Bitcoin in the Fog of War.
By Nico Ignatieff on ALTCOIN MAGAZINE
Part I
It seems every time there is a new violent price spike in crypto, our clients proportionately express an upsurge of interest toward the technology that created this asset class. Last year, when BTC was reaching for the historical highs, and now, when the price is back to where it was before the hyperbolic rise, more and more people reach out seeking information in order to gain clarity.
Hours spent talking about this new technology and its adoption into different existing business models brought realization that this process is very similar to the one we had to go through decades ago, when we were programming our first online banking applications, thus, integrating internet technology into core banking. Few will believe that 20 some years have already passed :) Fewer will believe that first attempt to introduce online banking by four major US banks was a failure and was abandoned in 1989 after almost a decade of service (imagine the reason — inability to break even). Despite the “last century” tag, it seems what was relevant then is still relevant now. The biggest concerns our clients had back then were; security, speed and viability. It is easy to guess what the main concerns are today regarding blockchain technology — security, speed and viability.
The way blockchain technology is poised to disrupt the way we do business today, in many ways similar to how Internet was set to change our lives in its early days. Just like in then, there is so much “info fog” surrounding the issue today, it makes it very hard to absorb the information and understand it. The goal of this exercise — knowing that average read time for an opinion piece like this is under 3 minutes — is to provide a few facts in attempt to bring clarity and perspective which hopefully will lead to better understanding.
BITCOIN (BTC), ETHER (ETH) and other crypto
Blockchain is not Bitcoin, BTC is rather a product derived from blockchain technology, no different from how Google is the product of Internet technology. Thus, in many ways, it doesn’t really matter if BTC price is 1 USD or 1 mil USD — it is not indicative of capabilities facilitated by the technology. For those who remember Netscape will understand my point. (For those who don’t — here is the clue — from 90% market dominance and Wall street darling into oblivion — First Mover Disadvantage).
The fog of war that shrouds the blockchain is often created by industry prominent people whose opinions spread across the internet faster than a bushfire. For example, a few weeks ago an active voice in crypto world, Nouriel Roubini, has absurdly decided to utilize a narrative that Bitcoin’s transaction fee is $60 and to pay for products of less value such as a cup of coffee, it costs upwards of $63. For many such statement will be taken at face value considering the source. For those who actually develop solutions on blockchain this is a perfect example of another “loaded statement”. It remains unclear why Roubini, who is respected in his field of economics and finance, decided to attack an industry.
The transaction fee of BTC is publicly available and verifiable data (BTC fees are less than $0.10). In fact, this is one of the advantages of blockchain technology — all transactions and fees are publicly verifiable.
Just to be fair, Roubini’s statement is not entirely without merit since BTC was never designed for retail operations. For some this will come as surprise, but despite B. Gates being outspoken opponent of BTC, Microsoft has been accepting payments with Bitcoin since 2014. Overstock, Expedia, Subway, Virgin Galactic, KFC Canada and PayPal among others accept crypto currencies. But this can also become a loaded statement if taken at face value. For example, Starbucks “accepts BTC” — not really, they convert BTC into fiat and use the latter to settle the transaction.
Contrary to the popular assumption that BTC is not suited for retail payments because of slow transaction speeds and cost, the main obstacles in its adaption remain high volatility, uncertain regulations and tax implications. There is also a question of elusive nature of Bitcoin’s intrinsic value (a subject for a different discussion). As Alan Greenspan, former chairman of the Federal Reserve, put it; “The question is I do not understand where the backing of bitcoin is coming from”. Indeed, this is a $64K dollar question. Muddying these waters is the confusion associated with distinction of Bitcoin’s utility and its political value. Radical Libertarians claim that fiat currencies like dollars aren’t money. In fact, such currency is backed by the ‘full faith and credit’ of the countries that issue them. This can also be loaded statement, if you remember that US National debt is almost 22 trillion. This is a fog of war.
It really doesn’t matter if you believe that crypto is the biggest Ponzi scheme or the best thing since sliced bread. The focus should remain on technology. Here are a few facts that might help to clear some of that fog;
- On October 16, 2018, an anonymous owner of BTC wallet moved 30,000 BTC (194 million dollars value based on USD/BTC exchange rate) with transaction cost of USD 0.10 (ten cents!). If you know the cost of such transaction with a commercial bank please write it below in the comments.
- Current transaction ledger was developed by the Medici double entry accounting process in the 14th century. The modern financial system is simply a network of these ledgers held at each bank. BTC takes the global ledger of transactions out of the control of the banking system and distributes it onto every computer that is connected to the blockchain network.
- We are moving toward cashless society. Several US banks already offer financial rewards to merchants who decline payments in cash. Bank of Canada says it is not mandatory for Canadian businesses to accept cash. Amazon’s brick-and-mortar retail stores only accept credit cards and mobile payment methods. Visa has declared war on cash and its “opening salvo” is to start paying restaurants $10,000 to go completely cash free. So, if cash becomes digital, can it continue to use the 600-year-old process for transferring value and remain competitive with true digital crypto currencies?
- Top crypto exchange daily volume (no fees market on 30.11.18) — BitMex USD/BTC pair — $2,742,239,425
Bitcoin might not to do to banks what email did to the post office and Amazon did to retail. Does it have the potential? You bet it does. Is this enough reason for CEO of a bank, financial institution or any business which facilitates payments to be concerned with blockchain technology? It all depends on your personal interpretation of historical events. For example, in the mid-1800s the world’s street lights were kept alit with whale oil. A person named John Rockefeller streamlined the process of refining crude oil. Rockefeller went on to create Standard Oil, the predecessor to Exxon, Mobil, BP and Chevron. What happened to the whaling captains that did not recognize the change?
For those who remember browsing internet with 14.4 kbps modems, it was not a very exciting thing from user experience. Not long ago, I was driven in a car and watching a live football match on my phone in HD quality. There was no “wow”, it was expected.
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