There's a season five episode of The Simpsons (yes, I had to look it up to be sure of the number), where Bart steals Homer's credit card information to order an authentic animation cell from Itchy & Scratchy. What arrives is not a recognizable character, but a single arm of a character, roughly implied to be that of Scratchy the Cat. Disappointed with the purchase, Bart—with Lisa as a partner now—attempts to sell the $350 arm to Comic Book Guy, and what follows is one of the funniest exchanges in the show's history.
Bart: Is this cel worth anything?
Comic Book Guy: Let me show you something. This-- This is a Snagglepuss drawn by Hic Heisler. It is worth something. This-- This is an arm drawn by nobody. It is worth nothing.
Bart: Can't you give me anything for it?
Comic Book Guy: I can give you this telephone. It is shaped like Mary Worth.
This exchange is even funnier when you see it in the context of the episode, but it's still funny to see by itself, and in fact can serve as four subtitles for a primer on why crypto isn't all its cracked up to be.
Is this cel worth anything?
I've never quite gotten Bitcoin.
I mean, the basic idea behind it is simple enough: A currency not tied to a specific government or bank, which is difficult to counterfeit, could—in theory—relieve some monetary issues currently facing most nations and create a new group of wealthy people who were smart enough and/or brave enough to enter into the fray at an opportune time. That part all made sense, especially the aspect that it was digital, since digitization took away a lot of the barriers in place to making a theoretical decentralized currency.
It's just that—on paper—it never really seemed to quite work out.
First off, how anyone age 50 and up was ever going to use digital currency seemed to be a bit of a mystery. My parents are right around 60, and they're actually pretty sharp cats, but I also had to show my mom how to forward an email two years ago, and I honestly don't think they've ever figured out their smart TV. It's not that they're dumb—again, my mom and dad are actually rather far up on the ol' intelligence chart—but they're also human, and humans adapt to new technology less rapidly as they age. It'll happen to me too one day, insofar as it's not already happening. The point is: Find a Boomer—or even an older GenXer—and try explaining cryptocurrency to them. It's pretty cool; their eyes actually glaze over.
Second, how anyone was going to acquire Bitcoin seemed a bit of an unexplained plot point.
You'd ask a question like “how are people going to get this Bitcoin” and get an answer something like “well they'll be paid with it.”
Alright, fine. But how were the customers going to have it to pay people with?
Well, people could buy it on exchanges (with, it turns out, money), or they could create it themselves via a process called mining, an idea which went to the very heart of the decentralization process.
There's one tiny problem with that: The resources required to mine Bitcoin are absurd. In fact, just under 75% of all Bitcoin is mined in China—where literally all resources are controlled by the CCP Dictatorship—and Iceland—where otherwise irreplicable conditions for harvesting geothermal energy allow for the production to not outstrip the value of the finished product.
Think of the cryptocurrency blockchains as a hybrid between a log book and a playfair cipher, but done digitally and on an almost incomprehensibly complex scale. Your computers (yes, it's plural) have to create these chains, and the energy consumption is enormous. And it's not just to do the actual computing. You have to have entire warehouses full, and be cooling them because they're going to be processing so much for so long, they have the very real danger of melting down.
The point is that only a relatively small portion of the human population could actually make Bitcoin.
In fact, even the most general of web searches reveals that many proponents of Bitcoin openly proclaim that the entire product (and it's a product) are controlled by the miners.
A microscopic sliver of a population having total control over a commodity which—in theory—everyone needs to access.
So much for decentralization.
Then, it turns out in order for the blockchains to be complex enough to be secure, there's actually a finite amount of Bitcoin that can even exist. This presents another roadblock. The apparent maximum number of Bitcoin is apparently 21 million. There were a few other estimates here and there when researching for this, but the vast consensus is 21 million. This would mean there is approximately 0.003 Bitcoin for each person on Earth.
This leads to the second, irrefutable problem: Currency has to be stable, secure, and accessible. We, in fact, had a 50 some year debate over this from the 1880s to the 1930s. A monetary system based on the less readily available gold favored the wealthy. A monetary system based on the more readily available silver favored farmers and workingmen, and despite delivering one of the most eloquent speeches in recorded history in favor of the Silver Standard, William Jennings Bryan and his Populist party ultimately did not win that debate.
