Cryptocurrencies: Poison or Panacea?

I thought it would be interesting to compare two contrasting articles I have read about Bitcoin and other cryptocurrencies and their predicted impacts on ‘business as usual’. I think it is fairly uncontroversial to speculate that cryptocurrencies are going to be disruptive to existing banking and monetary systems, even to a layman trying to get an overview of the subject like myself. I am starting to discern, however, two trends in the things I am reading on the subject.Nozomi Hayase of

The first trend is basically ‘Bitcoin and related currencies are going to free us from the stranglehold of the existing financial infrastructure and open the doors to a truly P2P way of doing business with each other’. A good example of this type of article would be ‘Blockchain revolution: open source democracy for the 99%‘ by Nozomi Hayase of

Some excerpts:

“The revolution in this era may not need pitchforks, as the ‘peasants’ can just stop paying for the plutocracy.”

The Bitcoin network empowers those so called the other six billion, the unbanked, underbanked and exploited. In the West, Bitcoin is often seen as an instrument for speculation, yet it can actually be a tool for liberation in the Global South.

Transition into blockchain currencies has the effect of freeing people from monetary control and centralized economic hegemony. The blockchain-based borderless currency is such a game changer that it could foster a free flow of movement away from fiat debt, creating a kind of global jubilee, making personal and national debt embedded in the old fiat system increasingly irrelevant. It also could stop printing of money that is often used simply for building weapons and maintaining constant war. A shift into asset-based currency could help balance the red ink of the growing empathy deficit, transforming society into a global network of abundance.

In contrast, we have the second trend in reporting on cryptocurrencies, which we could call ‘Hang on a moment, Bitcoin is great and all, BUT…’.
Matthew Slater of
A good example of this is the article ‘What happens after the crypto-revolution?‘ by Matthew Slater of

Some quotes:

Bitcoin may disintermediate banks, but that will not change the economy, save the environment or make society fairer. One peaceful way to prevent our governments driving us to collective suicide is to get behind a new generation of P2P credit projects.

Many entrepreneurs and activists are eager for Bitcoin to ‘disrupt’ the banking system, but adoption is sure to be slow while the price is so unstable. There’s no solution to the volatility problem, and lets face it, most of the money which goes into Bitcoin is from people looking to make a profit from volatility – speculators. They do not care how well Bitcoin might function as money.

Bitcoin’s innate purpose is to disintermediate the banks as a global payment system and bring the cost of global payments to near zero. However, adopting Bitcoin as a national or even global legal tender currency would do little to change the balance of power and build a more equitable society.

At this point, the nascent state of cryptocurrencies is really reminding me of the early ‘Wild West’ period of the internet around 1995 – 2000: anything seems possible, and freedom seems just within reach. However I think we need to learn the lessons from that time: elites will remain elites and will use their power to warp reality to their way of thinking. We saw it especially with ‘Don’t Be Evil’ Google spying on us and passing our data to any interested party after we naively entrusted them with all our emails (and much more). By the way if you didn’t, if you were one of the few naysayers who warned against it, then I take my (tinfoil) hat off to you. We have now been warned, and to me, while applauding a great deal of the sentiments expressed in the first article, I tend to favour the more cautionary perspective of the second, and especially its upbeat conclusion:

If money was backed by your reputation, and issued interest free in the quantity that reflected our trust and interdependency, we could expect the economy to display entirely different characteristics:

  • 30 year mortgages would become 10 year mortgages
  • prices would plummet as interest was subtracted right through the supply chain
  • zero unemployment
  • two or three days working week
  • No inherent ‘need’ for growth
  • governments wouldn’t be slaves to banks!

The author goes on to recommend several promising truly P2P credit alternatives (including that favoured by the Cooperative Integral Catalana, with whom the P2P Foundation has recently entered into partnership.

In conclusion, I think we need to embrace the liberating potential of cryptocurrencies and other new P2P monetary systems, meanwhile keeping our eyes open for attempts by the status quo to subvert them to their own ends.

