Tag Archives financial injustice

Bitcoin and other cryptocurrencies are becoming increasingly popular, especially among young ‘digital natives’ who are living a significant part of their lives online. But besides helping smooth the transition to a physical-digital life, cryptocurrencies are also changing the world in a different way. This article, part of a two-article series on cryptocurrencies, shows how Bitcoin and blockchain technologies are rooted in a quest for social justice.

Bitcoin is increasingly seen as an alternative to fiat currencies owing to its ‘stable value’ (this can be refuted). At the start of this year, a single Bitcoin fetched more than $40,000, while it was worth $6,000 in March 2020, when the COVID-19 pandemic hit. In 2009, shortly after the currency was created, it was not worth a single dollar. This trend can be observed across the almost 5,000 cryptocurrencies that are flooding the market: in early January, total global trade in digital money reached one trillion USD, doubling since the start of the pandemic. 

It’s clear that cryptocurrencies are a big deal. Here’s why.

In his paper ‘A Peer-to-Peer Electronic Cash System’ (2008), Bitcoin’s founder, Satoshi Nakamoto, explained that the peer-to-peer version of purely digital money would allow online payments to be made directly from one party to another without going through a financial institution or a third party. As a system, Bitcoin is a type of software used for transacting objects of value (money), as well as for issuing forms of money with certain values. The digital currency, also called Bitcoin, is transacted via the Internet.

While Nakamoto did not link Bitcoin to blockchain technologies in his original paper, the term was coined by Hal Finney, a cryptographist from the United States who was also involved in providing input on the ‘Bitcoin system’ to Nakamoto, before the system was launched in early 2009. Blockchains are termed as such because collections of transactions are recorded in blocks that are linked or chained chronologically and secured cryptographically. They are considered very, very safe and very, very private.

The reasons for this financial tendency towards digitalised money include the uncertainty and depreciation of fiat money, high inflation, and high banking costs. But privacy was also a key concern driving the emergence of cryptocurrencies. Starting in 1992, hundreds of scholars with backgrounds in philosophy, mathematics, computer science, cryptography and political science have been joining hands with a multidisciplinary group of experts and activists calling themselves cypherpunks to seek alternatives to the mainstream economy and politics (Assange, 2016). Initial discussions were rooted in concerns about the increasing loss of privacy in the digital world, followed by other fundamental discussions that challenge both the establishment and the vulnerability of the financial system. One important question the discussion group sought an answer to, was how the epistemology of value is returned to each individual. Another was whether banks as custodians of valuable assets could be eliminated. After it was created in 2008, Bitcoin seemed to tick all of the boxes.

So here’s the good news about cryptocurrencies: they can be seen as one avenue of pursuing transformative change. We argue that blockchain, the ecosystem of cryptocurrencies, is essentially based on idealism, particularly the notion that individuals should not be subordinated and exploited by a system that does not work for them. Sovereignty is key. Moreover, the system is based on a sense of solidarity as opposed to individualism in the sense that those who buy and trade digital currencies are collectively opposing the mainstream economy and their position in it. 

Thus, cypherpunks – those seeking to enforce a return to greater privacy through digital technologies and cryptography – are leading a scientific rebellion. They are seeking the decentralisation of currencies, so that each individual becomes his or her own bank. They are seeking currencies where the exchange rate remains stable instead of depreciating. And they are seeking a fair world in which humans are not exploited by financial systems, but instead can participate freely in a financial system that promotes trust, stability, and accountability.

Are there real-world examples of how cryptocurrencies can be used for good? Intergovernmental organisations and INGOs are also interested in using cryptos for their transactions and donations. In October 2019, for example, UNICEF announced its Cryptocurrency Fund (CryptoFund) to enable donations worldwide through a singular digital currency. Save the Children was listed as the first NGO to receive and distribute digital money, and the Oxfam family and hundred of other NGOs across the world are following suit.

Yet blockchain technologies carry some risks, and its greatest benefit may also be its downfall. Bitcoin is not only being pursued by financial firms, corporations and hedge funds as yet another form of capital – cryptocurrencies have the potential to be misused by corrupt politicians, the mafia, and armed groups and terrorists because of the unrivaled privacy it enables to those using it (RAND, 2019).

It is also notable that countries with strong authoritarian tendencies are exploring cryptocurrencies. Zimbabwe recognised digital money as a possible alternative to fiat money following the collapse of the Zim dollar in 2008, and the collapse of the Venezuelan bolivar in 2018 led Venezuelan president Nicholas Maduro to create the Petro. Superpowers like Russia and China have created their own cryptocurrencies. These developments should be closely monitored to ensure that cryptocurrencies and blockchains do what they are intended to – serve individuals and promote fairness, freedom, and privacy.

Opinions do not necessarily reflect the views of the ISS or members of the Bliss team.