{"id":6360,"date":"2021-05-05T14:42:48","date_gmt":"2021-05-05T14:42:48","guid":{"rendered":"https:\/\/newmoneyreview.com\/?p=6360"},"modified":"2021-05-19T08:54:35","modified_gmt":"2021-05-19T08:54:35","slug":"a-cryptocurrency-sceptic-speaks-out","status":"publish","type":"post","link":"https:\/\/newmoneyreview.com\/index.php\/2021\/05\/05\/a-cryptocurrency-sceptic-speaks-out\/","title":{"rendered":"A cryptocurrency sceptic speaks out"},"content":{"rendered":"<p>Many large financial institutions have performed an about-turn in cryptocurrency during the last few years, moving from a position of outright hostility to one of acceptance and even enthusiasm.<\/p>\n<p>But there are still a few outspoken sceptics of the now-booming sector.<\/p>\n<p>One is Stephen Diehl, a software engineer, chief technical officer of a London-based fintech company called Adjoint and our guest on <a href=\"https:\/\/blubrry.com\/newmoneyreview\/76887819\/a-cryptocurrency-sceptic-speaks-out\/\">the latest <em>New Money Review<\/em> podcast<\/a>.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-6359\" src=\"https:\/\/newmoneyreview.com\/wp-content\/uploads\/2021\/05\/sd.jpg\" alt=\"\" width=\"401\" height=\"402\" srcset=\"https:\/\/newmoneyreview.com\/wp-content\/uploads\/2021\/05\/sd.jpg 458w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2021\/05\/sd-300x300.jpg 300w, https:\/\/newmoneyreview.com\/wp-content\/uploads\/2021\/05\/sd-150x150.jpg 150w\" sizes=\"auto, (max-width: 401px) 100vw, 401px\" \/><\/p>\n<p><em>Stephen Diehl<\/em><\/p>\n<p>According to Diehl, cryptocurrency is an internet-based lottery that serves mainly to enrich insiders at the many digital token projects.<\/p>\n<p>\u201cA cryptocurrency is a speculative financial product that has an embedded wealth redistribution function: it takes external capital and shifts it around to other people,\u201d he says in the podcast.<\/p>\n<p>\u201cBy comparison with traditional financial instruments, there are no external cash flows. The pay-out structure is contingent on new investors coming in. You can compare it to a lottery, but with a very unclear pay-out structure. It generally looks Ponzi-like,\u201d says Diehl.<\/p>\n<p>According to Diehl, there are rising risks from the assimilation of cryptocurrency into the broader financial system.<\/p>\n<blockquote><p>\u201cA cryptocurrency is a speculative financial product that has an embedded wealth redistribution function\u201d<\/p><\/blockquote>\n<p>\u201cThese things are working their way into the larger economy. We\u2019re seeing publicly traded equities holding large amounts of cryptocurrency. If things are left unchecked, they\u2019ll be finding their way into things like pension funds and ETFs,\u201d he says.<\/p>\n<p>Uninformed consumers, says Diehl, particularly millennials, are highly exposed to losses when buying the many new tokens on offer.<\/p>\n<p>\u201cI\u2019m particularly concerned about retail investors being exposed to products that come with a fair amount of counterparty, systemic and market risks. The education people are getting about these things is often from social media or online sources that have a vested interest in promoting them,\u201d says Diehl.<\/p>\n<blockquote><p>\u201cBitcoin has hijacked the populist rage narrative\u201d<\/p><\/blockquote>\n<p>\u201cA lot of millennials don\u2019t have the assets, savings or participation in the economy that previous generations had,\u201d he goes on, explaining the popularity of crypto with the younger generation.<\/p>\n<p>\u201cFor them, it makes sense to buy riskier things\u2014products that have a more asymmetric upside. And there\u2019s a lot of disenchantment with the financial system. So the narrative about creating an alternative financial system resonates with a lot of younger people\u2014the story of bitcoin and alternative financial services is a very compelling one.\u201d<\/p>\n<p>But those investing in crypto as a way of expressing dissatisfaction with the status quo risk being sorely disappointed, Diehl says in the podcast.