Current Affairs

Inside the Cryptocurrency Casino

Bitcoin and its imitators were supposed to democratize the world of money. Instead, speculators have gotten rich—and the planet is paying the price.

On a swelteringly hot day in July, 2019, I tagged along behind several dozen businessmen and women as they filed into the marbled passages of the Capitol dome. Some were lawyers, others tax specialists or technologists or marketers, but all of them came from companies in the new world of cryptocurrency. Although less than a decade old, the blockchain industry has already begun to engage in one of the most American of business practices: entreating Congress for favorable regulations.

This may surprise anyone who started using Bitcoin in 2012, when cryptocurrency felt like a subversive or anti-authoritarian alternative to finance. After credit cards severed WikiLeaks from the financial system, cryptocurrency donations helped keep the whistles blowing. “Bitcoin is the real Occupy Wall Street,” tweeted Julian Assange in 2017 from his refuge in the Ecuadorian embassy. In a 2019 interview, Edward Snowden revealed that when he leaked the NSA’s secrets, “the servers I used were paid for in Bitcoin.” Snowden has also spoken favorably about the privacy coins Zcash and Monero. 

Bitcoin has come a long way from the heroin dealers on the Dark Web. The crypto industry now has its own influence groups, as well as the ears of a handful of friendly Representatives and at least one commissioner of the SEC. Blockchain companies are signing up for government bailouts, and over 75 have accepted PPP loans.

None of the executives I met on Capitol Hill would have been mistaken for Edward Snowden. “Ban privacy coins,” said one C-suite officer, whose company specializes in tracing blockchain transactions. Others were asking for lower regulatory barriers, or more exemptions for digital securities. 

A few days earlier, David Marcus, the head of Facebook’s experimental blockchain group, had appeared before both houses of Congress, which received Facebook’s proposal for a digital currency (originally Libra, later rebranded Diem) with a mix of horror and fascination. But at least some lawmakers were open to the idea. “What you need to tell them about is the benefits,” said Representative David Schweikert (D-AZ), a member of the Congressional Blockchain Caucus, explaining to blockchain advocates how best to persuade his colleagues. “It is the revolution, we just have to sell it.”

At the time, I had been reporting on the cryptocurrency world for over a year. The blockchain seemed to have something for everyone—it was supposed to turn capitalism into a more level playing field, but also somehow make you insanely rich. The space was full of oddballs and cranks, like the real-life Bond villain John McAfee (who swore “I will eat my dick on national television” if Bitcoin failed to reach $1 million in 2020) and child star Brock Pierce (who led an exodus of Silicon Valley tech bros to build a crypto-utopia in post-Hurricane Puerto Rico, and later ran for President). This is not to mention cryptocurrency’s elaborate scams, automated pyramid schemes, faked deaths, and other hilarious devices to separate fools and their money.

At first, cryptocurrency arose as a fascinating experiment in free markets, without any of the bailouts, influence peddling and regulatory capture that have become the neoliberal norm. “It was like watching the history of derivatives and financial fraud on fast-forward,” says David Gerard, a long-time Bitcoin watcher who has become one of the industry’s top critics. “It was amazing to watch.”

Since then, the digital asset market has reached a trillion dollars of market capitalization, and Bitcoin was briefly worth more than Facebook. And the new economy is also looking very familiar: crypto-capitalists have reinvented the finance industry’s fractional reserves and derivatives, private interests began trading votes and carving out monopolies, and rent-seekers found ways to extract surplus value, all while trashing the environment and finding new ways to concentrate wealth at the top.

The “Real” Occupy Wall Street

It’s worth taking a moment to explain the terminology. A blockchain is a kind of collective record or database, in which multiple parties share their computing resources. None of the participants can unilaterally change the ledger, so blockchains are useful to record ownership of valuable assets. 

Bitcoin is the most well-known example, but there are dozens of other blockchains, some tracking hundreds of different assets. Some are open networks where anyone can contribute to the bookkeeping; others resemble oligarchies or monopolies, with important roles restricted to just a few entities. Most older blockchains are secured by mining, a computationally-intensive process that rewards accountants on the ledger with new crypto; newer distributed ledgers have done away with mining entirely. 

The comic-book style origin story of cryptocurrency begins with economic collapse. The first Bitcoin block contained a newspaper headline from the day it was created: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” The message was a virtual middle digit to the financiers who had caused the crash, and the regulators which permitted them to do so.

