Nothing for Something: Cryptos, Cons, and Zombies

IN HIS NEW BOOK Going Infinite: The Rise and Fall of a New Tycoon (2023), Michael Lewis has the difficult task of explaining why his subject, wunderkind Sam Bankman-Fried, co-founder of the multibillion-dollar cryptocurrency exchange FTX, who seemed tailor-made for the author’s patented oddball-outsider-disrupts-the-world shtick, was convicted for one of the biggest frauds in financial history. Like so many people both before and after crypto’s last big explosion in 2022, Lewis allows that he doesn’t know all that much about the underlying technologies, specifically blockchain, but is nevertheless compelled by the scene’s anarchic ambition. At one point, he throws up his hands and admits that crypto “often gets explained but somehow never stays explained.”

Regardless of what happens as Bankman-Fried pursues his appeals—a heavy lift, given that even his friends from math camp testified for the prosecution—there is one thing that is guaranteed. The general greed around cryptocurrencies, the nerdish interest in their underlying blockchain technologies, and the desire for something—anything—to fully commodify digital art has not abated. We should expect rebrandings, relaunchings, and hype cycles that do their best to explain that “this time it’s different” even when it’s not. There will be more Bankman-Frieds and FTXs—in fact, there are plenty like him and them on trial or in bankruptcy at this very moment—and when they are gone, their spots will be taken by probably even worse actors in the global techno-economy. One thing we can and should do at this relatively quiescent period in the hype cycle is figure out how these technologies and concepts have attained a kind of immortality already—i.e., how they became zombies destined to shamble through the rest of the 21st century. [1]

One answer is that these technologies are about human desires as much as algorithmic capacities, and our species’ yearnings are fairly consistent no matter how markets and machines may perform. Unpacking the connections between technology, commerce, and even art at this moment leads us not to legal, technical, or aesthetic conclusions but instead to the conceptual space where desires are forever leading us to heartbreak and shame, the universal emotions of every mark who has ever been conned.

Before getting to the losers, let’s look at the game, and to do that, pace Lewis, crypto requires yet another explanation. The term is short for cryptographic, or having to do with secret writings, but for more than a decade its adherents have used the term to refer to an interrelated set of technologies dating from 2009, when a still-anonymous coder who went by the mysterious nom de clavier Satoshi Nakamoto announced and then released an implementable, open-source code that enabled a distributed, anonymized cryptocurrency called Bitcoin. As people or groups used Bitcoin, and other so-called currencies that popped up in its wake, their transactions were recorded in a ledger, and the blocks built into chains—hence blockchain.

These digital currencies claim to enable secure, inflation-proof, anonymous financial instruments safe from government regulation, superior on every level to the currencies issued by nation-states, with electronic transfer capacities beyond those of global banks and credit agencies. If we follow the etymology of crypto back to the classical Greek word “κρῠπτός,” which means “hidden,” we can better understand the crypto community’s inability to demonstrate what the technologies are actually good for beyond the illegal transfers of funds and the shady deals in black webs worldwide that have, in fact, proven to be their one and only killer application. The usual way that Silicon Valley proves use and value is via a demonstration, better known as a demo. [2] The idea is to invent a technology, go out and demo it to investors and the public, and then watch a market develop. In crypto, it has been the reverse: start with a market, and then flail about for a demo, which investors hope is indeed hidden rather than entirely absent.

In the absence of a viable demo, crypto’s enthusiasts tended to position it as an ideology. Like other 21st-century populisms, blockchain promises liberation from elite control while making centralization of power and control that much easier (if ever more obscured). To keep crypto in the realm of the “explained,” though, it is important to move past libertarian fantasies and head directly to analyzing fraud, credulity, criminality, and the “long confidence game,” better known as “the big con.” The classic book in the field was published in 1940 by University of Louisville linguist David W. Maurer, who interviewed a succession of crooks, grifters, con men, and marks, including the erudite and endlessly colorful figure Joseph “Yellow Kid” Weil, to whose beautifully succinct insights we will return.

