For Thousands of Years, Only Nobility Could Run Banks
A Little Bit of Money
Thought Experiments on Cross-Border Payments - Of Couriers, Bankers, and Bitcoiners
Series 14: For Thousands of Years, Only Nobility Could Run Banks
The Financial Crisis of 2008 Gives Birth to Bitcoin
For Bitcoin, no bank is required, and that’s why the banking monopoly is on its way out. With crypto-currency, everyone can clear and settle funds globally, and do it for themselves. If one were to look at the disruptive concept from the perspective of banks with a single focus on profitable moneymaking opportunities, then one might just as well be in denial of the power of digital cash. However, for those who are freedom-minded and innovation-friendly, the future of crypto-currency is self-evident.
No Quick Buck with Bitcoin Payment Start-Ups
What many Bitcoin company founders are investing in is the future of monetary transactions. Believe it or not, my intention here is not to hype the industry with mission-conscious messages, hoping to benefit from spiking Bitcoin prices or share prices of our venture. Needless to say that Bitcoin gets moved by factors that are out of my control. In reality, our business is not listed publicly. Hype would bring me no profit at all. Setting up a Bitcoin payment service provider dealing with the real economy does not happen overnight. The average payback period for an operator in the e-commerce sector is assumed to be seven years.
Gaining Insights into the Unknown
The only valuable thing to be gained in the short term is an insight into the future of payment services, and we have to take the rest from there. The money being made by first movers and fast followers – if at all - is urgently needed for paying the Bitcoin firm’s bills, not at all comparable to the astronomic amounts that were cashed in by the established investment banking industry before and after the 2008 financial crisis.
Banks Can’t Give Credit Forever; Consumers Can’t Take It Forever
The difference that Bitcoin made in 2009 when the blockchain went live was in revealing its crucial historical context. It was in the midst of the world’s financial crisis when U.S. banks that caused the crash had to relearn the basics. The same logic applied to their not-so-innocent customers, like U.S. consumers and almost all financial institutions around the globe, who enthusiastically invested in all kinds of toxic financial products. They all in unison chose to ignore that you can’t give and take credit endlessly.
Be Your Own Bank – The Declaration of Independence for Money
From the beginning, Bitcoin was a socio-cultural invention by a crowd that demanded to be heard. From day one, the Bitcoin community identified with the notion that money belongs to the people, and not to the banks – no more class distinctions. Bitcoin is the declaration of independence for money. More precisely, it is the freedom of choice, and as such, a basic principle of democracy. Finally, sovereign users get the right to send money to each other directly, independently, and privately. At last, fair money for the whole world, “We the People.
To be continued. Further Reading:
- M. Herpel. “2011 Observations on the Digital Currency Industry.” In Digital Gold Currency Magazine, pages, 1-72, Jan. 2011.
- S. D. Lerner. “MAVE, New Lightweight Digital Signature Protocols for Massive Verifications.” Research paper, 2012.
- D. Yermack. “Is Bitcoin a Real Currency? An Economic Appraisal.” NBER.org. 2013.
- U.S. Const. Pmbl