The emotional relevance of bitcoin for millennials and the neurobiology of trust.
Back in 2008, the whole world woke up to realizing American banks took a bigger bite than they could swallow. This lead to a cascade of a lot of events that are now dauntingly named the global financial crisis of 2008. It was the worst of times for many families, companies, organizations, political outfits, and corporations with exposure to the global financial system. Still very young, millennials were emotionally unaffected back in 2008, still chilling with cartoon networks and chocolate milk. The news, however, took the world by storm with one of the most ancient survival strategies and neuro evolutionarily conserved 'fear of the unknown' taking center stage. Interestingly, the immediate aftermath of this phenomenal loss of life savings to the working class exposed another hard reality where the subprime lenders that were emotionally viewed as the fundamental reason for the 2008 financial crisis were given bailout out after bailout to cushion the fall.
It was during this time of optimism scarcity and increased cortisol levels ( stress hormone ) among the general population a slow breeze rattled the fallen leaves that would later be instrumental for the next storm. web3. The first culturally relevant seed of bitcoin and everything older than itself it is going to represent, from proof of work to decentralization in the modern age came into being. There is a lot of information about hash rates, mining, and how there is going to be only 21 million bitcoins with a supply squeeze coming any moment now in the past few years. What we do need to understand is what is emotional vacuum bitcoin is filling in the millennials and what cultural revolution it is bringing to the table. When bitcoin was created out, the original intention of Satoshi was to create a means for peer-to-peer transactions without having to trust a middleman.
“In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions”
Decentralization, accountability, and trust
The idea of currency since time immemorial is that the currency is valid as long the running elite approves its legality. By limiting the total circulation to one value forever, with every lost coin, the value of a currency is emotionally seen higher for a non-economist.
“It’s the opposite of when a government prints money and the value of existing money goes down”
Adding this coin ceiling idea to the decentralization is primarily a cultural take on what was happening in Web2 when big social media organizations and search engines owned all the traffic, data, and, in essence, the personal life of its users. Decentralization is a fundamental removal of centralized power and the ability of turbulent leaders to manipulate the currency supply. But, this need for decentralization was a cultural necessity not just for currency alone but for society in itself as accountability and the need to trust became a significant problem. The first tiny step to solve the world's accountability problem was introducing the whole transactional history on a blockchain.
“A digital coin contains the public key of its owner. To transfer it, the owner signs the coin together with the public key of the next owner. Anyone can check the signatures to verify the chain of ownership”
The significance of this important but so far underappreciated milestone is that this creates a need among progressive nonprofits, governments, artists, creators, and most importantly the general public to create ways and means in their own lifestyle and businesses to include a bit more accountability than before. By 2040, if any data that is not listed on a blockchain is either going to be very personal or untrustable. All the Web3 experiments that began more complicated and more far-reaching quests in smart contracts, private tokens, virtual metaverse, NFTs, DAOs have their humble origins from the simple ability to list down all the previous owners of the bitcoin one is currently holding and making sure the accountability is held on without the need to trust a third party. After the banks got a nice cleaner than expected state from the real and surreal emperors of the world there came an emotional question of trust around the world. The question of trusting central banks is way more existential as Satoshi rightly put it 10 years ago.
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust”
Within the realms of Neurobiology, trust occurs when the brain is convinced that the stranger in front of you is trustable. Experimental evidence suggests that higher levels of peripheral oxytocin help in reducing the fear of trusting a stranger. This in turn leads to cooperation. The human brain communicates with chemicals in many ways, oxytocin also seems to increase a person's empathy. Stress on the other hand is a very severe oxytocin inhibitor. From a Neuroeconomic viewpoint, without running the risk of oversimplification, it is important to understand how trusting a bank or a financial institution is not a viable option anymore for millennials when the same institutions have created a system, that shoots them in their heels for every step they take, from student loans, low wages, poor job opportunities to high mortgage.
The severity of the situation can be best understood if we look at cryptocurrencies as new market standards set by the evolution of trust from a scarcity of oxytocin levels while thinking about a bank in the conventional sense. An interesting hypothesis to test is the possible higher levels of peripheral oxytocin when the 'need to trust centralized organizations' is removed from the equation. Although, this is easier said than done, as the current state of the crypto industry is very volatile with big market players slowly creeping in. In my humble opinion, stable coins, companies holding bitcoin in their balance sheets, and governments HODLing bitcoin are some of the key reasons why the crypto space is slowly gaining momentum in the minds of millennials as a space for creating the right kind of trust to make web 3.0 possible. In summary, there are going to be countless new players in the crypto space in the next 10 years but bitcoin, much like the Beatles or Frank Sinatra has a cultural and emotional mark and triggered curiosity in the hearts of 90s kids and is here to stay.
P.s: The millennials talked about here are the ones that want to invest after doing proper research to have crypto in their long-term portfolio.
P.P.s: Quotes are from the pseudonymous creator of bitcoin, Satoshi Nakamoto from his/her posts and white paper before he/she went completely radio silent.
