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A few years ago mum and I were sat down in the living room, eating sunflower seeds, watching the news when a small segment about crypto came up. So she asked me - "What is this crypto stuff that keeps going around?"
Context
My mum is either a late baby boomer or a very early gen-x depending where you place generation cut-offs. She was also born in socialist Bulgaria so everything you think you know about western baby boomers with their wealth and their attitude, most likely doesn't apply here. She sadly missed the computer revolution because she immigrated to the UK where she worked blue collar jobs for sometimes upwards of 15hr shifts. So this didn't give her much of a chance to get familiar with tech beyond the very basics. She is not a luddite nor is she a technophobe, just someone the tech revolution missed, like so many people around the world. For her to ask me about crypto and for me to explain I had to go really from the beginning. Thankfully I'm quite familiar with the topic, how it started, the technology it's based on so indeed was able to explain.
Now while she is tech-challenged, she is not naive on the topic of scams, pyramid schemes etc. When more people in the west were getting savvy to the machinations of the more obvious schemes, the scammers found themselves in a pickle. Well very helpfully, around the same time, the Iron curtain lifted across Europe and people who have been in a command economy for all their lives were exposed to the free market. With it of course came these schemers, seeing this fresh new fertile soil of naive people who genuinely thought that pyramid schemes are how capitalism works. So many people in the early 90s, across the previously socialist countries were taken in by schemes so blatant they would make Charles Ponzi himself embarrassed to be a part of. A compounding factor is that the legislation, which is usually behind in the best of circumstances in the west, was completely unfit in these countries. A few years ago the internet discovered, for example, how almost the whole of Albania was taken over by one such scheme, but the story was similar everywhere.
There was a cadre of people in these ex-socialist countries who used to travel abroad and saw the rest of the world, so they were usually the ones perpetrating these schemes - either solo or the first "representative" of something like an MLM or a Ponzi scheme. They were seen as travelled, experienced and "oh they know what's what so what they say must be true - look at how much money they have!" Those representatives were usually the ones who were wealthy and in the upper echelon of society during the socialist times - either a party higher-up or some sort of a friend of the party-higher ups. Yes, there were some fabulously wealthy people in those times! On top of that something akin to the prosperity gospel in the US popped up. Being wealthy in the socialist myth, was linked with the myth that "They must have worked so much for that money." or "They must deserve it". Of course many knew the reality, but this was the pervasive mirage everyone liked to believe. To this day rich people are somehow often connected with success, intelligence, deserved power and righteousness. It's my theory as to why Donald Trump was so popular in Bulgaria during his first term as president. Why Elon Musk was practically idolised by all of my friends across the Balkans for a very long time, while I was the black sheep told that "I don't understand him" for the last 10+ years. And why people everywhere still fall for the schemes - whether they be the grift nonsense, MLMs which somehow still exist or whatever the new thing is going to be.
My parents still joke around often that "Thankfully we didn't have any money to give to these schemes!" Sadly others did. And a lot lost everything.
For additional context on my opinion of crypto - I do think the asset known widely as cryptocurrency is misleadingly named and is primarily a vector for scams. It will never function as a currency, nor is it designed to. The tech it's based on is interesting, but very doubtful that it will be used properly as a means of true decentralisation as a means of freedom from the enshittification of big tech. More likely than not it's used as a means of freedom from regulation which prevents crime.
The Conversation
So I started literally right at the start. My mum may be tech shy, but she is no dummy. She graduated as a construction engineer, and later on was an accountant. If anything her understanding of math dwarfs mine. So I told her about the whitepaper, how decentralisation works, why it's called crypto, the cryptographic elements of it all and the ledger. I didn't express a single opinion, if anything I think the whitepaper is super interesting as a thought exercise combining tech. She understood all the theory, but in the end asked one poignant question - "But how is it a currency?"
Great question mum! I dusted off my econ knowledge from sixth form (college) and we went over the three main functions of a currency to check crypto against. After all we had to be fair and give it the best chance and try to steel man the argument that crypto is a currency in the way we use the dollar, pound or euro. A currency from the perspective of economics:
- Unit of account - you can use to quantify and do your books with
- Is a medium of exchange for goods
- Stores value
That last one is something quite interesting because while on the face of it a single unit of Bitcoin stores the most value - that funnily enough does not make it "the most currency". I didn't even have to explain it to my mum - she has once again lived through it.