Won’t get fooled again!

4 Comments Cryptocurrencies: Poison or Panacea?

  1. AvatarNozomi Hayase


    Thank you for initiating this space for dialogue. Your conclusion referencing attempts by the status quo to subvert crypto-currencies to their own ends raises an important point I feel needs to be addressed. But before I go into it, I like to first describe what I see as the most revolutionary potential in this unprecedented Blockchain technology.

    Satoshi’s vision of Bitcoin, the core of the invention of this technology is about distributed trust, or the ability for us to organize a society through truly peer-to-peer consensus without having any third party. We can innovate. We can exchange. We can associate with anyone we wish and work together through mutual aid without anyone’s permission.

    I see this is similar to a protocol of consensus and the spirit of “In Each Other We Trust” that emerged during the Occupy Movement. With Bitcoin, we can do consensus (regulated through algorithm) at a global scale. We tend to focus on Bitcoin as a currency but it is so much more. In a sense, I see its potential to be anything that we can collectively imagine and agree on that can then be built on distributed trust.

    Bitcoin as a currency might not be a perfect design and some are concerned about the percentage of reward carried by the first miners, the so called early adopters. It might be possible that 20 years from now Bitcoin will become something different than it is now and we might be placed into the position of challenging its subversion. But at this point no one can point to concrete examples of that subversion taking place.

    I would rather like to challenge the existing highly controlled financial system and the 1% that is benefiting from it, as Western hegemony not only subjugates its own people in debt servitude, but also creating economic apartheid for the other half of the global population that are unbanked and underbanked and are awash in exploitative poverty.

    This all is being challenged with Bitcoin. Like I stated in my article, Bitcoin is not just about speculation and investment in the West. It is about freedom from financial oppression everywhere else. I have not found anything near to Bitcoin that has this potential to disrupt the existing financial system.

    I am not just talking about disruption in banking and remittance, but about the power of innovation and of peer-to-peer trade and exchange that could grow with a network effect. Bitcoin is not simply absorbing or replacing the current economy. It is generating its own economy. Also, Bitcoin not only can disrupt the payment industry monopolies, but with it we can also do micro-payments, crowd-funding and crowdlending.

    It is important to note that the Bitcoin technology emerged when there is an unprecedented scale of impending currency crises and also coincides with the end of the oil age and the petrol-dollar. Whether Bitcoin exists or not, the U.S. petrol-dollar hegemony is running out of time. Bitcoin only accelerates this process.

    You used the example of Google to point how the internet could become a tool for emancipation or one that can be turned into a dystopian nightmare. The Internet is currently both. No one can deny it changed the world and upset the balance of power regarding the flow of information. It could be co-opted or to some degree subverted into a tyrannical tool. After the Snowden revelations we all know there has been a militarization of the internet taking place. The Internet has in a sense become a battleground.

    The same thing can be said about the Bitcoin ecosystem. There are potential forces of centralization through regulation, even at core levels of its development. It is important to recognize outer forces that may work to turn it away from Satoshi’s vision and make it to into something else.

    Google supposedly started as a progressive company and we saw what happened to them. Commercial interests are pressuring any large corporation to collude with the state/corporate power. The same could possibly happen with the Bitcoin Foundation. Yet would such an organization be allowed to rewrite the code without a consensus of the miners? That is an interesting and complex question.

    Nevertheless I do not see any potential threat regarding centralization of Bitcoin to be a reason to shy away from cryptocurrencies, or a reason to criticize and dismiss what it is already bringing to the world. We know how the internet has been invaded and it is not as free a space as it used to be, but will that make us not use internet and has that truly dampened the paradigm shift in information and transaction freedom that the open source protocol of the internet brought? For instance Snowden revelation informed the public about mass surveillance and it helped many of us take the situation seriously. Many people and organizations like EFF are fighting to keep net neutrality.

