Cryptocurrency’s Image Problem: A Conversation That We Need To Have
We’ve all had conversations with people who don’t trust crypto, and want nothing to do with it. We try to explain the virtues of a blockchain-based currency to them, and they visibly recoil from the conversation, as though we’re talking about secret nuclear data stolen from the CIA.
Crypto has been portrayed as “dirty” due to its history in DarkWeb use and anonymity in making illegal transactions. It’s been dismissed as having “no real value” because it isn’t a fiat currency (more on this in a moment.) The CEO of JPMorgan Chase even dismissed Bitcoin as “Fool’s Gold” recently.
Some don’t trust it, some don’t understand it, but most are coming to the realization that we’ve known for a while now: Cryptocurrency is here to stay. Companies from Tesla to Home Depot to Starbucks now accept it as payment. Benoit Coeure of the Bank for International Settlements has urged world banks to start minting central bank digital currencies immediately. The aforementioned JPMorgan Chase even started their own cryptocurrency in 2019.
So how does a community-based, peer-to-peer currency exchange clarify the image of what crypto really is? How do we help people understand that Bitcoin, cryptocurrency and blockchain aren’t shady, evil or dishonest; they’re actually quite the opposite?
The answer is right in the question; as a community. Here are the three biggest misnomers about cryptocurrency that you’ll probably hear over the holidays, as well as how to politely discuss them…hopefully without getting candied yams thrown at you:
Misnomer #1: “Cryptocurrency Is Dirty Money.”
The majority of this reputation comes from crypto’s involvement with Silk Road, a bitcoin-only site used for a variety of criminal transactions. However, aside from the anonymity the Internet provides, cryptocurrency is no dirtier than any country’s fiat money (and in a literal sense, it’s much cleaner.) Illegal transactions still take place every day, and cryptocurrency represents a small fraction of the currency seized; cash is still king in that realm.
The Truth: Cryptocurrency is specifically designed around transparent transactions.
This may seem simple to you and I, but most people still don’t know this. While crypto allows anonymity through the Internet, every blockchain transaction is public and permanent. You can see a history of where funds have been and what they’ve purchased. If any company wants to be completely transparent with their business dealings, cryptocurrency is the future for them.
Furthermore, and this is something the black hats have found out the hard way, it’s very, very difficult to be 100% anonymous on the Internet. Silk Road was closed down in late 2013. The owner, Ross Ulbricht, was arrested, convicted of a multitude of felonies, and is currently serving two life sentences plus 40 years. 170,000 Bitcoins were seized by the FBI and later auctioned to the public as “washed” coins. As with anything that has a ledger entry, cryptocurrency transactions leave a trail behind them. And trails eventually get followed.
Misnomer #2: “Cryptocurrency is made up.”
This is the one that might start an argument. Your good old Uncle Fred might take a $20 bill out of his wallet, boldly slap it on the dinner table and say something like, “I can hold this in my hand and walk in to a store anywhere in the country and it has VALUE! This Crypto nonsense is just made up!” Then you’ll go back and forth about the gold standard and fiat currency, and before you know it, someone’s wearing most of Aunt Marge’s jello salad.
The Truth, Part One: Uncle Fred is right.
Of course it’s made up. It’s all made up. To quote Jeremy Irons from Margin Call: “It’s just money. It’s made up. Pieces of paper with pictures on it so we don’t have to kill each other just to get something to eat.” It’s all about what people think is worth something. People always valued shiny yellow rocks, but they got awfully difficult to carry around, so people used pieces of paper to represent the rocks. Today, we carry around pieces of paper that our governments say have value. Tomorrow, we’ll have value in digital wallets.
The Truth, Part Two: The gold standard is actually a pretty good comparison to Bitcoin.
The main reason every country in the world abandoned the gold standard is that there’s a finite amount of gold in existence, and there wasn’t enough gold to back up the paper money that represented it. Similarly, there’s a finite amount of bitcoin that will ever be mined, but it’s divisible down to a single Satoshi, or .00000001 Bitcoin.
Misnomer #3: “Cryptocurrency doesn’t have any real value, and no country uses it as fiat.”
There are two main entities that have been shouting this from their proverbial rooftops for years. In a revelation that will shock very few people, these two entities are governments and banks. Make no mistake, decentralized finance (DeFi) has the attention of government regulators and monetary institutions around the globe.
The very purpose of decentralized finance is to create peer-to-peer monetary exchanges, without regulations or bank fees. While there are legitimate points to be made about the need for oversight and controls on exchanges, let’s not pretend that there isn’t a very wary eye on the revenue stream that governments and banks could lose through DeFi. They stand to lose a LOT of money, and they’re not particularly happy about that.
I mean, it’s not like governments or corporate banks would ever do anything dishonest and underhanded to keep money, right?
The Truth, Part One: Bitcoin and many other cryptocurrencies are governed by one of the oldest laws of economics.
That law is supply and demand. Any coin with a hard cap will have a limited supply, which inherently increases demand. The difficulty with the demand side of the equation until recently has been the retail limitations. Those limitations, as explained above, are starting to disappear; you can now go into a Tesla dealer and buy a car with Bitcoin.
The Truth, Part Two: Bitcoin is now a fiat currency.
Last month, El Salvador recognized Bitcoin as legal currency, and purchased $20mm worth. This is the first country to officially recognize Bitcoin as fiat, and opens the door for other countries to follow.
Whether the answer is to adopt an existing coin, create a government-backed stable coin, or use a corporately-backed bank coin, one thing’s for certain: Cryptocurrency is here to stay on a global scale, and that is by no means a bad thing. Although the rollout of Bitcoin in El Salvador has been bumpy, there’s certainly been progress. As of this writing, the adoption of Bitcoin has resulted in about $4mm of profits for El Salvador.
They plan to build schools.
So there you have it. As you sit down for dinner around the table with friends and family this holiday season, remember to be kind and patient in any crypto discussion, even with Uncle Fred.
Because next year, you might have to explain NFTs.