Crypto: The Good, the Bad and the Ugly
I&#x27;ve gotten this feeling, ever since about 2008 or so, that the map that is asset prices is slowly, inexorably becoming uncoupled from the territory of the physical world.<p>This economy-scale decoupling is the dual of each and every one of our very own psychological uncoupling from our own physical worlds, which has occurred because of the computerization of work, socialization, and life itself (the shimmering neuralink dream).<p>Cryptocurrencies are what happens if you <i>completely</i> decouple the asset price from the physical world. To create the &quot;value&quot; of cryptocurrencies, we purposefully do <i>nothing</i> at all. The asset is valuable <i>only</i> because of the flow of entropy. Not the flow of energy (which generally has some <i>physically</i> useful function). But entropy itself -- a thing that exists only in the &quot;map&quot; of information, not the &quot;territory&quot; of the real world.<p>Typically, moving entropy around is useful to us, because it actually corresponds to changes in an underlying physical process. Like, your job doing excel spreadsheets for warehouse inventory management is <i>just</i> changing the flow of entropy -- to you, it is decoupled from the physical world. But there is a <i>link</i> to the physical world: when you change a cell in a spreadsheet, so too a physical good moves somewhere else in the warehouse.<p>With cryptocurrencies, not so. All this entropy is moving for the sake of itself. It&#x27;s all virtual -- none of it can be coupled with the physical world (by design! if it could be, some physical force could go in and take your crypto-coins).<p>Now, here&#x27;s the delusion: unfortunately for us, moving entropy around is actually still coupled with moving energy around. It actually has a tremendous physical effect on the world around us.<p>Something I&#x27;ve noticed about cryptocurrency people is that they are very, very plugged in. The evangelists never have a physical job; always a computer job, and they are always online, and believe in being online to the greatest extent possible. And I think, actually, there is a very obvious reason for that.