Episode 67 — An Early Skeptic’s Telling of “Why be skeptical?” (Feat. David Gerard) — Crypto Critics’ Corner

Crypto Critics' Corner

An Early Skeptic's Telling of "Why be skeptical?" (Feat. David Gerard) Crypto Critics' Corner

Today Bennett and Cas are joined by pioneering cryptocurrency author and skeptic David Gerard so he can tell us why he was skeptical in the first place and why he continues to be so today. David's books:  Attack of the 50 Foot Blockhain https://www.amazon.com/Attack-50-Foot-Blockchain-Contracts-ebook/dp/B073CPP581 Libra Shrugged https://www.amazon.com/Libra-Shrugged-Facebook-Tried-Money-ebook/dp/B08KK9SZP6/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr= Books Recommended: Extraordinary Popular Delusions http://supernovae.in2p3.fr/~llg/Textes/Extraordinary-Popular-Delusions-Mackay.pdf The Politics of Bitcoin https://www.amazon.com/Politics-Bitcoin-Right-Wing-Extremism-Forerunners/dp/1517901804 BitCon https://www.amazon.com/BitCon-Naked-Truth-About-Bitcoin-ebook/dp/B00NUIUQ3A Shameless self-promotion: Cas' article on Caritas Ponzi Scheme https://thecaspiancey.medium.com/caritas-or-how-i-learned-to-stop-hating-and-love-the-ponzi-26bd8e05c066 Cas on Crypto Island by PJ Vogt https://podcasts.apple.com/us/podcast/crypto-island/id1614253637?i=1000556292753 This episode was recorded on Friday, April 8th, 2022

In this episode Cas Piancey and Bennett Tomlin are joined by David Gerard to discuss his history as a skeptic in the space. 

Other episodes mentioned in this show:

David’s Materials:

Other book recommendations:

Cas’ Materials:

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English transcript:

Cas Piancey: Welcome back, everyone.

Cas Piancey: I am Cas Piancey, and I'm joined as usual by my partner in crime, Mr.

Cas Piancey: Bennett.

Cas Piancey: Tomlin, how are you today?

Bennett Tomlin: I'm doing well.

Bennett Tomlin: Orson, how are you?

Cas Piancey: There we go.

Cas Piancey: I'm I'm doing fine.

Cas Piancey: We're joined by quite a special guest today, someone who has been a very important part of this cryptocurrency, skepticism and criticism space, Mr.

Cas Piancey: David Gerard.

Cas Piancey: First of all, how are you?

David Gerard: Good evening.

David Gerard: I'm doing great.

David Gerard: It's a lovely sunny spring evening here in London.

Cas Piancey: Well, it's good to have you on because you were at the forefront of cryptocurrency, skepticism and criticism.

Cas Piancey: You wrote Attack of the 50 Foot Blockchain, which Bennett and I both read and enjoyed.

Cas Piancey: You also authored the Libra book Forgive me, the name is escaping Me.

David Gerard: Libra shrugged, and then they changed the name to Diem a month after it came out.

David Gerard: Obviously my fault.

David Gerard: This is direct personal attack by David Marcus.

Bennett Tomlin: David Marcus was scared of your book.

Bennett Tomlin: It's not David versus Goliath, it's David versus David.

Cas Piancey: I think it's important to have you on because, well, for a few reasons, but I think mostly because you've been here a lot longer than we have, and you've played an important role calling out what you perceive as, I guess, an industry worth of bullshit.

David Gerard: I think that's an objectively correct description of cryptocurrency.

Cas Piancey: Well, let's talk about it.

Cas Piancey: Obviously, I'm sure you've gone over this 100 times, but I'd love to hear how you first discovered cryptocurrency and why you've been so critical of it.

David Gerard: I started looking into it around 2011.

David Gerard: I think I first heard it in 2010 when WikiLeaks got cut off from PayPal and Mastercard and Visa, and I was outraged.

David Gerard: I thought, they can't do that, they can do that.

David Gerard: And someone suggested, oh, they could use Bitcoins.

David Gerard: What are they, some sort of internet money?

David Gerard: I looked at a bit further and discovered that this was some sort of weird internet nerd money being done by our very good friends, the basement dwelling internet libertarians.

David Gerard: And I had long had experience of these guys online because they've made things better online for decades, and Bitcoin proved to be no exception.

David Gerard: I predicted at the time that this would just be an inexhaustible mine of comedy gold, and it has turned out to be so just by the nature of the people who started it and why they would have started it, I hadn't even looked into it deeply at that stage.

David Gerard: It was just anything done by these people would be basically a manifestation of just world fallacy amongst privileged nerds who are convinced that the entire rest of the world is a simplified version of front end JavaScript.

David Gerard: And these people are endemic, and they're an endemic for I've been acquainted with these people for many years, so Bitcoin is just another one of those.

David Gerard: So I followed it a bit for a few years and gradually built up the Bitcoin article in Rational Wiki, a small skeptics Wiki, which I edit on.

David Gerard: I built that up from like two lines to a reasonable article, and I don't know why, but for some reason, around 2014, I found myself on Reddit, our B*** coin, which is just a wonderful place, full of heartwarming people and the correct views on things.

David Gerard: Like, you called me before one of the first skeptics of crypto, and that's absolutely false.

David Gerard: Everything I did was basically built on a whole bunch of these guys who correctly called these bozos out very early.

Cas Piancey: Calling me a liar.

David Gerard: David, you're just underinformed, and I'm here to help you with that.

David Gerard: In my educational role, some of these guys, they're still around, like Jorge Stolfi, who still tweets occasionally.

David Gerard: He viciously dismantled this nonsense on Bitcoin for quite some time.

