This article briefly draws on the history of cryptocurrency, tries to define the sociology of cryptocurrency and analyses how various sociological theories have been used to understand the global phenomenon of cryptocurrency use and its impact on the world.
Money’s origins are difficult to ascertain, for they have been shrouded in mystery. Some scholars think that money had sacred/religious roots—it was offered to God or used as payment for religious chiefs. Others opine that money has state/social origins, where money has roles to play in social interaction but has yet to take on economic functions. Others assert that cash had a commercial/trading aspect where it was introduced to trade efficiently compared to the barter system in pre-monetary societies. Even though money’s origin is concealed in ambiguities and irregularities, capital has developed into an essential element of society that determines a person’s position and status. It has transformed from its unknown origins to being the basis of everyday life in market-organized communities.
Today, a new facet of money has emerged, i.e., cryptocurrency. It has gained massive popularity as well as criticism.
Cryptocurrency- The Era of Bitcoin
A cryptocurrency is a digital currency that functions as an exchange on computer networks. Cryptocurrency does not require the support or maintenance of any central authority, like a bank or government. Consequently, it is a decentralized system.
Since the creation of Bitcoin in 2008, the cryptocurrency market has developed irregularly and at an unprecedented rate. The fundamental idea behind Satoshi Nakamoto’s article Bitcoin: A Peer-to-Peer Electronic Cash System was that payments might be made directly from one party to another without needing an intermediate financial entity. People from many walks of life have welcomed cryptocurrencies, especially in libertarian-leaning nations. In contrast, other countries like India, South Korea, the United States, and Japan have tended towards the non-acceptance of this novel currency.
Sociology of Cryptocurrency
One tries to connect sociology and cryptocurrencies when one hears the term “sociology of cryptocurrency.” Since people are the primary users of cryptocurrencies, sociology is crucial to understanding cryptocurrency and the phenomenon of Bitcoin. According to estimates, the number of cryptocurrency users has increased globally from 0.8 million to 4.3 million (2017). The rise of Bitcoin has become both a technological and a social phenomenon thanks to massive software and hardware advancements, networks of connected individuals sharing information, and creating venues for interaction. Since various social and governmental issues influence how the cryptocurrency market is governed, sociology also plays a role in the studies of cryptocurrencies.
Social Exchange Theory
The five behavioral hypotheses of George Homan evolved into Social Exchange Theory, which examines Bitcoin as money. Bitcoin has been explored using Homans’ five behavioral propositions: success, stimulus, values, deprivation-satiation, and “emotive.” The result (result) and incentive (revenue) for trading behavior are thought to be bitcoin.
- The success of Bitcoin can be explained by two factors, namely the ability to quickly profit from trading the price volatility of bitcoin or to conduct a secure exchange of bitcoins for goods or services.
- As a result of Bitcoin’s popularity, a growing number of its users encourage additional people to use it, producing a “network effect.” Media accounts of how using bitcoin increased one’s wealth and prestige serve as a motivating factor for repetitive activity.
- The high result value of Bitcoin (a type of cryptocurrency) may encourage its continued, widespread use. For instance, a trader might view bitcoin’s price changes as potential future earnings, facilitating more bitcoin trading.
The four key institutions of finance, the state, economics, and information are discussed in detail in Peter Blau’s institutionalized exchange systems. Commercial, merchant, and investment banks make up the financial arm. The state branch creates laws to stop any actions that try to sabotage the current system of collecting taxes. The world banks control the economic arm, while the mainstream media and academic institutions control the informative arm.
Several examples show conflict within and outside institutional structures against what Bitcoin represents. The central and private banks’ monopoly over money is diametrically opposed to Bitcoin or any other form of cryptocurrency because there is no intermediary institution in cryptocurrency transactions. The ‘pseudo-anonymity and spatiotemporal quality’ of Bitcoin’s transport and exchange anywhere in the world with (or without) an internet connection makes it difficult to track down tax evasion criminals.
