Tag: cryptocurrencies

Revival

There appears to be media consensus: “Bluesky is dead.”

At The Commentary, James Meigs calls Bluesky “an expression of the left’s growing hypersensitivity to ideas leftists find offensive”, and says he accepts exTwitter’s “somewhat uglier vibe” in return for “knowing that right-wing views aren’t being deliberately buried”. Then he calls Bluesky “toxic” and a “hermetically sealed social-media bubble”.

At New Media and Marketing, Rich Meyer says Bluesky is in decline and engagement is dropping, and exTwitter is making a comeback.

At Slate, Alex Kirshner and Nitish Pahwa complain that Bluesky feels “empty”, say that its too-serious users are abandoning it because it isn’t fun, and compare it to a “small liberal arts college” and exTwitter to a “large state university”.

At The Spectator, Sean Thomas regrets that “Bluesky is dying” – and claims to have known it would fail from his first visit to the site, “a bad vegan cafe, full of humorless puritans”.

Many of these pieces – Mark Cuban at Fortune, for example, and Megan McArdle at the Washington Post – blame a “lack of diversity of thought”.

As Mike Masnick writes on TechDirt in its defense (Masnick is a Bluesky board member), “It seems a bit odd: when something is supposedly dying or irrelevant, journalists can’t stop writing about it.”

Have they so soon forgotten 2014, when everyone was writing that Twitter was dead?

Commentators may be missing that success for Bluesky looks different: it’s trying to build a protocol-driven ecosystem, not a site. Twitter had one, but destroyed it as its ad-based business model took over. Both Bluesky and Mastodon, which media largely ignores, aim to let users create their own experience and are building tools that give users as much control as possible. It seems to offend some commentators that one of them lets you block people you don’t want to deal with, but that’s weird, since it’s the one every social site has.

All social media have ups and downs, especially when they’re new (I really wonder how many of these commentators experienced exTwitter in its early days or have looked at Truth Social’s user numbers). Settling into a new environment and rebuilding take time – it may look like the old place, but its affordances are different, and old friends are missing. Meanwhile, anecdotally, some seem to be leaving social media entirely, driven away by privacy issues, toxic behavior, distaste for platform power and its owners, or simply distracted by life. Few of us *have* to use social media.

***

In 2002, the UK’s Financial Services Authority was the first to implement an EU directive allowing private organizations to issue their own electronic money without a banking license if they could meet the capital requirements. At the time, the idea seemed kind of cute, especially since there was a plan to waive some of the requirements for smaller businesses. Everyone wanted micropayments; here was a framework of possibility.

And then nothing much happened. The Register’s report (the first link above) said that organizations such as the Post Office, credit card companies, and mobile operators were considering launching emoney offerings. If they did, the results sank without trace. Instead, we’re all using credit/debit cards to pay for stuff online, just as we were 23 years ago. People are relucrtant to trust weird, new-fangled forms of money.

Then, in 2008, came cryptocurrencies – money as lottery ticket.

Last week, the Wall Street Journal reported that Amazon, Wal-Mart, and other multinationals are exploring stablecoins as a customer payment option – in other words, issuing their own cryptocurrencies, pegged to the US dollar. As Andrew Kassel explains at Investopedia, the result could be to bypass credit cards and banks, saving billions in fees.

It’s not clear how this would work, but I’m suspicious of the benefits to consumers. Would I have to buy a company’s stablecoin before doing business with it? And maintain a floating balance? At Axios, Brady Dale explores other possibilities. Ultimately, it sounds like a return to the 1970s, before multipurpose credit cards, when people had store cards from the retailers they used frequently, and paid a load of bills every month. Dale seems optimistic that this could be a win for consumers as well as retailers, but I can’t really see it.

In other words, the idea seems less cute now, less fun technological experiment, more rapacious. There’s another, more disturbing, possibility: the return of the old company town. Say you work for Amazon or Wal-Mart, and they offer you a 10% bonus for taking your pay in their stablecoin. You can’t spend it anywhere but their store, but that’s OK, right, because they stock everything you could possibly want? A modern company town doesn’t necessarily have to be geographical.

