Cryptocurrency is an idea founded on libertarian politics but adopted by many modern-day coders and companies, including the famous bank JP Morgan. The idea behind cryptocurrency is to create a decentralized form of currency that the government can’t control, an idea that appeals to most libertarians since they rally for freedom and independence. Though the idea was originally created to support an almost anarchical group, the idea has expanded and evolved over time, boosting to fame thanks to the work of Satoshi Nakamoto, the mysterious founder of Bitcoin, the main cryptocurrency circulating the world today.
Cryptocurrency was founded on libertarian politics, and supported by many people, including a group who call themselves the Cypherpunks. According to the Cypherpunk Manifesto, the regular banking system allows for no privacy, because when one creates a bank account or swipes one’s credit card, one’s identity is revealed to the world. Privacy is not allowed under the current system of currency, but with systems that allow for privacy, like Bitcoin, only the bare minimum is revealed, and citizens are able to keep their privacy for as long as they would like. Personally, I think privacy is a great idea, especially looking from the Cypherpunk point of view, but it is too easy for people to take advantage of this system.
The idea behind cryptocurrency is to have a form of currency that is not controlled by the government, and it has succeeded. Instead of names, people identify users by long strings of numbers and letters for when they want to make an exchange. This provides anonymity, though all transactions are public and anyone can find them. Once you know someone’s user string, you can find every transaction they have made, whether it be to sell or buy something. A system like this is very open and easy to read, which allows for full accountability.
Looking at this from an economics point of view, Bitcoin could be a feasible transfer from banking institutions if the government is willing to get rid of banks and control, which is doubtful. Hypothetically, however, if the government was willing to institutionalize Bitcoin as the new currency of the US, the stability of the economy would now depend less on the regulation of money and more on the regulation of people.
In the current economy, recessions happen because people, for some psychological, unknown reason, choose to withdraw their money from the bank or start to save money instead of investing it. The bank, being a company that prints and regulates the usage of money, attempts to fix this by printing more money, which creates a bubble. This goes on and on until banks are unable to create more money without harming the economy, leading to the bursting of the said bubble and a major recession. In this context, the usage of Bitcoin as national currency would nearly eliminate all causes of a recession, because it is mostly due to the meddling of banking institutions. However, this would cause problems if a recession did happen; Bitcoin can only generate money for so long, and the problem isn’t similar to government-controlled banks where the bank can simply make more money. A possible solution involves regulation, which is impossible to get rid of no matter what. People will have to agree to lower the price of Bitcoin and all objects, and a regulatory council of some sort will have to oversee this change until the economy rights itself. So though the libertarian foundation wanted banking to be autonomous and mathematical, a regulatory counsel for the economy is necessary no matter what, and if the government itself sponsors the change to Bitcoin then the council will most likely be under government control. I think it would do wonders for the stabilization of the economy, however.
From a political point of view, using Bitcoin as a national currency raises all sorts of issues in how easily society can exploit it. The very idea of cryptocurrency relies on mathematically generated strings as usernames for full anonymity, though it is possible after some work to find the identity of people. The full transparency of the system in publishing online every single transaction is also an advantage for determined users who really wish to find someone’s identity. However, in the case of the Silk Road, the anonymity Bitcoin provides was used to devastating effect.
The Silk Road was first created by libertarian Ross Ulbricht, who wanted to maximize political freedom and autonomy by creating a website where people could sell anything they wanted to by using Bitcoin, which allowed them total anonymity. This website manifested into a black market best known for the selling of hundreds of types of drugs, led by Ulbricht, who used the pseudonym Dread Pirate Roberts.
Without the assistance of online money like Bitcoin and other cryptocurrencies, the Silk Road would not have been an idea that could come to fruition since working with banks would make the tracking down of people who were selling drugs and illicit substances laughably easy. Even though Ulbricht was eventually caught after nearly three years of hard work and collaboration between the FBI and DEA, it was only thanks to a leak from Ulbricht’s carelessness in coding the website that they managed to find him at all, or there is a high chance the Silk Road would still be running today. Anonymity was only furthered by the use of a TOR browser in Ulbricht’s software, again adding to the difficulty of the authorities to shut the illegal drug cartel down.
