The more Bitcoin unravels, the more obvious the real problem is: we’re trying to use technology to solve what are ultimately political problems. Recent events have shown that Bitcoin has unwittingly melded the problems of cash and electronic transactions to distill the worst of both.
Bitcoin is like cash in the sense that once it is physically (or digitally) gone, there’s no getting it back. No surprise, organized crime has begun to kidnap and force big fish in the bitcoin world to transfer their coins at gunpoint. There’s no recourse. Were this to happen with a bank, the fraudulent transfer could easily be reversed.
If the authorities want to trace your Bitcoins, they will. It’d be easier to just call up the bank and get your credit card history, but if you’ve done something serious enough to draw attention, Bitcoin will give you away. It’s how Silk Road went down and Childs Play got busted.
You’re no safer with cryptocurrencies than sitting around with a suitcase full of hundreds. If you’re doing legitimately sketchy things, you’re going to get caught even if you use Bitcoin. So what’s the point of all the trouble?
Bitcoin an an Ideology
Whenever I talk to cryptocurrency proponents or take a gander at various subreddits, conversations tend to be circular. It becomes clear that this is an ideology of radical libertarianism rather than a solution to any set of problems. When it’s pointed out that Bitcoin solves no problems, the inevitable ‘you just gotta believe, man’ rears its head. Welcome to a religion.
None other than Mr. Money Moustache called out Bitcoin as a libertarian fantasy. The whole techno-liberatarian fantasy breaks down pretty quickly. Suppose I have the best encryption on the planet, buy everything properly tumbled bitcoins and have other otherwise made no security flub ups—the Feds are at my door with a valid search warrant and threatening to send me to slammer for ten years for obstruction if I don’t hand everything over. Game over real quick.
That’s why I find the techno-libertarians to be childish at best. While I’m all for better privacy, more encryption and greater oversight, it’s all moot without a rock-solid society.
The problems that Bitcoin have mostly been solved by more mundane technology. What’s left is the ideology of decentralization. It’s beautiful to imagine a world that seamlessly functions without any central authorities, a sort of global Burning Man.
Experience shows a different story. The decentralized web devolves into 4chan and weak states morph into autocratic cleptocracies. HN and the better subreddits are all heavily moderated. Much like the proponents of communism that dismiss each failure as not being true communism, libertarians ignore each failure.
Kenya was the trailblazer here with M-Pesa. WeChat is killing it in China. Even in places like Ukraine, where I don’t remember having a single cashless transaction in 2011, are becoming mostly cashless.
What’s remarkable is that East Africa and Asia are leading the pack here. Apple Pay is old news to the developing world. The EU has had free bank transfers for ages, Zelle brings the same to the US. In any case, I don’t see any cryptocurrency on the vanguard here. If you look past the need for absolute decentralization, there have been huge gains in the past decades with electronic money.
Most people that hopped on the Bitcoin train in late 2017 never actually held any Bitcoin. If you use something like Coinbase, you’re just using a bank-like entity that writes you an IOU. These exchanges collapse, get hacked or outright defraud people all the time. For the most part, you’ve replaced a somewhat accountable central bank for a completely unaccountable exchange.
Remember, this is the first sentence of Bitcoin’s initial white paper:
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
You can go it alone and set up your own wallet. Here’s how. This is in the realm of experts and mistakes can cost you everything. This isn’t going to solve the bigger political problem of the underbanked in the world. Just the opposite is going to happen, the white collar class can use and manipulate cryptocurrency, while the poor will be left behind.
Ignore the rhetoric of helping African peasants that crypto-lovers repeat. There’s simply no evidence to support the claims that the poor in authoritarian regimes are using BTC to protect their savings.
What does Bitcoin Solve?
Given the massive energy and resource consumption of cryptocurrency, it had damn well better solve some real problems. As far as I can see, beyond some libertarian LARPing and a massive bout of tulip-mania FOMO, nothing is being solved.
I’ve made money on cryptocurrency. No sour grapes here. This is realizing that it’s time to grow up.