Maurer was obsessed with the creative language that criminals developed to communicate amongst themselves. The Big Con: The Story of the Confidence Man, compiled during the depth of the Great Depression, was already a portrait of a vanishing world, one dependent on the restriction that distance put on information. The big con required the kind of freewheeling capitalism of the robber-baron era that had fallen into disrepute by the time of the economic collapse of the 1930s. That decade also saw the growth of the regulatory state and nationalized law enforcement like the Federal Bureau of Investigation, but Maurer had no trouble painting for posterity a rogue’s gallery of grifters eyeing a seemingly endless stream of what they called “willing winchells.” These were the middle-aged, middle-class men from the US heartland who harbored tiny flames of larceny in their hearts, and whom the ropers and the inside men and the big bosses exploited in order to separate the marks from their money. Here is Maurer on the dynamic ecology of the grift:

Con games never remain stationary; the principle may be old, but the external forms are always changing, for con men know that they must adapt their schemes to the times. This is especially true of the big con. A good grifter is never satisfied with the form his swindle takes; he studies it constantly to improve it; as he learns more about people, he finds a way to use what he has learned. So the big-con men over the country began to improve the payoff in every way possible. […] They tried out new ideas, discarding those which failed and developing those that worked.

There is no better description of crypto’s endlessly evolving and iterative discourses, as its most fervent believers ride out the waves of hype and chasms of collapse.

The big cons that Maurer was writing about were typically focused on an individual, but the essence of the grift extends to ever larger groups of marks, and often depends on language. In his classic text The Crowd: A Study of the Popular Mind (1895), French polymath Gustave Le Bon observed the importance of repetition and declaration for imprinting an idea on a population. One of the first thing any newbie needs to do as they enter the crypto space is to master its argot. There’s the key concept of HODL, a mistyping of the English word “hold” that became its own acronym, “Hold On for Dear Life.” Those with “weak hands” panic-sell rather than continuing to HODL. They are NGMI, “Not Gonna Make It,” because they lack the faith and listen to the negativity from … well, from people like me. And then there’s WAGMI. WAGMI is a communitarian concept in crypto—it stands for “We’re All Gonna Make It,” by standing shoulder to shoulder and advancing into the blockchained future. It’s pretty hard to keep the faith when you’ve been “rugged,” though, which is to say that you’ve had the rug pulled out from under you and your investment by scammy developers. But if you just hang on, you’ll LAMBO—i.e., make enough money to buy a Lamborghini (or a fleet of them).

For all the geeky, math-adjacent specificity of the crypto jargon and the endless torrent of dialogue about it on subreddits, YouTube channels, and Twitter/X, there’s an unwillingness to actually argue, much less demo. The value proposition is that crypto is new, and it’s a technology, and (post hoc, ergo propter hoc) crypto is destined to liberate/disrupt the world as ruthlessly and profitably as did the social media and desktop computers that preceded it. As Le Bon wrote: “Affirmation pure and simple, kept free of all reasoning and all proof, is one of the surest means of making an idea enter the mind of crowds. The conciser an affirmation is, the more destitute of every appearance of proof and demonstration, the more weight it carries.”

The destitution of “every appearance of proof” and, key here, of “demonstration” is not at issue for the believers who can always point to someone who bought earlier or traded cannily and—at least in the ledger—appears to have made a brilliant decision. In contrast to the lottery-like phantasms woven around the concept of blockchain, the reality of cryptocurrencies is that, even though upwards of a half a billion people have dabbled in these markets, all of these currencies are dominated by a very limited number of major holders, or “whales.” These whales keep holding through the spectacular rises and horrific crashes of cryptocurrencies. Another way to put this is that crypto is a digital oligarchy, power is power, and power benefits from and produces imbalances.

