What Intellectuals Still Don’t Get About Crypto

I normally agree with Matt Stoller and his critique of corporate power. But his views on crypto make no sense.

AccessTimeIconDec 10, 2021 at 6:01 p.m. UTC
Updated May 11, 2023 at 3:44 p.m. UTC

“Yes, Web3 is a bunch of bullshit. The problem is, compared to what?”

That subhead to Matt Stoller’s newsletter this week set me off even more than the headline, which read, “Cryptocurrencies: a Necessary Scam?”

To be clear, my issue isn’t with the all-too-common grammatical slip in the comparative. (Hint: Matt, please review Shakespeare and the difference between “compare to” and “compare with.”)

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No, what got me was the “yes” in Stoller’s statement. It was a wink to the intellectual elite, as if to say, “Don’t worry, it’s okay to acknowledge that those crazies in the crypto community, while possibly well-meaning in their critique of broken political-economic order, are, yes, Kool Aid-drinking cultists.”

It was especially galling because I’d been scheduled to join Stoller on Peter McCormack’s “What Bitcoin Did” podcast this past weekend, with a format that Stoller suggested we describe as “convince Matt Stoller.” Scheduling conflicts meant I couldn’t make it. I guess he remains unconvinced.

It also stung because I’m a big fan of Stoller, a leading light in the so-called Hipster Antitrust movement who is closely aligned with Lina Khan, chairwoman of the Federal Trade Commission. Stoller’s book Goliath is a must read on why we must confront monopoly power to protect democracy and long-term prosperity. In so many other respects, his worldview aligns with mine. He’s a believer in free, open, competitive markets and, most importantly, that it’s necessary to prevent excessively powerful gatekeepers from manipulating and distorting those markets. In an age when dominating internet platforms have forged an insidiously destructive system of surveillance capitalism, Stoller’s writings – found in his BIG blog/newsletter – have done much to focus our attention on why society needs to act on this, now more than ever.

Where we clearly disagree is on whether cryptocurrencies and blockchain are a viable mechanism in the digital age for executing on that.

The story until now

Why do thoughtful, intelligent people like Matt Stoller have such a blind spot to crypto? On the surface, it might be because, like me, they find the money-grabbing excess of crypto speculation kind of gauche and annoying, a bit beneath us.

But, stepping back. I’d say it’s because even though they express interest in reforming our financial system, their minds are trapped – as we all are to differing degrees – in the meta-story of our system of money and power, the one that holds it all together. They fight from within that framework, not from outside of it, because they can’t imagine any other way.

Nearly all of what constitutes our system of governance – our agreed-upon mechanism for setting the rules of conduct and forging the trust needed to engage in exchanges of value – is a product of our collective imagination: religions, nation-states, corporations, money itself.

According to Israeli historian Yuval Harari, our ability to imagine such concepts, to collectively tell these “stories,” is what made civilization possible. They are necessary fictions, but fictions nonetheless. Before we can analyze whether cryptocurrencies constitute “real” value or not, we must first acknowledge that reality.

Not doing so is where Stoller sells himself short. In describing – and thereby dismissing – cryptocurrencies as “a social movement based on the belief that markings in a ledger on the internet have intrinsic value,” he loses sight of how that exact same description can be applied to all money.

As we’ve discussed in prior editions of this column, the essence of money doesn’t lie in the thing we use to represent it – the gold coin, the banknote, the wampum – but in its function as a record-keeping device, the means by which society keeps track of everyone’s debit and credits and by which our debts to each other are cleared. Money is, quite literally, “markings in a ledger” – albeit one that now integrates bank account entries with the physical transfer of tokenized “counting tools” (coins and banknotes).

Also, we should note that in its currency form, money has no intrinsic value. Yet to function, it requires collective belief in its indisputable “value.” Because that unquestioned belief is necessary for it to fulfill its core record-keeping function, all money can quite reasonably be described as a “social movement.”

