With Halloween and the 12th anniversary of the Bitcoin white paper approaching, it’s an apt moment to consider a classic horror trope through a monetary lens.
“Who are the real monsters?”
From Mary Shelley’s “Frankenstein” to George Romero’s “Night of the Living Dead,” to Jordan Peele’s “Us,” some of the scariest tales suggest that “normal” people are more nefarious than the nominal bogeymen. This is a useful way to think about the allegedly abominable qualities of cryptocurrency when compared to the incumbent institutions it challenges – and the supposedly safer visions they are now putting forth.
Since CoinDesk is a family publication, I won’t go into the details of those gory fictional works. Besides, because there’s an element of farce here as well, I’ve got an even better seasonally appropriate metaphor: “The Munsters.”
For the 99% of readers too young to remember, this was a 1960s sitcom about an eccentric family who live in a cobwebbed mansion and resemble iconic movie monsters. The patriarch, Herman Munster, is a dead ringer (ahem) for Frankenstein’s monster, his wife and father-in-law are vampires, his son a werewolf. They’re a friendly bunch but never quite understand why the neighbors act so strangely around them.
The most important character for this discussion is Marilyn, Herman’s teenage niece. She isn’t a monster at all; she’s the archetypal Girl Next Door. The running gag is that the other Munsters pity Marilyn for her looks, and even she somehow blames herself when boyfriends run away screaming upon meeting her relatives.
Just like Marilyn Munster, the Bitcoin network is a wholesome outlier among the frightening creatures of the legacy financial system.
The censorship monster
The cryptocurrency’s chief value proposition, censorship resistance, is not a radical departure from tradition as sometimes implied. On the contrary, it’s the way money’s been since the days of cowrie shells. All Bitcoin did was restore it for transactions over the internet.
You go to a butcher shop, you hand a few banknotes to the guy behind the counter, he gives you a steak. No third party who thinks you should be eating soy instead can veto the transaction. That’s normal.
What’s abnormal is busybody A pressuring intermediary B to prevent individuals C and D from transacting, even lawfully. Even more abnormal is moving to a world where every last C and D has no choice but to rely on a B and therefore lives at the mercy of the As.
None of this is to say that intermediaries are going away, nor that they should. They can add value. The problem is having no choice but to use one, which makes them choke points to be exploited by scolds and tyrants.
Possessed, like Linda Blair in “The Exorcist,” you might say.
The asset seizure monster
Another characteristic bitcoin (loyalists to other crypto tribes may substitute the asset of their choice) shares with older forms of money, and not the electronic kind that sits in your bank account, is that it is a bearer asset. Like cash, once you lose it, it’s gone, and it’s the holder’s burden to keep it secure through careful storage of their cryptographic private keys.
Yes, this is scary, as many crypto investors can attest. But also scary is cops seizing assets of people who haven’t been charged with a crime and putting the burden on them to prove an asset wasn’t involved in a crime. What’s even more terrifying is moving to a world where ALL money is held at intermediaries who must comply with such a regime.
In this context, the advantage of a bearer asset secured with public-key cryptography is that the authorities cannot unilaterally seize someone’s funds by subpoenaing a bank. They need the key holder to cooperate, even if under duress. As I’ve written before, this “claws back a modicum of power for the individual” from the lurking Leviathan.
The surveillance monster
One more commonality with cash is that bitcoin requires no personally identifiable information to handle – at least, the basic open-source software doesn’t, even if regulated exchanges demand it.
The pseudonymity of alphanumeric addresses, along with the aforementioned resistance to seizure and censorship, go a long way toward explaining the technology’s popularity among criminals and other unsavory types.
“Current terrorist use of cryptocurrency may represent the first raindrops of an oncoming storm of expanded use,” warned a recent report by a U.S. Department of Justice task force. The laundering of illicit funds, the report pointed out, “can be substantially easier when the movement of funds takes place online and anonymously.” That’s enough to give anyone goosebumps.
But remember that the demand for legibility of financial flows is a modern phenomenon. The U.S. Bank Secrecy Act only just turned 50 (with mixed results at best, as Michael J. Casey wrote last week). Depending on how you define it, money has been around for as long as 5,000 years.
Legibility is the aberration. Legibility is an ongoing experiment.
That experiment has spawned its own terrors. Consumers in today’s digital world must entrust sensitive personal data to an untold number of hackable organizations, Equifaxes-in-waiting.
Even more chillingly, the powers-that-be want to double down. U.S. regulators recently proposed lowering the threshold for the “travel rule” to $250 from $3,000 for international money transfers. Under the travel rule, if you wire someone money, not only does your bank know your name, account number and address, so must the recipient’s bank, and it keeps a record for five years. And if you receive money, there’s a chance the sender’s bank has your name and address as well. Perhaps this makes sense for high-roller transactions, but $250?
The inflation monster
Also, note that $3,000 in 1996, the year the travel rule was created, is equivalent to nearly $5,000 in today’s dollars.
So even if the regulators don’t follow through on their proposal to lower the threshold for international wires, it’s already been happening in slow motion, thanks to inflation. Every year the dragnet widens a bit automatically, just as it has for the cash transaction reports banks file to the government.
The upshot is that, by default, more and more personal information is likely to be captured over time.
And that brings us to the last way bitcoin is a return to form rather than a deviation, although this one is perhaps the most controversial.
While its exchange rate with the dollar fluctuates wildly from minute to minute, over time bitcoin has appreciated mightily in value. To detractors, the short-term volatility makes it useless as a currency; to proponents, the long-term appreciation and hard supply cap make it the ideal currency, one that incentivizes saving.
They have a point. “A penny saved is a penny earned.” That’s normal. Or was – it’s the kind of thing you hear parents say in black-and-white sitcoms.
“Stop whining about low interest rates, hoarder. It’s your patriotic duty to blow your discretionary income at the mall or wager it on stonks, we need to keep the economy moving.” That’s the stuff of nightmares. – Marc Hochstein
