What the Vatican and the crypto brothers have in common

American hedge fund coryps are usually not inspired by the Pope. But when financiers came together in Los Angeles to form the Milken Institute Global Conference, the Vatican was an unexpected topic of the dinner debate.

Shortly before the conference began, the Holy Stuhl announced plans not to spend fungal tokens on the Blockchain; The aim is to "democratize" the historical art collection of the Vatican by giving people around the world access to the paintings. (How exactly this will work remains to be seen.)

For some of the milk participants, this was a sign that blockchain technology caused a shift in power. More precisely, the idea that the crypto evangelist is enthusiastic (as often by people like Peter Thiel, the libertarian investor from LA) is that the blockchain offers the promise of a decentralized world in which networks of ordinary people can challenge elites-priestly or otherwise.

should we believe that? After the crypto hype (sometimes sweetened with delicious wine) I was visibly torn. It is not just a debate between the crypto evangelists (such as Thiel) who believe that the blockchain-Ledger is a revolutionary technology, and those like the celebrated investor Warren Buffett, who has replied that Bitcoin has a "gaming device", a pyramid is scheme and "rat poison".

The other problem is the gap between rhetoric and reality. The people who are involved in the crypto world today operate with a pronounced creation myth that contains many contradictions.

The one revolves around the idea of ​​digital money. For most spectators, this is the feature that makes crypto unmistakable. After all, it was Bitcoin that made the concept of blockchain popular, even if this has now been transferred to other areas such as art. In reality, most of us have had digital bank accounts for years, albeit in Fiat currency. The crypto world constantly threatens the "normal" money by being purely digital, but the latter has become more futuristic and faster - from mobile banking to payment transactions - when most people imagined this.

A second problem affects anonymity or more precisely pseudonymity. This is often regarded as a determining characteristic of crypto and criticized to enable crime. But in the adjoining rooms of the Milken Conference, I heard entrepreneurs describe how they try to find better ways to confirm the identity of users. Advisors like Chainalysis are apparently so good at pursuing opaque crypto flows that it can be easier for the law enforcement authorities, including the FBI, to track down criminals with crypto instead of banknotes. "Cash is anonymous," says a sniffer dog.

Then there is "hedging". In view of the falling stock markets, there was a hot topic in Milken how investors can secure their portfolios. As an answer, crypto enthusiasts presented Token like Bitcoin. But now it seems that, like excess liquidity in the past, the price of almost all assets has raised their retreat to all of them - including crypto.

Those who advertise NFTs praise them as valuable because they are scarce and unchangeable. But as right -wing experts like Dinusha Mendis from Bournemouth University and João Marinotti from Indiana University argued, the degree in which an investor "owns" an investor is properly checked in court. And the scarcity aspect collides with the fact that new tokens are always created.

Finally, the question of decentralization arises. The original creation mythology for Bitcoin was a white paper that was written by the mysterious Satoshi Nakamoto and demanded a world that is based on peer-to-peer or "distributed" trust. The vision that makes Thiel's eyes shine is one in which a joint computer book enables people to complete business without traditional - i.e. hierarchical - institutions. As soon as a shared computer book has been created, the argument could certainly do business with each other without needing centralized institutions.

that may still be right. But like Charles Hoskinson, a blockchain pioneer who is now building a successful operation on the Cardano platform, in LA: "The vast majority of Web3 [ie, blockchain] applications are centralized, not decentralized." This is partly due to the fact that the main books are often so -called "private chains" or clubs only for members organized by institutions such as JPMorgan. But it is also because a new generation of virtual stock exchanges has arisen to organize the trade and custody of crypto.

And when a facility like the Vatican publishes NFTS, it is the credibility of this institution, some of which creates confidence in these assets. Even if the word "decentralization" is washed down with wine at milk dinner, hierarchies keep appearing in subtle and sometimes opaque way.

I do not say that these inconsistencies make the whole crypto dream meaningless. The industry develops interesting technologies and ideas that could become a mainstream - precisely because institutions are involved.

But the crucial point is as follows: what creates "value" in cryptocurrencies is the assumption of a ambiguous faith in which rhetoric often collides with reality. In this respect, the step of the Vatican makes sense.

Follow Gillian on Twitter @Gilliantt gillian.tet@ft.com

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