“A new economic paradigm is emerging that merges the virtual world with the physical world. This seemingly impossible accomplishment will also “eventually,” cause all geographic-financial boundaries to disappear. This new Digital Oz has the potential to radically reorganize global economic foundations and the governments who are attempting to controlled them.”
That a financial do-over becomes an existential threat to governments is laid out in the quote above. How do you control an electron on the other side of the world that is influencing financial transactions and the cost of goods and services in your own country? A digital financial resource that has the potential to remodel the monetary policies of a government, apart and distinct from that governments acquiescence or control. Wrenching away a fundamental component of a governments ability to control its own domain. The short answer that the Bitcoin community is counting on is; you can’t. Governments may not share the hopes and aspirations of the Bitcoin community or their opinions or optimism of this new financial system, but resistance can only delay the inevitable, not deny it.
Governments have the absolute right to define the parameters of commerce including authorizing a standardized and stable currency. The ability to regulate currency is intrinsically linked to collecting taxes and paying the countries bills. The power of the purse has alway been a central tenant to governments since the first central authority emerged and it is unfathomable that this fundamental power, so closely aligned with the control of governments and governments control of their populace, will be relinquished without complaint. Many powerful interest, both governmental and corporate, have vested financial interest in maintaining the supremacy of fiat currencies. Although goverments have this unalienable right, the abject failure of governments to provide safe and fair monetary policies produced the environmental cauldron within which Bitcoin was born.
Bitcoin was born in a climate of financial disaster; the housing market crash of 2008. This was accompanied by a profound loss of trust in our banking systems, regulatory oversight, legislative representatives and the government. The savings and loan collapse was not the only financial calamity to inflict emotional and financial pain on millions of individuals. Situations that our governments loudly proclaim they are there to protect us against. The almost identical screeching we are now hearing from some senators like Elizabeth Warren. “We need legislation to protect our citizens from this good for nothing financial fraud.” But what entity has perpetrated fraud against it citizenry over and over again? The International Monetary Fund counts thirteen systemic banking crises that have occurred since 2007. In each crisis the government(s) utilized their ability to set interest rates and control the amount of available currency by several means including extensive liquidity support, increases in guarantees on liabilities, and significant nationalizations.” You can understand this last sentence to mean; print money, lots of it!
Bitcoin has the capability to replace fiat currencies regardless of the government or country you are in. Regardless of the acquiescence of that government. It dramatically reduces the need for any and all banking systems. Gone also is the need for any regulatory oversight, regardless of its governing authority or charter. It removes any encumbrances to moving financial resources from point A to B or from any person or company to any other person or company. With these attributes Bitcoin becomes the first money allowing for global, frictionless, instantaneous commerce and banking-like transactions.
The vested self interest of most countries, specifically those with benchmark or reference currencies, would have been to kill this baby while it was still in the crib. I believe that a combination of not understanding the technology, not believing it is secure and not believing it would survive, has left them in a position of watching , what they envisioned as a small innocent, innovative fluke of an idea, morph into a new global financial backbone. They still don’t understand because this new and unfettered digital currency is also spawning a new-world, political order. The populace of many impoverished countries, many of which are controlled by dictators, now have an alternative to the devalued, inflation prone currencies of their home countries. This financial freedom and financial security is rapidly being adopted throughout the underdeveloped world. Bitcoin now has total market value of around 1 Trillion dollars. One country, El Salvador has recently recognized it as legal tender. Many others have indicated their intent to fellowing suite. A country designating Bitcoin as “Legal tender,” may not sound important, but once any country in the world has adopted a monetary system as “legal tender,” it requires all other countries to adjust their handling of transactions between them and that country. To put this another way, every country must now adapt to handling Bitcoin transactions in the same manor they would any other currently accepted monetary transactions. At the point where international banks, monetary funds, and governments have established the transactional infrastructure to conduct trade with El Salvador in Bitcoins the barrier to conducting business, trade or commerce with any other country utilizing Bitcoins disappears. As soon as the infrastructure for these international Bitcoin transactions become established, entrenched, frictionless and instantaneous, its adoption will spread even more widely and quickly.
