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Cryptocurrencies: Politics, Culture and The Future

September 20, 2018

Context 

The financial world has been exploding since the creation of a new, completely decentralized, transparent and seemingly infallible form of currency called Bitcoin, whose popularity soared in December 2017 when prices surged to more than $25,000. This currency had the dual nature of being high in value, but also volatile and liquid in nature, meaning that, during the peak of growth in mid-to-late 2017, investors could maintain capital gains whilst also using their Bitcoin to pay for services from companies such as Microsoft, Dell and Steam.

A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange- money for crypto-currency, crypto-currency for goods and services. Block chain, the technology that enables cryptocurrencies, is a ‘digital ledger’ through which transactions of cryptocurrency are recorded publically and chronologically.

Many now prefer cryptocurrencies over traditional money created by the Central Bank. This has much to do with their reputation for being completely secure and incorruptible. Just as serial numbers on the top of $5 notes authenticate its value, authentication via blockchain is attributed to isolate and validate each the currency using cryptography for each rate of cryptocurrency (such as Bitcoin). By securing and verifying transactions as well as controlling the creation of new units of currency, crypto is very much impossible to corrupt.

Given the seemingly unbreakable nature of this “currency of the future”, there is much to be said about their political impact, the culture of the Blockchain industry, and where this virtual currency make take us in the future.

Power to the people 

Cryptocurrencies are decentralized and independent from any country or bank, hence by investing in cryptocurrencies, any government or political influence which impact traditional currencies, won’t have any effect on cryptocurrencies. Therefore, there is no chance of, for example, hyperinflation causing the value of the cryptocurrencies to plummet. Whilst interest rates remain a privilege of traditional money, it is quite possible to find crypto exchanges that offer dividends.

Paul Vigna captures, “the blockchain keeps everyone honest, and a whole level of banking bureaucracy is removed, lowering costs.”

The fact that cryptocurrencies are not issued by any central authority makes them theoretically immune to government interference or manipulation. Let’s see why.

Conventional currencies, aka fiat currencies, are issued by the government and have values established by its central bank. They are centralized and controlled by the government through monetary policy, i.e. through exerting influence on the economy’s money supply. The government also tracks fiat currency movement by dictating how they can be transferred. It’s easy to see that all this control is lost when non-government bodies create their own currencies without relying on an intermediary. In fact, since cryptocurrencies are created in the cyberspace, their holders do not need the existing banking system.

Ironically, although cryptocurrencies are known as decentralized currencies, the sudden fall in the market cap of all cryptocurrencies at the start of this year was mainly due to governments around the wold. Governments in major crypto markets, including China, South Korea and Russia, have either explicitly banned cryptocurrencies or are tightening regulation around them, making them much less attractive to investors. While it is nice to think that cryptocurrencies are immune to government interference and allow you to hoard wealth, this requires you to believe that the governments will stay idly by while people abandon fiat currencies.

“Blockchain bros”

Though it would appear that cryptocurrencies are heros without capes, the industry culture threatens to be yet another thinly-veiled “boys club”, a trend in the technology industry. Blockchain is something of a Wolf of Wall Street fantasy, a symbol of wealth and intelligence dominated mostly by males. With the large amount of money that could have been accumulated, they’re  ready to talk about their investment successes with just about anyone.

This digital revolution was supposed to allow the democratisation of forces. However, the present culture of fellow investors is to make those who have not jumped on the cryptocurrency feel inadequate, or that they do not belong.

So where does that leave women? Some say women only account for four to six per cent of blockchain investors. At the North American Bitcoin Conference, there were only three women speakers in comparison to the other eighty-four male speakers. Perhaps it was only natural that this was followed by an official conference party at a Miami strip club.

In the world of Blockchain, confidence has a lot to do with this. Men have an innate confidence in participating in areas that they aren’t qualified in, whereas women often don’t take risks in new areas based on their perception of inability or unworthiness. It’s been found that men will apply for a job even if they only meet 60% of qualifications, whereas women will only apply when they meet 100% of the criteria. Women are already underrepresented in the technology industry, and it seems that Blockchain is following suit. Women are neither encouraged nor accepted in this budding currency. It also doesn’t help that men use their knowledge and complicated terminology as a way of asserting their position of power in finance and tech industries like this one.

It’s possible to turn this boys club into a diverse group of investors. Crucial steps have already been taken, including the formation of a blockchain diversity advocacy group called Collective Future. Men dominated the early days but it’s slowly changing. It is up to women to start conversations on blockchain and enter the space feeling confident enough to break down the barriers men have put up, given they are both smart enough and qualified enough to venture into the crypto world.

Future 

The controversy and dissension surrounding cryptocurrency currently, has ensured these digital assets remain at the forefront of financial discussion and speculation. However, as cryptocurrency begins to rise in popularity, the question of it’s viability in the future must be posed. Understandably, it is the youth as opposed to the older generation, that has shown a greater interest and somewhat acceptance of cryptocurrencies, like Bitcoin and Altcoin. Surveys conducted by Coinbase, a digital currency exchange, highlight the growing number of US students owning some form of cryptocurrency, with 18% of all students responding positive to the questionnaire. In comparison, the general population had only half that percentage owning or adopting any form of cryptocurrency. This statistic is important as it highlights the potential influence of the world’s youth. Often seen as forebearers of mass-cultural shifts towards technological change, the growing inclination towards Bitcoin and other virtual coins, could perhaps be a sign of the future.
It is also the actions and implementations put in place, particularly regulation and security, that will perhaps draw even more individuals into investing in coins. Attracting even governments, the current lack of regulation is an issue investors are hoping for resolutions to. Another survey conducted by Encrybit, with 40% of investors polling security as its main concern, illuminates the immediate need for greater regulation. As the Chief Marketing Officer (CMO) of IngotCoin, Ahmed Khawanky explains, “there’s a need to win the trust of the people… ensuring security is the heart of the overall success of blockchain technology.” The current unsafe nature of blockchain and trading means hackers and cybercriminals have taken advantage of unsuspecting investors. This must change for blockchain technology and cryptocurrency to advance socially and economically into the future. As such, with the advent of more secure methods of payment and the protection of investor’s digital assets guaranteed, consumer concern may be put to rest and cryptocurrency may propel itself way into the future.

The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ, our Partners and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.