Solutions Sans Problems
It was late 2016 and I had just finished a consulting gig for an almost acquired consultancy when I got a phone call from one of the many recruiters I had pimped my profile out to upon my return to Europe from the Middle East a few months earlier. He had a job for me he said, but it was a little out of left field. There was a bitcoin exchange that was having trouble opening a bank account and they needed someone who had for their sins, some kind of experience in financial services and a degree of technology based skills. The only issue was (of course), they had no real budget but they could pay in Bitcoin.
I had watched Enemy of the State by then and always thought that Gene Hackman’s character was the kind of person who embraced Bitcoin, beyond that I was totally naive to crypto as a whole. But there began my torrid affair with cryptocurrency in general. I remember writing down in one of my many leather bound books that Bitcoin sounded cool but never really understanding what the hell it could be used for. Turns out it was one of the handful of prescient thoughts I’ve had in my life as we sit here almost 7 years later pretty much asking the same thing. Crypto as a whole remains a set of supposed solutions dying for a problem with all the bullshit buzzwords of the last 24 months swarming around it like the lyrics to an old Iron Maiden song I first heard growing up in the desert in the 90s (Thank you Maciek, I have no idea where you are in the world but you rocked my world brother).
So let’s get some home truths out the door and into the wild. Crypto has no killer application, yet. OpenAI got ChatGPT to 100 million users from zilch in months, spawning swarms of LinkedIn and Podcast based shitposters with their how-to guides. Crypto’s sole 100 million user asset by all accounts is Bitcoin, which has been brewing since 2014. The crypto industry remains awash with generic talk of disruption and utility that has yet to stand up to real use cases en masse. Zeke Faux’s excellent piece in the Intelligencer has some great fodder that really kicked my thoughts off. What really struck me was the following observation:
“From the beginning, I had thought that crypto was pretty dumb. And it turned out to be even dumber than I imagined. There was no mass movement to actually use crypto in the real world. The crypto apps hyped as the future of finance and art barely worked. As I crisscrossed the globe, from El Salvador to Switzerland to the Philippines, all I saw were scams, fraud, and half-baked schemes. By the end, I’d find myself in Cambodia, investigating how crypto fueled a vast human-trafficking scheme run by Chinese gangsters.”
He really hits on the philisophy or otherwise of the people in the middle of the machine when he regales us with the cliques he encountered
Then there were the programmers, who were so caught up with their clever ideas about new things to do inside the crypto world that they never paused to think about whether the technology did anything useful.
At a party for a project called Degenerate Trash Pandas, I asked one coder if crypto would ever be helpful for regular people. “Why is it that you think that is important?” he said to me, in total sincerity. “I really would like to know.”
Crypto is still in search of it’s killer use case and the one most touted of financial inclusion has fallen flat for the simple reason that the crypto world and the fiat world remain intrinsically linked. You have to get through one to get to the other, and you remain at the mercy of the fiat ramps that the traditional financial system maintains. Even the biggest bullies on the crypto block have issues when banks turn them off, for good reasons or otherwise. I call it the shit sandwich.
In my mind, the marriage of cryptographic digital money and the real world really solves the financial inclusion problem that is quite frankly, a disgrade. The World Bank Findex Database estimates 1.7 billion adults don’t have access to ‘formal financial services’, that’s more than a third of the world’s population. A number barely fathomable. We’ve got here because banks, by and large, don’t want to dish out services to people who don’t make them money by taking out liability products (I know this because for my sins, I’ve been inside 2 of the top 5 banks in the UK and 1 of the top 5 in the UAE). Not having a bank account should equate to a basic human right, and a lack of access to financial services has proven to be a key factor in keeping the homeless in vicious cycle of poverty because of the often onerous ID and address requirements that traditional financial institutions have. This of course was once a huge selling point for crypto, and remains so for all the privileged douchenozzles (shout out George Parker from all those years ago) who forget that to exit or enter crypto you still need a traditional banking facility or a stack of cash and a stomach strong enough to brave the hordes of scammers out there touting increasingly sketchy crypto for cash ramps.
Giving every citizen a digital wallet that has government mandated access to basic, open banking is an issue that is being politicized because of the track record states have of using every byte of information on their populace to exert as much control (be it financial or otherwise) as possible. This basic belief belies the entire architecture of a cryptographically secure database (whilst frankly often placing more faith in the technical chops of civil servants than I personally would). Whilst a system could be architected to have an Uber like God mode, my view is that the benefits far outweigh the potential disadvantages (of course I would, I’m gently pimping my startup). This asymmetery is particularly more glaring in countries where the duopoly of Visa and Mastercard isn’t as strangled, countries where the unbanked are a fraction of those who have access to smartphones.
There are so many use cases for Central Bank Digital Currencies that would benefit developing nations, be it raising nigh on free money from their citizens as national savings bonds, capturing a share of the staggering diaspora remittance markets or simply eliminating inefficiencies in their own revenue generation or spending. It’s not the perfect solution, nor is it in my opinion, a like for like replacement for paper money in circulation, but it sure beats incel scammers pimping their shitcoins on what used to be Twitter.