<\/p>\n<p>\u201cWhether that system is actually being built is a separate question,\u201d says Diehl.<\/p>\n<p>\u201cI\u2019d argue that it\u2019s not. These things\u2014cryptocurrencies\u2014don\u2019t provide anything other than [a means for] gambling. Bitcoin has hijacked the populist rage narrative to propose a story that tenuously makes sense. But if you dig into the details it doesn\u2019t really feel solid.\u201d<\/p>\n<blockquote><p>\u201cWhere the fraud occurs [in cryptocurrencies] is in the governance structure around the projects\u201d<\/p><\/blockquote>\n<p>In the podcast, Diehl also talks about the distorting effect he believes cryptocurrencies are having on scientific research, as well as on the prices for computing services.<\/p>\n<p>\u201cCryptocurrency has had an impact on the hardware market: it\u2019s basically impossible to buy a graphics processing unit as these things all get snatched up by miners. That\u2019s having an outsized impact on machine learning and artificial intelligence,\u201d says Diehl.<\/p>\n<p>\u201cPeople working in these domains require specialised hardware and can\u2019t actually purchase the devices they need. Ultimately, these price increases will be passed down to anyone using cloud computing services. Even if you\u2019re not touching cryptocurrency, you\u2019re going to see inflation propagate for anything it touches.\u201d<\/p>\n<p>And while the open-source nature of most cryptocurrency projects means their codebase can be audited, the same principle of openness doesn\u2019t extend to many of the service providers in the sector, says Diehl. Here, he argues, there\u2019s a major problem.<\/p>\n<p>\u201cWhere the fraud occurs [in cryptocurrencies] is not in the code <em>per se<\/em>, but in the governance structure around the projects, the auditing of the alleged reserves and of the bank accounts that hold the actual money,\u201d says Diehl.<\/p>\n<p><a href=\"https:\/\/blubrry.com\/newmoneyreview\/76887819\/a-cryptocurrency-sceptic-speaks-out\/\">Listen in to the <em>New Money Review<\/em> podcast, \u2018the future of money in 30 minutes\u2019, to hear the full discussion between Stephen Diehl and <em>New Money Review<\/em> editor Paul Amery<\/a>.<\/p>\n<p>*************<\/p>\n<p><em><u>The New Money Review podcast covers the future of money in 30 minutes<\/u><\/em><\/p>\n<p><em>The changes in money are getting faster, more chaotic and more confusing. And it\u2019s not just money that\u2019s changing, but technology, finance, law, government and culture with it. Each week, we interview a leading expert on one or more of these topics. By listening to the podcast, you can stay up to date with what\u2019s going on in money and prepare yourself for what lies ahead.<\/em><\/p>\n<p><em><a href=\"http:\/\/eepurl.com\/du6eTr\">Sign up here<\/a> for the New Money Review newsletter<\/em><\/p>\n<p><em><a href=\"https:\/\/blubrry.com\/newmoneyreview\/\">Click here<\/a> for a full list of episodes of the New Money Review podcast: the future of money in 30 minutes<\/em><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many large financial institutions have performed an about-turn in cryptocurrency during the last few years, moving from a position of outright hostility to one of acceptance and even enthusiasm. But [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":6358,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1013,1012,1053,1027,1014,1011],"tags":[1034,1035,2009,2008],"class_list":{"0":"post-6360","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-account","8":"category-exchange","9":"category-featured-1","10":"category-our-picks","11":"category-payment","12":"category-value","13":"tag-bitcoin","14":"tag-cryptocurrency","15":"tag-millennials","16":"tag-stephen-diehl"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A cryptocurrency sceptic speaks out - New Money Review<\/title>\n<meta name=\"description\" content=\"Stephen Diehl is an outspoken sceptic of cryptocurrency. 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