I often sit and think about the claim from my bitcoin friends that they’ve invented money without government. I’ve blogged about it quite often too.
The reason it is of so much interest is that if the blockchain and bitcoin can circumvent the financial system and the banks, then we really are in transformational times. A world of self-regulation on the net run by the global digerati and managed by no-one would be amazing. I just can’t see it happening however.
For example, unlike just a year ago, the banks are now saying how can we use this technology? NASDAQ, NYSE Euronext, USAA, BBVA and more are all turning their radar onto the blockchain and saying it’s good. Industry heavyweights like Dee Hock (founder of Visa) and John Reed (former CEO and Chair of Citigroup) are saying it’s good. Even governments are saying it’s good.
In America, there’s now a bit licence and you can see a real change in economies that tried to ban bitcoin, like Russia and China:
China bans Bitcoin, lowering the ceiling of the currency’s potential
Bitcoin trading roaring in China
Start-ups Speak Out on Russia's Looming Bitcoin Ban
Russia Central Bank to legalize Bitcoin P2P transactions
A year ago, they were trying to ban these developments because it undermines their economy. If they incorporate bitcoin and blockchain, it makes it respectable.
So what has changed? Why would banks, governments, regulators and the financial system suddenly change from saying bitcoin is rubbish to bitcoin is good?
I guess it’s the core of what bitcoin does. Bitcoin enables a real-time exchange of value one-to-one, peer-to-peer, in real-time for virtually free. That is its main benefit and, as a benefit, that is transformational.
Right now, if I send a payment from Brazil to Britain, it takes around two weeks, has to go through a mass of legacy infrastructure to check counterparties can be trusted, and arrives with heavy costs of fees. That is so last century. To me, it’s like making a phone call to a friend and they pick up the voicemail a week later and can only answer my message by leaving me a voicemail to which I can respond in another week. That is our banking system.
If I call you, do I really expect you to pick up 7 days later? So why, if I pay you, do you get the funds a week later? This is madness in the age of real-time.
That is the real reason why everyone’s now working out how to use the blockchain. The blockchain, bitcoin and cryptocurrencies may not be the answer but they are trying to provide a solution to the basic problem, and that problem is that I cannot move money across borders, across continents, in real-time.
This will change.
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