Chapter 6
Blockchain: The Tulip Bulb oF the Internet?
Where is blockchain today, and where is it going? To its critics, blockchain is little more than a speculative bubble—another power grab by technologists, a solution in search of a problem, and a system rife with errors. It’s vulnerable to thieves and hacks, or otherwise hopelessly compromised. But to its supporters, blockchain represents nothing less than a revolution. It establishes what makes human affairs work: truth, which leads to trust. It takes control of the internet back from the tech companies, gatekeepers, and totalitarian governments. In their eyes, the challenges and missteps of the past decade are to be expected given the enormity of blockchain’s potential.
The infrastructure to fully support cryptocurrencies is coming into place. Several exchanges—such as Binance HK, Upbit, and Huobi—have set up digital currency ventures. Miners operate all over the world. Supply chains, including those of Walmart, are adopting blockchain technology. In May 2019, companies such as Amazon, Whole Foods, Nordstrom, AT&T, and Barnes and Noble began accepting cryptocurrency for payments.
However, there have also been stumbles. The 2018 crash in Bitcoin and other cryptocurrencies weakened investor demand and interest. The volatility of their value made cryptocurrencies difficult to use as a medium of exchange. Major Wall Street institutions such as Goldman Sachs and the Chicago Board Options Exchange delayed, or dropped, plans to offer trading support for Bitcoin.
“When you talk to tech industry insiders about where [blockchain] is heading, two vastly different comparisons are inevitable: the tulip bulb and the internet,” observed a New York Times reporter. The tulip bulb craze occurred in the seventeenth century in the Netherlands, when speculators bid up the price of tulip flower bulbs on newly opened markets. The prices reached astronomical levels and then abruptly collapsed, and the tulip craze has become shorthand for speculative bubbles. The internet, on the other hand, was also a speculative bubble that popped in 2000. But it ultimately rewarded investors. “So what is it?” asks the article. “We are still a few years from any sort of clarity about where this technology will fit in the world.”
Restoring Trust in Data
According to its supporters, one of the biggest potential applications of blockchain is data. All around us, networked appliances, vehicles, laptop and desktop computers and, of course, smartphones, are talking to the network. They share information—billions of bits of data. Analysts and programs sift through this vast trove to glean insights. Imagine if doctors could track the spread of disease with extraordinary accuracy in real time. Or if machine parts informed users when they need to be replaced. Or if the progress of a customized educational program could be confirmed in real time.
Data can provide vital clues to consumer behavior, voter preferences, and organizational effectiveness. We often think of Amazon as a website where we can buy virtually anything and have it shipped directly to us. In reality, Amazon is as much a data-gathering company that holds valuable information on its customers’ shopping habits. Other companies such as Google, Facebook, and Apple have similar pools of user data. These companies protectively guard their data. Their high stock prices are evidence of their commanding position in the economy.
However, public trust in these companies has fallen in recent years. It was revealed that consumer data has been used to manipulate, spy on, and target and deliver “fake news” to users. Many users now wonder how their data is being used—or abused. Trust is a critical component for all transactions, and trust in the era of data collection is near all-time lows.
Many companies do not abuse the data they collect but have shown they can’t be trusted to protect it. Because user data is so valuable, these companies have been targeted by hackers. Every few months, it seems, another company reports a significant data breach. A hack of Twitter data, for example, led to email in-boxes jammed with spam, sophisticated scam campaigns, and harassment.
Finally, many people have privacy concerns. They don’t want their data to be recorded, analyzed, shared, or possibly stolen. They don’t want a third party to use it to push an ad telling them what to buy. They don’t want to be manipulated by targeted media stories telling them what to think and who to vote for. Long after a person searches for or even purchases an item, ads for it can appear in their browser. It is an annoying and sometimes unsettling reminder that we’re always being watched.
How can the promise of data be realized with these severe limitations? How can trust be restored? According to some, the answer is blockchain.
