Bigger players have not discovered peer-to-peer crypto either. PayPal and Venmo (which owns PayPal) claim to support crypto since early 2021. But a closer look at their services reveals that although the platforms allow US customers to buy, sell or trade crypto-in fact investing – they can’t pay for purchases or send crypto to other users. If “the future of money is hereAs Coinbase claims on its website, apparently ordinary people won’t be able to do much with money in the future.
Despite the fact that it is difficult to spend cryptocurrency, it’s still pretty easy to lose it, and as the industry grows, so do the losses. Without the protections put in place in traditional financial systems (such as the Know Your Customer or KYC protocols that require identity verification for financial transactions), fraudsters cost crypto investors — usually individuals targeted by all those advertisements —more than $14 billion last year, almost double the loss from the previous year† The losses are piling up. For example, in late March, Sky Mavis reported that a hacker had stolen $625 million worth of cryptocurrency from the blockchain behind his pay-to-play game AxieInfinity.
Even if their wallets are not hacked or their crypto assets are liquidated, individuals are at risk of the extreme volatility of crypto markets; The value of Bitcoin dropped more than 20% several times in one day in just the past six months.
“I’m concerned about access; I’m concerned about abuse,” said Afua Bruce, social policy and technology expert and author of: The next technology† “As we develop new technologies, we have to figure out which communities we’re building for. Can they use it? What does sustainability look like? How does it strengthen the communities we say we build for? I don’t know if those questions have been asked and answered for blockchain.”
In fact, the crypto industry’s relationship with its community appears to be a predatory one. The “we” in “WAGMIA” is a small group of predictable players who get rich from the risks ordinary people take. Indeed, from December 2021, .01% of Bitcoin holders controlled 27% of the currency– a much more skewed ratio than for dollar holdings in the US, which isn’t a flattering stat to begin with. And because they are not backed by any real assets, cryptocurrencies increase in value as demand for them increases. As more individuals choose to buy in, VCs and crypto executives will see their own portfolios move up and to the right. There are many uses for marketing in technology: it can raise awareness of a new technology or help build a user base before monetizing it. Both things happen in crypto. But if marketing persuades enough people to turn real money into cryptocurrencies, it could literally pay the industry’s bills.
Crypto firms have already turned people on their executive teams into billionaires, such as Sam Bankman-Fried, the 30-year-old CEO of FTX, who started his short career in traditional finance and is now worth an estimated $24 billion. Bankman-Fried is currently the richest American in crypto, but there were six other “crypto billionaires” on it Forbes 2021 List of the richest Americans. And that’s only in the US; Binance CEO Changpeng Zhao, which has found new base in Dubai since China banned crypto, was worth $96 billion at the end of 2021 (but had fallen to $63 billion by early April). While the Web3 pitch may promise an egalitarian utopia, the current distribution of crypto wealth is more in line with late-stage capitalism. “Capitalism is very happy to sell a real product and make a small profit from it,” said David Golumbia, a crypto critic and the author of The politics of Bitcoin† “But it’s even happier to sell scams. Never underestimate the power of a lot of money and a scam to convince a lot of people to do something.” And as more and more individuals buy the vision the ads paint, the wealth of those crypto billionaires continues to grow.
“Never underestimate the power of a lot of money and scams to convince a lot of people to do something.”
What happens next in regulation will significantly shape the future of consumer crypto. Last year, Facebook shut down its nascent cryptocurrency—Diem, formerly called Libra — after serious regulatory scrutiny. It probably won’t be the last to go. Federal agencies have recentlyaggressive actions against some crypto exchanges for offering what they consider to be unlicensed investment products, and in October 2021, the US Department of Justice issued a task group to explore how crypto markets enabled illegal activities such as money laundering. In March, President Biden signed an executive order directing financial agencies to create a complete regulatory strategy for crypto, and like many other countries, the US is exploring creating a regulated digital currency called a CBDC (for “digital central bank currency”). These are not cryptocurrencies at all, but can offer similar levels of efficiency. Right now, many crypto exchanges are trying to mitigate volatility by using private stablecoins – a class of cryptocurrency pegged to a real asset like the dollar. If the US creates a CBDC, it could compete with those coins or even push the government to ban them entirely† FTX CEO Bankman-Fried himself predicts that the decisions of the US Federal Reserve will be the biggest drivers of the crypto market in the coming months of 2022.
However, regulation has its limitations, as we have seen with traditional banking. With so much money flowing into crypto and so many Silicon Valley power players invested in its success, the industry can find a way to prosper even with severe constraints. Five years from now, Web3 startups may still be figuring out how crypto can be useful to everyday people, but we’re all likely to feel the environmental and social impacts of this tumultuous moment for a long time to come.
While consumer crypto still resembles a pioneer town with gold miners and snake oil dealers, the non-consumer landscape paints a very different picture. Companies such as corporate banking, pharmaceutical giants, film development companies and international shipping companies use blockchains for transparency and efficiency. Such efforts can bring old, slow and sometimes paper-based processes into the digital age and even help industries meet new regulatory requirements.
Ripple, a company with more than 500 employees in nine offices worldwide, is an example. As a much, much larger version of Paymobil’s crypto-powered money transfer service, Ripple uses its proprietary blockchain token as a bridge between currencies, allowing hundreds of corporate clients, including Bank of America, Santander and Japan’s SBI Remit, to reduce operational costs. costs caused by time zone differences and manual settlement processes.
Contrary to the radical rhetoric of its crypto contemporaries, Ripple uses the speed of digitized currencies to enhance legacy banking processes, not replace them. In line with this reform-not-replace stance, RippleX CEO Monica Long sees regulation and even CBDCs as part of the evolution of blockchain for businesses – and financial operations more broadly – in the coming years. “Customers and consumers alike will benefit from improved infrastructure, user experience, regulatory clarity and interoperability as crypto becomes a critical part of the new standard in finance,” she says.
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The most industry-transforming use case to date — though perhaps the one with the least sizzle — is arguably the MediLedger Network and its governance organization, Chronicled. In 2013, the US government approved the Drug Supply Chain Security Act, which says the pharmaceutical industry must create a digital system to track prescription drugs by 2023 to prevent counterfeiting. Healthcare and life sciences are known for their old, non-interoperable systems, and the requirements of the law required a whole new way of doing business. Chronicled CEO Susanne Somerville questioned whether a private blockchain — a closed system with permission, as opposed to public blockchains like Bitcoin — could provide a secure, shared environment in which pharmaceutical players like Pfizer and Gilead could collaborate. After years of working on corporate rules and goals, in 2019 Chronicled launched the MediLedger Network, a group of major pharmaceutical companies. Chronicled offers a range of services for them, such as a spoof-resistant index of verified product IDs and access to real-time public price updates. These scary solutions may not be what people typically associate with blockchain technology, but they are critical within pharma. “Almost everyone thinks of these super-lofty ideas, and it’s hard to get there,” says Somerville. “But there are a lot less sexy things that are actually fundamental.”
The use of the blockchain by Ripple and MediLedger could lead to safer drugs and faster money transfers for ordinary people, without anyone having to create a digital wallet or exchange coins. As for consumer crypto? If the industry’s deafening tone for a financial revolution sounds too good to be true, it’s because it is. Until it can provide affordable, everyday use for new coins and comprehensive protection against fraud and scams, we’d all be better off sticking to cash and traditional banking systems than joining the parade of crypto boosters marching across our screens and cities.
Rebecca Ackermann is a writer, designer and artist based in San Francisco†