Crypto-Optimism and Crypto-Pessimism
This post is the second in a series of articles by Daniel Thorson and Michael Fogleman about cryptocurrencies and the possible futures they open up for organizations, communities, and individuals. It gives an overview of cryptocurrencies, blockchain, and distributed ledger technologies. If you’re already familiar with these, this article is unlikely to provide you new information, but might offer a new perspective.
PART 1 | PART 2 | PART 3 | PART 4
Many opinions about cryptocurrencies and distributed ledger technologies fall neatly into one of two perspectives: crypto-optimism or crypto-pessimism. These largely overlap with “bullish” and “bearish” perspectives¹, but indicate a larger perspective than only market sentiment.
Here is a brief summary of some of the major points of each perspective.
From the crypto-optimistic perspective:
- Blockchains are a novel and powerful technological innovation.
- Distributed ledger technologies enable interesting business models in many areas, such as file storage, payments and remittance, prediction markets, identity verification, social media, advertisements, and shared computing power.
- Bitcoin solves a long-standing computer science problem called the Byzantine Generals’ problem.
- Bitcoin’s invention deserves consideration for the Nobel Prize in Economics.
- Blockchains and cryptocurrencies promote values like privacy, openness, market efficiency, and merit.
- Private parties can issue their own cryptocurrencies. This allows individuals to avoid currencies issued by parties with whom they disagree, such as unpopular or irresponsible governments or central banks.
- Cryptocurrencies move trust from human organizations and governments to code-based solutions, improving trust, testability, and consistency.
- Blockchain-based governance models enable rapid iteration, resulting in the creation of new, more effective paradigms for governments and collective organizations.
- Cryptocurrencies are just getting started, and will reach peaks that are much, much higher than current market value.
- Investing money and human capital into cryptoasset-based projects is economically beneficial to individuals, and promotes financial literacy.
- Blockchains will transform the economy, benefiting every part of human society.
From the crypto-pessimistic perspective:
- Cryptocurrencies serve no useful purpose.
- Cryptocurrencies are an enormous Ponzi Scheme.
- Cryptocurrencies are only useful to criminals.
- The technology is new, unproven; hacking and theft abound.
- The cryptocurrency market is extremely volatile.
- Major coins have high fees, and transactions take too long.
- The cryptocurrency market is driven by fear of missing out (FOMO), greed, self-interest, and promote irresponsible gambling.
- The explosive growth in cryptocurrency markets is motivated by greed, and causes societal-level coordination failures, where individual gain causes net harm
- Cryptocurrencies lack oversight by financial regulators.
- Government regulations will stifle or shut down the market growth.
- The cryptocurrency market is almost certainly a bubble and will crash.
- Cryptocurrencies should be avoided as investment vehicles.
- Cryptocurrencies create “brain drain” away from other societally important problems.
- Major cryptocurrencies are dominated by a small number of wealthy investors (“whales”), perpetuating economic inequality
- Cryptocurrencies are male-dominated, perpetuating gender inequality and sexism.
- Mining major coins wastes resources, consumes more energy than a number of countries, and exacerbates global warming
- They should be banned or outlawed by governments as a moral imperative
I hope that the juxtaposition of these lists produced the sensation of extreme cognitive dissonance.
Each of these individual arguments can be and has been persuasively presented. The whole truth is more nuanced than an opinion or a black-and-white perspective.
If you encounter one of these arguments in conversation or online, it’s easy to walk away with evidence that validates a strictly crypto-optimistic or crypto-optimistic perspective. If you already had a clearly defined perspective, it’s easy to find ample evidence that supports it.
But from a purely practical perspective, it’s useful to explore the perspective that differs from your own pre-conceptions and opinions.
If you believe that you’re going to get rich from investing in cryptocurrencies and save the world while you’re at it, you might very well have an unpleasant surprise in store. You probably have something to learn from those that think crypto is a giant bubble that’s going to collapse and dramatically worsen global warming all the while.
If you believe that cryptocurrencies are a useless Ponzi Scheme, you are not positioning yourself to clearly and accurately understand and prepare for the future. You probably have something to learn about the technical innovations behind the technologies, and the emerging solutions that those technologies are beginning to make possible.
The point of this exercise isn’t simply to convince you that your pre-existing opinion — for or against the developments in distributed ledgers, blockchains, and cryptocurrencies — is wrong. That would be just as misguided as sticking to your pre-existing opinion and ignoring other evidence.
Instead, the point is to come to a new perspective, which transcends instinctive optimism or naïve pessimism: crypto-sobriety.
The crypto-optimistic and crypto-pessimistic perspectives are both true, and yet incomplete. We need more nuanced opinions that take into account both perspectives; we need more crypto-sobriety. One example is the view taken by Stratechery’s Ben Thompson. Thompson argues that rather than comparing the emergence of blockchain applications to the folly of tulip mania, we compare it to the dot-com businesses of the 1990’s: good businesses that were 15 years too early. In his view, there is a bubble, but it is a bubble of timing, not a bubble of irrationality.
The tension between crypto-optimism and crypto-pessimism — and the need for a higher, more nuanced perspective — reminds me of Venkatesh Rao’s distinction between Prometheans and Pastoralists in his series Breaking Smart:
A basic divide in the world of technology is between those who believe humans are capable of significant change, and those who believe they are not. Prometheanism is the philosophy of technology that follows from the idea that humans can, do and should change. Pastoralism, on the other hand is the philosophy that change is profane.
These two philosophies manifest with any new development, including machine learning, virtual reality, and autonomous cars, and older ones such as literacy, television, and horseless carriages.
All of these views, crypto-optimism and pessimism, and Prometheanism and Pastoralism, relate to humanity’s view of the future. Crypto-optimism and crypto-pessimism relate to a particular set of technologies. Prometheanism and Pastoralism relate to broader beliefs about technology in general, in relation to our human species, and our ability to change. But the broadest level of all is a more fundamental orientation towards the future, not just for the human species, but for all living beings, and finally, the universe itself. Here too, there is an optimism and a pessimism.²
These crude categorizations, made in rough and broad strokes, do not necessarily lack accuracy. Just as crypto-optimism and crypto-pessimism gave way to crypto-sobriety, these fundamentally optimistic and pessimistic orientations towards the future point to an important and more accurate perspective. The most useful perspective to hold is that everything is getting better and worse simultaneously, in different respects, all of the time.³ This perspective enables us to take advantage of positive developments and prepare for negative outcomes.
¹ For a split within the bullish / optimistic crowd, see these tweets by Taylor Pearson (archive here).
² For example, we might stereotype many past societies as carrying the belief that everything is getting worse (the “Kali Yuga” perspective). On the other hand, we might stereotype our current society with the belief that everything is getting better (the “Silicon Valley” perspective).
³ This point was articulated in a talk by Soryu Forall.
Vertical Context Cues
Curiously Related Rabbit Holes
- Why is pop culture obsessed with battles between good and evil?: argues modern storytelling tropes of good + evil is more political than moral
- SWAMI BHAKTIVEDANTA CHANTING GOD’S SONG IN AMERICA: Allen Ginsberg poem on Kali Yuga
- Robert Anton Wilson on Perception and Interpretation: How our interpretation affects our reality, and the uses and misuses of optimism and pessimism.
