The latest crypto meltdown has sparked an avalanche of news coverage and explainer articles. As someone who—for my sins—acts as the crypto skeptic whisperer to a handful of institutions, I find it intellectually interesting to analyze the entire press cycle from a sociological perspective because it gives us insight into our societal sense-making process that the press, and thus ultimately the public uses to understand these technologies. If you listen to the incessant hum of the 24-hour tech news cycle long enough, you start to notice certain defining features about the forms of the half-reasoned thesis, oft-repeated cliches, and shibboleths of the chattering class.
Despite all the sound and fury of the last two weeks, very little is different in the coverage of this current news cycle other than the scale of the financial bomb that just went off. The FTX collapse is a financial scandal that rivals previous historic disasters like Madoff, Enron, Long Term Capital Management, and Wirecard. And just as before, we see the same wringing of hands about how this very predictable catastrophe was so unpredictable despite us crypto Cassandras warning about the conflicts of interest in these exchanges for years. The business news channels will put on the usual self-interested talking heads from the industry to do damage control and promote their bags because one should never let a good crisis go to waste. There is no catastrophe that the industry pundits can’t spin as a good thing for Bitcoin—because everything is good for Bitcoin and the crypto revolution is predestined and inevitable—and the media is happy to run with that narrative because it’s bullish and pre-chewed brainfood for the credulous masses.
None of this is new; these people are just talking their books, and that’s rather uninteresting and transparent to anyone with an ounce of sense. What is more interesting is the set of anomalous sense-making memes we’ve seen emerge where almost every outlet, regulator, and politician, whenever discussing crypto, has to pay homage to “the underlying technology” and kiss the ring of uncertainty about a technology they don’t understand. And this is the one topic that, if you speak to the press, cannot be questioned; in fact, it is the one orthodoxy and line you cannot cross. From a sociological perspective, I find it incredibly interesting because self-imposed imaginary red lines are terribly fun to cross, and the idea that this intellectual moat exists in the mental landscape around crypto is humorously bizarre. We should ask why discussing “the underlying technology” is so taboo.
Much of this convention arises from the simple fact that many outlets have an editorial mandate not to take a position on controversial topics; they should present both sides of any issue and let the readers decide because the truth is usually somewhere in the middle. Suppose you bring on a Nobel laureate physicist who says the Earth is round. In that case, you need to bring on a respectable flat-earther who says the Earth is flat because the actual Gaussian curvature of whatever planet-manifold we live on is somewhere between. We need to be reasonable and find common ground, right?
Let’s take Vox, for instance, they’re a competent left-of-center English news outlet, and their coverage has been exceptional on this topic. They broke the massively important story where Sam Bankman-Fried decided to self-immolate himself in a series of unhinged late-night text messages that prosecutors will use in his upcoming trial. Cool. But then we go over to their podcast, The FTX Cryptocalypse —which is quite solid reporting—yet at the end of it, we see a perfect shining example of the “underlying technology” shibboleth starting at 0:24 minutes:
“There is an argument to be made that there is a fundamental value in the technology. The financial system is incredibly inefficient, dumb, and relies on a lot of paper and trust, and that you could build a more efficient kinda trustless system where the code does the job that hundreds of thousands of people in the financial system do. I think there’s some value in that and that the underlying technology will continue to exist and evolve here, but there’s no need for these goofy tokens. […] There are some good pieces of the technology and those will be fine.”
On the other side of the political spectrum, take the Economist article Is this the end of crypto? which fairly accurately accounts for the fourteen-year abysmal failures of the crypto space to produce anything beyond naked speculation and scams. But in conclusion, the authors hedge their argument in an apparent appeal to our collective ignorance of what the next fourteen years of failures for “the underlying technology” might produce, the tech shibboleth yet again:
“Crypto is no different. As the virtual economy develops, useful decentralised applications may yet appear—who knows? The underlying technology continues to improve. An upgrade to Ethereum’s blockchain in September radically reduced its energy consumption, paving the way for it to handle high transaction volumes efficiently.”
Setting aside the obvious repudiation that Ethereum’s 2.0 protocol migration is a a solution to a problem it itself created, we see another perfect example of an appeal to ignorance couched in some handwavy appeal to the paradigm-shifting power of “the underlying technology” whose application shall not be named. And we see this exact same handwaving all the way up to the highest offices in the land, Chairman Gensler, head of the SEC, who uses this same language as an appeal to the soft touch regulation that informed the regulatory policy that led to the FTX collapse. From an interview with CNBC:
“The American public and investors around the globe are getting hurt by a field that says they put a lot of fancy talk around it, Andrew, and the underlying technology is interesting. I taught it at MIT and there are some interesting innovations here, but we still need investor protection.”
There is a strange half-baked awareness to Gensler’s comments here in that he recognizes that the crypto industry exists to hawk investments wrapped in techno-obscurantism but not enough self-awareness to recognize himself as the principal agent enabling this obscurantism to direct public policy. Regulators don’t want to be seen as stifling innovation, even when they can’t demarcate the innovation from fraud or even describe the shape of the innovation or what it’s to be used to do. Gensler indeed gave a lecture at MIT outlining his dated 2017-era views about the “underlying technology” to build solutions for trade finance, clearing systems, straight-through processing, and digital identity, all of which have been tried repeatedly, with the same uniform result: failure. The only innovation we’ve seen from blockchain technology is for defrauding investors, facilitating capital destruction, and creating transient, unfair, chaotic dark markets for speculating on hot air. The literal antithesis of the mandate of the agency he chairs.
And yet, for years, we’ve heard these persistent vapid appeals to “there’s too much money there,” “there are too many institutional investors involved,” and “there are too many smart people working on it” as the rationale for why the public could safely ignore all the red flags on crypto. When you look at something through rose-colored glasses, all the red flags just look like flags, and after the rose-tinted scales fell from our collective eyes and we looked inside the “inevitable” FTX empire, the emperor had no clothes. It was a shining example of capital’s ability to warp reality and the collective laziness of the transitive trust in a received narrative that no one had independently corroborated or analyzed. On a deeper level, it is a manifestation of a particularly pernicious form of an epistemological collective action problem that, in the post-literate internet era, gives rise to popular delusions of extraordinary virality—crypto being the canonical example—that our slightly-evolved primate brains and institutions are woefully unprepared to address.
The same blindspot in our sense-making that we had for FTX manifests in precisely the same phenomenon of the consistent unfounded droning about the so-called utility of the “underlying technology” of crypto; it’s an intellectual apparition and second-order composite fallacy arising out of the synthesis of false balance, appeals to ignorance, and baseless faith in the techno-inevitability thesis. The question we have to ask is straightforward: these so-called use cases for the “underlying technology” of crypto you keep seeing, are they in the room with us right now?