“The root problem with conventional currency is all the trust that’s required to make it work,” explained Satoshi Nakamoto, Bitcoin’s secretive and likely pseudonymous inventor, in his early release notes. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.”

Satoshi’s message had an obvious appeal to the Ron Paul brand of libertarians, many of whom have never forgiven Franklin Roosevelt for ditching the gold standard. With a hard limit of 21 million Bitcoins, it was also immune to inflation, and could not be taxed or confiscated. It was like a Swiss bank in your pocket. 

But it also scored a few sympathy points on the disenchanted left: financial speculators had nearly shipwrecked the economy, before begging for a public rescue. After sharing the losses of the auto and financial industries, American capitalism looked less like a free market than a kind of “socialism for the rich”—with JPMorgan and Goldman Sachs in the role of welfare queens.

As much as conservatives complain about regulations, few of them realize that capital is arguably the biggest beneficiary of government intervention. The rules are different for the rich: capital gains taxes allow investors to pay significantly lower taxes, not to mention the generous breaks for the Amazons and Trumps of the world. Federal Reserve Banks are not wholly public institutions: two-thirds of their directors are chosen by commercial banks. When the coronavirus pandemic hit, the central banking system acted quickly to save… the stock market. “Why are stocks soaring as the economy melts down?” asked Business Insider rhetorically last April. The answer: “Thank the Fed” for slashing interest rates and buying up corporate debt.  

And of course, the dollar and Federal banking regulations are regularly deployed in the interests of foreign policy. While free trade and globalization have been the mottoes of neoliberalism, that freedom does not apply to anyone trying to do business from Iran, or Cuba, or Venezuela, or any other country which defies U.S. hegemony. President Trump was “unusually pugnacious” in weaponizing the dollar, reports the Financial Times, using the currency’s dominant status to sever America’s rivals from global markets. “Normal U.S. sanctions aim to prevent American citizens from dealing with a given country or party,” the Financial Times explains, “but secondary measures allow the government to penalize third parties that do business with a sanctioned country.” 

So much for “free markets!” 

How To Make Money Online. No, Really. 

The solution, at least for Satoshi, was to create a payments system that does not rely on the integrity of central banks or national governments. “Centralization” is one of the curse words of crypto-speak. A centralized payments system like Venmo or PayPal relies on a handful of intermediaries, any one of which can choose or be forced to stop a transaction. 

At a time when bank transfers required high fees and days to settle, Bitcoin transactions could move almost instantly. Even if you don’t have a bank account (which 1.7 billion adults don’t, according to the World Bank) you can send Bitcoin anywhere, without an intermediary, and in any quantity. You could even send a few cents—Bitcoin tipping used to be popular on Reddit, and some of those forgotten tips have appreciated to thousands of dollars. After learning a few arcane security procedures, it’s as easy as sending an email—and just as hard to stop. In a distributed system like the Bitcoin network, everyone keeps their coins and transactions are processed by thousands of independent miners, so it’s nearly impossible to confiscate coins or stop them from moving.

At least, that’s the way it’s supposed to work. In reality, Bitcoin (and the wider cryptocurrency space in general) requires a lot of trust. First of all, you have to trust the programmers who code the software—unlike PayPal, there’s no number to call when your payment goes missing. Instead of a widely distributed mining network, transactions are executed in warehouse-sized mining farms, largely clustered in a few energy-rich Chinese provinces. 

Much has been made of the enormous energy costs of the Bitcoin network, which now uses more electricity than all of Argentina. It’s less well-known that mining operations also benefit from China’s generous energy subsidies. Like most free markets, Bitcoin depends on a kind of business-friendly socialism. 

“Cryptocurrency has solved no problem that it set for itself,” says David Gerard, who authored a biting critique of the 2017 crypto bubble. He quickly recites the problems outlined in Satoshi’s original white paper—cross border transactions, micropayments, and monetary sovereignty, almost all of which are still as remote as they were in 2009. Bitcoin transactions are too expensive for micropayments, he notes, too slow for daily use, and the unpredictable price swings make it impossible to use as a regular currency.  “Bitcoin failed at every one of those [goals,]” he adds. “Every middleman that crypto said it would get rid of, they’ve replaced with a new middleman, except worse.”

To be fair, there are still things you can do with crypto that can’t be done with regular money. I have a good friend in Tehran who uses Bitcoin as a lifeline to the world economy, thereby circumventing the sanctions which the Trump administration re-established in contravention of international law (and which the Biden administration has yet to lift). Dash, a competitor to Bitcoin, has acquired a limited success in Venezuela, where inflation and sanctions have made the local fiat currency useless. 