David Gerard: If you ever want detailed expositions of precisely why lightning network cannot possibly scale.

Cas Piancey: A good friend of ours was working to build L2, and Lightning network, and yeah, he stopped working on it.

David Gerard: The whole idea would literally require new mathematics.

David Gerard: It's one of those.

David Gerard: It's like some of Ethereum's wilder fancies where you realize that actually, I don't have a computer science degree.

David Gerard: I bombed out repeatedly, so I had to get a real job.

David Gerard: But it was like, I do respect the fact that sometimes you just actually got to know s***, and that never sunk in with the crypto crowd who are really full of this.

David Gerard: It's a standard Silicon Valley stereotype, the Heinleinian hero who pulls things forth from his forehead and doesn't need to do the reading because he's enlightened by his own intelligence.

David Gerard: So I got onto Reddit Bitcoin and hung out on there for about late 2014 onwards, which was great watching just after Mount Cox had crashed.

David Gerard: And that hilarious moment in January 5, 2015 when Bitcoin dipped $250.

David Gerard: But it was really interesting.

David Gerard: So then I joined Something Awful, which is the great big message board where all the internet's worst troublemakers were in the 2000s, and they're still there.

David Gerard: It's just now they're 20 years older and they have backaches.

David Gerard: Bitcoin actually started there.

David Gerard: The people who run the Bitcoin Twitter and the Bitcoin Foundation website, they started on Something Awful in the Bitcoin threads.

David Gerard: I could not have written my book without tremendous help from people on Something Awful and read it.

David Gerard: There's a whole lot of people that came before me.

David Gerard: I mean, I'm just someone who's still here and persisting because I don't know when to quit.

Cas Piancey: That's.

Cas Piancey: My next question is that considering your perspective on this, what is driving you to continue to stick around?

David Gerard: So I wrote the book, and I thought this would be a self published book by someone with decent social media.

David Gerard: It'll sell 300 copies easily, but it came out in July 2017, which was when the 2017 bubble was really on its upslope.

David Gerard: And so there were no other critical books.

David Gerard: There's literally hundreds of books on how great crypto is and why you should get into it.

David Gerard: And there's nearly no solidly critical books.

David Gerard: There's a few good histories and a few bad histories.

David Gerard: But for critical books, there's Jeffrey Robinson's Bitcoin from 2014.

David Gerard: He basically spent the 90s writing about financial crimes.

David Gerard: And then there was David Columbia's book, The Politics of Bitcoin, which I will never stop recommending to people because it's essential reading.

David Gerard: It was written in 2016, but its history and insight into the history is absolutely solid and it's great.

David Gerard: So chapter three, and his book is the extended version of that.

David Gerard: And then there was my book and there was no one else.

David Gerard: So I got the press come to me and talked about it and the book took off and it's like kept on selling and then it took off again in the 2021 bubble and it's coming up to 150 sales.

David Gerard: This is not what a self published book does, but mine did.

David Gerard: So cool.

David Gerard: Yeah.

Cas Piancey: But the main reason you're saying that you've chosen to stick around is because you feel as though you're one of the only critical voices because it turned into half a job.

David Gerard: I stick around because it's interesting, it's absolutely fascinating, and it's an endless clown car of speeding towards a dumpster on fire with more clowns jumping on.

David Gerard: I nicked that description from someone from Bitcoin who was using it to describe Bitcoin, but really, it describes all the crypto.

Cas Piancey: I think my favorite description of Bitcoin period came from.

Cas Piancey: I don't know if it was Bitcoin or that tweet where someone talks about imagine leaving your car motor running.

Cas Piancey: I can't get the exact phrase down.

David Gerard: But something like running your car to solve sudokos you can buy heroin with, right?

Cas Piancey: Yes.

David Gerard: And like around July, I think my wife said to me, oh, you should do a patron for this stuff.

David Gerard: No, I want to stop thinking about this and write about something else.

David Gerard: And she was, of course, correct.

David Gerard: Which is a lesson I'll probably learn eventually.

David Gerard: So, yeah, I started a Patreon and like just for the blog, and I put up early release things of stuff I've written for other places.

David Gerard: Yes, $700 a month now, which is pretty good.

David Gerard: And that plus book income, plus freelancing income, plus doing panels, which unfortunately that just didn't happen much in 2021, which is a real pity because it turns out the nodding and smiling racket is where the money is as a writer.

David Gerard: So basically it turned into half a job.

David Gerard: So I kept doing it.

David Gerard: But also, given the amount of work I put in compared to the money, it's clearly I'm not in it.

David Gerard: If I was in it for the money, I'd be doing something else.

Bennett Tomlin: You'd be rang one of the hundreds of other books that are positive.

David Gerard: It's like I said to my wife, why am I doing this book rubbish.

David Gerard: I should do an ICO and no, but it could totally be no.

Bennett Tomlin: You only get one chance to sell your soul.

David Gerard: I can honestly say that I have passed the moral test.

David Gerard: I am too dumb to take the money.

Bennett Tomlin: Clearly we are as well.

Bennett Tomlin: Sitting here doing a podcast for free.

Bennett Tomlin: Being a skeptic or cryptocurrency critic is a challenging pursuit just because the cryptocurrency community can be a bit toxic and standoffish at times.

Bennett Tomlin: And I know there were lots of times I almost wanted to step away because of that.

Bennett Tomlin: I'm like, this can't all be worth it.

Bennett Tomlin: Have you ever felt that?

Bennett Tomlin: Or do you keep more of a laugh at the responses kind of mentality?

David Gerard: So the online weirdos are the worst 10% and the worst 10% of anything.

