la rue des mots

Charlie Shrem, past CEO of BitInstant and Vice Chair of the Bitcoin Foundation, is the newest casualty of the Silk Road fiasco. 

Shrem, 24, is up for trial this coming January after having pleaded guilty to aiding "co-Conspirator" Faiella in obtaining bitcoin (which would eventually make its way to the Silk Road.) 

The case against Shrem is not nearly as strong as the case against Faiella- Faiella, after all, did actually have a hand int he cookie jar when it came to funneling bitcoin through to the Silk Road. 

Shrem, it seems, is being made into a martyr in the payments and financial innovation industry. 

What the government is ignoring: the Silk Road is a black market. Black markets exist everywhere. And oftentimes it is USD that is used in transactions! Why? Because USD does not have a "paper trail," to be perfectly blunt. USD dollars can disappear into someone's pocket and re-emerge years later to purchase a lollipop, but the time it spent folded up under a seat cushion or in that back pocket it was "off the grid," unseen and seemingly unmissed while still being counted as part of the economy's financial market. Back to the point: black markets exist, whether we want them to or not. 

So what makes the Silk Road the focal point of the federal government? For one, it's the single best "anti-bitcoin" case out there. Want to scare people away from something, keep them from adopting a new technology? You make them fear it! You make them hate it. You string up the leaders like poppets and make them into the boo-ed villains of villages bygone. You certainly make sure that no one understands it. So governments send out a flurry of messy information, stats, and propaganda- then string up some "faces" of a revolution and demonize them. Successful deflection. 

What makes this martyrdom especially disgusting? At least when Christians were being thrown into the ring with lions and gladiators, they were truly "guilty" of being Christian. Excuse my religious reference, but Christian martyrs are an excellent example of what.... a martyr.... is! Charlie Shrem happened to be operating a business (much like many others in the space) that allowed people to get hold of bitcoin. What those people did WITH the bitcoin... is another story, and anyone who has studied economics in WHATEVER school knows that consumers either behave rationally or irrationally, but regardless, they have agency in their own spending/use of assets (unless we are talking about taxation and programs like such denoted by social contract theories.) 

By the rationale the government is using, the Lehman Brothers should have gone out of business long ago, brick and mortar banks shouldn't be operating and their CEOs should be behind bars, and all investing activities should be stopped because by GOLLY I think everyone in the financial market in question has come into contact with at least $1 that has come through/gone through/heading to a black market of some sort. 

What do you think, is Charlie Shrem a victim or villain?

So, I know the African Leaders Summit was a while ago (August 4-6 2014) but I did have several thoughts. VP Biden had some strong comments on corruption in African governments (let's face it, it's always a topic of discussion, whether the corruption is getting better or worse!) 

So, some thoughts on corruption:

-Must be combatted at all levels. Giving people control over their resources (like cash and assets) is even more important that inter/trans governmental efforts to limit corruption. 

-US Government/Western Democracies clam to collect taxes so that they can distribute cash to necessary societal programs and infrastructure (yes, I know, the taxation and distribution system is a discussion for another time...) BUT these governmental institutions and elected government officials were established by a body of citizens and allowed to stay in office by the body of citizens, and therefore have an historical check/balance (again, a discussion for another time...) In essence, ideologically these "western" democracies and their government administrations presiding over them are democratically elected through legitimate processes and are held accountable by society (not the other way around.)

-Corrupt governments are NOT democratically elected, and not even necessarily elected by an electoral body that represents the people of the country they claim to represent. Distribution of wealth isn't a "people's" choice but rather the government's. Problems here: nepotism and despots, control over wealth and never ending cycle of corruption, leads into the cycle of poverty.

A broad assumption we tend to operate under is that when people are in control of their own money, then as rational consumers they would make decisions to increase their (society's and) own welfare. By this reasoning, quality of life increases as a population is being self-invested in. I re-iterate, rational consumers. A bit Keynesian I know but it is a proven rationale. 

-Governments feed on money and revenue generation. Circumvent that, and corrupt governments will whither away... 

How does this all relate back to bitcoin and cryptocurrencies? Well, think about it. Bitcoin is held by the individual and it is up to that individual to send it wherever they see fit. It is safe, secure, and doesn't require a middleman (like the government) to facilitate at any stage in its travel from wallet A to wallet B. 

Think about it. 

Link to African Summit recap: 

http://www.washingtontimes.com/news/2014/aug/4/joe-biden-opens-africa-summit-with-corruption-warn/

Emily works as a freelance research assistant/social media intern with ZipZap, Inc. 

