The Cryptocurrency Revolution is Already Underway

According to Black Cat, money without the state involves a “core paradox” – “it [non-state money] will inevitably be used without the state being there to stop its usage, but it cannot be used while the state is present.” However, as the author also acknowledges, “as people free themselves from the state, moving beyond its reach and fighting back against it, they will begin to be able to (and, as the state retreats ever further, have to) carry on their affairs with each other,” including using non-state currencies and trading systems.

I will suggest that this process of people freeing themselves from the state is already underway in the monetary domain and that alternative monies – in the form of cryptocurrencies – not only can be an important alternative for people operating outside the state, they already are. Right there in the shadow of the state. Hence, there is no paradox, only a slow and gradual displacement of the established state-controlled monetary system with a new and better one.

To be fair, Black Cat recognises the promise of blockchain technology, but underestimates the extent to which cryptocurrencies are already addressing present needs and that all this goes on in the shadow of the state – pointing towards a future where cryptocurrencies eventually replace fiat money systems, one use case at a time. It may take decades still before we get there, but the cryptocurrency revolution is already underway. The necessary infrastructure for such an alternative money system, which Black Cat points out must be in place before it becomes needed, already exists and is currently addressing real needs at the margins of the established system.

In places like Venezuela, where the national currency has become unusable due to hyperinflation, cryptocurrencies are already making a real difference in people’s lives. Even some larger chain stores and supermarkets there have begun accepting it. But we need not turn to a complete collapse of a national currency to find present use cases for cryptocurrency. Many people, especially in poorer countries, do not have bank accounts, and cryptocurrency offers them the possibility to “be their own banks.”

Some entire industries lack access to traditional banking services. The legal cannabis industry in the US, for example, suffers from the fact that cannabis is still illegal on the federal level which makes it difficult for cannabis merchants to gain access to banking and thus have to deal exclusively in physical cash. Such merchants can now use cryptocurrency to circumvent the need for traditional banking.

Now, I agree with Black Cat that Bitcoin hasn’t done great as a currency. The original vision of Bitcoin as a peer-to-peer electronic cash system has largely been abandoned because of too high fees and too slow confirmation times. But other cryptocurrencies are addressing these drawbacks. The author’s claim that “Bitcoin is, essentially, a scheme for obfuscating one’s financial data” mischaracterizes it. In fact, Bitcoin does not even offer very strong privacy. In this respect too, some other cryptocurrencies are superior. What Bitcoin is, essentially, today, is a vehicle for speculative trading, and sadly this is true of the entire cryptocurrency market at the moment. This explains the price volatility of cryptocurrencies. But when speculation is gradually taken over by real-world usage, the prices will hopefully stabilize.

It remains true that cryptocurrencies are far from perfect as they stand, but competition between different projects fosters continual innovation and improvements. I applaud Black Cat’s invitation to developers to try to mix desirable features of LETS-schemes with blockchain tech, but it must be kept in mind that it is the decentralized nature of cryptocurrencies that make them so hard for governments to shut down.

Unlike older forms of private or community currencies, cryptocurrencies lack a central point of failure and are thus very hard to topple. Black Cat emphasises that money is based on trust, and this is true enough as it stands. But this does not mean that you should have to trust anyone else with your money. With decentralized and trustless cryptocurrencies, there is no entity that you need to trust – you only have to trust in the distributed network and in the technology.

Finally, Black Cat’s claims that “Bitcoin [and by extension, other cryptocurrencies] derives its value entirely from the existence of states” and that “If all states disappeared tomorrow, Bitcoin would have no value” are unsubstantiated. It is hard to imagine states disappearing overnight, but the developments we already see in the world today suggest that as people are becoming increasingly unsatisfied with national fiat currencies (either completely or in some or other respect), they seek out and adopt available alternatives.