Some things are just too good to not synthesize them.

Stephen Diehl has written what seems to me a great description of the “Intellectual Incoherence of Cryptoassets”, that is of digital currencies based on cryptography and distributed online databases of which Bitcoin is currently the most notorious example.

The central argument stands by itself, as a good, not unbearably technical summary of what is wrong with cryptocurrencies as they are today. That is, cryptocurrencies are not always and only bad, by definition. But to get what’s good in them, here is what must be removed.

Says Diehl:

Crypto assets are the synthesis of a speculative mania and a financial scam built around an opaque technology, phoney populism, with a tolerance for intellectual incoherence at its core.

[Crypto assets] share the obscured and circular payouts of Ponzi schemes, the cult-like recruiting of multilevel marketing schemes, the ephemeral nature of high-yield investment fraud, and payout mechanics of pyramid schemes but strictly speaking they aren’t exactly like any of the classical scams.

They’re something entirely new that we don’t have a word for yet…

However there is a simple inescapable truth behind these schemes. These schemes around crypto tokens cannot create or destroy actual dollars, they can only shift them around (*). If you sell your crypto and make a profit in dollars, it’s only because someone else bought it at a higher price than you did. And then they expect to do the same and so on and so on ad infinitum.

Crypto investments cannot be anything but a zero sum game, and many are actually massively negative sum. In order to presume a crypto investments functions as store of value we simultaneously need to suppose an infinite chain of greater fools who keep buying these assets at any irrational price and into the future forever.

This is where these financial instruments leave the realm of reason and enter the cult-like world of MLMs and quasi-religious movements. Arguments for the non-zero valuation of crypto assets are all predicated on belief in infinities, circular logic, or faith in invisible hand of future forces yet unknown.

Begins and continues here". Go read it all!

(*) of course, that is true only until/unless one or more cryptocurrencies completely replace the dollar, the Euro and so on, thus making it completely unnecessary to ever convert your cryptomoney into any of those old fashioned, “fiat” currencies. The problem is how to get there, assuming we need to, without all the current, undeniable crap that Diehl describes.