Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.

About 20 minutes into his latest interview with Bloomberg, crypto’s favorite entrepreneur Sam Bankman-Fried said something revealing about the industry: Crypto is mostly a shell game.

“You know, where do you start? You start with a company that builds a box and in practice this box, they probably dress it up to look like a life-changing, you know, world-altering protocol that's gonna replace all the big banks in 38 days or whatever. Maybe for now actually ignore what it does or pretend it does literally nothing. It's just a box,” Bankman-Fried said.

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Crypto, specifically “yield-farming,” or the generative process of turning tokens into more tokens, is filled with machines that print money, or grant voting rights over money printers or promise future returns through things like airdrops. You put a token into the “box,” you take some out, he said. And anyone can make their own box.

The exchange – prompted by a question from Bloomberg financial maven Matt Levine for a “sophisticated” explanation of yield-farming – went on for a bit longer. “Sophisticated investors” were mentioned, but the definition stayed pretty rudimentary. (“You're just like, well, I'm in the Ponzi business, and it's pretty good,” Levine said, summing up.)

Of course, crypto is more than just an empty box – it’s a fundamental rewriting of how economic activity could be routed away from centralized gatekeepers into community-owned structures. It touches anywhere that developers and entrepreneurs see “market inefficiency” or rent seeking. In theory.

But Bankman-Fried’s comments are not hollow. Crypto also is significantly wrapped up in branding, or the stories that people tell about it. Ask what Ethereum is for, and you might get hundreds of ideas about possible applications – from blockchain cities to banking the unbanked – but rarely an answer as self-contained or obvious as Bankman-Fried’s money-making machine.

There’s at least one potential theory about crypto that more people should spend time thinking about: Crypto is a luxury good. For all the long reads in Bitcoin Magazine about how people in developing countries are using BTC to protect or transfer their wealth, or similar stories about crypto dissidents or non-fungible tokens (NFTs) being used for charity, there’s hundreds of examples of crypto being used for self-promotion or personal enrichment.

Crypto is not a necessary tool for many people who use it but is often a way to signify a lifestyle or alignment with a certain movement or set of ideas. Crypto’s users are often conspicuous consumers – sometimes by nature of blockchains being public records – and often concerned more with using the right application or the right coin.

Lap of luxury

Last year I blogged about how “crypto is a luxury good, and Gucci hasn’t realized it yet.” Just today, the Italian luxury brand announced it will accept crypto in certain U.S. stores. Other highfalutin brands have also moved into the crypto world.

High-end watchmakers Hubolt, Franck Muller and Norqain, among others, are accepting crypto payments. As are travel agency Travala.com, carmaker Tesla and yacht retailer TJB Super Yachts. Luxury brand conglomerate LVMH, managers of the Louis Vuitton and Hennessy labels, is using blockchain to authenticate some of its products.

Other examples abound, some companies are building in the metaverse and minting branded NFTs. The play, though perhaps risky, is that crypto has made a lot of people very wealthy, and the crypto rich may be inclined to patronize businesses that affirm the industry.

Indeed, the chronicle of capitalism Bloomberg has reported a number of stories about crypto folk as high-powered buyers – in housing, in travel, in luxury services. Your money, even if fake internet money, is just as good.

But crypto isn’t just a means, but a luxury in itself. Pamela N. Danziger, author of “Putting the Luxe Back in Luxury” identifies 10 attributes that make a brand "luxury." Those can really be distilled to a sense of superiority or sophistication, rarity and pedigree and a shared delusion. These characteristics are not necessary to exist but are objects of desire.

Market analysts sometimes refer to digital assets as Veblen goods, or items that see an increase in demand as their prices rise. This is about perceived value – and a form of it exists in crypto hype-cycles where more people are willing to buy a hot asset as it gets more expensive. Sure, there are other psychological and market factors at play, but data shows that there were more bitcoin buyers at its all-time high above $60,000 than today. (Some even say BTC is trading at a discount.)

The trouble with understanding luxury goods in the postmodern, postindustrial economy is that anything can suddenly become hip. Luxury is less about brand lineage or craftsmanship today than about identity and about aspirational signaling.

Experts say

Michael J. Silverstein, senior partner of the Boston Consulting Group (BCG), and Neil Fiske, CEO of Bath & Body Works, recently wrote about this trend in the Harvard Business Review, arguing that there’s a new type of luxury good that occupies “a sweet spot between mass and class” – these are items that exist between “super premium” but priced well-above the discount bin.

“[Consumers] seek goods that make positive statements about who they are and what they would like to be and that help them manage the stresses of everyday life,” they wrote. This “love affair” with “products” is largely “emotional.”

Luxury goods, they write, weasel into your brain and make promises they can “take care of you,” easing the burden of having too much work and too little time; “take you on a quest,” providing new experiences and fulfilling challenges; “connect you with others” while also practically helping you self-actualize “using the sophistication and currency of one’s consumer choices” to demonstrate success and express “individuality and personal values.”

“Spending on luxury goods is like burning money in public, to convince others that you really have a lot of money,” Wharton marketing professors Z. John Zhang and Pinar Yildirim said in a recent interview. Their new book, “A Theory of Minimalist Luxury,” also reexamines Veblen goods in the modern age, where more people have more money and counterfeit goods have gotten really good.

Bitcoin is a luxury good in the sense that its value is literally tied up in energy consumption. It provides a market and tool, but the burned energy really fundamentally signals that this thing, BTC, is desirable and valuable. Some studies have found knowledge or investment in crypto is sexually appealing as wealth always is.

The Wharton profs also mention how luxury brands today – facing counterfeits and a range of alternatives – must keep their brands “as clear and as undiluted to the consumer as possible.” Perhaps this speaks to bitcoin maximalists’ attempts to separate BTC from “[rhymes with pit] coins,” or any maximalist coin tribe disparaging a competitor chain.

Further, Zhang and Yildirim note how for many people the pandemic was an “opportunity to reevaluate our values.” Perhaps, for some, this moment of reevaluation of goods and society was a time to think about money itself – considering we were buying less and less.

This isn’t an all-inclusive theory – for as much as crypto is about signaling belonging or one’s wealth, it’s also a powerful tool for financial inclusion – just an attempt to open up the box and see what’s inside.

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Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.

Daniel Kuhn is a features reporter and assistant opinion editor for CoinDesk's Layer 2. He owns BTC and ETH.