Too Big To Fail or Too Powerful To Succeed?

By J. Robert Varghese | President & COO, injii

Much has been written as of late regarding the meteoric rise of Bitcoin. Invariably, when you see a market, sector or financial instrument experience a 500% rise in less than a year or 7,500,000% increase over eight years, the word “bubble” is bound to get bandied about. However, things took a peculiar turn a few weeks ago when Jamie Dimon, Chairman and CEO of JPMorgan Chase, came out excoriating Bitcoin and going so far as to call it “fraud”.

At first, I thought Mr. Dimon was merely talking his book. Dimon said he’d “fire in a second” any JPMorgan trader who was trading bitcoin, noting two reasons: “It’s against our rules and they are stupid.” Further, “It’s worse than tulip bulbs [a reference to the boom and subsequent bust of prices of tulip plants in 17th century Europe]. It’ll end when people lose a lot of money.” This self-imposed prohibition would imply that JPMorgan hasn’t profited from the rise of Bitcoin.

He then went on, a few days later, to extend his criticism to all cryptocurrencies, including Ethereum — “So right now I say these crypto things are kind of a novelty.” What is especially unusual about this is the fact the JPMorgan Chase is a member of the Ethereum Enterpise Alliance. At this point, one had to wonder if this was a case of the right hand not knowing what the left hand was doing in a large bureaucracy such as JPMorgan. But that’s too easy an excuse. This wasn’t a verbal gaffe; it was deliberate and pointed in its delivery.

After more careful consideration, it’s clear Mr. Dimon, head of one of the largest financial institutions in the country, and in turn, one of the most powerful men in the world, knew exactly what he was saying. The real question is “why?”

Blockchain technology or decentralized applications (and their associated coins/tokens) represent an existential threat to these massive financial institutions whose very lifeblood is controlling the flow of capital in some way, shape or form in and around the world. It is not Bitcoin itself that those in power detest but, rather, what it represents. Over the course of centuries, the world had become accustomed to the notion of centralization. Regardless of the type of political system one lived in (be it capitalist, communist, other), the fact is information, capital and ultimately, power rested in the hands of the few.

The distributed nature of a blockchain solves the problem of continual integration of new intermediaries and service providers. In fact, it removes the entire concept of a central clearing house or source vendor. The blockchain can be verified and added to by any party along the chain of custody with complete independence. The addition of smart contracts to the blockchain empowers us to create an utterly autonomous supply chain. When linked to a crypto-currency (e.g., bitcoin, or BTC for short), this enables autonomous, self-paying contracts. This self-executing contract removes middle-men from the transaction (no banks, no central e-commerce servers such as iTunes, etc.).

“The blockchain lets people who have no particular confidence in each other collaborate without having to go through a neutral central authority. Simply put, it is a machine for creating trust.” — The Economist

We are now at the dawn of a new era. One in which individuals regain control of….well, their lives. This represents a fundamental change in the way the world functions. As with any kind of change, there is fear and resistance. Hence, the fierce criticisms being lodged against cryptocurrencies.

What is important to remember though, is that this criticism isn’t universal. In fact, a number of prominent individuals and institutions (including the venerable Goldman Sachs) recognize the value of the underlying technology and are opting to embrace the future.

This brings me to the point that I want to make — it is when there is such a wide divergence of opinion that true opportunity exists. I am not here to say who is right and who is wrong. I don’t know if Bitcoin will surpass $10,000 or if it will experience a historic collapse. What I do know is that we are on the cusp of not just evolutionary but revolutionary change. If you’re willing to take the time to examine the projects that are being proposed, understand the underlying technology and how it’s being used to tackle real-world problems, and evaluate the value propositions that are being offered, then you have the chance to be part of something remarkable.