The Most Thorough Case Against Crypto I've Heard

The hype around cryptocurrencies has reached a fever pitch. There are Super Bowl ads for crypto companies featuring celebrities like Matt Damon and Larry David. The Staples Center in Los Angeles is now the Crypto.com Arena. And behind that hype is a distinct vision: a more decentralized economy where individuals have more autonomy over their finances, a grass-roots internet free of the not-so-invisible hand of Big Tech, and a cultural ecosystem where artists and musicians can fairly monetize their work. But what if that vision is deeply flawed? What if the technology undergirding cryptocurrencies isn’t what it’s cracked up to be? Or what if the technology does work, yet the world it creates isn’t a decentralized utopia but a hyper-financialized dystopia? Dan Olson is the creator of a two-hour-YouTube video, “Line Goes Up,” that has now been viewed nearly seven million times. “Line Goes Up” is the single most comprehensive critique of crypto that I’ve ever heard. And that’s because Olson isn’t just focused on cryptocurrencies as a technology or an asset class, but on the crypto universe as a distinct culture underpinned by a powerful ideology. It’s easy to think about the lingo, the acronyms and the myths associated with the crypto world as incidental to the value of cryptocurrencies and NFTs as assets. But for Olson, the culture and the currency are inextricably linked. And once you’ve made that connection, suddenly a lot of the problems, warning signs and potential dangers of crypto become visible in a new way. Mentioned: “A Crypto Optimist Meets a Crypto Skeptic” from “The Ezra Klein Show” “How NFTs Create Value” by Steve Kaczynski and Scott Duke Kominers You Are Not a Gadget by Jaron Lanier “Web3 Is Going Just Great” by Molly White The Gift by Lewis Hyde Book recommendations: The Power Broker by Robert A. Caro The Tombs of Atuan by Ursula K. Le Guin Persuasive Games by Ian Bogost Thoughts? Guest suggestions? Email us at [email protected]. You can find transcripts (posted midday) and more episodes of “The Ezra Klein Show” at nytimes.com/ezra-klein-podcast, and you can find Ezra on Twitter @ezraklein. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs. “The Ezra Klein Show” is produced by Annie Galvin, Jeff Geld and Rogé Karma; fact-checking by Michelle Harris, Mary Marge Locker and Kate Sinclair; original music by Isaac Jones; mixing by Jeff Geld and Isaac Jones; audience strategy by Shannon Busta. Our executive producer is Irene Noguchi. Special thanks to Kristin Lin and Kristina Samulewski.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:04Ezra Klein?

  I'm Ezra Klein and this is the Ezra Klein Show.

• 0:19Ezra Klein?

  So, back in the fall, I'd wanted to do a cluster of episodes on crypto. And I didn't quite get there. Right before I went on paternity leave, I got the first one that I'd wanted to do done, which was with crypto investor Katie Hahn and was built around the question, what if the crypto boosters are right? What is it that they're trying to build? What kinds of problems could their technologies and their ideas solve? And what kinds of problems could be created by their success? It took a while, but this is a show I had to depair alongside it. This is a conversation asking the inverse question. What if they're wrong? What if their technology doesn't build anything like the world they think they're building?

• 1:01Ezra Klein?

  What kinds of problems could be created by crypto's failure? And who could be hurt by it? And I'll be honest, I'm probably in a different place on this myself from the intervening months. I've become a lot more worried about crypto. The advertisements I'm watching, when you have Matt Damon doing ads suggesting you're a coward if you don't buy crypto, you've got Larry David doing a Super Bowl ad, a Super Bowl ad, where the explicit message, the whole point of the ad is invest in crypto even though you don't understand it. Every day, I get WhatsApp messages trying to get me to join this or that Bitcoin chat group. I get a lot of scammy crypto stuff. This is what a bubble looks like.

• 1:46Ezra Klein?

  And there is a lot of cash being spent right now to get dumb money to invest. A lot of cash creating marketing, really slick marketing. And then to say nothing of actual scams that are pitched explicitly at people who don't understand what it is they're buying. And I've covered enough bubbles and enough financial crises to get nervous when I start seeing that. A few months ago, the single best, most thoroughgoing critique of crypto I've seen was released. Dan Olson is a video essayist on YouTube whose channel is called Folding Ideas, where he does these great, deep videos that focus on questions of art and gaming and commerce. And so he naturally got interested in crypto because of the rise of NFTs have made crypto

• 2:31Ezra Klein?

  a huge transformation, a new player in the art world. And he dove deep into the technologies and the ideas here, and I think it would be fair to say he did not end up impressed. He's got this more than two-hour takedown called "Line Goes Up," and it went incredibly viral. It's been viewed by millions of people. We got dozens of requests to have him on the show. And something he does in "Line Goes Up," something he does throughout his thinking here, is he takes crypto seriously as a culture and an asset class and a financial market, not just as a technology. Crypto isn't just code. It's also marketing and investments

• 3:12Ezra Klein?

  and currency prices and incentives and in-jokes and social pressures. And all of that matters because that's actually where a lot of the problems and warning signs lurk. I find it hard, a difficulty of this conversation, is deciding how much I want to or even think you can keep some of these things separate. Can you like the technology and be worried about the culture? Can you think some of the ideas are good but think that the way the investments are working isn't good? Or do you have to treat it all as one thing? But it is, to some degree, all, if not one thing, very interrelated. And so you have to treat it as a single system, or as he calls it, as a machine. If you can, I do recommend listening to the show alongside the Katie Hahn conversation, which we'll

• 3:56Ezra Klein?

  link in the description, because I think the two together give you a sense of both what this will look like if it goes well, but also how it could go very, very badly. As always, my email is [email protected].

• 4:14Ezra Klein?

  Dan Olson, welcome to the show.

• 4:15Speaker 01

  Thank you for having me.

• 4:17Ezra Klein?

  Your critique of crypto is pretty thoroughgoing, I think it'd be fair to say. And so before we get to it, I want us to show some understanding of the vision that has powered crypto. The people involved in it will tell you they're building a better internet, that they're solving a bunch of the problems the internet we have now possesses. So what are they trying to build? What has made so many people, smart people, good-hearted people, so excited?

• 4:40Speaker 01

  Basically, if you go into any group and press them on that question, you'll get a different answer. And it may range from something that's relatively cogent and focused about like, well, we're built, we're trying to build like decentralized systems of governance. So that we could have a version of Twitter that is owned in fractional portions by every single user. And that's a coherent goal, regardless of whether or not you think it's a feasible goal. But then you go into a lot of others and it's just a lot of wash about, well, we're, we're building something new. And it's going to be different and we're going to push corporations off the internet.

• 5:24Speaker 01

  It doesn't really make a lot of sense. There's not a lot of coherence to it. There's not a strong vision. There's just a vibe, there's just an energy there about being involved in something that feels like the cutting edge. Regardless of whether or not anyone's able to vocalize it. And a lot of crypto enthusiasts will point to that ineffability as the thing that gets them excited. You know, that's like, oh, we're participating in something that's so new, that's so radical, that it's difficult just to even give voice to it.

• 5:55Ezra Klein?

  You used a word there that I think is really important because I think there's more of a unifying thread here than you do, which is participating. So I've come to think there are two levels to the claims crypto people are making about the world they're trying to build. One, and I think this comes more from the VCs, the financiers, the companies, is that they're trying to create ownership. They're trying to create the capacity to own digital goods. And that explains a lot of what's going on. Own a currency, own an NFT, own a JPEG, whatever. But then there's this other level, which is the crypto community, for lack of a better term. And I think the unifying thread there, as I've tried to understand it and report on it and absorb it, is participation,

• 6:40Ezra Klein?

  that at every level, it's a view about participating in the way our digital world is run, participating in building it, participating in governing it, participating in profiting off of it, that obviously, we all participate in the internet to the extent we use it, we create content for it. But there's a sense that we are just creating and other people are deciding, that we don't participate at the fundamental layer of the system. And what I see as the thing people are trying to build, rightly or wrongly, well or poorly, is these structures of participation. And that what's alluring about it to people, what is seductive, once you get into it, is the feeling, because I do

• 7:24Ezra Klein?

  think it's more of a feeling than a fact, but nevertheless, a feeling of participating, not just in the construction of something new, but in participating in your four NFT Discord communities, it's a metaphor for the way you would be a participant in the whole thing, at a time when I think people feel really alienated by the companies that run the internet, governments, et cetera.