Bitcoin’s code was released just after the global financial implosion of 2008, which engendered a general stagnation of wages and wealth-building, especially for the young. It is impossible for me to feel any schadenfreude about the plight of the small-investor crypto enthusiast. Social media made crypto wealth visible and almost tangible to people who are highly unlikely to put enough money away—no matter how hard they work—and then find a powerful enough investment vehicle—no matter how savvy they are—to be able to buy property in a place they want to live and raise a family. When all choices are bad, who am I to say that the average crypto investor should have known better?

None of this is meant to excuse the bad actors in the crypto arena, of which there are many. Some were simply running the basic con named after Italian businessman Charles Ponzi, in which early investors are paid partial returns on investments that are nothing in the end but new revenues from gullible marks who will either be reassured by partial payment down the road in a similar fashion or else be those poor suckers at the end of the line who invest days before the whole scheme implodes. Crypto as it has existed for the last decade is all of this and more, an infinitely flexible sine curve of profits and losses, where the key figures are, to repeat Maurer, improving “the payoff in every way possible,” trying “out new ideas, discarding those which failed and developing those that worked.”

“Affinity fraud” generally takes place, as the term implies, within immigrant communities or among co-religionists, but it is possible to see crypto afflicted by this Ponzi variant as well. The key to affinity fraud is the notion that someone who is part of the “community” would never cheat people like themselves, that there is trust and solidarity to be found among the already affiliated. The so-called crypto community deploys the parasociality of the internet to build these affinities—as noted, one of the key phrases in the crypto community is “We’re All Gonna Make It.” How can “we” fail in “our” investments when “we” are so obviously a part of the community that is conversant with the intricacies of crypto jargon and that believes so fervently in the future—always future—liberatory promises of blockchain technologies? After all, they’re called “crypto bros,” and while the sibling bond that term describes is fairly tenuous, on one level it does exist. But it also suggests a sense of a universal brotherhood for whom crypto is an evangelizing faith, its pulpits the aforementioned social media accounts and video-sharing channels, its sacraments Bitcoin and Ethereum, its votive arts non-fungible tokens, better known as NFTs.

Are the NFTs a demo of a successful use of blockchain, or yet more zombies gnashing their way through the museum, as opposed to the banking system? Again, some explanation: An NFT is a unique digital certificate, created to attribute authenticity and establish and substantiate ownership of an electronic image or virtual object. The blockchain authenticates the NFT (that is what makes it “non-fungible”), and its presence within the shared ledger is what allows for it to be traded—that is to say, brought to market and bought and sold, as if it were a discrete physical collectible like a painting or antique. The NFT is not, as many observers and even collectors seem to think, the object being bought and sold; it is instead a file that indicates that a version of the thing is unique and belongs to whomever is listed in the ledger as the owner of that thing. In an analogy to the analog art world, an NFT is simultaneously the bill of sale indicating ownership and the guarantor of authenticity. But NFTs are far closer to the provenance of ownership than to a work of art in and of itself. An NFT is not the thing; an NFT is the thing that says what the thing is and who owns it. On one level, NFTs are supposed to be a killer demo for blockchain: a way to validate digitally native art and to certify some sort of specific ownership that ensures that consumer capitalism will continue to thrive in purely virtual environments such as the metaverse, so beloved by Mark Zuckerberg that he renamed Facebook “Meta” in hopes of controlling it.

In 2021, NFTs exploded into the general consciousness due to two initiatives—one distributed, the other unique. The first was a collection of digitally generated cartoons grouped together as an edition of collectibles under the name “Bored Ape Yacht Club.” Thousands of people purchased the Bored Apes, some using them as their avatars on social media, but all who invested in this bubble were looking to be on the ground floor of what they hoped would be a growing market. The Bored Apes were almost anti-aesthetic, produced by algorithms and released in “limited” editions that resembled nothing so much as the global sneakerhead market that has emerged over the past two decades, in which massive companies like Nike and Adidas release limited “drops” of new footwear—which, like crypto, evolved into what economists call an “alternative asset class,” driven by and marketed to an overwhelmingly young, male, and very, very online collector’s market, a demographic virtually indistinguishable from crypto bros.

