Cryptocurrency; Snake Oil or Ticket to Riches?

This is eParkeni’s very first commission. 

Needless to say, we’re chuffed, if not taken aback! 

To offset these turbulent economic times, sane people tend to tread cautiously around their finances. Heeding expert counsel, they put money away in banks, investment portfolios, sometimes – when they’re sure nobody’s watching – even stash it inside furniture. Can’t say we blame them. As such, here at eParkeni we count ourselves very lucky that as we scrounge forth on empty coffers, we fortuitously crossed paths with a madman – henceforth known as Mr. Alto – who foolishly entrusted some faith in our plebeian scribblings; something that is, to borrow from Liverpool’s Bill Shanky, not “a matter of life and death…it is [so] much, much more important than that.” Mr. Alto, who, in his colourful phrasing, “learnt to fight in the township” and is a familiar figure at its funerals, streets and those other haunts where saner men dare not tread, is unequivocal; “Mayaba, online currency is the way to go,” he says with a slight caveat,…”if you know where to start looking.”

“OK,” we respond, “just as long as we’re clear – eParkeni will try the writing, but we don’t do pitches for anybody!”

Agreed?

In cryptocurrency and the attendant Artificial Intelligence (AI), Mr. Alto realizes the prospect of an equalizer, something with the capacity to place the little guy front and center of a cutthroat economic playing field. Hard to second guess the sincerity of his convictions given that he is so much of a believer that he puts his money where his mouth is by pumping some of it in that direction. “Crypto is decentralised,” he lectures, “and it cuts out the middleman, meaning cheaper, efficient money transfers and the potential for great returns.” Among the key players, he numbers Bitcoin, Ethereum and Ripple. With the right conditions, he continues, an investment of a few thousand Rands could accumulate to hundreds of thousands, even millions, in profits. 

eParkeni raise their eyebrows. 

We scratch at our pates. 

Less out of suspicion of his motives but simply because of reservations around things that sound way too good to be true. 

And also because, well, to us crypto is like neurosurgery. We’ve heard the name, but have absolutely no idea what the big deal is. 

What is Cryptocurrency?

What first comes up about crypto according to Wikipedia, is that it is “a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold and maintain it” and uses blockchain technology. From here it gets quite technical, riddled with the jargon of commerce and IT and so we seek the counsel of another technology nerd – ChatGPT. 

“Explain cryptocurrency in simple language, as you would to a school pupil?” we ask the boffin. Here is one result: “doesn’t have a physical form like coins or paper bills. Instead it’s made up of computer code and exists only online.” That much is common knowledge, so we up the ante; “Which cryptocurrency is best for investment?” Part of the answer is; “Factors to consider when evaluating cryptocurrencies for investment may include their market capitalization, adoption rate, development team, technology and security features, and overall market sentiment.” Although the answers are conservative with a disclaimer at the end, perhaps we should move from the pressing leitmotif – the removal of traditional central institutions. 

Such a radical premise automatically flips the script and makes crypto not only something that flies over the layperson’s head but flies in the face of established institutionalism. The more one dredges for answers, the more questions float to the surface. For one, if there is no traditional central authority, how does one then negotiate around things like taxes? How do these oft-invisible people behind the technology ensure that the funds transferred comply with the fiduciary laws of the jurisdictions in which they operate? On Bitcoin, for instance, one is able to register transactions on a digital blockchain ledger without giving recipients names. How do they prevent criminals from exploiting the glaring lacunae in existing laws, which it would seem are still limping far behind this technology? A few years ago South Africa was gripped by a spate of abductions where the kidnappers demanded Bitcoin for ransom. To the discerning eye it seemed that criminal syndicates were running rings not only around law enforcement but that this surge in AI technology and crypto had bowled a mean yorker at life as we’d hitherto known it.

In China cryptocurrency transactions are illegal. El Salvador became the first country to accept Bitcoin as legal tender in June 2021. According to ChatGPT; many countries “have taken steps to regulate and legitimize the use of cryptocurrencies within their borders…Japan recognizes Bitcoin and other cryptocurrencies as a form of payment and has established a regulatory framework for cryptocurrency exchanges.” The United States, Australia, Canada and many European countries are following suit in this direction.

Crypto from a geopolitical premise 

In the absence of government intervention, to some economists, crypto is currently the ultimate manifestation of laissez-faire markets. To our businessman this smacks of a financial revolution boiling to happen. This laissez-faire economic position advocated for “minimum governmental interference in the economic affairs of individuals and society.”  One should point out, however, that proponents of this doctrine also “argued that government had an essential role in enforcing contracts as well as ensuring civil order.” Which raises the question: Exactly where is that symbiotic line between governments and blockchain companies then drawn? 