Despite the fears of central and private banks and the concern expressed by many countries, more than 3000 cryptocurrencies have emerged and have been traded since the introduction of Bitcoin. They possess distinguishing characteristics that have the potential to bring about legitimate change in social institutions. The collective power of cryptocurrency users can change the current neoliberal economic and political global order. As the total number of users and transactions grows, money will continue to flow from public and private for-profit banks to consumers (private citizens). If large and small underdeveloped countries abandon global debt servitude and adopt bitcoin (or another decentralized cryptocurrency) as their official currency, they may be able to reclaim monetary sovereignty.
Marxism and Cryptocurrency
According to Karl Marx, capitalism centralized power in the hands of the bourgeoisie, who accumulated infinite wealth while the proletariat, or working class, was left behind. Marx predicted a communist revolution that would demolish all forms of social hierarchy, establish socialism, and usher in communism once the last vestiges of the state had withered away.
The main reason Marx would support Bitcoin is that the decentralised aspects of socialism are mirrored in the nature of Bitcoin’s use of blockchain (a system in which a record of transactions, particularly those made in a cryptocurrency, is maintained across computers linked in a peer-to-peer network’). As there is an absence of a central authority in cryptocurrency, “people who join the Bitcoin network were, quite literally, both customers and owners of both the bank and the mint.” Bitcoin would also support Marx’s ideas of destroying national borders on the way to communism. This is because cryptocurrency would be an economic tool for dismantling the current organization of nations and borders and facilitating cross-border trade. Bitcoin may be the ideal tool to drive this transition because anyone can use bitcoins to make online transactions. Bitcoin is a perfect tool for the socialist movement because it can be used globally without needing a centralized institution. For these reasons, Marx would not only support Bitcoin’s existence, but he might also adopt the currency as the primary monetary system for socialism.
Cryptocurrency and its Impact- An Assessment of the Global Scenario
- Approximately 1 billion people worldwide need access to bank accounts because they do not meet the criteria established by various central and private banks. On the other hand, cryptocurrency can connect these people to the global receiving and making payments network, allowing them to become more connected members of society.
- Despite the negative consequences of the COVID-19 pandemic, 2021 saw an incredibly exponential growth in the use of cryptocurrency for charitable donations. Almost immediately, currencies were transferred across national borders to philanthropic organizations. The lower cost of international transfers meant more money was sent to charities.
- Cryptocurrency accelerated the concept of Universal Basic Income, and many of its programs, such as the Building Blocks Program, performed well in 2021. This World Food Program initiative provides 100,000 Syrian refugees with the ability to purchase groceries, monitored by a private, permissioned blockchain.
- While many nations and international organizations have criticized cryptocurrency and blockchain, the United Nations has accepted it. It has also announced funding eight open-source blockchain start-ups to support their projects in various parts of the world. They also established the UNICEF Crypto Fund to aid in the creation of innovative humanitarian projects.
- Collaboration between the government and blockchain foundations. For example, IOHK (a technology and engineering firm that creates cryptocurrencies and blockchains for academic institutions, businesses, and governments) has formed a partnership. IOHK, founded by Charles Hoskinson and Jeremy Wood, is contracted to design, build, and maintain the Cardano platform) and is collaborating with Ethiopia’s Ministry of Education to create a digital identity for five million students and teachers.
The Future of Cryptocurrency?
Cryptocurrency, particularly Bitcoin, is a relatively new concept gaining traction worldwide. Bitcoin is regarded as both the savior of capitalism (as a hedge against worthless paper money) and its nemesis (as a tool for socialist revolution). It has several characteristics, including uniting countries, democratizing money, transparency, and freedom from spatial-temporal constraints… However, in a silent universe in constant flux, we do not know what Bitcoin’s immediate future will be. Will it be unable to compete with existing monetary institutions, or will it contribute to creating a world free of authoritarian, belligerent, and hierarchical institutions? The answer is unknown and has yet to be determined.
Also Read: Sociology of Money
Aggarwal, G et al. (2019). Understanding Social Factors Affecting the Cryptocurrency Market by.
OE Villarreal Robledo. (2016). The Ontological Sociology of Cryptocurrency: A Theoretical Exploration of Bitcoin
Corderman, H. (2019). Would Karl Marx Support the Existence of Bitcoin?
21 of the top crypto social impacts of 2021- https://www.cryptoaltruism.org/blog/2021-in-review