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I made this a top level post because I think people here might want to discuss it but you can remove it if it doesn't meet your standards.
Edit: removed my opinion of Scott from the body
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Many rationalists support crypto because they consider that it will help to avoid government control to buy nootropics, participate in prediction markets etc. My advice is that instead of supporting crypto it is better to lobby politicians to allow to do these things legally and openly. That may take longer time and be harder to achieve but it will be much better because negative externalities from crypto are too severe and damaging that they cancel all the benefits that crypto could give us.
Many of these things are legal in other countries and they are not as great as many rationalists think. I am in Latvia now; piracetam and phenibut are manufactured by a local pharmaceutical company here, they are not only legal but doctors routinely prescribe them. What I think about them is that their effectiveness is very low. Healthcare professionals consider them as low class antidepresants/anxiolytics. They have very few adverse effects but basically they do very little.
If 50% of antidepressant effect is due to placebo effect, then prescribing something to people with moderate depression/anxiety will have 50% improvement rate. Doctors initially select medicines with less side-effects and switch to more serious antidepresants when they are not effective. It would be good if other countries used them as well but in the big scheme, they matter very little that it is not worth to use crypto to illegally buy them.
Many of us think crypto and decentralization are just good things in and of themselves.
This is, bluntly, underpants gnomes logic.
I know you're an enthusiast, but liking (and seeing) those things as worthy of pursuit in of themselves does not make it true. There are a lot of X and Y things we can introduce into systems that exist, but would we want to? Is there a tangible, economic benefit? Is it cheaper? Is it better? Or, lacking in those two essential traits: is it the right thing to do regardless?
Forgoing the efficiencies and economies of scale of the current system is a cost. Trusting centralized institutions is extraordinarily cheap on scale. And sure, there may be a market of legitimate use - buying grey-market goods, sending funds to dissidents, etc. But that economic activity is a sliver of a sliver. That's not what advocates are pumping. They're envisioning a mass adoption across the whole economy - of which crypto's limitations and decentralization's costs would become rapidly apparent.
Crypto without exchanges is a currency without liquidity, a nightmare of passphrases and uncertainty of payment. If everyone self-custodies and that is the result, what value is the technology? How are you going to buy a pizza with your cold storage wallet?
At least underpants physically exist as a tangible good.
This may be true, but as Aqouta pointed out, trust has to be earned. Doubly (or triply!) so when you are an institution in a democratic nation. The US Dollar is the world's reserve currency, and while I can grant that fiat currencies are not The Devil, the US Dollar is pretty much held up by confidence in the US Government (or perhaps its value is directly a measure of confidence, even).
So imagine what happens when the country I was born and raised in has been pissing away international goodwill, domestic goodwill, treasure, blood, and competence for practically the entirety of the 21st Century, while private industry finds new ways to exploit the bad decisions made by the Reagan and Clinton admins. Every 5-10 years, there's been some new bubble blowing up, whether that be in tech, housing, or even Crypto. Meanwhile, the Internet, a product of American innovation, has become the new agora, only to be colonized by the same corporate forces colluding with the government to ruin everything. (For God's sake, Visa and MasterCard are pushing Pixiv around. Pixiv! A Japanese company having to self-censor because it made the mistake of connecting itself to the West's payment-processing duopoly!)
I'd like a world, or at least a US, with strong regulations and well-considered laws enforced consistently, where dumb financial shenanigans and abridgement of our God-given rights in the name of profit never happened, but we do not live in that world. We live in the Cheems world instead.
I don't want to act like a defectbot, but our world is incredibly defective, and you do not cooperate with the defective.
Not that I have any true objection to what you just said, but the USD-market has its share of bad actors, then crypto is crawling with them. It would be charitable to say that most of the space is full of scams preying on dumb money.
Just because a system is bad doesn't make its alternative automatically better! Crypto enthusiasts are baffled at the lack of uptake of their ecosystem - it is because for the vast majority of users, they lose their entire investment or come away losing money. An unregulated, legally opaque market is the perfect environment for naive investors to lose their shirt.
(And being a 'grudger', in the defect/cooperative axis, is a suboptimal strategy.)
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