titotal - thanks for a detailed and fairly balanced critique of crypto. You're accurate in many of these points about the crypto industry as it currently is. 

However, I think it's important to view crypto in the broader historical context of centralization versus decentralization, and the global catastrophic risks of ongoing economic centralization.

A major civilizational challenge we face is that within about 10-15 years, our entire financial ecosystem may be centrally controlled by powerful nation-states and central banks, using central bank digital currencies (CBDCs) that allow them to track every transaction made by every citizen, and that allow them to block any transactions, confiscate any assets, and censor any communications, that they don't like. This won't just be happening in China. It will be happening in the US, the UK, the EU, and most other advanced economies that are eager to adopt CBDCs as one of the most powerful authoritarian technologies ever developed. 

Within a few years, people in many countries will face the very real possibility that if they post anything on social media that their government's AI surveillance bots don't like, their social credit score (or functional equivalent) will be penalized, and their access to all money, assets, financial records, legal records, voting privileges, transport, health care, etc will be curtailed, censored, suspended, or banned.

The only feasible alternative to this CBDC dystopia is, IMHO, crypto. I haven't seen any other feasible technologies that could challenge CBDC hegemony.

EAs often write about an authoritarian lock-in of bad values and abusive power as a global catastrophic risk. If we're serious about this risk, we should at least understand that CBDCs will probably play a central role in authoritarian lock-in, and that crypto is one of the only alternatives.

Governments, central banks, and traditional centralized finance institutions understand that a decentralized crypto ecosystem would threaten their existing power, and would undermine this emerging  CBDC hegemony.  So they've fought crypto by every means possible, including legislation, regulation, propaganda, and money supply manipulation. Their attacks have been relentless, and have often been successful. 

Everything is at stake for them. If crypto rises and the US government loses dollar hegemony over the world economy, then its ability to print money, to engage in deficit spending, to enforce favorable terms of trade, to project military force, and to spend on domestic social programs, would be severely handicapped.  US prosperity depends partly on the US government's ability to project military, diplomatic, and economic power to force other countries to use the US dollar as a global reserve currency. If crypto threatens the US dollar's status as a global reserve currency, that's an existential threat to the US government's stability and power. The US Federal Reserve banks have been very explicit about this. 

So, when we ask questions like 'Why hasn't crypto been adopted as quickly as the Internet was?', its important to consider relative strength of governmental and institutional headwinds against adoption for these technologies. Governments were largely blindsided by the Internet in the 1990s and early 2000s. They didn't quite understand how the Internet would undermine their control over public opinion, commerce, news, etc.  They put up some token resistance against the Internet (framing it as a domain of money launderers, pornographers, tax evaders, scammers, etc.), but they quickly saw the economic growth benefits of e-commerce, and the military and surveillance benefits of the Internet, so they didn't impose strong headwinds against Internet technology.

However, governments quickly understood that Bitcoin, and then crypto in general, was a serious threat to their monopolistic control over money. Just as secular democracies allowed separation of church and state, crypto threatened to allow separation of money and state. States didn't want that. Central banks didn't. Traditional finance didn't. So they fought back.

The anti-crypto attacks by the government have been relatively light so far in the US, but extremely strong in other major countries such as China. China's complete ban on crypto mining and trading in Sept 2021 was arguably a major factor in the end of the recent crypto bull run, the subsequent 80% drop in the values of many crypto coins and token, and the intense financial pressures that exacerbated the Terra/Luna collapse, and then the FTX collapse. Crypto's volatility is partly endogenous to the cyclical nature of speculative bubbles, but it's partly engineered by nation-states imposing vague, threatening, inconsistent, and/or draconian regulations against crypto -- in order to discredit the only alternative to their CBDC hegemony.

So, we shouldn't be naive about crypto. It's a weird, young, speculative, volatile industry. But we also shouldn't be naive about why governments, central banks, and trad fi institutions hate crypto, want it to fail, and will do anything they can to discredit it.

If we're serious about fighting authoritarian lock-in as a catastrophic risk, then we should be careful not to prematurely reject, avoid, and disparage one of the few technologies (crypto) that could resist authoritarian CBDC control over all of our money, assets, property rights, communications, etc.

Disclosure: I'm a heavy investor in crypto, partly for ideological (libertarian) reasons, and partly out of intellectual curiosity about the psychology and game theory underlying crypto consensus protocols, but partly for financial/speculative reasons. So there's probably some motivated reasoning going on. I've tried to be objective, but would welcome any criticisms and comments on these points.

Minor object-level objection: you say we should predict that crypto exchanges like FTX to fail, but I tried to calculate the risk of this in the second part of my post, and the average FTX-sized exchange fails only very rarely. 

