Why Bitcoin’s Network Effect Can’t be Neutral
Many Bitcoiners equate the Bitcoin network’s neutrality with Bitcoin being the Great Equalizer. It’s quite understandable. After all, the network is decentralized, censorship resistant, sovereign and borderless. Bitcoin is an unprecedented structural upgrade to money that favors no country, corporation, or group.
However, without intervention, a neutral network will only reproduce existing inequities. For Bitcoin to reach its full transformational potential, more people of color, LGBTQ communities, women, and the global poor must own Bitcoin. They must also become early adapters, and benefit from First Mover Advantage. To achieve this, at minimum, Bitcoiners must employ what we know about the Network Effect to proactively bring Bitcoin to new and diverse audiences.
Failure to act ensures Bitcoin will remain overwhelmingly male dominated, White dominated, and/or disproportionately owned by an elite class. In other words, wealth concentration under a Bitcoin Standard would look pretty much like the fiat system does now: unequally distributed, overly concentrated, and ironically, not monetarily decentralized. This is why Bitcoiners, unlike the Bitcoin network, must not remain neutral. We must take action to promote early Bitcoin adoption among those who will benefit the most: those who have the least.
Worldwide wealth distribution is woefully unequal. According to Oxfam International, men own 50% more of the world’s wealth than women. Brookings reports that White US households control 84% of total household wealth, though they make up only 60% of households. How does that differ from Bitcoin? Well, the disparities get worse.
eToro data indicates 85% of Bitcoiners are men. We don’t have accurate data on the prevalence of bitcoin ownership among Black or Latinos in the US. Promisingly, data from a Harris Poll notes a higher percentage of Black and Hispanic investors hold Bitcoin than their White investor counterparts. However, polling doesn’t indicate what percentage of the total Black and Hispanic Americans invest. Their figures may mask how under-represented Black and Hispanic Americans are, overall, in Bitcoin ownership.
For example, The Brookings Institute reports that the median black family’s wealth is only 1/10th of the average White family’s wealth. The Institute for Economic Equity reviewed data from the Federal Reserve’s Board of Survey of Consumer Finances and found:
· Median wealth among white families: $184,000
· Median wealth among Hispanic families: $38000
· Median wealth among black families: $23,000
While we do not have enough data to draw exact figures, we can conclude that Black and Hispanic populations have significantly less money to invest than their White counterparts, and have less economic opportunity to invest in the first place. It is promising that, among Black and Hispanic adults that invest, they are adopting Bitcoin at a faster clip. First mover advantage will compensate for smaller capital allocation.
However, the wealth gap is too wide to rely on presumably small subsets of minority populations to eliminate it. It’s aspirational that Bitcoiners are committed to financial equality, and view Bitcoin as a viable way to achieve it. However, a distinction must be drawn between equality and equity.
Here’s an example of each:
Equality: Jamie has not eaten in 2 days. Juan has not eaten in 1 day. Pat just ate a big breakfast. Ada has three pieces of bread to hand out, and splits them evenly between Jamie, Juan, and Pat. The result is Jamie remains hungry, Juan is satiated, and Pat is full.
Equity: Jamie has not eaten in 2 days. Juan has not eaten in 1 day. Pat just ate a big breakfast. Ada has three pieces of bread to hand out. Ada hands 2 slices to Jamie, 1 slice to Pat, and no slices to Pat. The result is that Jamie is satiated, Juan is satiated, and Pat is satiated.
Equality treats everyone the same, which can widen existing disparities. Equity treats people different, taking context into account, to correct for existing disparities. Bitcoin, as a neutral network, treats everyone the same. If wealth were merely to transfer from a fiat standard to a Bitcoin Standard, gross wealth inequality would persist. The only way for the Bitcoin Standard to eradicate the wealth inequities of the fiat standard is if economically disadvantaged communities adopt Bitcoin en masse, early.
What role can Bitcoiners play?
Bitcoiners can take what we know about the Network Effect and apply it toward equity and inclusion efforts.
Elevate new and diverse voices, so Bitcoin “influencers” better reflect local, national, and global communities. A risk of having predominantly white, male, cis-het leaders in the space is that the network effect is more narrowly tailored to certain audiences. Adding more black, queer, and other voices to elevated platforms will broaden the network effect by bringing Bitcoin to new audiences across broader communities.
Prominent bitcoiners in the space can bring more diverse guests on their podcasts. They can retweet great ideas from thinkers across diverse backgrounds, and elevate new thought leaders.
Along similar lines, all Bitcoiners must call out racism, misogyny, homophobia, and transphobia within Bitcoin spaces. Worse than neutrality, which merely reflects pre-existing inequalites, bigotry spreads them. Expressing bias against groups decreases their engagement, slows adoption, and is plainly intolerable behavior that hurts people and limits Bitcoin’s revolutionary potential. Call. It. Out.
Next, companies that profit from the Bitcoin space can contribute to equity efforts. Exchanges can hire Equity Directors to coordinate culturally specific education and outreach campaign designed to onboard and empower minority communities.
All companies in the space must hire leaders, board members, and employees that reflect the diversity of the population. Diversity of opinion and ideologies must also be embraced. A lack of diversity leads to monolothic thinking, which stunts innovation and adoption.
Additionally, Bitcoiners can scale the efforts started in a small community in El Salvador to communities across towns and cities nationally and worldwide. Company contributions, coupled with crowdsourced fundraising campaigns, can fund on the ground outreach efforts with unlimited reach.
These efforts will not be enough to eradicate centuries of economic injustices. Bitcoin alone cannot fix all the ways our current system is broken. However, Bitcoiners can do our damnedest not to replicate the past, as we build the future.