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Why does Bitcoin thrive in the old socialist states?

August 3, 2020

Nestled between the Julian Alps and the Adriatic Sea, in a beautiful corner of Europe that is often overlooked by international visitors who flock to nearby Venice or the Dalmatian coast, is Slovenia, a nation that gained independence from the former Yugoslavia in 1991 .

As one of the travelers who flocked to Venice, I accidentally came across Slovenia a few years ago because I hadn’t received a train ticket to Italy. Once there, I decided to explore the impressive karst caves and the pristine natural beauty of Triglav National Park before returning to the historic capital, Ljubljana, to learn about the local culture.

Although I recognized and appreciated the friendly people in Ljubljana and the rich Slavic cuisine, I saw no other lively side of the city at the time: Your new bitcoin community.

Why does Bitcoin thrive in the old socialist states?Why does Bitcoin thrive in the old socialist states?

A former socialist state, although it oscillated between tough politics and a greater degree of economic and personal freedom than anywhere else in the Eastern Bloc. Slovenia is a prime example of how the decentralized spirit of cryptocurrencies resonates with citizens who have grown up with a highly centralized government.

When we talk about Slovenia and Bitcoin today The first name that comes to mind is probably Bitstamp – A cryptocurrency exchange founded in Ljubljana in 2011 with offices in London, New York, Luxembourg and other countries.

In fact, Bitstamp is the oldest cryptocurrency exchange still in operation today. It has outperformed other old school competitors like Mt. Gox and BTC-e just because they are reliable. This longevity is a feat in itself given the extreme price volatility and the lack of established business models in this emerging industry, especially before 2017.

Bitstamp: a national success story

When asked about regional tech skills and fintech startups, most people immediately speak of the busy hubs in Silicon Valley, London or Singapore. The small Slavic nations of Central Europe rarely come to mind – after all, these nations were under communist rule only three decades ago.

So, How is it possible for a company like Bitstamp to leave Ljubljana with little financial support, compete in an industry as unpredictable as crypto, and continue to thrive for almost a decade? Miha Grčar, Director of Business Development at Bitstamp and veteran of the company’s beginnings, explained how Bitcoin and Bitstamp started in Slovenia.

“”The original group consisted mainly of geeks, anarchists and cypherpunks“Said Grčar.”But there wasn’t too much economy here and there weren’t many job prospects for young people. When the price started to rise, many young people naturally began to pay attention and learn from it“”

“In Bitstamp terms, I think it definitely helped to be among the first. But we were also lucky, you have to be lucky in this industry.”

“But the things we could influence, I would say that we always try to do the best for our customers,” said Grčar.because trust in the early days was not easy to earn. There were many scams and the exchange went back and never came back. So it was difficult to do business at the time“”

“But,” he continued, “It was very important to be trustworthy, to be available and to do everything possible to be a company that people can trust. We also always had banking business here, which was very difficult to achieve in the early days. “

Grčar’s comments shed light on the monumental challenges that cryptocurrency exchanges had to face to survive in the early days. Not only was it difficult to gain consumer confidence to deal with a new digital asset that was out of the reach of financial regulators, but it was also more difficult to find banking partners – which were of course crucial for the operation of the entry and exit ramps in fiat money from exchanges like Bitstamp. At that time, no major European bank was remotely interested in tapping into a cryptocurrency business. So it seems that headquartering in a small, nimble country with local banks that were open to business was actually a problem, a big advantage.

“”Slovenia is a very small country with only a few million inhabitants. A success story like that of Bitstamp is therefore disproportionate. This would not have been the case in Germany or Great Britain, for example, and definitely not in the United States. When the price of Bitcoin rose sharply in 2013, everyone paid attention to it“Grčar closed.

In a way, the success of a start-up and the emerging industry became a national success story that built tremendous momentum that affected the industry itself. In fact, according to Coinmap.org, Today, over 250 companies accept Bitcoin in Ljubljana, a disproportionate number for a city with only 300,000 inhabitants.

The anarcho-capitalist soul of Prague

Further north, beyond the Austrian Alps, is the Czech Republic, a nation that woke up after the collapse of communist Czechoslovakia in the early 1990s. The capital city of Prague is known to visitors as a beautiful city full of culture, history and impressive, well-preserved Gothic architecture.