• 7:48Speaker 01

  I would agree with a lot of that assessment. And I think where I would diverge is that I don't think that the goal of like, oh, this participatory energy is what we're trying to build as a baseline of the future system. I don't think that that's necessarily a goal at all. The charitable myth laden version is a version of the internet where corporations have been defanged, corporations are unable to

• 8:23Speaker 01

  Ingress into calcification where everybody is a part owner, everybody is a stakeholder, everybody profits off of it, you own all of your actions and all of your data and you are thus free to sell and profit off of that. A lot of it's about control, a lot of the myth-making is about control. And this is where it starts to get a little bit fraught because we start running into things that crypto enthusiasts will describe as good things. Like they'll be just like, oh, like they'll get super hyped about like, imagine if you had like granular ownership of like every single tweet you ever made and you

• 9:06Speaker 01

  could fractionalize those tweets and their value. You could take a tweet that was really popular and you could fractionalize it so that you could create a community around that tweet where everybody who buys into this fractionalized version of that tweet owns a part of the essence of that tweet. And then the more that tweet gets sold, the more that fractionalization increases in its perceived value and the more you are rewarded as the person for tweeting that. And they'll get really excited about that. And I just look at that and go like, that sounds horrifying to me, but they get really excited about it.

• 9:45Ezra Klein?

  Yeah, there was a running joke in our prep for this conversation between me and my producer, Annie Galvin, where we would run across these descriptions of things very much like that. But, but they all boil down to this question of, wouldn't it be cool if you could own X? And in parentheses, we kept ending up asking, well, would it? I mean, would it actually be cool? There's a, there's an idea, I, I came to journalism as a blogger and there's an idea floating around, wouldn't it be cool if people minted their blog posts as these digitally scarce goods, right? As NFTs. And then the blog post would be displayed and then like in a museum, it would be like this blog post on loan from the collection of X, where X is some crypto whale or some crypto community.

• 10:30Ezra Klein?

  And I mean, as a blogger, like my actual answer to that is, would that be cool? Like what, what about that exactly would be cool? And on the other hand, right? On the other hand. The fact that a lot of us have this feeling that we are endlessly producing content for internet giants that we don't make any money off of.

• 10:50Speaker 01

  I'm empathetic to that. Absolutely. Yeah.

• 10:52Ezra Klein?

  Yeah. I mean, the work of Jaron Lanier, you know, you are not a gadget. There's like a long history going back that we are getting pillaged by the internet. Like, there's a long lineage of this thinking. A lot of my skepticism comes into the fact that we are buying too much into the logic of commercialization in an effort to solve a commercialization problem.

• 11:12Speaker 01

  Yes.

• 11:12Ezra Klein?

  But nevertheless, the idea that there is a problem with not profiting off of what you create on the internet, that is a true idea.

• 11:19Speaker 01

  Yeah, I have an empathy for it. I have an empathy for a lot of the myths that the A16Zs of the world use to get people into it of like, hey, your data is being like sold by these tech giants. And there's kind of a sleight of hand that's working there, which is that it's like, your data, in kind of scare quotes, isn't valuable in a granular sense. Our data is valuable to these tech giants. The fact that they have access to like millions of points of reference in order to construct their models out of and to then sell those models to vendors, that's what's valuable. Your individual contribution to that is fractions of a cent of value.

• 12:05Speaker 01

  There's this core problem of like, your data is being sold. And the answer to that is not, well, what if you could individually sell your data?

• 12:16Ezra Klein?

  I think that's an important point, and it gives me a couple of different directions to go in here.

• 12:22Ezra Klein?

  Fuck it, let's go in the deep one. Okay, you're an art guy.

• 12:25Speaker 01

  Yeah.

• 12:25Ezra Klein?

  You know, you have this great YouTube page, you think a lot about art and art markets and the whole art thing. I sound real, real intelligent here.

• 12:34Ezra Klein?

  One of the tensions, it seems to me, in the way that the NFT culture of art and fractionalization and art sales is evolving, is that there's always been a tension in art and in creation about what happens when you yoke creation to different incentives. So there's this very famous beloved book by Lewis Hyde, The Gift, about doing art as a kind of gifting economy, as an alternative to the logic of capitalism, that art is not supposed to be, and that the artistic impulse is not pure capitalism. And then, of course, there's the reality that you need to eat and the reality that people need to get paid. But the thing that worries me here, to what you were just saying, and you see it in the

• 13:18Ezra Klein?

  way people are talking about these crypto games, where instead of playing for fun, you play to get tokens that maybe you can then convert out into money, or that you're now going to get paid by Twitter if you have a really good tweet, is that I am not sure it builds a better world to give people these power law incentives to work in the content minds, which is a, you know, some people do really well out of it. I've done really well out of it. I mean, I was a blogger and I became a journalist and I work at the New York Times now and it's great. But, I mean, take TikTok as it exists now and how alluring and seductive it is. And now imagine that every time you're some teen whose TikTok gets 50,000, 150,000, a million hits completely randomly, you actually get a bunch of money. Not a ton of money, but enough that it matters to you.

• 14:04Ezra Klein?

  How much more addictive has TikTok become to you when it really is a slot machine that occasionally pays out coins? And is that a better world? It isn't 100% clear to me that it is.

• 14:15Speaker 01

  It does strike me as like horrifying, the sort of potential for that. I've been spending a lot of time looking at other content communities online that are heavily industrialized in this sense, so like content mills, and really asking myself, like, what is it like to work in a content mill? So you have all these content mills that churn out endless reams of garbage about, you know, acai berries and blueberries and how oatmeal will help you grow your hair back or whatever. And... Humans are writing that.

• 14:55Speaker 01

  Someone, somewhere, a creative person or a skilled writer, or at least a like aspiring writer, is sitting somewhere in a room using their fleshy human hands to type on a keyboard and will those words into existence. And that incentive cage is basically what you're what you're describing there. It's just taking the incentives and structure of a content mill and encaging, enclosing, if you will, the entire internet in it.

• 15:32Ezra Klein?

  At the very least, I would say it is a somewhat sad restructuring of the utopian vision of the internet. That always strikes me here that, you know, there was all these ideas about abundance and a world that operated on a different logic. And now, and this is something you you get at in some of your work, there's an idea that we're going to more fully absorb that logic, but people think maybe they can be the masters of it. And most people end up in the middle of that and and it's not always great. But something that has come up a little bit in our in our conversation, but I want to pull out. We've been talking about tech giants. We've been talking about tech giants as the implicit and explicit enemy of this vision.

• 16:15Ezra Klein?

  Your Twitters, your Metas, your Googles, you know, you can go on down the line. But if you back up, I would say five or 10 years in crypto world, back then, the enemy was banks, monetary policy authorities, the government, the global currency structure. And it is an interesting transition from this being a way to overturn government control of currencies to this being a way to change how

• 16:46Ezra Klein?

  A successor to social media compensates social media creators. Can you talk a bit about that part of the ideological and conceptual evolution here?

• 16:56Speaker 01

  I mean, I think it's as simple as the first myths failed to gain widespread traction. The Bitcoin utopia, one, failed to materialize and, two, failed to really speak to people. And three was basically revealed largely as a sham. You had all of these myths about like, oh, Venezuela is gonna, you know, like, if you're looking at like 2013, 2014, it's like Venezuela is gonna adopt Bitcoin as its national currency any day now. And it's like, they didn't. Still hasn't happened. Still not going to happen. You would get a lot of, yeah, maybe Bitcoin doesn't make sense if you live in Canada, which has one of the like, air quote, best functioning bank systems in the world.

