You want to learn what this Bitcoin thing is really all about? Try this well written introduction: Bitcoin: It’s the platform, not the currency, stupid!
A tl;dr might go like this: the crypto currency express is leaving now. Please take your seat and learn your magic – or stay a muggle.
No, really. As Arthur C. Clarke wrote in his third law of prediction: Any sufficiently advanced technology is indistinguishable from magic. And if you follow the arguments of two authors of the study, you will probably want to board the train to a virtual Hogwarts ASAP.
The authors know pretty well what they are talking about: Sander Duivestein is a software engineer and works at VINT, the trendwatching think tank of Sogeti (which is a subsidiary of french IT giant Cap Gemini S.A.). His co-author Patrick Savalle is the founder and technical director of Mobbr, a brand new payment platform for network economics, based in the Netherlands.
They start with a nice intro why the current trend of economist debunking Bitcoin is not Hogwarts, but hogwash. Like Alan Greenspan asking for its intrinsic value, just seeing a bubble. As his contributions to the Great Recession are quite undisputed, the verdict of the co-creator of the largest financial bubble of the history of finance could have some weight.
But Duivestein and Savalle treat the aging economists quite nicely (There is a lot of confusion about bitcoin.) They could have quoted Clarke’s first law. When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.
But they do explain to everybody, what the real, technological impact is.
Thanks to the Bitcoin protocol (crucially distinct from bitcoin, the currency it underlies), for the first time in history it is possible to transfer property rights (such as shares, certificates, digital money, etc.) in a fast and transparent way, which cannot be forged.
Moreover, these transactions can take place without the involvement of a trusted intermediary such as a government, notary, or bank. Anyone who fully appreciates these attributes will immediately acknowledge the tremendous value of Bitcoin.
It’s the platform, stupid! And this platform can have some serious implications for anybody’s way of doing business. Just have a look at the all the oversized successes of the Internet economy. What do Twitter, Facebook, Google, Yahoo have in common? They are media businesses. Their business model is advertising, meaning: they have found no intrinsic way to make users want to pay for the services they render. More than one eight of the world population uses Facebook quite extensively. But they need to extract their value exclusively from third parties.
Or look at the posterboys of the sharing economy, like AirBnB, Uber, Lyft. They are all highly centralized businesses, which outsource the grunt work to some local drone (who might even get sued for making a couple of Dollars or Euros on the side). I love AirBnB. But as a company, they’re the 1% of the digital Uberclass.
Bitcoin pioneers a different model: everyone becomes a stake- and shareholder in this new networked economy.
Bitcoin is key to the success of the Collaborative Economy. Bitcoin enables a frictionless and transparent way of sharing ideas, media, products, services and technology between people without the interference of corporations and governments.
It’s ideas like the DAC (Digital Autonomous Corporation, or Community), the Decentralized Application (DA), which are driving the process. Sometimes a bit wild-eyed. But hey, Bitcoin shows a valid path: it’s a completely bootstrapped economy, still in beta and its infancy, with a market cap of 10 bn USD (not counting the capitalizations of the startups and businesses – just the money rolling around in the system).
In a system like this, ownership rights can flow through the Internet like ‘normal’ content (from e-mail to video streaming) already does. And no one can dispute or counterfeit who has ownership. It is safe, transparent, and mathematically secure.
What we see is an emerging commercial operating system, on top of the global communications layer the Internet already offers.
What we enter, is a totally unchartered area. At the Inside Bitcoins-conference in Berlin, even the crypto-savvy lawyers talking about “Emerging Issues in Regulatory Compliance and Law Enforcement Efforts” were a bit out-of-bounds, when asked about the legal ramifications of DACs and DAs. Think about an autonomous soda machine and …
… who exactly is legally and economically responsible (say, if someone were to get sick from a can of soda from one of these machines, for example).
So why touch crazy stuff like this anyway? Duivestein and Savalle have a historic answer:
In 1937 Ronald Coase published a groundbreaking article, The Nature of the Firm. In it he posed a very simple question: “Why do firms exist?”.
In his research he came up with the concept of transaction costs to explain the nature and limits of firms. Companies exist primarily because the underlying coordination mechanisms of the market aren’t perfect.
According to Mitt Romney, corporations are people (which sounds nicer than saying corporations are oversized homunculi). But the basic idea is already nicely embodied (sic!) in the English term “incorporating”: you give a transactional structure a legal body (sic!). Coase gave the answer to the nowadays mostly unasked question why we are doing that. Yes, deflecting liabilities can play a role here. But at its core it’s all about transaction costs.
Of course, the crypto currency based democratization of money and finance can be a scary thing as well.
Like any powerful technology, Bitcoin can either be seen as a Pandora’s box, or as a step towards Utopia. Bitcoin just obeys the First Law of Technology:“Technology is neither good nor bad; nor is it neutral”.
Asking yourself whether Bitcoin will fail is like questioning yourself whether technology can be “un-invented”.
If you accept that there’s magic, you may ignore it at your own peril. Even if you hide all evidence in a tiny cabinet under your stair case, you might still end up as a pigtailed Muggle.
It is much better to experiment and innovate with this new platform.
And not just that. Becoming an active participant means you can shape this really new economy. Because, to stay in the metaphor: The “You-Know-Who” and “He-Who-Must-Not-Be-Named” will there be present as well, not just young Harry and his merry band of friends.
So, let’s end with Clarke, again, quoting his 2nd law of prediction. Please don’t forget: he was a prediction pro. In 1945, as a Sci Fi writer, he proposed the rather farfetched idea of putting communication satellites into a geostationary orbit, now sometimes nicknamed the Clarke Orbit. Farfetched, because it took another 12 years until the Russians launched Sputnik (first satellite ever) and another seven years for NASA to launch Syncom, the first geostationary communications satellite.
So, what is Clarke’s final advice:
The only way of discovering the limits of the possible is to venture a little way past them into the impossible.
Bitcoin raised this bar already to quite some extent.