The other day I found a loose amount of Bitcoin between the couch cushions. As any self-disrespecting nerd would do, I started looking at what I could do with it. Back in 2020, I was looking pretty closely at the Decentralized Finance (DeFi) ecosystem, built on the whole “Web3” / non-Bitcoin cryptocurrency universe. I took another look, and I’ve made a small money printer setup that I’m not unhappy with. I figured I’d chronicle my experiences here.

And before you get really upset at me for making fun of your pet project, your new memecoin with a $5m market cap that’s made up is not going to revolutionize global finance with trillions of dollars flowing daily.

Oh Jesus, Why?

First, why didn’t I do this sooner? I had a few big objections in 2020, some of which have gone away, and some I just don’t care about anymore. First, let’s talk about CO2 emissions. Bitcoin and other older coins (“altcoins”) depend on a “proof of work” system, whereby a bunch of computers solve increasingly hard math problems to randomly select who gets to validate the next correct block of transactions in the blockchain. This is incredibly costly to the planet and economy- for every $1 increase in Bitcoin value, it was estimated that there’s $3.11–$6.79 in damages incurred. In 2020, proof of work was the only game in town and I just couldn’t support that with a straight face. Enter proof of stake- now individuals economically elect blockchain validators, and vastly cut fossil fuel consumption to do so. Ethereum, the chief altcoin, switched over in 2022.

My next issue comes up with political theory concepts of state control over currency, otherwise known as “monetary sovereignty“. I get it- cryptocurrency is a tech-millennial’s trauma response to the 2008 Global Financial Crisis. The Bitcoin blockchain’s Genesis Block even includes the quote from The Times:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

If that’s not a commentary I don’t know what is.

It’s actually important for “the grownups” to have power over currency in an economy. It gives extra levers to smooth out the otherwise violent ups and downs you see in countries with poor economic controls. Nevermind what some attempts at “grownups” are trying to do…

The thing is that outside of cryptocurrency pegged to the US Dollar or other currencies managed by central banks (a.k.a. “stablecoins”), cryptocurrency isn’t real so it doesn’t actually matter. The cryptocurrency folks talk about “fiat” currency versus cryptocurrency. “Fiat” is modern definitions of dollars that have spending value and exist because some group of people agree they do. Cryptocurrency is modern definitions of cryptographically-defined tokens that have spending value and exist because some group of people agree they do. There’s no functional difference- it’s numbers in a decentralized set of databases versus numbers in a decentralized database, and we reasonably agree as a society that those numbers mean something.¹ The stablecoins have intrinsic value outside of the crypto ecosystem, so those are the made-up numbers that matter in the end.

So what about DeFi itself?

In short: it’s a mess.

DeFi is made up of a lot of the same elements in normal finance (“TradFi”² )- you have lending institutions, currency exchanges, and the whole suite of derivatives trading. It’s all based on smart contracts, which is an admittedly cool feature of the Ethereum blockchain.

Except Ethereum is slow and expensive- transaction fees are a killer, and it still takes an awkwardly long time to clear a transaction. You know when you’re standing there at the corner store trying to buy a KitKat and a fifth of Jack because it’s been that kind of day, and the credit card machine is slow so you’re just standing there holding up the entire goddamn line so you can have your sweet comforts? It’s kinda like that, but for everything. We can’t have that.

So enter the level 2 (L2) blockchain, which is implemented as a set of smart contracts on Ethereum. There’s so many of them! I like Base, because it was started by Coinbase and there’s a lot of big corporate activity to make it fast and cheap. There’s a bunch of other companies supporting it, and huge financial institutions typically don’t like to dick around, so I feel comfortable using it. Also, each chain is its own whole economy. You need to explicitly bridge currency over even if it’s the same currency.

The whole thing is useless.

Why should it cost me extra to first send USD Coin I have on Base to Avalanche, only to then pay extra transaction fees to actually use that USD coin? “Because it’s a separate network”. Oh! Your vendor is on Polygon instead? Shit, gotta hold up the entire line while I bridge my Fartcoin on the Optimism chain over to Polygon (5 minutes or so?) and then swap it out for the Polycoin my vendor accepts over there. The guy behind you in line is getting testy. Oops! My wallet had a weird issue, there’s a big red box talking about having a weird nonce thing, can’t I just do something easy like sell my first born child³? Wait! Transaction rejected because the exchange rate between Fartcoin and Polycoin changed while I was futzing about with my hardware wallet trying to get it to connect and oh God I just want to chug my whisky.

If you’re remitting money overseas and using crypto to avoid Western Union taking a bajillion percent of it? You’re using Bitcoin or USDC. If you’re doing interesting things with smart contracts, you’re using Ethereum or a purpose-built chain like Hyperledger. Individual purpose-built chains (like Base) make sense in their purpose, but right now every project is the same “revolutionize global finance with high-speed low-cost payments” thing. Yawn. Every DeFi exchange is seeking to radically simplify currency exchanges while maximizing returns for their liquidity providers. Yawn.

At the same time, DeFi is so entirely dependent on centralized infrastructure it’s hilarious. The amount of hoax cyber-squatting in DeFi is so extreme that there exists tools to get to the right place. The whole DeFiLlama folks are doing good work, but why am I placing my trust in the centralized DeFiLlama thingy to make sure I’m safe in the DeFi world? The system is hilariously broken and we just accept it because we’re busy making money out of it.

Might as well take some money out of it.

In my mind there are a few “real” projects in the cryptocurrency space, and everything else is just speculation. Because of that I’m playing money games with the rest of them, and reasonably happy with my money printer- but I’m seeking to extract value, not to drive value in it. I’ve my stuff pulling out some real amount of money every day from vfat.io and making sure it winds up dollars in a spendable account. As it should be.

1. Before you @-me about “limited supply” and “scarcity”, explain Dogecoin having value to me then. ↩︎
2. Not to be confused with “TradWife” ↩︎
3. As of this writing I do not have a child yet but it may take less time than waiting on this jammed transaction to clear when the price changed affecting my gas fees causing it to get stuck ↩︎