I’ve long thought that company towns, which allowed companies to effectively own employees, are the desired endgame for the titans. Elon Musk is heading that way with Starbase, Texas, now inhabited primarily by SpaceX employees, as Elizabeth Crisp reports at The Hill.

I don’t know if the employees who last month voted enthusiastically for the final incorporation of Starbase realize how abusive those old company towns were.

Illustrations: The Starbase sign adjoining Texas Highway 4, in 2023 (via Jenny Hautmann at Wikimedia.

Wendy M. Grossman is an award-winning journalist. Her Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. She is a contributing editor for the Plutopia News Network podcast. Follow on Mastodon or Bluesky.

Review: Money in the Metaverse

Money in the Metaverse: Digital Assets, Online Identities, Spatial Computing, and Why Virtual Worlds Mean Real Business
by David Birch and Victoria Richardson
London Publishing Partnership
ISBN: 978-1-916749-05-4

In my area of London there are two buildings whose architecture unmistakably identifies them as former banks. Time has moved on, and one houses a Pizza Express, the other a Tesco Direct. The obviously-built-to-be-a-Post-Office building, too, is now a restaurant, and the post office itself now occupies a corner of a newsagent’s. They ilustrate a point David Birch has frequently made: there is nothing permanent about our financial arrangements. Banking itself is only a few hundred years old.

Writing with Victoria Richardson, in their new book Money in the Metaverse: Birch argues this point anew. At one time paper notes seemed as shocking and absurd as cryptocurrencies and non-fungible tokens do today. The skeptic reads that and wonders if the early days of paper notes were as rife with fraud and hot air as NFTs have been. Is the metaverse even still a thing? It’s all AI hype round here now.

Birch and Richardson, however, believe that increasingly our lives will be lived online – a flight to the “cyburbs”, they call it. In one of their early examples of our future, they suggest it will be good value to pay for a virtual ticket (NFT) to sit next to a friend to listen to a concert in a virtual auditorium. It may be relevant that they were likely writing this during the acute phase of the covid pandemic. By now, most of the people I zoomed with then are back doing things in the real world and are highly resistant to returning to virtual, or even hybrid, meetups.

But exactly how financial services might operate isn’t really their point and would be hard to get right even if it were. Instead, their goal is to explain various novel financial technologies and tools such as NFTs, wallets, smart contracts, and digital identities and suggest possible strategies for businesses to use them to build services. Some of the underlying ideas have been around for at least a couple of decades: software agents that negotiate on an individual’s behalf, and support for multiple disconnected identities to be used in the different roles in life we all have, for example. Others are services that seem to have little to do with the metaverse, such as paperless air travel, already being implemented, and virtual tours of travel destination, which have been with us in some form since video arrived on the web.

The key question – whether the metaverse will see mass adoption – is not one Birch and Richardson can answer. Certainly, I’m dubious about some of the use cases they propose – such as the idea of gamifying life insurance by offering reduced premiums to those who reach various thresholds of physical activity or healthy living. Insurance is supposed to manage risk by pooling it; their proposal would penalize disability and illness.

A second question occurs: what new kinds of crime will these technologies enable? Just this week, Fortune reported that cashlessness has brought a new level of crime to Sweden. Why should the metaverse be different? This, too, is beyond the scope of Birch’s and Richardson’s work, which is to explain but not to either hype or critique. The overall impression the book leaves, however, is of a too-clean computer-generated landscape or smart city mockup, where the messiness of real life is missing.

Cryptocurrency winter

There is nowhere in the world, Brett Scott says in his recent book, Cloudmoney, that supermarkets price oatmeal in bitcoin. Even in El Salvador, where bitcoin became legal tender in 2021, what appear to be bitcoin prices are just the underlying dollar price refracted through bitcoin’s volatile exchange rate.

Fifteen years ago, when bitcoin was invented, its adherents thought by now it would be a mainstream currency instead of a niche highly speculative instrument of financial destruction and facilitator of crime. Five years ago, the serious money people thought it important enough to consider fighting back with central bank digital currencies (CBDCs).

