I remember my first credit card vividly. For months, I had been attempting to woo my local bank. “Give me a card,” I begged. “You can trust me.” My pleas fell on deaf ears.
Then one day, after all but giving up, I found myself at Gap. (As I recall, I was there to purchase a pair of skinny jeans.) While fumbling through my wallet at the checkout counter, the cashier asked me if I wanted to apply for a Gap Visa. “Sure!” I replied. After an instant vetting (what the heck did they look up, anyway?), they awarded me an account. The physical card arrived in the mail a few days later. What benevolence! I’ve had the card for years.
Think about that. I am a bastion of trust (trust me on that one). My finances have always been solid. I have a pleasant appearance. The only thing holding me back from getting a credit card was my youth. I had to wait a long time for someone to give me one.
And it’s not just credit cards. Banks often require parental permission to open savings and checking accounts. In general, young people have restricted access to the entire financial system—credit and otherwise.
You can’t blame the banks, though, or the credit card companies. They have to assess risk somehow. And to them, I was risky business. But how could I prove my trustworthiness if I was never given the chance? It’s a classic chicken-and-egg problem.
As a society, we want to lead young people to financial independence. We want to teach young people about financial responsibility. Yet the current financial paradigm fails miserably. Young people have to overcome immense hurdles to build credit and gain access to credit cards and reasonable loans. On the other hand, credit card culture can be detrimental to those who lack financial common sense. Debt entraps millions.
If only there were some way to empower young people to prove their trustworthiness without exposing financial firms to unnecessary risk.
That’s where bitcoin comes in. No trust barriers exist. Young men and women don’t have to bend over backward to prove themselves. Transactions are peer-to-peer and instant. Anyone can download a bitcoin wallet and use it. Forthcoming applications of the blockchain—such as smart property—inject this trustless paradigm with an additional dose of democracy.
The trust issue is particularly acute for minority youths. Faced not only with a disadvantage in age and experience, they have an additional barrier to overcome—that of being a minority. This has a direct effect on social mobility. For instance, 32 percent of white children born in the bottom quartile of income distribution remain there. This number increases to 63 percent for black children.
In the world of personal and commercial lending, discrimination is a reality, but it isn’t necessarily based on hate or racism. It’s based on risk. Pragmatism is the highest virtue of the financial professional.
Bitcoin has the power to address social mobility and discrimination, both as a currency and as a protocol. In a bitcoin economy complete with smart property, it doesn’t matter what color your skin is or what part of town you’re from. All that matters is your ability to utilize a smartphone or similar device. (Yes, Internet access is also a factor, albeit a quickly diminishing one.)
Bitcoin is uniquely promising, because it does not attempt to alter the valuations of financial professionals or of the system as a whole. Instead, it makes the need for those valuations obsolete. Technologies currently in the development stage include smart contracts and smart property. In short, these applications will utilize the protocol to enforce legal obligations, thereby protecting the interests of both creditors and purchasers—without the need for discrimination.
With bitcoin, nobody is at a disadvantage because of trust—neither the youth nor minorities. In that way, bitcoin reinvigorates the classical liberal goal of a society without privilege—as Ludwig von Mises once wrote:
With the advent of liberalism came the demand for the abolition of all special privileges. The society of caste and status had to make way for a new order in which there were to be only citizens with equal rights. What was under attack was no longer only the particular privileges of the different castes, but the very existence of all privileges.
Bitcoin helps reduce privilege and discrimination of many stripes, ageism included. Right now, young people are uniformly disadvantaged. Within the current financial framework, the youth must be treated as a lowest common denominator. As bitcoin evolves and becomes more widespread, this will change. Young people will be on equal footing with their elders. Financial independence can be sought, and financial responsibility will be rewarded…for those of all ages.