Can banks and governments become irrelevant in the face of Blockchain?
I recently had to present at the internal Accenture learning event about Blockchain and I really did not want to get into math or crypto lingo to explain the underpinning tech of the blockchain, my goal was very different. I also did not know the level of knowledge that my audience had, I assumed they were all newbies in the space and that again confirmed for me that I had to stay away from the technical jargon and explain the real purpose behind the blockchain and its future in my opinion.
I do not believe that blockchain is as big as the internet bubble, I am certain, it is so much bigger than that! And the main reason is money. Not the price of Bitcoin which is over $4500 mark this week, but the actual currency that is being created by blockchain. Think about it, how is money created today? Government print it and government back it. How is it backed really? No, there is no gold bar behind a $100 bill. It’s backed by the government and its reputation today but there is no value except the reputation behind it. Let’s go back to history and understand what did we do before we had money?
We bartered, we traded. You had an orange and I had an apple, we exchanged one for the other. If I wanted a banana and you had it and wanted my apple, we could exchange it. But very quickly that became a problem as some resources became scarce and some were in abundance. That created commodity of money, where we used something scarce like salt and spices to trade for something we needed- bread for example. Later, gold and silver became that scarce resource and people used gold and silver bricks or coins to buy something they needed. This is how money entered our society. Soon the gold bars were inefficient to carry around and people began storing them at Temples. Gods lived in Temples before money and people trusted temples and priests, who would want to steal from the temple and get wrath of God? So, the gold and silver was stored there and priest would give them a promissory note that 2 gold bars were held by Moshe at the Temple. Moshe then could go and use his promissory note to buy bread. Moving the note was moving gold from hand to hand.
After temples, banks and governments came. During 18th and 19th century, all the money was backed by gold and silver- a scarce resource. Soon banks said, “Why carry paper money around, if you lose them, nobody would replace them. Why don’t you place them into the account in our bank and we will give you a receipt,” and like that, the money was no longer backed by any scarce resource. In the era of the digitization, bank accounts became electronic and electronic entries represented money. Money went digital.
In 2008, during the financial crisis, very smart people that lost trust in big banks and governments created a blockchain that started creating new currency not backed by governments, but backed by math and network of people that believed in it. Because money is a story that people believe in. I believe that cryptocurrency is the new money story. Blockchain is the new technology that will change financial markets and will remove inefficiencies. I think banks and governments are afraid of this technology. Governments are trying to regulate it; how can you regulate and algorithm? How are you going to put punishment on a line of code? Banks are creating their own private blockchains, centralized and controlled by the same banks completely ignoring what blockchain is really meant to do. But who can blame them? If I would be Jamie Diamon, I would fear it too. Who wants to become irrelevant?
-Thoughts and opinions are my own and not representative of Accenture