bitcoin is much more than a typical online payment system. After all, we have plenty of them: PayPal, Venmo, and the like. bitcoin and other privately-used cryptocurrencies are money For the internet.
Paper money is a nearly perfect way to pay someone. You don’t need an account. It doesn’t care who you are or what you’re buying. It’s a bearer instrument. I give you a dollar. Now you have the dollar and I don’t. It’s instant and no one can interfere with the transaction. You don’t have to trust someone else to make sure the dollar gets to you. And the best part is that it’s private. There’s no record of that transaction. It’s so private that there’s an old joke in the cryptocurrency community: if cash were invented today, it would be illegal.
Yet for all its benefits, paper money is useless on the Internet. To pay someone over the Internet, we have come to rely on a system of middlemen that keeps the money moving. We deposit our money in a bank, instruct that bank to send the money to a company like PayPal, ask PayPal to send the money to another user's PayPal account, who ultimately has to withdraw it from PayPal to a bank account from which they can choose to cash out.
Every step of this process is recorded in detail by each company involved and ultimately reported to the government. And we have to trust that companies will voluntarily execute our transaction, something that history has shown should not be taken for granted.
Sadly, paper money is disappearing as people opt for the convenience of tools like Venmo. Even face-to-face transactions to buy coffee that were once done with paper money are now intermediated — that is, recorded, reported, and executed according to rules set by corporations and the government.
The fact that commerce now flows through a relatively small group of intermediaries provides a convenient access point for authoritarians to exert the pressure necessary to control what a population can and cannot do. This risk may seem remote to those of us who live in stable democracies, but the reality is that states control financial systems, and not all states uphold the values of freedom of expression and association.
bitcoin and other cryptocurrencies offer a solution. They work in a much more similar way to cash. They are bearer instruments that can be used privately without the need for an account. They are cash for the Internet and break the middlemen's hold on our financial lives.
Of course, there are valid reasons why governments might want to control the flow of money and place restrictions on certain transactions, but increasingly we have seen governments succumb to the temptation to use their control of intermediaries as a weapon to contain political dissent. This is the great flaw of regulation through intermediary finance.
When protests broke out in Belarus over a rigged election, the government cracked down, including with financial penalties. Protesters faced heavy fines and employers were pressured to fire dissenting employees.
In response, Belgium-based non-profit BYSOL provided financial aid to protesters. However, as the protests were deemed illegal, traditional financial intermediaries, complying with the law, confiscated protesters’ funds and froze their accounts. Wire transfers were monitored and cash was confiscated at the border. BYSOL turned to bitcoin, allowing protesters to receive funds into personal wallets and make small trades with locals, evading this state-mandated financial surveillance network.
In Russia, the opposition to Putin was labeled an extremist group that made donations illegal. As in any country, financial intermediaries had no choice but to comply with the law. These intermediaries had been weaponized to monitor political activity. Alexei Navalny’s Anti-Corruption Foundation turned to cryptocurrencies, empowered with the privacy enhancements offered by tools like Wasabi Wallet, to survive. Russian citizens could continue to financially support their opposition to Putin with this powerful new capability.
In Myanmar, the junta enforced strict “Know Your Customer” rules and cracked down on cash, forcing all economic activities into a monitored system prone to arbitrary account freezes. In Iran, new rules have been proposed to automatically deduct fines from the bank accounts of women who flout laws requiring them to wear the hijab.
Even in the United States, this problem could arise. The recent repeal of the Roe v. Wade It jeopardizes access to abortion. If funding for abortion services becomes illegal, payment providers could be forced to comply with the law or provide evidence to authorities. Many abortion pill websites use services like PayPal and Stripe for payments, and if these services are cut off, cryptocurrencies could become a crucial alternative. There are similar financial threats to access on all controversial topics. It is hard to control individuals, but it is easy to control middlemen.
Beyond the direct legal control of intermediaries, it is also important to consider another flaw of the intermediary financial system. These are private companies that have their own considerations and values. Many of them are listed on the stock exchange, which makes them susceptible to the whims of public opinion.
Why would a company like PayPal take on the reputational risk of processing payments to industries that some find unsavory, even if they are legal? There are endless cases of adult content creators being banned from platforms, or marijuana companies, or political voices being outspoken. At the end of the day, it’s much easier for them to simply kick those people out so they can focus on their core business. If every company makes the same calculation, those companies are effectively destroyed even if they followed the rules.
Meanwhile, cash — both paper and now cryptocurrencies — are neutral systems that are immune to the whims of not just authoritarians, but also the mob. Cryptocurrencies are cash for the internet. You don’t need an account, just a computer and internet access. They can’t have an opinion on what you’re doing. They don’t spy on you. And no one can interfere with your ability to transact with them. They are essential tools for protecting our ability to exist as free people in the digital age, and they are a check on authoritarianism made much easier by a centrally mediated internet.
This is a guest post by Neeraj Agrawal. The views expressed are solely his own and do not necessarily reflect those of btc Inc or bitcoin Magazine.