But the main users of cryptocurrency are speculators. Hedge funds are among the biggest traders, and their total assets more than doubled in 2019. Exchanges serve double duty as safe deposits and trading floors, and sometimes manipulate prices through practices which are banned in regular markets. During the 1920s, margin traders could borrow 10 times as much money as they put in, fueling wild speculation on stock prices. Today, on platforms like BitMEX, derivatives traders can borrow up to 100 times their collateral. Many speculators have been liquidated by suspiciously well-timed price movements, leading at least one economist to accuse the exchange of trading against its own clients.  

The second biggest blockchain, Ethereum, opened a floodgate of new cryptocurrencies, which could be minted in only a few minutes. These tokens were usually sold through initial coin offerings (ICOs), which pumped most of the air into the 2017 bubble. (Marx, who regarded stock trading as “fictitious capital,” would have had a field day with ICOs.)

In an ICO, companies sell tokens to raise money for future ventures—sort of like selling discount tickets for a theater that has not yet been built. But, much like the debt obligations that inflated the housing bubble, very few investors bothered to learn what they were buying. You may have heard of dentacoin, an aspiring cryptocurrency for oral hygiene; less famous was “Bitcoiin,” a rather shameless cash grab by action hero Steven Seagal, and SpankCoin, whose use-case is best left to the imagination. Most of them were as silly as they sound, and almost all were illegal securities. 

The real success stories from the ICO bubble were exchanges, which made huge profits both from traders and listing fees.  One company agreed to pay $250,000 in crypto to get listed on the Binance exchange, an annual payment which was to recur over the next three years. And that was a bargain—industry sources have told me about exchanges charging up to $10 million for a listing, as well as 10 percent of the token’s total supply.  

The latest fad is “DeFi,” or decentralized finance, a system of automated lending and trading facilities which could have been dreamed up at the Lehman Brothers’ subprime mortgage desk. DeFi allows traders to mortgage Bitcoins or other cryptocurrencies as collateral for a loan, which they typically reinvest or leverage for more speculation.  Annualized yields for some of the new DeFi protocols exceeded 100 percent in 2020. In some cases, the same coins have been lent and re-borrowed so many times that the total debt is greater than the number of tokens in existence.  

Occupied (By) Wall Street

While originally pitched as a form of “digital cash,” by 2017 most serious Bitcoin owners considered it a better version of gold—a long-term store of value which you could sit on forever. The distinction is important, at least to Bitcoin users. “Digital cash” requires attracting merchant adoption and new users, improving user experience and transaction speed, and creating easy-to-use wallet software. For “digital gold” that’s less important—one need only hodl, in the illiterate argot of the crypto world, and wait for inevitably higher prices. 

This quality was highlighted by a Bear Stearns alumnus, who later became famous for different reasons. “If we learn tomorrow that half of Montana contained a secret cache of gold, the value of gold would decrease instantly,” Jeffrey Epstein told the Next Web in 2017. “Bitcoin doesn’t have this problem.” Epstein gave generously to the Digital Currency Initiative, a research community at MIT’s Media Lab. 

But the trouble with “digital gold” is that—once you stop treating it as a currency—the main reason to buy it is because you expect prices to keep increasing. It’s a more sophisticated rephrasing of the Greater Fools Fallacy: the tech is unimportant, as long as someone is willing to pay more than you did.  

That reasoning has worked out so far. MicroStrategy, a business intelligence firm, spent over $1 billion on Bitcoin in 2020, mostly with borrowed money. Guggenheim Partners followed suit with half a billion dollars, and MassMutual, an insurance company, put in $100 million

As Bitcoin became the new gold, the rest of the mission seemed a lot less important. Bitcoiners are enjoined to “be your own bank,” but most prefer to leave that hassle to someone else. Bitcoin ownership is highly concentrated among exchanges or third-party custodians, like the Grayscale Bitcoin Trust, which controls over 3 percent of the total supply. 

Grayscale is open only to investors with a proven net worth of over $1 million. The minimum investment is $50,000, of which the trust charges 2 percent per year to manage the funds. Nonetheless, Grayscale has been a rousing success among high rollers, who poured a record $5.7 billion into the company’s digital vaults in 2020. Nine-tenths of that money, Grayscale says, came from hedge funds and other institutional investors. 

