Image: Molly White
The software developer and crypto critic believes that what is deemed by many to be the future of the web should be treated more like putting money on the roulette wheel.
The world of crypto has been on quite the rollercoaster in recent months. Fans of the technology have been heralding tales of getting rich from investing in bitcoin and other cryptocurrencies, while major backers have been looking for their piece of the pie.
Well-known finance players such as Stripe and PayPal have also been cautiously dipping their toes in the crypto space, bringing the technology more into the mainstream.
However, the volatile industry has suffered a series of blows in the last month, from the recent collapse of Terra Luna and TerraUSD to European Central Bank chief Christine Lagarde dismissing crypto assets as “worth nothing”.
Earlier this week, crypto lending platform Celsius Network announced that it was pausing “all withdrawals, Swap and transfers between accounts” for its 1.7m customers, citing “extreme market conditions”. And crypto exchange Coinbase revealed it is laying off 18pc of its staff to “stay healthy during this economic downturn”.
The pushback the crypto sector is seeing may not be surprising. While they’ve been on the scene for some time, interest in crypto assets has grown significantly in recent years as the technologies surrounding Web3, dubbed the future of the web, have become more prominent.
The volatility of crypto investment seems to promise big wins while also threatening huge losses, but unsurprisingly the good is often more visible than the bad. This has led to many technologists and academics speaking out against crypto, flagging it as a dangerous breeding ground for scams.
At the beginning of the month, 26 of these experts signed a letter to US lawmakers criticising crypto investments and blockchain technology, and sought support for “responsible fintech policy”.
Among the signatories was computer scientist Molly White, who has made no secret of her scepticism for the crypto space. She started highlighting the negative side of crypto and Web3 on her website Web3 Is Going Just Great when she saw how broadly it was being marketed.
‘It was just this total Wild West where people were getting hurt right and left’
– MOLLY WHITE
“I noticed really early that there was this major disconnect between the marketing around, ‘This is the future of finance, the future of the web’, and reality, which was that people were losing a ton of money to these hacks and scams and frauds,” she told SiliconRepublic.com.
“It was just this total Wild West where people were getting hurt right and left, so Web3 Is Great came to me as a good opportunity to candidly illustrate a lot of the issues that are happening in what is being sold as the future of banking.”
White has a computer science background and has been working in the space for six years, but said that Web3 and crypto is “totally divorced” from her professional career. However, she was aware of it for a long time because of the community overlap that can happen between crypto and open source, especially in the early days.
“I was aware of it and adjacent to it for a very long time and sort of uninterested in it. I didn’t see the point myself in it as a speculative investment.”
It wasn’t until recently that she felt like it had gone from targeting risk-taking investors and blockchain fans to “people watching the Superbowl and grandmas getting the newspapers in the mail” – and decided she had to speak out about the dangers.
“It’s no longer this niche thing that is sort of opt in. It’s beginning to feel like there is no option at this point, or at least people want you to believe that.”
Web3 is not going great
White’s site title sarcastically highlights that, despite what the die-hard crypto fans would have many of us believe, Web3 may not be all it’s cracked up to be.
The project does this by highlighting the negative side of the bitcoin industry. The stories on White’s site include bugs, scams and hacks that have resulted in millions of dollars lost, as well as job losses within the industry.
“If you were to look at the press coverage of crypto … you’ll just see story, after story, after story about the little guy who made it big and now they’re crypto millionaires.
“There’s nothing about the person who was told that this could be their ticket to financial freedom, who put too much money into it, more than they can afford to lose, and then something went wrong and now they’re even worse off than they started.”
‘There’s this very strong culture of victim blaming in crypto’
– MOLLY WHITE
She added that, similar to other areas of tech, there are a lot of incentives to be positive about crypto and the future possibilities it could bring, which has benefitted the industry immensely.
“I think there are few things that rely so much on public perception as crypto,” she said. “It’s so based on this belief that [crypto] has value, that there is this huge incentive to keep that faith alive and to be directly resistant to anything that questioned that faith.”
White pointed out an even more dangerous impact, which is that people are ashamed to admit they don’t understand it and even more ashamed to admit when they lose money in this space.
“It contributes to this culture where people talk about all the money that they’ve made and all the success that they’ve had, but the people who’ve lost money just stay quiet and they’re ashamed of it,” she said.
“I think a lot of that is because there’s this very strong culture of victim blaming in crypto that I’ve noticed a lot with my website, which is that whenever someone loses money, either they picked the wrong project and it turns out to be a scam, or they get phished and then people steal currency from their crypto wallet or whatever it might be.
“There’s always this group of people who respond by saying, you should have done more research, you should have looked into this more, you should have basically audited all of this code yourself somehow. And so people, if that happens to them, they’re like, ‘I don’t want to seem stupid. I can’t believe I lost all this money. I don’t want to tell people that I lost all this money because people will think I’m dumb or I did something wrong.’ And so they just keep it to themselves.”
Worse than gambling?
Another problem with the crypto space is that it’s so new compared to traditional finance systems that people are less familiar with how it works. And with so many stories highlighting people turning into overnight millionaires, it could switch off others’ regular instincts for red flags and leave them more susceptible to scams.
In her comments last month, Europe’s central bank chief Lagarde said that crypto should be regulated because people who think the assets will be rewarding have the potential to “lose it all” and be “terribly disappointed”. There are “no underlying assets to act as an anchor of safety,” she added, unlike traditional finance structures.
White said the most important thing for people to remember is that “crypto is not an investment”, despite being increasingly marketed as one.
“It is incredibly risky to put money into crypto. Some people compare it more to gambling, although I try to underscore the fact that even with gambling … there are actually protections around gambling too. If you buy poker chips when you go into the casino, you have a reasonable amount of trust that you can get money back for your poker chips when you leave,” she said.
“That’s not always true in crypto and there’s all kinds of other examples I can make. Casinos have to disclose the risk of the various games that they have, whereas with crypto there’s nothing like that.”
It’s easy for people to feel like they missed the boat on something big when they look back at the price history of bitcoin, but White said there are plenty of people who did buy bitcoin when it was cheap and still lost it all or had it stolen. “There’s so much revisionist history around it,” she said.
“If you really feel like you must get into crypto for some reason, don’t put more money into it than you can afford to lose. Treat it as though you are putting $100 on the roulette wheel because there’s at least as good a possibility that you will lose it as you will make money.”
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