John Oliver explains the complicated world of Bitcoin

The world of cryptocurrency is exciting, fast-paced, and might just bankrupt you if you’re not careful. Learn more with John Oliver on Last Week Tonight.

Sometimes, you start to hold forth on a subject and, with a sudden and terrible shock, realize that you may be too old for something. Is this how your parents feel? In one awful moment, you feel as if you have aged by the space of a few years.

That may be all too dramatic but, given your age, you may start to feel the edges of that notion when you talk about cryptocurrency.

Talking about technology, especially on television, is a tricky business. After all, John Oliver says that technology is “the thing that will make television so high def, that I will no longer be allowed to appear on it.” Can you blame him for feeling a little defensive?

Even if that weren’t the case, technology now moves at such a frantic pace that only a few years can make something hilariously outdated. Remember Google Glass? That all makes it difficult to predict where technology might be going. When you add money to the mix, it becomes even more fraught. Could something be the next Google? Or could it simply be a massive drain on your finances?

With that in mind, Oliver dove into the subject of cryptocurrency. Broadly speaking, cryptocurrency is a kind of digital money that has no physical form. It also operates independently of banks and other governing bodies. Currently, many cryptocurrencies are so new that government oversight of them is often shaky at best.

Take Bitcoin. This particular cryptocurrency has become wildly popular. Even though its value has dropped by half in recent weeks, it’s still a big name in the cryptocurrency business. But why? After all, the only reason Bitcoin (or any currency, really) has any value is because enough people have agreed that it has value.

Blockchain makes it tough

Some of it has to do with blockchain, the technology that makes Bitcoin and other cryptocurrencies possible. Essentially, blockchain tech keeps a record of every Bitcoin transaction ever made. These records are stored across thousands of different computers, meaning that it’s decentralized. Decentralization is a big deal when you’re concerned about security. If you have only one point of access or a central repository, then it can be hacked, as in JP Morgan’s 2014 security breach.

Essentially, blockchain is very complicated and very secure. Now, even large companies like IBM, Walmart and, yes, JP Morgan are looking into blockchain for their own purposes.

However, said Oliver, “no one yet knows what blockchain is really capable of.” It is still in many ways an unproven technology, with so much social cachet that it gets kind of ridiculous. Everyone seems to be so excited about blockchain that the very name increases a company’s market value.

Bitcoin isn’t the only cryptocurrency out there, however. Indeed, there are more than 1500 cryptocurrencies. Some aren’t even intended to act as money. Instead, they meant to raise money instead of issuing stock for startup companies. In some cases, these custom-made cryptocurrencies can even be used as a kind of virtual token in place of stock options.

It all gets even more complicated when you look at why people are buying so much cryptocurrency. Many people buying these coins are doing so because of their interest in cryptocurrency or its perceived popularity amongst their peers. They are not necessarily doing so because they have actually studied these companies or the cryptocurrency in question.

I AM HODLING

Cryptotrading is arguably on its way to becoming an entire subculture. People involved even have their own lingo. This led to a breathtaking stupid rap video featuring #HODLGANG. HODL, by the way, is a term referring to the necessity of “holding” your bitcoins for as long as you can before selling. That’s from a post created by a whiskey-soaked trader entitled “I AM HODLING.” Sounds like pretty solid financial advice.

Basically, many people are buying these coins because it’s cool. But that doesn’t mean that real risk isn’t part of the equation. “This market is essentially the Wild West and is ripe for exploitation,” said Oliver.

Traders can manipulate the value of currencies through “pump and dump” schemes. In these scenarios, people artificially inflate the value of a cryptocurrency through frantic buying, then “dump” the currencies by selling to others trying to get in on the sudden surge. With more established stocks, this is brazenly illegal. Yet, in the world of cryptocurrency, enforcement of these fraud rules is inconsistent.

Sure, a chestahedron is a real thing

“There are dodgy companies everywhere,” said Oliver. Take Bitconnect, which told investors that it would give returns as high as 40% a month, which is incredibly hard to believe. The Bitconnect speaker featured on the show is scarily exuberant. He’s one plexiglass pulpit away from a money-laundering church a la Our Lady of Perpetual Exemption.

To no surprise, Bitconnect basically collapsed. Since then, it’s been labeled a Ponzi scheme and outlawed in numerous states.

“I’m not saying that every cryptocurrency is a scam,” said Oliver. However, it’s hard to tell what’s legitimate in this frenzied climate. Nonsense marketing doesn’t do much to help, either. There’s plenty of that with cryptocurrency EOS and Brock Pierce, one of its proponents.

Last Week Tonight showed a clip of Pierce giving a speech wherein he talked about the importance of the company’s logo, which he insisted on calling a “chestahedron.” That’s technically the correct term, I will admit with a heavy sigh. But not so on the claptrap about it being connected to one’s heart or sense of compassion.

Does all of this mean that EOS is worth the $1.5 billion it raised in nine months? Does it matter that EOS has yet to produce any product or definitive value for its buyers? “Who knows?” wondered Oliver. “Maybe EOS is going to be the next Google.” Except, well, that it likely won’t be. It definitely won’t be worth over a billion dollars, according to Oliver. “I could be wrong. I’m absolutely not. But, I could be.”

#CRAEFULGANG

Ultimately, dealing in cryptocurrency is gambling. It could become the next worldwide currency, or you could lose all your money investing in it. I mean, there is an entire currency known as “Dogecoin” that started as a joke and has now, inexplicably, become a contender in the world of cryptocurrency. These are strange times and, perhaps, our fragile ape brains cannot quite keep up with our own creation.

John Oliver urged caution. “You need to be careful. And I know that sounds boring.” So, he brought Keegan-Michael Key out to promote sensible caution while wailing a la that Bitconnect man. “Never invest any more than you are willing to lose. And if you do, don’t just blindly HODL”.

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Instead, urged Key and Oliver, let’s be part of the #CRAEFULGANG. Yes, okay, it definitely sounds a bit like your mom made this. She’s worried about all of this bitty coin stuff on your computer and just wants you to make good decisions.

Except, in this case, your imaginary out-of-touch mom (who probably doesn’t represent actual parents out there) is right. Investing, in general, requires a certain kind of caution. That’s even more necessary in the breakneck world of cryptocurrency. You can leave your chestahedron at the door.