The Winds of Change in Capitalism

A Little Bit of Money

Thought Experiments on Cross-Border Payments - Of Couriers, Bankers, and Bitcoiners

Series 20: The Winds of Change in Capitalism

Satoshi is a transitional object

Needless to say, my thoughts are interpretations, of course. It appears that the father of Bitcoin is a mysterious figure for good reason. Satoshi seems to function as a transitional object, allowing us to discuss the underlying values of the Bitcoin community and what Bitcoin is meant to be – a better form of money, designed to endure for many generations to come. An innovative form of money which is more evolved than the book money of the Medici dynasty.

Cryptocurrency encourages the evolution of civilization

Apparently, cryptographic tokens are the beginning of a new era of money. Crypto-communities are poised to establish themselves as the new financial dynasties that will encourage the evolution of our civilization and, if nothing else, at least support the maturation of money. Bitcoin technology, more specifically, private money is a monetary concept which ideally can connect more deeply to the needs of humanity than government money can. Bitcoin evangelists are fantasizing about the hundreds of years of cryptocurrency ahead – and a future that will finally embrace the billions of unbanked people.

A smart movement dealing with complexity

There are lots of smart people in this financial movement. Admittedly, crypto-community members are not always easy to deal with. Indeed, some of them are very particular at times. Most of them deal with complexity on a daily basis, unlike ordinary mortals. After all, Bitcoin is a multi-layered topic suitable for Renaissance men, but mind that not everyone enjoys technical arguments or shoptalk. Despite playing around with complex matters, many hardcore types of Bitcoiners have one thing in common: they don’t only trade; they code. To them programming is no trivial matter. It comes with a variety of complications which they are keen to resolve.

Ready when you are

Bitcoiners are participating in lengthy discussions through online community forums, always gathering information and ideas. And more often than not, taking action on some level. The same readiness for action is required from the financial establishment. The established banking world has focused on quick and dirty trades for far too long. Too often have financiers and corporates been looking for short-term profits only, and far too much emphasis has been put on investing in opaque hedge funds chasing bonuses and insider deals. All of this is not suitable in a digital era, where complementary currencies such as Bitcoin and others will become business as usual. Ultimately, the financial economy may want to develop a serious interest in real business, as well as real cryptocurrency if they do not want to fall behind in the future.

Bad actors hurting the digital cash ecosystem

This is the era of creating real value for the real economy through digitization, but some in the community don’t get it at all. They hurt the ecosystem by promoting questionable business models. Unfortunately, this industry is currently haunted by many swindlers, who want to “get-rich-quick” by making big promises without the intention to fulfill the duties of a proper businessman. Thus, they are just as unscrupulous as those profit-greedy bankers which we all started to hate back in 2008.

Ditch camouflaged fiat instruments masquerading as cryptocurrency

I am talking about multilevel marketing scams for fake bitcoin mining, the great many totally non-transparent ICOs with less than zero substance, or even worse, dressed up bitcoins – “Bitcoin Binary Options” or those “Bitcoin CFDs” - contract for difference (CFD) as they call it; which is nothing else than an old-school financial instrument carrying high-risk and designed to deliberately mislead investors. If one has common sense and knows how to use Google and read small print, it is easy to detect that such Forex providers are, in fact, gambling companies operating with a financial license. And the bank always wins. Consequently, investors almost always lose.

Rebels with or without a cause

“Kitchen sink” psychology may suggest that some Bitcoin abusers behave like a bunch of neglected kids, locking themselves up to play forbidden video games until the stage is set alight, or you might as well call them a gang of immature rebels without a cause. Father, forgive them, for they do not know what they are doing! But besides biblical Luke 23:34, in reality, most Bitcoiners – the young, urban, professional, intellectual, digital natives - I have defined them as YUPIDs in an earlier series - are grown-ups and their actions are far removed from actively committing fraud or any kind of passive-aggressive behavior.

Yawning chasm between crypto entrepreneurs and fiat banks

Let’s focus on the mature and responsible individuals within the community. Those who are aware of the disconnection between crypto-style Fintech businesses and traditional banking. More and more crypto-minded entrepreneurs are looking for clues from financial institutions and guiding principles from regulators. For YUPIDs, the old financial model is no good in many ways, and that’s one of the reasons why they utilize cryptocurrency rather than traditional financial instruments.

Bitcoin highlights the crosscurrents at a time of expansive banking

Currently, most banks are not responsive towards crypto companies as the size of the market is irrelevant compared to their regular verticals. They neglect the banking requirements of bitcoin firms because of legal concerns and simply ignore such inquiries. Not replying to the most advanced participants of the financial industry cannot be called innovation-friendly. However, it creates an additional challenge for all the YUPIDs out there. Sooner or later, economic deprivation in terms of banking may lead to even more innovation. Bitcoiners are used to search for alternative solutions and used to bounce back to their own capabilities. Creativity is their home base, making it the new paradigm.

To be continued. Further Reading:

Alan Feurer. “The Bitcoin Ideology.” New York Times, December 14, 2013. http://www.nytimes.com/2013/12/15/sunday-review/the-bitcoin-ideology.html

C. Sorge and A. Krohn-Grimberghe. “Bitcoin: Eine erste Einordnung (an initial classification).” Research paper, 2012.

L.J. Trautman, "Virtual Currencies; Bitcoin & What Now after Liberty Reserve, Silk Road, and Mt. Gox?." Richmond Journal of Law and Technology 20.4 (2014).

Miklos Dietz, Vinayak HV, Gillian Lee "Bracing for Seven Critical Changes as Fintech Matures", McKinsey Insights, November 2016, http://www.mckinsey.com/industries/financial-services/our-insights/braci...

 

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