Billions of transactions occur every day on the internet. These transactions are recorded through third parties, who can use, abuse, or lose the data. The third parties can analyze the data for their own purposes or sell it to another party without their users’ knowledge. Moreover, whoever holds the data can combine it with other data about the user, forming a more complete (or distorted) image of them.
Blockchain removes the intermediary, limiting the exchange of data to the two parties. The exchange can be made in private and is confined specifically to the transaction. This means a user can buy something without allowing third parties to track them all over the internet. Blockchain also allows users to take control of their data. Without blockchain, users typically log into a website with a specific ID name that is verified with a password. The user may think they own this experience. After all, it’s their name, password, and data. However, everything—the user’s identity and content—is actually hosted by the website.
“Apps were not responsive to customers so much as designed to lock them in,” said tech company founder Ryan Shea. “You go into the net and Facebook or Google or Dropbox or Pinterest or Amazon all want you to move in, giving them all your documents, music, providing storage for your life. Medical sites want to store all your health data. You have to petition to get it when you want it.”
In an era of ever-rising concern about data and privacy, as well as the potential for hyperefficient internet giants to shape societies and economies in ways that benefit them, blockchain may become a potent alternative. Decentralized, private blockchain addresses provide an alternative to the current, tedious system in which each website requires a separate ID and password. The individual retains control over their identity and data rather than handing them off to an app or platform.
To understand how this might work in the future, consider the following example: you are on a long drive in your electric vehicle and need to charge up. However, no charging stations are nearby. You instead pull up to a house that has advertised itself as a charging station for electric cars. You plug in and authorize payment via blockchain, using a digital currency from your digital wallet. The exchange is made, and you’re back on the road.
This transaction may seem fairly simple, but it requires a lot of trust. A blockchain must verify that the car is owned by the driver, that they have the money to pay, and that they are not using software that may infect the homeowner’s computers with a virus. Without blockchain technology, there are a number of different gatekeepers that could slow down, or even prevent, the transaction. The electrical company could sell its electricity only to individuals within a certain jurisdiction. The car company may negotiate to have its cars only serviced at specific charging stations. The telecom company may not allow the transaction unless it’s paid a special fee. And the current financial system—where exchanges of cash and securities are expensive and can literally take days to settle—is not going to enable a quick exchange of digital currency.
With blockchain, all of this is bypassed. The individual owns their identity, their money, and their things (in this case, a car). They carry out a transaction with another individual without a third party or intermediary. They do not need a government or financial institution. They do not even need a prior relationship or reputation to establish trust. It is easy to understand why totalitarian regimes and police states are regarding cryptocurrencies with suspicion and, in some cases, outright banning them. In the example described above, blockchain is an enabler of freedom.
Establishing the Person
Part of freedom is having the right to self-determination, to control your own identity. In many societies, people do not have access to their own pasts or to their own selves. They may have lived in a home or on a piece of land for decades and yet have no proof they own it. They may have skills or characteristics but no way to verify them to a government or a bank. Millions of people live in these precarious circumstances all over the world.
In other places, people have records—birth certificates, passports, driver’s licenses, deeds of ownership, credit histories, and so on—that can be used to prove to the government and other institutions they are who they say they are and own what they say they own. Because individuals can establish their identities, they are able to take out loans, take advantage of financial and educational opportunities, and invest in themselves. They can access short-term credit cards for emergencies and long-term loans to finance home purchases or their educations. Individuals outside of this system—who are generally poorer—actually have to pay more for services such as banking and are locked out of making money off their assets.
In Manila, Philippines, more than five hundred thousand squatters live in structures with no titles to the land they live on. This leaves them vulnerable to challenges from the government and private landowners. In Brazil, millions live in vast favelas—neighborhoods of shacks and homes built by people on land they do not own. In countries in South Asia, such as India, rural farmers cultivate crops on public land. Without titles (deeds) to the property they work on, these people are deprived of their investments, any improvements they have made to the property, and any savings. They lose their past and are denied their future.