An important point here is this: that baby in a crib just a few years ago is a rapidly maturing geopolitical Gozilla. The opportunity for governments to kill Bitcoin has passed. El Salvador provided both a demarcation and point of no return. Its opponents plan B appears to be, marginalize bitcoins as well as all other crypto currencies, in every possible way while simultaneously developing their own digital currency, linked in some tenuous way to the countries fiat currency. It has got to strike many as contradictory that governments and financial institutions are roundly criticizing Bitcoin, while in the next breath indicating that they want to model the next iteration of that nations transactional currency on the exact same model. These country specific, fiat digital currencies, are not hypothetical. China, while actively discouraging Bitcoin use and mining has actively developed its own Central Banking Digital Currency (CBDC), the digital Yuan. It works exactly the way Bitcoin does, incorporating a blockchain for security and transactional ledgers. There is however one caveat for the digital Yuan, Chinas blockchain is permissioned, meaning the People’s Bank decides who can and can’t use it. The ledger and blocks are also completely transparent to only one entity, the government of China. At some point China’s goverment will know everything their citizens purchase, how much they paid, what the orginating source of the funds where and where the item was geographically residing when purchased.
We can also look forward to legislation and regulations aimed at throttling Bitcoins growing utilization and broad acceptance. Corporations who correctly view the emergence of Bitcoin as a threat to their power and control will be flooding the digital and mediea realm with their own, vested self-interested propaganda. To whit — An article recently published online for NationalInterest.org: “Bitcoin Is a Threat to National Security,” exemplifies the fear mongering and calls for nation security as a reason to 1) outlaw Bitcoin, 2) regulate Bitcoin and finally 3 ) compete with Bitcoin.
The sub heading of the article is a good summation of the direction and misdirection of the article.
“The time has come to stop the use of Bitcoin as a pirate currency before it spreads further into not only the U.S. economy, but into the entire global financial system.”
The article was obviously written by two individuals who know very little about Bitcoin. I can pretty much guarantee to you that they know that, and don’t care.
First and foremost they refer throughout the article to Bitcoin as a privately controlled, pirate currency. Neither description comes anywhere near accurately describing Bitcoin. But the article is engaged in the exact same type of misinformation that is now being employed to convince mainstream citizens that there is something nefarious about Bitcoin and by extension all crypto currencies. The intent I assume is to hedge the tide of adopters and investors to slow the advance of a movement that threatens many huge and powerful corporations with strong governmental connections. That last sentence in all probability should have ended with: strong lobbying connections. How ironic that vast amounts of money will be spent to kill off a new and better from of money, depriving mankind of one of it greatest advancement while at the same time criminalizing financial freedom.
Much has been made of the use of bitcoin by criminals to hide their transactions. How ironic that Federal prosecutors utilize the ability to go into the ledgers to track and identify criminals utilizing bitcoins. Here is a link to a Ted Talk that details this use by prosecutors. All curencites, througout time have been involved in crimes. The all time winner for being utilized in the most crimes, involving the most financial value is the US Dollar. For all pratical purposes there is no second place and certaintly not bitcoin.
My background in clinical research and biotech consulting required me to study a lot of biology. The most powerful influence on human development has been natural selection. Often referred to as survival of the fittest. It is a genetic predisposition enabling an organism to survive in some, but not all hostel conditions. Those that overcome obstacles in their development paths survive and thrive, passing those survival attributes on to the next generation, those that don’t, disappear.
Bitcoin has already survived obstacles that prior attempts at a digital currency did not. Although there are threats to Bitcoin, there are no existential threats to its existence. It is genetically predisposed to being able to survive in a hostel environment. As it continues to survive it will continue to thrive and grow stronger through adoption, adapatation and distribution. There is no other currency digital or otherwise that provides a financial transaction mechanism that can store, transfer, protect and account value, as a digital asset class without the encumbrances of a government or the vested self interest of potential manipulators. There is no other currency that can release citizens from being held hostage to the financial manipulations of their countries currencies and improve the economic futures of individuals previously without hope.
Bitcoin has a mantra: Trust but Verify. This is accomplished through a combination of innovative cryptographic, mathematical and distributed nodes. It was designed and developed as an open source project. By definition this is the opposite of “private.” Bitcoin went to great lengths to eliminate “permissions.” Pirates traditionally stole from wealthy merchants and citizens for their own enrichment. That definition seems better suited as a label for those who want to maintain the fiat-currency, status-quo. The rest of us are headed to a better world, a Digital Oz.
For a brief description of how Bitcoin works and the security protocol that makes it safe you can read our review and introduction of the history of bitcoin technology here.