The Cryptolaundry

Below is a blog entry that I posted back in 2010. Although I was talking about the money markets at the time, what I said back then is even more applicable today to the cryptocurrency ecosystem.

Sometimes I like to think of the banking system and the financial markets as a gigantic Magic Money Machine. They create money out of nothing and spread it around. Most of the time this magic works very well, and everybody has money, and the shops are full of things they can buy, and everyone is happy.

But every once in a while something goes wrong with the machinery, and the magic starts working backwards. Instead of money being made, it starts disappearing. And suddenly nobody has any money, the shops start closing, and everybody is sad. Yet no-one has taken the money, and nobody even knows where it went. It has just vanished, like fairy dust.

Because money, like fairy dust, only works if you believe in it. And when people stop believing, the magic dies, and their money turns back into the worthless paper (or more commonly these days, the worthless bits of information) from which it was made.

Today it seems to me that the whole alt-coin infrastructure is like a gigantic laundry business that depends on a bunch of guys who (in the words of the old saying) have been earning a precarious living by taking in one another’s washing. But when the going gets tough and their operation becomes unprofitable, they will simply turn off their machines and walk away. And then alt-coins will be seen as the worthless bits of information that they always were. And their price won’t just go to zero–there won’t even be a price.