However, on top of all that, there is an extraordinary waste of human creativity. As Matt Levine recounted in a recent Bloomberg BusinessWeek story, the institutions created by cryptocurrency enthusiasts were little more than a mirror financial system, complete with protocols for lending money, creating derivatives, writing contracts, and settling trades. The fact that this architecture was structurally compromised and collapsed under its own weight does not take away from the great amount of ingenuity that went into creating it.
At a prom party at my sons’ school earlier this month, I found myself talking to a friend about the collapse of FTX, the cryptocurrency exchange run by Sam Bankman-Fried. To my surprise, my friend, a caring and gentle doctor and father of three, had more than an academic interest in the subject. Last year, he spent A$2,000 ($1,367) in cryptocurrency and treated it as a hobby, avoiding new investments and making and selling NFT art as a sideline. (one)
He’s hardly alone. More than half of the adult population of Nigeria and Turkey buys or sells cryptocurrency every month, according to a July survey by Morning Consult, a business data company. In all, in the region of 900 million people, around one in seven adults on the planet conduct regular transactions on the blockchain, according to survey figures.
It is impossible to know the motivation of all this activity. For all the attention garnered by testosterone and Adderall fueled cryptocurrency traders and broke billionaires trying to escape the long arm of justice, the vast majority of cryptocurrency players are likely doing so for more mundane reasons.
All that activity in Nigeria and Turkey is likely driven by a very understandable desire by family savers to escape those countries’ currency controls and double-digit inflation. Others will do it as a creative and intellectual outlet, like my friend. Others will buy cryptocurrency in the same way they might have the occasional flutter at a lottery ticket or horse race.
For the record, I have never believed any of the claims made by crypto pushers: that it is a viable alternative to fiat currency or a stable store of wealth, or even that it has a place in an investment portfolio. The fact that so many ordinary people have invested in cryptocurrency should worry governments and make them that much more prepared to not only regulate the infant industry, but also crack down on it to ensure people’s savings don’t go to waste. in a Ponzi scheme. The fact that it is pumping large volumes of carbon into the atmosphere should encourage them to force activity on the less damaging proof-of-stake protocol used by Ethereum, rather than the emission-intensive proof-of-work of Bitcoin.
However, you don’t have to believe the millennial claims of blockchain online evangelists to think that it deserves its place in the world. Many human activities do not satisfy very obvious fundamental needs, and may even be slightly harmful, from art to gambling and fashion to alcohol consumption. The pleasure that people derive from such aimless activity should be recognized as a valuable end in itself.(2)
A better comparison might be another group of idealistic eccentrics who celebrate their annual party this Thursday. Speakers of the invented language Esperanto, developed by Polish ophthalmologist LL Zamenhof in 1887, have pursued their own hobby on a global scale for more than a century. The language has long been a hobby of brilliant and quixotic visionaries who have made a genuine impact on the non-Esperanto world, from writers Leo Tolstoy and JRR Tolkien to figures like Ho Chi Minh, Pope John Paul II, and George Soros. .
Esperantists have their own flag and radio broadcasts, and have on several occasions tried to devise a currency based on a slightly fragile economy (one early variant was pegged to the price of bread in the Netherlands). To this day, they write poetry and novels in Esperanto, hold annual conferences, and stay at each other’s homes when they travel. They even made a 1960s B-horror movie starring William Shatner, with a script written entirely in soft Esperanto. In short, they have created a remarkably fertile and sustainable global community of weirdo enthusiasts.
That suggests a more hopeful future for cryptocurrencies than the current conflagration would suggest. Enforce deposit limits similar to those recommended for online gambling and divert activity away from proof of work, and it will be possible to balance the genuine interest of millions with the need to avoid harm to people and the planet.
Amid the ruins of the 2022 crypto crash, we should be pretty comfortable with that prospect. Almost all of the harmless amusements that humans engage in were once novel and frowned upon by those who did not enjoy them. Someday soon, cryptocurrencies and NFTs will join the ranks of such activities. Beyond their angry adolescence, they will no longer seek to change the world. However, they are likely to find something better: the realization that happiness and undirected pleasure can often be its own reward.
More from Bloomberg’s opinion:
• Sam Bankman-Fried’s apology is as hollow as his empire: Lionel Laurent
• You have change? Why digital cash should feel real: Andy Mukherjee
• What 16th century Venice teaches us about cryptocurrencies: David Fickling
(1) He reckons he’s still ahead of his investment, though he admits that most of that value is tied to the notional selling prices of his illiquid NFT artwork.
(2) Jeremy Bentham, whose utilitarian philosophy is a wellspring for the creed of effective altruism professed by many crypto players, argued that the thumbtack, a popular children’s game, was as valuable an pursuit as poetry and music.
This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering energy and commodities. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
More stories like this are available at bloomberg.com/opinion