A serious problem is that record keepers in many societies are incompetent and corrupt. An individual may try to get a deed to a piece of land—its exact location, the dates when it was bought and sold—and find the records are out of order, or improperly entered. Or someone could bribe an official to write a different name on the deed, effectively stealing the title of ownership. In the United States and Canada, Native Americans have been forced to give up their land under threat of violence, and the federal governments have failed to honor treaties and laws signed regarding Native land rights and ownership. This corruption favors the wealthy and powerful.
“Governments have been known to make up completely new land registries and say, ‘Hey, this land is ours and nobody lives here,’ ” noted conservation biologist Guillaume Chapron. This is especially common if natural resources are present in the area.
Blockchain could be a solution to these challenges. Because of the decentralized ledger accounting system, blockchain contracts can’t be altered. They are transparent and universally accessible to anyone with access to the internet. This impacts more than online shopping. Blockchain could allow billions of people access to the modern global economy—people who have previously been ignored, exploited, or simply left out.
“The time stamp makes this all possible,” noted authors Michael Casey and Paul Vigna, “because it inserts a declaration that a milestone has occurred—a birth, a graduation, a property transfer, a marriage—into a commonly accepted record of history to which all can refer.”
Individuals who own their own homes, for example, are typically better stewards of it. They often participate more in local government and seek solutions to common problems. They become active citizens in a world where active citizenship is more needed than ever.
But again, a decentralized ledger doesn’t guarantee that the original coding is valid. It could have been written incorrectly or deliberately corrupted. Users must always read the fine print—whether it’s computer code or the end of a contract. Blind faith in blockchain is not a solution. Blockchain by itself cannot overcome tyranny, build social cohesion, eliminate corruption, or otherwise ward off the many challenges people face.
Blockchain and Banking
Banks have naturally been skeptical about a system that blockchain enthusiasts claim will replace them. One wealthy investor stated that he bought Bitcoin to “support a way of ripping apart the financial system.” Recently, however, banks have started to embrace the new technology. Many have released coins that are guaranteed by the US dollar or other assets, thus helping to avoid the wild swings cryptocurrencies have experienced in the past. One cryptocurrency, Utility Settlement Coin, allows banks to move money among themselves more efficiently.
JPMorgan CEO Jamie Dimon, who once threatened to fire employees if they traded Bitcoin, announced that JPMorgan would introduce its own digital token, a first for a major US bank. Despite calling Bitcoin a “fraud,” Dimon came around to recognize blockchain’s potential. JPMorgan, after all, had already developed Quorum, a blockchain platform that companies used to track financial data.
Headquarted in New York City, JPMorgan is the largest bank in the United States. It has only recently begun investing in cryptocurrencies.
According to the bank, clients had asked for a way to move their money onto blockchain. Securities are typically bought, sold, and delivered (or settled) through the Depository Trust and Clearing Corporation, an institution jointly owned by banks. The steps to ensure the secure and legal transfer of a security are numerous, tedious, time-consuming, and costly. About $50 billion of trades fail each day in the US Treasury market, representing a significant loss and friction for the markets.
These failures are also expensive for the banks. The attraction, said JPMorgan’s head of blockchain, was that large institutions wanted to move money safely and, above all, quickly. Through Quorum, the institution’s money is converted to JPM Coins, which are backed by US dollars. Once the transaction is completed, the JPM Coins are converted back into US dollars. This allows institutions to bypass the relatively laborious process of wiring money.
In China, the world’s second-largest economy, financial regulators have taken a deep interest in blockchain. The Communist Party of China, which rules the country, has moved to prevent cryptocurrencies from operating outside government control. China has banned cryptocurrency exchanges and ICOs. Instead, the People’s Bank of China (PBOC) has reportedly begun developing a digital currency to replace cash. Though details haven’t been confirmed, Chinese citizens may be given digital wallets in exchange for their cash. This would allow the PBOC to track virtually all its citizens’ transactions, as all purchases would occur digitally. This system is at odds with the vision of the first cryptocurrency developers.
