The Case for Bitcoin (or Something Like It)

 The Case for Bitcoin (or Something Like It)

Chris Skinner

Chairman at The Financial Services Club

Views 587

The Case for Bitcoin (or Something Like It)

11.07.2016 09:45 am

I can remember a few years ago that the UK pound was almost at the level of being valued at $2.  Two dollars to the pound.  Amazing.  I brought a lot of American stuff that year.  Yesterday, I bought something and it was $1.30 to the pound.  Shoot.  The dinner for $100 that a few years ago would have cost me £50 was now £72.  Ouch!  I’ve seen this a lot over the years in my travels.  Australia used to be cheap.  It’s now expensive.  Europe used to be expensive and then became cheap, but it’s getting more expensive again since we voted to Brexit.

Currency fluctuations are something that batter everyone, based upon the stability of their economies.  My South African friends used to get a decent rate to the Rand until President Zuma messed up the country.  As for Zimbabwe, well.  Zimbabwe now trades mobile minutes as currency along with US dollars, ever since the national currency went into meltdown.  Right now, Venezuela looks like it’s doing a Zimbabwe

So what does this mean?

Well, many of us look at dollars, euros, pounds, yen, yuan as being of great value.  But they’re not.  These currencies are all useless.  They’re just fictions.  They are made up by governments to be of value and, because we believe in governments, they work.  As long as the government works, the currency works.  The Zimbabwe Dollar and the Venezuelan Bolivar are only imploding because their governments stopped working effectively.  Other countries stopped believing in their governments’ abilities to run the country, and their currencies imploded.

This is what feels very close to home at the moment.  Our country voted to #Brexit, and the guys leading the campaign to Leave all left.   The left the rest of the people with no plan.  With no plan, there is no confidence and with no confidence the currency implodes.

What happens when money stops working?  We find alternatives to trade.  Gold, oil, mobile minutes, comic books, beads, food.  Anything that has a value that is stable when currencies are unstable.

In many markets, when currency stops working, people are now also turning to bitcoin.  We saw this in Crete when the central bank seized citizens’ savings and others are thinking, like me, that the Brexit vote could be a gift to bitcoin.

It won’t be of course, because bitcoin has too many faults – lack of scalability, cost of processing, trust in structure, challenge of acceptance, understanding of consumers and so on – but it may be the prototype for something far more acceptable in the future.  A little bit like the internet before Tim Berners-Lee, bitcoin sits in its own technical basket of geekiness that is waiting for someone, anyone, to break through.  Maybe it will be Circle or maybe it will be Ethereum – oh no, the DAO hack  – and I’m pretty sure there will be a breakthrough in the future whereby some cryptocurrency becomes a standardised internet exchange of value.

This is the dystopian vision of Lionel Shriver, author and visionary, in her new book The Mandibles, 2029-2047.  The book is a fairly depressing vision of the future in which the American Empire is on the skids, US government debt is astronomical, the dollar is in free fall and being battered by a newly-created international reserve currency, the bancor.  In response, the US government confiscates all the gold in the country, and American citizens are forbidden to take more than $100 out of the US.

Likely?  Probably not at the moment, looking at what China is doing, but the book intrigued me for the idea of the bancor, the envisaged currency of the future.  The bancor is a cryptocurrency based upon a basket of fiat currencies.

As The New Yorker describes it, America’s economic collapse is “set in motion by the introduction of the bancor, a new global reserve currency meant to replace the dollar on the international market and backed by a coalition of countries led by Russia’s ruler-for-life, Vladimir Putin. Furious, President Alvarado, America’s first Mexican-born head of state, announces that the U.S. will default on its loans. The Fed goes into overdrive, printing new money to cover its debts. In short order, a greenback is as worthless as a Weimar cigarette rolled with a fifty-billion-mark note. Hard-earned savings go up in smoke. A meagre cabbage costs thirty dollars one week, forty the next, and that’s when there’s still cabbage to buy. So long, superpower nation. Hello, hyperinflation.”

For me, the bancor is bitcoin 4.0.  A design upon a design that gradually makes the faults of bitcoin 1.0 to be wrinkled away until we do have a trusted digital currency.  Bearing in mind what’s happening in Venezuela and Britain right now, maybe that wouldn’t be such a bad thing.

 

Latest blogs

Jonas Andersson Fingerprints

In Consumer Biometrics We Trust: Authentication For the Data Privacy Age

Data privacy is high on the global agenda. In the wake of data protection policies such as Europe’s GDPR, ensuring the integrity of personal data is an increasingly pertinent subject. This is a governmental and corporate policy reflection of the Read more »

John Burgos Mindgate Solutions

Overcoming anxiety around mobile payments & digital payments - In the South Asia Pacific

Innovation and technology usually go hand in hand.  Therefore, for innovation to be fully realized, the technology that enables the innovation must be adopted as well.  During the last 5 years, we have had innovations from Google, Apple, Read more »

Stuart Robertson iDelta

Finance Sector PLCs Hold the Key to Economic Recovery

We have started to see the devastating impact the Coronavirus will have on our economy.  The travel, leisure and hospitality industry redundancies are rapidly mounting up with restaurant and bar owners facing no option but to shut up Read more »

Hirander Misra GMEX Group

Are UK Banks profiting from the current coronavirus crisis and failing SMEs?

A UK business could be eligible for a Coronavirus Business Interruption Loan Scheme (CBILS), as set out by the UK Government. However, it appears that despite the Government’s best intentions, this scheme is not working in practice and some urgent Read more »

Otabek Nuritdinov Safenetpay

A strong fintech needs more than just access to funding

  Investors, both private and institutional, are excited about investing in fintechs that are in the payments services business. What are the issues that really should matter to you, as a client? In 2019, institutional investors Read more »

Related Blogs

Danny Scott CoinCorner

Too early to say whether or not Bitcoin is a true safe haven asset

“The past decade has been a turbulent time for Bitcoin - we've experienced bull markets, bear markets, 10% swings (in both directions), China banning Bitcoin, China unbanning Bitcoin, China banning Bitcoin (again), China unbanning Bitcoin (again), Read more »

Danny Scott CoinCorner

Opera becoming first major browser to enable Bitcoin payments

CoinCorner’s CEO, Danny Scott, commented: “It's great to see a company like Opera getting involved in the cryptocurrency industry. It was actually my browser of choice back in the early 2000s and this innovation may encourage me to move back to them Read more »

Jean-Paul Carbonnier CarboKinetic

Market Data, Reference Data and Blockchain

Blockchain, or distributed ledger technology (DLT), has the potential to disrupt a wide range of business models across the financial services industry. However, the potential application of blockchain to the worlds of market data and reference data Read more »

Henry Benjamin Skycoin

Why the Future of Cryptocurrency isn't Bitcoin

The world was introduced to cryptocurrencies with Bitcoin, and at present, it is still the de facto cryptocurrency on the market. The thing is, the future of cryptocurrency doesn't lie with BTC. The majority of things that are first to market always Read more »

Chris Skinner The Financial Services Club

Should I Buy Some Bitcoin Now?

I’m being asked this a lot as the value of bitcoin and other cryptocurrencies have increased ten-fold in the past few weeks.  Good for those who have some.  Bemusing for those who don’t.  There are a range of factors driving the rise in Read more »

Magazine
ALL
Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel