest man, Elon Musk, owes his fortune to a state-subsidized electric car company that produces far fewer vehicles than his competitors but is worth more than almost all of them put together. (Although it must be said that Musk’s rivals often aren’t much better: Volkswagen, the number-two car company in the world by revenue, cooked the books for years by rigging emission-detection software.)

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The cryptocurrency industry may be the ultimate distillation of the golden age of fraud. Like Uber, it’s benefited from vast sums of cheap investment capital and pliant public officials easily charmed by new technologies. But whereas Uber provides a clear service, albeit at the expense of underpaid gig workers, the use cases for crypto remain uncertain, even as it drapes itself in utopian rhetoric about financial revolution. Wild volatility, a lack of payments infrastructure, rampant scams, and technical complexity make crypto an unappealing choice to be a real currency or store of value. And its environmental impact and Ponzi-like economics—new investors are required to buy out the old—mean that it may actually be a negative-sum game.

In a hype economy built on froth, virality, misinformation, and celebrity endorsements, crypto has no apparent utility besides being a source of risky speculation. As economists from both the left (Krugman, Roubini) and right (Hanke) have pointed out, crypto has no inherent value except what another person might pay for it. In economics, this is referred to as the “greater fool” theory. At its base, crypto is private money (an outdated notion from the nineteenth century) that largely runs on rails purposefully set up to be outside the banking system and away from those pesky government authorities with their annoying focus on transparency and the rule of law. Its value is a collective hallucination, dependent on constant salesmanship and, in some cases, deception and market manipulation.