HackerNoon.com
Published in

HackerNoon.com

The War For The Soul of Cryptocurrency

Under The Guise Of “Protecting The Consumer,” Crypto Regulation Might Destroy All That Is Good

The Recap

First, a quick recap. The last 11 years — free of governmental intervention and regulation, undisrupted by borders, open to all and highly competitive — showed us what is truly possible. We saw an obscure internet concept turn into a global reality. We saw innovators and free thinkers flock to the digital decentralization movement. We saw financial markets open up to those who never before had access. For the first time we saw people recognize the full potential of decentralized technology in the digital world.

The Vision

One reason that the vision was lost is that it was never well articulated to the public. The big picture is in the continuation of a 4-century-old idea. The concept of free market, the ideal of liberty. Modernity has been defined by a movement towards decentralization, from collectivism to individualism. First, it was the disruption of the centralized structure of the Catholic Church by the equalizing forces of the Protestant Reformation — a bloody affair. Then it was the evolution of empires to nation-states and the right to national sovereignty and individual self-determination. Next came the decentralization of our political and economic systems: capitalism and democracy replaced class fueled monarchies.

Venezuelans pour bills onto the streets

The Threat

In today’s debate, the bad is overshadowing the good. The crash has shown us our weaknesses and failures and instead of fixing them and continuing — better prepared — on our course, we are turning to controllers who promise us security at the cost of freedom. We see this today in how those who once celebrated the concepts of decentralized technology are turning towards regulation, towards centralization. We see it in the promotion of centralized chains (at times concealed lightly behind terms like enterprise blockchain, permissioned chains, or tokenless chains). We see it in the call for regulation to protect us from the pains of growth. We forget that blockchain is about decentralizing technology. We forget that this kind of development is an arduous and challenging one.

Why Not Centralization?

The danger of centralization is that it hurts individuals and stifles innovation. For decentralized technology, centralization will only halt progress and destroy the long term goal. It’s really obvious. Cryptocurrency has reached where it is today (and despite an enormous crash, its current position is still an enormous achievement) because each party in the market was left to make his/her own decision free of any coercion. Innovators were left to innovate, educators to educate, programmers to program, and yes, even scammers to scam. But we achieved our progress because each was willing to take a risk, whether motivated by greed or ideology or peer pressure and fund a never before conceived idea. And it’s easy to take for granted the progress we’ve made. But if we make the mistake of using short term solutions to curb short term problems (regulation to solve corruption and greed), then we will hinder our ability to achieve long term progress.

If we think that the downsides of today’s crypto market have too high a cost, we must ask ourselves what will be the consequences of overregulating the market and confining blockchain to only centralized/controllable applications. They are certainly much higher.

We must continue to fight regulation rather than embrace it. We must resist even when many of the previous supporters of the technology have consigned themselves to the “we need regulation” argument. They’re driven to this conclusion because they’ve decided that the market is broken (evidenced by corruption or crashes or scams) and that the only way to solve it is through governmental intervention. But what they really want are “predictable” blockchains. “Controllable” blockchains. Blockchains that fit into our current financial, economic, and social frameworks. They want “safe” innovation. But considering that blockchain is the realization of digital decentralization, controllable and predictable would be death blows. We must accept that innovation is difficult. Success and failure are two sides of the same coin and crashes don’t signify that the system is broken — but rather that the system is alive.

What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. — Milton Friedman

The downsides and risks voiced today — in legislative bodies, on Twitter, and in articles — aren’t imaginary. Crypto did attract the worst of the worst. But these very downsides are the consequences of a system that will ultimately progress crypto and blockchain technology and offer decentralized alternatives to our digital landscape. They are the consequences of a system that transfers responsibility to every individual and gives them the freedom to act as they might with no constraints — to invest in whatever they deem worthy. If we think that the downsides have too high a cost, we must ask ourselves: what will be the consequences of overregulating the market and confining blockchain to only centralized applications? They are certainly much higher.

Now What?

Criticizing the current limitations is easy. Offering a solution is difficult. As Dale Carnegie once said, “any fool can criticize, complain, and condemn — and most fools do.” So let me try to offer a path forward.

  1. Private Ownership — Regulation is there to protect the rights of private ownership.
  2. Competition — Regulation is there to ensure fair competition, mainly by enforcing anti-trust laws and breaking up monopolies.
  3. The Tragedy of the Commons — Regulation is there to protect “common goods” from exploitation (i.e. to prevent the “Tragedy of the Commons.”
  1. Private Ownership — Digital assets are virtually tamper-proof and, if managed responsibly, require no outside intervention to protect private ownership.
  2. Competition — The open-sourced, decentralized nature of the technology effectively prevents monopolies. Ethereum might have largely monopolized the ICO rush, but anyone can (and some have!) fork Ethereum and entice unhappy users to a new platform. Blockchain-based social platforms would have none of the problems of Facebook, where moving to a new network means leaving all your valuable data behind. With decentralized social networks, users maintain control over their data and can seamlessly jump to a rival network. It is virtually monopoly-proof.
  3. The Tragedy of the Commons — Finally, the current “common good” laws don’t really apply to digital assets. Where they do apply, they will continue to hold legal power (i.e. you can’t tokenize and sell a public park without federal permission).
No monopolies here — source CMC

Lose The Battle, Win The War

For the last 15 years in Venezuela, it was illegal to trade foreign currencies. In the Soviet Union, it was a crime that was punishable by death. In true free-market spirit, crypto will reduce the ability of governments to maliciously and artificially control the economic lives of their citizens. The greatest achievement of crypto may very well be the extraordinary way it forces change upon regulatory bodies in today’s economy. But more than anything, we need to be ready for this economic freedom. We need to accept that it is our responsibility and our responsibility alone to manage our money wisely.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store