In social networks, online chat rooms and blogs, there is an ugly alignment taking shape between disparate, radical groups that hold all sorts of distorted and misinformed views on the issues of the day.
What is emerging as a common thread across all these groups is a belief that they are under siege and blockchain might be able to fix this. Except the problems they describe are not real problems, and the solutions they propose are even worse.
Do you believe unaccountable liberal elites are destroying America's economy with quantitative easing? Bitcoin’s deflationary algorithm is the solution.
Do you believe conservative voices are being silenced by Silicon Valley liberals? Blockchain-based, censorship-resistant decentralized social networks are the answer.
“Nanny state” regulators blocking your meme-driven stock trading? Be your own bank and dive into decentralized finance.
If any of these were real-world problems, blockchain technology could indeed fix them. They aren’t. Even worse, the proposed “fixes” would do little to strengthen democracy and help the economy. The problem statements behind these proposed fixes are tired, recycled and discredited.
For old time’s sake, let’s revisit them again:
There is no hyperinflation coming. It did not happen in the last great recession, and it is unlikely again this time. Most economists think our economies need a bit more inflation, not less, and the idea of putting the world on a consistently deflationary standard like Bitcoin terrifies many economists. People can argue about whether we may see a bit more inflation or a bit less in coming years, but no one expects a bout of hyperinflation.
Nor are conservative voices being silenced. While highly placed individuals and platforms who have called for political violence, have been disconnected from privately-owned business services, nobody in the United States is in prison for expressing their opinion.
There is also the idea that regulators are preventing individuals from profiting from their expertise and using qualified investor rules and liquidity rules to protect finance executives from the man-on-the-street. That, too, is untrue.
Qualified investor rules exist to protect people who cannot afford to lose money on risky investments. The evidence strongly shows these rules work as intended and that day traders are, on average, very unsuccessful.
Indeed, we already tried this in the world of blockchain with terrible results. Does anyone remember the initial coin offering (ICO) boom? That was 2017 and not so long ago.
Back then, enthusiasts argued ICOs were a better path and might even render VCs obsolete. They were wrong. Nearly three-fourths of all ICO-funded companies never delivered any product at all. Overall, the record of ICO funding was substantially worse than venture capital, and that’s a low bar in an industry that already assumes most startups will fail.
While there is no single group or ideology behind these messages, there seems to be a significant overlap among bitcoin, blockchain boosters and right-wing extremists. It is visible in the popularity of white nationalist imagery in blockchain and bitcoin forums, and in the enthusiastic embrace of decentralization technology by white nationalists in social media.
These are not problems I want to help fix. This is not the revolution I signed up for.
The decentralization offered by blockchain promises a lot of good. The technology offers us the promise of business models that are built on providing services, not monetizing surveillance. From food traceability to carbon offsets, blockchains allow us to build sophisticated digital markets and channel capital to good uses at remarkably low costs.
Blockchains offer us a future where regulatory compliance can be implemented robustly and cheaply, and where we can offer proof of compliance without having to submit data that undermines our privacy. It will allow enterprises to work with each other without becoming cogs in a digital market structure run by a monopolist.
No technology is unambiguously good or bad. Blockchains do not have moral value and it is not possible to stop the work being done to mature and improve this technology. Nor is it possible to create systems that can only be used for good. Censorship-resistant systems will work equally well whether they spread truth or lies.
Furthermore, many of the critiques of our existing economic and policy infrastructure are fair and true. It is reasonable to feel that far too much of the money was spent in fiscal stimulus (in 2008 and again recently), and that too much of the quantitative easing went to the very rich and not the deserving.
There is good academic evidence our know-your-customer (KYC) and anti-money laundering (AML) regulations are costly and ineffective and prevent people from joining the mainstream financial system. And, there are many parts of the world where there is a compelling need for communications that cannot be censored.
But reasonable critiques are being over-indulged, giving extreme solutions an entry point.
Breaking the cycle
So how are we to avoid a bleak future where this amazing blockchain technology ends up making the internet safe for white nationalists, liars, fraudsters and science deniers, and, in so doing, turns everyone else against it?
I honestly am not sure, but I have some ideas.
First, can we skip the moral panic and the all-or-nothing approach? Banning blockchain will not work unless we are also planning on shutting down the internet as well. The level of surveillance and intrusion required to implement such a ban would be impractical.
Second, we can advance the constructive uses of blockchain and adapt regulatory models to support the growth of this market. Blockchains can be used to help people tell the difference between real news and misinformation by allowing people to validate the source of their information. In finance, smart contracts can be used to make regulatory compliance cheap, fast and simple as well.
The historical case of music piracy is an excellent example. BitTorrent, the decentralized peer-to-peer system that was responsible for a great deal of illegal content distribution, is still around. However, it no longer poses an imminent danger to the content business because users can now subscribe to reasonably priced streaming services.
Digital Rights Management (DRM) and anti-piracy software still exists, but it is now well enough executed that very few consumers even notice. Given a fair, safe and legal option, most consumers will pay if they can afford to do so.
Finally, society can vocally and publicly distance itself from extremists and their arguments. You can reasonably make the case that Bitcoin is an excellent hedge against inflation, but we do not need to spread extreme and unfounded fears of hyperinflation to make that point. Furthermore, we cannot be politely silent when such nonsense is being repeated, lest our silence be interpreted as agreement.
The technology industry keeps repeating the same pattern. Our enthusiasm to make the world a better place leaves us unable, or unwilling, to think critically about how great new technologies might be misused, or what steps we could take to give the best outcomes the greatest chance of success. With blockchain technology, we get another chance to repeat this pattern, or to break it.
The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
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