- Has bitcoin changed anything in your life?
- The revolution is yet to occur
- Competing currencies are the secret to success
I’ve been badly disappointed by bitcoin. Certainly not by its investment profits, to put it mildly. After all, I first discovered the cryptocurrency back in 2012. My new friend, Sam Volkering, had just joined our publishing company and began to talk about bitcoin all the time. (He hasn’t stopped since.)
When I say disappointed, I’m talking about bitcoin’s actual impact on… well, everything except investors’ net worth.
The pitch of those discussing bitcoin a decade ago wasn’t about the capital gains on offer… at first. It was how the cryptocurrency would have an important impact on our lives in a myriad of ways.
It would become a functional alternative currency, for example. This allowed all sorts of important benefits, such as avoiding inflation, state surveillance, central bank control and the many costs of our inefficient financial system.
The societal change that this could trigger was especially enticing. Governments would have to radically change how they treat their citizens for fear of driving them away from their national currencies and onto bitcoin.
Banks were going to have to modernise their services radically in order to be able to compete with digital wallets and decentralised networks.
The cost of transactions would plummet as the many middlemen of the financial system get barged out by blockchain and distributed ledger technology.
The world’s governments would launch digital nomad visas in a bid to entice high-earners operating on bitcoin as their “home” currency.
The list goes on. It was going to be a wonderful new world.
It wasn’t just cryptocurrencies that bitcoin unleashed. There was blockchain technology and tokenisation too. Suddenly, the old ways of doing things would be uprooted. No more ridiculous government bureaucracy, proof of identity, proof of ownership, transfer of titles, waiting periods or proof of address. It would all be done digitally, instantly and securely. The world could become a very different and much better place.
However, I don’t think any of this has happened – certainly not on any noticeable scale or on a day-to-day basis.
Sure, bitcoin is on everyone’s lips, and a lot of bitcoin-driven innovation has happened. Even Wall Street has absorbed cryptos as a speculative asset.
But that’s not what this was about. It was supposed to change the world, not just our bank balances.
Instead of cryptocurrencies making life easier or better, crypto investors find themselves wading through a maze of inconvenience when they try to buy or sell out.
Instead of crypto being about peer-to-peer networks, all the biggest stories on cryptocurrency news websites are about crypto exchanges going bust. Or stable coins that mimic national currencies that may or may not be fully backed.
Lately, the big story has been about a new bitcoin exchange-traded fund (ETF), which is bizarre. ETFs are a Wall Street invention designed to make it easy to own assets that you otherwise can’t buy easily, like uranium. But if you need an ETF to buy bitcoin, that sort of defeats the purpose, doesn’t it? You’re using a financial system to invest in something that’s designed to upend that very same system…
It’s all a bit demoralising, to be honest.
But my disappointment may be in for a rude surprise this year.
What if bitcoin was just the beginning?
The top cryptocurrency suffers from a variety of flaws that make it a poor choice for the vision that I had back in 2012, when I first began learning about it all.
It’s just not economical, efficient or convenient to use bitcoin on a daily basis for basic transactions. Not for me or the people I buy things from.
Bitcoin is very effective for certain other things, though. Moving money across borders, for example. I’ve moved back and forth between five different countries more than ten times in the last ten years. The compliance burden, the cost of exchange rates and the time it takes to move money around are painful. “Bitcoin solves this,” as enthusiasts like to say.
Bitcoin is also an excellent entry point into other cryptocurrencies, which brings me to what I want to tell you about.
Without getting into the weeds, what seems to be happening in the cryptocurrency universe is innovation to make different cryptocurrencies that are suited to solving different problems. Different cryptocurrencies are designed for different purposes, in other words.
For some people, privacy is a key issue. And so, the features of a private cryptocurrency must adhere to that concern.
Some cryptocurrencies are designed to be used every day, making their speed and transaction cost the key issues.
There are cryptocurrencies that are backed by gold. That means you can use them as if you were transacting in gold.
The list goes on.
The point being that the next phase of crypto innovation will be a myriad of cryptocurrencies to solve a myriad of problems. These will be judged on their merit, not their potential for speculative mania.
It all mirrors the history of currencies quite well. You see, money used to be a good, just like pizza. There was competition between different issuers of different money in an economy, and the government didn’t create a monopoly… for a while.
We seem to be transitioning back to this state of affairs in the cryptocurrency world. But that world has a lot more potential for innovation and variety. Also, there’s nothing like competition to produce what consumers want.
This means those who wish to be a part of the next phase of the crypto revolution will need to look Beyond Bitcoin.
Until next time,
Editor, Fortune & Freedom