Left unchecked, I have a habit of becoming a ‘Bitcoin Bore’ on this subject, and as it’s such an enormous area, there’s a lot to discuss. So, I will take my time, pull out the key points, and completely avoid ‘going off on one’ where possible. Let’s think of this as a simple introductory article exploring why we should even bother with this new phenomenon. And, to keep it even simpler, I’m going to talk only about Bitcoin – purely for ease – although you can substitute most other currencies in it’s place where we talk about generic applications.
It really blew my mind when I first learned about Bitcoin a few years ago, but I got completely and utterly hung up on the technical side and totally confused myself when trawling the internet for information, most of which was wrong, inaccurate or obsessed with the back end of how it works. It didn’t dampen my enthusiasm, but it did frustrate the hell out of me. I wanted to see real world cases, I wanted to get to grips with just how big this thing was going to be.
So, this article has nothing to do, really, with the tech. To use my favourite analogy, it’s a bit like driving a car: I don’t need to know exactly how that car works to drive it. I just have to know how to turn the key, what to do to keep it going (petrol etc) and how to use it (drive to where I’m going). The guys at the garage take care of the actual working parts, for me that car is a tool for work, a source of pleasure, something that’s handy in an emergency and a myriad of other things. Bitcoin is the same.
Let’s start small.
Most of us use credit or debit cards on our phones, or a form of digital payment gateway like Apple Pay. We’re already used to it, but just a few years ago, this was an impossible dream. There’s no physical money there, it’s all just 1’s and 0’s, and it all happens digitally without us really knowing how it works. In fact, the money isn’t really there either. It’s just a number in your bank account. If you want to turn it into something physical, you just go to a bank or ATM and they’ll give you some paper which says it matches the numbers in your bank account. It’s only paper, remember, it’s not actually backed by anything except your faith that the next person will accept it. The days of being backed by gold are long, long gone in pretty much every modern economy. It’s all an illusion, but we’re all bought it in and the system works as a result. It’s only paper, yet we will all accept it, work for it, fight for it. It’s quite a thing when you think about it.
But what if you cut out the paper bit completely? Why not go ‘full digital?’ – we’re nearly there anyway in our day to day lives. And then, while we’re there, we could solve a few other problems as well, so let’s go a little larger.
Let’s say I nipped over to see my friends in America. They’re not going to accept my ten pound notes, but they will, probably, accept a payment by card, perhaps even with my smartphone. Of course, I’ll need to let my bank know for security reasons or they’ll stop my payment, and I’ll need to pay them some hefty fees for using my own money abroad, but it’s not that hard. But why should I have to tell my bank, or pay for the convenience of, well, paying? Wouldn’t it be easier if you could have a global currency that you could use anywhere in the world at any time without any conversion costs or even having to think about it. You know, like Bitcoin. Now THAT could be handy.
Of course, transacting like this means there’s no bank accounts required. Wow. That’s a thought isn’t it? No charges, no forms to fill in, no-one telling you what you can and can’t spend your money on. For us lucky few in developed cultures, that may become more of a choice running alongside a bank account, but let’s think even bigger: what about the billions of people who have no access to banking facilities at all, usually in poorer countries. Suddenly, with minimal training and a simple hand held device, they can be equal with anyone else in the world. Not only that, in many cases, these disadvantaged countries suffer from extreme corruption and hyperinflation and, whilst Bitcoin is not a panacea for everything, they suddenly have the choice. Even better, their money can’t be eroded by economic mismanagement or blocked from leaving the country. It’s theirs. It really does belong ‘to the people.’
Suddenly, those people could trade with you, right here, right now. No fees for going across borders, no waiting 5 days and paying a fortune for a SWIFT transfer. Escrow services already exist for crypto (though in their infancy) and a new generation of blockchain driven smart contracts can be set up to ensure that no funds are released until all terms of the contract are fulfilled, ie a delivery made or a service rendered. And that can be done just between the parties, with no middlemen. You can use the same currency to buy a box of matches as you would to buy a mansion, anywhere in the world at any time and everyone will have an understanding of whether the price you’re asking is too much or is a bargain.
If that’s not enough for you, think about this: There’s no fat cats controlling the money supply, devaluing it when it’s convenient or withholding it when they need to. There’s no government or banking system in the world that can stop it, that’s the beauty – and the point – of the decentralized consensus system. It’s a million ‘little people’ and market forces that control the value not the big boys. And as for supply, it’s utterly limited at 21 million coins. Forever. It is more absolutely finite than gold, or, actually any other material we know about.
And that’s just the beginning of course. It’s all a bit clunky right now; transferring fiat money to cryptocurrency can be messy and expensive, it’s easy to make mistakes and values fluctuate to a ridiculous degree in a unregulated and wild market, ripe with chancers and con men, as all new things are. But that will settle down and get cleaned up in time, so just take a moment to step back and see the bigger picture.
You think the internet changed the world? It did, but this will be far, far bigger.
(NOTE: this article has been written from an ‘ideal’ perspective, ie the idea of Bitcoin and other currencies, rather than the real world application which will always have practical limitations. Eg, will Bitcoin’s scaling ever be enough? Will it really be totally decentralized? Will the banks and governments do their damnedest to stop it happening by making it hard for people to buy in or by giving institutional protection to the big boys? We don’t know and I don’t pretend these issues aren’t there. For now, this piece serves only to say ‘this is the potential’ and we’ll achieve some, most or all of it.)