I don't think this is our main point of disagreement though. My main point of disagreement is about how actionable this is and what real effects it can have.

I think that the main way EA is "affiliated with" crypto  is that it has accepted successful crypto investors' money. Of people who have donated the most to EA, I think about 5-7 of the top ten names made their money in something crypto-related (even counting all the FTX people as one donor). Some of those people (example: Vitalik Buterin) are well-liked, honest, and haven't done anything to embarrass us. I think it would be practically bad to stop accepting their people, and morally bad (as a betrayal) to denounce them and writing them out of the movement based on guilt by association. (CoI note: I have benefited from non-FTX crypto money)

I see you're not recommending that EA stop taking crypto money. But then I'm not sure what you do want, other than what's already happening:

• You recommend EA not invest in crypto, but I don't think the movement is really doing this, and if they are I would expect that to be for normal economic reasons like diversification (and in general I expect Open Phil's investment managers to know more than us) .
• You recommend that organizations not put crypto people on their board, but I don't know of this happening except when those people have already been EAs before getting into crypto (I think SBF was on CEA's board before he got into crypto, although I could be wrong). If it was happening in other cases, I would assume it was because of standard practices around very big donors getting on the board, and not because EAs love crypto so much that they invite random crypto leaders to join company boards. If you know of examples to the contrary I would be interested in hearing them.
• You recommend not boasting about ties to crypto insiders. I haven't seen this happen except with SBF, where I think the boasting was along the lines of "look how well this person earning to give paid off". I agree that people should do less of that in the future.

Although the point of "don't invite random crypto scammers to serve on your board and become the public face of EA for no reason" is obviously correct, I don't know of anyone actually doing this, and so I worry that the real effect of posts like this will be to slowly make crypto so toxic in this community that EA leaders feel pressured to refuse crypto donations for PR reasons, and then we lose > half of our potential money. I'm especially worried about some kind of purity spiral, where after crypto is toxified, the next level is people arguing that Facebook has also been a pretty evil company at various points and so maybe we shouldn't accept Dustin's money either. I don't see a good Schelling fence here and would prefer not to start down that slope. I think we should avoid associating  with (including taking money from) anyone who seems likely to be an outright fraud or breaking the law, and maybe some extremely harmful industries like tobacco, but not try to more generally be the arbiters of which industries are vs. aren't socially productive.

I’m mostly in the midst of the refi/regen cluster of the crypto community, so I’m constantly surrounded by all the good stuff that people try to do with crypto. I’m mostly thinking of the Funding the Commons conference series, projects by Protocol Labs, projects I’m a bit less familiar with like Ixo and Commons Stack, and the general cluster of things that Vitalik Buterin might get excited about. It’s all not as impact-focused as we are, but it’s good people.

I’ve been musing whether we could come up with something like “blockchain but without the money” to keep away the scammers. What’ll remain will probably not have a $1t market cap, but it’ll be web3 stripped down to its most valuable core elements. (Sadly, I have no idea, at this point, how “blockchain but without the money” would work.)

1. ACX/SSC has a history of writings on coordination failures, to the point that it has established the metaphor of “Moloch” for collective prisoners’ dilemmas that are stuck in defect-defect equilibria. Smart contracts let you test out and rapidly iterate new coordination mechanisms. Maybe the field of mechanism design is cursed and there are no better coordination mechanisms to be found than the ones that we have. Maybe seemingly valuable mechanisms like Pol.is or quadratic voting or my impact markets will turn out to be flawed. But at the moment I’m optimistic that the EV of experimentation with new coordination mechanisms is high, and a lot of that is happening in various crypto communities.
2. There’s probably also value in breaking up monopolies to foster innovation. A lot of this experimentation with coordination mechanisms and whatnot would work just fine without blockchains (e.g., Pol.is). But I trust PayPal and Stripe to not rug-pull me because they’re big and old; they wouldn’t have gotten big and old if they rug-pulled people. (And they don’t care about rug-pulling me specifically because they’re big and I’m small.) But it takes a lot of time to get big and old. If we want to foster quick experimentation with coordination mechanisms that require trust, we need a quicker way to establish trust – such as to put all the smart contracts on a public blockchain and have them audited. All sorts of things can still go wrong, but it’s a start, and it makes the trust advantage of big, old companies a bit less expensive to acquire.
3. There is that exchange-like platform that I’m building. Building something like Kraken from scratch is difficult because the security is so tricky and important to get right (unless you’re callous about it). For a lot of standard use cases you can use Stripe or PayPal instead of building them from scratch, and you don’t need to think about the security. But for all the rest of use cases, you have no other choice than to code it yourself, get the licenses, hire the security experts, etc.… Unless there is a provably secure blockchain with audited software built on top of it that you can just use. (Cardano is the Motte here but I can make do with the level of security that Ethereum or Solana provide.) Defi will probably be somewhat more mature by the time of the next crypto summer and will make it a lot more efficient to implement secure coordination mechanisms. You can still make mistakes when you start writing your own smart contracts (though there is audited template code and the SPL for a lot of stuff), but it’s less code, so fewer mistakes.