They didn't exactly lose it either though; you see, the Gold Standard also didn't win. Fiat currency did. Philosophically this causes some sour stomachs for a lot of people, especially on the right, but from a pragmatic view of what currency needs to be, this outcome regrettably makes some sense.
Gold and silver are both secure (contrary to the horrible young adult novel of the same name, we do not have alchemists, nor have we perfected alchemy). Gold and silver are also both stable, or at least as stable as anything can be—nothing has a fixed price forever.
The problem is that if your currency is based on something—or is literally that thing—there is only so much of it that can exist, with gold and silver being no exception to this law of finality.
You see, currency has to be accessible, but not too accessible or it becomes worthless. There is a reason we don't use sand as currency.
The smaller your population, the easier it is for your currency to either be backed by something, where one Bart Buck equals one ounce of gold. This system works great when you have a population that is small, but as you grow, you require more and more gold to support more and more people, who are—naturally—requiring more and more currency. Eventually, one of two things must occur: you must stop growing in population, or you must change the structure of your currency. As no civilization yet has found a way to stop sexual reproduction (despite Puritans and Leftist Progs trying their best), nations have simply changed their currency over time.
But don't take this column's word for it. Let's try putting this into practice with a thought exercise.
Given: The United States population is roughly 328 million people.
Given: There is a maximum number of 21 million Bitcoin.
Now, replace “Bitcoin” with “Dollars” and see if it still looks feasible.
You see, cryptocurrencies—but specifically Bitcoin—suffer from the other end of the problem spectrum faced by currencies: they're too scarce. Just like we don't have a monetary system based on sand, we don't have a monetary system based on moldavite. Ethereum has partially fixed this problem by not having a total cap, but limiting the amount that can be created each year. This reflects in its noticeably lower price point for entry, and in its relative stability compared to Bitcoin. (This point is partially subjective and could be debated forever, and so it won't be discussed further here lest we get too far off track.) Still, one of Ethereum's co-founders has called for a hard cap, a move which would kick the can extremely far down the road, but down the road nonetheless.
This isn't the only set of issues, however, that plagues cryptos.
So, is this cel worth anything?
Well, Bart, the answer is yes, on the correct scale and under the correct conditions, which will be hard to create and even harder to maintain.
In other words, you'll need to find a purple squirrel who wants to buy that cel.
On to part two.
Let me show you something. This-- This is a Snagglepuss drawn by Hic Heisler. It is worth something. This-- This is an arm drawn by nobody. It is worth nothing.
When people talk about the Civil War, they like to talk about the battles or the politics of the time. Admittedly, both of those are interesting, but one of the more intriguing side stories is how the Southern economy worked during its period of cessation.
One of the things about the Civil War that strikes people who start to really get into the time period, is how similar the constitution of the Confederacy was to the one they'd just up and left. It specifically legalized slavery, expanded states rights, and granted a line item veto to the president (hey, they had some good ideas too), but for the most part it was identical. They weren't trying to build a new town so much as they were trying to build a new house.
With the new country came a new currency, and it was a disaster. Inflation in Dixie hit ludicrous heights, caused by massive inflation from trying to finance a war, a tenuous trade situation, and scarcity levels for raw materials that would be laughable even by today's Zimbabwean standards. The most valuable thing you could have to engage in commerce? Union currency, which was still backed, established, widely traded, and not suffering from hyperinflation.
So what does this have to do with Snagglepuss and cryptocurrency?
First, no crypto has actually demonstrated that it can generate and hold value on its own, totally independent of an established currency. Yes, of late, some vendors have started to—or said they plan to start—accepting some cryptos as payment, but this is an incomplete picture.
The crypto you would spend to, say, pay a Discover Card bill, would vary based on the value of that crypto, because your coin—whatever it is—still has to be converted back into dollars. If you want to buy a house, you still have to convert the coin into dollars. If you want to buy a car, you still have to convert the coin into dollars. If you want to buy a painting, you get the idea.
The point is this: Your crypto isn't a currency, it's a commodity, because it only has value insofar as it can be converted to a nation's currency.
In the interest of transparency and fairness, it should be pointed out that some companies have begun accepting crypto as a direct payment. These fall into three categories:
Big Tech companies, who are the cradle of crypto to begin with. Tesla, Paypal, etc fall into this category, and their adoption of crypto-as-payment should surprise no one.
