It’s time to give you my own take on bitcoin. Over the past few days, we’ve armed you with the knowledge you need to understand the arguments. But where do I think they should take you?
Well, I don’t own any bitcoin myself. But if I did, I wouldn’t tell you about it…
My own view is complicated by a long list of things. Both bitcoin investors and sceptics should be aware of them.
First of all, bitcoin’s many benefits only truly apply under certain conditions. And we’ve seen those conditions often don’t apply. In fact, it takes a bit of effort to maintain them.
It can be worth the effort for some of us. And it could increasingly become worth the effort in the future. Or it could become easier.
But, right now, I don’t think many people would use bitcoin if they had some. Not in the way that it was intended. This makes me question bitcoin’s long-term future. It’s just not convenient enough. If you want to get the most out of it, that is.
Let me explain with an example. Amongst the early adopters of bitcoin were drug dealers. Bitcoin was used to buy drugs online in a completely anonymous way. Except, of course, many people were caught.
Many people argue this proves bitcoin is flawed. But that misses what actually happened.
In the most famous example, the operator of a drug dealing site had mentioned his email address in connection with his public key at some point. This eventually allowed the FBI to track him down. Via his email address, not his bitcoin.
Ensuring you never make a similar mistake and connect your bitcoin’s public key to your identity is not always easy.
Another problem shows why. The gateways into bitcoin make it hard to preserve your ID.
Most people use cryptocurrency exchanges to buy bitcoin. These can be flawed in all sorts of ways. Some defrauded their account holders. And many crypto exchanges require you to log all the same details as a bank might. This means your entry into cryptocurrencies is within the financial system. A matter of record that tracks the bitcoin to you and your personal information.
The cost and speed of bitcoin transactions have also failed to hold up well. But that discussion gets a bit technical.
My point is, although the benefits are very real, bitcoin takes quite some effort and understanding if you want to maximise those benefits, such as anonymity. For some people, that makes a lot of sense. But they’re in places like Argentina and Venezuela, or working in questionable industries. For such people, bitcoin is heaven sent. And I’m its biggest supporter in those cases. In fact, I believe it has saved countless lives of people in such situations.
But are you struggling to buy medicines because of government bans? Or do you have someone in Venezuela you need to support financially, but can’t get money to?
Well, not many of us do…
Now I am rather pessimistic about our own economy and the future of lockdowns over the next year. Which means Covid-19 may well bring bitcoin use to the UK. We might soon have reason to bother with bitcoin; a crisis or crackdown in the traditional financial system.
Then, bitcoin suddenly makes sense. And you’ll find me on the list of buyers. Or, rather, you won’t. But you know what I mean…
For now, many bitcoin investors simply buy and hold, they don’t use the currency. But, for bitcoin to succeed, this’ll have to change. Its value depends partly on its usability, not anything intrinsic. But usability is far from an established thing. Yet.
How bitcoin will actually change the world
The technology behind bitcoin – distributed ledger technology (DLT) – will change the world. It already has in many ways, bitcoin being just the lead story.
But I don’t think cryptocurrencies are the real topic you should focus on. I think it’s the other applications of DLT which will have an impact on your life.
For example, the Australian Stock Exchange is set to replace its outdated share registry and transaction systems with a DLT system. That’s been delayed till 2023. But another Aussie company, the National Stock Exchange, recently announced it has a DLT system ready to go and in the final stages of approval. NSX’s share price went from below 9 cents mid-October to 38.5 cents a few days ago… Not bad, even compared to a cryptocurrency.
National governments are attempting to use DLT technology on their own currencies too. Initially as a sort of parallel currency.
They love the idea of an open ledger that records every transaction and shows who owns what money. Ironically, for the opposite reasons to the libertarian cryptocurrency enthusiasts. It gives the authorities complete information about you. Cryptocurrency’s anonymity is possible, but if you lose it or design it out of the system, it becomes a tool for surveillance too. Once your ID is connected to your public key, anyone can know your entire transaction history!
Businesses’ and governments’ cost savings from DLT will be huge. It’s comparable to what computers did to information storage. Huge registries of information could become obsolete and our interaction with their information much more efficient. And secure too.
My own favourite prospect for DLT is one I haven’t read about elsewhere. It’s all about diplomacy and international trade.
Right now, when two governments or multinational governments deal with each other, they have a very simple problem. Whose authority do they appeal to in a dispute?
For a long time, the UK’s legal system was the go-to for multinational companies. International legal institutions have also developed.
But what DLT promises is something better. A system that is run by hard rules instead of arbitrary decisions and political considerations. That could bring a whole new level of trust to cross-border transactions and diplomacy.
If you ask me, we should be hunting for investments that benefit from DLT. That’s not just cryptocurrencies like bitcoin, but a huge variety of things which are barely emerging.
We hope to tell you about some of them in the future.
Nick Hubble
Editor, Fortune & Freedom
PS Do you have questions about bitcoin and other cryptocurrencies you’d like answered by an expert? And asked for you by none other than Nigel Farage himself? Let me know at [email protected] and then keep an eye on your inbox…