In my previous post about cryptocurrencies, Cryptocurrencies considered harmful, I tried to express my disappointment with the poor favour to the goal of decentralisation that the Web3 and its entanglement with cryptocurrencies are doing.
To be honest, I expressed a bit more than disappointment, but my opposition to what I believe is a wrong move for all of us as citizens. Monetising citizenship, or social relationships in general, is evil, and we should not let ourselves gain by greed behind it.
That said, cryptocurrencies have their bright side too, which is what this second post is about. Before diving into it, allow me to repeat that I have absolutely no ties to cryptocurrency companies, nor do I have any cent invested in anything related to crypto whatsoever.
No matter the benefits I see in cryptocurrencies, I don’t believe that they reached the point in their development at which I would like to get involved.
Let’s check out these latter ones so you can decide for yourselves.
It’s not decentralisation, it’s decoupling!
Everyone who remembers the Lehman Brothers cascading effect on virtually the whole world will perfectly understand how evil coupling in the financial system can be and has been several times in the past. So it should also be crystal clear that any kind of decoupling within our financial system institutions, private and public, would be highly beneficial.
The contagious power that our current financial system holds is due to the tightly intertwining that all its constituents keep with each other and with the public governance agents that (allegedly) watch them. In plain words, recognising some banks (or whatever institution) as “too big to fall” is a strategically wrong move because provides their managers with undeserved leverage.
Europeans have another example these days in the long relationship with Russia based on our energy weakness and poor decisions than transformed this weakness in power for evil people.
This is why the fact that the governance of every cryptocurrency (and of every one of their Web3 applications) is designed to be self-managed, and independent of the others, is beneficial. For it means that, should a disaster come, contagion could be severely contained.
We have seen proof of the contagion containment power inherent to cryptocurrencies last summer with the fall of LUNA, Celsius, and others. Anyone interested in cryptocurrencies was capable of monitoring the risk and solvency of every crypto platform in real-time.
On the other hand, this level of full transparency is unknown within our conventional financial system precisely because the high level of coupling among all their constituents turns every piece of data into a political asset.
The ability to contain the contagion that cryptocurrencies hold is what makes me think we should stop talking about decentralisation (which, as I’ll show in a second, is a feature) and start talking more about decoupling.
Decentralisation is a feature because cryptocurrencies are designed this way. It is a decision every cryptocurrency proponent makes when choosing ways of governance for their platform. Which means they might decide otherwise. It might break some hearts, but technically speaking there is nothing preventing cryptocurrencies to be dominated by a few, or just one, investor. In fact, as I showed with data in my previous post, this is exactly the case.
Decoupling, on the other hand, is an emergent property: it is a consequence of how cryptocurrencies operate. Operationally speaking, the technology behind cryptocurrencies has limitations that make it impossible for them to expand beyond some limits. And, at the same time, their open nature facilitates that discomfort users of any crypto platform just leave and settle on their own whenever they want.
This, by the way, is what happened once the Merge in the Etherium mainnet successfully reached its conclusion.
Decoupling is also key because empowers us with an agency we never had (and we never will within the conventional financial system) which is to use a different currency in different contexts.
Let’s think about it for one second. There is no reason why we should use the same currency in all our transactions. It looks convenient, indeed. However, just imagine the power of will that comes out of deciding what money is put in what system. You may have money for paying a mortgage or a flat rent, completely separate from the money you use to pay for groceries.
It would be like having a passport of every country and using one or another on your will and without any global institution of governance deciding for you because every passport issuer would have no institutional relationship with the others.
Do not forget that the money you have got available to spend is power, and you transact with it every time you purchase or pay for something in return. Using a different currency for groceries and similar goods empowers your local economical system, protecting it (and you) from big corporations and even government abuse.
As I said, this power should be properly called decoupling because it is this separation of financial systems that yields agency to all of us. Decentralisation is just about governance, something most of us are not that interested in. Even centralised cryptocurrencies might perfectly operate without harming their users, thanks to the fact that they can always leave.
How could you leave the current financial system, when there is only one?
Even in greed, there is some good hidden: calling talented people to come and work on something new. This is the case with cryptocurrencies. And with talent comes innovation: new ideas and approaches that make it super hard to keep up with all the innovations popping up in the crypto ecosystem every week.
Indeed these innovators are not innocent: they are in crypto for the money, and the technical challenge is a secondary motivation. However, this is everything but new. We can see it everywhere around us just by turning our eyes to the Military industry, the Pharma industry, and so on and so forth.
We even monetised our fight against Climate Change!
Talent is scarce. The talented people who are working in crypto are not working on other things. This means that there is an opportunity cost here, a cost that all humanity is paying. That is why I am hoping some talented people will find other interests beyond money to pursue other challenges than crypto.
However, that these talented people are not working in some other industries (think of the ones you hate the most) is good news. And since this innovation is operating in front of us thanks to being decoupled from institutions, it means there is transparency in the cryptocurrency ecosystem that honestly feels uncommon.
Everything that happens in crypto is tweeted 24×7. This makes investing in crypto far safer than in any other market.
At the same time, nothing in crypto happens without being logged and signed. Every transaction is monitorable. The idea that cryptocurrencies allow criminals to punch and flee embroiled in complete shadow is a fallacy. They use real-world means for that. Anonymity is a fantasy myth that media uses for entertainment purposes.
I am convinced that maturity is far away in the future of cryptocurrencies. Years in the future. By the time it comes, the picture we have right now of them will have changed enormously. This means that there are plenty of ideas we simply don’t know yet about how cryptocurrencies and Web3 (if its current monetised incarnation survives) will work.
In summary, even though I will not invest in them, and I’d rather spend far less money on them to pursue alternative endeavours, I am inclined to believe that cryptocurrencies deserve to be developed further, for the benefits I mentioned above, or for others that I never achieved to realize they have.
Copyright: the artwork at the top is a picture of a Calabi-Yau manifold, a mathematical structure relevant in the context of String Theory in Physics. It is taken from Stewart Dickson’s space at Redbubble without permission.
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