David Gerard: They're going to be bloody awful.

David Gerard: I was actually surprised when I started doing panels in like 2017 2018 and I met Bitcoiners and they were normal and they were much more optimistic about the future of this stuff.

David Gerard: But they agreed on consensus reality.

David Gerard: They were normal people and they're fine.

David Gerard: I've got like friends who are into crypto lots and I'm on lots of crypto chats with decent people.

David Gerard: I do stuff for a lot of people are fine.

David Gerard: One thing I surprised when the book came out was a lot of people who were Bitcoin has liked it because it was actually reality based instead of frothing, unrealistic nonsense, and they found that refreshing.

David Gerard: Like the space had gotten too BSE even for them.

David Gerard: So the fact that I wrote down facts and had about 400 footnotes with little numbers and everything and you could check them and then the ebook you could click on them, that helped my credibility a lot.

Bennett Tomlin: I mean, there's frequently times, even still, when I'm writing or researching something, when I pull your book off the shelf so I can crib off the footnotes in the bibliography to find the original sources for certain claims and stuff.

Bennett Tomlin: And still, even at the time, one of the only people who got Phil Potter, one of the Bits Next executives, to go on record about the hack.

David Gerard: Yeah, I didn't actually quote him in the book, but the description of the hack is basically from him.

David Gerard: Now, Tether had been caught in a number of untruths in the past.

David Gerard: However, his description matches the previous description I'd be given by someone else who I can't name, but I bet they're watching So High, which I posted to Reddit Bitcoin and then someone from Bit for Next got in touch and said, look, that's not how it happened.

David Gerard: You want to talk to Phil?

David Gerard: They really didn't want the description I had going out, so he gave me a more detailed description, which, well, it's basically a more detailed version of the same thing and it rings true.

David Gerard: I wrote a blog post recently about Heather Morgan and whatever her husband's name was.

David Gerard: Ilya or something.

Cas Piancey: Ilya Lichtenstein.

David Gerard: That's the one.

David Gerard: Ilya Lichtenstein.

David Gerard: But I suspect it could be a social engineering rather than some sort of computer science whiz-bang.

David Gerard: Genius.

David Gerard: Most hacking is just social engineering and doorknob rattling and persistence.

Cas Piancey: I hate to say that maybe the Bitfinex and Tether executives aren't the brightest bulbs in the whole world.

David Gerard: It's interesting because Phil was actually one of the most qualified of them.

David Gerard: Because he was an experienced trader.

Cas Piancey: Yes.

David Gerard: And he knew what was constituted good conduct and what didn't constitute good conduct.

David Gerard: He knew whichever one he chose.

David Gerard: That's between him and God.

David Gerard: But he knew.

David Gerard: But he was an experienced trader.

David Gerard: He knew what the job was.

David Gerard: Razzlecom was great to see.

David Gerard: It was like this was like going back into the early days of Bitcoin.

David Gerard: They were all a bunch of weirdo freaks.

David Gerard: It was amazing.

David Gerard: The absolutely bizarre characters who got into this stuff just because they thought magical Internet money was a fun idea.

Cas Piancey: I think they're still there, don't you?

David Gerard: Oh, they are.

David Gerard: They're just overshadowed by the number go up.

Bennett Tomlin: Yeah.

Bennett Tomlin: It's gotten a little more institutionalized since CME had futures and there's big firms trading it now.

Bennett Tomlin: There's a bit of a different mentality when you look at the average Bitcoin than there was in 2016.

Cas Piancey: Yes, I think that's actually a good question.

Cas Piancey: How have you noticed, as a skeptic and critic, how have you noticed the space change over the past, let's say five years?

David Gerard: The scams have gotten bigger, a lot of it.

David Gerard: I think the authorities have just been asleep because no one cares about crypto.

David Gerard: It's tiny in the scheme of finance.

David Gerard: It's really not very big at all.

David Gerard: Now they're worrying because they're worried about these guys becoming systemic.

David Gerard: That's the big threat, because if you have an $80 billion institution called Tether and it's messing around with money in ways that are clearly completely chunky, you don't want that going near the actual economy where people live.

David Gerard: On the other hand, if it's often its own little sequestered bubble, let them kill each other, let them fight.

David Gerard: So it's when they start threatening the world with interfering with the real economy where people live, that the regulators get upset.

David Gerard: I think that if the crypto world does not like regulators being up in their business, they need to blame Facebook, because Libra absolutely frightened the crap out of them.

David Gerard: Every regulator, finance Ministry, central bank.

David Gerard: I mean, I wrote a book where the central banks are the good guys, and that's what I'm doing.

Bennett Tomlin: This is actually going to be my next question is because I remember reading your coverage of the Libra hearings and reading through Libra shrugged.

Bennett Tomlin: And I thought you laid out the case quite convincingly that it was a wake up call to a lot of regulators in these financial groups that crypto is small, but the same ideology, the same technology can be used by these other groups to reach this kind of scale where it becomes a threat.

Bennett Tomlin: And the dichotomy that was so strange for me is you heard all these central bankers, these finance ministers, these regulators making statements that seemed like they were going to apply to a lot of other stable coins and other things.

Bennett Tomlin: And the crypto industry seemed to largely ignore those hearings like it was very rarely discussed.

Bennett Tomlin: And it was a strange thing to observe.

Bennett Tomlin: Do you have any thoughts from that period?

David Gerard: So the reason why they went after Libra was because it was retail.

David Gerard: It was supposed to be actual money in the economy doing the job of dollars or euros or pounds or whatever.

David Gerard: When a regulator says the word systemic, that should be correctly interpreted as they're sending off the air raid sirens.

