Bitcoin was born out of the need for a peer-to-peer, digital cash system. The need for a decentralized monetary system which does not need humans to maintain it.
Necessity is the mother of invention, but it is also the mother of adoption, and since the 2008 financial crisis adoption of cryptocurrencies has skyrocketed. Investing in digital currencies, especially around 2017, appealed to so many because it seemed to be an opportunity to make a lot of money very quickly, and like most get-rich-quick schemes, many people lost a lot of money, very quickly.
Many in the crypto-space tried to defend the sell-off in 2018 by denying it was a bubble at all. Possibly out of fear that labelling it a bubble would in some way undermine the legitimacy of digital currency in general.
Was it a bubble? Of course it was. Does that mean all digital currencies are scams or ponzi schemes? Of course not.
In the same way the dotcom bubble burst in the early 2000s, only to bounce back bigger, stronger, more refined than ever, we can expect digital currencies to do the same. The difficulty lies in figuring out which the Amazons and Googles will be this time.
Satoshi Nakamoto is perhaps similar to the Wright brothers, the inventors of the first power-driven airplane, in that he solved the unsolvable. Who’d have thought in the early 1900s, that we’d have 700,000 people in the sky at any moment just one century later?
Similarly, will paper money exist 20 years from now? Digital currencies will bounce back from the 2018 crash and it’s not difficult to foresee a shift towards digital cash in the near future. What is hard to foresee, however, is that digital cash being bitcoin.
Bitcoin was created as a peer-to-peer digital cash system, but despite a brief stint as some people’s choice as cash in the early days, it’s unlikely to live out its original purpose. It has navigated all kinds of regulatory hurdles, public perception nightmares and bubble bursts but it’s also encountered some seriously damaging limitations along the way.
High transaction fees, dangerous miner politics and exorbitant power demands to list a few, make its proposition as the digital cash of tomorrow a weak one. That being said, given its uncanny ability to bounce back from the depths, I wouldn’t write off bitcoin just yet. Bitcoin is still a great option in terms of a store of value, a ‘digital gold’ if you will, and there is still technically room for further development.
Whatever comes of bitcoin at this point though, is secondary. It may not live out Satoshi’s original electronic cash dream but one thing is for sure, it will be the root of much, much more. Whether it lives on as digital gold, as the precursor for more technologically sound digital currencies or through its underlying technology — blockchain, bitcoin can be regarded as a successful failure, possibly the most successful failure ever.
It’s an example of the incredible power we all possess to make an impact, and the potential we have to amplify that impact globally. The power to truly be the change we want to see in the world — whether we choose to take the plaudits for it or not.
The next wave in the digital age would seem just as baffling to our ancestors as it will be to many of us such is the speed at which it’s unfolding. The idea that a person, business or device can send or trade a digital representation of anything of value, to anywhere in the world, instantly, with no possibility of it being hacked, will raise many eyebrows. Yet this is the the global economy we are heading towards.
Digital currencies can be used to define virtually any form of value and can be exchanged for any other digital currency, representing any other form of value. At present, a dollar can’t be directly exchanged for a Facebook like, your leftover hardware storage can’t be directly exchanged for someone else’s loyalty points and the extra electricity you generated with your solar panels can’t be directly exchanged for a room in an apartment building. All that, and any other form of token exchange will be both possible and easily accessible. As will the ability to specify precisely how a token will function.
Since digital currencies are essentially lines of code, they are programmable, allowing us to create specific rules for them to follow when exchanged or converted. We can impose constraints or free up all kinds of possibilities with regards to how they can be used.
For instance, a token could be programmed so that it can’t be exchanged for diamonds that are mined in locations known for their use of slave labour. In this way the token is not just a utility but also something that expresses social values, changing our economy from a single value model to a multi-value model where many different types of value and micro-economies can be created, while maintaining the possibility for instant exchange.
On a superficial level, digital currencies have evolved from an idea to a multi-trillion dollar industry. But look a bit deeper and you’ll see diverse communities of entrepreneurs, investors, ideologists, doers and believers who have nurtured the idea of a digital currency from a dream to a movement, to an industry that is transforming our economies, the markets we form part of, and our day-to-day lives.
And yet despite their huge predicted impact, digital currencies are just one part of a bigger thing. They’re the result of a shift going on at the base level — a shift towards decentralized systems — as entire industries and markets begin to adopt Distributed Ledger Technology. They represent the economic element of a global shift towards decentralization, a shift towards a new era. A shift from dependence on centralized authorities to global networks that follow distributed consensus models managed by the masses, by us.