How Can Cryptocurrency Move Forward?

I originally wrote this article "Apr 7, 2014". It was a weird time for crypto. People who were trying to advocate transparency were not well received. I was trying to advocate for transparency and government cooperation because regulation is really the only way to protect people, whether self-regulation or government oversight. People NEED protection.

I hope after the DAO disaster this article has better reception :)

How Can Cryptocurrency Move Forward?

If there is one thing that almost everyone in the crypto world has in common, it is the loss of money through scams or larceny.

Whether it is a pump and dump, an attack on an exchange, or a long con, it has been nearly impossible to remain unscathed in the free market of the crypto economy. With new regulations on the horizon from the US government concerning tax laws, many crypto users are looking at the potential to have their currency taxed not only for the coming years, but also retroactively. What has NOT been discussed, however, is any protection for cryptos. It seems governments want to take money from the crypto communities through taxation, but they want to leave us to fend for ourselves.

Who can the crypto community trust to protect it from the scammers and thieves?

To better understand this dilemma, we should examine why “trust” is fundamentally at the basis of a
functional community.

In social scientist Francis Fukuyama’s book, 'Trust: The Social Virtues and The Creation of Prosperity(1996)', he presents the following argument: at the basis of every functional society, trust must exist, and even further the more trust a society has, the easier it is for that society to create prosperity. To summarize, Fukuyama posits that a society with laws can function not just because of the laws, but because people trust the laws will be enforced, so things like ownership and legal contracts become possible because people invest their own trust in the system.

He makes the case that it’s easier to create a large consolidated firm in a place where there is more trust. He also mentions that in light of new technology, people would be able to connect on smaller scales and create firms that were not based around countries or local economies, but also functioned on the trust between individuals. In essence, it is the trust that allows firms to work as a unit towards the same goal.

While it’s not easy to accurately measure trust, it’s easy to see that trust in the crypto world is fading, and it is mainly due to the scammers and thieves, not because of the systems themselves.

Since the crypto world is largely based around anonymity, our first level of trust is gone. We don’t know the names or faces of people we are dealing with. Such a simple gesture goes a long way in establishing trust, but not many people in the crypto world want to take that first step. Now that we know that many countries will not only tax crypto, but they will not actively protect them, another level of trust is gone, which would have been the legal system to protect this realm.

But the worst thing affecting trust now, is the thieves and scammers themselves. While these types are not unique to the crypto world, since this technology is so early in its inception, they have the potential to cause mass distrust in the crypto world and cause it to fall apart. With the current state of the crypto economy, we are all faced with a choice. Do we retreat to what feels safe, and what we feel we can trust in the old legal system and old currency, or do we band together as individuals and force the thieves out on our own since the governments will not and cannot do it?

The crypto world is the Wild West. We have no Wyatt Earp, so we must all be the sheriff.