Speculative businesses, like Sotheby's, whose business models inherently dictate that they deal in fields with narrow markets and that require calculated risk taking.
Companies in failed states like Venezuela. Several international fast food chains have experimented with accepting crypto in Venezuela in recent years. This should, like with Big Tech, surprise nobody. Venezuela's currency is effectively worthless; experimenting with accepting crypto as payment would have been no different than if Burger King Venezuela had experimented with accepting oranges as payment.
Everything about crypto has remained tied to other, established currencies. That leads to the second reason the Civil War is connected to crypto and Snagglepuss:
The very fact that crypto is decentralized creates new problems. Specifically: Who the hell is issuing and guaranteeing this currency?
When asked this question, Crypto Simps default to discussing the security and reliable chain-of-custody created by blockchain. These are both in and of themselves irrefutable truths, but they don't answer the question posited. A brief history lesson should suffice.
Most nations add some musculature to this skeleton, but currency distribution has basically worked thusly: A government of some type (monarchy or true democracy it matters not), issues a standardized currency for use within its borders. This is given to banks (or a reasonable facsimile thereof, if we're going back to ancient times), and distributed through these banks to the citizenry via credit or loans. This mechanism—which coincidentally is the same mechanism which causes capitalism to be the most efficient generator of wealth—is somewhat lacking when it comes to cryptos.
You can buy crypto currencies, but you must have money to do so. You can mine your own crypto currency, but you have to have money to purchase said equipment, even if you have crypto on hand.
Moreover, crypto currency independence would require governments to act against their own self interests. Can you imagine a government that voluntarily gives up its place as head of the money distribution? Perhaps we will also one day only have lawyers who act with strong morals, or doctors who do not allow political feelings to cloud their judgment. The bottom line is that as soon as governments stop accepting Scratchy's Arm as payment, or taxing Scratchy's Arm aggressively, it's all over.
One could suppose that crypto bulls could buy an island and start their own nation. Elonia has a good ring to it.
Can't you give me anything for it?
We sure can! Though what we can give for it varies from coin to coin—this is another point which should surprise nobody.
Shots have been taken at popular cryptos in this narrative, shots which are fair questions to ask of things which purport to be poised to change the way we engage in commerce. Their primary cases for why they have value are security and scarcity. But there are other cryptos, and so we have the first opportunity to talk about my favorite crypto: Dogecoin.
I love Dogecoin. I've bought, sold, and rebought a number of times over the last few months. I think it's cute. I think it's a wonderful thumbed nose to monetary policies which have become farcical. I also think it's fascinating that they've chosen to experiment in the total opposite end of the economic pool from most crypto currencies.
If Bitcoin is trying to emulate the Swiss Franc or the Swedish Krone—and in many regards, it is—then Doge has decided that it has found a previously undiscovered edge in emulating the Zimbabwean Dollar. Doge has no caps, and is relatively easy to mine. As much as I love it, the currency itself is inherently worthless. And yet through popular demand, it persists. Holding at around fifty cents a Doge, you currently get about a 115,000X better exchange rate than you do for the Iranian Rial, a reality that is mentioned here for no other reason than it amuses the author.
As long as speculation continues—or in the case of Doge, demand—you can likely get whatever you want for it.
It is in this moment that one realizes that perhaps, if crypto is to be the future, perhaps Doge has stumbled onto something in its tightly-knit populism (which I am part of and find wonderful by the way). Perhaps if crypto is the future, the key is to flood the market, and attempt to deflate later. It'll be pretty easy to stop 21 million Bitcoin. However, 21 trillion Doge? That's a bigger dog, so to speak.
I can give you this telephone. It is shaped like Mary Worth.
My fear is that crypto will learn nothing from its early success, and instead bottom out into being a Mary Worth shaped phone.
Bart learns two hard lessons with his animation cel. Things are only worth what people are willing to pay for them, and buyers need to be sure that what they're getting is what they want.
The current fad of crypto speculation is fun, but it's just that: speculation.
Who's trying to acquire crypto for transactional purposes? One supposes the Doge Army could fit into this description, but their success—while not impossible—certainly doesn't seem immediate.
The reality is we don't talk about cryptos like they're money. We talk about them like they're commodities. This is because that's what they are. They're highly speculative commodities.
So buy dips, HODL, and mine if you can.
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