In the 90s along with all the schemes, there was also a period of hyperinflation. One day mum and dad had almost enough money to buy a flat (one more salary savings and they would have been able to). Two days later that money is enough to buy a washing machine only and a Kinder Surprise egg for me.
So she immediately goes - "That is a stupid currency, you never know what something costs! We had that with the Lev in the 90s no one was celebrating that and thinking that the lev is the best currency."
Now some of you may be thinking - well the situation is not the same at all! The Lev was being devalued at the time, not like Bitcoin which just keeps getting value! (and loses and gains and loses again etc.) Therefore the argument stands that this is indeed the most currency, currency there is, it stores the most value.
In actual fact it is a known thing that the markets in general like stability in their tools and instruments. Reliability is so important that having stable value is the most important factor - not the "most" value. Otherwise traders don't know what to charge you, you don't know what you'll be expecting to pay and everyone is confused. Not to mention that with such astronomical prices for something that is meant to be a currency, Lord have mercy on the ones not yet born, how will they ever afford bread? I can imagine the conversation in 2045 at the bakery, if the crypto-bros have their way and make it a currency:
"Where were you in 2011 and not mining crypto?"
"Well I wasn't born"
"Sounds like a skill issue"
Let's just put it this way. There is a reason why China forcibly kept its currency stable for so long. Did many countries and people have an issue with it - absolutely, especially publicly. Did some of those people profit from that stabilisation of Chinese currency - absolutely. If China allowed the currency to follow their substantial growth in economy, they actually likely wouldn't have had such a growth sustained over so many years. They prioritised keeping their currency low and stable, because for them as the exporter to the world it was important that people doing business with them to find it cheaper to buy from them and predictable to buy from them.
This is not to say that China hasn't invested in Bitcoin, crypto etc. Everyone has by now, sadly. This is not the argument here and it's a tangent if anything. This is to illustrate the viability of crypto as a currency rather than a tradable asset.
Here is where my mum again asks the right question "Well how does it have value?"
For comedic purposes I retorted with "Well how does anything have value" - the joke was a bit missed on her, I had to explain that this is how crypto-bros think, not how her daughter thinks. Thankfully that allayed the disappointed look in her eyes.
The way things have value is partly a social construct, yes, but it's also a mechanism brought on by institutions - banks, governments etc. So in a sense it is a well-enforceable social contract. If you have a legal tender that gets rejected in its jurisdiction or a merchant tries to unilaterally say it's worth less than the printed money says, there are mechanisms of enforcement. You know that when you walk into a shop with £10 you can get £10 worth of stuff. (The unless inflation hits of course, but on the whole you roughly know what you will get). With crypto I couldn't really tell my mum how it has value beyond "there is a limited number of them" and "tech-bro decided". I couldn't tell her what the mechanisms of decision are beyond "the market decides". And I couldn't tell her what the mechanisms of enforcement are if someone decides to go ahead and not accept Bitcoin. It's the way Pokemon cards are worth everything to someone and nothing to another person really. No one can make you value Bitcoin and therefore accept its value.
So then my mum said - "oh so it's a scam that is wearing the disguise of technology, like the scams of the 90s in Bulgaria wore the disguise of 'well this is actually a special mechanism of capitalism'".
There it is. A person who is familiar with scams but not at all familiar with technology was able to see through the shiny tech facade.
You may believe me or not but I genuinely tried to keep everything to the facts and not influence her. If anything I was overly positive on the technology aspect at least as I do see potential there if applied well.
In summary - if a tech illiterate woman, to whom often technology is closer to magic than science, can recognise the mechanisms of a scam, then you can too!
This rambling brought to you by me remembering the conversation while watching the excellent take down from Ben McKenzie on the topic of crypto. Massive respect to the man for bringing this back into the conversation because the scams never stopped, but the news coverage had moved on.