The Cryptocurrency Questions We Already Need to Be Answering (But Aren’t)

Earlier this year, bitcoiners obsessed over a looming collapse in the financial system and railed against the response of governments and central banks. BRRR, bubbles, socialism, all that.

Now that bitcoin's price has tapped its previous all-time high, you'd think they're doubly eager to warn everybody about how bankrupt, bloated, and unfair the traditional financial system is.

Nope. Every Tweet is about the price or how some Wall Street guy bought bitcoin. What'd that altcoin do today? ETH 2.0 kicked off! XRP went up 3x! NOBODY IS SELLING BITCOIN EVER AGAIN!Most countries remain in economic peril, some in lockdown, hundreds of thousands are still dying from COVID-19, and the traditional financial system still hasn't recovered from this year's financial crisis.What's the response from the cryptosphere?Eh, fuck it. Bitcoin’s going to the moon! It’s amazing how people’s perspectives change when prices go up.

Maximalists: Please Stay on Message :-)

Everybody forgot the whole point of cryptocurrency: to give everybody fair, open, secure, private markets and access to financial opportunities.

As the literal opposite of the modern financial system, it represents a new paradigm for thinking about money, upending long-held worldviews about finance and governance. With cryptocurrency, you can now do things that simply aren’t feasible using traditional financial technology. As a result, we will have to confront lots of very practical questions that never came up before.Boring? Perhaps. Certainly not as much fun as Lambos, but maybe more important.To answer these questions, we will have to reflect on our collective values and fundamentally change our notion of government, or at least the role the government should play in our daily life.While I could spend days mulling all sorts of interesting questions, I’ll raise just six in this post.

When are Your Bitcoins Actually “Yours”?

In real life, your money is yours the moment you get it. In many countries, the government can’t take it from you unless you commit a crime.The reason is as much practical as philosophical.For thousands of years, governments could not easily track money as it passed from one person to another, much less actually retrieve it from its final destination. Can you imagine FBI agents driving around the country rounding up dollars from hundreds of people in an attempt to find the specific bills from last week’s bank robbery?With blockchain, you can actually see where money moves within a global network. If you have enough real-world data to confirm who has the money, you can find some—possibly all—of the recipients.

In other words, while blockchains may never tell governments who is moving money, it will tell them how the money’s moving.

It won’t take too much effort to figure out the rest. In fact, that’s how U.S. investigators nabbed the guys who hacked the U.S. Democratic Party’s servers in 2016.Once those bitcoins get distributed around the network, passing from one person to another, splitting into smaller and smaller transactions among more and more people…at what point can police seize them? How far do you let them extend the dragnet? On what grounds?What happens to those “tainted” bitcoins the criminals used to commit their crimes? Will you have to return them to their rightful owner? Forfeit them to the police? Surrender them under eminent domain?Surely some recipients conspired in the crime while others didn’t have a clue. How do you sort that out? Do the police have a right to take money from innocent people who end up with tainted bitcoins but had no knowledge of the crime?

Rule of Code or Rule of Human?

With blockchain, computer algorithms enforce the rules. Tokens ensure everybody follows those rules. Humans have no say in the matter.As a result, you can do things that seem impossible. For example, decentralized governance, autonomous organizations, immutable arbitration, and trustless crowdfunding.Who makes sure that these rules serve the public’s benefit? Should that even matter? Do we allow the code to determine all outcomes, regardless of the consequences? Do we hold developers accountable for results, as if they can anticipate every possible contingency? Or do we put that responsibility on users who do not have any control over the programs they use?What happens if the code sucks or others use it to defraud you? If a network flaw results in loss of funds? How do you punish frauds when the entire network is itself a fraud? Who’s responsible for protecting you?In the real world, you can sue somebody for damages or try to recover your losses. How do you sue a DAO? Can you subpoena a smart contract?When a DAO conspires to destroy the value of your cryptocurrency, should you even have a right to seek compensation? You freely, voluntarily agreed to use a technology that allows other participants to screw you over—does the blame fall on you or them?At what point do real-world laws and courts intervene? What’s the proper balance?

Accounting for Micropayments

Let’s assume cryptocurrency works the way everybody expects.In the future, people and machines will send each other tiny bits of money for common services or privileges. Cars will pay for right-of-way, advertisers will pay for your attention, businesses will pay to execute smart contracts. These payments will cost fractions of a penny.Imagine you make 3,000 payments of $.0001 over the course of a year. That’s about 8 transactions each day. At the end of the year, you end up with $.30 in costs, some as gains, some as losses.Should you have to report all of these? If so, how on earth will you do so? Will anybody be able to check?Presumably, somebody will create technology to track these things, but I’d bet that technology will cost you more than 30 cents each year. How does that serve the public good?If you don’t have to report these micropayments, don’t you open the door for bad actors to move big sums of money via millions of high-frequency payments? E.g., send $20,000 as 200 million computerized payments of $.0001…without ever declaring it. Do you want to live in a world where techies, rich people, plutocrats, and dictators can use the system to skirt the law while you suffer under its idiocy?