Demonstrated here is how Bitcoin and other cryptocurrencies, though created with good intentions in mind by Satoshi Nakamoto, are easily corrupted and used for illegal purposes. No matter how useful cryptocurrency would be in society, especially in stabilizing the economy, the risks of people creating more illegal websites and taking part in more illicit transactions would increase by a significant percentage. The black market would flourish under such a currency, especially if the government nationalized the currency. Even now, when the government does not use Bitcoin in its dealings, people use cryptocurrencies for a variety of illegal purposes, many of which include black market dealings.
This is almost a reflection on society in a way if one just looks at the way humanity is able to take something new and manipulate it to suit their own base tendencies like greed or lust. An example is how people used the internet for their own purposes, no matter how twisted, and it is what happened to Bitcoin. Even now, though the Internet is useful for a variety of things and used by people across the globe, there are darker parts that agencies such as the FBI or CIA have trouble working through in order to apprehend criminals. The institutionalization of cryptocurrency would only make their job harder, and the darker parts of society, the ones that hide in the shadows, would flourish.
Culturally, corruption is not the only path humanity takes when presented with a new resource. DAO is one instance that comes to mind. DAO, or the Decentralized Autonomous Organization, was a venture capital fund created by members of the Ethereum Community. Ethereum is an open source, blockchain-based computing platform. In the beginning, people were allowed to send any amount of Ether to the community, to later be loaned to companies looking for loans. A proposal would be made online, and if the DAO investors thought it was worthwhile, money would be invested in the idea. If a donator wished to withdraw their money from the DAO, that too would be possible. Unfortunately, stealing will always be a prevalent part of society, and an unknown hacker took advantage of a bug that allowed him/her to withdraw their funding multiple times in a row, collecting almost 70 million dollars before the community noticed, before withdrawing. Two options remained – end the bug and continue on as before, or end the bug and delete the transactions of the blockchain going to before the hack, so that it would be as though the hack never happened.
Here is when philosophies started to change – both changes were made. Ethereum Classic is the original, with only the bug fixed, and Ethereum is the version where the hack was erased from existence. For some members of the community, deleting the hack seemed like too much power; they did it once, and who is to say they won’t do it again for some smaller issue? It is incredibly tempting, to be able to delete one’s mistakes, but then there is no learning from them. The members of the Ethereum Classic saw the way power could corrupt and backed away, choosing to live with their mistakes and move onwards. It is a poignant thing to know that Ethereum Classic is the smaller community, with 89% of the Ethereum community choosing to stay with Ethereum at the time of the split.
From my point of view, I don’t trust that we, the people, will responsibly use the power we are given. I believe that in the blockchain if we had the opportunity to CTRL+Z our mistakes we would, and I don’t think we should be trusted with this much power. If it was possible to erase any version of what happened with the DAO and Ethereum and make sure that we can’t just erase our mistakes and act like they never happened, I would be slightly more agreeable to a system of nationalized cryptocurrency. Deleting our mistakes means that we never learn from them. Even then, the system is too easy for criminals to exploit, and with that much freedom, they could run havoc on the system. Economically, Bitcoin is a great idea, but politically and philosophically, it is too easy to exploit and gives too much power to humans, who I, a human, don’t think can be trusted with this power. The idea behind cryptocurrency is solid, and the idea of a decentralized currency is appealing, to say the least, and preferable to the use of banks, though it is much darker in some aspects. This is, however, an opinion I have adopted as a teenager, and seeing as how taxes aren’t really in my view yet, I have no idea how my ideas will change as time goes on.
Links:
https://www.torproject.org/projects/torbrowser.html.en
https://www.activism.net/cypherpunk/manifesto.html
https://www.cryptocompare.com/coins/guides/the-dao-the-hack-the-soft-fork-and-the-hard-fork/
https://www.cryptocompare.com/coins/guides/what-is-ethereum-classic/
https://www.wired.com/2015/05/silk-road-2/
https://en.wikipedia.org/wiki/Silk_Road_(marketplace)
https://www.wired.com/2015/04/silk-road-1/
Bitcoin Explained Like You’re Five: Part 5 – Macroeconomics
Niharika Agrawal 
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