“Crypto: The World’s Greatest Scam” is a documentary that was released on January 1st, 2023. Created by James Jani, a documentary maker with more than 2M followers on YouTube, the video tries to guide you through the complex world of cryptocurrencies.
An industry where, according to James, revolution, money, web3, digital art, and influencers merge in one place to give as a result the ultimate scam scheme.
He bases his theory on two main pillars: analyzing NFTs and Bitcoin as investment assets using sensationalist mass media arguments, simplistic reasoning, and some of the lowest-quality but most popular crypto-related content on the internet.
The NFT topic covers more than half of this 54-minute video and James uses the 2022 NFT fever to expose one of humanity’s most horrible flaws: greed.
He explains how digital art burst into the space transforming it into a battlefield of memes, social media trends, and influencers who claim the revolutionary vision of art digitalization while JPGs were selling for fortunes at the peak of 2022. A scenario where market manipulation made people buy out of greed without knowing what they were doing while others were selling images and fake promises.
While true, that is a simplistic way to see the panorama. There is nothing new here. Scams have been running in all their forms for thousands, if not hundreds of thousands, of years, similar to what happened in the 2000 Dot-com Bubble and the ICO fever.
Many NFTs were and are flooded by fake promises. You could call it a scam, where millions of dollars have been lost every year since 2021.
I won’t defend NFTs as investment assets but rather as technology, which is how I see non-fungible tokens out of the flashy lights of the legacy media narrative to spread misinformation and the scammy marketing techniques that exist in the industry.
Non-fungible tokens (also called ERC-721) are a type of token that, unlike Bitcoin or any other digital asset representation, aren’t interchangeable. In simple words, they are unique representations of an asset and this is a game changer in terms of tech advancement because it can be used for diverse purposes other than price speculation.
To put a practical example, NFTs can help to avoid fraud. Online fraud such as e-mail impersonation and phishing are some of the most popular methods of scams since the internet’s inception.
Solely in 2023, 2.6M scams were reported in the US estimating a $10B loss. This is therefore a big issue that even after more than 30 years of internet usage it hasn’t found a solution.
If you have heard about DID (decentralized identifiers) you would know that DID wallets could automatically detect any website identity on the blockchain. A DID wallet is a digital tool that allows you to manage your digital identity in a decentralized manner.
Moreover, an integrated decentralized reputation system could add an extra security layer. Here is where NFT and DID merge as technology that could be implemented to solve fraud and save billions of dollars every year.
Even if NFTs and DID are different concepts, they are highly compatible and share similar underlying principles used to develop a system that will enable on-chain verifiable credentials.
Both advancements are developed in a blockchain, use cryptography to apply unique identifiers, and enable digital ownership making it easy to associate certain data to an individual or identity. Some companies working to improve this industry are the Sovrin Foundation, Selfkey, Dock, and ION.
However, this isn’t the only industry where developers could improve already existent industries, among others we can find public auditing, secure voting systems, traceability and supply chain management, intellectual property, and public budget allocation.
BITCOIN AND THE ENERGY REVOLUTION
James explains the basics of Bitcoin as an asset and network. To support the theory that Bitcoin was doomed from its start he assumes that the deflationary nature of the asset is a bad incentive to transact it. Why spend something that can make you rich by just holding it, right?
, he expands on Bitcoin’s defects like the L1 scalability issues, waste of energy due to its proof-of-work consensus mechanism, and big mining corporations as some sort of centralization.
THE LIGHTNING NETWORK SOLVES BITCOIN’S SCALABILITY
Bitcoin scalability has been a big issue every time the network is congested. However, it was solved by new implementations as in the case of many on-chain protocols.
Developers maintained the Bitcoin block size to prioritize network security. However, the team has implemented some changes since Satoshi left the project in the hands of Gavin Andresen and other developers.
Some changes and code implementations were Taproot, Segwit, the Lightning Network, BIPs, and soft forks. They aimed to improve scalability.
