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(+) Bankers and Bitcoin

Originally published on: CCN
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August 16, 2018

Something special happens when someone becomes threatened by an idea. They often lash out with their reasons for believing that it won’t work, but don’t address the fact they have a vested interest in it not working. This is exactly what is starting to occur with bankers commenting on Bitcoin.

You hear all the standard criticisms from these people: that it enables crime, that the cryptocurrency isn’t backed by anything, and governments will never let Bitcoin survive.

This is true of all politics and most arguments. People argue from a point of self-interest that they never unpack, so it becomes hard to take their viewpoint seriously when it is just a thinly veiled defense of themselves.

Disruption of a Monopoly

The banking industry has been a source of wealth to many people over the last few decades, but in the last few years the trend of working in tech has emerged as the smarter move for young graduates. The skills are said to be in higher demand and the chances of making the big bucks are greatly improved.

So in a way, cryptocurrency just represents one more threat against the financial industry. Now tech has gotten so big it threatens to completely replace parts of the financial industry, and they don’t like that. The big banks have had a monopoly on the consumer financial sector for decades, and this is about to change.

To be fair, this is completely reasonable, but blockchain technology is coming, and even if Bitcoin isn’t the coin to topple the financial system, there will be numerous innovations based on the same technology. The result will be an industry upended by automation and more trustworthy systems.

Criticizing Bitcoin

There are many valid criticisms of Bitcoin, but when someone argues so vociferously that they don’t address the issues with these criticisms, it hampers their argument. The truth is not a lot of people know what is going to happen and the market for cryptocurrencies is almost irrationally exuberant.

The problems with the criticisms of bankers is they don’t take into account the most important part of cryptocurrencies: decentralization. And that’s because their jobs and careers are based on centralization, or the idea that one person can be smarter and more trustworthy than the entire system. As long as they continue to see Bitcoin as a replacement for the dollar rather than an evolution of money, they will miss the point.

When people argue against the utility of Bitcoin, they falsely go after the micro-level mechanism. There are definitely problems here, as have been demonstrated by scaling issues, forks, and hacks of exchanges. But we can’t throw the baby out with the bath water. The ideas behind Bitcoin that allow for a decentralized management of a money system are clearly a step forward. To be against decentralization is to be against progress.

Karma Finally Strikes

Perhaps the funniest part of bankers protesting the spread of Bitcoin is they created the conditions that bred its necessity. The financial collapse of 2008 and every other collapse before that have been proof of too much trust being put in a centralized system. It has become clear that no single group can be trusted to run the entire economy, especially with so much at stake. It is no coincidence that Bitcoin was first released at this time.

Knowing this, we can start to think about whether these financial crises would have occurred if we were using decentralized applications. Obviously, we can’t know for sure, and it is likely something bad still would have happened, but it could have been greatly reduced by democratizing the management of the economic system.

This “democratization” is the act of letting everyone vote on whether a transaction is viable or not. The system solves the ‘double-spend’ problem by looking for a relative consensus in the network. If one person is claiming something that is out of sync with what everyone else is claiming, it can be “voted” out of existence.

To the common person, this looks and feels a lot better than having an arbitrator control the fate of his or her financial future. That is where the appeal comes to many of those who are disenchanted by the current economic system and are looking for a change.

So there is a very valid case for the decentralized aspect within Bitcoin. Whether Bitcoin will be the one to bring it to fruition or if it will be a different currency is yet to be seen.

Featured image courtesy of Shutterstock. 

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