Money Reimagined: Crypto's Diversity Problem

Technology on its own doesn't ensure inclusion. People do. There’s nothing intrinsically fair about a blockchain.

AccessTimeIconJun 26, 2020 at 4:49 p.m. UTC
Updated Dec 10, 2022 at 9:16 p.m. UTC
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A few years ago, when MIT Media Lab researcher Joy Buolamwini was leading an interactive digital art project, she found the facial recognition technology it employed was far better at recognizing her lighter-skinned MIT colleagues.  

The discovery sent Buolamwini on a mission. She founded the Algorithmic Justice League and started doing research that builds awareness about biases in software algorithms. One paper she co-authored with Timnit Gebru, the technical co-lead of the Ethical Artificial Intelligence Team at Google, found facial-analysis software had an error rate of 34.7% for dark-skinned women versus just 0.8% for light-skinned men. 

Facial recognition is the tip of the iceberg. Biases are inherently present in all forms of artificial intelligence algorithms, those digital machines that increasingly run our world. 

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Over the years, an extreme lack of diversity in computer engineering has left white men with a disproportionately large influence over all software design. Unconscious bias – now, finally, a topic of great discussion across the United States – means they end up creating products to serve the needs of people like them, not necessarily those of others. 

This is a vital issue for the algorithm-dependent cryptocurrency and blockchain industry. If this technology is to have a broad impact on the world, it must engage a wide population. 

If bitcoin, for example, is to become a global currency, if it is to become a monetary standard accepted by people of vastly different backgrounds, it must be accessible and valuable for a full cross-section of those groups. And if distributed ledger technologies end up providing the data architecture in “smart cities” or enabling our health systems to manage privacy-protected data for fighting pandemics, we better make sure these platforms don’t discriminate against one group or another.

Diversifying the dev teams

The need for diversity in this industry was the central theme in a virtual symposium held last Friday by Cleve Mesidor, founder of the National Policy Network of Women of Color in Blockchain, which coincided with the Juneteenth emancipation holiday. The panelists’ message, according to CoinDesk reporter Nathan DiCamillo, was that while crypto can help citizens opt out of “a racist financial system,” for that to happen “Black people and people of color must be part of the development of the technology.”

Calls for diversity like these are often met with retorts such as “bitcoin doesn’t care about the color of your skin" or “blockchains are based on math, not flawed human processes.” It’s a naive perspective. The code for the protocols that dictate each blockchain’s rules, and for the smart contracts and apps built on top of them, are written by people, not by some universal law of nature. And, in the blockchain community even more so than in tech broadly, those people are predominantly white men. 


Don’t think, either, that blockchain technology is protected against bias by its preference for open-source development. A codebase can be fully accessible but if there isn’t a sufficiently wide group of skilled people reviewing and contributing to it, biases will persist. 

It’s true, this technology has the potential to help people overturn some of society’s ingrained, structural injustices. As investor and active #BlackLivesMatter supporter Mike Novogratz says, “Crypto is about systems change.” But a decentralized system is only as inclusive as the platform on which it is built. There’s nothing intrinsically fair about a blockchain. 

Action plans

A key problem is the digital divide. Impoverished communities of color worldwide have significantly reduced access to the information tools needed to participate in blockchain and crypto development.

Addressing these imbalances is vital for crypto adoption. While it’s exciting to see usage rates grow in places like Nigeria and Venezuela during the COVID-19 crisis, we must also recognize the painful circumstances leading these people to bitcoin and stablecoins: economic breakdown, severe dollar shortages and failed public health systems. And in the grand scheme of things, those newly increased numbers are a tiny proportion of the total developing world population. We have a long way to go before we bridge the crypto divide.

A natural starting point is education. While a number of interest groups have sprung up to support the expansion of blockchain knowledge among women and people of color, the industry must do more. Funds should be dedicated to high schools and colleges serving underprivileged students about the technology and the opportunities it poses. Online courses and self-training programs should be designed for and delivered to minorities. And, of course, crypto companies should also be hiring from those communities. 

Equally important, media organizations like ours and people like me who work at them must learn to identify, address and fight against our own implicit biases. The stories we write are vital to how information is absorbed about this technology. We need many more of them to be for, about and by people of color and women. 

Like all media, crypto newsrooms and their management must confront this diversity imperative head on. CoinDesk is no exception. Only with a broad spectrum of voices across race, gender, geography and economic background can we properly expose the world to the opportunities and challenges posed by the technology we cover.

It’s all about the debt

What a difference two months of COVID-19 makes. 

This week, the International Monetary Fund made an interim update to the quarterly World Economic Outlook Report it originally released in April. The headline item: The IMF now expects a massive, unprecedented 4.9% decline in world economic output for 2020, versus the 3% shrinkage it previously predicted. That’s an additional loss of $1.67 trillion from what the World Bank estimated as the size of the global economy in 2019. You have to go back to the Great Depression for economic malaise on this kind of scale. 

What’s just as striking, and arguably more worrying, was the accompanied forecasts for government debt as a result of this downturn. The IMF now expects net government borrowing in advanced countries to spike to 10.9% of GDP in 2020 from 3% in 2019 and that it will drop back to 5.4% in 2021.

Net government lending among advanced nations.
Net government lending among advanced nations.

The problem with governments’ ballooning debt levels is not the amount borrowed per se. It’s the interdependent nature of it and the geopolitical ramifications. 

Unlike a person or a company, a country cannot go bankrupt. It’s a permanent entity with exclusive taxation powers and mostly exclusive money-printing power. (The latter is why proponents of Modern Monetary Theory, like new author Stephanie Kelton, argue fiscal deficits should not be viewed as a problem.) Indeed, governments right now have a compelling case – even an obligation – to borrow at low interest rates and fund the social distributions needed to keep their economy’s income levels afloat. Viewed in the isolation of one country and one government, this is one of those no-brainer moments when you focus on the problem at hand and worry about the cost later.