Banks and cryptocurrencies face other challenges. Financial companies are among the most regulated in the industry. This is for good reason. Irresponsible banking, lending, and speculation have led to asset bubbles, financial panics, and economic devastation, all of which have made populations miserable, overthrown governments, and even brought on war. While blockchain is supposedly transparent, regulators will need time to understand the technology and its implications.
“The standard answer of ‘just go to your local Chase branch’ doesn’t work in crypto,” cryptocurrency trader Sam Bankman-Fried told a Bloomberg reporter. “It’s not illegal for big banks to bank the crypto industry, but it’s a massive compliance headache that they don’t want to put the resources in to solve.”
How cryptocurrencies will ultimately affect banking is still being worked out. Though banks are already using blockchain to become more efficient, its intended purpose—to replace intermediaries—is still more potential than reality.
Blockchain: Job Destroyer?
Given the current political and social instability in the United States, blockchain may provide solutions to issues within the labor market.
All effective innovation puts pressure on specific industries and the people who work in them. Blockchain could potentially make record keepers, and the individuals who monitor and ensure they are correct, redundant. Record keeping is not a small industry. More than one million people are classified as accountants in the United States alone. But the change may affect more than just that profession. Wall Street employs—and pays very well—teams of analysts and portfolio managers who wait for earnings releases and quarterly data. Blockchain could make this content available in real time and verify its accuracy—no need to wait around for the information. Banks, too, are huge employers at all stages of the financial process, from making loans to verifying transactions to providing due diligence for customers.
The loss of many high-paying, upper-middle-class professions could be destabilizing. It could make current angry debates about immigrants, foreign competition, and globalization appear tame by comparison. As more automated machines take over manual labor, and as software based on algorithms replace traditionally white-collar jobs, we are left to ask what kind of world this leaves for human beings. The role of work in our lives, the importance of dignity, the pride of building something on our own—all of this must be discussed, debated, and solved, or those creating the technology will do it for us.
Some believe that humans, once unencumbered by meaningless work, will focus on their own creative potential. The irony is that creative industries, such as music, visual art, and writing, were some of the first professions consumed by technology. Can blockchain be part of the solution?
Technology made it virtually free to copy writing, music, or film, and to reproduce and distribute it. Blockchain, however, solves this problem by establishing something that cannot be reproduced—something unique. Thus, an artist can create something and have it exist as the sole copy (or as one of a number of copies) to be sold and distributed. This is a first step. To create a digital economy that works for individual artists, it is critical to establish the singularity of a work and the person who created it.
Blockchain and Democracy
Blockchain could also help the relationship between democratic governments and their voters. Some of the biggest challenges in any democracy are voter fraud and voter suppression. Since citizens first held elections, individuals have tampered with the process. Traditionally, individuals would vote several times or add votes to stuff ballot boxes. Notorious in the United States are methods that deny individuals their right to vote through poll taxes, tests, and gerrymandering, or because of infractions on their record. Subtler efforts to influence voting include locating polling stations in remote or difficult-to-access areas.
Technology enthusiasts have long advocated using the internet for voting. An election could be held online, with individuals simply tapping their smartphones to register their votes. This would undoubtedly raise voter participation—no more traveling to polling stations, waiting in lines, or navigating cumbersome registration procedures. Online voting could also potentially address the fact that polling devices in the United States are sometimes old, broken, hacked, or ineffective.
Blockchain, which establishes one copy, can theoretically establish one vote. In late June 2018, Zug, a city in Switzerland, held a trial vote using blockchain technology. Zug is part of a group trying to establish itself as a center of blockchain innovation. Zug established an electronic ID system that allowed its citizens to vote through their smartphones on a specific issue. The municipal government claimed the experiment was a success because voters registered their votes easily and anonymously.
Just outside of Zürich, Switzerland, the small town of Zug is sometimes called Crypto Valley, a play on the more famous Silicon Valley in California.