After the initial skyrocketing of prices for the Bored Apes, much of it driven by the blind bidding that the anonymity of crypto not only allows but also encourages, fraudulent pricing—with individuals selling Apes to themselves—drove up the value of the market in general. Within a year—after thefts, counterfeiting, and the deflation that happens to almost every fad—the Bored Ape market has diminished in its value and its hopes. Charitably, it marked a moment in fashion, perhaps a conflation of tulipomania and Beanie Babies, but what it was not was a transformation in artistic value.

But what of Everydays: The First 5,000 Days, a digital collage created in 2021 by the artist Beeple that sold for $69.3 million in March of that year? Beeple (a.k.a. Mike Winkelmann) had already established himself as a culture worker with a pop touch, collaborating with famous musicians including Ariana Grande and Nicki Minaj, and garnering two million followers on Instagram. The sale of Everydays as an NFT, however, drew global attention and rocked the art world, because its price instantly made Beeple the third most valuable living artist on the planet—at least in concept. It was not an art collector who put up this incredible sum, by the way; it was a cryptocurrency speculator who goes by the pseudonym MetaKovan. MetaKovan (a.k.a. Vignesh Sundaresan) took full advantage of not one but two unregulated markets, the art world and crypto. Before the auction, he had already bought other, smaller works by Beeple that were incorporated into Everyday and had sold them as NFTs via his own crypto investment fund. By the time he purchased the collage for that jaw-dropping price, the value of his earlier assets had inflated to over $50 million. As a crypto fraud investigator put it to The Washington Post, MetaKovan’s whole strategy in purchasing Beeple’s Everydays after monetizing its components could be interpreted not as a new form of art collecting but rather as “a cash grab,” or a big con in a new milieu and medium.

Many NFTs were released into the digital ecology with no impact at all, and the few that gained either attention or investment (or both) were subject to the same insane, roiling market as other blockchain assets. Again, the closing of so many 20th-century wealth-building options like real estate and blue chip stocks to younger citizens encouraged speculation in emerging products like NFTs, especially during the COVID-19 lockdowns. Additionally, what art historians refer to (after Marcel Duchamp) as the “anti-retinal” impulse in aesthetic production opened a conceptual space for these NFTs, alongside the “deskilling” of fine art production. If the will to power defines art (it’s art because I say it is), then why shouldn’t a slightly differentiated, algorithmically generated 2D ape be worth as much as a drawing by a modernist master such as Kazimir Malevich, or a digital collage be worth a whole gallery of Impressionist paintings?

Yet after all of the ups and downs of these markets and the utter failure of the NFTs to serve as demos of anything except the depths to which the digital aesthetic can sink, why do people keep coming back? Here, too, Maurer and his informants (as linguists call native speakers of the languages and dialects they are studying) help us to understand: “[I]t is difficult for the legitimate citizen (and sometimes for the mark himself) to understand why a man, once trimmed on a con game, will go back for another dose of the same medicine. Yet it happens all the time. Grifters have an endless fund of stories which illustrate this fact.” [3]

I, too, have an endless fund of stories. I write from a city where the Los Angeles Lakers, the most famous basketball team on the planet, play in a facility renamed the Crypto.com Arena. [4] Several of my colleagues and students have minted money and landed shows at major museums due to the success of their NFTs. The most promising fundraising my department has been doing of late has been in cryptocurrencies. European intellectual property lawyers argue that NFTs could solidify artists’ rights to resale profit, and who could be against that? Beeple himself immediately converted his crypto payoff into US greenbacks, a decision that made others in the scene angry, but which now looks more than prescient. Yet in the end, this all resembles the promises of influencer economies, in which hundreds of millions provide content for digital media monopolies while only a handful of those posters actually succeed in making a living at it. These are signs of a system in a state of decadence, delusion, and zombification.