David Gerard: Right.

David Gerard: Systemic means this could break things because the one thing they fear more than anything is another 2008 financial crisis.

David Gerard: And like I say in the book, the labor reserve plan would have done another 2008 or risked it.

David Gerard: A great big money market fund being run by Bozos.

David Gerard: They had arrogant plan and they had no idea what the h*** they were doing.

David Gerard: Perfect combination.

David Gerard: Very Facebook.

David Gerard: I wrote that foreign policy article in June 2019 and my editor turned it up a lot and made it a lot more hard hitting and vicious.

David Gerard: And I had nothing on the honorable gentlemen of the Senate and Congress in July.

David Gerard: Holy s***, they just ripped p*** out of David Marcus.

David Gerard: I can't really fault him because could you do a two seven hour sessions, one after the other in front of the people running the world's largest economy?

David Gerard: You'd probably slip up occasionally.

Cas Piancey: Maybe, but we don't have much to hide and we're not trying to build the next too big to fail money market fund.

David Gerard: Well, exactly.

David Gerard: So they don't worry about Tether, because Tether is just people playing with monopoly money.

David Gerard: But they will worry if they go near us customers.

David Gerard: But they'll worry about that because advice to investors.

David Gerard: I know you disagreed better, but Bloomberg's theory about why the SEC rejects spot ETFs but accepts the futures ETF is the future ETF doesn't touch a Bitcoin.

David Gerard: It's just a bet on dollars in dollars, in the price in dollars.

David Gerard: Whereas the spot ETF involves buying bitcoins.

David Gerard: Getting back to your question, why is the crypto world like ignoring the regulators and the things they're saying?

David Gerard: It's sort of defiance, sort of stupidity, sort of performative stupidity a lot because these people are not unintelligent and they also know what money is and how it works and what the rules are.

David Gerard: But God damn, they come out with stuff that makes them sound like dumbasses.

Bennett Tomlin: That is something we talked about a little bit when John Reed Stark came on the show, former chief of the SEC Office of Internet Enforcement and he referenced the Dow report and how it laid out how this was clearly a security and they got this order and then laid out all of Jay Clayton's statements on how basically every ICO he saw was a security.

Bennett Tomlin: And yet the claim you hear from a lot of cryptocurrency people is we just haven't gotten any clarity yet.

Bennett Tomlin: How are we supposed to know?

David Gerard: Clarity is absurd.

David Gerard: Meaning let me do what I want.

David Gerard: They're very into the theory of forgiveness rather than permission.

Cas Piancey: Which makes sense in some industries and in some ways I'm not opposed to that in theory.

Cas Piancey: But man, it has not been good for making cryptocurrency look like it's a legitimate industry.

Cas Piancey: Because what we see because of this is a proliferation of scams and frauds and not just ones like Enron or something where it's like it's massive, at least on some level, I guess on some scale.

Cas Piancey: Enron was providing services to people.

Cas Piancey: But it was a giant fraud, right?

Cas Piancey: It was one big massive fraud.

Cas Piancey: But the stuff that we see in cryptocurrency is like f****** BitConnect.

Cas Piancey: You go, this is so obvious.

Cas Piancey: It's just too obvious.

David Gerard: It's so obvious.

David Gerard: That's why I've got these little stickers I send out to people, which was actually designed some guy did on something awful Bitcoin.

David Gerard: It can't be that stupid.

David Gerard: You must be explaining it wrong.

David Gerard: Like the dummy schemes that just could not work.

David Gerard: And you go, how do you get away with that?

David Gerard: And oh, that's right, you get away with it because no one bothers prosecuting you for your blatant crimes.

Cas Piancey: This goes back to what we've been seeing in which we did an episode on as well about the Ponzinomics of cryptocurrency and how they're almost trying to normalize Ponzi schemes as a form of economics.

Cas Piancey: And you're like, well.

David Gerard: The dollar is a Ponzi scheme if you really think about it.

Bennett Tomlin: I hate that if you deliberately try not to think at all, you might come to that same conclusion if you think the way I do.

David Gerard: So, yeah, it's like there's a lot of performative stupidity.

David Gerard: There's a lot of people pretending the rules don't apply to them because they shouldn't.

David Gerard: A lot of it is targeted internally.

David Gerard: A lot of them, they do long threads which are basically designed to cheer the troops.

David Gerard: Let's remember, this is a scam with real victims.

David Gerard: We know the economics of crypto must be zero sum as long as you're keeping counting dollars.

David Gerard: And they're all keeping counting dollars because no one really believes that hyper Bitcoinization is going to happen.

Bennett Tomlin: I mean, Jesus, if you have the so called weirdos from the old days probably still believe.

David Gerard: Yeah, but they're no one, you know what I mean?

David Gerard: They're all in it for the dollar.

David Gerard: Quite definitely us dollar fee.

David Gerard: And there is no dollar that comes out of crypto to a winner that was not put in by a loser.

David Gerard: And there must always be less coming out than goes in because so much is bled away by the miners, the service providers, that sort of thing.

David Gerard: It's like if it was at least as regulated as gambling, that would be one thing.

Cas Piancey: I just got recently asked this question and I'm going to do a shameless shill for PJ Voice Crypto Island podcast, where he did an episode called The Skeptic and I got to chat with PJ for a really long time.

Cas Piancey: One of the questions he had for me was, how have you not been driven completely crazy by this?

Cas Piancey: And I gave the typical answer of like, well, I was crazy before I came here, which is true.

Cas Piancey: But also I think it's an easy way to write off that question.

Cas Piancey: And I think it is hard to not be driven crazy if you watch Price, and if you think about how long you've been following this space, and I know it's such a simple question and it gets thrown in all of our faces almost daily that like, well, we're no pointers.

