Discover more from Fresh Economic Thinking
Film review: Line Goes Up
A film about all that is wrong with crypto, from Bitcoin to NFTs
Nothing could be more boring than listening to a crypto bro talk jargon at you for two hours. I mean, who really cares about non-fungibility? No wonder the Apes are Bored in crypto land.
But Dan Olson is no crypto bro. In his film Line Goes Up - The Problem with NFTs, Dan spends two hours talking jargon as a way to debunk the hype around crypto-currencies, NFTs (non-fungible tokens), DAOs (decentralized autonomous organizations), and much more.
As every minute ticks past, he debunks, demystifies and derails another bit of crypto spin. By the end, the film left me wondering how on earth the crypto scam lasted so long and how so many “experts” went along for the ride.
Let me share my bias up front.
For years I have tried to understand if there was anything tangible behind the crypto hype. I never found anything but a culture of ignorance about money fuelled by fabricated stories that appeared designed to trigger every libertarian instinct.
For example, in 2017 I bet crypto-economist Jason Potts that in five years crypto would go nowhere—he would not be paid in crypto, my local stores would not accept it, and you could not pay your tax with it. He thought by now it would have replaced money. Yet here we are.
So I am a soft target for the way Olson skewers the full suite of fundamental misunderstandings that lie at the heart of crypto.
I want to dig in to some of the key points in Line Goes Up. I can’t do them all justice, but I can expand and add some new economic insights. Nothing I write is new. Nothing in Line Goes Up is new. But if you want a taste of some of the absurdities that are tackled, please read on.
What crypto bros get wrong is that cash is not a token and gold is no more “real money” than my Qantas frequent flyer points or my left shoe. Saifedean Ammous explains how this token view of money is a core structure that crypto attempts to replicate digitally.
The thing that defines money is that it is a good that you don’t buy for its own sake — because you want to consume it itself, or because you want to employ it in the production of other goods, which is what capital goods are, so we have consumption goods, we have capital goods — money is distinct from those two, because it is a good that is acquired purely to be exchanged later on for other goods.
And that’s something that many people have a hard time grasping: the concept of money as a market good. But it is a market good just like all others.
This is wrong.
Money is the way we record credit relationships. Money is accounting between people. No tokens required.
In Line Goes Up, Dan touches on this key point when he notes that banks do not associate an “account balance with any specific dollar”.
Banks don’t track which dollar goes into which account because there are no objects or goods known as dollars. There are only accounts. These accounts are recorded in units which we call dollars. When I pay someone I don’t “give them a dollar”. I debit my money account and credit theirs by one unit.
Even cash is not a token. Cash is one side of an accounting relationship with the central bank. Every cash holder inherits a relationship with the central bank.
Gold and other precious metals are also not money. We know this because they have a price in money.
So when crypto enthusiasts explain that crypto solves the double spending problem that could arise if you tried to spend a digital object twice before anyone realised it was a copy, people like Dan Olson and myself say, “what double spending problem?” Normal money accounting doesn’t have this problem because it isn’t trying to track an object around the digital environment—if you spend too much you can have a negative account balance.
I’ve written in detail before how money is system of accounting. The flexibility to create new money by creating new credit relationships in this accounting system is also a feature, not a bug. So when crypto advocates proclaim that a limited number of Bitcoin tokens makes it good money, they are simply misinformed.
Ignorance of money and law is how the crypto bros sell their stories. Credit where it is due, many central bankers have noted this exact point, even if some seemed seduced into establishing their own Central Bank Digital Currencies (CBDCs).
This ignorance is crucial, as the crypto approach only solves imaginary problems that do not exist while creating real new ones that do.
Dan Olson wryly, and repeatedly makes this case.
When you are tricked into doing something on the blockchain, all of the mechanics that follow are legitimate, according to the rules of the system. This has opened the door for every type of scam imaginable.
For example, one claim is that tracking global shipping is a good use case for crypto blockchains. Dan debunks this by simply noting that most fraud comes from colluding of parties, rather than man-in-the-middle electronic hacks, and once colluding parties have put the wrong information on the blockchain it becomes very difficult to reverse.
Rather than preventing these actual common types of fraud, cryptocurrency has made them absurdly easy, and the main reason why cryptocurrency needs to be so resistant to man-in-the-middle attacks is because the decentralised nature of the network otherwise makes them acutely vulnerable to those attacks.
The anonymity and irreversibility aspects of cryptocurrency transactions that are touted as a benefit are also plainly undesirable. I have never heard someone complain about being unable to pay someone they don’t know and can’t verify in a way that is totally irreversible from a computer. When making large cash purchases, it is prudent to take possession of the goods first. We do this because the irreversibility of cash transactions with anonymous others is undesirable. Replicating this undesirable risk digitally is absurd.
Coupled with the absurd cost of transacting crypto, often hundreds of dollars, these are the reasons that essentially no one uses crypto to make payments. In 2019, a survey found that although 80% of Australians had heard of cryptocurrency, approximately zero per cent had ever used it to make a payment.
Even the much-hyped CryptoSpend app and its partnership with VISA avoids using crypto at all. Their promotional material shows payments being made in Australian dollars, not crypto, via Osko and BPay, which are inter-bank payment facilities owned by the major banks that process interbank payments for free.
Clearly, the makers of this app know exactly what Dan Olson knows about the whole crypto business.
…the claimed functionality and the actual functionality are both bad. It is all broken. None of it works well.
I can accept that VISA partnered with a crypto app as a marketing ploy to boost payments on their own network.
But where are the experts on this? Why did so many fall for the hype? Why is Dan Olson doing their job by making this film?
For example, TIME magazine had “expert” macroeconomist Tascha Che respond to the film. If you look past the hype— “the point of the system is a revolution in how we distribute value”—Che’s comments are just admission after admission that everything Dan Olson says in Line Goes Up is correct and there is essentially nothing of social value in the crypto universe.
I fully expect that given the film’s popularity during a time when crypto values are in decline, Dan Olson will be remembered as a key figure who called out the crypto emperor with no clothes.
However, the film only serves to reinforce my amazement at how many otherwise respectable people and organizations, especially those that we presume to know something about money and payments, went along for the ride.
Perhaps in decades to come, this film will be studied by the next generation who will wonder how stupid we were, all the while being scammed by their own new crypto-tulip derivative with the support of future “experts”.
Thanks for reading Fresh Economic Thinking! Subscribe for free to receive new posts and support my work.