The complicated legacy of Blockchain
Cryptocurrencies, and the blockchain technology in general, have fundamentally altered the way internet is used. The cryptocurrency market is currently valued at $3 Trillion, and at least $150 Billion of which is from âstablecoinsâ. Traditional cryptocurrencies do not tie their value to an external asset or metric, such as gold or the U.S. Dollar; these are commonly called ânon-fiat currencyâ. Stablecoins on the other hand, have their price or value pegged to a fiat currency or exchange-traded commodities. It was recently found that over 50% of global cryptocurrency trade, measured by volume, was in relation to stablecoins.
I assume that this revelation would be equally shocking and disappointing to Satoshi Nakamoto, who published the white paper âBitcoin: A Peer-to-Peer Electronic Cash Systemâ over 11 years ago, and developed bitcoin and the blockchain technology. It is fairly clear that the conception of decentralised ledger mechanisms and cryptocurrencies were firmly rooted in the failure of the U.S. government and centralised banks in protecting the interests of the general public. The development and growth of bitcoin and blockchain technology is both in the aftermath of and in reaction to the 2008 financial crisis.
Over the past decade, both blockchain technology and its underlying principle of cyberlibertarianism have flourished and grown to change the internet in profound ways. However, the popularity of offshoots such as stablecoins and non-fungible tokens (NFTs) has brought into question the efficacy of blockchain technology, and the need to weigh its harms against its supposed benefits.
Stablecoins are seen as better and more reliable investment opportunities than non-fiat cryptocurrencies, but that comes at the cost of transparency. Most stablecoins cannot be independently audited in the way that cryptocurrencies like bitcoin can be. This has enabled traders to not be transparent and deceive investors, ironically similar to the way financial institutions functioned at the height of the 2008 financial crisis. This functioning is directly antithetical to the basis for the creation of cryptocurrencies.
Similar to how stablecoins distorted the ideology of both cryptocurrency and centralised currency, NFTs have distorted the value of art. NFTs are unique cryptocurrency tokens, that prove ownership over a digital media, ranging from picture and GIFs to videos and even tweets. The unobstructed growth of its popularity, specifically amongst a subset of internet users, has displayed the biggest harms of blockchain technology. NFTs take the idea behind non-fiat currencies to the furthest extent, by creating an entire economy that is based on trading valueless âartâ on a large-scale, all the while ignoring the irreparable ecological ramifications of the same. The carbon footprint of an average NFT is found to be equivalent to more than a monthâs worth of electricity for a person living in the EU. That is far too great a harm to gain âownershipâ over a tweet.
However noble the intentions of Satoshi Nakamoto were in 2010, it becomes increasingly crucial for us to question the direction in which blockchain technology is headed. On one hand, it has become the centralised and opaque financial institution that it opposed, through stablecoins, and on the other hand, it has prompted a massive âtrendâ of claiming âownershipâ over internet GIFs, with no real world value, and at the cost of the environment.