The big players haven’t figured out peer-to-peer crypto either. PayPal and Venmo (which is owned by PayPal) have announced support for the cryptocurrency from early 2021. But a closer look at their services reveals that although platforms allow US customers to buy, sell or exchange cryptocurrencies– mainly invest – they cannot pay for purchases or send cryptocurrency to other users. If a “the future of money is here”, as Coinbase claims on its website, there seems to be little that ordinary people can do with money in the future.
Even though cryptocurrencies are hard to spend, it’s still pretty easy to lose, and as the industry grows, so do the losses. Without the protections installed in traditional financial systems (such as Know Your Customer or KYC, protocols that require identity verification for financial transactions), scammers are bypassing crypto investors – mostly private individuals, as the targets of all this advertising –over $14 billion last year, nearly double the amount lost the previous year.. Losses continue to grow. For example, at the end of March, Sky Mavis reported that a hacker had stolen $625 million worth of cryptocurrencies from the blockchain of its pay-to-play game AxieInfinity.
Even if their wallets are not hacked or their cryptocurrency assets are not liquidated, people face the risk associated with extreme volatility crypto markets; bitcoin price fell more than 20% in one day several times only in the last six months.
“I’m worried about access; I worry about misuse,” says Afua Bruce, social policy and technology expert and author of the book Technology to come next. “When we develop new technologies, we have to figure out what communities we are building for. Can they use it? What does sustainability look like? How does this actually empower the communities we say we build for? I don’t know if these questions were asked and answered on the blockchain.”
In fact, the relationship of the crypto industry with its community seems to be predatory. “we are in “VAGMI” is a small group of predictable players who got rich off the risks that ordinary people take. Indeed, as of December 2021. 0.01% of bitcoin holders controlled 27% of the currencyis a much more asymmetric ratio than for dollar-denominated property in the US, which is not a flattering statistic to begin with. And since they are not backed by any real assets, cryptocurrencies rise in value as the demand for them grows. As more people decide to buy, venture capitalists and crypto executives watch their own portfolios grow up and to the right. There are many uses for technology marketing: it can raise awareness of a new technology or help build a user base prior to monetization. Both of these things happen in cryptocurrencies. But if marketing convinces enough people to turn real money into cryptocurrency, it could also literally pay the industry’s bills.
Cryptocurrency companies have already turned people on their executive teams into billionaires like Sam Bankman-Fried, the 30-year-old CEO of FTX, who started his brief career in traditional finance and is now worth $24 billion. Bankman-Fried is currently the richest American in crypto, but there were six other “crypto billionaires” in the market. Forbes list for 2021 of the wealthiest Americans. And that’s just in the US; Binance CEO Changpeng Zhao, which found a new base in Dubai after China banned the cryptocurrency, was worth $96 billion at the end of 2021 (but dropped to $63 billion by early April). While the Web3 pitch may promise an egalitarian utopia, the current distribution of crypto wealth is more closely aligned with late-stage capitalism. “Capitalism is very happy to sell a real product and make a small profit on it,” says David Golumbia, crypto critic and author of the book. Bitcoin Politics. “But it’s even nicer to sell a scam. Never underestimate the power of big money and fraudulent language to convince a lot of people to do something.” And as more and more people believe what the ads paint, the wealth of these crypto billionaires continues to grow.
“Never underestimate the power of big money and fraudulent language to convince a lot of people to do something.”
What happens next in regulation will significantly affect the future of consumer cryptocurrencies. Last year, Facebook shut down its nascent cryptocurrency– Diem, formerly called Libra – after serious scrutiny by regulators. It most likely won’t be the last. Federal agencies have recently adopted moreaggressive actions against some crypto exchanges for offering what they consider to be unlicensed investment products, and in October 2021, the US Department of Justice established task force to find out how the crypto markets have facilitated illegal activities such as money laundering. In March, President Biden signed the writ of execution directing financial agencies to create a complete strategy for regulating cryptocurrencies, and like many other countries, the US is exploring the possibility of creating a regulated digital currency called CBDC (for “central bank digital currency”). These are not cryptocurrencies at all, but they can offer a similar level of efficiency. Right now, many crypto exchanges are trying to limit volatility by using private stablecoins, a class of cryptocurrencies pegged to a real asset like the dollar. If the US creates a CBDC, they could compete with these coins or even encourage the government to outlaw them entirely.. FTX CEO Bankman-Fried himself predicts that the decisions of the US Federal Reserve will be the biggest drivers of the cryptocurrency market in the coming months of 2022.
However, regulation has its limitations, as we have seen in traditional banking. With so much money pouring into crypto and so many powerful Silicon Valley players invested in its success, the industry may find a way to thrive even with severe restrictions. Five years from now, Web3 startups may still be figuring out how cryptocurrencies can be useful for ordinary people, but we will all likely feel the environmental and social impacts of this tumultuous moment for a long time to come.
While the consumer cryptocurrency still feels like a pioneer city with gold panning and snake oil traders, the non-consumer landscape presents a very different picture. Enterprises such as corporate banking, pharmaceutical giants, film development companies, and international shipping companies are already using blockchains to bring transparency and efficiency. Such efforts can bring old, slow, and sometimes paper-based processes into the digital age and even help industries meet new regulations.
Ripple, a company with over 500 employees in nine offices around the world, is one example. Like the much larger crypto-based money transfer service Paymobil, Ripple uses its own blockchain token as a bridge between currencies, allowing hundreds of corporate clients, including Bank of America, Santander and Japan’s SBI Remit, to cut transaction costs. costs caused by time zone differences and manual calculation processes.
Contrary to the radical rhetoric of its crypto contemporaries, Ripple is using the speed provided by digital currencies to improve outdated banking processes, not to replace them. In line with this “reform, not replacement” stance, RippleX General Manager Monica Long sees regulation and even CBDCs as part of the evolution of blockchain for business and financial transactions in general over the next few years. “Customers and consumers alike will benefit from improved infrastructure, user experience, regulatory clarity and interoperability as crypto becomes a critical element of the new norm in finance,” she says.
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So far, the most industry-transforming use case — although perhaps the least cool — might be the MediLedger Network and its custodian organization, Chronicled. In 2013, the US government adopted Drug Supply Chain Security Law, stating that by 2023, the pharmaceutical industry should establish a digital system for tracking prescription drugs to prevent counterfeiting. Healthcare and the life sciences are notorious for ancient incompatible systems, and the demands of the law demanded an entirely new way of doing business. Chronicled CEO Suzanne Somerville wondered if a private blockchain — a closed, controlled system, as opposed to public blockchains like Bitcoin — could offer a secure, shared environment where pharma players like Pfizer and Gilead could work together. After years of working on business rules and goals, Chronicled launched the MediLedger Network, a group of large pharmaceutical companies, in 2019. Chronicled provides them with a range of services, such as a tamper-proof index of verified product IDs and access to real-time public price updates. These narrow decisions may not be what people usually associate with blockchain technology, but they are crucial in pharmaceuticals. “Almost everyone thinks about these ultra-high ideas, and they are hard to get to,” says Somerville. “But there are a lot of less sexy things that are actually foundational.”
The use of Ripple and the MediLedger blockchain could mean safer medicines and faster money transfers for ordinary people without requiring anyone to create a digital wallet or exchange coins. As for consumer cryptocurrency? If the industry’s deafening claims about the financial revolution sound too good to be true, it’s because it is. Until it offers affordable everyday use of new coins and extensive fraud and fraud protection, we are all better off sticking with cash and traditional banking systems than joining the parade of crypto boosters marching across our screens and cities.
Rebecca Ackermann writer, designer and artist based in San Francisco..