On May 4, “Ethereum Classic” popped onto the trending section of my Twitter page. I narrowed my eyes and I laughed.
This was around the time when Dogecoin was smashing previous price records, requiring mainstream business pages at places like the New York Times to not only explain to the average reader cryptocurrencies, but that a meme coin—a “joke” making fun of crypto’s self-seriousness—had been taken up by Elon Musk in a wealth-scheme-cum-promotion-cycle for an appearance on Saturday Night Live . Along the way, Dogecoin was making people millionaires .
Despite that, what was going on with “Ethereum Classic” was weirder. Frankly, it was so dumb as to bring clarity.
Ethereum Classic (ETC) is the original version of Ethereum (ETH)—which is kind of like Bitcoin. Each are tokens you can digitally swap as money without having to rely on a third party, like Visa or SunTrust. ETH is a particularly popular cryptocurrency: Ashton Kutcher likes to talk about it. By market capitalization, it’s the second most valuable after Bitcoin. In addition to carrying out transactions, ETH has the added value of carrying out digital contracts. Ethereum Classic , on the other hand, does almost nothing. It was created when a hacker stole millions of dollars worth of crypto through a vulnerability in the code of a separate program. The vast majority of the Ethereum community left, created ETH and allowed the old protocol to function as a zombie blockchain . ETC became a useless ETH more prone to cyber-attacks.
Yet, from the beginning of March to the beginning of May, the value of Ethereum Classic had shot up by over 1,000 percent. It jumped from about $12 a token to over $130. This isn’t entirely unprecedented during cryptocurrency boom cycles. Tokens, even ones that serve no purpose beyond being a joke like Dogecoin, explode as speculators pile in trying to get in on the next big, meaningless cash grab. But as I scrolled through tweets trying to figure out what was happening with the latest lottery, I noticed that ETC’s boom appeared to be based on a simple misunderstanding.
A pseudonymous crypto Twitter account had written in a semi-successful tweet the lie that “$ETC (Ethereum Classic) is basically the same thing as one $ETH and can be purchased on all major exchanges including #robinhood at a price that’s basically 70 times cheaper.” People, as Anthony Sassano, a prominent crypto investor and influencer on Twitter, explained , thought that they were purchasing “a cheaper version of Ethereum.” They were wrong. In fact, Ethereum Classic was like buying a Blockbuster location thinking you’re purchasing into Netflix.
More seasoned and knowledgeable crypto traders called investing in a useless protocol a “dumb” play. But as retail traders thought they were pulling off an arbitrage, Ethereum Classic reached an all-time high.
Versions of this kind of financial absurdity have played out across the crypto space and the broader economy. You perhaps saw when niche markets for digital art (some of it real, some of it silly) flared; when valuations for SPACs, a way to take a company public without having a fully formed company that does anything, boomed; when various cryptocurrencies—whose projects often don’t even fully exist yet—went through the roof. Online people suddenly were—and are now—selling objects even less tangibly connected to the “real economy” than stocks. It is hard to tell what is stupid and what is genuinely important, and that’s because it doesn’t really matter: You can get rich doing it either way, as long as you can bet on some number increasing.
All this looks absurd and unprecedented—and while the methods are new, the madness is not. For the past few decades, the wealth barons have played an equally ridiculous game. Robinhood didn’t invent options trading. Putting money into cryptomarkets isn’t the first time people could invest in early stage technologies before they were publicly listed on stock exchanges. Venture capitalists and hedge fund managers do all this professionally. Now, everyone else is finally (sort of) just catching up with them. The American Dream is not a home with a white picket fence—it’s a green ticker symbol that only goes up.
Even in a pandemic economy, the Dow is near an all-time high. Corporate profits have skyrocketed. The housing market is up. So is the computer chip market. As is the car market. If you’ve got something to sell it has probably never been worth more than it is right now.
The problem is most of us do not own shit. The top 10 percent of Americans in wealth […]
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