• 17:40Speaker 01

  Okay, but like, if you live in, you know, Central South America, where things are a lot more dysfunctional, where you have a lot of like, government censorship around money, and like, there's all of these issues with remittances, and you get a lot of people talking up how much it's gonna help people in those places, but then the actual boots on the ground adoption is average people only adopt cryptocurrency in those environments when things get so truly dire that they're like, whatever, I might as well deal with jumping through all of these crypto hoops in order to try and like, get some Bitcoin that I can convert into pesos that I can actually spend.

• 18:21Speaker 01

  So the Bitcoin utopia never emerged. The Ethereum utopia never emerged. Then you got like, the whole ICO gradual explosion, leading up to just the...

• 18:31Ezra Klein?

  Can you say what ICO is?

• 18:32Speaker 01

  An initial coin offering is somebody starts a new cryptocurrency, they generate a genesis block, which creates like, a million, a billion, an arbitrary number of new coins out of thin air. And then they sell off whatever percentage of that initial chunk. Then their new blockchain starts its rolling operations. The terminology of it comes directly from investing. You've got an initial public offering when a company switches from being a privately owned company into offering public shares. Same logic, just nothing preventing people who buy into the ICO from just turning around and immediately dumping their stuff 30 seconds later. And so you had literally hundreds of new cryptocurrencies started in the years leading up to 2017, 2018.

• 19:12Speaker 01

  And then in 2018, there was this massive, just atomic bomb of ICOs. They were all over the place and like 90% of these coins inevitably fail.

• 19:25Ezra Klein?

  So Bitcoin emerges. It becomes widespread in public knowledge of it.

• 19:32Speaker 01

  Yeah.

• 19:33Ezra Klein?

  It becomes quite valuable. If you go back eight years, if you had told me Bitcoin's worth today, I would have never guessed how few applications there are to spend it. It would have never occurred to me that those two things would be simultaneous. It would be so functionally useless as a currency, but so valued as an asset class. But then, as you say, there's an explosion of new currencies. And a lot of the new currencies, at least one of the ideas behind some of them is, well, we're going to fix problems in Bitcoin. It won't be mined in the same crazy energy intensive way, or it won't be limited in the same way that creates such volatility. And you can go on down the line of problems people wanted to fix. What is a financial incentive in this period to start a new currency?

• 20:15Ezra Klein?

  Why might you want to do that such that so many people would do it?

• 20:19Speaker 01

  Oh, because the ground floor payoff is potentially explosive. It's all driven by that narrative like, okay, like at one point Bitcoin was worth eight cents, now it's worth $60,000 or whatever the price is on that day. And so the whole ICO craze, which really hasn't entirely stopped, is driven on that logic of like, what if Bitcoin happens again? This could be Bitcoin. And this is all like coinciding with a general movement in tech of like everybody looking for that unicorn investment. So that's the narrative is it's just extremely financially driven of we'll start our new coin.

• 21:02Speaker 01

  It's Bitcoin with a twist, so it's lemon lime Bitcoin. And.

• 21:08Speaker 01

  It's going to do the same thing that Bitcoin's going to do. And even if it doesn't, what's $5,000 buy in on a couple million coins? Like, sure, it may not take off like Bitcoin, but what if it does? That $5,000 could become 300 million.

• 21:26Ezra Klein?

  And this gets to an important dynamic in a lot of these operations. And I think now two in a lot of NFTs, which is that because the price of a new asset like this is almost entirely denominated in hype, right? Almost entirely driven by whether or not other people are excited about the new asset. It turns out that if you have a lot of hype power on the internet, you can control the speculative run up of this thing that you invested in before you manipulated it. So I think of the canonical example of this being Elon Musk hyping Dogecoin to the moon.

• 22:05Speaker 01

  Yeah.

• 22:06Ezra Klein?

  He can make a tremendous amount of money to the extent he wants to. I mean, he's always already quite rich from investing in any random currency before then saying on his Twitter account, hey, look. And why I see happening behind that to some degree is a lot of people doing very small versions of the Elon Musk play.

• 22:25Speaker 01

  Yes.

• 22:25Ezra Klein?

  But a small version where you make 65,000 bucks is still pretty cool. And so that that seems like one of the the issues here, that there also develops a culture of you make money by creating or finding a new crypto asset and then convincing other people it's cool when you were already there first. And if you have a little bit of power, that's a really neat game to keep playing.

• 22:50Speaker 01

  Yeah, you have this constantly blossoming garden of new assets. So like whether it's new coins or whether it's new NFT projects, you know, NFTs have really allowed the ICO logic to find a much more downwardly scalable format where basically influencers at any. Size of influence can participate in the same thing where it's like you can find a asset class that whatever size influencer you are, you are, you can move the needle on. If you've got this NFT project that probably only like 300 people are going to buy into,

• 23:33Speaker 01

  but you've got a following of like 80,000 people on Twitter, if you can get 30 more people to buy in, you've just increased the traffic to that by 10%. You can noticeably move the needle on participation and thus the needle on price.

• 23:52Ezra Klein?

  Right, but now you begin to get into this problem, which you were alluding to a few minutes ago, when you said that the myths began to fail, which is that the currencies don't take over. I mean, they keep going up, some of them like Bitcoin and Ethereum, but you begin to need other stories. The story of Ethereum becomes this global decentralized computer, but it becomes clearer and clearer, you're not going to overturn governments. It becomes clearer and clearer, you're not going to overturn central banks. And so you need other villains, other stories to keep pulling people into this project. And I think that is part of how you get this transfer over to the internet giants, where I'm not convinced there's actually a more compelling story of how this overturns Meta

• 24:36Ezra Klein?

  as opposed to becoming part of Meta's business model. But talk a bit about that, because I do think it's been a more sustainable story. It is at least more plausible how you could replace some of the internet's players than how you can replace the currencies that have guns behind them.

• 24:52Speaker 01

  Yeah, I think it's just as simple as it's easier to grapple with. You know, anybody who's my age, like anybody who's kind of middle aged, has watched like a whole several waves of tech giants rise and fall, you know, who are AOL today, who's Yahoo? So it does just seem like that much more believable that it's like, yeah, we could cause Facebook to go to zero, like that could happen. And realistically, the thing that's going to cause Facebook to go to zero is Facebook. Their own actions are going to slay. Long before Web three lands even a minor wound. So I think it just comes down to the comprehensibility of it, that it just seems that much more believable that it's like we could replace Twitter.

• 25:35Speaker 01

  We could replace Facebook, we could replace Google, we could replace YouTube versus like, yeah, we're going to replace the trillion dollar US military.

• 25:45Ezra Klein?

  But something really puzzling happens right about here. And this was a big topic I was trying to get at with Katie Hahn. But you've taken it on too, I think in a, in a more direct way, which is the people making this argument most loudly are the people who invested in, started and still sit on the boards of the Web two giants. So take A16Z because they've been really at the center of the crypto boom. Chris Dixon over there has been a real important both investor and thinker and storyteller in this. But Marc Andreessen, he sits on Facebook's board. And I mean, that's true throughout that, throughout that organization for a lot of the companies in, in Web two.

• 26:30Ezra Klein?

  And they're investing in companies that look to me like OpenSea, which is a big marketplace for selling NFTs that could become the big middlemen of the crypto world. And so there's this, you know, or Jack Dorsey moving very heavily into this, then he steps down from Twitter eventually. But there's a weird thing that occurs that it wasn't Ben Bernanke saying we should overturn the US dollar with Bitcoin. But it does become in this period, it's like all the people who built and are profiting off of the internet we have are also now trying to harness this populist energy and this meme energy and saying they're going to blow up the whole internet we have for this decentralized internet where conceptually they won't have any power. It seems real weird.

• 27:16Speaker 01

  It's definitely weird and it feels bizarre and hypocritical until you just look at it through an utterly mercenary lens. You know, if you just allow a little bit of cynicism to creep into it, it becomes very logical and straightforward, which is that a 16Z, you know, Mark, Chris and co. believe that they can make just an absolutely unfathomable amount of money if they can be not sitting on the board of the new Facebook, but they can be the Mark Zuckerberg of the new Facebook. And a lot of it comes down to that if you want to see those like triple-digit, quadruple-digit multipliers, you need something new. So if you're Mark Andreessen, you need there to be a new thing.

