Bitcoin cultural divide: USA vs. developing countries

[legiteum]

First, some background:

https://www.theglobaleconomy.com/rankings/informal_economy_dge/

The "informal economy" is the portion of a country's economic life that operates outside of normal government rails, doesn't pay taxes, doesn't follow any financial rules, and so forth. Some countries have much larger "informal economies" and in particular, the USA has a very small one. This changes the way people in the country think about money and finance.

In an informal economy, you worry about your government taking your money away all of the time since you are operating outside of, and often in opposition to, the law. In the "formal economy" you don't worry about this at all.

For Bitcoin: much of the "hard core" interest in Bitcoin--and much of the driver of its community, its reputation, its "vibe" and so forth comes from participants in informal economies.

Most of money (i.e. the thing that drives Bitcoin's market cap) comes from participants in formal economies. In other words, US whales, US apps, US ETFs, the US president, the (US-based) Strategy, etc. (Substitute "US" here for developed, low informal economy countries).

Hence you have "hard core sentiment" on one side, and money on the other side.

As for Bitcoin itself, the divide shows up as a massively different viewpoint about Bitcoin's purpose and usefulness:

Formal Economy: Bitcoin is an investment and nothing else. It's a button on my investment app. "Number Go Up!".

Informal Economy: Bitcoin allows me to evade my government's regulations/taxes when I perform transactions. "Censorship Resistance!"

This divide will no doubt continue to be a major feature in the future of Bitcoin. When we talked about various topics, we see these different viewpoints in action:

Centralize Bitcoin to Make Its Market Cap Go Up?
Formal: Yes! Number Go Up!
Informal: No! That will wreck censorship resistance!

Is Bitcoin Really Decentralized When Govs Can Control the Price?
Formal: No, govs can control the market price through laws, so they basically control Bitcoin.
Informal: Yes, because the price doesn't matter to me (and doesn't matter to "anybody else").

Do You Compare Bitcoin to Fiats or Stocks?
Formal: Are you kidding? You don't "invest" in pure cash, only poor people do that.
Informal: Physical cash is how I keep my savings because if I put it in the bank my "informal" money will get taken from me by the government.

And so on. The divide comes from one's environment--one's country and financial system.

Finally, there's a major divide about people's worldview when it comes to crime: if you live your life in the "informal" economy, everything you do is considered a "crime" in your country, and hence whenever you hear of any crackdown on crime or criminals, you assume that this might mean you. Of course this gets tricky because there's different kinds of crimes, e.g. tax evasion versus stealing for instance.

If you live in a country like the US, for most people, crime is... universally bad. We know that some regulations can be bad and wrong, but breaking the law is never a good thing, and most people don't do it.

***

Something to think about for our future discussion here. Whenever you have a conversation, ask yourself which side of this divide you and the person you are conversing with are on...

[Ambatman]

They overlap.
I pay my tax and also understand the risks that comes with censorship.
There is a basis why people on the spectrum you label formal believe it would go up
And that's what people you consider informal economy tries to protect
Because without these features
Bitcoin wouldn't be worth investing
And would be an average Joe in the market.

[sergiorus]

Always thought it was called "Shadow Economy".

Anyway, as someone from a place with its fair share of informal economy, and also someone who is somewhat aware of the situation in other such countries I can tell you the reason why informal economy exists there is simply because nobody cares - there's just not enough government enforcement against it.

In many cases people don't even have to use cash/physical bills in their operations - bank transfers literally aren't tracked as long as they are below certain threshold.

As of Bitcoin, people there see it as an investment, possibly a more profitable one than what they usually have access to. I've never heard of simple folk using Bitcoin to evade taxes or hide their incomes - it's simply not needed as long as you're not a really big fish. And even as a big fish, you're better off using your connections and certain "schemes" and I'd bet none of them involve Bitcoin.

I'd agree it's used to move the capital overseas (although it's probably more true for USDT, than for BTC), especially if it's not the most fairly earned capital, but that's a thing everywhere, including the developed world. Maybe even more so there.

[Hamza2424]

I recently came to know that a huge part of my economy is also informal haha, which means it is not on paper, people are not paying taxes, FBR or any other authorities are not making money, and even if they are making money from the formal economy, they burn their stuff in the names of accidents and we all understand what actually happens. It is not the whole organization, just some wrong people at good positions with more power are pulling all the strings. Eventually they will get caught.

Anyway, I won't say we should judge how a person thinks about bitcoin based on their economy's abundance, as Germany, the US, etc. are formal, but people in Germany once took part in a survey and they all said bitcoin is used for criminal activities, like almost every major formal economy has said it. But the last point where you said, if you will do something good, but you are in an informal abundance economy, then that will be considered a wrong move from you and investigations will be launched.

