News
Cryptocurrency is not the paradigm shift you’re thinking
Have you heard?
Donald Trump to speak at the Bitcoin 2024 conference. The Republican Party has included cryptocurrencies in its election platform.
Not too shabby.
Another US presidential candidate, Robert F Kennedy, Jr., has said he would use blockchain to improve governance and has proposed Bitcoin as an alternative currency.
That’s nice to know, but doesn’t that defeat the purpose?
Why should you use blockchain technology to manage a centralized entity? You only need blockchains to manage entities that do not share a common database or business process.
Why does it matter if the US government or any political party “approves” Bitcoin? Bitcoin is a non-governmental source of money. Anyone can use it.
I think the concept is not catching on. When people talk about cryptocurrency as a new paradigm, do they really know what that means?
The point is missing
A few months ago, a commentator argued that blockchain technology requires huge data centers, so we should invest in the data centers and everything needed to support them, not in the tokens themselves.
She missed a crucial detail.
If cryptocurrency worked as it should, there would be no need for data centers.
You will have access to vast, public, global networks of computing power provided by people and companies around the world, who use their resources and equipment in exchange for rewards.
You will have no opportunity to invest in real estate, commercial property, machinery and other things that support data centers.
Ordinary people will provide all of these things in exchange for compensation from these networks in the form of tokens (including, potentially, tokens pegged to national currencies).
You will have the opportunity to invest in these tokens, in the people who contribute to the network and in the companies that profit from its cryptocurrency, such as miners, developers, entrepreneurs, validators and all those who participate.
Not like the money you know
This isn’t the only paradigm cryptocurrencies will upend.
Baby boomers have become so accustomed to their government’s monopoly on money that they don’t know any other way. So-called monetary experts still think that money has intrinsic value or some innate property that makes it worth using.
We know that money is a social technology. Its value comes from social consensus. If enough people agree to use it, they will use it.
Whether such an agreement is reached because the government so dictates or by some other agreement, belief is more important than utility.
Shiny metal flakes? Pixels displayed on a screen? Writings in a ledger or images on scraps of paper?
Sure. Whatever gets you what you want.
The stories we tell ourselves
Some time ago, my son told me the story of “baby money.”
He said that a million years ago, someone dug orange dirt out of the ground and called it money. He let the money be used only by children. Then, when the children turned 18, they forgot about the money and how it got there.
Sounds familiar.
Many civilizations have had two sets of money: government money and common currencies. One form of money for the rulers, another for the people. One currency by decree, another by consensus.
Today’s economists believe this is unstable and unsustainable, but humans created vast empires, stable trade networks, and prosperity with these systems before the Fed was created.
Our money is a meme, an emotional connection to images and photos that quantify our wealth. It is a mirage, the product of financial engineering, supported by government edicts and collective nostalgia.
Try telling that to Billy the Neighbor. He’ll look at you funny and ask for a stock tip or a memecoin recommendation. He doesn’t know how money works. He just wants more of it.
This is what Wall Street is banking on. This is what politicians see.
You and I know that the opportunities offered by cryptocurrencies go far beyond.
Our money, not theirs
We don’t need to invent stories, get presidential approval, or argue about monetary principles. We need to design and iterate. Let the technology thrive or fail, and trust that people and markets can figure it out.
The Bitcoin network is self-financing. The protocol works without human intervention and no programmer can hack or take over the Bitcoin network.
Over time, some altcoins will also reach the same level of autonomy and relevance.
So you can have ETFs, bans, US government chokepoints, useless DeFi protocols, scams, Ponzi schemes, smart contract platforms, angry politicians, and greedy developers.
None of this changes the cryptocurrency’s fundamental value proposition:
Money for the people.
With Bitcoin you can send money to anyone, anywhere, at any time, in any amount, without restrictions, without revealing your sensitive personal data, without putting your property under the control of another person, with the certainty that your transaction will go through successfully and with the confirmation that every payment you receive is authentic and valid.
It works under all conditions, even when counterparties fail. It can sustain itself without political violence, military coercion, government manipulation, or sovereign debt.
Other cryptocurrencies exploit some or all of these features for different purposes, with the same result: everyone has access to all the tools of finance.
This is the investment opportunity.
A new type of printing machine
With cryptocurrency, you can choose who you associate with, how you associate, and the terms of your agreements. You don’t need to petition the government or declare war if you don’t get what you want.
You can simply create another protocol or implement a new smart contract.
Cryptocurrencies don’t need Wall Street to be safe or easy. Every failure, hack, and attack exposes a vulnerability that developers must fix. Every “cycle” brings more money and attention to the technology, its flaws, and how to fix its problems.
When using cryptocurrency, monetary power does not flow to those who can capture the hearts and minds of regulators. It flows to entrepreneurs, developers, and community members.
Now, we have Wall Street ETFs. Cryptocurrency commentators think they will attract a lot of money and attention. They seem willing to sacrifice their share of the world’s wealth in exchange for a fraction of what remains after the traditional financial system gets its share.
But Wall Street has a different plan. Its firms sell financial “picks and shovels” – access to financial markets.
Cryptocurrencies provide us with our pickaxes and shovels for free.
If you’re thinking of buying one of these ETFs, ask yourself:
Why would you want to invest a share of Blackrock’s success rather than your own?
Think smaller
This is the real paradigm shift.
With cryptocurrency, a teenager in Indonesia has as much power as the most prestigious financier in Manhattan. All you need is a laptop and an internet connection, and you can create a new monetary system that is global, permanent, and accessible on demand.
The sooner you understand this idea, the sooner you will realize that:
We have reduced the tools of finance into a format that you can carry anywhere and use anytime for any purpose.
And there is nothing any politician, financial company or government can do about it.
Originally published on https://mirror.xyz.
Mark Helfman publishes the Encryption is easy newsletter. He is also the author of three books and one of the best Bitcoin writers on medium AND Hacker noonFind out more about him in his biography and connect with him on Green algae.