    In a similar way, I see this at a point where a greater solidarity and union will be made. In a sense, it is like sand in the oyster that makes Bitcoin stronger and live up to its true potential. After all, I believe we are all fighting for freedom from the corrupted force of institutional hierarchy, this force of centralization. This is where I feel we can unite together and build a network of truly decentralized society.

    Bitcoin needs all of us who guard from any forces from outside whether it is state or corporations that try to subvert and control it. It needs those who commit to its original vision to steward it. Perhaps it is similar to how people like Snowden and Manning fought to uphold the Constitution and defend the public interest. To me, they were true to the spirit of equality in the Declaration of Independence, which is the foundation of the US Constitution. To me, Blockchain’s distributed trust encompasses this spirit of equality and with it we distribute it to the world because this ideal “all men and women are created equal” is truly universal. Bitcoin’s first application as a currency is like the First Amendment. We can build more apps, a set of rule (law) through consensus.

    I learned about the potential of Bitcoin technology greatly from Andreas Antonopoulos. I find him truly gifted with his ability to speak to the essence of Bitcoin in an engaging and informing manner. If you are interested in gaining more depth about Bitcoin, I highly recommend you exploring some of his work.

    I believe we all want the same thing, decentralized solution to the hierarchical problem. I think a peer-peer credit project is interesting and it is good alternative at a local level that can be maybe used in combination with blockchain based crypto currencies. I also think we have actually a lot we agree on, especially the core idea of the blockchain revolution. As Matthew, the author of the article “What Happens after the Crypto-Revolution” pointed out in the end he was referring to the need for blockchain technology!

    Thank you for giving me this opportunity to share my view.


  2. AvatarGuy James

    Hi Nozomi, and thanks for the detailed and thoughtful reply.

    Yes, we definitely want the same thing – a ‘decentralized solution to the hierarchical problem’, however I remain unconvinced that Bitcoin – in its current form at any rate – provides the answer. I love the spirit of “In Each Other We Trust”, as embodied by Occupy, but I think we have to remember that big banks, billionaire speculators, and nation states can also use Bitcoin… do we trust them? It’s not like a tight-knit group of activists working together to overthrow an injustice.

    We see in the so-called ‘sharing economy’ how corporations use our naivety and our desire for things to be righteous and sustainable in order to profit. Ok maybe AirBnB is better than staying in a big hotel chain, but let’s not kid ourselves it represents a truly P2P model. Facebook is a great tool, but they are making their billions by monetising our P2P relationships with each other. Obama did it too, partially crowdfunding his campaign, promising all sorts of progressive things… and people wanted to ‘Believe’ so badly they fell for it again. I am suggesting we go in with our eyes wide open this time.

    Much has been made of Bitcoin’s potential for decentralisation but actually it is very centralised and “Half of all bitcoins belong to around 927 “individuals.” If those figures are right, then half of the world’s 12 million or so bitcoins is held by a tenth of a percent of all accounts.”. I have actually seen a lot more evidence of Bitcoin becoming centralised rather than fulfilling its promise of decentralising banking, although there are some counter-examples.

    You make a good point about the US petrodollar being disrupted by Bitcoin – this could indeed be one of its most important effects, and could be difficult to stop, especially if things like Dark Wallet take off. So it’s certainly not all negative, however as you point out, the internet has ‘become a battleground’, and I agree that this will be the same for Bitcoin, with various forces seeking to use it for their own ends.

    The more problematic side of Bitcoin itself, as opposed to cryptocurrencies in general, is its similarities to gold, pointed out here by Dmytri Kleiner. It can be hoarded and as he notes,

    “The critical feature required of public money is that we can socially determine how much of it there is, and how much of we want to apply to public purpose. We need ways to create and destroy public money so that we can can have a counter-balance to private activity, to manage cycles, to counter-balance economic sectors, and to socially pursue public objectives, such as health, education, and justice.

