Using the Transformative Nature of Bitcoin to Understand Our Future
Lately Bitcoin and the blockchain have been occupying more and more of my attention and I recently found myself watching Andreas Antonopoulos’s excellent talk “Introduction to Bitcoin: what is bitcoin and why does it matter?”.
It does such a terrific job of encapsulating Bitcoin’s transformative potential and I wanted to translate this into some likely futurist scenarios in the years ahead.
Andreas has become a world-famous advocate of Bitcoin-related technologies, and he’s published five books on the subject, but it took time for him to become convinced enough to turn his obsession and advocacy into his vocation.
His experience followed a now-familiar two-part process. First, he dismissed Bitcoin as “nerd money” for gamblers and drug dealers. Then he grasped its potential and became completely obsessed with it.
What makes Bitcoin so captivating? It’s much, much more than what it appears to be.
Bitcoin is not a traditional currency, or a company, or a product. Rather, it’s a platform of trust.
All forms of currency are based on trust. Not just those that are commonly referred to as fiat money, which means “trust,” but absolutely every form of currency is based on some level of trust.
Phrased more philosophically, Bitcoin is the concept of decentralization applied to the exchange of value.
To get our minds wrapped around this idea, it helps to take a step back and ask, “what is money?”
What is money?
A common economic definition of money is “any good or asset that is accepted on one side of every exchange”.
If I’m buying something, the seller will almost always accept money. And if I’m selling something, I will almost always accept money.
This characteristic of money means that simply possessing it lets you purchase a near-infinite variety of goods, services, and experiences.
Money itself typically isn’t valuable, though commodity money like gold might have industrial uses. But since money is tradable for things that are worthwhile, such as the goods or services we actually want to purchase, it opens up whole new opportunities for specialization, trade, and mutual profit.
If you don’t find this point fully convincing, consult the first few chapters of any introductory economic textbook. Economics 101 almost always has a setting-the-stage section talking about all the ways in which money is superior to barter.
For most people it’s difficult to grasp all the nuances of money because it’s one of the oldest technologies in existence, so deeply embedded in our lives that we take it for granted.
However, today’s monetary systems are old and tired, with so many patches in place that even the patches have patches.
Why is decentralized money potentially revolutionary?
Over its long history, the human race has had to struggle through five major paradigm shifts in money:
- The emergence of barter
- The first abstractions of value (e.g., shells and beads)
- The move to metallic monies, like gold and silver
- The move to paper fiat money
- The move to plastic money (e.g., credit cards)
Andreas maintains that the 6th revolution in money started with the introduction of #Bitcoin and the creation of the first network money.
Like the Internet, the Bitcoin blockchain is completely decentralized and allows for currency to run as an application.
Approaching it from another perspective, Bitcoin isn’t “money for the Internet,” it’s the “Internet of money.”
This line of thinking is more than a clever soundbite; it’s a profound truth that gets at the heart of why so many people are excited about this space.
What the decentralized properties of the Internet made possible for communication, the decentralized properties of the blockchain make possible for money.
Bitcoin has emerged as the first open, global currency not beholden to any nation state, institution, or central authority.
It is also programmable. Anyone can write applications on top of it and launch them, without asking permission from gatekeepers.
Why do decentralization and programmability matter?
Decentralization and programmability are the same attributes or characteristics that have made the open-source movement so exponentially innovative. From out of the late-night musings and buzzing of programmers that contributed to the confusion of that community have emerged staggering examples of emergent order that has irrevocably changed the world, almost always for the better.
Tons of software, including most of the code powering your computer, your access to the Internet, and even the pixels displaying on your screen right now, was written by decentralized open-source communities.
And now, there’s a monetary system that can be used and modified in the same way.
Putting it all together, we have:
- An ancient technology (money) that forms part of the core stack that civilization is running on.
- The first protocol which allows for experimenting with that technology at the scale and speed of open-source software.
From this vantage point, you don’t need much imagination to see the potential.
What’s the future of Bitcoin?
Of course, we’re still in the very early days of the blockchain and trying to predict where it’ll be in fifty years is like trying to foresee the emergence of Amazon from the crude Internet of 1975.
Still, there are indications, and as the co-host of the Futurati Podcast noted, we are being exposed to a variety of insightful glimpses of what’s in the pipeline.
The decentralized, anonymized nature of the major cryptocurrencies will prevail.
Many people, especially in the older generation, will remain confused by cryptocurrency. They’ll stick to national currencies, giving traditional banking a bit of staying power. Increasingly, though, these people will miss out on investment opportunities and efficient financial services.
It may become harder and harder for them to find retailers that accept their dollar-based credit cards without adding a surcharge.
At the same time, cryptocurrencies are seen as “geeky,” and it will take a serious upgrade to their user interfaces for them to reach mass adoption.
Speaking with noted crypto-evangelist Joel Comm, he helped us understand the possibilities of using non-fungible tokens (NFTs) to store documents like property deeds and driver’s licenses. This could substantially reduce the red tape involved in many routine activities while reducing the likelihood of fraud and legal disputes.
Corey Hoffstein, of Newfound Research, talked to us about the burgeoning market for NFTs and the challenges of applying traditional financial concepts to the crypto asset ecosystem.
And of course, famed Bitcoin podcaster Peter McCormack had a lot to say about the double spending problem, Bitcoin versus gold, and Bitcoin versus every other major cryptocurrency.
There are going to be a number of monumental new experiments with this technology, and I’m thrilled to be here to see them happen.