The argument for the adoption of cryptocurrency goes something like this: "Traditional currencies are based on trust in the government, and you can't trust the government. Let's put our trust instead in an algorithm-based currency, which is objective and mathematical. That'd be a better trust-based currency system."
On the surface, this is a reasonable argument. The problem is that both these assumptions are false.
Government-backed, trust-based currencies are not based on trust in public officials or even really the government itself. They're based on trust in the assets, institutions, and economy the currency operates in. That trust is not based on the efficiency or affinity of those things, but rather their longevity and viability. Take federal land in the United States - there are 640 million acres, worth hundred of billions of dollars. When you combine that with the collective value of all of the private and public land under the sovereignty of the USA, that number goes up to hundreds of trillions. And that's just the land - that doesn't count the value of the U.S.'s gold reserves ($300 billion in 2024) or any other physical resource the U.S controls. And all that pales in comparison to the economic value the U.S. creates through its political and military influence.
This isn't a patriotic thing - the same is true of the U.K. and the British pound, the Euro, and even the economies of smaller countries like Luxemburg. Within the world of NATO at least, you have dozens of countries with their valuable assets and institutions all supporting each other. So trust in practically any first-world currency is trust in a massive, global network of economic stability, not trust in any specific government and certainly not trust in any specific leader or policy.
By contrast, an algorithm - and software in general - is the work of a relatively small number of people. Large, widely-adopted open source projects can attract tens of thousand of contributors, but that's the exception rather than the rule. More significantly, even 25,000 people is a trivial number compared to the billions of people who participate in the world economy. So putting trust in an algorithm is putting trust in a tiny group of people and a trivially tiny piece of infrastructure.
It's also not true that algorithms have no bias. Algorithms incorporate the unconscious biases of their developers by default, and every algorithm is built for a purpose, so they are going to have conscious biases towards inputs and outputs that achieve their goals. That doesn't make them suspect, but it means they aren't objective. We don't need to look any further than social media to know that algorithms can be engineered and primed to exclude certain outcomes, scenarios and groups.
Cryptocurrency is an interesting concept, and it does seem like the math behind it is sound. But that doesn't tell us anything about the health of the implementation. And the adoption of it as an actual financial vehicle is based on unsound logic.
