Blockchain businesses exaggerate their benefits and ignore consequences of their disruptions

When blockchain, and cryptocurrencies, burst on the scene, they were hailed by proponents as yet another digital disruption of traditional power structures that could make wealth more accessible and decision-making more democratic. However, there is a common pattern of companies using digital innovation to disrupt traditional economies in order to generate private profit, in part by exploiting the gap between the introduction of new technologies and the introduction of regulations designed to curb their abuse. Tech startups tend to play up the benefits and downplay the negative effects of such disruptions. When the two major ride-share services launched, just over a decade ago, they dwelt on how the “sharing economy” could reduce car ownership, and hence pollution, and provide accessible, flexible work opportunities to folk with time and wheels to spare. As it turns out, ride-share companies generate 70 percent more pollution than the trips they displace, increase congestion, and undermine public transportation. Their profits are built on exploitative labor practices, and the companies are engaged in a running battle to defeat legislation that would force them to actually employ their drivers, with attendant labor protections, rather than treating them as disposable contractors. They did indeed divert wealth from one set of people (who owned taxi medallions) to another (the CEOs and shareholders), but not in a way that fostered economic equity.

Similarly, businesses built around blockchain play up how the technology can make the world more transparent, equitable, and democratic. And indeed, by disrupting the middleman, whether that is a bank or an art dealer, they have created economic access and financial opportunities for some people who were shut out by traditional power structures. Some artists, for example affirm that NFTs provided them with access and exposure they never had through traditional art spaces, which are often predominantly white and male. (Also, during the pandemic, sales of digital art buoyed artists’ incomes while tourism tanked and traditional place-based markets shut down.) But cryptocurrency, which is the economic driver for blockchain platforms, is especially advantageous people who want to evade oversight, detection, and regulation, often for nefarious purposes that include money laundering, extortion via ransomware, and illegal commerce. While there is a lot of talk about how blockchain could, theoretically, reduce wealth inequality by distributing ownership and control of capital, in actual practice the distribution of Bitcoin (for example) mirrors wealth inequality overall. Speculating in cryptocurrency is a high-risk venture, with extreme and rapid cycles of boom and bust, and people who already have deep financial capacity are best able to bear that risk.

So, while blockchain generally, and cryptocurrency specifically, does afford some opportunities for people previously excluded from or disadvantaged by traditional gatekeepers, like banks, or art dealers, it affords even more opportunities for people who are already economically and technologically privileged, and well-situated to exploit the disruptions created by new mediums of exchange.