Dan Olson’s viral anti-NFT video is almost at six million views.
Last month, YouTube content creator Dan Olson uploaded Line Goes Up: The Problem With NFTs, a two-hour video that discusses the foundational issues with blockchain-based assets such as NFTs, Bitcoin, and Ethereum. The video cites volatility, slow processing times, and high transaction fees as major issues that keep cryptocurrencies from becoming useable.
Other topics Olson discusses include the indirect role of the 2008 financial crisis in creating the crypto rush, the environmental cost of cryptocurrencies, and how cryptocurrencies led to the creation of NFTs.
Why Are Cryptocurrencies Popular?
According to Olson, the 2008 financial crisis made people aware that the value of fiat money is highly influenced by a powerful few, namely banks and governments. As a guide to national debt by AskMoney explains, when countries are in debt, they often print more money to keep the economy going. However, when there’s an increase in spendable money, more consumers have the power to buy items, which means that sellers have to raise prices to control supply — a process known as inflation. In countries like Venezuela, government mismanagement led to inflation so severe that local fiat currencies became extremely unstable.
Distrust in these systems led to the creation of Bitcoin, a virtual currency capable of recording every transaction in a public database called the blockchain. Because users could theoretically keep an eye on other users, there was no need for banks to preside over the financial system. In theory, cryptocurrencies would be resistant to government-caused financial crises, such as hyperinflation.
Why Are Cryptocurrencies So Wasteful?
Olson then explains that for a Bitcoin transaction to be considered valid, it needs to be verified by multiple members of the Bitcoin network, who all need to reach the same consensus. The process of verifying transactions is called mining.
To incentivise users into essentially acting as auditors for the Bitcoin network, the first miner to successfully verify a transaction receives a sum of Bitcoins as a reward. And, to prevent bad actors from validating fraudulent transactions, the network forces miners to solve a complex algorithm for every transaction, a process that requires staking a significant amount of computational power.
Today, mining bitcoin requires entire warehouses of computers. And because the system only rewards the first miner to verify a transaction, Bitcoin rewards go straight into the pockets of the wealthy few who can afford to buy the necessary amount of hardware. It’s a system that makes the rich even richer.
Olson then discusses the implications of this system on the environment. The Cambridge Center for Alternative Finance discovered that the Bitcoin network alone spends 110 terawatt-hours of electricity per year, comparable to countries like Sweden and Malaysia. That’s not counting the countless other cryptocurrencies that also use mining to verify transactions.
Are Cryptocurrencies Good Investments?
According to Olson, cryptocurrencies and NFTs are foundationally a greater fool scam. Because cryptocurrencies themselves are not tied to any value-producing assets, their worth hinges entirely on the availability of future buyers. People who already bought cryptocurrencies then have to rope new buyers into the system to ensure that their assets remain valuable. NFTs, in particular, were invented to drive cryptocurrency prices up, since they are one of the few things people can legally buy using crypto.
Scams are also extremely common within the crypto sphere. Many pump-and-dump scams pose as legitimate coin offerings, which prey on investors with promises of instant wealth, only to pull out of projects once they’ve collected investor funding.
Cyber attacks are equally common. Just recently, the NFT marketplace OpenSea experienced a phishing attack that affected about two dozen users. The attacker stole about 254 tokens, worth 1.7 million USD.
Finally, Olson argues that although the crypto sphere arose from people’s disappointment in the system that failed them, it has very few benefits to those at the very bottom. The new system instead rewards the few who are wealthy enough to pass cost-intensive consensus mechanisms, who then grow their own wealth by luring the disenfranchised into investing in potentially worthless assets.
