Innovation and Bitcoin

Illustration done for Bitforx

When one talks about Bitcoin the word Innovation is not far behind. Indeed it might be the most important innovation of the XXI century. However, like most innovations, it’s often met with skepticism.

Lessons from the past

Automobiles are the cornerstones of our modern societies, they are not merely a form transport, but also a sign of your social status. It is easy to forget that when they were first introduced to the society they were laughed at. It was a clunky, slow and unreliable machine far inferior to a horse or a carriage. After the mocking came fear — automobiles were perceived as dangerous and difficult to control. The media-driven hysteria in the UK resulted in the passing of a law called the Red Flag Act. This law stated that a car needed three crew members including a red flag carrier who would run in front of the car to warn the pedestrians about the imminent arrival of a dangerous death machine — the automobile. What did the law accomplish? It didn’t really save any lives, but it did manage to kill the automotive industry in the UK at that time.

Same thing happened with electricity. People viewed it as a shiny thing for the wealthy and extremely dangerous. Newspapers were full of stories about people getting electrocuted or their houses burning down.

Similar story with the Internet — place of pornography, thieves, and scammers.

Now, guess what they’re saying about Bitcoin — it’s weird and complicated, it’s used by drug dealers, degenerates, pornographers, terrorists, thieves. It’s true, criminals use Bitcoin, just like terrorists use cars to kill people, or drug dealers use the internet to spread illegal substances. Does that make cars or the internet bad? Cars, the internet, electricity, Bitcoin are tools for anyone to use for any reason they desire. Unfortunately, not all people have good intentions.

Giving into fear of something new and innovative will definitely have extremely negative consequences. Kodak was a huge international and well-respected company making camera films. The same company declared bankruptcy in 2012. Why? Because of the digital camera. No one needs films in the digital era. You know who invented the digital camera? Kodak. They failed or refused to see the potential in their product because it threatened their original line of work.

IBM was the most prominent computer producer in the world. Buying anything less than an IBM computer was a sure sign that you were a loser. But then, Linux happened, which shook the company to the core, because it turned out that you didn’t need IBM to have a good computer. IBM could not the potential of the new OS and IBM doesn’t make PCs anymore.

Today Bitcoin is taking on the entire banking system, the most powerful industry in the world. How do you think that will end? It’s going to win because of a very simple reason — it’s better.

Changing the world

Change is the most important effect of any innovation. Bitcoin is going to change the world because it changes the rules. It’s a technology that will shake up our financial and banking system, just like oil shook up the whaling industry, or electricity shook up the wood stove industry, or digital cameras shook up the film industry. By the time these old industries figure out how serious the change is, it’s usually too late.

Bitcoin is a completely open network. Anyone can connect to it. You do not need a permission to join or leave the network. However, banking creates an environment where everything needs permission. Essentially Bitcoin is a free system, while banking is an “unfree” one. Guess where the all of the exciting things and innovation happen.

As a technology Bitcoin can bring economic inclusion and empowerment to billions. We forget that banking is not available to most of the population of the earth. Bitcoin can ensure inclusion of billions of people into the financial world with a very simple phone. In US alone millions of people have no bank accounts but they cash their paychecks and send them abroad. $550 billion is transmitted every year as remittances from first-world countries. Most companies cut up to 9% from every transaction. How long will the same people continue to use these companies, when they find out that transactions can be made not for 15%, 9% or 5%, but for 5 cents? There are a billion people with access to the internet and feature phone who could use Bitcoin as an international wire-transfer service.

In conclusion, a system of digital currencies that have no banks, no government, no central control and is available for anyone to use without asking permission — will change the world.

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