I got into a great discussion yesterday about the wild, Wild West of cryptocurrencies and bitcoin.
The dialogue was with a new bright-eyed MBA graduate, who believes this is the future. I felt pretty bad to be the old Gandalfian cynic, who saw opportunities here but poo-poohed the notion that you could have a currency without government.
Am I just being an old cynic or is the youth too fresh-faced to see reality? You tell me, as I’ve had this dialogue many times with the bitcoin aficionados, and the argument goes thus.
They: “we are creating a new world order where the world can exchange value without control.”
Me: “you cannot have a world without control. It will be regulated.”
They: “we believe in crowd control and the community will regulate the currency.”
Me: “no way. Governments will not allow it.”
They: “we can get around governments.”
Me: “no you won’t.”
They: “we’re creating a world that does not need government.”
Me: “you think so? So what happens when your currency is used for terrorism, drug running and money laundering?”
They: “well, we can do that with cash. What’s so bad if we do it on the net?”
Me: “you want to live in a world without government? A world without regulations? “
They: “yes, we don’t need government. We don’t want banks. They can stay out of the way. We will self-regulate.”
Me: “OK, so when you have a nuclear bomb explode funded by bitcoin, you won’t care who paid for it, who set it off or where it came from. That’s the future you want?”
They: “Urm …”
It is this last point that is the critical aspect of why governments will regulate bitcoins. If America is attacked by terrorists funded by a cryptocurrencies that is unregulated, and counter-attack those they believe set it off causing a rift with China and Russia … do we really want a World War III created by an unregulated net?
Their argument is that it’s happening anyway, so we’re going to have to live with it. My argument is that the G20 will not allow it to happen. He ended up saying that this divide of views appears to be a generational thing, with the millennials believing they can change the system and the boomers saying the system will change you.
It’s an interesting debate, and I would love to sit on the side of the bright-eyed, rose-tinted youth, but then I used to wear a t-shirt when I was 20 that had a picture of James Dean on it and the slogan “f**k the future”.
I’ve changed … as does everyone. The best example, and maybe saddest, being John Lydon or, as used to be, Johnny Rotten of the Sex Pistols.
In 1976, he created an anthem: Anarchy in the UK.
An excerpt of the lyrics goes thus:
I am an antichrist
I am an anarchist
Don't know what I want
But I know how to get it
I wanna destroy passerby
'Cause I wanna be Anarchy
So John Lydon, the reformed singer, appears in the papers this week saying join the political debate, don’t shun it.
His exact words were: “go to town hall meetings and give them f**king hell … if you don’t start locally, you’re not going to change the world”.
The Times in their infinite wisdom, thus rewrote Anarchy in the UK thus:
I am a nightmare
I want a day mayor
I know what I want
And I know how to get it
I wanna vote in elections
'Cause I wanna see Democracy
Oh how we want to change the world but oh, how the world will resist such change. Hence, when I hear the bitcoin brigade talking about a bright future of a world without government, I go: you gotta be kidding me.
Pawel Turczynowicz says
I think it is not terrorism that will make regulations essential.
Sooner there will be a problem with unlimited money creation.
Bitcoin is fixed M0, but there is no problem to create M2, M3 for cryptocurrencies. Without control that could be just dangerous for the economy in case of reaching massive scale.
Another aspect that will block block-chain is Copernicus Law. Cutting long story short – in case of parallel money systems, when people believes that one system carries value better, they transact with the second one.
Between idealism and cynicism lies pragmatism. I was intrigued that your bright eyed graduate believed that they could rely on crowd control and the community for regulation. The trouble is that crowds are easily led, and easily whipped up into a state of frenzy by people with less than honourable intentions. This will be no different in a world of virtual currencies.
I was 15 in 1968, and I thought we were going to change the world. Much has changed, and a great deal of it for the better, but that was as much about working through the contentions of individual liberty and collective responsibility as about radical, disruptive…and even destructive change.
If you take one recommendation from me this year, take this one.
Read “Bitcoin, Burning Man and Beyond”. The crowd regulating through consensus is a better model, but it’s going to take a very long time to get there.
The observer in the west see’s that Land Registry, Payments and “freedom” are largely effective and balance the ability to prevent bad actors in the system.
The observer in Zimbabwe does not see the same. This technology can solve problems and be proven in markets where centralisation is actually a bad thing. In doing so it can dramatically reduce costs to serve and bring billions into economic activity.
Then over the 100 / 200 year time frame, the west will gradually adapt to group forming networks. Democracy is simply the least worst form of Government, but there may be better. I don’t know if decentralised regulation can prove itself in the short term, how do you aggregate consensus?
It would be nice however, to have a system that pushes towards consensus without falling for populism and doing stupid things like bringing back capital punishment. We don’t vote on everything that happens, but we empower people to run the system for us.
Voting on a blockchain has a certain usefulness, because it’s transparent and irrevocable, but it’s not yet proven.
The youth who want this change emotively would be best served channeling that energy to building the change they want to see in the world.