Estonia, a European country of 1.3 million on the Baltic Sea, is leading another effort to use blockchain in voting. For several years, the country has transitioned from a traditional government to a fully digital one. Each citizen has been issued a secure ID card. They can vote for candidates on their home computers. They can file taxes, apply for loans, or see a doctor without the paperwork needed in other systems because the information can be accessed online.
The security of this system is based on Keyless Signature Infrastructure (KSI), a blockchain technology. KSI was developed by an Estonian company, Guardtime. The US military is among Guardtime’s largest customers.
To understand why blockchain could be so important for security, it’s vital to understand why security breaches can be so devastating. In conventional terms, people typically understand a data breach as someone seeing secret information. But that’s only part of the problem. The other, perhaps more important, security threat is that someone can alter data without being noticed. The details of your medical records are probably not important to a data thief. But if someone changed those details—for example, the medications you’re allergic to—that could be deadly the next time you’re at a hospital.
This example can be applied to many other scenarios. Imagine if voting records, tax records and payments, or land titles were changed without anyone being able to track the change. The average time before a data breach is detected is 197 days. That’s plenty of time to create havoc with records. The blockchain, however, makes every alteration immediately noticeable, ensuring that the records are sound. More importantly, technologies such as KSI are able to monitor the integrity of information while not having access to the data itself. Thus, information can be kept protected and private.
Blockchain and the Environment
Blockchain supporters believe that, in addition to supporting democracy, blockchain could be a crucial part of the solution to the most serious challenge we face: the destruction of the natural world.
Blockchain has already been used to track food. This allows consumers to know their food has been responsibly raised, captured, and delivered. Other companies have started piloting blockchain programs that allow individuals to trade their excess energy. In Japan, blockchain enables customer-to-customer relationships by establishing who owns what energy and how much of it is theirs. Ultimately, the goal is to have rural power customers create their own renewable energy sources and then sell their energy over the grid to other customers. The end result is a reduction in carbon emissions.
Blockchain by itself won’t save the planet. However, supporters argue, by establishing trust on a vast scale, it can be an enormous tool. It can enable concerned individuals to connect, verify, and trade. It allows people to work together. As the environmental crisis mounts, blockchain supporters argue that it will likely be at the center of the solution—an answer to critics who wondered when blockchain would find a problem.
Blockchain Is the Future?
The innovation inspired by blockchain, and the potential it holds, are still in the opening stages. Will blockchain improve access to technology? Will it contribute to a more level playing field for users? Will it let individuals collaborate more effectively? Or will blockchain lead to yet more centralized control, more alienation, and more abuse from those who hold power?
The most optimistic vision of blockchain is that it can help upend our current technological situation, which seems destined for some kind of dystopian dead end. A few giant companies currently dominate, offering “free” services that are actually paid for with very valuable user data. This data is used by the companies for their own benefit in ways mostly unknown to the general user. The companies also abuse their position to stifle innovation and competition, and ultimately dictate users’ online experiences.
“I wouldn’t say the internet has failed with a capital F, but it has failed to deliver the positive, constructive society many of us had hoped for,” noted Sir Tim Berners-Lee, the inventor of the World Wide Web.
Supporters of digital tokens believe they will inspire a new wave of innovation and creativity, especially when building public tools—or open protocols—for use on the internet. In the past, the internet was mostly built by institutions that did not need to serve the needs of stakeholders—i.e., the government, universities, and nonprofits. The individuals who created these tools, for the most part, were not able to directly profit from their labor. Consequently, the top software engineering talent tended to go to companies that could pay the most. Projects for the common good that might not immediately generate revenue, on the other hand, languished. With tokens, however, individuals could now create open protocols that benefit everyone—and get paid for it.
“This ecosystem of tokens and open platforms is starting to look like the map of a new, decentralized economic future,” wrote financial journalists Michael Casey and Paul Vigna. “In fact, these digital assets might even become the primary means by which human beings generate and exchange value.”
