Financial privacy and autonomy are important. But cash and cryptocurrencies are not the only means to those ends.
Bitcoin and Blockchain
Using an encrypted digital ledger – one that substitutes hashes for trust – eliminates vast numbers of layers and time. Time and trust equal counterparty risk. Automating this with blockchain drops the costs to a small fraction while increasing certainty.
Financial intermediaries that might not stand a chance against blockchain technology were it allowed to develop in a vacuum instead might be strengthened by it.
Ten years have passed since Bitcoin was introduced, and it still isn't used much in online commerce. Will the Lightning Network get it back on track?
In a recent NBER working paper, Barry Eichengreen argues “there is no straight line from commodity money to fiat money and from there to crypto.”
With perfect hindsight, we construct narratives about how technology changes the world. The internet flattened the world. Cars replaced horses. But what we miss, the often-catastrophic messiness during those transitions, is so much more interesting.
Regulatory uncertainty is one of the major risks facing the blockchain industry as it matures. Ohio’s courting of the industry throughout 2018 may have value beyond a handful of overblown headlines.
F.A. Hayek’s proposed market for private monies resembles the market for cryptocurrencies that has emerged over the last decade.
What this is about is what is called provenance, which is the definitive establishment and documentation of who has owned what and where it has been. This is the foundation contribution of blockchain, to prove provenance better than any other technology in history.
Disruptive technologies are rarely superior to incumbents in every single product or service the latter provides. And incumbents are rarely passive enough not to adapt and adopt in response to technological change.