As Bitcoin has grown into a universally accessible outside money with global social value, the New York Times has failed to cover it accurately. When FTX seemingly conducted a decabillion dollar fraud, the Times wrote a puff piece.
As I write, millions across the globe are reeling from the sudden collapse of FTX, the world’s second-largest cryptocurrency exchange. A company once valued at $32 billion has declared bankruptcy. People with money on FTX wonder if they’ll ever see a penny of it.
The New York Times just published a piece on Sam Bankman-Fried, the person that appears to be the perpetrator of the massive fraud that led to FTX’s collapse. But the article fails to provide any details of the fraud, call any of the person’s actions wrong, or even use the words “fraud” or “crime.” Instead, it gives Bankman-Fried a microphone to admit that he “expanded too fast” and “failed to see warning signs.” It explains, but doesn’t judge. “He’s getting some sleep,” the paper quotes him as saying, and “it could be worse.”
The Times’ reporting on Bankman-Fried is in stark contrast to their treatment of Bitcoin. The New York Times has repeatedly attacked the one cryptocurrency that has no CEO, no corporation, no governing board, and no opportunity for this kind of fraud -- Bitcoin. We’ve written before about how Bitcoin stands apart. The New York Times has not gotten the memo. I’ve submitted op-eds correcting blatant errors in their coverage and giving the positive case for Bitcoin, They’ve all been rejected. Of course, the New York Times doesn’t owe anyone a mouthpiece -- not even a subscriber such as myself. (Full disclosure: I subscribed to support them in the era of Trump’s repeated attacks, but I’ve canceled my subscription due to their Bitcoin coverage.) But they owe their readers the truth. And what they’ve published is simply not true, as I’ll show in this essay. I leave it to the reader to discern why the newspaper of record props up crypto frauds and attacks inclusive, decentralized, censorship-resistant money.
The Times has published three recent op-eds attacking Bitcoin – all riddled with factual errors. I’ll go through them each in turn.
In this op-ed, Paul Krugman investigates "the strange alliance of crypto and MAGA believers."
It's important to note, first, that Donald Trump is anti-crypto. He called Bitcoin "a scam against the dollar." Krugman does point to one pro-Trump and pro-Bitcoin person – Josh Mandel, who lost to JD Vance in the Republican primary for an Ohio Senate seat. Is this sufficient for "an alliance?" Some Donald Trump fans are also Yankees fans; is there an alliance between Yankee and MAGA believers? I doubt it. More evidence needed.
Krugman asserts there's "long been a strong connection between support for Bitcoin and right-wing extremism," but provides no evidence for that claim. Had he looked a little further, he might have found The Progressive Bitcoiner, and learned that there are pro-Bitcoin people on both sides of the aisle. The link between Bitcoin and right-wing extremism is no stronger than the link between videogames and right-wing extremism.
Krugman suggests that it's important to understand "the cultish aspects of the cryptocurrency movement." But then he doesn't point to any of them and never returns to the issue. Every fandom has “cultish aspects” from the outside; that doesn’t make them cults, and it makes the real cults more difficult to discern if you label every passionate fan base as a cult (one thinks again of the Yankees). We get no criterion for cultishness, nor how Bitcoin exhibits any of the criteria.
Krugman says that Bitcoiners distrust banks, and asks whether banks are untrustworthy. That depends on who you are. Krugman is well-positioned to be treated well by banks, so he can trust them. Others – socioeconomically disadvantaged people, people of color, sex workers, marijuana workers, etc – know that they can't. Krugman shows an incredible amount of financial privilege in asking this rhetorical question.
Krugman "explains" the "deepening alliance between Bitcoin and MAGA" (that he never shows actually exists) by saying that the modern right is all about fostering distrust. He has perhaps not noticed that the modern left -- where I find myself -- is also all about distrust. We distrust facebook, Elon Musk, Wall Street, the Supreme Court, Donald Trump, the GOP, Amazon, Fox News... The list goes on.
This explains Krugman's fundamental mistake. Bitcoin isn't MAGA. It's anti-establishment – the political establishment as well as the corporate one. Bitcoin helps all people – on the left and right – elude those they distrust. Bitcoin is resistance money.
