I regularly come across two mythologies about Bitcoin – mythologies that allow us to celebrate our existing beliefs about how the world works.
Boomers often rail that Bitcoin is a dangerous and useless fad, while millennials offer rosy techno-utopian visions of how it will address a range of social ills. Both mythologies simplify evolving cryptocurrency-based ecosystems.
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And as someone researching the taxation of cryptocurrencies – an intersection of the state machinery with novel blockchain technologies – I winced at both mythologies.
But the boomer mythology about Bitcoin worries me even more. It seems misdirected on two fronts. First, Bitcoin and other cryptocurrencies empirically offer a wide range of utilities that weren’t there a few years ago.
Second, our existing value creation and transfer system normatively cries out for injustice; we see layers of oppression in it – the colonizers versus the colonized, the haves versus the have-not, and the associated low creditworthiness in certain corporate and housing sectors compared to the usurious conditions of payday loans and credit cards.
There have been many significant developments in the field of cryptocurrencies in recent years. I highlight two: a robust cryptocurrency-based savings and credit infrastructure and thick, mature, liquid markets for Bitcoin.
The rich have access to much higher returns than the poor. The latter may have savings of a few hundred dollars, if any, and so seldom get anything above a trivial rate of interest on their assets.
In contrast, cryptocurrency savings platforms like BlockFi and Celsius offer double-digit interest rates. These cryptocurrency platforms also offer highly efficient security-based loans. They often finance a loan on the same day and at much lower interest rates than credit cards.
In addition, there has been significant progress in the development of mature, liquid markets for Bitcoin.
Ten years ago, Mt. Gox was the most important bitcoin exchange in the world. Despite the rumors of decentralization, it seemed that most users had to deal with one company – and an opaque, unsavory one at that – in order to trade Bitcoin.
There are now hundreds of bitcoin spot and derivative exchanges.
The largest cryptocurrency exchange in the United States – Coinbase – is now a publicly traded company. The Chicago Mercantile Exchange has been offering bitcoin futures since 2017, and an exchange-traded bitcoin fund was launched this week.
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In addition, advances in technology enable policy experimentation – we see this in El Salvador’s decision to adopt bitcoin as legal tender and Ohio’s acceptance of bitcoin for tax payments.
The latter proposal failed – as is sometimes the case with experimentation – but that failure is a necessary step in developing well-functioning and scalable systems. Some boomers seem to ignore such experiments, preferring to imagine that the Bitcoin ecosystem is exactly as it was 10 years ago.
This selective observation may in part be due to different normative obligations. Billionaire Charlie Munger said in May that he hates the success of Bitcoin and that “the whole damn thing is disgusting and contrary to the interests of civilization.”
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Attempts to create alternative money seem to baffle some boomers – people who lived at the top in postwar America with easy access to good money. But they live well while much of the world lives badly, in part because of our opaque, deeply unjust system of national currencies.
Of course, Bitcoin is not a panacea.
But it enables socio-technical experiments that have become a promising limit of the possible.
Arvind Sabu is Assistant Professor of Law at Capital University Law School, where he teaches tax and business associations. He researches the taxation of cryptocurrencies.
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