In 2019, Facebook announced Libra, a consortium-backed cryptocurrency that would enable payments on its platform, apparently to match China’s social media messaging system WeChat, which are used by 1 billion users monthly. By 2021, when Facebook’s holding company renamed itself Meta, Libra had become “Diem”. In January 2022 Diem was sold to Silvergate Bank, which announced in February 2023 it would wind down and liquidate its assets, a casualty of the FTX collapse.

As Dave Birch writes in his 2020 book, The Currency Cold War, it was around the time of Facebook’s announcement that central banks began exploring CBDCs. According to the Atlantic Council’s tracker, 114 countries are exploring CDBCs, and 11 have launched one. Two – Ecuador and Senegal – have canceled theirs. Plans are inactive in 15 more.
politico

The tracker marks the EU, US, and UK as in development. The EU is quietly considering the digital euro. In the US, in March 2022 president Joe Biden issued an executive order including instructions to research a digital dollar. In the UK the Bank of England has an open consultation on the digital pound (closes June 7). It will not make a decision until at least 2025 after completing technical development of proofs of concept and the necessary architecture. The earliest we’d see a digital pound is around 2030.

But first: the BoE needs a business case. In 2021, the House of Lords issued a report (PDF) calling the digital pound a “solution in search of a problem” and concluding, “We have yet to hear a convincing case for why the UK needs a retail CBDC.” Note “retail”. Wholesale, for use only between financial institutions, may have clearer benefits.

Some of the imagined benefits of CBDCs are familiar: better financial inclusion, innovation, lowered costs, and improved efficiency. Others are more arcane: replicating the role of cash to anchor the monetary system in a digital economy. That’s perhaps the strongest argument, in that today’s non-cash payment options are commercial products but cash is public infrastructure. Birch suggests that the digital pound could allow individuals to hold accounts at the BoE. These would be as risk-free as cash and potentially open to those underserved by the banking system.

Many of these benefits will be lost on most of us. People who already have bank accounts or modern financial apps are unlikely to care about a direct account with the BoE, especially if, as Birch suggests, one “innovation” they might allow is negative interest rates. More important, what is the difference between pounds as numbers in cyberspace and pounds as fancier numbers in cyberspace? For most of us, our national currencies are already digital, even if we sometimes convert some of it into physical notes and coins. The big difference – and part of what they’re fighting over – is who owns the transaction data.

At Rest of World, Temitayo Lawal recounts the experience in Nigeria., the first African country to adopt a CBDC. Launched 18 months ago, the eNaira has been tried by only 0.5% of the population and used for just 1.4 million transactions. Among the reasons Lawal finds, Nigeria’s eNaira doesn’t have the flexibility or sophistication of independent cryptocurrencies, younger Nigerians see little advantage to the eNaira over the apps they were already using, 30 million Nigerians (about 13% of the population) lack Internet access, and most people don’t want to entrust their financial information to their government. By comparison, during that time Nigerians traded $1.16 billion in bitcoin on the peer-to-peer platform Paxful.

Many of these factors play out the same way elsewhere. From 2014 to 2018, Ecuador operated Dinero Electrónico, a mobile payment system that allowed direct transfer of US dollars and aimed to promote financial inclusion. In a 2020 paper, researchers found DE never reached critical mass because it didn’t offer enough incentive for adoption, was opposed by the commercial banks, and lacked a sufficient supporting ecosystem for cashing in and out. In China, which launched its CBDC in August 2020, the e-CNY is rarely used because, the Economist reports Alipay and We Chat work well enough that retailers don’t see the need to accept it. The Bahamanian sand dollar has gained little traction. Denmark and Japan have dropped the idea entirely, as has Finland, although it supports the idea of a digital euro.

The good news, such as it is, is that by the time Western countries are ready to make a decision either some country will have found a successful formula that can be adapted, or everyone who’s tried it will have failed and the thing can be shelved until it’s time to rediscover it. That still leaves the problem that Scott warns of: a cashless society will give Big Tech and Big Finance huge power over us. We do need an alternative.

Illustrations: Bank of England facade.

Wendy M. Grossman is the 2013 winner of the Enigma Award. Her Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. Follow on Mastodon or Twitter.