Is Bitcoin a savior or a bandage?
For Bitcoin evangelists, every economic disaster is also an opportunity to, well, promote Bitcoin. From Greece to South Africa, Bitcoin has been vaunted as a technology with world-saving power, either by replacing a broken money system wholesale or just making it easier for people living in the West to send money back to their families at home.
But a new UN working paper disagrees with the boosterism around Bitcoin's place in developing or destabilized economies. According to the report, written by independent researcher Brett Scott for the United Nations Research Institute for Social Development, most Bitcoin startups are just too damn libertarian to take up the altruistic challenge of helping less privileged people. In other words, Bitcoin is filled with people who believe in individualist, market-led solutions to collective problems of public import.
"It is one thing to use Bitcoin to provide a counter-power to the powerful cartels of banks in nations like the United States, but in a country like Zimbabwe the real need may be to strengthen the integrity of the banking system, something that can only be achieved by hard, long-term political battles," Scott writes.
"Escaping weak local institutions might help individual people, but does little to empower the broader social majority who remain reliant on the existing systems," he adds.
For many, "money without government" translates directly to "money without politics"
The issue, Scott notes, is the long-standing tendency within the Bitcoin community to see the Bitcoin protocol as an apolitical, automated entity. For many, "money without government" translates directly to "money without politics."
But, as the recent and heated debate over a code change that would allow the Bitcoin network to handle more traffic shows, this is untrue. The debate has ruffled the feathers of large Chinese players who feel they would be disadvantaged by the change, and prompted one of the Bitcoin's most senior cheerleaders—former developer Mike Hearn—to brand the whole thing a failure. Some spin-off debates have even asked whether Bitcoin is a democracy, or a developer-led autocracy. The underlying message is that Bitcoin developers and users inevitably bring their politics into the realm of code and protocol.
But there is some hope that Bitcoin's underlying blockchain technology, the publicly viewable distributed ledger that records every Bitcoin transaction, might actually help developing economies, Scott writes. For example, "smart contracts," really just self-executing code based in the blockchain, could track weather patterns and automatically release cryptocurrency funds to farmers who need it most in dry areas. The Ethereum project, a distributed coding platform powered by its own blockchain and currency, also shows promise, according to Scott.
But for now, the Bitcoin blockchain really solves one problem: proving that somebody owns something. That makes the blockchain a limited-use tool, although potentially disruptive in areas like recording land registry claims for posterity in countries with weakly enforced property rights. This has been a favored point for Bitcoin boosters with a libertarian bent, but, like most other use cases for Bitcoin in developing nations, it falls short.
"Instead of hoping for a democratically governed state to optimize these market processes, the poverty-eliminating potential of property and markets might be activated by replacing weak state institutions with technology," Scott writes, "another form of political 'escape'."