Is Cryptocurrency The Best Blockchain Can Do?
A cartoonish rendering of blockchain’s structure. Blocks, representing nodes of communication, support each other. Graphic by Theodore Zaritsky.
Bubble wrap was invented to be fancy wallpaper. Q-tips are used for the one thing they explicitly advise against. Super-glue found its footing in medical tents on the battlefield in Vietnam. Each of these is an entry on a strange list of technologies no longer used for their originally intended purposes. It is time for blockchain to join them.
Blockchain was designed to radically reinvent the business model and turn exclusive financial services over to the people. Its first words promised the end of thievish central banks and meddlesome bureaucrats who manhandle free markets. Its devotees point to cryptocurrency’s peak market value of $3 trillion as evidence of genuine worth. Comparisons to the steam engine or early internet riddle articles that advertise blockchain as a limitless technology.
Critics who herald blockchain’s fade into oblivion dedicate their hyperbolic headlines to the implosion of FTX, a cryptocurrency exchange rife with “old-fashioned embezzlement,” and its disastrous fallout. Maybe this crypto winter portends an apocalyptic ice age, an end to the “magical thinking” pervading companies and their consumers who doggedly follow the “Instant wealth: Just add crypto!” mentality. More likely, despite cryptocurrency’s distinctive volatility, this cyclical slump will eventually thaw and Bitcoin, the most famous of them all, will face death many, many more times. After all, the coins of the future will probably not be dog-themed or enchantingly ethereal, but, against 3 trillion votes of confidence, what is mine.
Both of these lines of speculation are flawed. Sensationalizing the cult of cryptocurrency reinforces the false assumption that blockchain’s biggest contribution rests in finance. Discussing the trend amplifies it. Companies have begun to realize that cryptocurrency is incompatible with the existing structure of American capitalism. Accepting censorship—shudder—is inevitable. The government, wielding blockchain as pruning shears taken to a jumbled bureaucracy, should use an intrinsically democratic technology to allay public distrust—not let Americans make deposits without opening a bank account.
The term “blockchain” describes a digital balance sheet that processes information in batches, forming a long train of receipts. People, geographically distributed, agree on which receipts are valid, eliminating a middleman’s stamp of approval. Imagine a giant Google spreadsheet where everyone can only view and enter information—no deleting and no editors.
This type of record-keeping makes evidence of tampering immediately obvious to its participants. It also provides a framework for organizations to cross-compare their information with a single set of facts. In theory, if a central authority is untrustworthy or mistake-prone, decentralizing its responsibilities could give its stakeholders fewer reasons to be distrustful. Everyday consumers are mostly insured against the risks of centralized banking. Cryptocurrencies have failed to gain momentum because they exist to solve an exaggerated problem.
Those that otherwise struggle with accessing financial services are thrilled. The ability to bypass money’s traditional control points likely helped Russia sidestep a recent barrage of sanctions, state-backed North Korean hackers launder over half a billion dollars in digital tokens last year, and a woman in New York City illicitly fund terrorism in Syria. Innovation in crime has never been such a superb indicator of democratization.
The appeal of blockchain is infectious: emerging technology can give people fewer reasons to distrust those who handle their information. Charities should prove to their donors that they use funds as intended. Democracies, measured by accountability, should show their citizens how they distribute taxes and count votes. In Nigeria’s recent presidential election, many voters lost hope that the new electronic voting system would prevent tampering when polling stations failed to publicly upload votes to a central database. When electoral fraud mars history, only “radical transparency” can lend credibility to elections and refute conspiracies.
In 2012, former United Nations Secretary-General Ban Ki-moon said that “corruption prevented 30 percent of all development assistance from reaching its final destination.” This February, Western concern with funneling aid through a murky Damascus where it is likely to be siphoned off for personal gain hindered Syria’s humanitarian response to the devastating earthquake. In late January, a corruption scandal revived conversations about tracing the $13 billion in cash—soon to be joined by another $9.9 billion—that the U.S. has given Ukraine to keep public services afloat. The U.S. has used “extraordinary measures,” including audits run by the World Bank, to trace direct financial support.
Beyond blockchain’s potential to illuminate the flow of aid, establishing a clear record of behavior paves the way for greater cooperation. Blockchain itself, unfortunately, cannot miraculously replace inspectors who corroborate records against physical inventories nor absolve administrators from checking their entries. But maybe slightly improving record-keeping removes a small step of verifying information in a process corroded by distrust.
The Stimson Center, a research group in Washington, D.C., drafted a blockchain network that would reconcile errors among nuclear inspectorates in Finland, a country whose nuclear power program provides a third of its electricity. The fictitious prototype, SLAFKA, found an elegant solution in blockchain because its premise “so closely matches” the demands of monitoring compliance with international guidelines. Reducing the time it takes to report unauthorized access to restricted materials is so critical to arms control that the Stimson Center’s latest non-proliferation project, MATCH, is exploring how ownerless, shared ledgers can catch discrepancies in the international chemical trade to thwart chemical weapons programs.
To be clear, blockchain itself does not solve problems. The mechanisms that preserve information do not care whether that information is accurate. Moreover, it’s unclear whether building blockchain infrastructure is a cost-effective alternative to centralized data management systems. Blockchain’s revolution is limited by its subtlety; rather than a solution in search of a problem, it drives people to reconsider basic accounting upgrades—and maybe that is its greatest accomplishment.
Regardless of that uncertainty, cryptocurrency’s gains and losses can never be used as a proxy for blockchain’s value. It is useless to fixate on the economic disruption that cryptocurrency enthusiasts fantasize about when blockchain’s most practical purpose remains untested. Neither is it useful to over-promise an already over-hyped technology that, ideally, is unnoticeable. In 2016, Dubai announced plans to become “fully powered by Blockchain by 2020.” They were equally successful with their second, albeit more ambitious, goal: becoming “the happiest city on earth.”
Blockchain is often shrouded in incomprehensible crypto-jargon like so many other technologies that are buried under marketing buzzwords. Yet, undeterred, we seem content to dismiss a technology we do not understand. Blockchain’s innovation will remain unproven until we reject cryptocurrency.
Theodore Zaritsky (CC ‘26) is a Staff Writer for CPR studying Political Economy.