As crypto investors we are sometimes faced with the question about the usefulness of crypto. While we believe crypto assets can be the foundation for a new kind of trust infrastructure not just for money but more generally for contracts — we will here think about crypto as a form of money.
Living in Australia or another developed country in Europe or North America it can be hard to understand how important it is not having to trust the whims of the ruling party, a king or a brutal dictator with your money.
Holocaust survivor Ruth Weitz writes in “Flares of Memory — Stories of the Childhood during the Holocaust”:
Hoping to escape from the concentration camp, I had sewed coins inside the waistband of my dress before going there. Within the hem of my dress I sewed my mother’s engagement ring, and I secured a gold chain inside my long braid of brown hair. I knew the consequences were death if I were caught, but I wanted to be prepared.
Imaging if the jews trying to flew the holocaust had a means to protect their wealth by just remembering 12 words or a passphrase instead of hiding gold and risk being caught.
With cryptocurrencies like Bitcoin that becomes possible, a potential store of wealth which is becoming speech. Uncensorable speech free from political influence, and not possible to confiscate.
A current example of a country where people are really suffering under a brutal regime is Venezuela. Despite being a country with great natural resources its people are now struggling to survive. Due to poor governance, the inflation rate in Venezuela averaged over 32% from 1973 until 2017 before exploding in the last couple of years to over a million percent.
Carlos Hernandez, a Venezuelan economist, describes how Bitcoin has saved his family by keeping all his money in Bitcoin and only exchanging it for Bolivar when needed. He also tells the story how for anyone leaving Venezuela having money that is borderless and can be stored with just a passphrase in your head prevents people from getting their money seized by the military.
LocalBitcoins.com was founded in Finland in 2012 and has since then been a major peer-to-peer platform for buying and selling Bitcoin. The volume as measured in Bitcoin in Venezuela just hit a record on LocalBitcoins:
Cryptocurrencies in addition to becoming a store of value that is unseizable are programmable money that could potentially provide checks and balances for dictators which has throughout history made off with great fortunates:
It’s our belief that crypto assets is a new computing platform for trust. Specifically as money it has some important traits that humans have been valuing for millenia. It has the same kind of robustness and scarcity that gold has. We can now for the first time do scarcity in a digital form, going the full circle:
Cryptocurrencies are not yet private enough to protect us against all adversaries — maybe it most pressuring weakness. Supporting the opposition in a dictatorship using cryptocurrencies is still dangerous if you’re not very technical oriented and even so it is very hard to be sure that your transaction can’t be traced. There is still a lot of work to be done to make digital currencies as trustless, permissionless and as censorship resistant as possible.
Clear, however, is that as a store of value that can’t be seized or deflated by an irresponsible government is, as Carlos Hernandez puts it, “more than a buzzword when you live in a collapsing dictatorship.”
At least when it comes to the digital dimension we finally have an opportunity, thanks to crypto assets, of moving the discussion from “don’t be evil” to “can’t be evil”.
Henrik Andersson is the Chief Investment Officer of Apollo Capital — Australia’s Premier Crypto Fund. The Apollo Capital Fund is a professionally managed portfolio of crypto assets, offering investors exposure to the fast growing crypto market. For more information, please see apollocap.io.