However, the icing on the cake for cryptocurrency enthusiasts is that Prague is also an important hub for libertarians and Bitcoin. A 2018 Forbes study showed that Prague has the most Bitcoin companies than any other city in the world.

Simon Dixon, founder of BnkToTheFuture and veteran in the Bitcoin area, told me an interesting anecdote about the secret early crypto scene in Prague.

Dixon attended the first European Bitcoin conference in Prague in 2011, where he came across a “treasure hunt” for the secret location of a hackathon. Told: “We had a lot of clues that took us from one place to another in the city until we ended up in a dark building that looked like a dangerous cave where they sell crack. We came to a room where you had to knock on the door in a certain way to open it. Then we went in and there were lots of people coding and there were QR codes that could be scanned to buy a Mars bar for 1 BTC. “

Today, an important mediator of the strong Prague crypto community is housed in a black-painted three-story building on Dělnická Street. the headquarters of Paralelní Polis, a non-profit organization dedicated to “crypto-anarchy”. The Paralelní Polis building includes a cafeteria that is paid in Bitcoin only, a work area and a hacking area called the “Institute for Cryptoanarchy”..

Over the years, The Paralelní Polis has established itself as a meeting point for cryptocurrency-related events and hackathons in the region.

The name of the organization in Czech means “parallel world”, a concept popularized by the Czech activist and anti-Soviet dissident Václav Benda. The idea of ​​a parallel world was that since neither voting nor revolution seem to be effective to replace existing governments and central planning systems with something better, the only way to have a free society and a free market is to create one independent and parallel system from the ground out of control of politicians in an environment like cyberspace.

Paralelní Polis was founded by Pavol Lupták, a prominent figure in the local anarcho-capitalist scene. When asked about the reasons for Prague’s passion for Bitcoin, he replied: “The Bitcoin phenomenon in Prague is essentially caused by two factors. First, the pioneers of crypto companies like SatoshiLabs or General Bytes, companies that are the world’s largest manufacturers of Bitcoin wallets and ATMs, are in Prague. Second, Prague’s crypto community was supported by Paralelní Polis and the regular weekly Bitcoin events, the annual HCPP congress, etc.“”

Prague clearly benefited from a perfect mix of: a passionate group of people obsessed with freedom, a high level of technical competence and a safe and committed place where people could meet, exchange ideas and spread the community. . Being geographically in the middle of Europe also makes Prague the ideal mediator between east and west and a perfect meeting point for people with different ideas and skills. Few cities in the world could offer something similar.

But, What were the basic social and cultural components that were responsible for creating such technical competition and passion for anarcho-capitalism – both natural precursors to Bitcoin?

Based on what I have gathered from people like Lupták, the answers may lie in the repressive socialist past of the Czech Republic as part of the Soviet bloc. To confirm this hypothesis, I went to interview other prominent members of the historical crypto community in Prague.

Life in communism and the meaning of freedom

Jan Čapek is the CEO of Braiins, a Bitcoin mining company that operates the Slush Pool, the world’s first Bitcoin mining pool.

“”People working at Bitcoin understand the social impact of decentralization. Although we now live in a free society, we can already see signs of “lack of freedom” or that freedom is gradually being taken away in many facets of life“Čapek told me.”I was born in 1980, so I have some experience from the communist era and realized that we didn’t have it“”

I went on, curious about his personal anecdotes from the days of communist Czechoslovakia, and Čapek was forced.

“My father worked in a chemical plant and was sent on business trips to the western world because they needed advanced analytical equipment. He wasn’t even a member of the Communist Party, but they had no choice because he was the only technically skilled person Time was me I was only 6 years old, but I already knew that the environment we lived in was different because my father spoke at home about how things worked in the West. “

Čapek continued “So I was a little geek back then and I had this state-of-the-art Sinclair ZX Spectrum computer. My father bought it on his trips abroad with the German markings that he had kept because obviously it wasn’t something that could be found here. For example food, I don’t mean we were starving, but many food options weren’t available. You couldn’t go to the store and buy bananas because bananas were only occasionally imported from a tropical country at a certain time and people queued up to buy them. “

“In a way, the perception of this reality at that time made us very flexible to navigate through the system and find a way to make our standard of living at least acceptable.”

