An Operating System for Capitalism: CRYPTOCURRENCY

BY CHRISTOPHER ATTARD, HEAD OF MEDIA OPERATIONS AT THE MALTA A.I. & BLOCKCHAIN SUMMIT

WITH THE ADVENT OF CRYPTOCURRENCIES DRIVING THE FINTECH SECTOR TO NEW HEIGHTS, THE SENSE THAT TRADITIONAL FIAT CURRENCIES ARE IN FOR A HEAVY SHAKEUP IS GRADUALLY CREEPING INTO PUBLIC AWARENESS.

Irrespective of one’s opinion on individual currencies, there are confluent reasons why competition in the value storage and transfer business is growing. In fact, it’s reasonable to say that an emerging economic system built on improved fundamental principles is approaching faster than die-hard traditionalists care to admit.

Back in 2017, barely 1% of the value of all payments made in Sweden were transacted in coins or notes. Similarly, the UK saw a 15% drop in notes and coin usage that same year, indicating growing popularity of contactless cards and cashless payments. While the possible Orwellian downsides to fully-digitalised cashless payments are obvious, the facts speak to a transition nonetheless.

This is in part why those who carelessly dismiss cryptocurrency as a bubble that’s going to zero will all be eating humble pie in due course. Money has no personal agenda, it is simply a means of exchanging value. Once this mechanism is pitted against an alternative built on a trustless premise that provides the same level of convenience, then the switch is inevitable.

Today, fiat currency valuations are no longer tied to any commodity – which is to say that their price is essentially contingent on what people collectively believe it to be. If that belief were to be extinguished overnight, then would there be any reason to go back to paper money and metallic coins? Leaving aside arguments based on historical precedent, the size and scale of central banks and the promises they’ve made to maintain valuations, the emphasis on widespread belief becomes even more relevant. In fact, it’s reasonable to say that trust and belief are the primary drivers that buoy fiat-currencies. Admitting this forces one to consider that technological innovation in either of these could allow for another step forward. For example, if the element of trust is taken away from the inevitable failings of centralised human systems, then the only thing that remains is belief in any given asset.

Far from the panacea-like assertions of blind cryptocurrency enthusiasts, or the witless declarations of hardcore traditionalists that can’t see beyond their own nose, outsourcing trust to quasi-infallible systems is a clear technological advancement.

Given the collapse of the Gold standard, which is to say that cash valuations are now a product of beliefs coupled with the promise of sustainable value, traditional fiat also fits neatly into that description.

Bitcoin’s significance lies in the fact that it provided a solution to the double-spending problem. As such, cryptocurrency isn’t the future merely because a committed band of dreamers would have everyone believe it is. On the contrary, it is the future because decentralisation takes trust away from unreliable third parties and tangibly places it in the hands of individuals. It is the digital equivalent of paying someone with cash up front with no meddling middleman. This was never possible before Bitcoin. Case in point, Bitcoin has allowed an entire generation of Venezuelans to have an alternative to the crippling inflation brought about by a socialist, governmentcontrolled paradise.

In principle, Bitcoin – one of many cryptocurrencies – grants people financial autonomy irrespective of monetary policies dictated by governing bodies. This is to say that there is now an alternative operating system to forced austerity, government intervention and financial collapse.

Needless to say, government regulation through taxation and legislation is still a big factor depending on which cryptocurrency one uses. But then again, cryptocurrency is not a final solution, it is a prototypical upgrade. At the same time, Bitcoin is probably more comparable to MS-DOS in terms of its operating system capabilities, but despite its rudimentary functions it is undeniably a cash alternative.

One can argue the details and the issues relating to nextof-kin, cashback and ease-of-access endlessly, but these discussions come after the fact and do not take away from the fundamentals. Bitcoin’s value lies in the fact that it is a non-replicable digital asset as well as a peer-to-peer payments system. Perhaps the best thing of all is that all this technology can be used across cryptocurrencies. At the same time, Satoshi’s invention mimics gold’s natural and uncontrolled scarcity on the Internet. If this isn’t valuable, then what is?