Those are the side of crypto that I’m most exposed to. 

Preventing s-risks from AI, which can result from coordination failures, is the highest priority in my mind. So the general field of innovation of coordination mechanisms seems plausibly extremely valuable to me, at a high level. (Plausibly even more valuable than enabling people to conduct financial transactions without having to fight with the corrupt or inefficient systems in their countries.)

Whether all the concrete stuff that is being trailed in the various crypto communities is at all relevant to s-risks in the end is difficult to answer. But I’m only trying to defend the thesis here that all the innovation that is happening in the blockchain space is highly valuable, not that it can compete with (s-risk-focused) AI safety. It’s much too unfocused for that, and I don’t yet know the particular blockchain projects that might be more focused.

That said, I don’t know whether I agree with your conclusion. Usually people go like “Here’s a cool solution for incentivizing carbon capture,” and the response is, “Crypto is a scam. Blocking you.” But just now I saw an EA tweet something and someone replied, “EA is a scam. Blocking you.” That’s a new one to me. So I’m afraid the public perception of crypto might be infecting EA. I feel a lot more protective of EA than of crypto, so I kind of want to shield it. Then again that goes dangerously far in the direction of doing things because of their “optics,” which is also cringe.

One solution could be to just wait a few more years to allow defi solutions to mature to the point where the usability rivals cefi. Maybe then we’ll be able to draw on all the blockchain innovation and collaborate with companies in the space without looking distinctively cryptoesque while doing so. The best typeface is the one that the reader doesn’t notice, so I hope defi will be like Linux Libertine soon.

Or put differently: Using an acoustic coupler in a phone booth to post on the usenet might’ve come off as a distinctly nerdy thing to do. So if you don’t want to appear nerdy, that’d be something to avoid. But commenting on TikTok today is much less distinctively nerdy. So maybe we can have our EA cake and eat it too once defi becomes more like TikTok.

This seems like a massive overcorrection to me and seems to be using the FTX crisis as an opportunity to push a preconceived anti-crypto bias.

Many people think crypto could be revolutionary, like the Internet in the 90s and 2000s. The Internet had many fraudulent and scammy companies arise and many people lost lots of money but I think looking back on it, we'd be absurd to say that EA should stay away from the internet since there is a lot of nefarious behaviors. Suggesting that EAs should stay away from this could be sacrificing some of the most important interventions on global poverty and/or coordination problems with relevance to AI safety. Furthermore, we could miss our opportunity to have an impact on a multi-trillion dollar industry.

Many people don't like crypto. That's fine. They may be correct that it won't have much technological importance. But it very well might. It seems bad for EA to steer clear of it.

I would suggest that crypto's socially-valuable / non-speculative uses are largely inconsistent with the existence of a significant degree of speculation. Notably, the first function of currency is as a store of value; the second is as a medium of exchange (because it depends on the first). Non-speculative users will have zero interest in using a currency that cannot meet these metrics due to heavy speculation.

I wonder if some of crypto's popularity in some EA circles partially reflects a certain theory of how EA should get funded --basically a variant of the Dustin Moskovitz story. Someone generally in their 20s enters the "hot" field at the right time, VCs are willing to throw hundreds of millions at said unproven 20-something because the field is so hot, and the field experiences such massive growth that the founder can cash out with mid-10 to 11 figures within 10-15 years. The reality is that there are few niches in the economy for which that narrative is feasible at any given time. Among other things, there can't be a lot of competitors with deep war chests to overwhelm less-funded entrants, the profit margins have to be quite high, the capital requirements have to be moderate, etc.

I haven't been trying to amass 10-11 digits of wealth in the past five years . . .  or ever . . . so am not sure where people have thought the best niches were in the last five years (other than crypto). But if you're committed to this theory of funding, it would (be / have been) very hard to write crypto off as an appealing option. Where else can you print so much "currency" out of thin air?

[edited typo]

Cryptocurrency is all bad.

Cryptocurrencies immediately self-organize into Ponzi schemes from the moment they are created, because when you create a speculative asset with no value other than speculative value, a Ponzi scheme is all that it can become.

The necessary incentive structure exists right from the start: people will want to buy low and sell high, but the asset's value is entirely imaginary (unlike that of land or gold, for example). So they speculate until the bubble pops and everyone tries to cash out in panic, and because the asset's "value" was literally 100% bubble-hype and 0% tangible economic value... well, that's a straightforward description of every Ponzi scheme ever.

