Bitcoin Won't Save The World

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Avatar for dave_gutteridge
3 years ago

One of the conspiracy theories that floats around the Bitcoin Cash world is the idea that Blockstream took over BTC specifically to neutralize Bitcoin as a threat to the status quo. Some versions of this story have the CIA or governments in general being the ultimate masterminds, because if Bitcoin became big enough, both private and central banks would be wiped out, robbing the government of a lot of control over the economy.

I'm sure there are analysts at intelligence agencies the world over who look at cryptocurrency and it's potential effects on the economy and how that might impact national security. These guys have to justify their budget, and finding new vectors of threat is one of them.

But do they pump millions of dollars into trying to force a particular outcome for Bitcoin? I doubt it, because even a little bit of analysis would show that even at it's best possible outcome, Bitcoin is not going to destroy banks, or threaten any nation's ability to regulate its economy. It just wouldn't be worth the effort to try and force Bitcoin away from it's current potential.

Bitcoin, or cryptocurrency in general, will definitely force banks to change their business models, and governments will have to take a position on them. But saying banks and governments will crumble is like anyone in 1990 saying the internet is going to force telecom companies out of business and make it impossible for government to censor anyone.

The impact of the internet on communication and society makes a good parallel for how cryptocurrency will impact banking and government.

The internet effectively destroyed any and all profits telecom companies made from international calling and most local calls. But telecom companies shifted and moved so that now they are the ones making profits on cellular networks. Some companies came and went, but, to me, swapping one company for another isn't exactly a revolution.

The internet also eradicated postal mail as a form of interpersonal communication. A paper letter from a friend or relative is a deliberate novelty now. But postal services didn't cease to be, because what they lost in letters was more than made up for with home delivery for online shopping.

The internet also reinvents old problems. Services like Uber start out as being a great way to shake up the monopoly of taxi companies. But then questions of labor standards and fair pay and corporate responsibility come up, and laws start to emerge to regulate. Hopefully something new can be made that's better than the old taxi monopolies. But, it's not clear at the moment that we're not just moving sideways on the issue.

Similarly, Bitcoin, should it ever be stable enough, could potentially wipe out the money banks make on transfers, especially international transfers. But banks will probably just put more effort into other services that Bitcoin can't compete on, at least, not anywhere near as easily, such as credit and insurance.

Maybe banks will offer their own crypto wallet apps where they also offer to insure your balance should you lose it. Most current crypto enthusiasts might scoff because they feel capable of managing their own security. But a lot of people might prefer that service over having to engage in the technicalities of encryption technologies. Just like how everyone who drives a car shouldn't be expected to be able to repair it.

I have friends who are bankers, many of whom hold Bitcoin or other crypto assets, or at the very least, don't see it as a threat. The idea that bankers are ideologically committed to fiat because it affords them control over their profits strikes me as uninformed about the people involved in banking. So far as I've known bankers, like all people, they have a variety of opinions and ideologies, but their approach to making money is largely, "if Thing X has value, get more of Thing X." If Thing X is Bitcoin, then fine.

Which is to say that banks aren't fighting Bitcoin because it's an existential threat. Individual bankers may believe it has value or not, but altogether, it's an asset no different than stocks, mortgages, or dealing in fiat exchanges.

Right now, most crypto trading is being done by new companies calling themselves exchanges. They may be very profitable, but if banks start offering that service, I think the current players will get wiped out or bought out. The same way that a little company called Rio made some of the most popular MP3 players for a few years when MP3 were still a minority compared to CD sales. But then one day Apple decided to make an iPod, and Rio evaporated.

In short, we've seen examples of big new technologies coming in and shaking things up, but it's almost never been the case that large institutions just get crushed. Usually if that happens, it's not because the new technology had features that strong armed old businesses out of their position, but because old companies missed the opportunities on offer. Blockbuster could have bought Netflix for a mere fifty million in 2000, but didn't. Is it more accurate to say streaming put them out of business, or mere shortsightedness?

There will probably be various banking institutions that get Blockbustered, but when you're talking about the banking industry as a whole, you're talking about a huge number of businesses operating in a wide variety of services, as opposed to Blockbuster's single operation. For any one bank, just as an example, if their international remittance business goes down, that doesn't mean they lose their mortgages.

In short, Bitcoin entering the world of finance isn't a big earthquake that destroys everything and forces a complete rebuild. It's like a river that hits the ocean for the first time. It brings fresh water and silt and other things in that the ocean has never seen before, it forces change, but it doesn't destroy the ocean.

I'm personally looking forward to a day when Bitcoin Cash will make it viable to transfer money internationally with no risk of loss, something not possible with current volatility levels. When that happens, my life, and the life of others, will be improved. When people who have extremely low levels of income and who are undeserved by current banking systems can start to do more commerce, their lives will improve.

So Bitcoin Cash and other cryptos will make things better. But bring down governments or the banking industry and create some kind of free market utopia? Not likely.

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Avatar for dave_gutteridge
3 years ago


One of the conspiracy theories that floats around the Bitcoin Cash world is the idea that Blockstream took over BTC specifically to neutralize Bitcoin as a threat to the status quo.

That does summarize my conspiracy theory pretty well except Blockstream is just a pawn of "dark forces" and you do cover that issue in the next quote below. See my most recent article and older ones for my version of that story.

Some versions of this story have the CIA or governments in general being the ultimate masterminds, because if Bitcoin became big enough, both private and central banks would be wiped out, robbing the government of a lot of control over the economy.

I don't know what "dark forces" captured BTC to protect fiats from the competition a better currency represents. I have never believed banks would be wiped out (even though some people may make or believe that claim). "Robbing" is an interesting word choice.

Anyway, I think a real Bitcoin would provide another currency option (competition) to the people of the world. A potentially better option for commerce and for the people who hold the new currency. What it weakens is the ability to print more of the currency people are holding. It takes away the power of the governments to make one kind of money the people can hold worth less by printing more (that the government gets to spend) of it. I am not saying it would take away "a lot of control over the economy", but I believe the concern over the possibility of taking a small amount of power was enough to spur dark forces into action.

So, ya, Bitcoin will not save the world. I doubt many believe that is it's intent. Instead, it is theorized to make the world a better place and provide some (or more) financial freedom to many.

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3 years ago

Thanks for reading. I'm glad that you felt I was able to somewhat accurately encapsulate the general conspiracy theory premise, and that we agree on the overall impact of Bitcoin, even if we might disagree on the level at which "dark forces" might be motivated to try resist Bitcoin's emergence.

Personally, I think Blockstream, backed by various financial investors, co-opted Bitcoin purely because of the potential profitability of inventing demand for side chain services. I think that's motivation enough, no grander conspiracy required. But we'll probably never really know, because the better the conspirator, the less evidence of a conspiracy. ;)

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3 years ago

I like your writings :-)

My theory is that the "Blockstream was motivated by greed" story you say you believe was created to cover the truth. That is what we are all supposed to believe. You may be right that we may never know the truth if the professionals I believe are behind all this are real pro's. If we do find out, we may have to wait for death-bed confessions and such many years from now.

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3 years ago