The Elephant At The Crypo Party
By Ves Sladin 12/17/2021
Yes, there's an elephant in the room at the Cryptocurrency party and
everyone just wants to keep partying. Being new to the party,
it's very obvious, and I keep asking, "Ah... I mean, you guys see
the elephant, right? It's not just me, is it?". If
he takes a shit here, the whole place is going to get cleared out...
Party over. The elephant I'm talking about is government, and
the fact that governments are starting to crack down on crypto and
making it illegal.
Few months ago I asked someone I would describe as a crypto industry
leader, currently launching and developing a new network, about the
problem, and he pointed out two things:
1. Cryptography is a form of free speech, and there are already
Supreme Court rulings and enough precedence that it would be very
difficult for the US government to declare it illegal.
2. He believes that decentralized crypto will prove to be a much
better financial system, and those countries that embrace it will
prosper. Those that don't will suffer, and eventually will
have to come around.
One of the ideas behind cryptocurrency, arguably the primary idea,
is to break away from the existing, failing, fiat currencies, and
provide a stable alternative, which is controlled by the people, in
the interests of the people. We're not talking about
converting the existing system over to cryptocurrency. We're
talking about a completely different system, that eventually should
make the existing currency obsolete.
Honestly, the idea is it's not new. In the US, the ability for
people to make their own currency existed before crypto, and it
still does. Any community can legally print their own money,
as long as it's distinguishable from the US dollar. This
allows a community to meet needs that a nationwide currency may not
be able to. However, in the US, states are banned from
officially printing their own money, because apparently we need a
centralized system, because when every state was in charge of their
own gold backed money, it caused a meltdown. Let's ignore the
fact that it was corruption in the system which caused it's
downfall... greedy bankers. Ignoring that fact, the bankers
got together, said we need a solution before one is pushed on us,
and we end up with the new central bank policy, which basically
legalized the very policies that caused the downfall in the first
place, namely fractional reserve banking... which is a fancy way of
saying that 90% of the money that is loaned out doesn't really
exist. The act of signing a document saying IOU $xxx creates
the money. The bank never had it to lend it to you. So,
how much money is created is dependent on how much demand there is
for loans, which is dependent on the interest rate, which the
government, among other things, manipulates to get the results they
In principal, a national currency makes sense in terms of presenting
a unified front for trade with foreign entities, and also in order
to tailor the currency to the countries needs. Just like a
community money better meets the needs of the community.
Inherently there is nothing wrong with a national currency.
The problem is in the policies and ultimately how people that make
those policies are elected and made accountable.
But the point is, the government has a system, and they believe that
system functions in everyone's best interest, to keep the economy
stable and productive. Now, that is definitely arguable given
the banking crisis and collapse in 2008. You would think that
such an event would have the government economists rethinking their
approach, evaluating what went wrong, making sure it doesn't happen
again, or better yet that nothing worse happens. It didn't
happen, because there's corruption and self interests, so now we
have interest rates at 0%, with talk of them going negative, banks
no longer have the reserve requirement of 10% even, government is
writing checks to the tune of trillions of dollars, and the
producers inflation rate is the highest it's been in 50 years.
At this point, if the dollar and the economy don't collapse it's
going to be a miracle. Even Russia and China see that it's a
bad idea to keep the US dollar as their reserve currency, and they
are collaborating to change that, quickly.
However, just because the US monetary policy has failed miserably,
doesn't mean that government is just going to step aside and say,
"Yeah, we screwed up, you guys go ahead and take over." No, in
fact I think it will make governments more defensive. Because,
they still believe that central control of the currency is
essential, and now they are facing the growth of a system which they
have very little control over, and which they see as a threat to
economic stability... saving us from ourselves. Do we really think
that they will just let decentralized crypto continue growing
Most likely government will create it's own centralized
crypto. At the same time, even if decentralized crypto can't
be banned, they can definitely legislate it to the point where it's
difficult and costly for people to use it. Government being
able to both mandate a centralized currency and drive it's
acceptance, as well as hinder the competition, puts decentralized
crypto at a huge disadvantage in terms of adoption and
stability. Which are exactly the two things that are keeping
crypto from becoming mainstream now. With government fighting
it, it would be even worse.
I suppose a case could be made that if decentralized crypto is
fighting for it's life, it's supporters and creators will be more
determined. But as much talk as there is about the people
having the power, and we do, that power has to be organized and
brought to bear on the problem. I don't know if the crypto
world, where there are now 5000+ crypos, can pull it together and
muster that kind of organization and consensus. And I don't
know if it's the right problem that's being solved. Because
the problem is not our form of money, it's the policies that drive
it. I'm not sure most crypto people know enough about
economics to set up appropriate policies.
Which has brought me to the conclusion, that if you have money in
it, make sure you can afford to lose it all. Yes, the rewards
could be huge, if it continues to grow, and government stays out of
it, but don't kid yourself for a minute that they will, or to what
extent they will crap on everyone. All it's going to take is
one drunk crypto guy at the party to bump into the elephant, and
scare it, and shit's going to go flying.