The problem that MMT proponents seem to gloss over is the financial system is globalized – and overly dependent on the U.S. dollar – while politics is domesticized. Governments are accountable to their citizens, not to the foreign entities that own much of their debt and that measure their wealth in a foreign currency. 

Governments will naturally choose the former over the latter, helping out domestic borrowers at the cost of foreign savers by debasing their currency. And if they’re the only government with such a problem, the fallout can be limited to those foreign entities. But what happens when every major government is in the same situation? This is why some fear the nightmare of a global currency war and debt spiral, one that could seriously undermine the dollar, the currency upon which this international financial system is based. 

Some people see the need for a coordinated, global debt jubilee (or forgiveness). But getting everyone to agree on the terms is almost impossible to imagine. Another outcome: The world gravitates to a new international currency system. The question is whether that happens in a controlled, top-down manner, with governments agreeing to a new framework, a la the 1944 Bretton Woods conference, or through a more unpredictable bottom-up, private-sector-led monetary revolution. The technology is coming into place for that revolution.

The Global Town Hall

ECHOES OF 2008. If there’s a reason to doubt the IMF’s forecast that advanced country debt-to-GDP levels will start normalizing in 2021, it’s that there’s another shoe to drop: private debt. Unlike the financial crisis of 2008, where the culprit was retail sector lending to homeowners, this time the private sector risk lies with mountains of corporate debt accumulated over the past, low-interest rate decade. Now, as The Wall Street Journal detailed Thursday, that debt load is combining with the economic stress of COVID-19 to trigger a “wave of bankruptcies.” The structure of a lot of that debt is defined by something called a CLO, or collateralized loan obligation. Sound familiar? It’s very much like a CDO, a collateralized debt obligation, the financial instrument that sat at the heart of the prior financial crisis. It has many people worried about another systemic collapse. If that happens, there’ll need to be another round of bailouts. And if that happens, governments will need to take on even more debt. 

ROME NO LONGER. For the past century, the center of global financial power lay not in Washington but to its north, in New York. Because so much global trade and financial market activity has been denominated in dollars, international payments and capital flows inevitably must pass through correspondent banks located on Wall Street. That gives those banks, and the regulators who oversee them, great power as global gatekeepers. With a say-so over what money goes where, New York state regulators wield this power to impose sanctions on countries deemed by U.S. intelligence to be rogue states and to determine what classes of activity are worthy of vital banking services. It’s why the New York Department of Financial Services is not just your average state regulator. Its influence extends beyond New York’s borders, not only into all other 49 states but overseas as well. 

But on the fifth anniversary of the NYDFS’ controversial “BitLicense,” it’s worth reflecting on the agency’s failure to extend its regulatory power over the cryptocurrency industry to a wider landscape. CoinDesk’s Danny Nelson did just that this week, noting how the then-NYDFS superintendent. Benjamin Lawsky. had predicted in 2014 the BitLicense would become a standard that other states’ regulators would follow. This assumption, founded on the hubris of New York’s outsized global status, proved wrong. Nelson reports that “Lawsky’s NYDFS had created what legislatures in other states now consider a case study in how not to regulate an industry whose complex technical details can quickly confound over-broad and ill-defined rules.” Crypto may be the first financial industry to subvert New York’s regulatory grip on global finance. Beginning of the end?


OIL’S CRYPTO-LIKE VOLATILITY. A tweet thread by Patrick Chovanec caught my attention. Boy, have oil prices been volatile over the past 12 years. Not quite crypto-level volatility, but pretty extreme for a commodity that’s a mainstay of the global economy. It’s all about the competing swings in demand and supply since 2008: the mix of financial crises, monetary policy-stoked speculation, the fracking revolution, Saudi Arabian political maneuvers within OPEC, and now a pandemic-fueled global economic shutdown. Who knows where crude prices will go from here? But with so much resting on them – questions of environmental sustainability, for one, but also the stability of the Middle East – crypto watchers should monitor them closely. Here’s why: The dollar’s fate as the world’s dominant currency is not insignificantly tied to the direction of oil markets because crude contracts are priced and settled in greenbacks. If oil-producing countries in sanctioned countries like Iran feel compelled by price movements to boost supply, a crypto solution that bypasses the dollar could help them do so. Alternatively, if locally sourced renewable energy usage starts to expand rapidly, the global trade in both oil and dollars will fall. The future of oil is one of many pieces in the puzzle driving a reimagining of money. 

THE POWER OF MANY VOICES. The results are in for CoinDesk’s #NYBWGIVES charity drive for COVID-19. The month-long campaign, conducted with our Blockchain Week partners Gitcoin, Ethereal Summit and the Giving Block, raised $110,000, most of it in crypto-denominated donations, for 12 different charities. As promised at the campaign launch during our Consensus Distributed conference, CoinDesk is matching those donations with distributions totalling $50,000. Half of those funds will be assigned according to Gitcoin’s capital-constrained liberal radicalism (CLR) methodology, which aims to democratize grant and subsidy distribution. It meant that although two big “bitcoin whale” donations turned the International Medical Corps into the runaway winner in terms of total funds raised, the No Kid Hungry charity received more than three times as much in matching funds even though it raised less than a third of International Medical Corps’ tally. That’s because the latter’s intake came from twice as many contributors. This “power to the many” concept stems from Ethereum founder Vitalik Buterin and Microsoft Principal Researcher Glen Weyl’s work on “quadratic funding.” Read about it and watch the explainer video in our write-up of the charity drive.


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