Charles
Mackay[1]
"Never
believe anything in politics until it has been officially denied."
Otto
von Bismarck
"The
development of Blockchain is a further technological advance in laying the
material foundations for a planned socialist economy in which the mass of the
population—as workers and consumers—would be able to exercise democratic
control and supervision over the organisation of economic life to satisfy human
needs rather than the drive for profit."[2]
Nick
Beams
Ruja
Ignatova has the great distinction of being the greatest digital currency
fraudster in the world to date, and Jamie Bartlett's narrative-driven book will
make her even more infamous. Bartlett's The Missing Cryptoqueen was derived
from a BBC podcast of the same name.
Even
at a tender age, Ignatova was searching for ways to become rich quick. She was
part of a very brutish and nasty social layer who worshipped at the altar of
Capitalism and did not care whom they burned or cheated as long as they became
rich quick.
Ignatova's
search for wealth was boosted by the advent of cryptocurrencies such as Bitcoin,
which she saw as a quick way to get rich. Quite why Bartlett glorifies this
viper in his book is quite beyond me. He has an annoying habit of using Dr in
front of her name as if she is some kind of economic genius. In reality, she
was a small-time entrepreneur who decided to move from strategy consultancy
into grooming and fashion and then into grand larceny via a scam.
Ignatova
faced one tiny problem she had no idea how to integrate her OneCoin Cryptocurrency
company into the existing financial landscape and had even less idea how to
produce a blockchain[3].
The Blockchain is an integral part of any cryptocurrency.
As
the Wikipedia article explains, it is a secure, decentralised electronic
account of every crypto transaction and can be seen by all users who buy and
sell digital currencies. In 2016 OneCoin attempted to hire a Norwegian expert,
Bjørn Bjercke, to remedy this far from a trivial problem. Bjercke rejected the
company's offer, which was above his pay grade and said that OneCoin having no blockchain
was a bit like "a car without an engine."
Given
that anyone with half a brain could see that OneCoin was a glorified $4bn Ponzi
scheme[4] ,.
As Bartlett writes, "OneCoin was not a rival to bitcoin, and a closer
analogy would be Bernie Madoff Investments or Elizabeth Holmes'' medical tech
startup Theranos. It was a brilliantly designed Ponzi scheme with no real technology.
Up to a million people held thousands of OneCoin in believable-looking digital 'wallets',
which they could not sell to anyone. The 'price' of OneCoin was just a number
generated by Ruja's cronies. The only thing that was real was the losses".[5]
It is amazing that it was
allowed to continue to exist and is still going despite a number of its top
executives being in Jail or awaiting trial
According
to Henry Hitchings, "There were dissenting voices: as early as February
2016, Britain's Daily Mirror denounced OneCoin as "virtually
worthless" – "all fur coat and no knickers". Yet only in the
autumn of 2017, following an FBI probe into Ignatova's sometime lover Gilbert
Armenta, did it become clear to investors that, as Bartlett neatly puts it,
OneCoin was "three different scams rolled into one": a Ponzi scheme,
an extreme example of "shark-like" multilevel marketing and a fake
cryptocurrency".[6]
As
I said, Barlett treats this scam company and its crooked leader with far too
much respect and leniency. Despite Bartlett's vagueness over Ignatova's
intentions, it seems pretty clear to even a child that she was planning an exit
strategy from the off.
Bartlett
calls her a "visionary" and "painfully clever". It is not
that Bartlett is not a good journalist because he is but from a social
standpoint, he is very soft on these capitalist parasites. The way he treats
Ignatova is similar to the glorification of wild west criminals and killers like
Jesse James and John Wesley Harding.[7]
The
book does have its moments. Bartlett described one jamboree when Ignatova came
on stage to the sound of Alicia Keys anthem "Girl on Fire". Whose
lyrics talk about "living in a world … on fire, / filled with catastrophe
— but she knows she can fly away". Also, the numerous trips to the plastic
surgeon were a bit of a giveaway. In her own words, she would 'Take the money
and run, and let someone else take the blame.'
While
the book is not without merit, it has some serious structural weaknesses. Its
primary one being there is no analysis. Bartlett's attitude towards the origins
of Cryptocurrency or Blockchain leaves a lot to be desired. The origins of
Cryptocurrency are worth a few volumes. In the book, Bartlett downplays the
significance of the founder of the Blockchain, Satoshi Nakamoto, and he treats
him as a shady character. The fact that Bartlett fails to mention that the
founding of the Blockchain and then Cryptocurrency was preceded by an extremely
complex academic paper. Nakamoto's paper is not mentioned in the book, and nothing
from academia is mentioned.
It
is worth quoting at length from Satoshi Nakamoto's paper. He writes, "commerce
on the Internet has come to rely almost exclusively on financial institutions
serving as trusted third parties to process electronic payments. While the
system works well enough for most transactions, it still suffers from the
inherent weaknesses of the trust-based model. Completely nonreversible
transactions are impossible since financial institutions cannot avoid mediating
disputes. The cost of mediation increases transaction costs, limiting the
minimum practical transaction size and cutting off the possibility for small
casual transactions, and there is a broader cost in the loss of ability to make
nonreversible payments for nonreversible services. With the possibility of
reversal, the need for trust spreads. Merchants must be wary of their
customers, hassling them for more information than they would need. A certain
percentage of fraud is accepted as unavoidable. These costs and payment
uncertainties can be avoided in person by using physical currency, but no
mechanism exists to make payments over a communications channel without a
trusted party.