Cas Piancey: We could have bought in at any price.

Cas Piancey: We weren't obviously not going to make it.

Cas Piancey: But why haven't you been driven crazy, David?

David Gerard: Because I'm an old guy and I'm setting my ways and I know how.

David Gerard: I think once you realize that the words Bitcoin and blockchain when I'm asked these days what is a Bitcoin?

David Gerard: How does a blockchain work?

David Gerard: The correct answer is not to go into technical detail.

David Gerard: Don't go into technical detail.

David Gerard: The first answer is it's a promise you can get rich for free.

David Gerard: Remember, Bitcoin didn't start as a scam.

David Gerard: It was started by anecdotal capitalist libertarians who are very sincere people.

David Gerard: They honestly believe this was the best thing they could do, and even they very early on thought, we're going to get rich from this for free.

David Gerard: You can totally make money in crypto.

David Gerard: I'd never say you can't make money in crypto, right?

David Gerard: You can absolutely make money in crypto.

David Gerard: But it is an unregulated shark pool.

David Gerard: And you'll make money if you're a better shark than all the Sharks are already in there and present and set up the pool.

Cas Piancey: It's so easy to even reflect on.

Cas Piancey: Like, if someone got involved in Bitcoin really early and let's say they held their coins at the wrong exchange, they're not rich now.

Cas Piancey: That's all it takes.

Cas Piancey: That is all that you need to happen to.

David Gerard: Well, I think you need to read crypto Twitter a bit more because they will reassure you.

Bennett Tomlin: They bought all their coins in 2009 and withdrew from MTG a year before the heck, before withdrawals got absolutely.

Cas Piancey: After being here for so long and seeing that Bitcoin has not failed.

Cas Piancey: I don't know how you feel, but I guess my perspective is that it's not ever in my lifetime likely.

Cas Piancey: It's possible it could go to zero.

Cas Piancey: I think the likelihood that Bitcoin goes to zero in my lifetime is minimal, though, and I'm wondering what your perspective is on that.

Cas Piancey: And like, if you do think of it as purely a scam, or if there's more nuance to it to you now, or if you totally write the whole entire space off.

David Gerard: It'S a very nuanced details scam with a lot of interesting bells and whistles.

David Gerard: Yes, I'm not a fan.

David Gerard: I think it will be around for decades, obviously, because what do you need for Bitcoin to exist?

David Gerard: Copy the software, copy of the blockchain two or more interested enthusiasts, and they can do transactions to their heart's content.

David Gerard: It will be just like the early days with Satoshi and Hal.

David Gerard: But in terms of how exchangeable it is for actual money, that's a completely separate question.

David Gerard: I've been saying, at least for the last few years on record, that the future of cryptocurrency is to become increasingly regulated, and it will eventually become an asset you can only really get into if you're one of the rich guys.

Cas Piancey: With the goal being what for that then just because otherwise the authorities aren't going to put up with it just as a speculative asset, you think basically like a casino.

David Gerard: It can't possibly work like currency.

David Gerard: It literally just is not useful for that job.

David Gerard: But as a speculative asset, well, you know, it's digital gold.

David Gerard: It's a well known inflation hedge.

David Gerard: I saw a great clip of Ben McKenzie on CNBC where hosted they say inflation.

David Gerard: He said, didn't it go down 30%?

David Gerard: And she went, well, she backed down immediately.

David Gerard: It was great, but I think that it'll be regulated.

David Gerard: And we see this now.

David Gerard: The regulation seems to be coming not from the regulatory authorities, but from the money laundering authorities, but we'll take what we can get.

Cas Piancey: Just so I understand, I think, and just to say it back to you, what I perceive your perspective as in full is that you've found work by covering this space critically and skeptically that you will continue to cover it because you suspect that this is a speculative, volatile asset with a lot of fans.

Cas Piancey: So it will be around for a long time, and that regardless of how you personally feel about it, there will be perceived value as a speculative asset, and therefore it's not likely to go away.

Cas Piancey: And it's here to be to go on for a while.

David Gerard: But Bitcoin is here to stay as an extremely small statement.

David Gerard: As I said, all you need is the software, the blockchain in two or more people.

David Gerard: How it interacts with actual money is a much more complicated question.

David Gerard: I expect everything to tighten down.

David Gerard: Remember, the only advantage this stuff has as a financial instrument is the degree to which it can evade regulation.

David Gerard: That's why crypto does not work for the Remittance case, for example, and the absolutely comical nonsense attempts to use it as money in El Salvador, which are just absolutely incredible.

David Gerard: And a detailed work example of this stuff just not working.

David Gerard: Even blockchain for enterprise.

David Gerard: It's a promise that you can get organizational efficiency for free by magic.

David Gerard: I noticed something else.

David Gerard: There were lots of talk of enterprise blockchain in 2017 and 2018.

David Gerard: Then there was nothing in 2019, in 2020.

David Gerard: Then Bitcoin went up and they started talking about it again.

David Gerard: Last year I got to go on one panel and say, you realize the only reason this panel exists is because the price of Bitcoin is up, and they acknowledge the point.

David Gerard: I mean, there's no more interesting story in finance.

David Gerard: The number go up.

David Gerard: It's literally the point of finance, after all.

David Gerard: But I'd like a bit more interrogation into why it's going up.

David Gerard: I also think that a lot of people have forgotten what unregulated markets look like.

David Gerard: They're really used to the last 90 years of having the SEC and stuff and regulation and markets that behave and are monitored and have rules and stuff.

