The outlook for cryptocurrencies as a cause area seems rather mixed from my pretty uninformed viewpoint. I’d like to highlight some reasons outside of their speculative potential. I think the best argument can be made for cryptocurrencies adding value through poverty alleviation.
Epistemic disclosure: Any knowledge comes from reading the news not studying the topic.
May make it much much easier / far less costly to send remittances which make up larger and arguably more helpful inflows than aid in many LMICs. I think this is worth thinking about.
Similarly it can compete with incompetent central banks & provide a means of transaction in a country experiencing hyperinflation / economic collapse. This seems potentially valuable but I wonder if this could release pressure on bad governments in critical moments. I’m not too interested with how it competes with what I view as generally competent central banks (found in most HICs)
Experiment with with new governance strategies and voting techniques. Those techniques can obviously be experimented with in other places, but perhaps not to the same scale as quickly.
Massive energy consumption. I’m thinking of bitcoin, the mining of which reportedly sucks up ~0.3% of the world’s energy consumption. If so, that’s a lot. Supposedly miners mostly use renewables, but it wouldn’t surprise me that bitcoin’s impact on the world was net negative even if only 10% of the energy used to mine it came from coal. I’m not sure if that energy, counterfactually would be used.
This one is not strongly held: It may be a talent black hole. I don’t know if this view is some vestige of at one time having more leftist sympathies, but I still worry that complex financial markets can siphon off scientists from having a much higher impact.
General reservation: For comms reasons I think EAs should be conservative / cautious on the margin around controversial topics or cause areas that’d distort our image in such a way that could damage our LR growth.
Mixed: Making drug / illegal markets more efficient.
Funds criminal organizations. This view may be a little old fashioned, but criminal organizations have large negative externalities. Particularly Latin American drug cartels which may benefit from cryptocurrencies.
Increases safety of consumers of illegal drugs.
One generic argument I see raised in this post is “here’s a way that lots of money could be made so --> earn to give / save.” Keeping the mostly-efficient market hypothesis as a prior, I’m skeptical of most propositions that include the first part of that quotation.
In summary: Cryptocurrencies probably aren’t going anywhere. Supporting their use in failed states / their use for remittances seems potentially useful if a currency could be found that’s not so volatile. Making them less energy hungry seems potentially useful if someone is well placed to do so.
Thanks a lot for you take.
One thing I would note is that cryptocurrency as a cause area is independent of cryptocurrency having have a net benefit or a net harmful effect; potentially cryptocurrency could destabilize global financial systems, so if one has a less positive view on cryptocurrency, regulating cryptocurrency (whether by governments, or by self-regulation within the ecosystem) and making sure at least some cryptocurrencies have a positive impact (thus reducing the overall net harm) could still be a potential cause area.
To address a few other points:
Massive energy consumption. I’m thinking of bitcoin, the mining of which reportedly sucks up ~0.3% of the world’s energy consumption. If so, that’s a lot.
Indeed, bitcoin is outrageously bad in many aspects of its technology.This isn’t a universal problem for cryptocurrency though, the whole Nano network for example could approximately be powered by a wind turbine while having much higher throughput and speed compared to bitcoin.
It goes to show how the crypto market right now is not guided by the right values, the bar for positive change here is quite low.
I am pretty sure that’s a real problem, the complexity of blockchain technology is quite high, and there are powerful monetary incentives while the social benefit is far from being automatic.
I agree, it might not be suitable as a widely presentable cause area in the same way poverty is.
I don’t think it’s old fashioned but still highly relevant.For example, cryptocurrency being banned instead of being regulated in a sensible way could potentially to lead to criminal organizations benefitting from cryptocurrency while devaluing legal currencies, so I see a real risk here.
Keeping the mostly-efficient market hypothesis as a prior, I’m skeptical of most propositions that include the first part of that quotation.
I am not sure the concept of an efficient market is a very useful concept with regard to cryptocurrencies as it’s now. As a former poker player I see more similarity to poker in that there are rational ways to get an advantage, but the market as a whole is rather irrational, driven more by circumstantial information (eg Elon Musk making a tweet) rather than well-informed investors.
The big difference to poker is that cryptocurrency is not a zero-sum game for the players, and at least in the past it was a positive-sum game in a rather dramatic way, as it was such a relatively small market which had incredible unrealized growth potential.
This is decreasingly the case as the market becomes saturated, but it seems realistic the market cap of cryptocurrencies could still grow to a multiple of its size over the coming years, making the average crypto investment potentially quite profitable.
Good point! I think I’d like to see more spelling out of how exactly it could transform things (for better or worse). With my lame understanding: once I see that cryptocurrency is a solid store of value, then I can see it potentially threatening central banks and the ability for states to generate revenue through taxes. However, I find it hard to believe governments would let cryptocurrencies get to that point—if cryptocurrencies are in fact capable of getting to that point.
Another thing that is worth pointing out with cryptocurrencies is how they interact with the digitization of the economy. In general greater digitzation may not be a bad thing. But it’s possible that cryptocurrency led digitization may make corruption easier (I’m imagining it’d behave similarly to cash).