A response to David McWilliams
Today I listened to David McWilliams podcast with Stephen Diehl. I thought I’d write a response to some of the critcisms as well as some of the points that seem to be misunderstood.
I’ll first debunk Stephen’s Case Against Cryptocurrency as found here: https://www.stephendiehl.com/blog/against-crypto.html
The technology does not solve a real problem.
In the introduction to David McWilliams podcast, there is a very notable line “To understand the economy, you have to understand human nature”.
To borrow from that line of thinking:
“To understand cryptocurrency, you have to understand power”
Bitcoin was created as an alternative to a powerful minority led banking system. Indeed a banking system that is still fundamentally broken. One which revels in the mantra of privatize the profits and socialize the losses.
A very real problem is wealth in the hands of the few and by extension power. That is the problem that Bitcoin was created to solve.
But besides that, many useful problems are being solved. Data breaches being one such obvious one. See here for just a small inkling of the size of the problem https://www.upguard.com/blog/biggest-data-breaches-us
Zero Knowledge and Self Sovereign identity aims to solve this very real problem.
To say that crypto does not solve a real problem is choosing to focus on a subset of the market that suits Stephen’s argument. So obviously flawed I don’t need to spend too much time debunking his guff.
So called “cryptocurrencies” aren’t actually currencies, and cannot fulfil the function of money.
There’s a broad spectrum of use cases performed by cryptocurrency. Some act as currencies. Only some purport to be money.
All generalizations are dangerous even this one
Seems like Stephen either hasn’t done his research or again has cherry picked arguments to support his thesis.
The history of private money is one of repeated disasters that destroy public trust.
Stephen did so much research that he went all the way back to 1837 in order to justify this point.
Got to at least thank him for making me realize money as a concept is less than 200 years old. There’s that impeccable attention to research that Stephen performed.
Let’s forget about all the banking crises that have occurred.
That pesky Amsterdam one from 1763 couldn’t have been the fault of banks. How about all these? https://en.wikipedia.org/wiki/List_of_banking_crises
I know I for one trust central banks after doing a cursory dive into the shenanigans they’ve thrust upon us over the centuries. Surely it’s not a problem to be solved?
Crypto assets are all unregistered securities.
All generalizations are dangerous even this one
And even if this was true, then it’s up to regulators to get their fingers out of their arse and start doing some actual work and providing frameworks.
Let’s now move onto the Podcast.
Stephen admits it’s a space that is “very difficult to actually understand this”. This is one of the few things I actually agree with him. He seems to be talking about himself.
Stephen refers to himself “As a tech guy” — My son is a tech guy. He uses his iPad to watch Pokémon. He also struggles to understand cryptocurrency in much the same way that Stephen does. Perhaps an analogy would help. Would an electrical engineer understand mechanical engineering? To assume because someone is a “tech guy” he understands the nuances of a particular subset of technology is incredibly simplistic.
Another pearler from Stephen “There’s not a meaningful distinction between Bitcoin and the rest of these cryptocurrencies in any meaningful financial sense”. Anyone that believes this, should never be regarded as a crypto specialist. This is such an easy thing to dispute. Let’s just mention some of the more obvious ones:
- Fixed supply vs elastic supply
- Proof of Work vs Proof of Stake vs many others
- Inflationary vs deflationary supply
Stephen then goes on to show why he believes the US Dollar is worthless. “I don’t see any fundamental reason why Bitcoin should have any particular value, because it doesn’t represent a claim on anything”. I wonder if Stephen realizes the US dollar hasn’t represented a claim on anything since 1933, when FDR abandoned the gold standard.
Ah God, Stephen, you’re making this way too easy for me “Blockchain technology is one of these memes...blockchain is effectively a very slow database.”
This is from 2020 so a bit outdated. Much like Visa and PayPal.
Then the show ends with the following excerpt:
“Supposed to be fraud proof, but it’s not”
This is probably my favourite one to debunk as it’s one of the key reasons why Decentralized Finance (DeFi) is better than Centralized Finance (CeFi).
In the many failures of crypto in 2022, the worst ones were caused not by DeFi, but CeFi. Going through all of them, we saw how incredibly resilient DeFi is. No government bailouts came. No one came to help us. And yet the system worked exactly as planned. When 3AC and FTX went down, they had to pay back DeFi first. All the other creditors have to go through liquidation processes and court cases. The DeFi protocols just liquidated the loans and users got their funds back. DeFi protocols don’t need to rely on crooked politicians and lawyers. The contract is immutable on the blockchain and transparent.
https://twitter.com/TreehouseFi/status/1590648851874336769?s=20&t=4UtaWNAbUCeLm4wEpeS-Pg
For this podcast to not even talk about DeFi and it’s incredible power is very disappointing.
The whole thing looks like a cheap stunt to jump onto the zeitgeist of the day after a few centralized fraudsters were caught. All industries have fraudsters. Central banks and Wall street has some of the highest percentage. To talk about being Fraud Proof and not even mention DeFi seems like not even the most cursory research was done for this podcast.
Disappointing as I’m generally a fan.
