By Guest Contributor
By Miko Matusmura
Honestly, the people are mad as hell and won’t take it any longer.
I’ll open this with a quote from Sir John Dalberg-Acton, and liberally sprinkle his quotes throughout this piece.
Liberty is the prevention of control by others. — Sir John Dalberg-Acton, 8th Baronet.
Humpty Dumpty Sat on a Wall Street
I was in a room full of bankers in San Diego at a conference and I was asked repeatedly to explain Bitcoin. Finally, what I ended up saying to them was:
“It’s not that everyone trusts bitcoin so much. It’s just that they have stopped trusting you (banks).”
American confidence in banks has clearly eroded as a function of the bank failures of 2007. Every day there is a new headline about banks creating fraudulent accounts, asking customers to buy toxic assets that they themselves are dumping, or getting hacked and revealing customer data to hackers.
Bitcoin is “Trustless”
Restoring trust in financial infrastructure requires a new recipe, one not fueled by secrecy, centralization and externality. Bitcoin from day one has been ruthlessly designed to eliminate the need for a trusted third party.
Every thing secret degenerates, even the administration of justice; nothing is safe that does not show how it can bear discussion and publicity. — Sir John Dalberg-Acton, 8th Baronet.
First of all, the code of Bitcoin is open source, so it can be read by anyone with sufficient technical ability. This provides the first layer of transparency.
Secondly, the blockchain provides transparency of the decentralized ledger. The Bitcoin blockchain puts every transaction and every account into public view. This is an unprecedented level of global transparency. As you probably know, Bitcoin is a very decentralized system with no central bank, no central government, no leadership (it can be forked by anyone who is able to develop software) and no founder (the pseudonymous founder, Satoshi Nakamoto has dissappeared from the public eye).
Humpty Dumpty Had a Great Bank Failure
The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks. — Sir John Dalberg-Acton, 8th Baronet.
The chart below shows the emergence of giant banks through further centralization via mergers and acquisitions.
All the King’s Horses and All the King’s Men
The most certain test by which we judge whether a country is really free is the amount of security enjoyed by minorities. — Sir John Dalberg-Acton, 8th Baronet.
Despite the populist reform agenda that Trump was elected on, the Trump administration continues to hire Goldman Sachs executives and billionaires to positions within the administration.
Banks are spending upwards of $48 Million this year on lobbying congress. 3000+ bank lobbyists means that there is a 5 to 1 ratio of bank lobbyists to members of congress in Washington.
This brings to mind the most famous words of Lord John Dalberg-Acton:
Couldn’t Put Humpty Together Again
The danger is not that a particular class is unfit to govern. Every class is unfit to govern. — Sir John Dalberg-Acton, 8th Baronet.
The move to Bitcoin is not restricted to the United States, it is global. And the collapse of central banking is not a US phenomenon but worldwide. Banks are failing countries like Argentina, Zimbabwe, Venezuela and many more.
Nor is this a diatribe against the Trump administration which is more of a symptom of global mistrust rather than its cause, although it may be contributing to the decline of trust in centralized power.
It’s not that the people are technical, economic or financial geniuses that they have figured out the inner workings of the bitcoin blockchain. It’s rather that they are preferring the experience of bitcoin (value stored increases) rather than the experience of banks (stored value decreases, fees are applied, corruption scandals break out).
I am not a crypto libertarian. But for every complaint levied against Bitcoin, it’s easy to point the finger back at fiat currencies like the US Dollar and simply observe that there are significant externalities and challenges.
I am also not a crypto-anarchist and believe in the need for regulation — and I applaud recent SEC enforcement actions against cryptocurrency scammers.
Also I am not a crypto-utopianist and do not believe in the end of government, central banking or fiat currencies by any means.
All I’m saying is that the current money supply has big problems.
Also, I’m not happy about the situation we are in, nor am I saying that bitcoin as it is today is going to fix it. Bitcoin is a single instance of open source money, which is money that competes for users based on being better, and it improves every day based on the developer attention it gets.
Bitcoin itself is not necessarily even the be-all-end-all… to me it’s open source money, which means that if you play it out, we will end up with better money with fewer externalities over time, simply through competition.
You don’t have to like bitcoin. Bitcoin has to “like” you — or another open source currency will take its place.
Through open source, it will continue to try to serve more and more people — and if it fails to do that it will fork or be knocked out by another open source money alternative.
The case for Bitcoin $100k is simple, that bitcoin is simply a better product.
I won’t make the case that it’s a good product because it rises in value, that creates a circular argument.
Bitcoin is a better product because centralization has failed us.
The combination of banks, lobbying and government have produced a toxic environment, and a swamp that refuses to be drained.
Wealth inequality is creating massive populist political strife, and solutions like Brexit and the Trump Administration’s recent tax reforms are not going to fix the problems of centralization that created the banking crisis.
What to do?
I’m not an investment broker by any means. This blog post is not investment advice. I’m simply making this case:
Open source money is here to stay.
Having thousands of developers being paid to work on open source money will be a benefit to society as it will allow users to choose financial infrastructure that serves them the best.
Bitcoin isn’t here to fix Humpty Dumpty Banking.
Link to the Medium article here.