Appelbaum’s op-ed doesn’t have a thesis, except maybe “Bitcoin is bad.” It is a hodgepodge of unconnected complaints thrown at the wall to see what sticks. And it’s written in a way that doesn’t suggest Appelbaum has ever used Bitcoin or ever talked to anyone who has – and certainly not anyone who lives in a different country from him.
First, he says, “Bitcoin is popular despite being mostly useless. Its success rests on the simple fact that the value of a Bitcoin has increased dramatically since its introduction in 2009, making some people rich and inspiring others to hope they can ride the rocket, too.” This may be true of some people in the US and other countries with stable currencies and relatively trustworthy governments. But much of Bitcoin’s success rests on its adoption elsewhere. The top four countries for cryptocurrency adoption in 2022 were Vietnam, the Philippines, Ukraine, and India. Bitcoin adoption in Africa is up 1200% this year. Human rights activists from across the world have credited Bitcoin for enabling them to continue their work in hostile environments. It's not hard to see why people in countries whose local currencies are highly inflationary, or whose financial infrastructure is uncertain due to war, or whose leaders are untrustworthy, might find a use for Bitcoin.
Appelbaum asserts that Bitcoin is “not really a virtual currency at all.” Appelbaum doesn’t give criteria for what constitutes a currency, but a reasonable definition is that a currency is a commonly accepted medium of exchange. Tens of millions of people own Bitcoin, and over 15,000 businesses accept payment in Bitcoin. Bitcoin is accepted by more people and companies than many government-backed currencies. Bitcoin is legal tender in El Salvador and the Central African Republic. Appelbaum gives no reason for his assertion that it’s not a currency, and the evidence suggests he’s wrong.
Next comes Appelbaum’s most obvious and egregious mistake, which concerns Bitcoin’s security. First, he suggests the security is overstated, since if the password to an address is lost, the Bitcoin is lost. Many, of course, would see this as a security feature – nobody can steal your Bitcoin.
But then he goes on to say that that’s not in fact true, and that “the federal government apparently recovered part of a Bitcoin ransom payment” by “basically by figuring out the password.” This is false. The federal government did recover part of a Bitcoin ransom payment, but they did it by asking for the password and receiving the password. Bitcoin uses the SHA-256 hash function and Elliptic Curve Digital Signature Algorithm (ECDSA). Neither of these have been broken.
Appelbaum says that “Bitcoin is difficult and expensive to use as a currency.” This is false. Bitcoin wallets are free apps on phones or computers. It costs about $1 right now to conduct a Bitcoin transaction on the Bitcoin blockchain. But Bitcoin is a base settlement layer where transactions are irreversible, and as such is not designed for small purchases. Complaining that it’s expensive to use is akin to complaining that the SWIFT software is too expensive for a person to buy.
Appelbaum does not appear to know that, like the US dollar, Bitcoin has layers. The Bitcoin blockchain is a base settlement layer, where blocks of transactions are published every 10 minutes and are probabilistically irreversible after publication. The Lightning Network is built on top of the Bitcoin blockchain, and payments occur with Bitcoin on it.. The Lightning Network is capable of processing 1 million transactions per second, and currently costs about $0.0003 per transaction. Lightning is the way that most people use Bitcoin as a currency, and it is not expensive.
“Most Bitcoin holders, of course, don’t even see it as a currency. They’re in it to get rich, which is the one service that Bitcoin has managed to deliver,” says Appelbaum. This statement focuses on the relatively low percentage of Bitcoin users that are wealthy and ignores the millions of people using Bitcoin in authoritarian regimes and in countries with rapidly inflating currencies.
Finally, Appelbaum asserts without evidence that “Bitcoin mining is an environmental disaster.” This is far from settled. Bitcoin mining does use a lot of electricity. But the kind of electricity that it uses and where it can use that electricity makes it an interesting participant, stabilizing the energy grid and subsidizing renewable energy development. Some think Bitcoin mining might save the environment. More discussion, and less dismissal, is needed.
Prasad sets out to enlighten readers to the brutal truth about Bitcoin. In reality, there is no single brutal truth presented and argued for. Rather, he asserts a variety of negative things about Bitcoin. But the reasons given don’t stand up to scrutiny.
