Hell Money Podcast Episode 8 Show Notes: Crypto is Trash

Hell Money Podcast Episode 8 Show Notes: Crypto is Trash
7.16.2022

cryptocurrency

Crypto History

Pure clones of bitcoin with a few parameters tweaked
Changed supply, difficulty adjustment, PoW algorithm
Big lesson was that Bitcoin gets all these things mostly right, no strong advantage to changing them
A few projects tried to do something different and interesting, e.g., namecoin
I would actually include Ethereum in this latter category, however Ethereum has problems

In the early altcoin period, launching a coin was relatively hard, because you had to deploy software to computer and get other people to run it
With Ethereum, you could just write an ERC20 contract and deploy it to Ethereum, so technical bar was very low
Ethereum normalized tokens, premines, and presales, so community couldn't fundamentally reject zero-value cash grabs

Grifters: Incentivized to lie, hype, and overestimate what their projects can do
Astronauts: Underestimate technical complexity, assume all problems can be solved
- Vitalik is an astronaut par excellence. People in this group underestimate need for security, simplicity, aligned incentives
- Probably enthusiastic about complex large-scale social and economic interventions. Remind me of fringe political and economic theorists
- Worst example is economic space agency
The hoi polloi:
- Unit bias (Bitcoin is too expensive!)
- FOMB: fear that they missed the boat with bitcoin, must find new boat no matter how shitty
- Zero technical understanding, ingest radical bullshit from grifters and astronauts alike
- Think bitcoin is a prototype. No, bitcoin is like the internet, has problems but better to just deal with them

Solidity has terrible semantics
Terrible and insecure code, even in major projects, nobody actually audits contracts
Scaling comedy: State channels, plasma, plasma cash, sharding, roll ups. No good scaling story. Everything they're pursuing comes with massive costs.
Massive premime. Fine during PoW, leads to massive centralization post PoS transition
Security comedy: Solidity is phenomenally bad, everything big gets hacked, see rekt.news
Optimism has no fraud proofs yet has $X TVL
Community tolerates tokenization, so everything gets tokenized. Their lighting competitor got tokenized. This is serious karmic rot that infects everything.

Almost all ponzi economics
No value creation
No underlying economic activity, all finance
Can't create credit, can only do collateralized lending, so can't serve most useful credit creation function
Insanely complex and insecure

Actually often pretty high utility. People who want digital dollars can't access them
Algorithmic stablecoins are doomed
Best case scenario is digital, private, fully-collateralized bank on crypto rails

Stake ratchet: Strong centralization pressure
Merges token holders and miners, in bitcoin these are separate groups who keep each other in check

Relatively non-awful. Fair launch, community driven.
Hard forks mean developers have a lot of power
Has on-chain privacy, but transactions are 8x larger than bitcoin, so 1/8 transaction throughput
Lighting is the way for privacy. Use lightning network to mix your coins. Make big channel with tainted coins, pay someone for inbound liquidity w/lightning, slosh your coins over to channel w/inbound liquidity, close back to BTC.