There is a deep link between libertarianism and the cryptocurrency movement. Cryptocurrencies such as Bitcoin rely on a decentralised, extralegal and unregulated approach. But while the crypto billionaires will enjoy their Caribbean playground, poorer locals with little knowledge of the technology will be excluded.
The mostly male entrepreneurs, who moved to Puerto Rico last year and plan to do more than create a cryptocurrency bank, will perhaps bring crypto libertarian ideas to the island. Their vision is similar to another would-be crypto utopia, the Free Republic of Liberland, which claims to be a “micronation” camped on the western bank of the Danube river. It uses Bitcoin as its “national” currency.
Back on Sol, the wealthy crypto expats want to use the blockchain system for decentralised elections and even to issue citizenship ID. But we doubt that locals who are fighting poverty will be enthused by these ideas.
This behaviour reeks of disaster capitalism – the use of a natural or economic crisis to reshape and mould a society into one which entrenches a libertarian, hypercapitalistic worldview. When you are without power for months and feel ignored, any offer of help can seem a good lifeline with little thought for the consequences.
Fight the power
Crypto utopias can also cause severe environmental damage. Puerto Rico remains in a deep power crisis after Hurricane Maria, making the idea of Sol simply impractical. One Bitcoin transaction consumes 215 kilowatt-hours (KWh), enough power to supply dozens of households on the island when the grid was at full capacity.
The annual electricity consumption for mining Bitcoin increased from 9.5 terawatt-hours (TWh) per year to 48 TWh in the last 12 months – 2.5 times higher than Puerto Rico’s total consumption of 19 TWh. Resources and infrastructure, post-Hurricane Maria, are too stretched to support cryptocurrency mining on the island.
When you are without power for months and feel ignored, any offer of help can seem a good lifeline with little thought for the consequences
Crypto rich kids made their fortune on the rapid growth of cryptocurrency markets – which are problematic due to their idiosyncratic risks. It’s a game for wealthy people who can cash out early and lock in gains, having been the developers of the bubbly product. This is characteristic of any bubble – those who get in early do well, those who cash in late do poorly.
Our recent research shows that cryptocurrency prices are relatively isolated from the shocks transmitted from other assets, such as gold and equities. But cryptocurrency prices are deeply interlinked with each other, so a fall in the price of Bitcoin affects other virtual currencies.
If Bitcoin can ride out its latest price fall, then it’s likely that crypto-colonialism will slowly spread around the globe. Crypto libertarians – if they follow the Sol model – could focus on those parts of the world that have been ravaged by earthquakes, tsunamis, hurricanes and economic crises.
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