The Lightning Network, for example, enables near-instantaneous transactions in Bitcoin at a very low price. The trust in the Lightning Network has solidified its narrative reaching $400M in TVL on the 8th of November. Moreover, more than 100 apps have been built in the Lightning Network ecosystem for payment services and CEXes are gradually integrating.
BITCOIN MINING IS ENERGY-EFFICIENT AND GREEN
Proof-of-work as a consensus mechanism is an energy-demanding system that has indirectly pushed for innovation and new technology adoption. Mining energy usage has become more efficient and eco-friendly since corporations who mine Bitcoin have allocated R&D funds for improving their activities.
Companies like CleanSpark and Marathon are pushing to increase green and wasted energy as a form to optimize mining activity and share wasted energy from mining activities with small communities as a social activity.
They are part of the Bitcoin Mining Council (BMC) which is a voluntary forum that counts with more than 10 mining companies and aims to promote transparency, and best practices, and educate the public on the benefits of Bitcoin mining.
They represent almost 50% of the total mining network and in a report released on August the 9th 2023 they revealed that BMC members and participants are using electricity with a 63% sustainable power mix.
In mining activity, there are more than 28 big players ranked by hash rate distribution in the last 3 years. A hash rate is a measure of the computational power of a blockchain network. The more years we consider, the more mining pools we will find.
Moreover, within those Bitcoin mining pools, it is possible to count small players with big amounts of capital joining to make mining more affordable.
The unknown percentage of the image represents a mix of different miner entities that could not be conclusively identified by the analysts based on the data they have access to.
This describes the decentralization of the Bitcoin mining network since the entity with the highest number of blocks mined represents 20%, followed by the second with 18%, the third with 13%, and the fourth with 10%.
If you are familiar with the 51% attack term, in this scenario, it wouldn’t be possible since one mining company would have to take 51% of the mining power for this to occur and destabilize the network.
It is certainly a lucrative activity that evolves. This is why many mining companies optimize energy usage, especially through wasted energy. These entities envision a future where communities will benefit from mining companies in a sort of energy source rent. This is the case in Paraguay where Bitcoin Mining activity is improving people’s lives.
CRYPTO IS A SPECULATIVE ASSET
The characteristics of crypto as a speculative asset and greed as human nature aren’t particular to the blockchain industry. Get-rich schemes, Ponzi schemes, and greedy influencers have used fiat currency way before Bitcoin or NFTs.
Since there is a demand for asset speculation there are also offers and marketing in the form of scams like in many other industries. Influencers sell scam tokens with the sole purpose of becoming rich by dumping coins on their followers.
They disguise the fake promise of a getting-rich scheme and sell a hope that many perceive as a ticket to becoming millionaires or retiring early.
However, this won’t stop development and improvement in the industry.
CONCLUSION
James’s theory contains some truths but is heavily biased, simplistic, and misleading. He labels every blockchain digital asset type as a scam and a failure. Even if he understands the basics, he fails in the technical concepts and actual solutions blockchain firms propose.
He states that code isn’t law because one of the reasons is that smart contracts cannot be changed. This is totally false. They can be improved thanks to governance mechanisms that democratize decentralized application functionality. This is a crucial part of the decentralized nature of blockchain firms and an important pillar of community participation.
The knowledge James has about Bitcoin is limited and therefore insufficient to criticize topics like, for example, scalability in 2022 when the Lightning Network was operational with fast transactions and low fees since 2018.
Bitcoin as a network and an asset is complex because it involves many topics that aren’t only tied to the asset price going up and down.
Bitcoin as an asset is a new way to store energy and therefore value through generations. It is the ultimate form of money because it is backed by decentralized energy which with time transforms to become more efficient, and sustainable, and could potentially improve people’s lives.
NFTs as a form of speculative assets may fail as happened to ICOs or some meme coins, but the technology to solve real problems is evident since this society has become more digital and we require better security measures in different digital areas.
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