Crypto Is a Scam That Took Me In

A lot of smart people got in it, and now some of them are getting out

Photo by Jeremy Bishop on Unsplash

I will freely admit I have a blind spot for technology and techno-optimism. I think it’s a good bias to have - technology sure has done a lot for humankind - but it does fail sometimes. Crypto, for me, was one of those times.

My browser remembers me entering my college email address into the Coinbase login form, so I must have gotten my first bit of crypto back in about 2012. (Thanks to readers for correcting my misremembering as 2010.) I remember a referral drive where you and a friend both received $5 of Bitcoin.

In late 2012 or 2013, I logged back into Coinbase and saw my Bitcoin had jumped from $5 to $50. A 10x gain for doing nothing! $50 was a lot to me then - I remember debating whether or not to buy a single share of Tesla at ~$100. (I didn’t pull the trigger, and I refuse to calculate how much that one share would be worth now.)

I tried mining Bitcoin, thinking the powerful CPU in my work computer would surely net me something. By then, though, only a GPU could pull in anything, so no new Bitcoin for me.

I also remember signing up for what we would now call an “airdrop” for Ripple, thanks to a little blurb in a science magazine.

I had no theories then, no specific reason crypto would be important. I just knew it was new and techy and surely better than the cash that had come before it. That’s okay though - a lot of great technologies start out as fun diversions.

---

Flash forward to 2017. Crypto is riding its first crazy peak, $BTC $19k. All of our employees at Castle own crypto. Our Slack has a #cryptolife channel and it is active. One guy in particular is super into ICOs.

Here I am in my promoter phase. I have theories about what comes next and how the market works, reasons why this or that project are great use cases and are ready to take off. I’m bullish on distributed file storage like MaidSafe and Factom. I own some Decentraland. Heck, I even accept that Litecoin is the silver to Bitcoin’s gold. I gift my sister $100 in crypto for Christmas.

We’re still early! There is no Michael Saylor or laser eyes or NFT or energy outcry, not that I remember anyway.

A year later I’m working at Atrium, a tech-enabled law firm. There is a blockchain practice and it earns the highest revenue per head. There has been some sort of crash but it’s “clear” to me that crypto is still the next big thing. There are so many whitepapers, so many new technologies and applications. Something will break through to the mainstream.

---

I think the facade started to crack for me during the rise of NFTs. I remember hanging with a group of friends when NBA Top Shot was getting popular, probably spring 2021. One of the friends had an offer from a similar company and was seriously considering it. I recall not understanding why anyone cared about NFTs but still assuming that something of value was happening - how else to explain the valuable ETH people were paying for these digital receipts with JPEGs attached? But something wasn’t sitting right.

Next was my close encounter with web3: Orange DAO, a group of YC alums interested in, working in, or investing in crypto. I joined to see what all the DAO hype was, wondering what a “decentralized autonomous organization” looked like in practice. Surely a DAO of YC alums would be powerful! What I found was a disorienting Discord server and an NFT minting process that had me questioning how any of this technology made any sense in any sort of production environment.

Things accelerated with r/Buttcoin. I had seen the subreddit on my adventures before, but my impression was most content was from early on and from people who were salty they missed out. I don’t remember what prompted me to visit again, but this time I wasn’t just a subculture tourist; I was thinking about moving, permanently.

The good people at r/Buttcoin had more than just the standard complaints about energy use and money laundering. I knew about those and thought of them more as costs than fundamental weaknesses. No, they had real counterpoints, things that undermined the entire concept of crypto beyond speculation and illegal transactions. Where were the use cases? What could possibly explain the price surges other than speculation? Why was there so much fraud, hucksterism, and scammy behavior?

The gateway to the other side, to full-blow crypto skepticism, was undeniably Bitfinex’ed. Whoever runs the account has a vendetta against Tether, the premier stablecoin. At this point most people who know anything about Tether know how sketchy it is, but Bitfinex’ed goes the extra mile to highlight all the fraud behind the scenes. It’s not just the obvious pump-and-dumps and the spectacular blowups, it’s the coordination behind the scenes of powerful crypto people who have so much to gain (or to lose), it’s the nonsense that is too in-the-weeds to make headlines - until it does.

---

It’s self-serving to think it, but I believe I was part of the wave that has now swamped crypto.

Of course, crypto isn’t dead. In fact, I sold some of my remaining crypto last week, at prices above what I paid for it. Coinbase is a going concern. YC is still funding crypto companies. It’s not a fringe phenomenon.

I think it’s getting that way though. There’s been a lot of ink spilled recently about the impact of rising rates, I don’t have anything original to add but I have to agree with it. Liron declared victory and moved on. Matt Levine wrote the definitive explainer, which is the definitive takedown without trying to be. People are making jokes about crypto bros becoming AI bros. (I feel bad for, and think about often, the guy who turned down a job offer from us at Scale AI to work in crypto in mid-2022.)

---

I’ll continue to gleefully cheer on the collapse of most crypto, but the point of this article is not to celebrate - it’s to reflect. How did I fall for the con?

“Stay humble” is one lesson, albeit a general one. I think the more specific lesson is to keep my understanding simple and concrete. Bitcoin only ever made concrete sense to me as a dark web currency. Everything else was an abstraction: decentralized money, Ethereum as a world computer, immutability blah blah blah. I still have a soft spot for utility tokens like Filecoin, but the whole ecosystem is too tainted for me to touch it anymore.

For AI the value is obvious to anyone who has used ChatGPT, it passes my test. The metaverse inspires the same feeling as crypto did when I believed but had not understood, so it fails my test, although VR mini golf specifically is amazing. I’ll be keeping myself more honest as more technologies come along. I hope others who had the journey I did will keep themselves more honest as well.