Prasad says that Bitcoin’s privacy “made Bitcoin the preferred currency for illicit activities, including recent ransomware attacks.” This is false. $2.4 billion worth of Bitcoin was used for illegal activities in 2019. That seems like a lot! At least until you learn that $800 billion to $2 trillion worth of government currencies was used for illegal activities in 2019. So in fact, criminals prefer government-back currencies 333x-833x more than Bitcoin. Prasad also fails to distinguish between illegal activities that are morally permissible and illegal activities that are morally impermissible. Murder is an example of the latter. But unless you live in a country with perfect laws, there are some illegal things that you should be allowed to do. Some think that having an abortion in Texas is illegal but morally permissible. Others think that having a gun in Australia is illegal but morally permissible. Many think that a woman having a bank account, while illegal in many countries including Afghanistan, is morally permissible. Bitcoin allows criminals to operate privately, for some time and to some degree. But some criminals using Bitcoin are doing good.
“As it grew in popularity, Bitcoin became cumbersome, slow, and expensive to use,” says Prasad. Like Appelbaum, he appears unaware of both Bitcoin’s role as a base settlement layer, and the Lightning Network as Bitcoin’s payment layer. A base settlement layer ought to be slow, because it ought to be irreversible and permanent. And there’s a cost – in money and in time – to making it irreversible.
Prasad then says that “it has become clear that Bitcoin does not offer true anonymity”. This is an interesting point. Bitcoin does not associate any real-world identities with any information on the blockchain. But because the blockchain is a public ledger, anyone can see every transaction ever made. And some governments and companies have gotten quite good at analyzing the blockchain.
But it seems Prasad is committing himself to a contradiction. How can bitcoin be so great for criminals if it isn’t actually anonymous? In fact, Bitcoin seems to give exactly what Prasad wants. It’s hard to use Bitcoin to subvert large governments with vast resources for lots of money, like the US government. But it’s not at all hard to use Bitcoin to subvert small governments or for small amounts of money. This lets protesters in Myanmar and Belarus use Bitcoin, but makes it difficult for huge thefts in the US. Bitcoin’s privacy is a long and complicated topic (to which my coauthors and I are devoting an entire book chapter).
Prasad goes on to say that Bitcoin is a puzzling investment because “it has no intrinsic value and is not backed by anything”, that “its value comes from its scarcity”, and that “Bitcoin investors seem to be relying on the greater fool theory.” Again, there are no arguments for any of these assertions. On the first: I’ve argued elsewhere that Bitcoin has no intrinsic value because almost nothing has intrinsic value; Bitcoin is not unique in this respect. On the second: part of Bitcoin’s value comes from its scarcity, part comes from its use as a digital payments network, part comes from its non-replicable founding, and so on. There are many aspects of Bitcoin that people find valuable, and so a lot of reasons that people exchange other things of value for Bitcoin.
Finally, on the greater fool theory, which says that people hold Bitcoin only because they believe someone else will come along later and buy it from them. People trade traditional money for Bitcoin because they find having that amount of Bitcoin to be better for them than having that amount of the traditional currency. This is no different from people who acquire US dollars; they also expect to exchange dollars for something else, whether it's food or rent or something like that. This is what money is for – saving and spending. Is the US dollar greater fool theory? Surely not. People who have US dollars aren’t fools, and people who have Bitcoin aren’t fools.
Prasad alludes to “mountains of electronic waste from specialized machines used for such mining operations that burn out rapidly.” Machines do not, in fact, burn out rapidly. The Antminer S9 was launched in May 2016, and it is still profitable to mine with it 6 years later. The study Prasad cites assumes miners will become obsolete 1.5 years after introduction; the reality is that it takes 4x longer for miners to become obsolete. And even if those incorrect stats were correct, Bitcoin would still contribute just 0.075% of the world’s e-waste. The reality is that Bitcoin contributes ¼ of that amount. And it does so while securing a private, censorship-resistant, inclusive, global digital financial network.
As Bitcoin has grown into a globally accessible outside money with demonstrable social value, the New York Times has failed to cover it accurately. As the world’s second-largest cryptocurrency exchange conducted what seems to be a decabillion dollar fraud, the New York Times wrote a puff piece on the apparent perpetrator. In an era where American institutions are in turmoil and trust is on the decline, it’s especially important that the paper of record take great care in what it publishes. Too much hangs in the balance to be cavalier with the truth. The New York Times can and must do better – even in op-eds – to print things that are true and supported by the evidence. Experts, like myself and my colleagues at the Bitcoin Policy Institute, are available to help the newspaper get things right.