On balance, I consider myself a cryptocurrency bull. As I’ve mentioned multiple times, I’ve ridden the highs and lows of Bitcoin (CCC:BTC-USD). I consider myself incredibly fortunate for cryptos bolstering my finances and perhaps the sector will surprise me again in the future.
But I’m also a crypto realist, which probably has an ugly connotation among more than a few communities dedicated to digital assets. Having witnessed my fair share of cultish behaviors and the occasional multi-level marketing scheme, I like to think I have a very low threshold for bovine scatology or BS for short.
Finally, it seems that the mainstream is catching on. Throughout much of this year, I’ve criticized not decentralization as a principle but rather, the assumption that merely shifting monetary systems to a decentralized model will cure most or all social ills associated with money. It won’t. I may have sounded crazy as a Bitcoin supporter saying this but finally, other analysts are starting to come around.
Recently, CBS News aired a piece noting that cryptos have been “touted as a new form of digital money not tied to government or a central bank.” Therefore, on paper, it should be free from bias and unequal distribution. However, the National Bureau of Economic Research states that “the top 10,000 Bitcoin investors own a combined 5 million Bitcoins, or roughly $230 billion’s worth at recent prices.”
In other words, those “top players represent a mere 0.01% of all Bitcoin holders and yet they control 27% of the digital currency.” Democratization? My posterior democratization — at least that’s probably was the thinking of some writers from The Wall Street Journal, which reported that in traditional fiat-based terms, the “top 1% controlled 30% of total U.S. household wealth.”
Is “regular” money a better democratizer than BTC?
Bitcoin Can’t Evolve Human Behaviors
In short, yes, regular money is a better democratizer of wealth and equity than Bitcoin. Indeed, the great irony is that the creation of money allowed regular folks to accumulate wealth and distribute it among their families and communities. Prior to this innovation, it was difficult if not impossible to purchase political or even military power.
Now, some Bitcoin proponents will argue that just like the original creation of money de-monopolized wealth creation from the exclusive clutches of the wealth, cryptos perform the parallel function between regular citizens and their central banks and government authorities. But I find this a flawed argument because government will never let go of its power, nor should it.
To create a more equitable society, the question is not about decentralization or centralization. Rather, it’s about morality in governance — and that has nothing to do with Bitcoin.
Look at it this way: If the concept of trickle-down economics really works, whereby the free market is considered the most efficient arbiter of charity, why is the wealth gap in Bitcoin so much worse than in fiat currencies?
It’s the dirty secret of cryptos and the blockchain concept: it can’t evolve human behavior for the better.
Consider the Africa argument. Seemingly everyone — including the United Nations — loves waxing poetic about decentralized protocols democratizing wealth on the continent. But as author Eugene Yiga points out, many African markets lack reliable internet service.
So, who ends up owning the vast majority of digital assets and infrastructures? Obviously, the nations that have the most resources and infrastructural integrity to begin with. Time and again, whenever these power imbalances exist, the initial human impulse is not to democratize but to exploit.
As CBS News pointed out, decentralization didn’t change a darn thing.
Blockchain as the Culprit of Inequity
Anyone who has been deeply ingrained in what I would diplomatically term carrot-and-stick religions face a similarly uncomfortable secret. Many doctrines prescribe eternal torment for people who lack the ability to indefinitely restrain their urges. Therefore, we have a situation where people suffer eternal punishments for finite crimes.
Intellectually honest people wonder to themselves (because you don’t want to ask this out loud), who’s the bad guy here?
Well, I’m wondering the same about Bitcoin. Not only does decentralization not seem to help bring global equity, it seems to instead inspire global greed. Color me unsurprised. Sometimes, you need government to step in and right wrongs. Otherwise, you’d have reckless abandonment of moral principles.
It’s already bad with the rules in place. Imagine a network of no rules? Well, that’s part of the blockchain conundrum for you.
That’s not to say that Bitcoin can’t rise in value — that’s a completely different topic. My point is that if you do decide to venture into BTC, don’t do it because you think you’re saving the world. There’s a non-zero chance that you might be making it worse.
On the date of publication, Josh Enomoto held a LONG position in BTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
