The Voip of Wall Street

Reboot Wall Street? No incentive yet for the incumbents.
Reboot Wall Street? No incentive yet for the incumbents.

 

At Quora, I stumbled over this question: How could large corporates take advantage of the growth in virtual currencies such as Bitcoin, Litecoin etc?

My take on it goes like this:

Many large transnational corporations have turnovers bigger than many national economies. They have to deal with any currency they encounter (as long as the market it represents is big enough). So sooner or later some large entity might add Bitcoin to its already existing Forex headaches. 

For retailers, the incentive to accept Bitcoin should be fairly huge: reducing the acceptance fees for a sale from let’s say 1.5 to 0.5 percent would almost double the margin of many a A&P, Walmart, Carrefour or BestBuy. This won’t happen too soon on a large-scale, as the investments involved would be quite sizeable and the whole Bitcoin economy is still too small and fringy to make a real bottom line impact.

The really fascinating use cases might even be a bit more spectacular. Running and controlling a large corporation is a highly complex and costly affair. They have to operate under Lenin’s advice: trust is good, control is better. By solving the Byzantine General Problem (how to trust the inherently untrustworthy), Bitcoin (and other crypto currencies) were able to build currencies without needing a centralized trust authority like a central bank at its core. 

If you now apply a trustless system with its encrypted public ledgers to the operations of a large corporation (think: crypto SAP), the effect should be rather scary. Even if you just start by converting your internal financial system from multicurrency into GEcoins or DaimlerCoins or IBMcoins, wth each of them possibly representing a larger market cap then the “meager” 10 billion USD Bitcoin currently represents.

Seems like I almost missed the pink elephant in the room. The industry which could benefit the earliest the most from Bitcoin is of course the industry which currently has to feel threatened the most: finance. Antonis Polemitis brought it very much to the point in a nice well monied exchange between himself and Marc Andreesen.

closest analogy for me is voip. Derided, then adopted by telecoms. BTC/fin svc more complex tho 

Of course we’re still in phase 1: derision. So it might take a while. Just listen to JP Morgan CEO Jamie Dimon on the matter of Bitocoin:

And honestly, a lot of it — what I’ve read from you guys — a lot of it is being used for illicit purposes.

Dimon surely knows what he’s talking about. Just last November, JP Morgan settled with the US Justice Department to pay a record $13 billion fine for its, hmm, questionable mortgage practices. On top of that come another $2 billion for serving for more than 20 years as Bernie Madoff’s primary bank. But wait, there’s more … nevermind. Last October, JP Morgan set aside a pot of $23 billion to pay all recent fines. Which is more than twice the current total market cap of Bitcoin, lingering currently just a bit north of $10 billion.
But no need to feel sorry for Jamie and JP, the gargantuan fines leave neither the bank nor its CEO impoverished. Last year, the bank still pocketed more than $5 bn, and Dimon got a 74% raise for this impeccable too big to fail, to big to jail-performance.

Sounds like a great opportunity for a disruptive technology like Bitcoin.
And some of the people involved in this short exchange are already putting their money where there tweets are :

https://twitter.com/pmarca/status/426947485383151617

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s