Whenever I introduce myself in class at the beginning of the semester (you know, that awkward day where no one wants to be there because all the profs do is go over the syllabus and make everyone introduce themselves...?) I always have something better to say about my "hobbies..."  Bobby: I play kickball on the weekends, and I like to read.

Sally: I like to go running down on Capital Crescent trail, but before the mosquitoes come out!

Bobby #2: I'm always doing homework, but when I'm not I like to go explore the city.

Emily: I research cryptocurrencies and their role in developing markets, the ecosystem of payments, and how cryptocurrencies will disrupt all payment industries world over. 

.......

One of the largest growing economies in the world is Africa as a continent. By extension, it is also one of the largest remittance-receivers on the planet. In 2013, Africa received approximately $32 billion in remittances! By 2016, Africa is projected to have a remittance threshold of $40 billion per annum. 

An assumption that many of us in the more comfortable "developed" parts of the world is that the cost  of transmitting these remittances will, in fact, go down as transfer service providers are guaranteed more business. But the sad reality is, business is business, as usual. The cost to send money back home for migrants has remained significantly higher than expected. In Africa, more specifically, the cost to transfer amounts (minimum $200) is 12%! This is $24 per $200 sent... Now imagine, what did the remittance service providers take home in 2013 when Africa received $32 billion in remittances? 112% of $32 billion is $3.84 billion!

The global average cost to transmit money internationally is 7.8%, which is considerably lower than in Africa... and that's an average. This means that Africa's 12% is contributing to the higher-than-the-expected-average of the global average of 7.8%! 

One of the reasons that fees have remained so high, as any logician or economist can tell you, is that there is a lack of solid competition. When I say competition, that means fully compliant and honest-to-God-whatever-other-deity-you-choose brick and mortar payment shop fronts. On top of that, there is a strong oligopoly on the payments and transfers market in Africa, depending which country we are referencing of course. 

We all know that Western Union and MoneyGram tend to be the big players in the payments space around the world, and this certainly holds true in Africa. We also see almost-monopolies forming on the banking front- which, as we can tell anyone from experience, is not necessarily to best long run schema for any financial market/growing economy (e.g. Great Depression, South East Asia banking crisis, even tangentially the EU Sovereign Debt crisis...) 

How do we lower costs to transmit? Well.... we could encourage more payment shops to set up and compete in a traditional game-theory set up with the big players Western Union and MoneyGram. But as anyone should know, that is a Pre-Emptive Game  they are playing. In a pre-emptive game, the first mover is always the one who reaps the profits/benefits of setting up shops first... and since Western Union and MoneyGram have been around for quite some time (a laughably long time) any new payment shop competing in a traditional way would be at a prohibitive disadvantage. 

What is the solution, you ask? Well, we already know that cryptocurrencies have been making a great foray into the transfers market because of low-cost competitive edges. The demand for a cheaper alternative is so great, that Bitcoin is probably the best mode of transfer any sane person could think of... But then again, I am just preaching to the choir at this point. But why are Cryptocurrencies the future of the remittance market? Not just in Africa, but the world? 

The answer is quite simple- it is the least biased, most honest, secure and ridiculously competitive-with-traditional-services service/commodity out there. It is the most easily accessible, traceable, transmittable and functional value transfer product out there. And that, friends, is why traditional institutions already imbedded in the payments infrastructure resist and reject anything to do with digital currencies and digital money. 

There is a massive push-and-pull between the traditional payments industry and the new payments industry. There are strings being stressed between the traditional industry, the market itself, the populations within the markets, and the oncoming new payments industry. This push and pull will be the subject of my next commentary... stay tuned!

Emily works as a freelance research assistant/social media intern with ZipZap, Inc. 

Apparently run screaming for the hills. Especially when you receive the first tuition bill. 

I was recently accepted to American University's School of International Service for their MA in International Economic Relations. Brilliant. I'm sure it's a great program, and I wouldn't have applied if I wasn't enthusiastic about it at one point. 

But at which point does student debt become too much? At what point do the domestic ratings of a University not matter anymore? It's a "top ranked" institution, but should I really be using textbooks that I read (cover to cover) in Undergraduate studies when I am pursuing a Masters degree? 

I am seriously flipping out right now. I don't want to repeat my Undergraduate degree, but slap a shiny new label on it. I want to study economics. I want to learn something new and not be in loads of debt for it!