The great American con artist Joseph “Yellow Kid” Weil was born in 1875 and lived to the ripe old age of 100, dying just as our present decadent phase of capitalism was starting to zombify, but I don’t doubt that he would have thrived under it. [5] That’s because the Yellow Kid would have agreed with social media entrepreneur Deb Schultz’s succinct tagline: “Technology changes, humans don’t.” The Yellow Kid was in his eighties when he sat for an interview with Saul Bellow for The Reporter magazine. This was in 1956, when Bellow was in the first flush of his career. From our contemporary perspective, it’s hard to tell who was responsible for the quote the Yellow Kid is best known for—a former felon who had lived off his wits and ability to read others’ weaknesses for decades, or a young writer whose gift for language and psychological complexity would garner him the Nobel Prize in Literature exactly 20 years later? Let’s just say that, like so many of the technologies that have been demoed since those two Chicagoans met in Bughouse Square, the famous line is the result of a collaborative effort: “They wanted something for nothing. I gave them nothing for something.”

Here is the explanation for the crypto zombie, the nothing at the center of all this tech. Crypto inverts the rationale for the demo, which had always been about technologies seeking markets. Here we have a market, more than a decade old and supposedly worth trillions, in desperate search of a demo. Were he still with us, the Yellow Kid would be delighted with the grift.

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Acknowledgments

This essay is adapted from a talk delivered at the International Colloquium: Démonstration sponsored by the Centre de Recherche Français à Jérusalem in 2022. My thanks to organizer Claude Rosental (CNRS, Paris), and fellow panelists Samuel Bianchini (EnsAD, Paris) and Emile De Visscher (Humboldt University, Berlin).

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Notes

[1] For more on zombification, see Paul Krugman, Arguing with Zombies: Economics, Politics, and the Fight for a Better Future (Norton, 2020).

[2] Peter Lunenfeld, “Demo n.0,” in Samuel Bianchini and Erik Verhagan, eds., Practicable: From Participation to Interaction in Contemporary Art (MIT Press, 2016).

[3] There is one last anecdote to tell about David Maurer and the inevitability of the con in American life. One day in the mid-1970s, Maurer received a phone call from an old friend, the famed humorist S. J. Perelman. Perelman asked Maurer if he got out to the movies much. Maurer replied that, due to glaucoma, he did not, and why was Perelman asking? Perelman replied that, vision issues or not, Maurer had to see the biggest film of 1973. With that, Maurer headed to the local theater and watched as a tale unfolded starring the two handsomest men in the world as they constructed an elaborate operation to defraud a vicious gangster in Chicago. Robert Redford’s character had the very movie star–like name Johnny Hooker, while Paul Newman’s grifter had a very distinctive one, Henry Gondorff. Maurer was, to put it mildly, intrigued to the point of outrage, as one of his chief informants had been Charley Gondorff, and the whole plot of the movie seemed to him lifted straight from the pages The Big Con, which had been out of print for years. That movie, of course, was The Sting, and it went on to make piles of money and win Oscars for Best Picture, Best Director (for George Roy Hill), and Best Original Screenplay (for writer David S. Ward). Perhaps it was that “original screenplay” nomination that irked Maurer the most, because he sued Universal for $10,000,000 for blatant plagiarism. Universal settled out of court for the then-still-substantial sum of $600,000, without, in that very studio way, admitting any guilt by any party involved. More details can be found in Sarah Weinman’s 2019 essay “David Maurer, The Dean of Criminal Language: Why ‘The Big Con’ and Its Scammers Still Have Us on the Hook.”

[4] There was, of course, an NFT.

[5] Given that its very first chapter is titled “Early Adventures in Chicanery,” I cannot vouch for the historical (or legal) accuracy of Weil’s autobiography “Yellow Kid” Weil: The Autobiography of America’s Master Swindler (1948), but I can certainly recommend it as beguiling entertainment.

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Featured image: László Moholy-Nagy. Segments of Circle with Cross, ca. 1923. Museum of Fine Arts Boston, museum purchase with funds donated by Claire W. and Richard P. Morse. CC0. mfa.org. Accessed December 13, 2023.