Luke 15:7

Source

The title of the post refers to the King James Version of the Bible:

I say unto you, that likewise joy shall be in heaven over one sinner that repenteth, more than over ninety and nine just persons, which need no repentance.

Luke 15:7

In the throes of 2008's Global Financial Crisis Satoshi Nakamoto published Bitcoin: A Peer-to-Peer Electronic Cash System. It inspired a large group of enthusiastic advocates who asserted that Bitcoin would possess the following attributes:

• It would be decentralized.
• It would be trustless.
• It would be censorship resistant.
• It would be securely encrypted.
• Users would be anonymous.
• Users could transact without intermediaries.
• Users could transact cheaply.

In short, it would enable users to escape the clutches of the TradFi (traditional finance) system that had so obviously failed. It has been obvious for many years that it doesn't, and in July there appeared a truly excellent mea culpa from a former advocate, Peter Ryan's Money by Vile Means. Below the fold I comment on it, and a couple of other posts describing how TradFi has obliterated Nakamoto's vision.

Ryan explains his involvement with the Bitcoin cult:

I was once a Bitcoin true believer. Back in 2013, I sat in a New York University classroom when an eccentric libertarian took to the podium to evangelize the new currency. Drawn to the message, I soon interned at the Bitcoin Center on Wall Street, where I participated in the nascent community. I later hosted events promoting the merits of cryptocurrencies. In 2018, I joined the crypto-focused news site CoinDesk, where I reported on the industry. I also produced a documentary series on cryptocurrencies.

I was never a major player in the ecosystem, but as I met various influential figures and learned more about how crypto really worked, I began to realize that behind the rhetoric of freedom, decentralization, and empowerment was a reality in which a few elites were accumulating immense wealth under false pretenses. As the cryptocurrency economy expanded and evolved over the course of the 2010s, it became hard to ignore how radically the facts diverged from the vision I had been sold. So in 2019, I wrote a Medium post called “Leaving Crypto,” terminated all my crypto-related contracts and collaborations, and sold all my crypto assets.

His current take on the cult is:

Bitcoin’s founding goal of fighting unconstrained government spending has been inverted, as crypto is increasingly serving as a means of enabling more deficit spending, an agenda the Trump administration has all but explicitly embraced. Today, crypto is merely the latest ruse to persuade the public to surrender democratic freedom and financial sovereignty to oligarchs.

One interesting part is his history of the internal politics of the cult:

The Bitcoin Foundation was created in 2012, with Ver, among others, on the leadership team. Its mission stated that it would be “funding the Bitcoin infrastructure, including a core development team.” Funding came from Bitcoin insiders, whether large investors like Ver or companies like Bitcoinstore, Mt. Gox, Bitinstant, Coinbase, and CoinDesk. It is estimated that the foundation had a few million (in dollar terms) under its control to finance developers and other activities. But amid allegations of mismanagement and ties to individuals accused of corruption, criminality, and incompetence, the Bitcoin Foundation became defunct in 2015.

A new centralized authority arose in the same year when the entrepreneur and former MIT Media Lab director Joi Ito announced the launch of the Digital Currency Initiative under his department within MIT. As its website states, “DCI was formed… in order to provide a stable and sustainable funding for long-term Bitcoin Core developers.” Parallel organizations emerged as well. For-profit entities like Blockstream, Block (formerly Square), Xapo, and BitMEX, as well as non-profit organizations like Chaincode Labs and Brink, also helped fund developers.

Ryan's point is that the software that defines and implements Bitcoin is controlled by a small group of people who are lavishly funded by institutions that profit from their efforts.

He doesn't mention the other central locus of control over Bitcoin, Bitmain, the dominant supplier of mining ASICs and power behind 7 of the top 8 mining pools. The large mining pools dominate Bitcoin:

By one estimate from Hashrate Index, Foundry USA and Singapore-based AntPool control more than 50 percent of computing power, and the top ten mining pools control over 90 percent. Bitcoin blogger 0xB10C, who analyzed mining data as of April 15, 2025, found that centralization has gone even further than this, “with only six pools mining more than 95 percent of the blocks.”

