What can the British 1831 Truck Act teach cryptocurrency pioneers?
In 1831, the British Parliament passed the last of a series of acts that outlawed The Truck System. What was The Truck System? Well it was essentially a labor abuse perpetrated by the powerful employers of the day, commonplace in industries from textiles to railways. Employers would pay their workers not in pounds and shillings, but rather with goods (commonly food, drink or clothing), or tickets, vouchers or tokens that could only be used in a store run by the employer themselves.
The Truck System was notoriously open to abuse. Employers would massively overvalue the goods given to workers for their days work. Or they would charge over-inflated prices in the company store where workers were forced to spend their tokens. The effect of these abuses was that employers reduced their wage bill at the expense of their workers.
Although many attempts had been made to outlaw these practices, the 1831 act finally succeeded by enshrining in law that wages must be paid in the “coin of the realm”. The coin of the realm, Great British Pounds, Shillings & Pence, had two important safeguards against the abuses of the Truck System. Firstly, it was not issued or controlled by your employer. Secondly, it could be redeemed in any store, or with any merchant, not just the store controlled by your employer.
What relevance does this have to the modern world of crypto? Now, I am no apologist for the many well-documented abuses of fiat currencies by governments. Indeed in Satoshi’s original vision of a decentralized electronic payment mechanism we find, I think, overlapping social ideals with the British labor reformers of the 1800s. Assuming Bitcoin remains truly decentralized and continues to grow its universal acceptance, then it would clearly satisfy both our requirements to prevent abuses such as the Truck System. Employers cannot control issuance or redemption of bitcoin. In fact BTC should be one step better, as even nation states can’t manipulate the currency.
However as we move from the ideals of bitcoin into the world of altcoins, ICOs and permissioned blockchains, things become much more opaque. To help us cut through the complexity, let’s consider a hypothetical future scenario;
The AMZN coin, launched by a large online retailer in a future ICO. Tokens are snapped up instantly by speculators and customers alike in a frenzy of PR and FOMO. The token sale is a phenomenal success, the world’s biggest, and overnight a thriving token economy is born. The tokens are of course a “utility token” designed to be redeemed in the AMZN store for goods and services, as well as distributed as incentives to loyal customers and supporters of the company. Staff are also issued with tokens as one-off rewards as it’s only fair they share in the success of the token sale. Before long worker’s bonuses are paid in tokens and as the tokens continue to appreciate there is a noisy clamor from workers to be allowed to substitute part of their fiat salaries for tokens.
The fervor of the token sale continues, extended with a constant series of positive announcements including new exchange listings, new platform functions and general cries of “to the moon”. And while the price continues its seemingly inexorable rise, company and workers alike are very happy with the arrangement. However, after the first year, the tokens suffer their first price pull back and we move into a new phase of volatility. Those post token sale peaks are not seen again.
It’s only now that workers, unions and regulators begin to check the details of the tokens they are by now receiving as significant portion of their wages. As is common with most ICOs, the company retained 50% of the total supply. No more tokens can be minted, but the company doesn’t need to mint more, they have a pool consisting of half of all the tokens ever created. They are free to do whatever they want with these tokens, including, if they choose, massively diluting their value. The company also controls the only place tokens can be redeemed for goods, the company online store. As such they have complete freedom to charge over the market rate for those paying in tokens, if they choose.
Now I’m not saying this will happen, or even that anybody is even trying to make this happen. But it’s a window into a possible future. Any token, coupon or voucher system that is controlled by a centralized entity is at risk of abuse. Just because it’s on a blockchain does not mean it’s safe from centralized control. Almost all ICOs to date fall into this category, in my opinion. As we build a better future together with crypto currency, we must ensure workers, particularly low skilled, vulnerable workers, are protected.
We have a duty to learn from those early labor law pioneers of the 1800s.
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