David Gerard: And this turns out to work out quite well because efficient markets don't happen just by happenstance or naturally or anything.

David Gerard: They collapse in a whole bunch of obvious ways if they're not monitored and regulated.

David Gerard: But crypto is like the amazing stories of stock operators from the 19th century and up to the 19th 20s, which led to the great Black Friday crash of 1929.

David Gerard: So, yeah, it works as long as it can evade regulation and it stops working insofar as it gets regulated.

Bennett Tomlin: One thing you said there, which I thought was striking because it's the thing I've talked about with Daniel Goldman, who we've had on the show, who's a developer over at Arbitram, is that when Russia attacked Ukraine and you had a bunch of Bitcoiners proudly bragging that Bitcoin could not be used to effectively evade sanctions at a nation state level, which is an analysis I agree with based on the liquidity for these things and stuff like that.

Bennett Tomlin: But Daniel noted that, like, guys, I'm not sure you want to be bragging about that.

Bennett Tomlin: I'm not sure you've really had sink in what was supposed to be the goal of this system and like the evidence that perhaps it's not working the way it was intended to.

Bennett Tomlin: And so you had all of these Bitcoiners, all of these anarcho libertarian capitalists who wanted to create this censorship resistant system that would allow and they're all crawling up the SEC's backstage.

David Gerard: Yeah.

Bennett Tomlin: And they're all like, listen, the treasury says we're okay and can't be used to evade sanctions.

Bennett Tomlin: And they say then without a hint of irony.

David Gerard: That'S because the only theology is number go up.

David Gerard: The rest is just promotional.

David Gerard: Memes, it was heartening, actually.

David Gerard: How many Bitcoin libertarians deeply objected to the way that Bitcoin is introduced in El Salvador?

Cas Piancey: Yeah, well, as somebody who, when I first found out about Bitcoin in 2017, I was actually excited by the idea.

Cas Piancey: I thought it was really cool.

Cas Piancey: I still think the idea of non nation state money is a really fun, cool idea.

Cas Piancey: I am not opposed to that at all.

Cas Piancey: But I do think that it has clearly been perverted, especially when you look at that in particular example where you're like, wow, so you're talking about a dictator who is going to take this money and force it on his population and you're like, Yay, are you nuts?

Cas Piancey: That's against everything that this was supposed to stand for at the beginning, yes.

David Gerard: It happened as soon as like 2011, when Mount Gox was up and running.

David Gerard: And finally Bitcoin had a meaningful price.

David Gerard: You could exchange bitcoins for dollars with any reliability.

David Gerard: It had a price.

David Gerard: The scammers swooped in.

David Gerard: And a lot of those scammers, of course, were people with a long history of scamming, mail fraud, that sort of thing.

David Gerard: Jerry Cotton starting a Ponzi scheme at 16 and going to found a Bitcoin exchange and then Patron coming back.

Cas Piancey: Holy crap, that was amazing that there's anyone who supports him is also astounding to me.

Cas Piancey: But I was so grateful when the community kind of rallied around me recently and we won't talk about that.

Cas Piancey: But I just want to say that it was really like you talk about going to conferences and meeting Coiners libertarians, whatever, who are very much just normal people and actually lovely to talk to.

Cas Piancey: Probably a lot of the time I felt like I had a lot of support from people who I thought hated my guts and hated Bennett and I doing our criticism and skepticism.

Cas Piancey: But there are plenty of them who aren't like Max Kaiser and Michael Sailor, who aren't these people telling you to sell your f****** house and not keep any cash on hand?

Bennett Tomlin: If you say not financial advice, you can tell people to sell their house, to buy speculative volatile assets.

Bennett Tomlin: You just have to say those three words.

David Gerard: There are a number of things I do think.

David Gerard: Like, I do think you need forms of money which are outside the eye of Sauron, outside complete government surveillance, and so on.

David Gerard: Marginalized people need those.

David Gerard: Crypto can do that job a bit, but then it comes with the rest of crypto's baggage, and that's a problem.

David Gerard: Also, the people who promote this are generally well off nerds up to rich libertarian leaning in an acre capitalist who have no understanding of freedom other than freedom of my money.

David Gerard: True freedom and Liberty is when I get your money and a fruit to human dignity and Western civilization itself is when you get my money.

David Gerard: That's the complete ideology in a nutshell.

Cas Piancey: I do think it's generally what I've seen is that skeptics and critics tend to be more accepting of some form of governance, as opposed to a lot of Coinners who we've tried the other way.

Cas Piancey: It doesn't know, but I think they believe that, and maybe the way I'm terming it is wrong, but maybe they perceive it seems like they perceive that governance should be done through cryptocurrency, like through the monetary means of this new mechanism, protocol, whatever.

Cas Piancey: This is how freedom is made, as though there's no other nuance or subject matter or reason for government to exist other than money.

Cas Piancey: It's all about money.

David Gerard: The standard trope is that you can always answer these extreme libertarian hopes and dreams with on the other hand, history libertarianism isn't a wrong desire.

David Gerard: Obviously nobody wants the government in their face.

David Gerard: Governments are stupid, they do dumb things.

David Gerard: They're really annoying and less regulation.

David Gerard: That's a reasonable thing to want.

David Gerard: You should absolutely fight regulations if they're a pain in the backside, that sort of thing.

David Gerard: But you are never going to reach the Anika capitalist ideal condition.

Cas Piancey: This goes for any of these political ideologies too, right?

Cas Piancey: I mean, this is the same for communism, for capitalism.

David Gerard: No good idea.

David Gerard: You can't turn into a bad idea if you just do it hard enough.

Bennett Tomlin: Crypto advocates do have a tendency to try to turn their ideas up to eleven.

