I am an active investor in bitcoin and ethereum. I see the inevitable reprograming of our culture as blockchain technology removes middle men in almost every industry, including ones we haven’t thought of yet.
However, I am not a crypto fanatic. I call these fanatics “bitcoin bros.” Their agenda is clear. Their message is (I’m paraphrasing) as follows.
The Bitcoin Bro Manifesto
“Government institutions have failed us. They have done nothing but widen the gap of wealth inequality and organizations like the federal reserve and institutional banking have made the world a worse place. Because of that, the only option is to burn the entire system down and create a new system that uses digital currency that is controlled by no one and can not be manipulated by printing new money.”
This is important because this is the allure of crypto currency. This is the brand of crypto currency. This is the religion of crypto currency. The only hope for our future is to remove all control and manipulation from our monetary system. Under this system, chaos (the true definition of chaos) will ensure fairness in our world.
Okay, enough with the esotericism. What’s the point?
The reason why I think it’s absolutely delusional to believe that crypto will be a legitimate currency is because it goes against human nature. People are social. We are memetic. We live in tribes and we exist in a world of constantly changing dynamics and belief systems. Our financial system will never be static enough to exist on top of bitcoin or any crypto currency.
The Mark Cuban Bet on TITAN
This story perfectly explains why crypto can’t be the center point of an economy. Here’s the story in a nutshell. (You can read the full story on Bloomberg here)
Chapter 1 – Mark Cuban invests a lot of money into a coin called TITAN. TITAN is a decentralized coin that is “stable.”
Chapter 2 – Mark Cuban writes a blog post expressing his excitement in decentralized finance and even mentions TITAN.
Chapter 3 – People read Mark Cuban’s post, buy lots of TITAN, and the price of TITAN skyrockets.
Chapter 4 – The price of TITAN collapses to ZERO overnight. (So much for stability)
Chapter 5 – Mark Cuban calls for regulation.
We’ve seen this before. We’ve seen this in the Tulip bubble, we’ve seen this is the whaling bubble of The South Sea company, we’ve seen this in the opioid epidemic, we’ve seen this the meat packing industry, the oil and steel trades in the industrial revolution and in the recent housing crisis.
Everything is great, until it isn’t. And then when it’s not, as a republic we demand someone “do something.” Which is just another way of saying that we want government regulation.
Ramit Sethi said it best…
The Middle Ground of Decentralization
Decentralization sounds empowering and it’s no wonder that a swarm of young men are the true advocates for decentralized economies. Let’s take a second to think about why. We are seeing a group of young men who have lived through extremely stressful economic times.
- crushed by two economic collapses
- a crippled housing market
- inflated student loans
- the worst pay (in relation to economic growth) in decades
- a culture manipulated by social media that is constantly telling them they are not good enough
What’s worse is throughout the entire ordeal it has been the people who have caused the problems who have been gotten richer and richer.
It’s no wonder bitcoin has become a religion for angry young millennials. I admit, I find myself jumping on the hype train as well
Of course I want a system that can’t be so easily controlled by a handful of oligarchs. But this full on conviction of crypto and this mindset that is devoid of anything even remotely close to compromise is not the way.
Decentralization can do a lot of good in our world. It can automate a lot of processes that aren’t required. It can trim the fat off of trillions of dollars of inefficiencies in thousands of industries. It can create an asset class that is predictable. It can create tokens and authentication for digital assets that could easily be replicated in the past. It can create ledger systems for mortgages, insurance, and more. God damn the potential is endless.
But crypto IS NOT a catch all solution for monetary policy. That’s the dumbest thing I’ve ever heard.
As soon as billionaires start losing their money, the government will step in and implement regulation. And then what will the bitcoin bros do?
A Final Note on Regulation
Somehow, we have created a narrative the sees regulation as a bad thing, but it’s not. The government has three jobs.
- Build an army
- Performs civil services (trash, clean water, utilities, etc)
Regulation is not the enemy. And it is hysterical to me that the inevitable outcome will be that once the crypto community starts to feel pain is when the community itself will start to ask for regulation.
There is regulation coming. It should be scrutinized, fought over, resisted and talked about.. but it should be welcomed.
P.S. – Like many of you, I am constantly trying to work through the ideas that crypto and blockchain introduce. Writing is a way for me to think. Sometimes I get it right, sometimes I get it wrong. I would appreciate any replies or comments on this piece. I’m eager to learn more.