• 28:01Speaker 01

  You need there to be a new wave of things to invest in that are going to quintuple 10 times, 50 times, 100 times, 1,000 times in value. That's his job. That's his business is building those. And this new populist wave provides a tool for generating those types of things. And they've always been open about this, that they've always been a spaghetti against the wall shotgun coverage operation that is like we invest in 100 things and only one of them succeeds. Gary Vee, same thing. And they'll say this out loud, that it's like their entire MO is I invest in 50 things,

• 28:45Speaker 01

  100 things, 200 things, and I only need one of them to be a unicorn and it goes 1,000 times, 2,000 times, 10,000 times. It goes to the moon and that pays off literally everything else. You know, I just need one Facebook to pay for a Juicero.

• 29:20Ezra Klein?

  So let's let some cynicism creep in here, but in a different way of just being mercenary, because there are different ways of understanding the underlying vision. We started by talking a bit about the more utopian vision of people just participating, of people buying in, of people who like the technology. But you look at the entire structure of it, the people investing, the markets, the use cases being proposed. And your argument is that the end goal of this infinite machine is a financialization of everything. So tell me about that vision. Tell me about what it means to financialize everything through crypto.

• 30:03Speaker 01

  It means that everything that can be conceptualized as valuable can be numeralized. There's sort of this sense, there is this sense that's like, oh, well, this is already the status quo. Your social media presence is already quantified. It's already like, here's how many followers you have. Here's how many likes you get. Here's your engagement metrics. And we have this heavily metricized engagement with the internet already. And this is sort of the next step of that of like, okay, how many dollars can that translate into? And the model that is used for that monetization is stocks. It's speculative financial instruments that, okay,

• 30:48Speaker 01

  we can take the most abstract thing imaginable, like the concept of insurance on a mortgage. Not a house, a mortgage. So there's, you have a house. The house has a mortgage. The mortgage is insured against failure. And we can take that concept of the mortgages being insured, and we can create an instrument out of that. Now you've got synthetic CDOs that are betting on the outcome of an outcome of an outcome of an outcome of an outcome of an outcome. Once you've broken that ice, then it's like, oh, well, we can apply this to literally anything that humans are capable of putting words to.

• 31:30Ezra Klein?

  I think a good way to ground this idea is to talk about some of the examples here. So tell me a bit about the Beeple sale. A lot of people heard Beeple sold this piece of art for $69 million. And for a lot of people, that was a moment. If people are buying NFT art for $69 million, that must mean there's real value there. Maybe I don't understand the value, but it is there. Otherwise, people wouldn't be paying $69 million for it. But an argument you make and that some journalists who have tracked the sales outcome have made is that that is a misunderstanding of what the value in the Beeple sale was and what the person that was trying to do.

• 32:11Ezra Klein?

  So tell me the story of that sale and its role as you understand it.

• 32:17Speaker 01

  So Beeple's a digital artist who has been putting out daily art for years now. And what just gets colloquially called the Beeple sale was a sale of a collage of these everyday images just arranged into a giant block. And that was sold for an Ethereum equivalent of $69 million. But the buyer, they had already bought several other specific artworks that people had sold in the months prior. And they were using these as the foundation for a new fractionalized investment coin called B20.

• 33:03Ezra Klein?

  Wait, so what does that mean, though? How does buying digital art create the foundation for a new coin?

• 33:09Speaker 01

  The asset gets used as the backing or the leverage for further investment.

• 33:18Ezra Klein?

  It's collateral.

• 33:19Speaker 01

  Basic collateral. So the whole idea of these schemes is that you have an artwork. That artwork is tied to a token or is signified by a token, which is the NFT. And then that token is the collateral on a series of derivative financial products.

• 33:47Ezra Klein?

  Why do you need the Beeple artwork in that whole structure at all?

• 33:50Speaker 01

  To create the...

• 33:53Speaker 01

  Myth, you need it to tell the story. You need to have a thing that humans can look at and go like, okay, here's this Beeple artwork that sold for 69 million. Therefore, it has value and that value is the thing that justifies the existence of these derivative token products.

• 34:14Ezra Klein?

  So what you've fundamentally done on some level is you've bought this piece of NFT artwork for a record breaking price. You've created a mythology around it. This is now the piece of NFT artwork. If people know anyone, they know this one. The point of the investment is not the value the art had to the buyer, but the value the art had as a financial kernel for this other project.

• 34:39Speaker 01

  Yes, and it's very difficult to wrap your head around. It's difficult to summarize quickly. And that incoherence is in a lot of ways a selling point that gets used in interactions with consumer investors. Because there's this sense of like, yeah, this is really difficult to understand. And that's what makes it like special, like you see the value in it. And that's, you know, you get a lot of this like ego padding mythmaking that extends out of the fact that it's basically this difficult to understand incoherent thing where the complexity is treated as a sign that this is important.

• 35:19Ezra Klein?

  So if anything has, I don't even want to say I'm turned on crypto because I think some of the underlying technology remains interesting. But if anything has turned me against the system, the culture of it as it exists today, I want to say it is this dynamic right here. And I think one day, and we'll see, this is a prediction. So I can be proven wrong. We're going to look at the Larry David Super Bowl ad. As the example of what was going wrong here. Did you happen to see that ad?

• 35:49Speaker 01

  I deliberately avoided it.

• 35:51Ezra Klein?

  Okay, so let me describe it. So the Larry David Super Bowl ad, which remember is a Super Bowl ad. So it's a lot of money to spend on anything. But it is Larry David through the ages, dressed up in historical period garb. Some caveman brings him a wheel and he says, who needs a wheel? Basically, I'm paraphrasing here, like, at least you can eat a bagel. Who cares about a wheel? Edison shows him the light bulb and he's like, eh, who cares about the light bulb? Like, I don't get it. That doesn't make any sense to me. Somebody gives him coffee. He says, this is bitter. Ugh, I don't get it. And it ends with some guy going in to pitch Larry David on FTX, which is a way you can begin trading crypto. And he says, eh, I don't get it.

• 36:37Ezra Klein?

  And I'm never wrong about these things. And then it says, don't be like Larry David. Don't miss out. When you see something like that, because I come to this, like, I'm an economics reporter. I cover financial crises. When you start seeing things like that, you're dealing with a need for the acquisition of dumb money. Like, that is why you buy an ad like that. And that ad is not an argument for why crypto works. It's not an argument for what it does or what problems it can solve. It is just financial FOMO. And if that ad was something alone, maybe I wouldn't care. But this seems pretty endemic to the culture.

• 37:18Ezra Klein?

  Like, can you talk a bit about NGMI and HFSP and diamond hands? And all these little acronyms and lingo that go around like this?

• 37:28Speaker 01

  Yeah, so there's a internal language of cryptocurrency that really revolves around this idea of making it and in groups and out groups. And none of this is new or unique. It applies to dozens and dozens of communities. It's pervasive in online trading and also like online gambling. So NGMI, not going to make it. HFSP or HFBP, have fun staying poor, have fun being poor. You know, very much this like. People are frustrated with the operation of the world as it exists right now and the

• 38:08Speaker 01

  way that things are clearly stacked in favor of people who have the ins to do trading. Like, basically, participation in the financial economy is the only possible method for really changing your station in life. If you want to move from working class to idle class, you're never going to do that off of wages. Like, it's mathematically impossible for you to work enough hours to get rich off of even like 25 bucks an hour, 50 bucks an hour, 80 bucks an hour. If you want to move from working class to idle class,

• 38:52Speaker 01

  you need to find something that's going to give you thousand times, 10,000 times, 100,000 times returns. You need to participate in these investment schemes. And so there's this frustration that the average person has been denied the opportunity to win this very specific type of lottery. And out of that emerges a protective aggression against other people of the same station criticizing this system that you are then choosing to participate in. So if you're trying to get into that investment scheme, you know, you're

• 39:35Speaker 01

  doing the Robin Hood thing, you're doing day trading, you're letting it take over your life, you're obsessing about it, you're watching candle bars all day, every day, you're hanging off of every word Gary Vee says. If you're letting that consume your personality and someone comes and says like, hey, I think this is actually like really destructive and it's a bad thing to buy into, the protective response to that ends up being this aggression of, well, you just aren't willing to do what's necessary to change your station in life. Have fun staying poor. I'm not going to stay poor. I'm willing to do what needs to be done. I'm willing to change my personality. I'm willing to

• 40:19Speaker 01

  change my outlook. I'm willing to take these risks. I'm willing to not be a coward and/or be A big enough coward to engage in these systems to bet on crypto, to bet on NFTs, to bet on OpenSea, to bet on DeFi, to bet on this new, completely unhinged, incoherent financial class because getting in on the ground floor of the next big thing is my only ticket out of this hellhole.