Bennett Tomlin: Just really close that dial and see just how crazy we can make these systems.

Bennett Tomlin: And the other striking thing about me for cryptocurrency is how short the memories are for cryptocurrency.

David Gerard: God, yes.

David Gerard: The only people who remember stuff are the critics.

David Gerard: I mean, who these days in crypto remembers the dog D*** coffee table?

David Gerard: Nobody.

Bennett Tomlin: That's true.

Bennett Tomlin: But that's the reason I end up so often recommending your book.

Bennett Tomlin: And the other one I recommend is Nathaniel Popper's Digital Gold because it's one of the better histories of the early Bitcoin era.

Bennett Tomlin: Because without those, you see so many people just repeating the same altcoin scams from 2014 and 2015 and a new wave of suckers buying in all the same scam.

David Gerard: It was Bitcoin in 2011, it was altcoins in later 2011 onwards, ICOs were the same scam.

David Gerard: D five was the same scam.

David Gerard: Nfts are absolutely the same scam.

David Gerard: It's all selling you cryptomagic beans with the promise that you will get rich for free.

Bennett Tomlin: And what's really striking for me is just like Olympus Dow eventually hit like a total market cap, multiple billions.

Bennett Tomlin: And like, if you read through their documentation, in their documentation, they say this can continue to be a wealthgenerating machine at any scale.

Bennett Tomlin: They had discovered perpetual economic motions and we're just giving it away to people.

David Gerard: You'd almost think they were funding schemes.

Bennett Tomlin: You would almost think so.

Bennett Tomlin: And that's the conclusion I ended up having to come to when I read this because I'm like, well, they started out as kind of like the honest ponzies you sometimes see in cryptocurrency, and then what a great price that is honest Ponzi.

Bennett Tomlin: Then they tell other people actually, this will go on forever.

Cas Piancey: I wrote an article a while ago because I prefer to look at these.

Cas Piancey: You're right in that critics and skeptics, I think, focus on the past.

Cas Piancey: And the rest of these people are very future oriented, right?

Cas Piancey: They prefer to talk about the unknowns and possibles, and we're all talking about things that definitely have happened in the past.

Cas Piancey: But I wrote about Karitis, which was a Romanian Ponzi scheme.

Cas Piancey: It's such a fun Ponzi scheme to me because as I said in the article, when you had the original Ponzi scheme, there was actual it was impossible.

Cas Piancey: But there was like a real arbitrage mechanism that he discovered, right?

Cas Piancey: He couldn't make it happen, but it was a real world thing that he was at least able to describe.

Cas Piancey: And people would be like, oh, actually, I guess that might be a real thing that you could do that you could make money off of.

Cas Piancey: So the difference between that and Caritas was that in Caritas, he was like, it's a mutual aid game.

Cas Piancey: I don't know.

Cas Piancey: You put money in, you get more money out.

Cas Piancey: And everyone was like, it sounds great, I'm in.

Cas Piancey: And so I called that a pure Ponzi versus like a Ponzi.

Cas Piancey: I think the purity there is, at least they're being open and honest about like it's just more money, more money is going to get created.

Bennett Tomlin: If I remember right, there was a period where one of those pure Ponzi, honest Ponzi, whatever you want to call them, was the highest smart contract by total value, locked on a theorem at one point.

David Gerard: That was the automatic one, wasn't it?

David Gerard: I remember, I forget its name.

Cas Piancey: That was in 2018, right?

Bennett Tomlin: Fomo Three HDS.

David Gerard: I think it was called that's the one.

Cas Piancey: But I think if you look at like, what is Tron used for another cryptocurrency that Justin Son copy and pasted from Ethereum, what is Tron used for?

Cas Piancey: It's a bunch of gambling gaps.

Cas Piancey: It's like it's a bunch of garbage that is just Ponzi schemes.

Cas Piancey: Just basically just a bunch of Ponzi schemes on a protocol that's not the best use case in the world.

Cas Piancey: It's pretty hard.

Cas Piancey: I can argue that there's some cool stuff when it comes to non governmental money.

Cas Piancey: I can argue that if someone I know in a country that's sanctioned, I technically would possibly be able to move Bitcoin to them, maybe without being traced.

Cas Piancey: If I did enough good OpSec, I don't know.

Cas Piancey: But anyway, there's some possible use cases there.

Cas Piancey: When you talk about like Tron or this other thing, you go, oh, so it's just a Ponzi machine.

David Gerard: Nick Sharbo came up with the concept of smart contracts and 20 years later we discovered the main use case of smart contracts, Penny sock scams.

David Gerard: Sometimes there's a fancy bit on the side, but mostly just a straight up Penny sock scam.

Cas Piancey: Bennett, do you have any other questions?

David Gerard: Because I would note that basically the trouble is that Get rich for free is an incredibly popular product, right?

David Gerard: You don't even have to deliver at any point.

David Gerard: If you just offer this product, people will queue up to give you money because people are suckers.

David Gerard: And actually it is in society's interest to stop this stuff because it's bad.

David Gerard: You know, this should be a simple enough point to explain the whole thing.

David Gerard: And everything else I say is a more elaborate, detailed version of that.

David Gerard: Pretty much.

David Gerard: And it's unfortunate I have to keep making this point, but it's like the best book ever written about Bitcoin is extraordinary.

David Gerard: Popular delusions by Charles Mackay, and that was written in 1841.

Cas Piancey: Yeah, I agree.

Cas Piancey: That's a great book recommendation.

David Gerard: Everyone should read it.

Cas Piancey: Yeah, it is such a fantastic book.

Cas Piancey: And there's some really just crazy stories in there.