“Since we didn’t have many options at the time, there really was no consumer culture here, and in a way that gave people more time to build than to consume.”

“Politically, of course, they tried to criminalize people who thought differently, who didn’t want to be part of the system. And I think that’s where it came from, the experience of living in a reality that had no freedom. Then in the velvet Revolution, when the borders were opened, people naturally accepted the new information, seized new technologies and started to build businesses around them. “

Alena Vranova, co-founder of SatoshiLabs, the company behind the Trezor wallet, also agreed with Čapek’s opinion.

“”Historically, people don’t trust politicians because they lied and cheated too often in the last century“he explained.”In 1953, my grandparents lost everything because of a currency reform – the President literally went on the radio the night before and told everyone that the rumors about an upcoming currency reform had no substance, and the next morning everyone was forced to switch to the new currency and lose about 30 to 1 in everything they owned.“”

“Because of the distrust of politicians, people developed this resilient” do it yourself “culture and always found ways to avoid bans or restrictions.”

“Let’s call it forced creativity.”

Then he referred to the lack of freedom of movement. “In the communist era, it was difficult not only financially to travel abroad, but also because an entire family was not allowed to travel together. In order for my father to travel abroad, he had to fill out application forms and go through a background check, get approval, and he was only allowed to carry a limited amount of cash with him to ensure that he was not deficient abroad. Civil movements were completely restricted and vigilant, and unfortunately we are now seeing some parallels in 2020“”

It addresses an uncomfortable point. In our modern information age, where self-sovereignty over data and money has disappeared and surveillance is quickly becoming ubiquitous, we may have given in too much.

Jan Čapek, like others who visited Paralelní Polis, firmly believes that Bitcoin is a critical part of the solution. “We recognize how precious freedom is and we don’t want it to be taken from us again – Bitcoin is a mechanism for global society to respond to anything that can change our freedoms“”

“I was working as a technology freelancer and making good money when I discovered Bitcoin, and I thought it was worth it because I wanted to spend the rest of my productive life working, so I made the leap. “

It seems that the people who walked through the gates of the Paralelní Polis have something in common – a deep passion for Bitcoin that stems from memories of a past, in which freedom was more a privilege than a right.

Passion paired with technical ability is a powerful combination that can disrupt entire sectors and change the world. Fortunately for the Czech crypto community, who wants to develop a free system without government intervention, both ingredients seem to be available in abundance.

Like Bitstamp, Prague-based Braiins / Slush Pool and SatoshiLabs are the first Bitcoin companies to stand the test of time. Not only did these companies emerge from Prague’s anarcho-capitalist roots, they also ran their businesses so skillfully that they continue to thrive even in an industry that bears little resemblance to a few years ago.

“”We were very focused and conservative from day one“said Čapek, thinking about what made his company successful.”We focus on things without being distracted by unnecessary things that would take advantage of resources, and we’ve always been very conservative about hiring. We were lean and profitable from the start and never raised external capital.“”

In other words, his company embodied the spirit of the Czech boot.

Similar, but different

“Yugoslavia was generally less depressing compared to the Soviet bloc, and Slovenia was the richest republic in Yugoslavia, so we could get some things like western cars,” said Grčar.Still, we still didn’t have nearly the freedom and opportunity they had in the West. For example, when you went to the store to buy beer, there were only one or two brands to choose from.“”

Grčar’s comments made me appreciate the taps in my local pub, and luckily the selection of beers is no longer an issue today.

Both Slovenia and the Czech Republic have emerged from oppressive socialist regimes and have successfully transitioned to free and progressive nations, but both are very different, as is their respective crypto success stories. Bitstamp was a national icon that put Slovenia on the fintech card, while the numerous Prague companies focused primarily on serving all facets of the crypto community.

Ultimately, it is important that everyone achieve results. The stock exchange, mining and hardware businesses have faced massive competition with seemingly endless resources, but these newcomers have failed to squeeze the lean and resilient veterans of Central Slavic Europe.

And so, The culture of creativity can be recognized.

This is a translation of an original article from Cointelegraph Magazine.

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