But by far the most interesting part is Ryan's history of the block size war:

This conflict was over whether to increase transaction capacity in each block by increasing the block size limit from 1 MB to 2 MB. The impetus for the proposed increase came from miners; in opposition was the “small block” faction, led by Bitcoin software developers.

The software developers:

argued that Bitcoin was best scaled by way of non-Bitcoin based “layer 2s,” which interfaced with Bitcoin but were not bound by its structure and incentives. Increased Bitcoin transaction capacity would increase the aggregate variable fees miners could receive, whereas frozen Bitcoin transaction capacity meant that providers of layer 2s could divert those fees to themselves. For example, Blockstream—one of the major Bitcoin companies—offered a layer 2 product called the Liquid Network, which promised to accommodate increased demand for transactions. Blockstream employed high-profile Bitcoin Core developers. Digital Garage, co-founded by MIT’s Joi Ito, invested in Blockstream. This put lead maintainer van der Laan, whose role was funded by Ito’s DCI, in the nexus of Blockstream as well.

In other words, the institutions backing the small group in charge of the software stood to benefit from abandoning the idea that Bitcoin was a medium of exchange that individuals could use for anything but speculation. Nakamoto never saw the block size limit as fundamental, so this was clearly heretical.

Ryan's account is long and detailed, including the victory of Bitfinex and Tether:

No cryptocurrency exchange was bigger than Bitfinex. Bitfinex was an early investor in small blocker-led Blockstream. Bitfinex’s executives also managed Tether, the company that pioneered stablecoins: cryptocurrency tokens backed 1-to-1 with the equivalent dollar reserves.
...
On Jan. 1, 2017, the tether supply was about $10 million. By Aug. 1, it grew 32 times to a total of $319 million. By Jan. 28, 2018, it was $2.3 billion. In just about one year, the Tether company’s supply of tether tokens and its alleged 1-to-1 reserves grew 230 times.

Ryan quotes Griffin and Shams and NY AG Letitia James and concludes:

When all these sources are digested together, the logical conclusion is that unbacked dollar-like tokens were printed to tilt prices on an exchange bottleneck. Bitfinex, an exchange with a clear small block conflict of interest, was in total control of what Griffin and Shams described as a pseudo-central bank.

He sums up the result of the war:

With the victory of the small blockers, Nakamoto’s theory that miners controlled Bitcoin crashed on the shores of reality. Miners were subordinate actors. They were scared of backing the losing side in the Scaling War and having their holdings go to zero. They also had to deal with short-term operating expenses of running server farms, which meant they needed to convert Bitcoin holdings to fiat currencies to pay their bills. The miners couldn’t afford to fight a war of attrition. A decentralized market didn’t decide the outcome of the Scaling War—a small group with conflicts of interest and a de facto money printer did.

There is far more good stuff in Ryan's account than just the snippets I quoted above. You should go read the whole thing.

You should also read Michael Kendall's Bitcoin: The New Tradfi:

Adam Back was an OG anarchist cypherpunk. Bitcoin arose out of the cypherpunk movement connected to online messaging during the infancy of the internet. Back shared correspondence with Satoshi and has been involved with Bitcoin since its inception. He’s the inventor of Hashcash whose cryptography became foundational to Bitcoin’s proof-of-work consensus, the founder of Blockstream, and a main contributor to Bitcoin Core. To say that Back has been a proponent of the original promise of Bitcoin would be a gross understatement. Back has been one of the strongest champions of every initial promise of Bitcoin’s decentralized financial system. That is until he sold out to Tradfi and essentially pulled the plug on everything he and his long promotion of Bitcoin stood for.

Because Bitcoin is useless for anything except speculation, most of the time the demand for transactions is low, meaning transaction fees are low and miners' income depends upon the block reward. The characteristic of speculators is herd behavior, so occasionally they all want to transact at the same time and fees spike enormously for a brief interval. A payment system in which not merely is the value of the coin volatile but so is the cost of transacting is not useful.

In an article entitled Curtain falls on BTC’s decentralization theater; mining crumbles, Steve Stradbrooke explains what Back did:

Bitcoin Core/Blockstream developers were largely responsible for ensuring the network didn’t proceed down the path that would have allowed individual network blocks to carry a sufficient number of transactions to make mining profitable as block rewards shrink.