I got in a discussion about this with another forum user here; rather than rehashing any more of what I've already said, I invite anyone reading this to check out the exchange as it happened: https://forum.effectivealtruism.org/posts/dQuaxGRkvEDXQLSNm/?commentId=ir9ihgeBkx4NTAvGD

That doesn't sound radical at all, I know very little about crypto but I'm convinced. The risks seem likely higher than the benefits, so why touch it for now? Looking forward to counter arguments as well! Hopefully the fanboys don't just vote you down without making the arguments in the comments...

I basically just agree with your post, but I want to build on it a little.

Basically all the reputational damage that EA took when FTX imploded was due to SBF having started the FTX Future Fund. I don’t think people would have looked as askance at some EA leadership being friends with Sam if Sam wasn’t also a major funder of the movement, with FTXFF clearly coded as an “in-EA” organization.

One of the main changes I’d like to see in the wake of this is that new funders can’t just pop in, start a fund, throw money around, and immediately get EA-coded. There should simply be some time that has to pass, maybe 5 years, before that happens.

We can’t enforce that (anybody can call themselves “EA” if they want), but we can explicitly call out funders who refer to themselves as part of the EA movement before they’ve been around for 5 years or so.

Thanks for your fair, candid take on the industry. I agree with some of what you've said and disagree with other parts. 

I work for Glo, an EA-aligned crypto company, so this is near and dear to my heart (or at least to how I spend my working hours! ) I will try to write up a longer response soon, detailing:

1) my personal journey into crypto;

2) how to think about the disconnect between crypto's total value and the comparative dearth of contemporary use cases (we can think of the total market value as representing a distributed bet on future applications, and given how gigantic "money" is as an application, that bet looks good across a pretty wide range of odds);

3)  IMO crypto folks trying to build real things have been all-too-willing to free-ride on the speculation train -- Scott's post argues that the worst thing to ever happen to crypto was for Bitcoin to go up a bajillion percent, and I've been mulling that over for a few days -- and we should collectively try to rein in that mania.

(this essay might change in structure when I actually write it)

Looking forward to engaging further,

I pretty much agree with the thesis of this post. I think it underrates the potential value-add of crypto in the developing world, but I don't think that substantially changes the bottom-line conclusion. I appreciated the relatively measured nature of the recommendation to avoid EA being too tangled up in crypto, and roughly agree with it at its current strength.

Great post. For third world banking, I'm reminded of David Roodman's 'Due Diligence', which pointed out the importance of basic, safe financial services for the global poor, especially (micro-) savings and insurance (and the mixed results of microcredit). That seems a more promising direction to pursue on this problem than crypto.

Your insights into the complexities of the cryptocurrency world are spot on. The recent FTX situation highlights the need for careful consideration in this dynamic landscape. Cryptocurrencies offer innovation but also carry speculative risks. The crypto industry's mix of innovation and speculation means it's important to conduct thorough research before investing. Despite the challenges, there are projects with genuine potential, like those addressing cross-border payments. But have you come across the Ethereum Code? It's an AI-driven trading platform that might interest you.

Post summary (feel free to suggest edits!):
The author argues that “the crypto industry as a whole has significant problems with speculative bubbles, ponzis, scams, frauds, hacks, and general incompetence”, and that EA orgs should avoid being significantly associated with it until the industry becomes stable.

In the last year, at least 4 crypto firms collapsed, excluding FTX. Previous downturns have included the collapse of the largest at the time crypto exchange mt gox. Crypto’s use is dominated by people using it to get rich - after 14 years, there are almost no widespread uses outside of this. This all means it’s a speculative bubble, and it will likely collapse again (maybe not in the same way). If we’re associated with it this could lead to a negative reputation that EA “keeps getting scammed”.

(If you'd like to see more summaries of top EA and LW forum posts, check out the Weekly Summaries series.)

For those who care about scalable effective altruism, it's surprising that there aren't more proposals for using coordination technologies, AI, and knowledge networks to rate and review potential charity frauds.

 While it's important to warn about the risks of cryptocurrencies and blockchain, we also need to prevent future scams in other forms. Even if we believe that web3, defi, and other emerging technologies aren't just iterations of the same scam, we should at least agree that there are no effective tools for identifying which projects have real open-source activity, privacy policies, links with reputable networks, whistleblower protections, and other features that could be used to measure and identify weaknesses that lead to fraud. Ignoring this issue and prioritizing the promise of fast riches for fast altruism will only lead to repeating the same historical mistakes. However, such an AI would probably not rank EA organizations highly either.

https://youtu.be/d8vyzIkR384

Cryptocurrencies are not all bad. However, in some areas, it is transformed into scams