• 40:50Ezra Klein?

  And I want to note that all of this, the not going to make it, the diamond hands, right? You never stop holding.

• 40:56Speaker 01

  Oh, right. I didn't talk about that. Yeah, yeah. You want me to just ramble about diamond hands for a bit because, oh, boy, the psychology behind diamond hands is wild. So diamond hands, the logic under there and the way that that gets like weaponized is that there's not enough liquidity in these ecosystems. There's not enough liquidity in crypto as a whole for the whales to do what they need to do. But then that disparity between how much cash is actually floating around and these absolutely absurd valuations that get tossed around is vast. And as a result, it's very, very bad if people try

• 41:40Speaker 01

  to cash out in waves. So as a protective measure, as like a immune system response, the culture has developed diamond hands as a virtue, that someone who is willing to bear incoherence, that someone who is willing to bear instability, who is willing to just look past the volatility and the warning signs and just keep holding.

• 42:17Speaker 01

  You are a spiritually better person if you're a diamond hands who is willing to just get a grip on your, your board ape and never sell it. So you have this board ape and it has this fictional price, whatever it's at right now, $60,000, $120,000, $250,000, $2 million. Whatever the theoretical price of this thing is can only be realized if you sell. But selling is quitting and quitting is spiritually bad. It means that you have given up.

• 42:57Speaker 01

  It means you don't believe in the theoretical future value of that ape. So it's trying to play both sides at the same time. It's trying to make you think that it's like you have this asset. You are rich now because you have this board ape and it has this value. But you're actually cash poor because you don't have the money from that ape. You can only get that money if you sell it, but selling it would be a bad thing to do. It would make you a bad person. It would make you a coward. You would be balking in the face of the future.

• 43:31Ezra Klein?

  And all of this, I think it's important to say, is backed up by both the logic and record of a speculative asset run up.

• 43:40Speaker 01

  Yeah.

• 43:41Ezra Klein?

  Which is to say that if you had invested in Bitcoin 10 years ago, by any reasonable measure, you probably would have wanted to sell every couple of years because you would have made a ton of money on the investment. People aren't really using this thing. All these, you know, Bitcoin repositories are getting hacked.

• 43:59Speaker 01

  I mean, yeah, statistically, if you invested in Bitcoin 10 years ago, you like either the FBI would have it right now or it would have been lost in the Mt. Gox hack.

• 44:09Ezra Klein?

  Sure, but, but, but if you hadn't, right? If you had had diamond hands.

• 44:13Speaker 01

  If you had gotten lucky, yeah.

• 44:14Ezra Klein?

  If you just held on and held on and held on and held on and not listened to the naysayers and not listened to the journalists and not listened to everybody who doubted, you just kept getting richer and richer and richer and richer and richer. And Bitcoin has had an extraordinary run-up. I mean, the, the cultural power of the stories of people who put a couple hundred or a couple thousand bucks in and now have astonishing money, that is potent. And so it has also powered this culture because you can look at those guys and say, ah, I should have been like them.

• 44:48Speaker 01

  It happened before, it'll happen again.

• 44:49Ezra Klein?

  But of course, the problem with bubbles is they're all like that until they're not. I mean, there's an old, you don't want to bet against it because you don't know when it'll pop. There's an old line, "The market can stay irrational longer than you can stay solvent."

• 45:02Speaker 01

  Great line.

• 45:03Ezra Klein?

  But nevertheless, that there is this problem when you are convincing people. It just seems to me that what I see in the market for a lot of these assets right now is they are doing the kind of acquisition strategy you need to get dumb money in.

• 45:20Speaker 01

  Buy the dip.

• 45:21Ezra Klein?

  Right, money that doesn't understand what you're doing. And also then they're creating a culture that tries to make money dumber, right? That tries to get people to not follow their instincts, to not look at what they're seeing in front of them and to not sell. And I don't believe for a moment that people who aren't going to sell are the super sophisticated VCs. I don't believe for a moment it's the folks, like, that the real financiers won't know when to sell, but a lot of folks will have been brought in behind them and they won't have been able to sense the market changing. And they will have believed diamond hands and not going to make it and, and, and they would have been excited about the run-up they already experienced. That's how you get a really painful crash.

• 46:02Speaker 01

  Yes. And we already see some of that, like, okay, so buy the dip is a really, really, really, really, really, really common phrase. Anytime that Bitcoin or Ether take a downturn, it's like, buy the dip. You know, like, now's your chance, like, you know, buy low, sell high. Well, this is as low as it's going to get for the time being. And I was seeing buy the dip. You know, all the way from, you know, Christmas through mid-January, these prices that were slowly going down, it's like now's your chance to get it on Ether, now's your chance to get it in on Bitcoin, like buy the dip, buy the dip, buy the dip, buy the dip. January 21st rolls around and well, that dip just got a lot dippier.

• 46:45Speaker 01

  And so anybody who bought the dip on January 1st now has to wait like how much longer before it goes back up? Will it ever go back up? Like, will it get back up to, you know, where it was back in November?

• 47:04Speaker 01

  No, no one actually knows. You need to be a prophet in order to buy it. And that's why, you know, the, the argument like the market can remain irrational longer than you can remain solvent goes in both directions. Like it can crash faster than you could possibly predict that it's about to.

• 47:22Ezra Klein?

  Right. So we've been treating it here as a speculative asset class that has simply the dynamics of a speculative asset. But if you're storytelling to say, no, you're buying something real, right? If I invest in Tesla, I'm taking a point of view that there are going to be more Teslas on the road and that company is going to be more profitable because of the changeover to electric cars in the future than is true today. If I invest in, uh, you know, anything, uh, any company you can think of, I'm making a statement about what I believe to happen in the future. So I do want to talk a bit about the technology here because something you can have is a speculative asset bubble that when it pops, you are still left with a usable technology.

• 48:07Ezra Klein?

  I mean, that is a story to some degree of the dot com boom of the, the late 90s. It does leave us with the, the wide adoption of the internet, a lot of companies that are tremendous and important companies today. And so.

• 48:21Ezra Klein?

  I do think it is important in terms of how you project this going forward, whether or not you think this technology works. And I've been a little more, I think, sympathetic than you have to the idea that some of these technologies are real. But partially because I've been more sympathetic to it, I want to elicit some of the critique you make. And I guess let's start at the base layer. I think the base case for crypto, and it's pretty similar for the currencies and the NFTs in a way, is that the ability to have verifiable digitally scarce goods allows you to do all kinds of economic things that that is simply a functionality the internet needs, and we have it in the physical world. It's come into the internet.

• 49:03Ezra Klein?

  Is this the technology that allows you to say, I own this thing on the internet? And being able to own a thing on the internet is simply going to be valuable, even if a bunch of current instantiations of it pop and fail along the way?

• 49:18Speaker 01

  Uh, is there a theoretical future version of this stuff that does what it claims? Maybe I don't think any of the current implementations have the throughput. I don't think they have the transaction speed. I don't think they have the processing capacity. I don't think they have the storage capacity. I don't think they have the flexibility that is necessary in order to actually create a meaningful, generic ownership object for digital goods. And so basically what we're seeing in practice is just this immense fracturing around these problems of capacity.

