A Tale of Two Cartels (and Crypto Use Cases That Matter)
I won’t pretend to be an expert on the conflict now happening in Ukraine. I would assume Russia kicking western banking cartels out of its borders in 2016 and Ukraine’s increasing enrollment with NATO has in some way propelled this conflagration to emerge but I can also think of a myriad of different variables that, through the fog of war, are difficult to take into consideration until we have more information.
That being said, I spent last evening sending various forms of cryptocurrency (mostly ETH) to friends in Ukraine who are suddenly in a state of emergency. Food has become scarce for them and explosions are occurring near their homes that are so loud every time one goes off their entire household breaks down into tears and wailing. They are terrified and, were it not for the advent of non-national borderless digital money, I would be powerless to help them.
I do not know if the ETH I sent my friends will save them. I do not know if money alone will secure them safe passage from their communities and into the western regions or across the border into Europe. All I know is, if there is a price tag on their freedom that I have the option of paying with crypto, I will pay it. This highlights a very specific problem most of the world has with crypto.
At night I send money across borders into Ukraine to help my friend and in the morning I awake to people saying crypto has no real use case, that “Russia intends to use crypto to fund its war effort,” that it “uses too much electricity,” and other myopic perspectives on crypto that are both flatly wrong and dangerously misleading.
I hear cries that Bitcoin’s proof-of-work mining uses too much electricity without realizing much of the electricity being used to mine was being entirely wasted. That is, it WAS wasted, until it was instead invested into securing the Bitcoin network (this was especially true in China where they don’t have a complete energy grid yet). Even more important to note, much of Bitcoin’s mining invested energy is coming from renewables (most notably hydroelectric, solar, and now geothermal power). Those that make this criticism never seem to grasp that the electricity is being *invested* in the network, not wasted by it, as the more electricity spent on Bitcoin mining, the more secure it is. It therefore becomes safer for large actors such as institutional investors and entire nation states to safely store value on the Bitcoin network, which in turn increases the incentive to secure the network further.
Bitcoin’s energy use is a *feature,* not a problem as it now safely stores more than $700,000,000,000 and does nearly $100,000,000,000 in transactions a day. So its electricity use is proportional to the amount of value/security it is providing to a global population of users. People who say it uses as much electricity as a nation state are missing the point.
Bitcoin and other DAO powered networks are a new kind of distributed nation state, so it’s entirely congruent. Bitcoin alone has a market cap commensurate with a mid-sized nation’s GDP and has over 100 million users. One of the clearer modern definitions of a nation state is a group of people that all use the same money. It is not ethnicity, creed, nor language that define a nation but rather the version of money they all agree to use. Welcome to the Bitcoin Nation. It borders on the Ethereum Nation and has many other provinces and neighbors to consider when exploring the emerging information age economic regions.
More immediately though this conflagration in Ukraine highlights another very specific problem that crypto solves. It allows us to express value, anywhere in the world, with no third parties having a say or a vote on the matter … instantly. This is powerful and important. Maybe not for the privileged few who have never been a refugee or who have never had their financial services frozen or taken away. However, for the billions of us who struggle with economic access, it is an essential lifeline, and when I see people criticize cryptocurrency I perceive that as a direct attack on those that are using it every day to keep their families alive and fed.
Try telling the families in Venezuela who I sometimes send crypto to, who in turn use it to buy food, that crypto has no use case. Try telling the users in Argentina and other failed economies that crypto has no use case when it is often serving as their only line of defense against runaway inflation and government tyranny. Try telling Julian Assange, who financed much of his legal defense on money sent via crypto, that crypto has no use case.
If you claim that crypto has no use case, all you are really claiming is that you see no use for yourself but to disenfranchise the millions that are using it everyday to keep their heads above water is inhumane and wildly insular. You may not see value in using a certain tool but that doesn’t mean others don’t or that you yourself may not need that tool to protect yourself someday.
Remittances alone would be enough to justify the market value of cryptocurrency but it is just a foreshadowing of what’s to come. Much in the way we are disintermediating remittance companies that have been robbing the hardest working people in the world, individuals who risk life and limb to come into developed nations where they are often treated like second class citizens, in order to earn enough money to support their families back home whom they may not see for years at a time. Companies like Western Union and MoneyGram have slowed the growth of these impoverished communities by placing a slow and expensive toll bridge between immigrant workers and their loved ones back home. Crypto upends this process in its entirety and that is just the tip of the iceberg.
It is often said that we have two legal systems. One for the rich and one for the poor. Using advances in regulation technology and merging it with crypto based payment rails we can create environments in which contracts are protected and enforced using methods that would otherwise be cost prohibitive to the average citizen. Imagine if every time you do a business deal or simply bought something from a stranger on Craigslist you were able to utilize a legal escrow service that would make sure the deal went through safely before the funds were released. Imagine if your rights and wages as an employee were maintained by an impartial system that actually paid you your hourly wage, every hour you were clocked in and on the job.
The potential benefits to society from automating all of our administrative, accounting, bookkeeping, and business deals would be difficult to overstate. The US healthcare system alone spends nearly half a TRILLION dollars on administrative costs. The US Government spends 1 billion in admin costs roughly every 2.5 hours. Are we absolutely confident these resources would not be better served being allocated elsewhere? Perhaps towards improving our infrastructure, tackling houselessness, or finally ridding ourselves of the systemic disease we call poverty?
How it’s possible to look at the emerging potential of the innovation happening in the cryptocurrency sector and think that there’s nothing there of value is beyond me but if you are still on the fence, I would ask yourself to imagine if you were a Russian Citizen. You likely had no hand in the buildup before the Ukrainian invasion and yet now you are forced to suffer because of centralized decision making happening well outside your sphere of influence. How useful do you imagine crypto might be for you in that scenario? If crypto was the only way to either receive money from friends and family who wish to help, or the only way in which you could offer help to those who need it, would you still be on the fence about the utility and importance of crypto?
For now both I and my friends in the Ukraine are happy that crypto was invented and I will continue to use it to help as many people as my own personal limitations will allow for. As is, it stands the best chance we have of protecting ourselves and our loved ones from the negative impact that out-of-control governments cause when they make decisions the rest of us simply may not be afforded the luxury of living with.
Update: After a harrowing journey and 24 hours waiting on line at the border, my friends were able to escape to Moldova, where they are currently settled into a studio apartment, using the crypto I had sent to ensure they are well fed with a roof over their heads. They are refugees now, but thanks in large part to crypto, they are safe.