Is crypto the new currency of trust? - Part I

"if you prick us, do we not bleed?   
If you tickle us, do we not laugh,   
if you poison us, do we not die?   
And if you wrong us, shall we not revenge?"  

I chuckle as I use these famous lines of William Shakespeare to reflect on cryptocurrencies and the future. Pretty sure he had no idea that he would be used to make a point about the difficulty of reinventing human society even as technology reinvents, disrupts and changes how we live, work, buy, sell, create or consume content.   
  
Like many people, I eagerly watch news on cryptocurrencies. But unlike many who watch this to geek out on the technology, to trade or horde in anticipation of profit, my interest is specific to what cryptocurrencies auger for human interactions and the dilemmas they pose for policymakers and regulators across the world. 

Also Read: Crypto outflows record $207 mn in first week of 2022: Report

It is time for you to chuckle and say, "once a regulator, etc.," but if you are watching the market volume and prices, you understand why I choose to dive in from this vantage point.   
  
These dilemmas are real because by their very existence, cryptocurrencies pose vexatious challenges to fiat currency, contracts, cross border controls and taxation. 

Further, they conjure images of consumers being lured into parting with fiat money to acquire assets that they may not understand and that may expose them not just to volatility, but to manipulation and frauds. 

On the flip side, they cannot be ignored because they have acquired currency with an audience that is now well beyond niche and the technology that powers them has compelling use cases in the future, now commonly understood as Metaverse. 

While the use cases of crypto as currency (exchange of value) or as financial assets (store of value) and sovereign decisions on Central Bank Digital Currencies, cross border trade in crypto and exchange between fiat and crypto are engaging minds of regulators everywhere, use cases such as NFT are growing in parallel with less interference from the establishment.   
  
Against this backdrop, a line on my Twitter feed last week caught my eye for this sentence, "What I did was simply to buy an NFT, as most of us do every day…". 

Well, so far, most of us don't, but let's say we get to a point where many of us do. So, I read on and spent a fair bit of my morning reading through a long thread that was about a person buying an NFT for 1.6 ETH. 

Within a few hours, he listed to sell it for 2.9 ETH. He was shocked to find out that he was restricted from selling this NFT because it had been reported as stolen. 

He wrote to OpenSea, the platform where this transaction was concluded. A series of events occurred after he tweeted about it, finally resulting in a happy ending for both him and the person from whom this NFT, along with a couple of others, had been stolen.   
  
So far, this story read like some combination of Da Vinci Code and The Matrix. But once I went through the entire thread and the replies, I came to the following conclusions-  
  
1. The old world will continue to live in the new world and to that extent, those who fail to learn from history are doomed to repeat it etc. (old proverb)  

2. Societal trust structures seem to be changing dramatically on the surface, but at their core, they don't seem to be changing that much.   
   
The screenshot of the reply from OpenSea is a simple illustration of the first point. It is clearly drafted by old-world lawyers. The language feels so familiar to my banker mind.   
  
"I am so sorry this happened to you. We take fraud very seriously at OpenSea (yeah, even your bank knows you snigger when they write this, but they need to stick to script approved by lawyers). It goes on to say that no refund is possible because "blockchain transactions are irreversible". 

Also Read: Bitcoin appears to be on a trajectory to touch $100,000: Report

Wait, what? Everyday, across the world, when regulators tell cryptocurrency advocates and lobbyists to pipe down, go slow, and manage risks from the information asymmetry between the aggressive sellers and greedy buyers, we hear of the brilliance of future technology and how.

And now we are told that if you make a mistake, you cannot reverse it? Well, that's the dystopian version of the technology age.   
  
If you are reading thus far, you are going to think I support 'ban crypto'. That because the world of crypto is also susceptible to frauds and theft, I agree that it should be banished, and we should live in the safe world of old-world banking and Nigerian frauds.

But obviously, that is not my point. My point is that just because people believe in 'decentralisation', they are not going to revert to caveat emptor and quietly mourn their lemons. 

Therefore, arbitration, recourse and justice are going to find their way in this new world as much as in the so-called 'centralised' world-if that is the right word.

Next week, I will talk about the rest of this story, glimpses of evolving new structures of trust and the hopes and problems inherent therein.   
  
(Shinjini Kumar is Co-Founder, SALT-@mysaltapp. She writes a weekly column and can be contacted on shinjini@salt.one )