To some, the idea of money that’s free of governments and banks is extremely appealing.
The money system causes the wealth gap, they say. It’s the reason both the state and the financial sectors have both grown to such disproportionate size.
Use a different money, and the government and banks’ monopoly is destroyed. Their power is reduced. They can’t perpetrate many of the abuses that go on – whether it’s inflation, forex- or libor-rigging, bailouts or even wars.
The same memes were behind the huge bull market in gold that went from 2001 to 2011. Goldbugs (and I’m one) were all saying the same thing. Buy gold, protect yourself from the debasement of currency, it’s nobody else’s liability – all that kind of stuff.
But that bull market ended. Gold is now down 40%, silver by almost 70% and we’re no closer politically to a hard money system than we were in 2001.
Anti-government or anti-banking rhetoric is seductive, but only if you’re of a libertarian or anarchic bent. Not everyone is.
I’m convinced that the great revolution so many are clamouring for can only happen through money reform. But the talk will not make that happen.
The tech could, however.
If Steve Jobs had said he was going to destroy the music business, would you have rushed out to buy an iPod?
If Steve Jobs or Jeff Bezos had promoted their businesses on the basis of all the upheaval they were going to cause to music and publishing, many people might not have been quite so persuaded.
‘I quite like vinyl, I like CDs, I like albums. I like my daily paper. I like the chap who writes that column. I like my local bookshop.’ There would have been more resistance than we saw in reality.
Instead, Jobs, Bezos and the many others like them focused on the consumer. They gave the consumer better and better products. The consumer did not buy in for political reasons, but because it suited him. The tech was irresistible.
IPods were a new and better way to listen to music, iTunes a better place to store it. Amazon is a great place to buy stuff. The Kindle is a fantastic way to read books. Websites and blogs are better places to consume news. YouTube and Netflix are better ways to watch videos. And so on.
Bitcoin needs to do the same.
In the 80,000 words that Satoshi Nakamoto wrote online, he made about three vaguely political statements. His only focus was on getting the tech working, and the reason bitcoin has been so successful is that the tech actually does work. Now the bitcoin community needs to remember his example.
Focus on the tangible benefits
I may love the fact that bitcoin is apolitical and I loathe the fact that fiat money is a political tool. But there are lots of people – the vast majority in fact – who either don’t agree or don’t care. The reason they’ll start using bitcoin is because it suits them.
‘Hey, this money isn’t losing value – it’s actually going up. I don’t get hit by forex charges. Remittances are cheaper and quicker. Lower fees means goods are priced lower in bitcoins. Sending or receiving money is so much less hassle’ – all those kinds of reasons.
Earlier in the year, Goldman Sachs IT analyst Roman Leal made some rough calculations as to the savings that bitcoin could have made possible globally in electronic payment in 2013. His findings demonstrate what could make the tech go mainstream – more than any amount of political rhetoric.
There were $49bn of transaction fees globally in 2013 on about $550bn of remittances. Using bitcoin (at an estimated 1% annual fee – which could be a lot less) those fees would have fallen by over 90% to just $5.5bn.
As for electronic payments in retail, currently retailers pay about 2.5% to 3% in transaction fees. In 2013, global transaction fees at retail point of sale were $260bn on over $10tn of sales. Had bitcoin been used (again using a 1% estimated fee) the number would be $104bn – a saving of almost $150bn. Leal notes that all merchants would realize “sizable savings” by using bitcoin, but small merchants will benefit most: they have the potential to reduce their payment processing fees by at least half.
Then there is its potential to get the world’s poorest 3.5 billion, who are currently shut out by the financial system, into e-commerce just as the cell phone got them communicating in a way they couldn’t with landlines.
The potential is enormous. But at present the growth of the bitcoin network is stagnant, it might even have slipped into the negative. Transactions are growing, but not compellingly. This is what needs to change.
Why Bitcoin should think like a tech stock
At the weekend David Cameron declared that the warning lights are flashing on the global economy. Japan has slipped back into negative growth territory. Germany’s growth has stalled, Britain’s has slowed.
Growth rates in the developed world have been falling since the 1970s. There’s a mixture of reasons for this. Aging populations and workforces, too many asset bubbles leading to busts, excess taxation and regulation costs, an ever-increasing cost of government, high house prices leaving little capital to spend elsewhere, the colossal burden of global debt load above the $100tn-mark and many more reasons you can think of.
One of the only sectors where there is real growth is tech. Take the Nasdaq. It’s a far cry from the bloated bubble of 2000. Names like Apple, Microsoft, Google, Gilead, Intel, Facebook and Amazon are all examples of companies that generate actual cash flow. Collective profits have trebled since 2008, according to newsletter Atlas Pulse, while most countries and sectors remain below pre-crisis levels.
Meanwhile, Nasdaq analysts are much more cautious. Flows into the ETFs are negative. Retail investors are not there in the way they once were. The index is still below its 2000 bubble peak. This all leaves plenty of room for further rises. The potential for the small caps in the sector is enormous.
The boom in tech stocks is just getting going. Both Atlas Pulse and I predict it will be the one area of real growth in 2015. This is the wave – and it is a positive wave – bitcoin wants to ride. Forget the negative attacks on governments or banks. It’s a war that cannot be won and making such powerful enemies does bitcoin no favours.
The tech and the companies operating it need to focus on making the transition to bitcoin irresistible and inevitable, in the same ways that listening to iPods or buying on Amazon has become the status quo. Governments and banks’ money will then be superseded on the Internet – and they’ll have as much choice over the matter as the music and publishing industries did 15 years ago.
That’s the way to get the revolution you’ve dreamed of.
The talk might win the argument. But the tech will win a great deal more. Remember the mantra: “Cypherpunks write code”.
Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.
Bitcoin: the Future of Money? by Dominic Frisby is available directly from the publishers Unbound, from amazon.com or amazon.co.uk. The audiobook is available here. And, yes, you can buy it with Bitcoin.
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