Crypto and the Battle for a Free World
Crypto and the Battle for a Free World
On the frontlines between freedom and enslavement
Ownership, a primary use case
Crypto promises a unique benefit not available within traditional financial institutions. That benefit is that you fully own your assets. They are under your control and it is not possible for anyone to take your assets or prevent you from sending them to anyone you wish anywhere in the world.
However, this advantage has been essentially nullified in a vast amount of the current usage of crypto today. Individuals have fled from traditional finance to enter a space where control over their assets is a common mantra, yet most will find themselves utilizing crypto essentially by proxy through exchanges or other types of crypto entities in which full control over assets is given to that said company.
Banning of crypto
Is it possible to ban crypto? The argument has been put forward that it is impossible for governments to ban crypto. It is true that no entity has the ability to stop a transaction in a properly decentralized system. However, they don’t need to do so. When you don’t have the means to control something directly, you can always control it indirectly. This is easily done through on and off ramps.
Businesses that must meet regulatory compliance can be restricted from using crypto. Nobody can stop you for paying for your lunch using crypto, but they can prevent the business from accepting crypto. It would be enforceable as a business must publish an address or provide some means for payment which would then reveal their non-compliance. However, it is unlikely this will be the direction governments will take. Co-option is the most likely path.
Crypto co-option
The turning of an adversary into an alliance. It will be far more advantageous for governments to incorporate crypto under their regulatory control as to oppose crypto. Knowing every financial transaction that takes place, trackable on the blockchain, is wonderful gift to those that wish to tax and control every existence of your life.
Despite the focus on privacy in crypto, most of it is not private. Regulation is going to bring about KYC as the norm and anything truly anonymous and decentralized will be under ever growing greater pressure. With every on/off ramp KYC’d, most crypto users will have every transaction trackable to their identity.
We have seen how social media has resulted in the tracking of everyone’s lives to excruciating detail. The social media platforms have also become tools of government spying. Crypto is simply the next great data mining opportunity for companies and governments. The great irony is that in the end the keys that were to set us free may also be used to lock us into our new gilded cages.
Regulation
The argument for reasonable regulation. Certainly bad actors abound currently within this space. Everyone imagines that there must be some form moderate regulation that will rid the space of scammers while still preserving freedom.
However, what we imagine as “reasonable”, is highly unlikely to become the implementation. Who will write the regulation? You? The crypto community? No, the regulation will be literally written by the current financial institution of power which you likely oppose, the banks, politicians, mega corps etc.
Regulation at its best, removes the incompetent criminals while consolidating power among the professional criminals. It is a trade-off in which volatile theft is exchanged for more subtle stabilized theft that is more difficult to perceive. For a more in depth peek at the murky nature of regulation of crypto, the following is a good read - Ava Labs (Avalanche) attacks Solana & cons SEC in evil conspiracy with bought law firm, Roche Freedman
It is a mythical fantasy to think an institution with unlimited resources and power will limit their regulation to what you or I conceive as reasonable. The history of regulation backs this up. If we want to know the end result, all we need to do is look at traditional finance. What we see there is simply years of “reasonable” regulation. There will never be enough regulation as there is never an end to doing something to make you safer which in turn feeds the machine. Also of note, Enron, Madoff and Lehman Brothers scandals all occurred under the watch of regulation. There is no guarantee that regulation will ever stop the next scandal, the next market collapse etc.
Unfortunately, we have somewhat ourselves to blame. We foolishly invest into companies built on blockchain technology which don’t even use the same tech to make transparent their operations of the business. We have simply made it easy for scammers when that was supposed to be impossible. The entire premise of crypto is having control of our assets. Yet, we keep turning over control of our crypto assets to someone else and complaining when we lose it all.
Without regulation
So what would happen if there were no regulation? Would the industry be left to the mercy of scam artists? Would crypto just collapse and cease to exist?
There is some related history that might be useful for comparison. The 2000 Dot Com bubble was an epic meltdown of the internet sector. The crash rivals much of what has been seen in crypto. It is estimated investors lost $5 trillion in the crash. Some companies dropped 99% in stock value. Companies existed totally on hype and were producing no actual profit. Sound familiar?
Despite the epic meltdown from the Dot Com bubble, today you can still create a web page as easily as was possible in the year 2000. Fortunately, the internet has remained largely unregulated despite the economic disaster. Nothing prevents anyone from creating another Pet.com ( famous failed dot com company ), except that today nobody would be willing to invest. The industry matured all on its own. Bad companies folded and went out of business. Investors became much more selective in what companies met their criteria for investments. The companies that survived lived on to be the tech giants we know today.
At the time of this writing, FTX is the catalyst of the greatest collapse in crypto which continues to expand its reach with a complex web of entanglements still being discovered. There are more questions than answers at this point, but the questions themselves are intriguing. Such as, why was FTX one of the most prolific pushers of crypto regulations while simultaneously running a scam? While we can only speculate at this time of motivations and reach of the bad actors, we can observe how the market has reacted.
With each company that folds, with each scam that is revealed, the behavior of market participants evolves in accordance to the environment. Investors become unwilling to participate without assurances and verification that previous problems and trust issues have been resolved. Without regulation, pressure comes directly from the investors and users. Regulation can take months or years to formulate. However, in the market, reactions begin immediately. Funds are being withdrawn from exchanges where trust is lost. Exchanges are now reacting by issuing records for proof of funds that can be verified on the blockchain. This puts pressure on other exchanges to do so, as it is competition of trust. Users are now able to scrutinize the blockchain records of the funds for any signs of malfeasance. This will become the norm and the minimum bar for expectations of trust.
Wherever there are problems in the market, new solutions and opportunities arise. In addition to changes in market participant behaviors, new companies form to provide services which address the problems in the market. Hardware wallets like Ledger, Trezor and more came along to give us greater security. Auditing firms such as Hacken, Certik and many others are growing which look to ensure greater trust in security and project operations. Software products such as Presend are filling a need to provide protections to users for wallet transactions. These companies are able to attack the problems in the space allowing the crypto industry to continue to mature. We can only expect the ease of use, security, reliability and safety will continue to improve if left completely on their own to do so without intervention.
What happens in the end?
Freedom is not protected by a technology, an algorithm, or other such devices. It has and always will be individuals who will stand to defend liberty. I believe there has been a faith placed into technology which has unfortunately resulted in individuals taking a step back from being the primary advocates and defenders of liberty. The unstoppable blockchain will be nothing more than an adornment that reminds of a vision that fell to the willing submission of a populace. A shield which is not wielded provides no defense at all. Moreover, it may then easily be claimed by ones adversaries. Instruments devised to protect us, never do so of their own accord.
… a mere demarcation on parchment of the constitutional limits of the several departments, is not a sufficient guard against those encroachments which lead to a tyrannical concentration of all the powers of government …
James Madison - The Federalist Papers: No. 48
References:
https://axioryintelligence.com/education/infographics/the-dot-com-bubble-the-infamous-economic-meltdown/