The Cult of Cryptocurrency

In a 2020 InfoWars interview with Bitcoin evangelist Max Keiser, the gravelly-voiced conspiracist, Alex Jones, waxed lyrical about cryptocurrencies. He compared the technology to Prometheus, a Titan God of Fire. In Greek mythology, Prometheus stole fire from his fellow gods, and gave it to humans in the form of technology and knowledge. Similarly, Jones hoped that cryptocurrency would emancipate ordinary people from greedy “elites”. Keiser himself has backed the government of El Salvador, the first country in the world to adopt Bitcoin as an official currency. Keiser’s crypto utopia came into being despite protestations from the International Monetary Fund (IMF), which warned of significant risks to consumer protection, financial integrity, and financial stability.” The rhetoric espoused by Jones and Keiser is made clear to us; they are part of the growing crypto movement.  In this piece, I want to look at cryptocurrencies as a whole and explain why we ought to have reservations about the concept.

It is imperative to highlight the fact that cryptocurrencies are not money. Put simply, currencies such as the dollar or the euro are media of exchange, which people can use in any shop or restaurant. The value of the currency is guaranteed by a third party, such as a government. In fact, money is only created when we need it. Suppose I want to borrow €100 from any bank, such as Bank of Ireland. The bank “creates” new money, and credits this sum of money to my bank account. The money did not exist before I went to the bank; money is created as and when it is required.

Cryptocurrencies are finite; they are a scarce commodity. Only 21 million of them will ever exist. They can be thought of as being like baseball cards, commodities that can be traded and exchanged for other things by small groups of people, without being supported by any central authority. It is also important to recognise that cryptocurrencies are a remarkably volatile asset. Consider Bitcoin: from a high of almost $70,000 per unit in November, the asset has fallen to about $35,000 in January 2022, at the time of writing. If I pay €5 for food today, I can be almost certain that it will cost €5 tomorrow, or in a month’s time. Money is a reliable store of value, cryptocurrency is not.

Furthermore, it is critical that we do not confuse digital currencies with cryptocurrencies. Digital currencies are monies that are only available in electronic form. For instance, when I use my Visa Debit card to pay for groceries, I am facilitating the exchange of money using digital currency. Ethereum and Bitcoin do not function in this way; the European Central Bank, which authorises the printing of the euro, does not print Dogecoin.

As I have already mentioned, cryptocurrencies react profoundly to fluctuations in financial markets and developments in the news cycle. Take entrepreneur and meme connoisseur Elon Musk. An intriguing analysis by Vox shows how the price of Bitcoin changes in line with the Americans’ latest stance on crypto. For example, on May 12 last year, Musk tweeted that Tesla would no longer accept Bitcoin as a means of payment, citing environmental concerns. The price of Bitcoin decreased by about 15% as a consequence.

Since I have established what cryptocurrencies are not, I want to move on and explain what they actually are. Cryptocurrencies are based on a version of a decentralized public ledger system, known as Blockchain. Blockchain is a digital means of recording cryptocurrency transactions, whereby the ledger in question is defined as a “chain” that is composed of many different “blocks” of data. Blocks are linked together, forming an interconnected chain that amalgamates each transaction as and when those transactions are processed. Verifying transactions is very energy intensive, as each transaction must be confirmed by each node. The University of Cambridge has estimated that Bitcoin miners consume over 120 terawatt-hours, or 120 trillion terawatt-hours, every year, equivalent to about 0.6% of global energy consumption. The energy that is used for one bitcoin transaction alone would be sufficient to power about 8.49 US households for a full day.

It is not difficult to see why cryptocurrencies have gained a lot of traction amongst certain individuals and groups. They are a decentralized means of speculation, and have become a go-to technology amongst more libertarian and anti-establishment entities. They might also be appealing to the so-called “precariat” class, a term popularized by the labour economist, Guy Standing. As Standing explains, the precariats are an insecure class of individuals who work menial and meaningless jobs that do not give them happiness, and yet they struggle to afford housing and basic amenities. Precarious comes from the Latin word precari, meaning to “ask earnestly” or to “beg”, exemplifying their vulnerable existence. They feel deprived of a fulfilling life that was promised to them by the media and by friends, and may be lured towards far-right propaganda, which demonises immigrants and “other” ethnicities.

The relationship between the extreme right and cryptocurrencies should not come as a surprise; hatred of higher authorities, and distrust of politicians, is rampant all over the world. Consider the UK; a 2019 Ipsos poll concluded that only 14% of ordinary British people trust politicians to tell the truth, making them less trustworthy than advertising executives. As economist Paul Krugman noted recently, there is a looming alliance between the Republican Party in the US, and cryptocurrency. Individuals who believe that the climate crisis is fake and that the 2020 US Presidential election was stolen are deeply resentful of governments imposing their will on the population, and as a result, are more likely to see Bitcoin as their new-found ticket to prosperity. It gives them power in a world that makes them powerless.

Unfortunately, some aspects of the cryptocurrency movement are disturbing. Take America again, and an organisation called Guns N’ Bitcoin. This group promotes “ghost guns” – guns that can be assembled by hand, using pre-packaged materials, or 3D-printed parts. The guns are traded anonymously by fascist groups, using cryptocurrencies to prevent detection by government authorities. Its founder, Ragnar Lifthrasir, told the HuffPost that ghost guns and cryptocurrencies provided a “bulwark” against “government tyranny and private sector deplatforming. Lifthrasir, despite repeated protestations to the contrary, has been involved with unsavoury extremist activity. He has lauded the acquittal of Kyle Rittenhouse on Twitter, a right wing vigilante who shot three Black Lives Matter protesters in Kenosha, Wisconsin in August 2020, killing two of them.

This hidden trafficking of guns and similar extremist developments have been condemned by many, with FBI director Christopher Wray designating “lone actors radicalized online” as “the greatest threat we face in the United States.” Though this is an extreme example, it is important to show how cryptocurrencies can be abused when many people come together in an online setting. Cryptocurrency is a cult, and that is a fitting description; a cult is a small group of people who venerate someone or something.

The case of El Salvador also poses a cautionary tale. Though a detailed analysis is beyond the scope of this article, David Gerard reports of yawningly long transaction times and a mass withdrawal of cash from Salvadoran banks. He also discusses comical overspending and ecological mayhem at the national geothermal plant, which is responsible for mining Bitcoin in the country. As Gerard writes, “A national economy really can’t run on a volatile and manipulated speculative commodity that’s unusable as a currency.” As happens all too often, poorer countries have to suffer the consequences of thought experiments conjured up by ideologues. 6.5 million Salvadorans are hardest hit by their negligence.The mass popularity of cryptocurrencies can be explained by FOMO, the fear of missing out. As our world becomes more digitized and interconnected, people do not want to be seen to be missing out on new things, and it is undeniable that cryptocurrency is an intriguing technology. It has brought people together, and has helped to foster relationships, but not always for good. Moreover, as populism and the disparagement of politicians become commonplace, crypto makes people feel empowered. English Labour MP David Lammy once noted that, “People who have no stake in society are the least likely to have respect for it,” and his words ring true. It is crucial that we understand what cryptocurrencies are, what they are not, and why people are drawn to them.