Who’s in Charge?

With cryptocurrency, anybody can create a global financial network. But all the participants live in different places with different rules.I think about this every time I see a really interesting project or an airdrop from a great team—but can’t participate because I live in the U.S.How does that affect the development of cryptocurrency? How much authority should local governments have? Do we need international standards? If so, what kind?We have global agreements on war, trade, climate change, passports, and many other issues. These agreements define what governments can and can’t do. They spell out the roles and obligations of each signatory.When do we get an international agreement on cryptocurrency? Do we need one?

How Would You Like Your Privacy?

A few months ago, I spoke to a representative from Deloitte who said you should never record personally identifiable information on a blockchain.Oops. We do this all the time.What’s considered “private” when all information gets recorded on a public ledger? Is it enough to anonymize it?What about the right to be forgotten? You can’t scrub the blockchain like you can scrub the internet (though many say you can’t scrub the internet, either).Microsoft is working on a decentralized ID solution using bitcoin’s blockchain. What sorts of protections do they need to provide for users? As a user, what expectations should you have for your data?Should governments allow non-governmental entities to record or service your identity? Will they accept it as valid? What happens if there’s a mistake? Will the authorities trust Microsoft? Will you?

Is Corporate Cryptocurrency OK With You?

This year, Facebook plans to roll out its own cryptocurrency through the Libra Association. Nobody knows when (or if) this will happen.Let’s hope it takes a while. Corporate cryptocurrency opens up all sorts of legal, ethical, financial, commercial, privacy, and technological questions that you, I, and our governments do not know how to answer.For example, whose regulations will apply? Will the Libra Association need to change its services for each jurisdiction?Facebook says it will not have any control over the project, it will simply use the resulting cryptocurrency. The Libra Association says it will open Calibra to all platforms, not just Facebook. So… do you regulate Facebook or the Libra Association? Both? Is that even feasible, given the patchwork local rules I mentioned above?Assuming Libra actually happens, do we need limits on its scope? Facebook will back every Libra token with foreign currency reserves and low-risk financial assets. Meaning, it will have control over possibly trillions of dollars worth of government money and bonds.This gives it incredible power. What happens when the Libra Foundation rebalances its holdings out of yen and into Swiss francs? How would Japan feel about $500 billion worth of Yen getting dumped on the foreign exchange markets?

Or, what happens if your country makes a law the Libra partners don’t like? Will Mark Zuckerberg threaten to dump your government’s currency?

What happens if Libra uses a dollar-backed stablecoin? It could end up with possibly trillions of dollars as reserves, much of it from people who live in countries that don’t use the dollar. Capital flight to the extreme, potentially devastating for smaller governments with unstable currencies.Not to mention, Facebook will have a lot of dollars it can hold as leverage to get countries to do what they want.

Cognitive Blind Spot

All these questions have perfectly reasonable answers, but to get those answers, we need to start talking about them.Yet, as long as people think about cryptocurrency only as money, we will never do that. We will not ask these questions until it’s too late, until Facebook, Microsoft, Bakkt, and governments, and others use this technology to make us less secure, powerful, and engaged.Cryptocurrency is not magic internet money. It’s not better money.

It’s an entirely different way of thinking about money.

With cryptocurrency, we can create a more transparent, robust, and inclusive society. We can design innovation platforms that support vast financial networks and deliver public services on a global scale.These networks can solve huge financial problems, unlock trillions of dollars in value, create vast new wealth, and liberate millions from financial oppression.If we choose to let them do so.That will not happen if all we care about is buying dips and shorting bankers.

Don’t Stop Thinking About Tomorrow

Bitcoin will keep going up. Price, usage, functionality, everything will get better. Some altcoins will play valuable roles in the financial networks of the future.While that’s an awesome thing to think about, I would urge you to also think about what that means for you and the people you care about. For the first time in history, anybody can create a money system that’s as good as your government’s and release it on a global scale. What happens next?

When I wrote my first book, Consensusland, I had this concept in mind. How does society use this technology for the public’s benefit? What might that society look like? How might its government work? What might its people value? How might its people think?

Governments will never get ahead of this technology, but if we start talking about these questions, perhaps they will care to try. Our future depends on getting these things right. These conversations will not get clicks or YouTube subs. They will never trend on Twitter. U.S. Congress will not hold hearings about them. Solving these problems won’t get you a Lambo.Ignore them at your own risk. If we don’t talk about these things until everybody’s made their money, it will be too late to do anything about it.

Mark Helfman is a top writer on  for bitcoin. He also publishes the  newsletter. His books, Consensusland and Bitcoin or Bust: Wall Street’s Entry Into Cryptocurrency, explore the social, cultural, and business challenges of cryptocurrency. Learn more about him in his .

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