Napster was killed to save copyrights. What does killing crypto save? Nothing.
There are interesting analogies between Napster’s rise and fall during the 1999-2001 period and today’s situation with the cryptocurrency sector in the US.
Napster was a popular peer-to-peer file-sharing network written and launched in 1999 by then-18-year-old Shawn Fanning. It was originally conceived as a workaround to his increased frustration with dead MP3 dead links emanating from central music websites he was visiting. Napster proposed to solve this vexing situation by bypassing these websites and stringing together users’ personal computers where MP3 files were stored. (MP3 is a compression standard that preserves CD-quality sound files)
Suddenly, Napster became famous for sharing digital music between users. At its height, it boasted 80 million users after passing 25 million in its first year. Its popularity rivaled top applications, email, and instant messaging.
Sadly, Napster’s success could not last because it couldn’t control copyrights over its network. So, in essence, it became illegal.
During its short life, Napster sparked the peer-to-peer technologies movement and captured the imagination of its application outside of music. Fawning’s invention was “file sharing via a peer-to-peer method.” Soon after, more than 200 startups with various file-sharing solutions entered the P2P file-sharing market. P2P became the essential tech of the day, just as AI is today.
Proponents of Napster opined that users were just sampling the music and that it was contributing to more CD sales. Others argued it was a wake-up call against distribution companies’ excessive monopolies and their being adverse to accepting new technologies.
During its ups and down, Napster was described as revolutionary and world-changing. It even placed temporary doubts in the music industry’s business model, forcing it to defend its intellectual property. Napster was unstoppable, except by court order.
Soon enough, the Recording Industry Association of America (RIAA) filed a lawsuit against it. The National Association of Recording Merchandisers joined them with a panoply of artists such as rock band Metallica and rapper Dr. Dre. Ultimately, these groups won, forcing Napster’s shutdown in 2001.
Technically, none of the information resided in a central server in Napster’s possession. Everything was spread across millions of user computers, but Napster was guilty of “tributary” copyright infringement. In essence, Napster facilitated other people’s infringement, not violating copyright itself.
There are uncanny parallels between crypto and the blockchain today about how a new revolutionary technology becomes so popular that it generates enough fear to warrant an assault against it.
The difference this time is that crypto is not an illegal technology. Furthermore, it’s not the private sector that wants to shut it down. Instead, it’s the US Government, its agencies, and regulators.
They are doing so by dramatizing crypto’s pitfalls while ignoring its virtues. Sadly, every tool at their disposal is being deployed to erect barriers, manufacture choke points, instill fear, launch lawsuits, impose arbitrary fines, and do almost anything short of declaring crypto illegal.
The most recent Economic Report of the President featured 30 pages bashing the technology behind crypto in a very biased way. Operation Choke Point 2.0 has been well documented as an overt series of actions the Biden Administration took to discredit the crypto industry. And the cherry on the cake became the SEC’s increased pace of litigations against several crypto actors.
But crypto is not Napster. So yes, they do share a native element: peer-to-peer technology. But the analogy stops there.
Sending money at the speed of the Internet isn’t breaking any laws. It only challenges existing financial rails and infrastructure. It’s a competitive factor anyone can adopt.
Napster was killed to save copyrights. So, what does killing crypto save? Nothing, except that it might kill about 1 million crypto-related jobs that are at risk of leaving the US to more welcoming parts of the world such as the European Union, UK, Switzerland, UAE, Hong Kong, Singapore, Australia, and Japan, who are going out of their way to welcome crypto businesses.
While US regulators and government agencies have been attacking the crypto industry, the USD as a reserve currency for global commerce is being challenged by the Chinese Yuan. Countries like Brazil, France, Russia, Iran, and Saudi Arabia are gradually replacing the USD in favor of the Yuan for their trade, including with Latin America, Asia, and Africa.
If not for the assault on crypto, the US would already be in a leading position with a crypto-enabled digital dollar that could quickly be adopted worldwide as a de facto standard. In another world, the same agencies currently attacking crypto would focus their efforts on backing it. Even US banks would immediately throw their weight behind cryptocurrency more decisively if it weren’t for the government pouring hot water on it so frequently.
There is also a political dimension. The crypto agenda is so polarized today, as some believe it might be a crucial swing voter issue during the next US elections.
Crypto is not Napster. Don’t kill it. The collateral and consequential damage will be irreversible and too grave to ignore.