Marc Hochstein is the managing editor of CoinDesk and the former editor-in-chief of financial industry publication American Banker.
The following opinion piece originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to our subscribers.
Every once in a while, it’s useful to revisit the core value propositions of cryptocurrencies.
One of the most underappreciated, at least outside of the technology’s inner circles, is the fact that bitcoin and the like can give individuals a greater degree of financial autonomy.
The reason it’s underappreciated, I suspect, is that like privacy, autonomy is one of those qualities no one cherishes – until it’s gone.
Be your own bank? Really?
Stepping back, “be your own bank” is a favorite slogan of the early cryptocurrency adopters. This baffles bitcoin skeptics, and understandably so.
Key management is a fussy business, nerve-racking and all too easy to screw up. Some digital currency doubters say it’s simply beyond the skill set of the average consumer.
There’s a whiff of paternalism in that claim, though. After all, people still cook for themselves (an activity that involves knives, fire and sometimes animal bacteria!) and drive their own cars (for now); how much harder can it really be to make up a random string of words and keep it a secret?
Then again, why would anyone want to bother with paper wallets or mnemonic recovery phrases when they can just store their money at a bank, a business that specializes in safekeeping? Here in the U.S., your balance is insured up $250,000 by the FDIC in the event the institution fails.
You might even earn some paltry rate of interest on your money, along with peace of mind unimaginable at a bitcoin exchange. (Don’t worry, the banker probably won’t set up an unauthorized account in your name to hit a sales quota.)
From this narrow perspective, being your own bank looks like way more trouble than it’s worth.
An insurance policy
But let’s zoom out the lens a bit.
Consider the slow but steady erosion of due process and property rights in the Land of the Free through policies such as civil asset forfeiture (in which law enforcement can seize assets from citizens suspected of committing a crime, whether or not they have been convicted or even charged).
Next, consider the lack of constitutional protections to begin with in many other countries. Finally, layer on top of these unsettling realities the worldwide gradual phasing out of physical cash, which at least you can put in your socks.
All of a sudden, those trusted, regulated financial institutions start to look like potential back doors.
In this light, the mere option of being your own bank, for at least a portion of your wealth, starts to sound a little bit more appealing.
Inb4 the strawmen: I am not claiming that cryptocurrency users are “above the law.” An individual who refuses to give up his private keys under court order can still be thrown in jail.
The point is that the government has to throw that person in jail, or perhaps beat him with the proverbial rubber hose, to get him to comply. It can’t unilaterally seize his funds.
A defiant crypto holder might borrow a slogan from the late actor and gun-rights advocate Charlton Heston…
In this way, cryptocurrency claws back a modicum of power for the individual.
The historical significance of this innovation – self-sovereign money – was explained beautifully in a blog post by Nathan Cook, a bitcoin user in Tel Aviv.
In a post, first published two years ago, he wrote:
“An owner of bitcoin no longer has the problem faced by the owner of any other transferable asset: ‘will my property rights be respected?’ Holders of bitcoin own it in virtue of material facts independent of their social relations. The world may turn its back on bitcoin, yea, its value may fall to fractions of a cent, but those who own it, will own it regardless.”
Just to be clear: this is hardly a reason to empty your checking account or 401(k) and put it all down on crypto (another strawman I encounter frequently on social media).
But it’s a damn good reason to be thankful bitcoin exists in the world.
Skeleton hand image via Shutterstock
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