Bitcoin has even made it to Wall Street, through futures trading at the Chicago Mercantile Exchange and the Chicago Board Options Exchange. The parent company of the New York Stock Exchange launched their own Bitcoin futures exchange in 2018, headed by Kelly Loeffler. Mrs. Loeffler later found a more lucrative trading floor at the U.S. Senate, where she sold millions in stock before the pandemic hit the market. 

“It’s professional gambling,” says Gerard, explaining why institutional investors took an interest in cryptocurrency. “One of the side effects of inequality is that if normal people get poorer, the real economy goes down. With not much wealth circulating there’s not much wealth being generated, and (investors) are just not going to find high interest rates. They ran out of sane investments, and started looking for insane investments.”

Despite their supposed antipathy to mainstream finance, the crypto-world was secretly thrilled to be at the center of attention. “Institutions are coming for your crypto,” predicted the industry-leading CoinDesk back in 2018, and it now seems that the institutions have arrived.

At least one participant could appreciate the irony. “For a movement previously described as ‘the real Occupy Wall Street,’” wrote Jackson Palmer, the creator of the satirical meme Dogecoin, “cryptocurrency now sadly resembles a community that instead wants to be occupied by Wall Street itself.”

A New Kind of Inflation

Since the start of the pandemic, the Bitcoin price has risen eight-fold, from a low of $5,235 in March to over $47,000 shortly before the time of writing. The rise was widely attributed to fears of inflation, but there may be a different kind of money printer driving Bitcoin prices. 

The key is Tether, a dollar-pegged cryptocurrency which accounts for three-quarters of all cryptocurrency trades, and the main vehicle for moving dollars between exchanges. In theory, at least originally, each tether was fully backed by real dollars. But the company behind Tether has never completed an audit, and tokens are not always easy to redeem, so there’s no certainty that they are fully backed.

The result is what one observer called “the largest fraud since Madoff.” Amy Castor, one of the few crypto journalists with no coins of her own, has produced a damning timeline of improbably large tether printings at times when the company had no reliable banking partner. If these suspicions are true, the entire cryptocurrency market from 2016 onwards could have been inflated with imaginary dollars.

This was all speculation, until the New York Attorney General discovered that Tether’s owners had “borrowed” nearly a billion dollars from their reserves, and Tether’s General Counsel admitted that the company only had enough cash to cover 74 percent of their liabilities. But the printers kept running, adding nearly 30 billion questionably-backed dollars since the NYAG investigation began. 

One might expect these revelations to raise a few alarms, especially as Tether reached Weimar Republic-levels of money printing. “The crypto press only cares about ‘number go up,’” Castor told me, “so they happily ignore Tether or pretend it’s not a problem.” The same goes for other crypto companies, which rely on high Bitcoin prices to stay in business. 

It’s a bit ironic, considering the anti-banker ethos of the cryptocurrency world. Less than a decade after Satoshi Nakamoto’s first message, the crypto market reinvented the fractional reserve and made it Too Big To Fail. 

The Bitcoin Takeover

You can still do some pretty cool things with cryptocurrency. In 2018, I reported on the growing trend of microdonations, in which generous-minded donors would send small amounts of crypto to needy strangers on the other side of the world. Since the fees for those currencies are negligible, the entire contribution arrives without the overhead costs of a normal charity. You can even send contributions to sanctioned countries like Iran or Venezuela.

But no one in their right mind would use the Bitcoin network for this purpose. The ledger is only capable of seven trades per second, and fees soar when the blockchain is congested. At the peak of the 2017 bubble, the average transaction cost $50—and Satoshi help you if you needed the money quickly. Fees are now more reasonable—they’re now about $11—but that’s still too high for everyday transactions. The Lightning Network, which is supposed to route micropayments through a Rube Goldberg-contraption of payments channels, is still largely experimental.

There were two proposals to fix the congestion problem: either raise the maximum number of transactions in each block, or find clever ways to settle them outside of the main ledger. There were merits to both sides, but the argument was not decided by merits. After many accusations and dirty tricks, the Bitcoin community went to war. The “small block” side, which opposed raising transaction limits, won.

One of the main players in that war was Blockstream, a venture-funded private company and a major employer of Bitcoin core contributors. Blockstream stubbornly opposed raising transaction limits, which would have reduced congestion and made Bitcoin more usable as an ordinary currency. By surprising coincidence, this also happened to align with Blockstream’s business model. As CEO Adam Back explained to Forbes, Blockstream makes money by selling access to private “side chains” for enterprise clients.  

