I regularly come across two mythologies about Bitcoin – mythologies that allow us to celebrate our existing beliefs about how the world works.
Baby boomers will often say that Bitcoin is a dangerous and unnecessary fad, while millennials offer optimistic techno-utopian visions of how it will solve a range of social ills. Both mythologies simplify the evolution of cryptocurrency-based ecosystems.
And, as someone who studies the taxation of cryptocurrency – an intersection of state machinery with new blockchain technologies – I scowl at both mythologies.
But the baby boomer mythology about Bitcoin troubles me more deeply. This seems misguided on two fronts. First, from an empirical standpoint, Bitcoin and other cryptocurrencies offer a wide range of utilities that were not yet present a few years ago.
Secondly, on the normative level, our current system of creation and transfer of value cries to injustice; we see layers of oppression – the colonizers over the colonized, the haves over the have not, and related easy credit in certain sectors of business and housing versus the usurious terms of payday loans and credit cards.
There have been many significant developments in the cryptocurrency space over the past few years. I highlight two: a strong cryptocurrency-based savings and lending infrastructure and dense, mature and liquid markets for Bitcoin.
The rich have access to much higher rates of return than the poor. The latter can have savings of a few hundred dollars, if they have any at all, and therefore rarely receive anything beyond an insignificant interest rate for their wealth.
In contrast, cryptocurrency savings platforms such as BlockFi and Celsius offer double-digit rates. These cryptocurrency platforms also offer very effective secured loans. They often finance a loan on the same day and at interest rates much lower than those charged by credit cards.
In addition, there are clear advances in the development of mature and liquid markets for Bitcoin.
Ten years ago, Mount Gox was the world’s leading bitcoin exchange. Despite the hubbub surrounding decentralization, it seemed like most users had to deal with just one company – and one opaque, unsavory company – to trade Bitcoin.
Now, there are hundreds of Bitcoin spot and derivative exchanges.
The largest cryptocurrency exchange in the United States – Coinbase – is now a publicly traded company. The Chicago Mercantile Exchange has been offering Bitcoin futures contracts since 2017, and this week a Bitcoin Exchange Traded fund launched.
In addition, technological advances allow political experimentation – we see that with El Salvador’s decision to make Bitcoin legal tender and Ohio’s acceptance of Bitcoin for tax payments.
This last proposition failed – as experiments sometimes do – but this failure is a necessary step to come up with systems that work well and on a large scale. Some baby boomers seem to ignore such experimentation, instead preferring to imagine that the Bitcoin ecosystem is exactly what it was 10 years ago.
This selective observation may be due, in part, to different normative commitments. Billionaire Charlie Munger said in May that he hated the success of Bitcoin and that “all this damn development is disgusting and against the interests of civilization.”
Following:Ohio accepts bitcoin for tax payments
Attempts to create alternative money seem puzzling some baby boomers – people who lived on top of postwar America with easy access to good money. But they are living well while much of the world does not live well in part because of our opaque and deeply inequitable system of national currencies.
Certainly, Bitcoin is not a panacea.
But it allows socio-technical experimentation that has become a promising frontier of possibilities.
Arvind sabu is an assistant professor of law at Capital University Law School, where he teaches taxation and trade associations. He studies the taxation of cryptocurrencies.