• 49:59Speaker 01

  So, you know, your, your like verifiable ownership of something on Ethereum only makes sense when you're interacting in the context of Ethereum. There's no reason for that to be respected or applicable to anything outside of the Ethereum ecosystem. And as a consequence, like it just ends up becoming the same as like, you know, if I own a mount in World of Warcraft, if I own a trading card on Steam, if I have a special user badge on a web forum, you know, you, you own that thing that has contextual relevance, but is not actually Universally verifiable and universally applicable.

• 50:44Speaker 01

  It's not like a physical object that you can take with you places. It can only go into places that it is permitted to go, which would be within the Ethereum ecosystem.

• 50:56Ezra Klein?

  Sometimes I have the feeling when I dig into the technology here of either I am very dumb or something very strange has happened because I keep seeing use cases that seem more or less solved to me framed as tremendous technological innovations. And I'll give an example. There's a Harvard Business Review piece by Steve Kaczynski and Scott Duke Commoners. The headline is how NFTs create value. And this got passed around by people I respect as the single best, quickest, shortest explanation of exactly what it says, how NFTs create value. So one of the things about having digitally scarce goods is you can be the good. It can be your identity.

• 51:39Ezra Klein?

  If we can give you, you know, your own signifier on the chain, then we know who you are or we know that you own this thing. And either the who you are or the thing you own can open other doors. And so they write that what makes NFTs special is that it's not only something you can own, but quote, "NFTs can function like membership cards or tickets, providing access to events, exclusive merchandise and special discounts, as well as serving as digital keys to online spaces where holders can engage with each other," end quote. But I read that.

• 52:12Ezra Klein?

  And that's just a password. Like, we do this all the time. I can subscribe to somebody's Patreon and then I get a password and I could be on their Discord server or I can get some gear from them or I can participate in their Ask Me Anything or whatever. And there's a slightly weird idea that has been floating around for a while and I've actually bought into, but I've been buying into less as I've thought about it more, that identity and access are these very unsolved problems on the internet, but they actually don't strike me when I really think about it as so unsolved. So that piece of the technology, I'm not 100% sure.

• 52:52Ezra Klein?

  What the point of it is?

• 52:54Speaker 01

  Yeah, it's kind of an interesting dimension of it. You know, you do get a lot of this like, oh, like we've solved this problem. And you kind of turn around and like, look at it more granularly. And it's like, well, was that a problem that needed to be solved? Or was that a problem that we had in fact failed to solve? You know, this idea of like access passes and keys and whatnot basically relies on this sort of like, wouldn't it be cool if, wouldn't it be cool if, if your bake, your port ape acted as an access pass to a bunch of things? You know, there was a whole ecosystem of services that interacted with it in interesting ways. And you can spin a story around that.

• 53:36Speaker 01

  But then there's just like the actual practical question that would be interesting if things function that way. But then you back up and look at it and it's like, okay, well, why are things so fractured in the real world? Like, why did single sign on through Facebook fail? You know, Facebook and Google, like, why are people actually starting to like reject single sign on as a solution? Why do we have 50 different streaming services now? And it's like, oh, because you end up with these centralized corporations that they don't want to buy into a generic class of object. They don't want to build something that will key off of someone else's token.

• 54:19Speaker 01

  They're going to build a thing that keys off of their own token. So you're going to have your Pepsi NFT that's going to have relevance within the Pepsi ecosystem. And even if it's a generic Ethereum asset, no one else is going to have anything interact with it in any meaningful or substantive way. So when you boil it down, like, yeah, all you've wound up with is a Pepsi account.

• 55:00Ezra Klein?

  So let me get at some other pieces of the technology that are worth, I think, scrutinizing. There's a claim that crypto is deeply privacy enhancing and that it's going to solve one essential failures of the current internet, which is that the current internet is murder on privacy. Your view is that it's privacy destroying. Tell me why.

• 55:21Speaker 01

  So there are the currently popular chains, so like really like Ethereum. So if we're talking about Ethereum, which is currently dominant in the marketplace and the Ethereum clones, so Solana, Cardano, they lay bare so much information about you in ways that are currently only obfuscated by the tools being bad. So if you find somebody's wallet address, you can see all of the interactions that that wallet has made. Everything that's come into it, everything that's gone out of it, every contract that it has like done

• 56:00Speaker 01

  a transaction with, all of that is open. You want to see how many people are interacting with a specific contract that does a certain thing. You can just pull that. So all of the stuff that like Facebook, Google, Amazon, that they actually care about, what are people looking at? What are people interacting with? How much money are they spending on it? How are they like moving things around? How are they behaving economically? All of that information is just there for them to harvest. And then drilling down just to like the personal layer, Molly White, the author and maintainer of Web3 is going great.

• 56:42Speaker 01

  She had a great blog post. The example she uses is, okay, you go on a Tinder date and then you Venmo, you crypto Venmo your date, your half of the bill.

• 56:55Speaker 01

  That interaction has now given this rando that you have met once, the thing that they need to dig into all of your recent economic transactions. And so they can see all of the other dates you've had where you crypto Venmo'd your half of the meal, your exes, your estranged parents. They can basically stalk you through your economic activity. And it requires this layer of like, okay, I as a person, in order to protect myself from the prying eyes of people that I interact with, need to take my online presence and I need to fracture it into not just a bunch of accounts.

• 57:40Speaker 01

  So it's not just like, okay, here's my Twitter account. Here's my Facebook account. What do I say on which? It's which economic interactions do I make with which wallet? Because the history of these wallets is visible. Am I getting extra cash from a side gig that I don't want my abusive partner to know about? Because I'm trying to save up a little bit of money in order to like move out. You know, questions like that become so much more fraught in this hypothetical crypto ecosystem because of how public your transactions are. And so while the wallets themselves are pseudonymous,

• 58:21Speaker 01

  it really doesn't take much effort in order to come to just very basic logical conclusions about like, okay, this wallet on the 21st of every month, this wallet sends $2,000 over to this wallet. And then that wallet doesn't really engage with anything. So that is clearly just the savings account of this person. And we can see exactly how much that person's saving up. And then we can just monitor that wallet to see when it starts interacting with other stuff. And then we can deduce what those are. Oh, look, this person, they're sending deposit money to a real estate, to an apartment complex. I think they're planning on moving out.

• 59:03Ezra Klein?

  And I should note here, because it's worth saying it. There are ways you can get around this. You can tumble your Bitcoin, but it then makes the whole way of operating in the economy incredibly complicated.

• 59:17Speaker 01

  Incredibly complicated. And it basically means is like, okay, if you want to safely interact with this hypothetical crypto future, you need to learn how to launder your own money just to keep you safe from like, you know, money laundering just needs to be a cultural norm that everybody launders their money so that it's not suspicious that like, oh yeah, I all of my stuff has been going through tornado because that's just what everybody does. And of course, the outcomes of that, if everybody is laundering their own money just in order to like vaguely anonymize their routine transactions to make themselves slightly less trackable, that opens a whole new world of perverse incentives.

• 1:00:00Ezra Klein?

  So there's another critique you make, which is again a bit counterintuitive, which is that the entire structure here, the entire culture of crypto promises decentralization. But your view is that in practice, it would centralize.

• 1:00:15Speaker 01

  Yeah.

• 1:00:16Ezra Klein?

  Why?

• 1:00:17Speaker 01

  Just structural incentives. So if we use Bitcoin as an example, Bitcoin is actually like pretty strongly centralized in the scheme of things because you have this capital requirement in order to engage in Bitcoin mining. You know, you need these big rigs, you need these like warehouses full of application-specific integrated circuits, ASICs, you know, Bitcoin mining machines. So you need these warehouses full of this. Well, so now you're operating at an industrial scale. And once you're operating at an industrial scale, there's only so many other people out there who are going to be capable of doing that as well. And you can just call them up on the phone and be like, hey,

• 1:01:03Speaker 01

  What if we merge? What if we just sort of form like an informal partnership? What if we set up a cartel where it's like we're still independent companies, but like we're coordinating with each other? Because if we compete aggressively with each other, we're just going to drive each other's costs up. But if we cooperate, if we collaborate, then we can keep our costs down, which means that both of us reap better rewards. And we just need to get two, three, four, five other people on the phone to sign in on this. And suddenly we now, as a collective, as a centralized collective, control 60% of the market, 70% of the market, 80% of the mining pool.