A sidechain is a separate, members-only network attached to the regular blockchain. For a monthly fee, Blockstream clients can move Bitcoins cheaply on the Liquid sidechain, without the wait and high fees of the public network. It’s a bit like a for-profit, high-speed railway that operates alongside public roads. The problem, as Blockstream critics pointed out, is when the same company is involved in building both networks. (Blockstream did not reply to an emailed request for comment.)

 “Blockstream doesn’t make profit on what Bitcoin can do,” critics said as the rift began to widen. “Blockstream makes money on what Bitcoin can not do.” Put the railway company in charge of public roads, and you may start finding a lot more pot-holes in your morning commute.  

Funding development is a “classic blind spot” according Amaury Séchet, the lead developer for Bitcoin ABC. Bitcoin—and its offshoots—does not have any mechanism to fund developers, who contribute on their own time or with corporate sponsorship. As a result, “one well-funded actor can buy most of the developers,” he explains. “This is probably cheaper than taking control with a 51 percent attack.”

Bitcoin ABC developed the node software for Bitcoin Cash, which seceded from the original protocol in 2017 before splintering into increasingly heretical sects. Their latest project is a variant of Bitcoin with a built-in “miner tax” to fund development, a proposal which received widespread condemnation. At the time of writing, the ABC version was trading at around $16 per coin. 

Building on the World Computer

In 2014, Vitalik Buterin dreamed up a ledger that could run applications as well as keep accounts, and Ethereum was born. Through the wizardry of smart contracts and digital oracles, the “world computer” could be used to conjure up a business with no boss, or a market with no middlemen. “Imagine Airbnb without Airbnb,” said one early pitch. “Imagine Uber without Uber.”

Whereas traditional businesses make money from their capital, companies like Airbnb make money from your capital—and with clever marketing, they can create a multi-billion dollar hospitality business without owning a single room. The promise of the blockchain, at least for believers, would be to replace corporate intermediaries with a peer-to-peer marketplace—thereby allowing homeowners or drivers to keep their surplus value. You could rent out your own extra room, or drive passengers in your car, without having to pay for the privilege.

“A blockchain is not really a technological solution so much as a political solution,” says Adrian, a self-described “blockchain socialist” and the author of a blog and podcast of the same name. “For the Left, that’s really interesting for imagining how to build infrastructure to reflect the type of society we want to live in.” For professional reasons, he prefers not to use his real name, but the Blockchain Socialist blog provides a rare Marxist viewpoint on the ways technology can facilitate new forms of economic organization. 

If major economies were to pivot towards socialist-style planning, they would require a mechanism for collective decisions. A shared ledger is not required for this purpose—but it might help. “It’s a big I.T. infrastructural problem to create a platform for economic democracy,” Adrian says.  “You can do a central database, where the government or some sort of authorizing body has to give you permission. Or you can do a shared database where everyone can access publicly and give their feedback on what goods to be produced and how to produce them.” A virtual voting system could also facilitate more elaborate schemes, like quadratic voting (in which votes are weighted according to the strength of individual preferences) or conviction voting (in which participants vote continuously, and votes are weighted by duration).

In the more immediate term, a shared, public ledger could also provide the backbone for cooperative enterprises and leaderless organizations. One of the unique inventions of the blockchain space are Decentralized Autonomous Organizations, or DAOs—virtual bodies in which human roles are replaced by self-executing code. If a capitalistic corporation were structured as a DAO, its shareholders would be able to vote directly on business decisions, without going through a board of directors. Members of a DAO cooperative or mutual aid collective could democratically set their own budgets, allocate resources, or even vote on their own salaries, with their funds distributed by blockchain-dwelling programs instead of human managers. And with no central point of control, a DAO-based body would be theoretically impossible for a hostile government to shut down.

“Those democratic structures and blockchain can create novel ways to interact within an organization,” Adrian says. “The DAO world and the cooperative world are starting to mingle.” On his podcast, also called the Blockchain Socialist, Adrian has interviewed some leading figures from the digital cooperative movement, like Resonate, a user-owned streaming service, and the Global Center for Advanced Studies, a small cooperatively-run college. 

Another is the Eva Coop, a Montreal-based ridesharing app which is owned by its riders and drivers. Aspiring to be a “socially acceptable” ridesharing platform, the cooperative allows its members to vote on key decisions and take a share in any eventual profits. Eva takes a 15 percent share of each ride, which can be changed by a vote of its members. 

That’s a pretty stark contrast to that other rideshare app, which pockets 25 percent of the revenue, accepts no input from the drivers, and spends hundreds of millions to persuade politicians that its drivers are not employees. While it may be some time before Eva has any profits to share with its members, it’s not alone. After spending 12 years and $20 billion to corner the market, Uber has yet to earn a quarterly profit.