According to Guardian columnist Zoe Williams, Peter Thiel, co-founder of PayPal has once said that AI could, “theoretically make it possible to centrally control an entire economy” and crypto “holds out the prospect of a decentralised economy and individualised world.” He is said to have determined “that AI is communist and crypto is libertarian.”

Williams concludes, “I think Thiel is right: crypto is the ultimate technology of libertarianism, the final frontier of discovery. He just missed the second footfall, which is that, through crypto, we will discover that libertarianism is bull**it.” I think then we can safely deduce what Williams’ take towards bitcoin might be.

Eyeball-deep in the political science commentary, we reverted to seeking out a living person who might shed a first-hand account to it all. Oom Sakie is a laybuilder and property developer who spends his days caulking walls, tiling, putting up roofs and toilets in Colesberg. He is middle aged, used to bet religiously on horses, and speaks in the prosperous adjectives of a telemarketer. “Bitcoin,” he says, is the way to go.” He’s been with the crypto company, “from around the time it was started.” Although reluctant to go into the figures, he is adamant that his money is accumulating impressively. The literature, however, is not always as promising.

What sayeth the random research?

In 2021 Elon Musk’s Tesla purchased $1.5billion worth of bitcoin. As of its 2022 annual report, the company has converted 75% of its digital assets, reducing its holdings to $191 million. One would ask why the company, reputed for innovation, did not continue to rigorously plough money into a sector purportedly capable of turning blue-collar workers into instant millionaires? The loss of capital is the most significant risk when you invest in Bitcoin, says one website, because its price is very volatile. You can gain or lose thousands of dollars in one day. 

But it is not always doom and gloom. Bitcoin was about 2,000–3,000 percent cheaper two years ago than it is today. As a result, many people who made early investments in this new asset are now millionaires. There is the story of a teenage Erik Finman who, at 12 years old, invested $1000 from his grandma into Bitcoin and other cryptocurrencies. Today, barely in his 20s, Finman is a multi-millionaire. There is the ultimate from-rags-to-riches story of Kristoffer Koch. As a postgraduate student in encryption technology Koch bought about 5000 Bitcoins at $27 in 2009 and didn’t think much of the investment. As crypto became a buzzword, he “spent the entire day looking for the right password to his encrypted digital wallet after learning how valuable his holding was and how it had overnight made him a millionaire in Bitcoin.” In his 20s, British-born Kingsley Advani also became a crypto billionaire.

Most of the research appears to suggest, that with crypto things could go either way. Also, given the inherently technical nature of this venture, one does not see swathes of people – particularly from communities where computers are still a privilege of the few – scrambling all over themselves to climb on the bandwagon. The internet is full of so much information on this topic that, lest we bore our dear readers to death, we’ll now work our way to the finish line.

But be vigilant of…

The Scammers

They lurk all over social media. Dressed to the nines, – Gucci suits and rattlesnake leather shoes – posing next to fast Italian sportscars. Swigging from long-stemmed champagne glasses, endless holidays at the coast, and you’ve probably received a few of their friend requests, complete with the inevitable private message about how, through forex trading and crypto, they upgraded from Soweto to Sandton. The dark web, coupled with the secrecy of crypto makes this the ideal playground for scammers and cyber criminals to pounce on unsuspecting victims. Local, *Yanga M has been doing Forex trading for years. He’s won and lost in equal measure. So when he chanced upon a supposedly South African forex company promising instant transfers and brandishing a beautiful profile, he set to plying his hustle. His initial deposit of R300 quickly doubled and he requested that the money be transferred into his bank account. A week later and he’s still waiting.

If Mr. Alto seeks eParkeni’s opinion, here it is. Investments to us have always been something akin to gambling. As in a casino, you’ll find the high-rollers and/or professional gamblers at the apex of the food chain. They go for the high stakes, bet big, win or lose big, but they have enough skill, experience and – most importantly – money to weather the circumstances. Then there are the social gamblers – everyday people occasionally trying their luck, with the slim hope of someday striking it big. Sometimes they do. But such stories are so rare that these unicorns often enjoy fleeting celebrity status on media platforms. Sadly, there is also the problem gambler who’s usually not very knowledgeable or monied to ever get anywhere in his pursuits. In a casino, one never knows where the jackpot lies but, there is one golden rule; the house always wins.

Whether there is massive money-making potential in crypto? Possibly. Whether scores of ordinary people will get their hands on it. I doubt. Whether this will even out the playing field? Both religion and politics have tried, but look where that got them. What is absolutely certain, though, is that eParkeni is a small media platform with no affiliations, no agenda and certainly no financial or any other advice to offer on these or any other matters. For such counsel, we suggest our readers consult suitably qualified people.