Bitcoin: Why Those in Power Hate it!
Bitcoin has generated a lot of euphoria and distain across a variety of walks of life, as the rapid increase in its value, along with taking a lot of the other cryptocurrencies on a ride with it, has forced the media to cover it.
It has also forced some of the entrenched powers – especially political and financial – to issue a seemingly endless number of warnings and caveats against bitcoin, although it is interestingly tempered by the fact the blockchain, which girds up the asset class, is widely seen as having extraordinary potential, with some people seeing it surpassing the impact of the Internet in the years ahead.
The major feature I want to focus on in this article is the decentralized nature of bitcoin, which was one of the major reasons for its creation, outside of the store of value, and possibly adaptation as a currency. At this time it’s the store of value that’s driving it up in value.
Taking into account the store of value and currency features of bitcoin, it’s easy to see why those that are in power are afraid of it, in that it is decentralized and can’t be rounded up and put in a vault like gold or other precious metals could be.
One of the financial institutions that hate the emergence of bitcoin is the Federal Reserve specifically, and other central bankers in general. The reason why is it diminishes their influence on the global economy, and specifically the printing of or digital creation of money.
When considering the fact that since the Federal Reserve was created in 1913, the U.S. dollar has lost about 97 percent of its buying power. That has come about from the endless quantitative easing programs it has put into play since then.
Others that dislike bitcoin are gold bugs, along with those that make a living touting the value of holding physical gold and silver, and to a lesser extent, investing in mining companies.
A number of these people have been making money selling newsletter subscriptions for a long time, and for the first time in their lives they’re faced with a competitive asset class that could totally disrupt the precious metals market.
The reason for that is bitcoin in particular is attractive to the market primarily for it being considered a store of value, just as gold has been. Not only that, but because it is easily divisible and transportable, in those areas many consider it superior to gold. This is a threat to those supporters of gold, and those making money off of selling information related from it.
Also on the financial side, large institutions are threatened by bitcoin because it can be held by individual investors in a way that allows them to be their own bank; this has the potential to undermine their business model as well.
It’s not a significant threat yet, but it easily could be if the value continues to rise, which is very likely.
And even when the price of bitcoin is finally discovered by the market, after it pulls back in price what remains will be a viable alternative to the existing financial system, and ways people buy and sell.
This doesn’t count the other viable cryptocurrencies that will meet different market demands and also be considered a form of money; albeit that won’t be the major purpose for most of them.
What’s formidable about bitcoin isn’t only what it is and does, but the fact it runs using blockchain technology. Essentially, it’s the most valuable brand that has brought to light the extraordinary blockchain potential.
The reason it’s feared is because what blockchain gives, in a extremely accurate documented ledger of transactions, it also takes away, in that it eliminates the need for a middleman, decentralizing the validation process of each transaction or block.
As much potential as bitcoin and the emerging cryptocurrencies have, blockchain technology has far more. The potential applications are almost limitless.
In regard to the focus of this article, it’s another piece of technology that will further eliminate the need for someone to mitigate transactions. It could remove much of the value of lawyers, accountants, and other professionals now needed to ensure a deal or transaction is legal and legitimate.
Decentralization doesn’t remove the middleman function, it simply transfers it to the crowd.
Since the accuracy of the validation process is impeccable, it would be harder for financial institutions of all types to cook the books. Many businesses could actually recent that type of accuracy and transparency.
Some people misunderstand what anonymity means concerning bitcoin or other cryptocurrencies. It’s not that the transactions are hidden from sight, it’s that the people or institutions engaging in the transactions are hidden from view. The point of blockchain tech is to make the transaction public without identifying who the parties participating in the transaction are.
Bitcoin represents the entirety of the emerging asset class that has the potential to disrupt industries at levels possibly never experienced before. It’s not that there haven’t been disruptions in the markets before from innovation, only that this time around it could be wider and deeper than ever has happened.
Where the greatest potential and disruption lies is in the possibility the vast majority of financial actions will be peer-to-peer in the future. By that I mean transactions usually performed by a bank or other financial institution, brokers, lawyers, accountants and other similar types of professionals. I’m obviously not referring to e-commerce or exchange of goods, as that has already been in place for a long time with companies like eBay.
One example would be a group of likeminded people tapping the crowd for a loan, rather than go to a traditional financial institution. People could do the same with real estate or any other sector we use middleman for.
The bottom line is bitcoin isn’t only hated and feared because of what it is in and of itself, but because it’s the tip of the spear of the entire blockchain industry.
On the branding and marketing side of the blockchain industry, it couldn’t have a better representative than what bitcoin has become. It’s also why I believe lawmakers and governments won’t step in and try to stop the advancement of the emerging sector. To attack bitcoin is to attack blockchain, and to attack blockchain is to attack one of the most important technologies to be developed since the Internet went public.
As for bitcoin on its own, it is becoming a store of value to younger people fare more than gold is. It will also benefit strongly from the eventual acceptance as a form of payment by large retailers, with the next one possibly being Amazon. Competitor Overstock has already been accepting bitcoin as money for a few years, as have others.
Bitcoin will continue to be hated, feared, despised and misunderstood, but nothing is going to stop its upward move in value until the masses start to take a lot of interest and bid up the price to extraordinary levels.
Even though the bubble will eventually burst, I believe bitcoin will survive, although at a more modest level, and blockchain technology itself, along with many new quality cryptocurrencies, will serve numerous market-generated demands in a similar way that smartphone apps do today.