I have been waiting impatiently for years for the final collapse of the cryptocurrency phenomenon, exposing the conjurer behind the curtain. But, although the illusion has been wavering and fading recently, with the aid of entrepreneurs like Mr. Bankman-Fried, I suspect that there may be weeks or even months more to wait before the final dénouement. This is more than an illusion, it is practically a religion, and the believers cling to it tenaciously.
Money in general is a flimsy, abstract thing. Most of what we imagine we have is nothing more than a few kilobytes in the memory of a computer somewhere, and we don’t even know where. Tangible money comes in the form of little scraps of paper that declare themselves to be “legal tender for all debts public and private.”
None of this has any real substance or value although, to avoid catastrophe, we must behave as if it does. It was inevitable that, sooner or later, somebody would dream up a form of money that is invisible, intangible and more or less indescribable. If you like conspiracy theories, this is the big one. In his eye-opening book Fantasyland, Kurt Andersen argues that our economic system is now 100% unreality based, as is our politics. Congress juggles with trillions of dollars that simply don’t exist, and never will.
There have been dozens of books and articles that try to explain how these new cryptocurrencies are created. Their supporters use the word “mining” to describe the process, and it seems that Chinese companies are mining money right now in computer factories in the Texas, which should give us pause for thought. The word “mining” reinforces the illusion that buyers are getting something valuable, like gold. I would prefer the word “imagining.”
Imagining crypto-money into existence takes a lot of electrical power — one single Bitcoin takes enough energy to power the average American home for two years. The only parallel I can think of is Frankenstein’s monster, who was also brought to life by a great jolt of electricity. It also reminds me of the paper Monopoly money we played with when we were kids, taking our vast profits and losses very seriously, and not always playing with complete honesty.
Like our Monopoly money these fragile electronic currencies, are highly vulnerable to theft by cheats and swindlers, and are stolen in the millions, although in a sense nothing is being stolen, because there’s nothing there. Only a tiny number of computer obsessives know how this conjuring trick works, but for everyone else it looks very much like a high-tech fraud. Serious economists have denounced cryptocurrencies as a scam and a Ponzi scheme. Nobody seems to love them except those who have invested in them. Billions have been lost, and many small investors have innocently bought into this just as many have invested in lottery tickets or betting slips.
The government worries that cryptocurrencies will allow people to avoid paying taxes. But the money the government collects now is all imaginary. Having less of it will make no difference; they can always imagine more. Cryptocurrencies have been described as a bubble, but a bubble must have at least some soap around it. They have been described as volatile, but there’s nothing to evaporate. Their main purpose seems to be to fuel a secret economy of crime, drugs, arms dealing and money laundering, which logically seems to prove that there is no secret economy of crime, drugs, arms dealing and money laundering. It’s all imaginary. That, I suppose, is the good news.