Cas Piancey: I said something similar in the PJ Voight thing where I said when I started this journey as a skeptic, I feel like I was attacking people more.

Cas Piancey: And now I've realized that that is definitely not the answer to getting people to notice what's going on.

David Gerard: You do need that as well, but you need all the other ways to say it as well.

David Gerard: You need all of them at once.

Cas Piancey: I think that's such a turn off for these people where it's like they know exactly what they're doing.

David Gerard: It can work too.

David Gerard: Sometimes people just need to be shamed.

David Gerard: It's like all the approaches work just fine and they're telling them that actually they're doing a bad thing in a way that makes them comfortable is not my first goal.

Bennett Tomlin: What if they're an effective altruist who promises to use all their ill begotten gains to save the world?

David Gerard: Then is it okay sent Chris Hansen around for a hard drive inspection.

David Gerard: I'll tell you, there was nothing that warmed me to crypto Twitter like having all these coincidence tell me in all seriousness that Cody Wilson was set up by this 60 year old Hussy sent by the FBI to entrap this innocent 30 year old Bitcoin.

Cas Piancey: As some Crypto Island project put it, oh God, what did they say the age of consent is?

Cas Piancey: Mental maturity.

Cas Piancey: That's right.

David Gerard: Not being able to live within 500ft of a school is a small price to pay for true freedom.

David Gerard: You know, corner adult f*****.

David Gerard: No coiner is great.

David Gerard: It's the best slur.

David Gerard: It's wonderful.

David Gerard: It's amazing.

David Gerard: I think we can honestly say there's seven to 8 billion no Coiners in the world because the general public, whenever the companies tried to sell them on, hey, we've done an NFC.

David Gerard: Give us free money, the customer base reacts.

David Gerard: No, this sucks.

David Gerard: Get out of here.

David Gerard: You guys are terrible.

David Gerard: In 2021, the general public finally learned what crypto was and came to understand it, and I think they understood it correctly.

David Gerard: It's rip off garbage, get rich quick schemes by scammers and they don't want to borrow it.

David Gerard: It's like not even the proof of work thing.

David Gerard: Even if it was all proof of stake, it would still suck because the structure of it is made to run scams.

Cas Piancey: Someone asked me what would make me feel vindicated in the space, and it's funny because I do think that years ago I would have told them, well when tether collapses and I would have very specific things set out for what would have made me feel vindicated.

Cas Piancey: But I can say that I totally feel vindicated.

Cas Piancey: I feel like everything that I perceived as being a major issue with the cryptocurrency space, it has played out as such.

Cas Piancey: That definitely has tether been forthcoming and transparent and clean this whole time?

Cas Piancey: I think we all understand absolutely not.

Cas Piancey: And has it been used probably for some really nefarious s***?

Cas Piancey: I think we all understand probably, yes.

Cas Piancey: And has there been immeasurable amounts of scams and frauds for Bennett and I to talk about on a twice weekly basis?

Cas Piancey: Absolutely.

Cas Piancey: I guess I'm fine with that.

Cas Piancey: I guess that's where we're at and I feel okay with that.

David Gerard: If you're into talking about scams like Makai was writing in 1841 scams bubbles over enthusiastic investors that sort of thing.

David Gerard: This is eternal.

David Gerard: It's always going to happen.

David Gerard: It's human nature.

David Gerard: As long as there's money there's going to be people who go a bit funny about money.

David Gerard: It's because it's interesting and it's a reasonable thing to try to warn people off but it's also fascinating.

David Gerard: It's fun to talk about market structure and so on.

David Gerard: If you're talking to someone who knows what they're doing they're a trader.

David Gerard: They're rich or whatever.

David Gerard: Their money is their own problem.

David Gerard: They know zero is a number.

David Gerard: That's fine when you're selling it to poor people as a way out, that's reprehensible.

David Gerard: I think more generally it preys on desperation.

David Gerard: It's 2022.

David Gerard: The poor are absolutely screwed.

David Gerard: Everything sucks.

David Gerard: So people have sold this stuff as a desperation way out and I mean guillotine is in short supply.

David Gerard: I guess in the meantime we have crypto Twitter.

Bennett Tomlin: Okay.

Cas Piancey: I think that's a good place to wrap it another high quality episode from crypto critics corner and apparently I am on now a probationary period for my employment with cryptocritics corner which is weird because I work for free and I edit the show.

Cas Piancey: Bennett Tomlin, you can't keep doing this to me.

Cas Piancey: Excuse me.

Cas Piancey: Please leave a rating a review my salary that doesn't exist Bennett depends on it show sucks.

One thought on “Episode 67 — An Early Skeptic’s Telling of “Why be skeptical?” (Feat. David Gerard) — Crypto Critics’ Corner

  1. Mr Tomlin,

    You seem to be grappling with some of the issues of the proper role of markets in society. For a very good lay historical tour d’horizon of these issues I strongly suggest you take a look at:
    The Mind and the Market: Capitalism in Modern European Thought Hardcover – November 12, 2002
    by Jerry Z. Muller (Author)
    4.5 out of 5 stars 73 ratings
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    See all formats and editions

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    A remarkable history of the idea of capitalism in Western thought–—from its origins in classical Greece and Rome and in medieval Christianity, through its flowering from 1700 to the present day—that examines the most significant thinkers who have influenced our views on how the market can (and should or should not) affect the way society is organized.

    I enjoy your podcasts , even the ones that become a little jejeune .

    Paul J. Isaac
    Arbiter Partners
    530 Fifth Avenue, 20th Floor
    New York, NY 10036
    Tel: 212-650-4670
    pisaac@arbiterpartners.net

    Like

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