The danger of the internet turning money into gambling



“A friend of mine suggested a variant on [Occam’s razor, which is] that the more ironic outcome is the more likely, ”Elon Musk told billionaire Jack Dorsey and Ark Invest CEO Cathie Wood at a virtual Bitcoin conference in July. Musk, who had delivered a relatively sober take on blockchain technologies, seemed delighted that the conversation turned to Dogecoin, the satirical cryptocurrency devoted to memes and dogs.

“And then I have a variation on it, which is the most entertaining outcome the most likely,” he continued. “If this is true, then the most ironic and entertaining result would be that cryptocurrency [Dogecoin] which started out as a joke to make fun of cryptocurrencies ends up being the main cryptocurrency. Musk burst out laughing.

Within minutes, the energy on Musk’s moon had spread to Telegram, TikTok, and Reddit. Inspired by Musk’s words, rapper Busta Rhymes announced to his 3.8 million Twitter followers that he was now “sold on Bitcoin”. In no time at all, the cool kids on the Discord trading forums called Doge a ‘coin of the plebs’, implying that ordinary people were flocking there and fueling speculation (by mid-August it was up 9,222% year-on-year).

The year 2021 will be remembered as the time when financial literacy and internet culture converged, resulting in investment bubbles in everything from memes stocks to token collectibles. But cryptocurrency trading, a largely unregulated casino, arguably represents the purest synthesis to date of personal finance and social status online. On TikTok, for example, one of the more popular formats involves a sibling offering investment advice, talking head style, while displaying the value of his crypto portfolio behind him; a billion or a trillion of anything, apparently, is good for both the ego and the algorithm. And everyone wants to participate. Over the past 12 months, over 5,000 new crypto coins have been released. In August, SEC Chairman Gary Gensler sounded regulatory alarm bells and called on Congress to intervene.

As lawmakers weigh their options, the desire for instant wealth – and the attendant increase in social currency for anyone who walks in early and leaves before the inevitable “carpet pull” – crushes all warning cries. The vast majority of amateur investors who buy Dogecoin will lose money, but they have had the opportunity to polish their credentials as card-holding members of a Musk-led internet tribe who can afford to treat everything like a joke. (Dorsey, a Bitcoin whale, has her own fan base.) [about] nothing to do with economic forces or motivations, ”says Bill Maurer, director of the Institute for Money, Technology, and Financial Inclusion.

This pursuit of likes via penny stock altcoins may seem trivial. But it is a symptom of a wider malaise. Upward economic mobility has been on the decline in the United States since 1980, which means millennials and subsequent generations have no memories of the good times. Warned that they will be wiped out, the young crypto investors respond with a shrug. There is nothing to lose and everything to gain.

Meanwhile, more and more economic activity is focused on the attention economy platforms that Silicon Valley controls. What could go wrong?

Money and status have always been linked, but the gamification of our financial lives didn’t start in earnest until the 1980s, when Discover Financial, then owned by Sears, introduced a cash back program linked to its card. credit. Soon after, banks and airlines began to team up to link personal spending with earning miles, which could be redeemed for perks like access to airport lounges, encouraging consumers to s ” optimize themselves and their portfolio. The more you spend, the higher you become! To hell with household debt.

After the 2008 financial crisis, fintech startups, Bitcoin, and gamification schemes all flourished in libertarian-leaning Silicon Valley, causing people to see themselves as owners who could transform the system that burned them down. The Robinhood stock trading app, which distributes free stocks to new users and lowers the barrier for crypto and risky options trading, represents all of these trends in one.

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With Robinhood, at least, most users play (er, invest) with their play money – $ 20 here, $ 50 there – in order to create fodder for group texts and clichés. When it comes to maximizing social influence and wealth, the stakes are much higher for professional digital content creators, a group of over 2 million people today. They play what technical analyst Packy McCormick, author of the Not Boring email newsletter, calls “the great online game,” where social media is where you make your moves and crypto is how you. keep the score. Altcoin cryptocurrencies, in particular, offer creators a glimpse into the kind of stock-based wealth that social platforms have denied them.

“They don’t want the constant hustle and bustle of content creation to be their only source of income,” says Josh Constine, principal investor at venture capital firm SignalFire, of these vloggers, podcasters and streamers. The more successful of these people, he says, will build “a sort of creator’s pension out of stakes” in startups and altcoins aligned with their audiences.
Some philosophers in the tech world believe that the big game online will soon be something everyone will play. For a taste of that future, witness the sudden rise of Axie Infinity, a Pokémon-style game that rewards winners with its own Smooth Love Potion cryptocurrency and draws millions of players. In countries like the Philippines, playing Axie is more lucrative than many traditional jobs, at least for now. “Some people who used to earn $ 5 a day are now earning $ 20 [playing Axie]Breathless McCormick wrote in a recent newsletter. Axie’s founders, meanwhile, are on track to make $ 1.1 billion by the end of the year.

“The kind of utopian song that goes into [these projects] is how to share the fruits of our business activities in a way that rewards users, [but it’s] driven by a personal interest in getting users to adopt things faster, ”says Lex Sokolin, chief economist at blockchain company ConsenSys. “But it is based on this hypercapitalist infrastructure. And the infrastructure is owned by billionaires.

The crypto boom can be attributed, in part, to social media softening its edges. Savvy developers have learned to strike coins that are likable, shareable, sometimes laughable. Clever promoters like Musk continue to be the biggest winners. Tactical intermediaries benefit from levying exorbitant fees for trading, voting on protocol governance, and other forms of community participation. And the plebs?

What is currently happening in money culture looks like this: The masses, frustrated with rigid social inequalities and the lack of economic opportunities, are playing any new lottery that presents itself. They’re investing their own social media in lottery communities and putting their savings into scratch tickets. The price for playing is expensive, the rules are designed for them to lose – and they do. According to research firm Chain alysis, investors lost an estimated $ 2.7 billion to investment scams in 2020. All signs point to even more fraud cases in 2021. Do your own research, warn crypto veterans.

“The price of this token can never go down. . . that’s really cool, ”the creator of a piece called Surge said in a YouTube interview in August. Thousands of viewers reveled in the hype. “I just bought 367 million [Surge coins] for only 5 dollars! we wrote in the comments. “It’s lightning in a bottle !!!”

We are almost certainly in a bubble. Or rather, we’re in the middle of an ever-changing cast of mini-bubbles. None are large enough on their own to create financial panic. But together, they reveal the deep and increasingly dangerous flaws in our traditional institutions. It would be relatively easy for regulators to devote more resources to monitoring cryptocurrency. More difficult, but much more important, will be to restore confidence by making economic growth and the financial institution that serves as its guardian accessible to all.


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