Libra
In June 2019 Facebook announced its plans to create a new cryptocurrency, Libra, which would be based on the open-source Libra Blockchain. Facebook’s goal was to make Libra available to its more than two billion users, who could use Facebook apps to make and receive payments. The currency would be managed by the Libra Association, a nonprofit based in Switzerland that included companies such as Visa, PayPal, and Uber. Libra would be backed by bank deposits and short-term government securities.
Supporters spoke of the benefits Libra could bring. It would charge virtually no transaction fees—a potential boon for the many people worldwide without a bank account or other access to the financial system. It would bring cryptocurrencies and blockchain technology into the mainstream but remain outside the control of Wall Street and central banks. Facebook executives portrayed it as a new system that would favor users over institutions.
“It feels like it is time for a better system,” said David Marcus, head of Facebook’s blockchain technology research. “This is something that could be a profound change for the entire world.”
Within just a few months, however, Facebook’s Libra ran into trouble. Government officials were cool to the project, while regulators criticized it on the basis of Facebook’s notorious privacy issues. Others questioned whether tech companies could handle such an enormous responsibility. To them, Libra’s creation seemed an act of arrogance.
“I think it is extraordinary how [ignorant] Facebook is about how and why the financial system works,” said tech veteran Halsey Minor at a conference. “Nobody wants to hold a currency that is not their own. There is not one single person out there that is going, ‘give me a new currency.’ ”
Minor compared Facebook to countries such as China, Russia, and Iran, who are seeking a financial system outside the US dollar. Representative Nydia Velázquez of New York noted that a company with the motto “move fast and break things” may not be the best source for a new currency. ”Mr. Zuckerberg, we do not want to break the international monetary system,” she said.
Zuckerberg himself seemed humbled by the fierce response to Libra. He told the US Congress that management of the currency would be in the hands of an association. Most revealingly, he admitted, “I’m sure people wish it was anyone but Facebook putting this idea forward.”
Mark Zuckerberg, founder of Facebook, speaks at a summit on May 1, 2018. He believes Libra could bring cryptocurrencies into the mainstream.
Partners such as MasterCard began to drop out as the backlash grew. Facebook publicly said it might have to delay Libra’s launch. A system that developers claimed would establish trust between strangers was facing scrutiny because tech companies had lost the public trust.
Other power brokers in the world, however, noticed Facebook’s effort. They were determined not to be left behind. In China, cryptocurrencies had been banned because the central government did not want a financial system to operate outside its control. Chinese president Xi Jinping, however, stated that blockchain was important for the future and that it was vital for China to have a role in its development.
Soon after his remarks were made public, Chinese stocks even loosely related to blockchain rose sharply. In fact, shares in more than seventy companies had to be suspended after they hit their daily limit. The government quickly released a statement that said investors should not drive up stocks in every blockchain-related company.
“The future is here for blockchain, but we need to stay rational,” reported the government newspaper, the People’s Daily.
What about Satoshi Nakamoto?
As the world caught up to their ideas about cryptocurrencies and blockchain, Satoshi Nakamoto remained mostly silent and hidden. In fact, since December 2011, Nakamoto has essentially disappeared. On March 6, 2014, they sent a simple, five-worded message—“I am not Dorian Nakamoto.” This was in reference to a Dorian Satoshi Nakamoto, a former CIA computer coder in Los Angeles who, because of his name, had been hounded by the media as the founder of Bitcoin. That was the real Nakamoto’s last public message.
Many have speculated as to why Nakamoto has withdrawn from any kind of public life. The most obvious reason is that Nakamoto could be worth billions of dollars and, as such, a target for criminals. Another is that Nakamoto wants to keep as much focus on their creation, Bitcoin, as possible so that the system becomes more secure and trusted. Finally, however, Nakamoto may fear the collective power of governments, states, and financiers who sit atop the current system based on fiat currency. Given the threat Bitcoin may pose to this system—and the ways it has been useful to non-state actors such as criminals, drug traders, and terrorists—Nakamoto may be wise to keep themselves anonymous.