The Financial Times reported this week that Blockstream’s founder/CEO, Adam Back, is in “late-stage talks” to contribute up to 30,000 BTC tokens worth ~$3 billion to a new ‘treasury’ firm being cooked up by Cantor Fitzgerald ...

Back once declared that “individuals using a peer to peer ecash, are the very reason for existence of Bitcoin.” Back now believes that the one true path is handing BTC to Wall Street investment bankers to launch a company that does nothing but warehouse tokens while selling shares in that company (at a premium to the value of its BTC) to ‘individuals’ who don’t know better.

Kendall concludes:

From the foundational backing by the unaudited Tether Ponzi that manipulates bitcoin’s price, to the shift from Defi to Tradfi as the only means to keep the system propped up (defeating Bitcoin’s reason for existence), and to vocal charlatans like Michael Saylor who are now the face of Bitcoin, Bitcoin belies Satoshi’s decentralized digital promise. Everything Satoshi’s White Paper envisioned for Bitcoin no longer exists. All that remains is a non-sustainable, manipulated asset where speculative frenzy defines its valuation.

Also worth reading is Ann Pettifor's Capitalism Devours Crypto:

Crypto - the criminal currency promoted by libertarians of a pioneering, frontier spirit - is being looted by the age-old criminality of capitalism - even while its global valuation rockets to $4 trillion; and even as it is clothed in the respectability of US Congressional and Presidential approval, with cover promised by US regulatory institutions.

Pettifor focuses first on (meta)stablecoins:

Crypto interests wanted to integrate Stablecoins into the regulated US financial system so that crypto assets and bank accounts could in future be protected by the Securities and Exchange Commission and the Federal Deposit Insurance Corporation, just as ordinary bank deposits are. In other words, the crypto sector wanted to be protected from losses or failure (insolvency) by the US rules-based system sponsored by the American taxpayer.

With the passing of the GENIUS Act, Stablecoin interests achieved their goal.

But she points to a different motive:

But Financialised Capitalism - i.e. Wall Street - had a very different, and a far more devious motive for integrating digital Crypto ’narrow banks’ within the financial system.

That motive: nothing less than the subordination of DeFi to the financial interests of TradFI.

This is where ‘crypto treasury companies’ come into the picture. By first luring the global crypto community of fiery libertarians into the rules-based system governed by the GENIUS ACT, THE US Federal Reserve and US institutions, Wall Street helped to inflate the price of crypto currencies. . As a consequence, sky-rocketing crypto valuations have risen to what many consider are unsustainable levels.

And there is one crypto treasury company in particular:

Crypto treasury companies are already well established and one is way ahead in the race to inflate the biggest bubble in Wall Street’s history.

That company is Strategy, previously MicroStrategy, and is led by one Michael Saylor.

Strategy bears an uncanny resemblance to a company at the heart of one of the biggest Ponzi schemes in history - the South Sea Company

Wkikpedia summarizes the South Sea Company thus:

In Great Britain, many investors were ruined by the share-price collapse, and as a result, the national economy diminished substantially. The founders of the scheme engaged in insider trading, by using their advance knowledge of the timings of national debt consolidations to make large profits from purchasing debt in advance. Huge bribes were given to politicians to support the acts of Parliament necessary for the scheme. Company money was used to deal in its own shares, and selected individuals purchasing shares were given cash loans backed by those same shares to spend on purchasing more shares. The expectation of profits from trade with South America was talked up to encourage the public to purchase shares, but the bubble prices reached far beyond what the actual profits of the business (namely the slave trade) could justify.

Emblematical print on
the South Sea Scheme

Pettifor notes William Hogarth's Emblematical Print on the South Sea Scheme, his famous engraving satirizing the South Sea Bubble:

Sky-high share prices are attracting a constant flow of new investors all keen to make quick capital gains from this giant and expanding Ponzi scheme. In a process not unlike the financial wheel of fortune depicted in Hogarth’s merry-go-round of 1721 (see below), the purchase of Strategy shares speeds up the speculative frenzy and in a positive feedback loop, further inflates the market capitalisation of the company.

According to Wikipedia:

The print is often considered the first editorial cartoon or as a precursor of the form.