Bitcoin (BTC) isn’t the world’s first stab at digital money. In fact, the idea of running society with digital cash has been around for three decades, if not more. David Chaum, an American cryptographer, founded DigiCash in 1990, but it failed not one decade later. E-gold, a computer-based representation of gold, and the Liberty Reserve, which converted U.S. dollars and Euros into digitized counterparts, failed, just like its predecessor in DigiCash.
But, when Satoshi Nakamoto released the original Bitcoin whitepaper, which was influenced by the failures of the aforementioned three attempts at digital cash, some became quickly convinced it would catch on. And, arguably, it has. BTC has now reached an aggregate market capitalization of $66 billion, and nearly everyone in the Western world has heard the word “cryptocurrency” or “blockchain” uttered once or twice.
However, via a recent blog post, Arthur Hayes, the chief executive at the Hong Kong-headquartered BitMEX, has claimed that the “first type of new money” will be centralized, not decentralized. Interestingly, his slightly harrowing post came on the tenth anniversary of Bitcoin’s first processed block. But don’t worry, Hayes expressed optimism on Bitcoin’s prospects too.
The “Bifurcated Near-Future Of Money”
In the post, titled “Two sides of the coin,” Hayes explained that as technology continues to propagate across all facets of society, a centralized, government-backed e-money is likely to become the norm — or “natural,” as the BitMEX chief put it. He explained that this centralized system will be a byproduct of existing financial infrastructure, coupled with the “increasingly corporatized economy.”
The key member of BitMEX’s top brass added that as consumers become more acclimated to hand over our private data — whether it be through Facebook, Google, or the traditional monetary system — an e-money actively tracked by the government becomes possible. Society’s forfeiture of privacy comes on the back of the abundance of convenience and entertainment, made possible by often exploitative technologies that track every bit and byte of data.
While the U.S. has been slow to adopt digital payments, Hayes noted that the push for government-backed computer-based cash has already begun in China, as millions in the Asian powerhouse now use WeChat Pay. And it’s no secret that WeChat Pay can fall victim to shortcomings, specifically those catalyzed by the presence of centralized entities. Through the system, payments can be censored, Beijing can monitor citizens, and, worse yet, it only works with Chinese renminbi.
And eventually, when similar systems evidently prop themselves up in the Western world, consumers using said product will experience similar downsides. Hayes wrote on the matter:
“The only place left in the system for inefficient or corruptible humans to participate will be at the apex of the network, where the authorities can issue credit directly to people, tax every transaction immediately, and determine who can and can’t be part of the network. In theory, your entire financial existence can be governed this way.”
Interestingly, financial technology service providers have already shown signs of this dictatorship-esque business strategy. Just recently Jordan Peterson, a Canadian professor that likes to speak his mind, was banned from Patreon — one of his main source of income — and cybersecurity news portal The Hacker News lost access to its Paypal accounts.
Bitcoin will fill the privacy gap, as its pseudonymous address system, coupled with fledgling privacy protocols, will make it a great alternative to the centralized e-money that is undoubtedly in the works. In contrast to this “top-down” system, the world’s first blockchain network is uncensorable, borderless, non-inflationary, and most importantly (in the eyes of Hayes), private — a far cry from the centralized systems of the future. The BitMEX CEO explained that privacy is an integral part of any well-function society, making a system like Bitcoin more than essential. He wrote:
“Sooner than you think, cash will not be an option for privacy, or for anything else. And private citizens will come to appreciate the inherent value of Bitcoin, as their ability to discreetly hold and transfer value evaporates once cash goes the way of the dodo.”
However, he explained that at heart, Bitcoin is “still very much an experiment,” as it’s the first system of its kind. This sentiment that Bitcoin is merely an experiment, but an elaborate one at that, has been echoed throughout the cryptosphere in recent memory.
Per previous reports from NewsBTC, Xapo founder Wences Casares claimed that Bitcoin is nothing more than an “interesting intellectual experiment.” Delving into the sentiment that crypto is an “experiment,” Casares noted that it is still worthwhile to pay attention to this industry, even if this experiment’s results aren’t optimal or according to plan. He explained that it would be irresponsible “not acknowledge that it could not work,” as Satoshi, like other humans, was inherently fallible.
Yet, Casares, along with his peer in Hayes, still touted optimism towards the project for the long-term. Hayes noted that Bitcoin has lasted ten years, even with the “biggest ‘bug bounty’” in software history, accentuating the fact that the project is likely here to stay for the long haul. And, as non-private digitized money becomes commonplace, BTC’s inherent value will become more than apparent in society’s eyes.