NFT Scams, Toxic “Mines” and Lost Life Savings: The Cryptocurrency Dream Is Fading Fast | David A. Banks


VSCryptocurrencies, according to their most ardent proponents, are meant to supplant the existing currencies of nations and end central bank control over the money supply. Instead, individuals will be able to trade with each other in a decentralized digital financial ecosystem. This is a good thing, they promise, because unlike governments and their central banks, technology is incorruptible. Crypto-evangelists imagine technology as a substitute for social and political institutions.

But technology never replaces social and political behavior; it only changes the rules and standards that we follow. To see this in action, just look at the plummeting value of Terra Luna, a crypto token that crashed 98% in one day, causing some investors to lose their life savings; the plunging value of Bitcoin and Ethereum; or the countless scam victims whose non-fungible tokens (NFTs) have been stolen. NFTs use the same blockchain technology as cryptocurrencies, such as Bitcoin, to exchange algorithmically generated artwork that riffs on a theme. The cartoons Bored Apes, Lazy Lions and “CryptoDickButts” are offered. Although NFTs are aesthetically uninspiring, they can sell for as much as $91.8 million and as they rose in value, scams involving stolen NFTs abounded. Last month, the Bored Ape Yacht Club’s Instagram account was hacked and the perpetrators stole around $3 million worth of NFTs by directing followers to a fraudulent site.

When a crook steals a CryptoDickButt, all the ecstatics Manifestos About Decentralized Power Of Blockchain Disappear, As Scam Victims Argue With Crypto Grip exchanges to block the sale of their stolen NFT. The underlying technology and its tokens might be decentralized (and even that claim is debatable, given that cryptomarkets are extremely concentrated in the hands of a few hundred people), but where you can actually buy, use, and sell these things is always limited to a few services and exchanges. This forces crypto fans to recognize a hard truth: currencies and contracts are only as valuable or enforceable as the people and institutions that acknowledge their legitimacy. Blockchain technology does not change this fact.

In turn, states and institutions have begun to treat crypto as a potentially destabilizing geopolitical force, capping and taxing the voracious amounts of energy that crypto mines consume. The crypto-mining industry already consumes 0.55% of global energy production about as much as a small country. Some have gone so far as to put the kibosh on blockchain technology. China effectively banned the mining and use of cryptocurrencies at the end of 2021; before that, the country was by far the largest bitcoin miner by volume, accounting for up to 75% of global volume in September 2019. Its reasons for banning the crypto are likely a combination of reducing energy consumption mining, protecting citizens against scams and controlling the flow of money both within the country and with China’s trading partners. To date, China is the only government to have taken aggressive steps to get rid of the technology, but other countries are facing similar issues.

Russia has learned that lesson in recent months, starting in January when crypto miners moved to neighboring Kazakhstan after being kicked out of China. Their mining servers have taken a heavy toll on the Central Asian nation’s power grid, using up to 8% of its total power generation capacity, as they quickly became the second-largest crypto producer behind the United States. Despite efforts to control the industry through energy taxation, citizens of Kazakhstan have revolted against high fuel prices and unreliable electricity. Troops from Russia and neighboring nations were called in to quell the violence in January, even as most of their attention was focused on Ukraine.

The war in Ukraine is proving to be different but an equally watershed moment for crypto geopolitics. Ukrainian Deputy Prime Minister Mykhailo Fedorov announced on March 3 that his government would issue an NFT to raise funds for the war effort. So far, the Ukrainian government has raised $50 million worth of crypto since the war began, although there has been little reporting exactly who is fundraising for arms in Ukraine this way. Alex Bornyakov, Ukraine’s deputy minister of digital transformation, said only that “most donations come from people”, while others come from companies.

Russia itself is a major crypto player, providing 11% of the world’s Bitcoin mining capacity. The country’s oligarchs must be grateful, given that trading between the Russian ruble and crypto assets has doubled since the assault on Ukraine began. Bypassing the sanctions by converting the ruble into crypto assets seems to be working for now, but that may end soon. Just as scam victims are quick to ask NFT trading sites to blacklist a stolen Ape, crypto exchanges are under pressure to ban Russians from their platforms. There has been a heated debate in the industry as to whether this is contrary to the very idea of ​​technology, but the fact is this: crypto did not cause a financial revolution, it just gave states and to the crooks a new piece to play on the grand chessboard.

This is only the beginning. Producing impenetrable financial assets using coal-fired power grids is contributing to the rapid warming of the planet which is already experiencing the worst droughts seen in over 1,000 years in California and supercharged monsoon seasons in India. All of the ethereal imagery associated with crypto obscures the fact that it is made up of millions of tons of coal, copper, rare earth metals, and plastic. Servers that mine crypto exist on the planet in real countries with laws, wars, and resource shortages – which are ruled by politicians with real commitments and interests. With the Russian invasion of Ukraine, we are starting to see a geopolitics of crypto emerge that looks a lot like the old world of banking and finance.


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