The Sunday Times Magazine • 15recorded on a blockchain, a decentralised
database that acts as a ledger for the
currency and is maintained co-operatively.
By 2017 a single bitcoin was worth about
£2,500. Since then its value has exploded
due to a flood of new buyers. Despite many
ups and downs, bitcoin is currently trading
at over £36,000. There are now more than
18,000 cryptocurrencies in existence,
although bitcoin and its younger sibling
ethereum make up more than 70 per cent
of the market between them.
Cryptocurrencies have generated a
staggering $3 trillion in new wealth over the
past decade, and the beneficiaries of this
gold rush are starting to push their assets
into art, property, sport and beyond. This
exponential growth has also created a new
class of billionaires and multimillionaires
overnight. People like Changpeng Zhao, the
Chinese-Canadian founder of Binance, a
cryptocurrency exchange, whose net worth
is already estimated to be roughly the same
as Mark Zuckerberg’s. This is some of the
“abundance” that Gmoney is referring to.
Cryptosceptics, and there are many, will
tell you this looks awfully like a giant Ponzischeme, built primarily on hype and
speculation. Much of it could still evaporate
of course, and more government regulation
is looming, but there is considerable
institutional power invested in digital
money, from banks to nation states, and
what began as bitcoin has already evolved
into far more than just cryptocurrency.
Advocates of blockchain technology
believe it can revolutionise the wider
economy. In the current digital economy
transactions usually have an intermediary,
be it Spotify, eBay, Uber or Airbnb. In a
Web3 world we would interact directly with
one another. Cassatt views this as an
enormous opportunity and says the Web
2.0 era — with tech giants such as Facebook
and Google collecting data on their users
and then ruthlessly monetising it — is over.
“People have cottoned on to Web 2.0,” she
says. “They are tired of being the product,
of being treated like commodities.”
The implications of all this go well
beyond just social media. In an economy
run according to these principles, energy,
for example, could be traded between
individuals on the blockchain instead of
going via the central grid. Goodbye energy
giants. Loans could be secured using
collateral posted on the blockchain, and
then simply traded between individuals
who have capital and those who need it.
Goodbye mortgage lenders. Head spinning
yet? This is just getting started. Blockchain
technology is also being used as the
foundation for the metaverse, a fully
immersive and interconnected digital
world whose economy could be run using
cryptocurrencies.
Many are highly sceptical, though, of
this elaborate vision. “It’s spin all the way
down,” according to Evgeny Morozov,
a scholar (and often critic) of the internet.
Morozov describes Web3 as “a map insearch of a territory”, a plan for the world
that doesn’t actually have a home or any real
means of implementation. “There is no
‘there’ there,” he argues in an influential
recent essay that accuses Web3 proponents
of “left-washing” their greed through
empty progressive slogans.S
o is Puerto Rico a Web3 paradise
in the making, or just a giant
crypto gap-year project hiding its
greed and hedonism beneath a
mask of altruism? Why are these
migrants really here?
“Tax is the incentive for being
here, let’s be honest,” Arteaga says. “You’re
saving 40 per cent capital gains tax. But it’s
also a beautiful place. We have the beach.
We have the mountains. This is my dream.”
Puerto Rico could certainly do with a
helping hand. Hurricane Maria was the
worst storm in almost a century, bringing
winds of 155mph and causing an estimated
$90 billion in damage. The entire island lost
access to power and regular outages are still
common today. Until March Puerto Rico
was officially bankrupt and the island faces
constant brain drain to the US mainland,
where stars of Puerto Rican descent, such
as Jennifer Lopez, Lin-Manuel Miranda and
Bruno Mars, have an outsized cultural
impact. (Lopez has actually invested in a
fintech company that works with bitcoin,
so we may end up calling her “Jenny from
the Blockchain”.)
The crypto migrants coming the other
way may not pay much tax, but many say
they are keen to help the island in other
ways, and they all contribute a
compulsory stipend of several thousand
dollars to local causes each year. There is
much talk of “giving back”, though also
GETTY IMAGES plenty of in-fighting.
Puerto Rico is an oddity: an island in the Caribbean that has been
controlled by the US since 1898 but is not fully part of the US federal
system. It’s an “unincorporated territory”, rather than a US state. That
position has enabled Puerto Rico to become a haven for Americans
seeking to escape mainland taxes.
About a decade ago the territory began introducing measures to
attract wealthy investors: among other things it allowed those who
became resident there to minimise or avoid altogether tax on capital
gains and dividends from companies. Since then an estimated 4,
companies and wealthy individuals have relocated to Puerto Rico.
The US Inland Revenue Service suspects that the US Treasury has
missed out on hundreds of millions of dollars in revenue from wealthy
individuals, hedge-funders and crypto traders moving to Puerto Rico.
It is now scrutinising the arrangements more closely.
Some locals are up in arms because they do not enjoy the same tax
breaks, and the influx of wealthy outsiders is driving up property
prices beyond the reach of existing residents.PUERTO RICO’S TAX-HAVEN REINVENTION
Jennifer Lopez is among many US
cultural stars of Puerto Rican descentCRYPTOS HAVE
GENERATED A
STAGGERING
$3 TRILLION IN
NEW WEALTH OVER
THE PAST DECADE