This has happened in around 2018 or 2020, when a huge mining station was caught and the government said they were laundering money via mining BTC haha, like I was thinking how it could be used to launder money, they were simply mining BTC, that's it. But the authorities can do anything when they are given power.

[legiteum]

They overlap.
I pay my tax and also understand the risks that comes with censorship.
There is a basis why people on the spectrum you label formal believe it would go up
And that's what people you consider informal economy tries to protect
Because without these features
Bitcoin wouldn't be worth investing
And would be an average Joe in the market.

There is certainly overlap in that both sides want $BTC to increase in value because it will make them richer. But for one side it's a "nice to have" and for the other it's a "got to have".

If all you care about is "Number Go Up", you would look at the hard numbers, and try to determine just how how much investment money (definitely NOT numbers of individuals since that is irrelevant to the price of BTC) comes from one side or the other. Anecdotally, for me it's clear that almost all of the investment money for BTC comes from the "Number Go Up" side--although it's muddy since those people will mouth "decentralization" or whatever religion (they don't care) in order to make their investment go up in value. (You can get an idea about this based on the numbers for self-custody vs. custodial).

What I've identified here is just a difference in viewpoints which leads to conversations, arguments, and sometimes misunderstanding. If you take the thread about centralizing Bitcoin, there were roughly three responses:

1. "I like that idea because it will make $BTC go up in value". (formal / NumberGoUp)

2. "I don't like that idea because it will ruin Bitcoin for me". (informal / censorship resistance)

3. "I don't like that idea because I think it will make $BTC go down in value because I think the informal guys won't like it and they will sell their BTC". (formal / NumberGoUp)

In two of those responses, the focus is entirely about the value of their investment, and the other one is about the utility of Bitcoin regardless of price.

Anyway, as someone from a place with its fair share of informal economy, and also someone who is somewhat aware of the situation in other such countries I can tell you the reason why informal economy exists there is simply because nobody cares - there's just not enough government enforcement against it.

That's a very interesting observation. I suspect there are a lot of countries like that, i.e. that without any fear of enforcement, you have no reason to care about "censorship resistance".

[Ambatman]

In two of those responses, the focus is entirely about the value of their investment, and the other one is about the utility of Bitcoin regardless of price.

I understand where you coming from but what I'm trying to explain is
It doesn't just go up because we want it to.
There's a reason why even the formal economy believes it would go up
There's no effect without a cause
And this cause is something people that try to protect it's decentralization and security understands.

(You can get an idea about this based on the numbers for self-custody vs. custodial).

I don't know about housing in other countries
But I would say it's quite similar to how people know owning your house gives more freedom
Yet many still option to stay in an hotel for various reasons.
Or driving your own car or hiring a ride.

[Crypto Library]

If I say it from my point of view, I don't think there is a cultural divide about Bitcoin.
Even I want to say it this way, in the case of developing countries, especially if I talk about my country, then your words are actually applicable here by opposite, because the government has not yet legalized Bitcoin here. And that's why those who use Bitcoin do less transactions here and hold more. Even here you will not find any shop or institution accepting Bitcoin for transactions. Because it is illegal to make transactions here. Most of those who are connected to Bitcoin here convert Bitcoin into fiat currency for their own needs and use it at the same time holding it like that USA people in your words.

I don't know about the others counrty but here the complete opposite of what you said is happening because you mean that Bitcoin is used in developing countries to protect the freedom of transactions to avoid surveillance. I can only say one thing here that the per capita income of the USA is much higher than that of other developing countries, so their people's investment and transactions in Bitcoin will be much higher than that of developing countries.

[legiteum]

I understand where you coming from but what I'm trying to explain is
It doesn't just go up because we want it to.
There's a reason why even the formal economy believes it would go up
There's no effect without a cause
And this cause is something people that try to protect it's decentralization and security understands.

Bitcoin goes up when more money is invested into Bitcoin than is sold.

The reason people invest in Bitcoin (as opposed to only holding it long enough to make a transfer), is because they think more people will buy it.

As for why they think that, there may be lots of reasons, they might think a lot of people will like the "decentralization thing", but they also might not care and just see an asset that is "hot" for investors and not care why.

(You can get an idea about this based on the numbers for self-custody vs. custodial).

I don't know about housing in other countries
But I would say it's quite similar to how people know owning your house gives more freedom
Yet many still option to stay in an hotel for various reasons.
Or driving your own car or hiring a ride.

The "divide" the OP talks about here speaks to the "advantage" you feel Bitcoin has with respect to "freedom". For most Americans, for instance, we all feel perfectly "free" when we use a plain old bank or brokerage account. Hardly anybody here lives in fear that the government will take their money, or that the bank will fail, or something like that. In fact, most here would say that such a fear is crazy. Hence that's why most here use custodial solutions, which are protected by another company and also by the government.