    Thus, Bitcoin’s innovation in terms of creating a networked form of commodity money is not useful in creating networked forms of public money, and as a result it does not create a way for networked public forms to replace the current State forms.”

    I have to confess I am a little bit out of my depth when it comes to these in depth critiques of monetary theory but I get the general idea – that as there is a limited supply of Bitcoin, the quantity can not be socially determined as needed. Add to this the volatility and the advantage of the early adopters, which appears not to be trivial, then there do seem to be some problems with the way Bitcoin has been structured. I believe that Namecoin and possibly Dogecoin, among others, have tried to mitigate these possible pitfalls in the way the currencies have been designed. It’s all a learning process and I do believe that cryptocurrencies in general can eventually allow us to at least partially free ourselves of the stranglehold of the current financial system. After all, the real moment when Bitcoin took off was after the blockade of Wikileaks by the various banks and payment processors. Anything which allows movements subversive to the status quo to survive has to be a positive force for creating a decentralised future.

    So overall I think we agree much more than we disagree. I will check out your recommendation of Andreas Antonopoulos, thanks for that. We are having a lot of these kinds of discussions on the P2P Facebook page, and there are a lot of people there who are much more knowledgeable about it than me, so if you’d like to join us you are more than welcome.

    Thanks again,


  3. AvatarMitra Ardron

    Yes – its good to see some debate starting to emerge. There has been lots of good work on alternative currencies, and lots of wishful thinking over the years. BitCoin’s designers have clearly ignored both. The trouble in the progressive space is that people have jumped on BitCoin’s success and presumed it would do everything they would LIKE an alternative currency to do, rather than look at its designs and ask WILL it do that.

    For example – speculation is one of the biggest problems with the international money system, there is nothing in BitCoin’s design to get rid of speculation, and in fact many constraints removed, so its value is exceedingly volatile, making it totally inappropriate for one of money’s key functions – storing wealth.

    Compound this with the reality that wherever wealth is stored, someone will try and steal it – and Bitcoin’s lack of oversight, and untested structures also make it a poor pace to safely store wealth – as witnessed by the major thefts in past months.

    And its (current) lack of wide acceptance means it isn’t very useful for money’s other main function – transactions – unless the benefit of hiding from the real money system outweigh the disadvantages of volatility and difficulty of exchanging.

    Of course these two create a vicious circle where lack of viability for storage of wealth or transactions increase the percentage of usage that is speculation, further increasing its volatility.

    Many of the other claims (as correctly quoted in that article) are obvious rubbish, there is no reason that Bitcoin will stop governments taxing us to spend on weapons as of course they’ll just find a different way to tax us.

    I think the one upside is that the increased buzz about alternative currencies provides the potential for the design of a decent one. I’m not an expert on how that should look – and from what I see even the reputable experts don’t necessarily agree with each other, but I’m sure that they can all agree that it isn’t anything like Bitcoin.

  4. AvatarJohn Rogers

    Blockchain YES. Bitcoin NO.

    The blockchain itself has a lot of potential to disrupt many current ways of doing things:!KuyDl

    But Bitcoin simply models the existing corrupted models of scarcity and speculation and shows very little evidence of establishing itself with millions of ordinary people as a credible medium of exchange for everyday exchanges. Its fans claim they want it to change the world and then accept its absolute lack of transparency as a virtue when it seems to be a gift to arms dealers and anyone who does not want us to know their business.

    I would far rather see the blockchain technology adapted to create transparent, sufficient (in this case the opposite of scarce) currencies based on existing models like mutual credit that we can all use with confidence.

    “Replacing trust with algorithms” as Bitcoin’s supporters claim is empty rhetoric. Every human community everywhere has always depended on trust as its bedrock. What we need to design are new forms of trust and transparency for our current situation in 2014, where the most pressing agenda is simply the Sustain Ability of the human race. Any currencies that mimic the old UN-sustain-able currencies simply will not cut it.

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