What
is needed is an electronic payment system based on cryptographic proof instead
of trust, allowing any two willing parties to transact directly with each other
without the need for a trusted third party. Transactions that are
computationally impractical to reverse would protect sellers from fraud, and
routine escrow mechanisms could easily be implemented to protect buyers. In
this paper, we propose a solution to the double-spending problem using a
peer-to-peer distributed timestamp server to generate computational proof of
the chronological order of transactions. The system is secure as long as honest
nodes collectively control more CPU power than any cooperating group of
attacker nodes.[8]"
It
should be noted that Nakamoto'does not bear responsibility for the current crypto
turbulence, which is causing the collapse and bankruptcy of many Cryptocurrency
companies. As Nick Beam points out, it is "an indication of a much broader
deepening crisis of the financial system as the massive inflow of trillions of
dollars from the Fed and other central banks over the past decade has promoted
new and ever more arcane forms of speculation and in the Case of OneCoin outright
swindling and criminality. Numerous reports from financial media have tied the wild,
uncontrolled printing of money to the massive growth of Cryptocurrency.[9][10]
According
to one report from the International Monetary Fund(IMF)," the total market
capitalisation of crypto assets has increased exponentially from less than $20
billion in January 2017 to more than $3 trillion in November 2021. Much of this
increase has occurred during the COVID-19 pandemic as trade in crypto assets
has accelerated, leading to a twentyfold increase in the market capitalisation
of crypto assets between March 2020 and November 2021."[11]
Therefore
it is no accident that figures like Ignatova have taken advantage of this phenomenon
for their enrichment. She may be the first and biggest, but she will not be the
last. The academic economist Robert Reich, the labour secretary in the first
Clinton administration, called the crypto markets nothing more than Ponzi
schemes saying, "There are no standards for risk management or capital
reserves, and there are no transparency requirements. Investors often do not
know how their money is being handled. Deposits are not insured. We are back to
the wild west finances of the 1920s." Gary Gensler, Securities and
Exchange Commission chief, said of crypto investments that they are "rife
with fraud, scams and abuse."
The
fraud and scams within Cryptocurrency
have, of course, had their counterparts in the so-called real capitalist
economy. Despite the promoters of Bitcoin and other cryptocurrencies saying they
represent the future of finance, again, as the Marxist writer Nick Beams points
out, "this wealth is not the outcome of an increase in productive
activity, signifying the underlying health of the real economy, but rather is a
symptom of its increasingly diseased character. Whatever the virtues and
advantages of the blockchain technology, on which Bitcoin is based, in
establishing a ledger system in which companies can make rapid transactions and
may have wider applications, the cryptocurrency mania is not an expression of
efficiencies deriving from this technology. It can only be understood by
placing it within a wider context. The past year has seen an orgy of
speculation while the global economy has suffered its deepest contraction since
the Great Depression, with consequences for years to come as the global
COVID-19 pandemic continues out of control. Vast fortunes have been made on
financial markets completely disconnected from the underlying real economy.[12]
Unlike
Bartlett, Socialists believe that the new technological advances contained in Blockchain
could well be developed to organise and plan production in a socialist economy.
Under blockchain technology, information on available resources and needs in
different areas could be gathered in ledgers and then used to organise production
globally rationally. Despite having a "nicely mixed character of prophet
and swindler."
Notes
Karl
Marx, Capital Volume (Penguin Books, 1991)
Crypto,
Corruption, and Capital Controls: Cross Country Correlations-IMF-Marwa Alnasaa,
Nikolay Gueorguiev, Jiro Honda, Eslem Imamoglu, Paolo Mauro, Keyra Primus, and
Dmitriy Rozhkov -WP/22/60
Cryptic
Connections: Spillovers between Crypto and Equity Markets-Tara Iye-IMF
Bitcoin: A Peer-to-Peer Electronic Cash System Satoshi Nakamoto satoshin@gmx.com- www.bitcoin.org
[1] Extraordinary Popular Delusions
and the Madness of Crowds
[2] https://www.wsws.org/en/articles/2017/12/23/bitc-d23.html
[3] https://en.wikipedia.org/wiki/Blockchain
[4]
https://en.wikipedia.org/wiki/Ponzi_scheme
[5] https://www.independent.ie/irish-news/the-missing-cryptoqueen-my-hunt-for-the-woman-behind-the-2bn-onecoin-scam-41782273.html
[6] https://www.the-tls.co.uk/articles/the-missing-cryptoqueen-jamie-bartlett-book-review-henry-hitchings/
[7] https://en.wikipedia.org/wiki/John_Wesley_Harding
[8] Bitcoin: A Peer-to-Peer Electronic
Cash System Satoshi Nakamoto satoshin@gmx.com www.bitcoin.org
[9] Wsws.org
[10] See Crypto, Corruption, and
Capital Controls: Cross Country Correlations-IMF-Marwa Alnasaa, Nikolay Gueorguiev,
Jiro Honda, Eslem
Imamoglu,
Paolo Mauro, Keyra Primus, and Dmitriy Rozhkov
WP/22/60
[11] Cryptic Connections: Spillovers
between Crypto and Equity Markets-Tara Iye
[12] https://www.wsws.org/en/articles/2021/04/16/wall-a16.html