The challenge

It’s difficult to acknowledge that our existing systems of money and governance are socially constructed imaginings. It forces us to put a metaphorical asterisk next to concepts we otherwise take for granted as given realities. And until recently, there hasn’t been a compelling reason to question the dominant governance paradigm. For the past few centuries, the global economy has operated, unquestioned, within a framework of centralized institutions such as nation-state governments, media outlets and companies.

It’s hard for any competitor to that system to challenge something so entrenched as money or the nation-state. Such a change is almost unfathomably monumental. But governance paradigms do shift – think of the French Revolution or the U.S Declaration of Independence.

For any newly imagined competitor to those systems to claim legitimacy requires a serious challenge to the foundation of that belief system, a shift that renders the existing paradigm out of touch, and the new one – be it crypto or something else – as a viable alternative. For something as entrenched as money or the nation-state, such changes are rare. They are monumental by nature.

Yet that’s precisely what has happened. Over the past three decades, there has been a shock to our prevailing governance systems, mostly due to digital technology and new means of human interconnectivity.

Many in the intellectual class may not have noticed the change, or at least haven’t recognized how fundamental it is. And no doubt many would think it presumptuous for a mob of crypto fanatics to claim they alone have seen it. Regardless, the paradigm has most definitely shifted.

First, the internet

The change came, gradually, in two phases.

First, there was the arrival of the internet, which broke down the hierarchies determining who gets to produce, broadcast and receive information. It also allowed people to organize independently of geography. The idea of what constitutes a “community” or who gets to lead it was upended.

Well before crypto fanatics started crowing about “decentralization,” the internet was already decentralizing a vital part of modern civilization. That has fueled what former Central Intelligence Agency analyst Martin Gurri has described as the “revolt of the public,” a backlash against the elites behind the centralized institutions that dominated our global governance system throughout the 20th century.

Meanwhile, as the internet widened societal access to information and gave more and more people the capacity to produce and distribute information, it forged an entirely new, highly valuable commodity: the data we accumulate throughout our digital lives as we interact with those ever-expanding information access points. That created an opportunity for a few centralized internet platforms to become even more powerful than the institutions of the pre-internet era. They used network effects to their advantage, fostering dependencies on their services and gathering monopoly power of that data.

The problem was that in this flatter, democratized information exchange system, there was no governance model commensurate with its decentralized structure. There was no way to prove identities or to keep track of transactions (either of money or of data, that newly valuable commodity) in ways that all parties could trust. So we defaulted to the same old centralized structures we’d always relied upon.

Yet in the borderless world of the internet, everything was ill-defined. Where do the boundaries lie for jurisdictions, copyright, property, identity, etc.? There was no way for people to trustfully interact with each other on a purely peer-to-peer basis online. That left a breach into which stepped the likes of Amazon, Facebook and Google et al. to act as our intermediating gatekeepers. It thrust us into the worst-of-all-worlds solution of surveillance capitalism.

Then, crypto

Then along comes the other element of the paradigm shift: a brand new governance system for keeping track of data exchanges (of which money is just a subset), without requiring people to trust an adjudicating third-party ledger keeper to record and validate those transactions. It started with Bitcoin and then encompassed a variety of blockchain solutions within what has since become known as “crypto.” Now, we have a decentralized system for the internet of value to marry the decentralized internet of information..

Together, these changes make for a radical new way of both conducting and governing human interactions. They are no panacea to the domination of Big Tech, but they at least offer the potential for a new, Web 3 model of existence for our current age. They offer a vision of self-sovereign individuals in the digital realm.

At the very least, they demand that we question existing narratives.

I still might not be able to “convince Matt Stoller,” but perhaps if he and his ilk were more open-minded about why these new governance models are important, they might see less of a “bunch of bullshit” and more promise.

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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Michael J. Casey

Michael J. Casey is CoinDesk's Chief Content Officer.

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