Cryptocurrency Has Yet to Make the World a Better Place

A truly consequential innovation is one that makes possible entirely new business models that touch the lives of millions. The car enabled motels and shopping malls, the internet enabled e-commerce, and smartphones and GPS enabled ride-sharing.

What business model that touches the lives of millions have cryptocurrencies such as bitcoin made possible? American motorists now know: ransomware. In such attacks, hackers encrypt and sometimes steal the victim’s data, demanding a ransom to decrypt and not release the data. Crypto is how Colonial Pipeline Ltd. paid hackers who earlier this month forced offline a conduit that supplies 45% of the East Coast’s fuel.

A few days after the Colonial attack, Tesla Inc. announced it would no longer accept bitcoin as payment for cars because of the carbon emissions generated by the computer processing necessary to mint new coins.

The two events underline how an innovation that was supposed to displace the dollar as a medium of exchange has proved largely useless for buying legal things yet frighteningly effective at facilitating extortion.

We usually think of innovation as unambiguously good. Human welfare advances through the continuous recombination of materials and muscle in new and creative ways. Every innovation has its dark side, but even with car accidents and internet scams we’re clearly better off with cars and the internet.