Jenny Rudd and Mat Tomlinson at the Miami Beach Convention Centre for Bitcoin 2022. Photo / Supplied
COMMENT:
Jenny Rudd says that if you think Bitcoin just helps investors get rich, you are missing the bigger picture.
When a new idea comes along that's complicated, it's human nature to be disparaging; it saves us the mahi of actually understanding it. We then look for confirmation of our view from sources that we respect, such as public figures and media. But those public figures are subject to the same tendency to be dismissive if they, too, don't get it.
The response to Bitcoin is usually pretty binary. You'll either hear someone calling it a Ponzi scheme and a fad, or hear an evangelical view on the NgU (number-go-up) theory of its increasing value.
American billionaire Warren Buffett has said about Bitcoin, "It's probably rat poison, squared". Microsoft's billionaire founder Bill Gates said, "I would short it if there was an easy way to do it". Economist Paul Krugman said: "It's just some fancy technological thing that no one really understands."
Most of the media air time given to Bitcoin goes to detractors such as Buffett, Gates and Krugman, who all share extraordinary wealth, as well as the old-white-man look that dominates the 'I'm-an-expert' category. There's also a lot of focus on "tech bros" making money out of pump-and-dump schemes, driving round in "Lambos".
Another aspect of human nature is to see everything from our own worldview. Buffet, Gates and Krugman live in the US which, like New Zealand, is part of the 13 per cent of the world's population which live in a free country, as defined by freedoms of speech, action and political democracy.
That means 83 per cent of people in the world don't have the same rights. Autocratic rule, weak monetary policies, censorships, surveillance, brutality and other human rights abuses are issues that around 6.6 billion people live with. And Bitcoin is playing a role in giving freedom to some of our global citizens.
Bitstamp, one of the world's first exchanges to trade Bitcoin back in 2011, has released the results of a study of 28,000 investors from 23 countries. The report finds that the more we know about and understand cryptocurrencies, the more we trust in them. Which means adoption of Bitcoin is strongly linked to education.
At the Bitcoin Conference 22, held in Miami in April, of all the innovative, exciting panels and discussions that I listened to about the future of Bitcoin, the most compelling and profound was a panel discussion called Bitcoin is Freedom. Moderated by Alex Gladstein, the chief strategy officer for the Human Rights Foundation, he said that if you were only concerned with the price of bitcoin, then you should check your financial privilege.
In 2008, Satoshi Nakamoto launched Bitcoin, the world's first decentralised peer-to-peer electronic payment system. The network's currency is bitcoin - note the lowercase 'b' just like in dollar or pound. Bitcoin with a capital B refers to the whole payment system, including the blockchain and the currency.
A blockchain is a public, digital ledger of transactions. Every transaction ever made on this network is time-stamped and securely stored in blocks. A new block is 'mined' (comes to life) every 10 minutes. There will never be more than 21 million bitcoin mined. There's a finite supply.
Each block contains a list of transactions, and a link to the previous block and is made secure, incorruptible and irreversible by a computer solving a complicated cryptographic puzzle. All the computers that have downloaded the Bitcoin blockchain are called nodes, which validate transactions in each block. This consensus (joint agreement) is called proof-of-work. Anyone can set themselves up as a node, join the network and benefit from the financial rewards of mining blocks in return for providing the computational power needed to solve the cryptographic puzzle.
In the middle of the night on a Sunday, I can transfer funds to someone I have never met, on the other side of the world with immediate settlement. They can use those funds straight away. No bank is needed, no foreign exchange costs need to be paid, there's no need for handing over my driving licence and taking photos of myself, no digging out old passwords for long-forgotten emails, no being on hold to the bank while they verify the information and make their own decision on whether I can send my own funds anywhere, nothing. And the transaction is totally secure, irreversible, transparent, and therefore, ethical. You have total sovereignty over your own money. You don't need a bank account to do it. No one can interfere with your transaction. That's so powerful.
Let's go back to the panel at the conference. Along with Alex Gladstein from the Human Rights Foundation, there was Yeonmi Park, a woman activist who escaped from North Korea aged 13 and was sold into sexual slavery, Farida Nabourema, a Togolese activist, and Fadi Elsalameen, a Palestinian activist. Yeonmi, Farida and Fadi come from the 83 per cent of the world who do not live in free countries.
Yeonmi explained that North Koreans were told to put their money into bank accounts by their ''Dear Leader'' who then blocked them from withdrawing their own money. Only those with connections to bank and government officials could access their funds. She said that for the 300,000 women who were trafficked into China who have no identification and no bank account, memorising the 12-word key to a digital wallet containing just US$50 worth of bitcoin would be a route to freedom.
There are 14 African countries today using the CFA Franc, colonial money which was created by the French government and based, Farida Nabourema from Togolo said, on a currency system: "The Nazis created in World War II, which was imposed on the French during Nazi occupation of their country. The French realised this was the best way to control the African country's economies under their colonial rule." The CFA Franc has no value outside these countries.
In 1994, Senegalese student Fodé Diop was preparing to go to university. His family had been saving for years to pay for his tertiary education. Overnight those savings were halved because 5000km away, on another continent, the French had decided to devalue the currency by half. Businessman Kal Kassa uses bitcoin to overcome the corrupt inequities between the rich and poor in his home country of Ethiopia. He said: "The upper classes use the US dollar as their unit of account, but for the poor outside the cities, dollars are officially illegal." After his brother was arrested for having a US$20 bill in his pocket, Kal set up a network where he pays freelancers, designers and translators in bitcoin. He said: "It's not an investment to me, it's a medium of exchange. It's part of my life."
Many critics have argued that African countries cannot achieve economic freedom while they are being controlled by France. For Africans in these 14 countries, which are not considered totally free, Bitcoin is the currency of decolonisation.
For all these people, the Bitcoin payment system means freedom from corrupt governments, damaging monetary policies and hyperinflation. It's an opportunity to have economic self-sovereignty. They can use bitcoin to pay for groceries, a car, or store value from the work they have done.
Another oft-touted story is that it's a haven for money laundering. But when you look more clearly, you realise that's not an accurate picture. A 2020 report released by the Financial Crimes Enforcement Network in the US said that the Government is either unwilling or unable to prevent trillions of dollars from flowing through the traditional financial systems as a result of financial corruption. If the banks and their nefarious customers want to hide transactions, they can. That's much harder on the blockchain. It's a public ledger, so every transaction is available for all to see.
Bitcoin does not discriminate. You can be 5 years old, or 80, have no bank account or live anywhere in the world under the most terrible political injustices and corruption. If you can get access to a mobile phone that's connected to the internet, you have economic self-sovereignty. That's an upgrade to humanity right there.
Jenny Rudd stayed at the Betsy Hotel in South Beach Miami as a guest of booking.com
Jenny Rudd is an investor and analyst who is passionate about creating equality for women through business. She is also the director of Aim Sure Group.
Jefferies and family will enjoy a leg of lamb with summer sides.