Sam Bankman-Fried is on trial this week for fraud in cryptocurrency, which seems like the perfect time to analyze why crypto is neither necessary nor sufficient for life in 2023. In other words, I don’t like it.
I’m supporting a couple of online investing classes that each had a whole module all about crypto, so I may have to “teach it.” One of my beefs is that explanation about a new payments process should not obsess about the technical aspects of how it works. If you start the discussion of “what is digital currency” by using the word “blockchain” and a set of Rubik’s cubes, then I know it’s already gone off the rails. Hope I don’t have to grade any assignments touting this nonsense er… technology still underdeveloped.
For those of you who don’t know the difference between proof of stake and proof of work or which Marvel movie featured the Scarlet Witch or how many points a ranger adds to their acrobatics D20 roll… in other words, if you’re not mesmerized by geekery over this stuff, let me see if I can detangle why digital currency’s time has not come. It has to do with 1) technological vulnerability; 2) lack of standardization; 3) volatility; 4) diffusion of purpose. Allow me to expound.
There’s actually a joke about crypto in the mystery series “After Party II.” The murdered guy made his fortune in crypto, and when one person asks what exactly he was doing, the official nerdy character jump in with, “Let me explain what blockchain is…” That’s how we know this is all silly. If you are explaining either an investment or a way to pay for a sandwich by talking about how the currency is built, we’re in trouble. Do I need to know what kind of special ink is used to make a twenty dollar bill or how they put the hologram on in order to know that it’s not counterfeit? If you ask me how a bank works, do I start by explaining what kind of reinforced concrete they use for the vaults?
Blockchain may indeed be quite secure. Encryption is pretty secure. Fort Knox, I suspect, is quite secure. The question of how digital currency works should not begin with whether or not it’s secure or how it’s secure. It should begin with how you use it. To my mind, there is vulnerability there. Why? Because digital currency can only be used from within a program.
Say I want to buy a soda at my local mini-mart with crypto. I need my phone, my password to the phone, my password to the app. And the phone needs service and to be fully charged. The mini-mart needs technology, too, as well as working access, service, etc. All of a sudden, this “so easy” process has several layers. Not convinced? One of the first folks to pay with crypto at Subway, which touted its willingness to accept payment, described this incredibly easy process as:
Once our subs were made the employee took out an iPad and opened Coinbase. She punched our total in the register and then in the iPad, which immediately generated a custom QR code linked to the store’s Coinbase account which was preloaded with our exact total calculated. I took out my iPhone, opened my Coinbase app, and scanned the QR code. Instantly the total popped up on my screen and gave me the option to leave a note about my purchase.From Coindesk.com blog.
I’ll stop you right there. The employee took out an iPad? A separate piece of technology, disconnected to the register? That has to coordinate with the store’s accounting system? Who do you think is making these sandwiches at Subway? It’s not Chat GPT, I’ll tell you that much.
By the way, googling this topic about Subway also led to story #1: Subway has just been sold to a giant conglomerate private equity firm that also owns a dozen other food service chains. Story #2: Subway-themed trading bot makes millions using ‘sandwich’ attacks! That means a digital pirate stole millions digitally using Subway as his villain name. And that whatever Subway wanted to do with digital currency acceptance may soon go out the window with the new ownership. Let’s see if crypto stays on Subway’s menu.Continue reading “Why Crypto Isn’t Ready for Us”