In his latest piece for El País, Moisés Naím talks about the disappearance of physical cash and how cryptocurrencies are challenging our notions of what money is. These are two complex issues, and I’m glad he brought them to his audience.
You know the not-so-old adage “software is eating the world:” Information technology disrupts industries very fast, which causes fear, uncertainty and doubt among those whose business models depend on older tech. Blockchains are new technologies we can use to keep track of money—one of the most important human inventions—and everyone should take the time to understand them a little better, so that more informed discussions can take place.
Let’s clear up some slight misconceptions, starting with the demise of cash. I agree with Naím that cash, in its current form, is losing the war to credit cards and mobile payment systems in most modern countries. Well, obviously! Consumers want convenience. Who wants to haul around physical pieces of paper and metal and do a lot of arithmetic every day?
But, it turns out, the Germans aren’t about to give up on cash. To them, states are not to be trusted with your entire history of transactions. In Germany, people prefer cash out of respect for the individual and the private sphere.
In liberal democracies, we’re fond of protecting and encrypting speech: you won’t give anyone access to your private messages, even if you (like most) are a law-abiding citizen. If the state wants access to your financial or message history, well, that’s what court orders and due process are for.
Centralizing payments can have disastrous effects on economies. A mere week after Naím’s article, Swish’s network was down for hours and millions of Swedes couldn’t transact.
This is where a privacy-preserving corporation like Swish can step in, right? Not so fast. Centralizing payments can have disastrous effects on economies. A mere week after Naím’s article, Swish’s network was down for hours and millions of Swedes couldn’t transact. It’s also too much to ask for a single entity to be the guardian of the financial records of millions of people, as the massive Equifax hack showed.
People who have been scarred by oppressive financial surveillance systems like China’s or Venezuela’s, or those with good reason to distrust single points of failure, see the value in digital cash. Zcash, the cryptocurrency that Naím brings up in his article, is being developed by one such group of technology builders. They believe that cash is a social infrastructure that’s worth updating to the digital age—and rather than remain anonymous, they incorporated as a United States company, holding frequent employee training sessions on how to pay taxes and remain compliant.
So, far from being a bunch of unruly libertarians who oppose regulations, the Zcash Company just wants to empower everyone with economic freedom and opportunity. And it turns out, Venezuela is a very good place to study how well they’re accomplishing their mission!
Far from being a bunch of unruly libertarians who oppose regulations, the Zcash Company just wants to empower everyone with economic freedom and opportunity.
Our currency is so devalued that our doctors and engineers earn monthly wages of $5, but if they’re gamers and use their graphics cards to mine Zcash, they can make up to $200—a crypto lifeline of sorts. Zcash can also be stored without an international bank account, and it can be traded for Bitcoin and converted to bolivars despacito… as a beautiful hedge against hyperinflation. Furthermore, it’s hard for the corrupt Bolivarian National Guard to seize your assets at the border if all you have is a password in your head that will unlock your Zcash once you’re back in safety.
Amazing, right? Gibson (William, not Mel): “The future is already here, it’s just not evenly distributed.” These are all use cases of cryptocurrency that Venezuelans, and everyone, technically have access to, and shift the balance of power from the violent, authoritarian state, to the humble individual.
Naím may be worried about potential nefarious uses—all tech can be used for good or ill—but the bet that digital cash advocates are making is that we’ll be better off if most people, who really just want to live peaceful lives transacting in sound money, can actually use these technologies daily.
Let’s be responsible about how we discuss technologies that are easy to misunderstand, especially to audiences like that of El País —first impressions matter!