“We had the idea in late 2017, when Uber was bullying the Government of Quebec,” explains Chief Operating Officer Dardan Isufi, who hopes to create a “global empire of community-led cooperatives.” The first cooperative, in Quebec, now has 30,000 rider members and a thousand drivers, Isufi says, and it’s now the second-largest rideshare app in Montreal. Most users “don’t even know it’s based on blockchain,” he adds. “We worked really hard to remove all barriers, like wallet creation.”

But very few crypto companies have managed to gain any real-world presence, a problem which the Blockchain Socialist attributes to the tendency to concentrate power among narrow insider groups. “Founders give themselves a lot of power,” Adrian says, and companies which raise money from venture capital or coin offerings are rarely interested in being egalitarian. “Blockchain only benefits at scale,” he explains. “It only benefits when people want to join and collaborate with you. No one would join an Amazon DAO, knowing that Jeff Bezos owns that much stock.”

Tilling The Commons

While most blockchain thought remains dominated by Austrian-type market fundamentalism, Adrian says, there is also a growing contingent who are interested in using the distributed ledger as a tool for “the commons”—public goods and shared resources, from which everyone has a right to benefit. 

“The commons” is a weighty term. Most know it from the Tragedy of the Commons—a parable about mismanaged resources in pursuit of short-term gains. And when you think about the contemporary blockchain space, an overgrazed meadow full of cow shit is a pretty good analogy.

For critics, that shitty meadow looks a lot like a dead end. “Computers don’t work,” Gerard warned me emphatically. “Programs are shit. If you trust software, you’re an idiot.” That may seem like a strong statement, but for anyone who voted in the Iowa Caucus, or has applied for unemployment insurance, it’s easy to see his point.

At least some of the problems in the crypto world can be solved, with effort. Ethereum is expected to replace mining—which will not fix all its problems, but will at least improve throughput and reduce the embarrassing carbon footprint of the second-largest blockchain. Some newer cryptocurrencies have functional DAOs, allowing the community to vote on resource allocation and resolve the kinds of hard questions which caused Bitcoin to split.  Once in a while I encounter interesting use-cases, like carbon offsets, or peer-to-peer energy trading, which almost sound like they could make a dent in the appalling externalities of proof-of-work mining.

But if blockchain technology is part of the internet “commons,” it seems to be disappearing into the digital equivalent of the Enclosures. Instead of open networks, private interests are constructing their own walled-off or centralized systems.  “What we’re seeing is the co-option of blockchain and cryptocurrencies into the corporate space,” Adrian says, noting a growing tendency towards “enterprise”-oriented ledgers. When companies like Facebook or IBM build blockchain-type infrastructure they’re typically not interested in the type of open, public network which Satoshi Nakamoto designed. National banks are also devising their own digital currencies, which will most likely be under centralized control. Even JP Morgan has a digital coin, which runs on a private ledger among the bank’s institutional clients.

That hasn’t shaken the perception that Bitcoin and cryptocurrencies represent a bet against the legacy banking system and the governments that protect it. It’s probably no coincidence that cryptocurrency is setting record highs, as the Federal Reserve pumps more interest-free money into what looks suspiciously similar to a bubble.  As the GameStop drama reminded Americans how much they hate hedge funds, interest in Bitcoin (and Dogecoin) soared. Curiously, one of the newest advocates for the new populism is Elon Musk, who recently eclipsed Jeff Bezos to become the richest human being in the universe. After Tesla made $1.6 billion in clean energy incentives last year, Musk demonstrated his environmental bona fides by putting almost all of it into bitcoin.  

It’s appropriate that cryptocurrency is being pitched by the same person trying to fight fossil fuels with luxury electric vehicles. Bitcoin can fix banking, in the same sense that buying a Tesla can solve climate change. At an individual level, it might help some people feel better about their financial footprints. But it won’t reform the banking system, or correct the over-concentration of wealth and power, and it certainly won’t avert the climate crisis, any more than colonizing Mars will. These are collective problems, and they require collective solutions. Technology has an important role, but solving these problems requires a fundamental reorganization of society, so that Bitcoins, and billionaires, have no reason to exist.

More In: Economics

Cover of latest issue of print magazine

Announcing Our Newest Issue

Featuring

It's our extraordinary "sea" issue, so expect unusual marine life floating alongside the insightful essays, gorgeous artwork, and amusing diversions.

The Latest From Current Affairs