Cryptocurrencies, according to their most ardent supporters, are supposed to supplant nations’ existing currencies and end central banks’ control over the money supply. Instead, individuals will be able to trade with each other in a decentralised, digital financial ecosystem. This is a good thing, they promise, because unlike states and their central banks, technology is incorruptible. Crypto-evangelists imagine technology as a replacement for social and political institutions.

But technology never replaces social and political behaviour; it merely alters the rules and norms we follow. To see this in action, one need only look at the plummeting value of Terra Luna, a crypto token that crashed by 98% in a day, causing some investors to lose their life savings; the plunging value of Bitcoin and Ethereum; or the countless scam victims whose non-fungible tokens (NFTs) have been stolen. NFTs use the same blockchain technology as cryptocurrencies, such as Bitcoin, to trade algorithmically generated illustrations that riff on a theme. On offer are cartoony Bored Apes, Lazy Lions and “CryptoDickButts”. Although NFTs are aesthetically uninspiring, they can sell for as much as $91.8m and as they have grown in value, scams involving stolen NFTs have abounded. Just last month the Bored Ape Yacht Club’s Instagram account was hacked, and the perpetrators stole about $3m worth of NFTs by directing followers to a fraudulent site.

When a scammer steals a CryptoDickButt, all the ecstatic manifestos about the decentralised power of the blockchain disappear, as scam victims plead with the handful of crypto exchanges to block the sale of their stolen NFT. The underlying technology and its tokens might be decentralised (and even that claim is questionable, given that cryptomarkets are wildly concentrated in the hands of a few hundred people), but where you can actually buy, use and sell these things is still limited to a few services and exchanges. This forces crypto fans to recognise a hard truth: currencies and contracts are only as valuable or enforceable as the people and institutions that recognise their legitimacy. Blockchain technology does not change this fact whatsoever.

In turn, states and institutions have begun to treat crypto as a potentially destabilising geopolitical force, capping and taxing the ravenous amounts of energy that crypto mines consume. The crypto mining industry already consumes 0.55% of global energy production about as much as a small country. Some have gone so far as to put the kibosh on blockchain technology altogether. China effectively banned the mining and use of cryptocurrencies in late 2021; prior to that, the country was far and away the largest bitcoin miner by volume, accounting for as much as 75% of global volume in September 2019. Its reasons for banning crypto are likely a combination of curbing the power consumption of crypto mines, protecting citizens from scams and controlling the flow of money both within the country and with China’s trading partners. To date, China is the only government that has made an aggressive move towards ridding itself of this technology, but other nations face similar problems.

Russia has been learning this lesson in the last few months, starting in January when crypto miners set up shop in nearby Kazakhstan after getting kicked out of China. Their mining servers …….


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