A few individuals have since emerged to claim the identity of Satoshi Nakamoto. One of the most prominent has been Craig Wright, an Australian computer programmer.
In 2015 Wired magazine announced Craig Wright was most likely the mystery individual behind Satoshi Nakamoto. Wired reported that it had secretly received leaked information—including emails and a trust agreement—that indicated Wright was Nakamoto. Wired published its results, though it also cautioned: “Either Wright invented Bitcoin, or he’s a brilliant hoaxer who very badly wants us to believe he did.”
How did he come up with the name? Wright told the Economist that Tominaga Nakamoto was a seventeenth-century Japanese philosopher, merchant, and freethinker who was very critical of his society.
A few weeks after publishing the story, however, Wired indicated some troubling inconsistencies had arisen. Wright, according to Wired, had misrepresented his education credentials and had backdated blog posts to make it look as if he had been involved in creating Bitcoin.
Skeptics wondered why Wright, if he were Nakamoto, did not simply produce Nakamoto’s private key. Only Nakamoto has it. Moreover, Nakamoto, if they are not Wright, has remained silent. No one has heard from them since their clarification about Dorian Nakamoto.
In 2019 Craig Wright, claiming to be Satoshi Nakamoto, sued several people who called him a fraud, including Ethereum founder Vitalik Buterin.
Boring
Perhaps Nakamoto wanted to be like his cryptocurrency: normal—boring, even. After falling in value by almost 75 percent in 2018, Bitcoin, against most expectations, began to rise again. The catalyst appeared to be a sudden change in monetary policy from the world’s most important central bank: the US Federal Reserve. In January 2019 the Federal Reserve announced it would begin loosening its monetary policy because the economy was weakening and investors had grown nervous.
The new policy typically encouraged investors to buy riskier assets. By the end of May, the price of Bitcoin had more than doubled. Other cryptocurrencies also benefited. That year Litecoin rose 290 percent through May. Ethereum was up 110 percent.
“The crypto winter is gone,” said a blockchain and cryptocurrency investor.
Despite cryptocurrencies’ decentralized nature, they are connected to the rises and falls of the rest of the economy and of financial institutions such as banks and traditional stock exchanges. In 2018 the operator of the New York Stock Exchange announced it was going to create its own cryptocurrency exchange.
Mike Orcutt, an associate editor at MIT Technology Review who focused on blockchain and cryptocurrencies, was more hopeful. “In 2019, blockchains will start to become boring,” he wrote. “After the Great Crypto Bull Run of 2017 and the monumental crash of 2018, blockchain technology won’t make as much noise in 2019. But it will become more useful.”
According to the website 99Bitcoins, the year 2018 saw ninety-three Bitcoin obituaries that claimed the death of the cryptocurrency. It is clear now that writers exaggerated these deaths. Digital currencies are a part of the financial and social landscape. In fact, Bitcoin and blockchain have become almost normal or, as Orcutt’s article put it, “boring.”
In October 2019 the Peterson Institute for International Economics hosted a seminar that asked a critical question: “What is the future of money in the digital age?”
Economist Martin Wolf noted that one idea in these discussions struck him as particularly interesting. Perhaps digital currencies are a chance for central banks—in other words, the government—to reassert its role in the global economy.
“Just as the internet has ended up as more of a source of enhanced government control than one of greater freedom . . . so the revolution in digital money might allow the central bank to replace the liabilities of private banks with its own,” Wolf wrote. “In this way, the seigniorage from money creation, now enjoyed by private banking, would be transferred back to taxpayers.”
Cryptocurrencies, once seen as a new, independent form of money outside of centralized control, may in fact be brought under government by a new generation of citizens tired of the abuses of the private market. It is difficult to conceive of a more ironic result from the cryptocurrency revolution.