Will Bitcoin’s underlying technology be able to free the people from financial slavery? Or will proprietary blockchain algorithms imprison people as serfs in a high-tech feudal state? Transcending class interest, I believe decentralized ledger technology can provide a mutual benefit to both the people and its ruling classes.
Bitcoin’s Historical Promise
In the early days, decentralized internet money Bitcoin promised to free a grassroots movements of tech enthusiasts from the financial chains imposed on them by central bankers, central governments and centralized capital. Bitcoin, it was believed, when used as electronic currency, could transcend national borders and escape legal oversight — a democratic People’s Money.
With Bitcoin, participants were able transact a digital currency in a way that did not require them trust anyone. The network’s decentralized algorithms guaranteed the validity of the network’s present state. Mathematical algorithms successfully eliminated the need for centralized authorities such as central banks to verify transactions.
As word spread, the excitement for Bitcoin’s potential to cut out the financial middle-men grew exponentially. Never before had the common man been handed a financial tool with the potential to disrupt the global economy.
Despite spectacular heists, with thousands of users losing up to millions of dollars in value, the Bitcoin ledger itself has never been hacked. For more than seven years, this decentralized blockchain ledger has been the most secure electronic system ever built. Bitcoin’s ledger is more secure than the global SWIFT network put in place by the financial world.
Bitcoin’s blockchain technology triumphantly delivered, but the much anticipated social revolution that would topple centralized banking hasn’t materialize. Early investors still eagerly hold on to their coin waiting for mainstream adoption.
Barriers to Adoption
There’s a simple reason why Bitcoin’s currency failed to go mainstream. Precisely it’s core feature — anonymous, trustless transactions — meant no major financial institution wanted to touch it. Bitcoin’s algorithms allow for a fixed and maximum supply of 21 million coins. While divisible up to eight decimals, this limitation means no Bitcoin user can create money from nothing, an important business model of commercial banking.
In terms of a global payment system, boutique consultancy firm Innopay had recognized early on Bitcoin would fall short. Seen from corporate merchants’ perspective, Bitcoin namely increases the barrier to payment. For example, with credit cards, merchants can take your money without your permission, yet with Bitcoin, consumers have to give merchants their coin. Bitcoin requires each consumer to actively initiate a payment transaction.
While the anti-capitalist underground loves this feature, globalist enterprise obviously did not welcome the increased friction Bitcoin introduced to payments. Unlike credit cards, Bitcoin could not support a host of conveniences such as pre-authorized payments, recurring payments or charge backs. Credit cards have names and addresses tied to each transaction, while Bitcoin’s anonymity has (mostly) driven massive online fraud and drug trafficking.
The globalized economy moving towards frictionless payments, Bitcoin’s cumbersome solution meant a throwback to medieval times. Whether we like it or not, the future of payments is going to be “always on”, i.e. invisible to consumers. The aforementioned limitations effectively condemned Bitcoin’s use to the ideological, anti-globalist / anti-capitalist hacker scene.
The Pivot: Currency or Ledger?
Despite big names such as PayPal and Microsoft piloting the technology, multinational corporations were never going to support mainstream Bitcoin adoption. The community, in turn, fairly recognized Bitcoin’s limitations as merely a money. From the start, the community has been fighting ideological wars over the question whether Bitcoin is a currency, a payment system, or a decentralized ledger technology.
In fact, Bitcoin is all three, but realizing they can’t win a three front war, Bitcoin industry leaders have chosen the most promising path to success. In recent years, many former Bitcoin start-ups have pivoted to become technology-first blockchain companies, some even thinking of powering an entirely new internet. Through a series of global workshops, Bitcoin enthusiasts have been busy pitching the technology to bankers, government officials and corporations —the former enemies of the Bitcoin community.
Some, like me, worry Bitcoin’s corporate sellout may in fact usher in an age of high-tech feudalism. Soon, advanced societies may be partially or mostly governed by blockchain algorithms. But ruling elites have an undeniable class interest to make those algorithms proprietary, killing the open source spirit that had once started the Bitcoin movement.
With the blockchain essentially controlled by an extremely small elite of core developers, these technocrats may align their personal interests more with those of their ruling masters than with the common man. If that were indeed to be the case, then where is the freedom left in blockchains? Are we headed towards “political autism”, replacing democracy with rigid, proprietary code?
Nonetheless, the path towards a blockchain civilization seems a feasible one. Thus, the time is now for philosophers, thinkers, ethicists and religious moralists to start imagining about what societies governed by code should look like. The blockchain mechanism simply offers too many economic advantages to discard it.
For example, if successful, blockchain software might soon guide interbank payments, stock market trades, corporate accounting, real estate registries, the issuance of driver’s licenses, license plates, birth certificates and passports, new business incorporations, income taxes and automated tax returns, notarized documents and simple contracts. Blockchain technology may further regulate global energy grids or determine the outcome of democratic elections.
Some have argued against blockchains due to the high cost of security. Bitcoin’s network, with miners being rewarded 1800 new Bitcoins a day at a current price point of $600, costs $1 million a day to secure. But ultimately that cost may seem insignificant in comparison to the billions of dollars saved on economic inefficiency, human error, and salaries.
Indeed, salaries, because blockchain’s efficiency also comes at a great social cost. While self-driving cars and trucks may put millions of drivers out of work, blockchain technology stands to replace millions of highly skilled workers. One day, lawyers, notaries, accountants, stock brokers, bank clerks and government officials may one day discover their jobs have been taken by software.
Towards a Mutual Benefit
With the blockchain deeply integrated with our economies, we’ve created The Terminator’s Skynet and handed it over to core developers and their powerful friends. It isn’t just going to be revolutionary, it’s going to be inescapable.
At this point, I’ve made it sound as if We the People only stand to lose. The blockchain will take many of our jobs and submit our lives to decisions calculated for us by mathematical algorithms. But this is not the whole truth. There is great benefit to be gained for and by the people. Despite that Bitcoin’s technology allows power elites to rule us more efficiently, it explicitly also hands the people a means to defend and expand their freedoms.
First of all, due to its decentralized nature, blockchain technology cannot easily be censored. Using the blockchain, grassroots movements can build systems for self-governance, with the potential to alleviate the most debilitating effects of central government. Furthermore, at local or even at state levels, community leaders may choose to roll their own blockchain solutions, empowering their supporters.
Blockchain technology enables censor-free dissemination of a host of cultural works, including paintings, music, video, architectural blueprints, technology patents and more. Blockchain-enabled platforms will make it much more difficult if not impossible to censor free speech, journalism, the free press, or even the internet itself.
Ultimately, blockchains provide both the people and their ruling elites a mutual benefit. Both stand to gain. Power elites may rule their nations, governments or financial systems much more efficiently, while at the same time the common man gains cultural, political and economic freedoms. In fact, underground movements could deploy blockchain-powered networks to fund revolutions.
The Bitcoin technology certainly will not shift the balance of power either way, but there is no doubt that anyone with the will to do so can deploy their own decentralized systems in defense of their interests.
Blockchains are here to stay.