• 1:01:47Speaker 01

  And this is the stuff that just ends up happening because our economic system gravitates towards monopolization. Like, everybody in school is pitched on capitalism as competition, but capitalism incentivizes and gravitates towards monopolization. And building capitalism to crypto version isn't going to change that incentive. And in many ways, like observable ways, hyper-incentivizes it. Because like, hey, this diminishing returns escalating processing cost on mining Bitcoin, it's in our interest to cooperate with one another in order to slow that down, in order to lower our costs.

• 1:02:31Speaker 01

  And if we lower our costs, we increase our returns.

• 1:02:35Ezra Klein?

  There's also the other side of it. So that's the centralization on the miners, the big institutional players. There's also this idea of the centralization on the user. It moves a lot of technical risk onto the individual. So right now, my internet world is fractured across a lot of different companies. And I outsource my needs to them in different ways. My bank is responsible for keeping my financial information safe, and they employ people to do that. So the constant thing happening in NFTs and Bitcoin is people get their money and their digital goods stolen.

• 1:03:16Speaker 01

  Yes.

• 1:03:16Ezra Klein?

  And when they get their money and their digital goods stolen, That's kind of on them, or if they simply lose their password and can never access their $200 million of Bitcoin again, that's on them too. And it's funny to call that decentralization, because in fact, what it is, is centralization on you, the individual. Like, you have to be very good at managing your digital life, because otherwise, you're going to fall for a phishing scam, or you're going to lose your password. Whereas, you know, if I lose my password, or fall for a scam, it's actually partially on the financial companies I work with to help me through that. I pay them, in part, to keep that from being too catastrophic if it happens. And, you know, they do a better or worse job.

• 1:04:01Ezra Klein?

  But, but part of the, the very idea of crypto is that there actually is nobody there, and it's supposed to be decentralized, and nobody has power over it. But that means if you screw up, it's all on you.

• 1:04:11Speaker 01

  Yeah.

• 1:04:12Ezra Klein?

  And that is a kind of centralization that I don't think is talked about that way.

• 1:04:15Speaker 01

  Yeah. This is a thing that I've gone on about on Twitter, is this, the fact that decentralization gets just like thrown around willy-nilly, despite the fact that it's being used to apply to all of these different contexts. So it's like, political decentralization, economic decentralization, data decentralization. But it's like, okay, well, the economic stuff is just, like, that's getting centralized because of monopoly forces. And data decentralization, it's actually the total opposite, because you're asking me to pour all of this information, all of this identity into this singular bucket, you know, of my crypto wallet, or like, a small handful of crypto wallets that interact with each other. And you have all of these myths about like, well, not even necessarily myths, like, people

• 1:04:59Speaker 01

  working on trying to develop protocols that is like, we can express your degrees as non-transferable, non-fungible tokens. And so your wallet would contain your credentials, and so you could apply for a job just by, like, linking your wallet. And then it basically auto-fills all of your relevant information, because people would just be drawing on this data protocol. And it's like, yeah, but I really, really... Really don't want to have all of my credentials tied to a single account. I don't want to have all of my work history tied to a single account. I don't want all of my economic history tied to a single account.

• 1:05:44Speaker 01

  And I especially don't want all three of those things to be the same thing.

• 1:05:50Ezra Klein?

  One thing this gets at, and I found this when I talk about some of these things with crypto folks, is you'll start hearing about all the ways to solve the problem. But they're very complicated. They require increasingly high levels of sophistication. Now, one thing that should make you think, it's what I think, is that that will just mean middlemen come into the game who simplify it for you and take on the risk.

• 1:06:13Speaker 01

  Yeah, because that's what we're seeing right now.

• 1:06:14Ezra Klein?

  Because that's what happens, right? That's what OpenSea is and Coinbase and everybody else. But that then destroys decentralization. If you want to keep decentralization, you can't have all these middlemen.

• 1:06:25Speaker 01

  Yeah.

• 1:06:25Ezra Klein?

  But across all of this, the contracts, the sign-ons, the making sure you're not using the wrong money so you can't be tracked on the chain, like the whole thing, it's just a lot of complexity. And something I've learned covering financial institutions and transactions is complexity is dangerous. Complexity is where markets get warped. Whoever has the money to dominate the complexity, to understand the complexity can screw you over. People don't read the terms and services they click on, on everything they're doing on the internet. Most of us don't read the little cookie pop-ups that come up. And so this idea that we're going to have this world where, you know, everything is smart contracts and so on, that self-execute.

• 1:07:10Speaker 01

  Yeah.

• 1:07:11Ezra Klein?

  Everything or things we own that can just be moved around. But that we're not going to get screwed over because we didn't read the contract or didn't understand it seems wrong to me. And you tell an interesting story about this around the squid game.

• 1:07:25Speaker 01

  Yeah.

• 1:07:25Ezra Klein?

  Could you talk about that?

• 1:07:26Speaker 01

  So the squid game scam, like in the pantheon of fraud, it is my Mona Lisa. I love it so much. It's just like as a connoisseur of grift.

• 1:07:39Speaker 01

  The Squid Game Token Scam is just a masterpiece. It's so beautiful. So they create this meme coin based off of, you know, the, the current hit thing. So like Squid Game on Netflix is big. It's popular. It's really popular on social media. The aesthetics of it are spreading across the internet. You know, lots of people are doing like cosplay characters. Lots of people are doing, you know, Halloween costumes around it. It's the thing that everybody's talking about. So these anonymous folks make a meme coin. Like they basically cloned Doge or whatever, and create a meme coin around Squid Game.

• 1:08:21Speaker 01

  And the trick in it is that they say that it's like, the token itself is going to be gamified. That if you want to trade Squid Coin, you need to have these marble coins and you're going, and like, the white paper is actually a fascinating read because it's all written in character. So it's all this language like, "In order to acquire marble tokens, you will need to demonstrate that you are a good person." And there's no indication of like, how this would mechanically behave at all. It's just like, it's just all this vague florid language, and it's great. And then the technological trick at the core of Squid Coin

• 1:09:06Speaker 01

  was that the tokens couldn't be traded unless you had this accompanying other token called marble. But the marble tokens were never available. And so the squid tokens are untradeable. They are useless dead weight. You can buy them, but you can't sell them. And if you can't sell them, it means that once people realize they can't be sold, the value just rapidly plummets to zero. So what happens is the squid token creators, they generate this huge block of tokens. They sell them all off in a gold rush to all of these people who are like, oh, is this official? Is this the next big thing? Oh, look, the price is going up very rapidly.

• 1:09:48Speaker 01

  Well, I got to get in on this because this is, you know, it's gone up 3,000% in two days. The sky's the limit and two days later it went to zero. As the truth came out and people actually dug into it and realized like, wait a second, I can't sell my tokens. Why can't I sell my tokens? What's going on? And it's like, well, you need to burn marble tokens in order to actually transfer squid tokens. Well, I don't have any marble tokens. When are we getting the marble tokens? Where are the marble tokens going to come from? And then the social media accounts get deleted, the website disappears and it just all goes black and it's like, bye.

• 1:10:30Ezra Klein?

  So how, what was the scam here at the center? How did the folks making squid coins get their money out of the, out of the coins?

• 1:10:38Speaker 01

  By selling the initial, the initial block of coins.

• 1:10:41Ezra Klein?

  Got it. So the initial block, they just got ether or whatever it might've been.

• 1:10:45Speaker 01

  Uh, yeah, I think it was, I think it was BNC or something. Yeah.

• 1:10:49Ezra Klein?

  Their, their money was never denominated in squid coins at all.

• 1:10:52Speaker 01

  No, no, they created it out of thin air.

• 1:10:54Ezra Klein?

  But so the key thing here is that in a way, there was no fraud.

• 1:10:59Speaker 01

  Yeah, people, people got exactly what they bought. Yes.

• 1:11:02Ezra Klein?

  Yeah. These were people who already knew how to trade crypto.

• 1:11:06Speaker 01

  Yes.

• 1:11:06Ezra Klein?

  And it's just, they didn't understand the contract. And it kind of seems to me, there's all this idea of trustless money, trustless contracts. You can do this without trusting people. But I think something you see, if you take complexity seriously, and if you take terms and, and services and structures seriously, is actually, you do need to trust people not to screw you over because if you don't have trust, then simply operating in an economy or a society takes completely unmanageable level of constant verification.

• 1:11:40Speaker 01

  Yeah, like the, the risk management of dealing with everyday life, like in a modern society is unreasonable if you can't trust anyone. Because there's going to be things that you're going to have to interact with that are just outside your wheelhouse. It's unreasonable to expect that somebody who has spent Years and years of their lives, learning how to perform delicate heart surgery is also going to have the free time to be fluent in solidity and able to audit a smart contract. And also then be aware of all these other things and other things. At a certain point, as a complex society, we need trusted people that we can just turn

• 1:12:24Speaker 01

  to and be like, hey, can you sum this up for me? Can you tell me what this does because I don't have time to figure it out for myself, but you do. So if you do that, I'll sum up this other thing for you. I'll have expertise over here. And that's just a very fundamental trust relationship that we need in order to not have just this absolute Wild West of scams. Because if you take out that trust layer, if you can't trust anyone, if you have to constantly verify absolutely everything that you deal with, you're just going to get worn out. And I would point directly to cookie pop-ups and Terms of Service.

• 1:13:08Speaker 01

  If every single site that you open is popping up with like, hey, do you want to manage your cookie settings? Eventually, you just get worn out and you stop paying attention to it at all. And that makes you vulnerable. And crypto starts at 10 times that level of like complexity and intensity and saturation of just dense, difficult to comprehend information that makes it very, very, very easy for malicious actors to hide stuff inside of that, to hide landmines in the field.

• 1:13:45Ezra Klein?

  So as we come to a close here, I want to try out one more optimistic scenario on you. Which is one interpretation of all of this is, look, it's a speculative bubble, but there's an important technology here. And when the bubble pops, the technology will remain. I think you're appropriately have some skepticism of that. But what about the reverse? That there actually isn't that important a technology here. But what there is is a culture that, you know, take out some of the VCs and some of the other actors who are clearly, you know, just making big bets. There are a lot of people, as we said at the top, who want to participate. A lot of people angry at how the web looks, how it has gone.

• 1:14:29Ezra Klein?

  There are a lot of people who enjoy being in crypto, and I've heard this a lot, enough that I don't discount it, who enjoy being in these discords and in these projects because it feels different to them. And cultures have their own power. Cultures impose norms, they impose criticism. I mean, you can look at a lot of religions where you don't believe in the core religious claims as a effective culture built around a technology that doesn't actually work, right? You're not actually getting judged by that God, but the belief in the thing keeps a lot of people cooperating, punishing each other in ways that allow for remarkable feats to be performed. And maybe crypto is that. Maybe the technology is functionally

• 1:15:14Ezra Klein?

  an artifact, a symbol, an organizing device, a metaphor, but that what's being built around it, the thing where people want to create this different web, that there's something there that actually is going to be more potent than a lot of people realize now.

• 1:15:29Speaker 01

  I would like to believe that that's the path it can take. So the optimistic read on that is that there is a hungering for authentic human interaction. There is a hungering for community. There's a hungering for connection that people are currently finding solace inside crypto. Like, at the moment, crypto as an ecosystem is providing that because it's this high-energy, you know, engagement sphere where everybody's just like jacked up on the sense of participating in something new. And that gives people a reason to come together and that that zeitgeist can be

• 1:16:12Speaker 01

  Captured and redirected into better technologies, better incentives. You know, this idea that it's like, oh, like it's getting people talking about decentralization. It's getting people talking about, you know, challenging systemic hegemonies. And I would like to believe that that's the way that it can go. But my cynicism still comes through on the narratives themselves matter. The goals matter, the aims matter. And I think there's sort of this hitch in all of that of, well, there's the well meaning. Like it's brought people together. It's, it's, you know, created community. But what are those communities doing? What are the values of those communities?

• 1:16:57Speaker 01

  What are they prioritizing? What are they aiming to do? And I think there's just a very, I think there's a real risk in getting optimistic about what we're going to be able to in turn do with communities that have been so deeply indoctrinated into this like wagame, NGMI mentality.

• 1:17:20Ezra Klein?

  Right. And a way of saying that maybe is it's easy enough to talk about the idea that maybe the technology survives a bust, right? Your video is called The Line Goes Up, that the technology survives the line going down. But if the communities don't survive the line going down, if there's a crash and people feel burned and they can't believe this is the ground floor of riches for them. I mean, I'm not, you've spent a lot more time in NFT communities than I have. But I think the question I have is, are people in these communities because they like being part of something where the line is going up? And that's part of what makes a community fun? Because I've, I work in politics personally.

• 1:18:01Speaker 01

  Yeah.

• 1:18:02Ezra Klein?

  And I could tell you that losing campaigns don't attract as many.

• 1:18:06Speaker 01

  Yeah, yeah.

• 1:18:06Ezra Klein?

  As many excited volunteers. And I wonder about that here. I wonder if these communities can survive the line going down. If they can, maybe there's something here. But if they can't, then there, then it's unlikely to persist.

• 1:18:19Speaker 01

  Yeah. I mean, that's a big question mark on the future and it's.

• 1:18:25Speaker 01

  It's difficult and it's complicated and there's a lot of very real human lives entwined in it with all the mess and complexity that that implies. And you know, this soup of well-meaning people who are trying to do good in the world with the technology that they don't fully understand and people who very much understand the technology and are trying to use it to leverage control. And they are able to use the unknown and the future as pressure points to get people to buy into schemes that they can use to make unfathomable amounts of money off of

• 1:19:05Speaker 01

  the backs of commercial, people who believe that they're becoming investors to leverage themselves out of the awful place that the economy has put them in. And will some of the communities survive? Yes, some of the communities I've been involved in are just like, just so cutthroat and just so mercenary that absolutely they'll survive because they've got that Wall Street grind set and they just, they, they're amoral and they don't care and they will absolutely keep going because our systems reward assholes. But then there's a lot of others that I think will, will absolutely just like crash and fail and disperse and it'll be heartbreaking to watch because you know, they believed

• 1:19:50Speaker 01

  it.

• 1:19:51Ezra Klein?

  So let's end on that happy note. Always our final question, what are three books you'd recommend to the audience?

• 1:19:57Speaker 01

  I'm going to be really basic and I'm going to say The Power Broker by Robert Caro. Massive tome. If it takes you two years to read it, don't feel bad, but it's Pulitzer Prize-winning biography of Robert Moses, who is the guy who destroyed New York City. But as a critique of the intersection of structure, infrastructure, culture, power, politics, absolutely unmatched volume of, of work and sadly forever relevant discussion of the nature of power in society. And the way that that interacts with the physical spaces that we exist in and the way that physical spaces can be used as a lever

• 1:20:41Speaker 01

  against people. Um, a fiction recommendation, The Tombs of Atwan by Ursula K. Le Guin. It's her second book in the, the Earth Sea Cycle. Heartbreaking little story about a girl who realizes that she is the false prophet of a dead god, but very emotionally applicable thing. And third one, persuasive games by Ian Bogost, which is about rhetoric and interactive media.

• 1:21:14Ezra Klein?

  Dan Olson, thank you very much.

• 1:21:16Speaker 01

  Thank you for having me.

• 1:21:28Ezra Klein?

  The Azaklan Show is a production of New York Times Opinion. It is produced by Raja Karma, Annie Galvin and Jeff Geld. This episode was fact checked by Michelle Harris, Mary Marge Locker and Kate Sinclair. Original music by Isaac Jones, mixing and engineering by Jeff Geld. Our executive producer is Irene Noguchi. And special thanks to Shannon Busta, Christina Samulski and Kristen Lynn, and also to my colleague, Kevin Ruse, who helped us think through some of the ideas here.