Nordic Retreat from Cashless Societies Opens Dialogue on Decentralized Alternatives, Says Vitalik Buterin
Recent moves by Sweden and Norway to reverse their ambitious cashless society programs, following revelations about the vulnerability of their centralized payment infrastructures, have caught the attention of Ethereum co-founder Vitalik Buterin.
He suggests that this shift presents an opportunity for decentralized systems like Ethereum to potentially serve as more resilient substitutes for conventional payment networks, while also acknowledging that significant technological hurdles remain.
While some figures in the cryptocurrency space believe existing decentralized finance (DeFi) protocols are already sufficiently robust, others emphasize critical dependencies, such as the need for electricity and internet connectivity.
The decision by Sweden and Norway to step back from their cashless goals, prompted by the fragility of centralized payment systems when physical infrastructure fails, has ignited a different conversation within the crypto community: the potential for decentralized systems to assume this critical role.
Commenting on a Guardian report that both nations now require citizens to maintain cash reserves, Buterin stated on X, “Nordics are walking back the cashless society initiative because their centralized implementation of the concept is too fragile.”
Sweden had previously seen cash use drop to a mere 1% of all transactions, and Norway’s Vipps app had achieved widespread commercial dominance.
Geopolitical events, exemplified by Russia’s invasion of Ukraine, have starkly illustrated how attacks on essential infrastructure could paralyze entire payment systems, leading Buterin to affirm, “Cash turns out to be necessary as a backup.”
Buterin’s View: Ethereum’s Potential and Prerequisites for a Cash Alternative
Reflecting on the Scandinavian situation, Buterin offered a measured view on Ethereum’s potential to fill such a void, writing, “Ethereum needs to be resilient enough, and private enough, to be able to credibly play this kind of role.”
The “Cash Versus Code” Debate: Is Ethereum Ready?
The ongoing debate of “cash versus code” sees varied perspectives.
Sam MacPherson, CEO of Phoenix Labs, a firm developing DeFi protocols, disagreed with Buterin’s assessment of Ethereum’s current readiness.
“Ethereum is already there. It is designed to be as resilient to hostile actors as possible,” MacPherson told Decrypt, citing the successful management of billions by DeFi protocols without major systemic failures.
He asserted that such decentralized systems are “designed to be as secure as possible from the ground up.”
Key Challenges: Offline Functionality and Technological Hurdles
Nevertheless, the capacity for offline operation stands out as a primary challenge if Ethereum is to become a truly resilient alternative to physical cash.
In the absence of electricity or internet access, Ethereum cannot function autonomously.
While Buterin noted in subsequent responses that zero-knowledge proofs could theoretically enable offline payments, he also pointed out that these technologies are still experimental and currently depend on “trusted hardware and/or post hoc enforcement against double-spenders.”
Stablecoins as a Solution and Their Own Resilience Questions
Stablecoins, which are digital currencies pegged to fiat currencies such as the U.S. dollar, might offer another viable solution.
Anthony Anzalone, founder of the walletless blockchain platform XION, explained to Decrypt, “Stablecoins are an exact solution to this scenario.”
He elaborated that the use of stablecoins has “exploded in usage and adoption” because they are not “reliant on one centralized party,” making them particularly suitable for nations with “unstable governments and currencies.”
However, stablecoins themselves face challenges concerning their resilience, especially in terms of user privacy.
Harrie Bickle, documentation lead at the AI-powered orchestration layer NodeOps, remarked to Decrypt, “While there are several privacy protocols with the potential to make Ethereum private enough to act as a meaningful alternative to cash, resilience is another issue altogether.”
Bickle further argued that for Ethereum to demonstrate true resilience in crisis scenarios similar to those now confronting Sweden and Norway, it would need to function without the strict necessity for users to have “access to electricity, secure operating systems, and unhackable Web3 wallets,” thereby highlighting practical limitations.
“We must travel a long way down an, as yet undeclared, roadmap before Ethereum will be resilient enough to replace cash transactions,” Bickle concluded.
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