Criticism of money and digital technology

Brett Scott is a journalist and financial hacker who writes about the intersection of money and digital technology.His work can be found in publications such as protector, new scientist, wiredand CNN.

Here, Scott shares five key insights from his new book, Cloudmoney: The Battle of Cash, Cards, Cryptocurrencies and Wallets. Listen to the audio version read aloud by Scott himself in the Next Big Idea App.

1. The U.S. dollar is three different currencies with the same name

We are often led to believe that digital payments are an advanced upgrade over physical cash, but this is grossly misleading. We live in a hybrid currency system with at least three different forms of money co-existing with each other. The first is physical cash issued by government agencies such as the Federal Reserve. The second is the digital dollar issued by the bank. The third is issued by companies such as PayPal.

Picture me walking into a casino and trading $100 in government cash for $100 in casino chips. The casino took ownership of my cash and issued me a form of private money – casino chips. There are two forms of currency here: government cash and privately issued casino chips that are redeemable for government cash.

this image privately issued chips Very useful when trying to understand banking. When you deposit cash at a bank, they take ownership of your cash and issue you a “digital chip” that can be used within the bank’s payment system. They can also issue more digital chips than government cash, and what we call a lot of “money” is actually issued in this form by commercial banks. Players like PayPal can own chips issued by your bank and issue their own chips for you.

2. “Cashless society” is a euphemism for top-down drive

A “cashless society” is one in which we rely entirely on digital chips issued by banks and corporations. Calling it a “cashless society” is like calling whiskey “beer-free alcohol.” is avoided. I was recently at a “cashless” pub in London and in order to buy a small item I had to download an app that required interaction with at least three large companies. I should use Google or Facebook for identity, two commercial banks for digital currency, and Visa or Mastercard as a way to message those banks. “Cashless” is a euphemism for the far-flung bloc of data-hungry, profit-driven companies that try to meddle between me and the people I want to pay.

The transition to a cashless society appears to be driven from the bottom up through consumer choice. The truth is that there has been a top-down cash war for decades, driven by institutions that want to make us more likely to opt for digital payments. These include banks, payment companies, fintech companies, big tech companies, and even governments. Business players have two goals: monetization and access to data. Political actors have one goal: to increase control.

3. Physical cash is paid for bikes

People often speak of convenience as if it could be infinitely increased with more technology. It is said that with the advancement of technology, we will get more leisure time, but in reality, we are busier than ever.

Convenience is a relative concept. Imagine a person in the suburbs of Los Angeles contemplating how to get to a workplace 10 miles from town. In this case, walking may seem inconvenient and driving may seem convenient, but ask yourself why this person lives 10 miles from the office in the first is because or car. In a capitalist economy, technology is rarely used to increase leisure.Instead, they are used to expansion Speed ​​up the construction of the economic system. Once this happens, our environment is recalibrated. A person in the Los Angeles suburbs was not liberated by the convenience of the auto industry.they are capture Because of the structure of the industry stifling their lives.

Just as we found millions of people “choosing” to buy a car in an urban environment transformed by the auto industry, too many will experience themselves “choosing” to use digital payments in an economy dominated by Big Finance and Big Tech. With us These industries gain far more from digital payments, and the “convenience” they provide depends on our reliance on their power. In this case, the digital payments industry sees cash as a horse-drawn carriage of payments, an outdated form of clogging up economic highways. In effect, cash is more like a public payments bike, allowing peer-to-peer, localized, and resilient transactions.

4. Fintech isn’t revolutionizing finance — it’s just automating it

After the 2008 financial crisis, startup technologists claimed that digital technologies could disrupt and democratize finance. Fintech companies are self-proclaimed revolutionaries, but they rarely want to make deep changes to the financial system. They just want to make the same old system faster and more automated by designing applications that can stick on top of the old system. We are encouraged to self-service over the phone rather than interacting with a bank branch agent. Fintechs are also starting to automate the work of bankers. Instead of manually evaluating your loan application, an algorithm does it.

This is why the fintech industry is anti-cash. Offline cash is difficult to integrate into automated systems, so the fintech industry sees cash as obsolete. These so-called revolutionaries have slowly but surely integrated into the existing financial system. Banks have a strong drive to automate, so they start to absorb fintech. On average, the fintech sector has reduced the cost of banking, allowing it to spread to segments of society that were previously isolated from it. This is often referred to as financial inclusion, but people are being included in data-hungry corporate systems with enormous power dynamics.

Simpler, slower and smaller systems are more resilient and inclusive than complex, fast and massive digital systems. Rather than jumping on the fintech bandwagon uncritically, we should ask ourselves how to strike a balance between digital and analog systems.

5. Bitcoin does not challenge the monetary system.

In the 90s, a group of activists known as cypherpunks attempted to build an alternative form of digital cash to counter the banking industry. In 2008, an individual or group under the pseudonym Satoshi Nakamoto took a series of cypherpunk innovations, combined them into an elegant recipe, and dubbed the result Bitcoin. It’s a system that allows a fast network of strangers to issue tokens and move them between them without a bank. Bitcoiners claim this can free us from the maelstrom of Big Tech, Big Finance, and Big Government.

I was involved in the early Bitcoin community but quickly realized that the system was a sophisticated means of moving crude tokens.Innovative technical architecture leads people to believe that tokens are also complex, but in reality, they are only limited edition digital objects brand as money. Think of them as digital medallions that simulate the surface appearance of money while being bought and sold in dollars in the actual monetary system.

These digital medals can be exchanged through a process called countertrade. I could hand over two $500 watches to pay for a $1,000 computer, but I’m actually selling the watch to the owner of the computer for $1,000 and giving them the money back for the computer. An alien watching this interaction might think the watch is a currency, but the currency is actually the dollar system hidden in the background.Similarly, I can offset a dollar-priced computer with dollar-priced bitcoin shards, but the reason bitcoin works here is because it parasite Get rid of the dollar instead of challenging it.

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