Alex Sobel, Labour and Cooperative MP for Northern English district of Leeds North West, has called Bitcoin, “…a right-wing nightmare which facilitates tax evasion, money laundering and environmental degradation.”
He has also warned that, “…the Left has continuously failed to engage with questions of finance, technology, and business…(and) Getting wise to the con-artistry and grift of the crypto movement, and countering its ideological appeal, is necessary…to deal with the inevitable crypto crisis that is lurking around the corner.”
Sobel, who sits on the Environmental Audit Committee, the Backbench Business Committee and who previously ran Social Enterprise Yorkshire, made the comments in an article called “The Bitcoin Scam” he penned for Tribune Magazine in late May.
In the article, Sobel says that, though neoliberalism and nationalism are commonly understood to be the “primary ideological opponent(s) of socialism,” “anarcho-capitalist” ideology has been boosted by the advent of Bitcoin:
“…(L)ibertarians or anarcho-capitalists…believe that the state should be abolished and replaced with a world of pure property rights…For much of its existence this ideology was relegated to subcultures and the political fringe. But, in 2009, it had a major breakthrough: Bitcoin…a digital cash or commodity system whose adherents promise an escape from banking surveillance, fiat currency, inflationary monetary policy, and taxation.”
Bitcoin proponents laud the invention for enabling “uncensorable” and “immutable” transactions via an expensive and energy- consumptive process called “proof of work.”
Bitcoin’s many network participants all maintain a heavily-encrypted copy of the entire Bitcoin transaction history and expend copious electricity competing for a prize of bitcoins.
Participants believe the network and transactions are maintained by “peers” and not by “venal bankers,” Sobel writes.
But the notion that cryptos have so far been used for anything other than criminal finance, Sobel writes, is “laughable.”
As well, crypto’s current bid for legitimacy shifts them “…ever closer to the worlds of politics and finance — the realms its early adopters argued they were escaping.”
Meanwhile, while processing relatively few transactions, Bitcoin’s energy consumption is equivalent to that of “medium-sized nations”:
“You may find it helpful to think of the process of bitcoin mining as akin to millions of computers expending ever-increasing amounts of energy buying quintillions of lottery tickets with one winner every ten minutes. The amount of power wasted on useless duplication of effort is staggering. At times, power demand for bitcoin alone has surpassed that of nations the size of Ireland or the Netherlands. You don’t have to be an environmentalist for this to strike you as less than ideal.”
As the general public’s taste for a carbon-heavy network that enables criminal finance may have faltered, calls for “blockchain, not Bitcoin” have concurrently increased.
But Sobel notes that “blockchain” and cryptocurrencies have been conflated in order to ensure a continuous flow of investor cash into cryptocurrency projects of questionable worth:
“The accidental (and often intentional) effect of all this earnest blockchain noise is to sustain interest and hype in the adjacent technology of cryptocurrencies. From the perspective of the grifters, charlatans, and scammers, it adds a much-needed veneer of respectability that functions to disguise more nefarious activities.”
Meanwhile, Sobel joins a growing list of detractors, including David Gerard (who fact-checked Sobel’s article), claiming there’s no-there-there when it comes to blockchain:
“…(T)heir advocates would argue, while cryptocurrencies might be flawed and wasteful, the underlying technology — blockchain — is a world-changing innovation. This, sadly, is also untrue. Blockchain is a solution in search of a problem. Google ‘blockchain uses’ and you’ll discover a huge list of test cases. Upon closer inspection, few will have moved beyond trial phase and those that have often do not make use of distributed consensus at all.”
Sobel gives as an example, “One frequently-championed blockchain project involved organising aid for a Jordanian refugee camp.”
Many firms have looked into how blockchains might be cost effective in places otherwise lacking in infrastructure.
In the case of the Jordanian project, Sobel writes:
“The claim was that the company, Building Blocks, was surpassing the inefficiency of food aid distribution by creating a system that allowed refugees to easily purchase food. Instead of issuing tokens or pre-paid cards to track family purchases, the scheme tracked individual spending by uploading biometric data to their blockchain. To purchase goods, residents of the camps had their iris scanned.”
Turns out this project was just doing a regular database, Sobel claims:
“But, despite the hype, it was later revealed that the system ran on a ‘permissioned blockchain’ with a central authority who controlled use of the network — and who could rewrite the database…The refugees in the Jordanian camp were not ‘on the blockchain’; they were merely listed in a centralised database.”
And while well-intentioned libertarians have envisioned a cryptocurrency-underpinned Utopia, their prized currencies appear to be majority-owned by a set of elites, Sobel writes:
“The libertarians may cry freedom and equality, but their world is the opposite. A Citigroup analysis of Bitcoin from 2014 found that ‘47 individuals held about 30%, another 900 held a further 20%, the next 10,000 about 25% and another million about 20%.’ No country on earth has such an unequal distribution of assets and wealth.”
The MP ends by advising politicians to be wary of crypto-lobbyists door-knocking for the sector:
“So, when the crypto lobbyists show up in parliament with a PR budget, the Labour Party should be paying attention. What they’re selling is an expression of political reaction, thoroughly intertwined with offshore tax avoidance, indelibly linked to black market activity, and implicated in environmental degradation. As for blockchain, in every proposed implementation, the merits of the technology are invariably oversold — with cheaper, more robust, database solutions readily available.”