What does our Currency Future hold in Store?
In Philosophy lectures during college I was required to take a course on Bioethics. The professor’s nagging principle was: With an increase in technological capabilities, we have an increase in responsibility, and therefore a needed increase in ethical guidelines. Well, that was good for Biology and genetic manipulation. Who really wants to eat a tomato cross-engineered with salmon genes, or a potato pumped with pesticidal enzymes? Tomatoes and potatoes aside, we want control over what happens to us. Not only what we eat but also how we spend. And that’s ethically sound – those who sell us those products should consider that we need information to make an option.
Online-banking, though? Is it a real option between potatoes and tomatoes? Or does online-banking just offer us many different sorts of tomatoes and we are faced with picking between pseudo-options? There is something else – outside of the realm of tomatoes – which may sit more comfortably with our online-banking habits: cryptocurrencies like bitcoin. I consider it a seriously good idea to take a brief look into what “online currencies“ are beginning to do and will do to us.
In March this year, for the first time ever, bitcoin has become more valuable than solid gold (see here). What?!? I don’t even know what bitcoin is… That’s right. Inform yourself, like you do with your groceries. Find out what has been pumped into your previous online-banking and credit card veins. You’ll be surprised that you could pay differently. Bitcoin and other “cryptocurrencies“ use the technology that could make it possible for us to pay 0% APR and 0 service fees (although they currently charge for so-called “mining“ fees). They are peer-to-peer payments, and more trustworthy than the best of fiscal and financial institutions.
Don and Alex Tapscott, in their 2016 book Blockchain Revolution, used the image of a genie in a bottle to describe this technology’s potential. This genie could literally transform (and simplify) the way you spend and shop and transfer money. It could revolutionize banking and with that, everything – literally – everything else. If banking, then construction and the automobile industry, then artisans and engineers, plus car components and steel, and hospitals and public funding, and the list would go on. It could cripple – or transform positively – all of society as we know it.
It would most likely take years, perhaps decades for such a thing to happen. The internet in the early 90s hoped with a dot-com revolution that power would go to the people, since it was theoretically independent of all big-business (which didn’t happen in the long run). And back then, only some used the internet. Now most of us can’t even imagine life without it. Now it’s a household term. This too will become of cryptocurrencies. They will give power to the peers.Nick Szabo says in his book, The God Protocol, “Doing business on internet is a leap of faith.“ Indeed it is: you have no real idea who is behind what is being promised to you. We just trust because it has turned out well before. So we hope it’ll turn out well again.
But cryptocurrencies like bitcoin are based on the principle of distributed trust – actually the core value behind the American free market system, from which we have necessarily been somewhat removed after 250 years. This trust nowadays requires utter transparency. And cryptocurrencies can offer that. Bitcoin was conceived and described by Satoshi Nakamoto in 2008 as a cryptocurrency in his paper, Bitcoin: a Peer-to-Peer Electronic Cash System. He says that there must be no third party to verify your identity and ability to pay, since it is based on an open source code. That means that the internet becomes more than an information highway. Now it becomes an interstate of money and value. This value comes directly from the users through true structured recorded information.
Sounds confusing? Well, it is for less-tech-saavy specimens like me. But I want to dedicate my next blogs to ideas from Tapscott & Tapscott’s excellent work Blockchain Revolution. I will deeper into the technology behind bitcoin and cryptocurrencies. I will show what challenges this technology brings, but most of all which current challenges this technology overcomes. And it’s not a rotten bunch of tomatoes.