Why National Cryptocurrencies Will Never Beat Bitcoin
National cryptocurrencies will never be able to compete with Bitcoin because no one will trust a system that requires advance permission from and which is controlled by a government to use it.
[Note: This is an op-ed, edited by Allen Scott]
National Cryptocurrencies Will Never Be Global
News is just in that the mint of a very important, historic sovereign nation has just hired a company in a separate nation to help it launch its own “Blockchain not Bitcoin” attempt to ride the Bitcoin wave. This is extraordinary in several ways, and allows a general principle to be explored.
First off, this mint doesn’t understand how Bitcoin works. That is clear. They’ve made the common error of believing what computer illiterates in well regarded newspapers mistakenly repeat verbatim about Bitcoin; that you can have “Blockchain without Bitcoin”. And this is only the first of their many errors in this project.
Even if their technical and economic assumptions were correct, there is no way that their private money system can beat the market. The Russians and the Chinese will never accept domination of a global e-money by a single foreign nation coded by a second party.
They will at a minimum, launch their own central bank altcoin, or more likely, settle on Bitcoin as the civilized global standard. These people have made the fundamental error of thinking that they can beat the market. It is the same error the Americans made thinking that everyone would use CDMA instead of GSM.
This new money will never be international. No one will trust a system that requires advance permission from and which is controlled by a government to use it, that can exclude any actor based on arbitrary rules of a hostile government when Bitcoin is available. There is no logical reason to trust anyone when Bitcoin exists; any system that is tainted by the requirement of trust is inferior to Bitcoin, and will make rational actors choose Bitcoin over those other, broken systems every time.
There are other problems with this new project, some of which will be of concern to the State. With a software simulation of money, the company providing the service is the mint, with absolute control over the money and its operation, not the mint.
In order to be the mint, you must directly control the levers of the machinery, you cannot outsource that control to other men, and certainly never to men from a foreign country; these foreigners de facto control everything if no one in the mint can understand how anything works. They seem to have forgotten what the word “Sovereign” means.
If you’re going to outsource the creation of a new e-money, and cede control over its development to foreigners, why not go all the way and give it to the global experts: Bitcoin Core?
You get all the benefits of the hundreds of developers working on Bitcoin, and access to the global Bitcoin network, its first mover advantage, huge ecosystem and its network effects. You are already willing to give up control, so you may as well give it up for something and not for nothing.
This is another example of the global Computer Literacy Crisis, where the ‘aparatchicks’ don’t understand how anything works, and are rendered helpless, delegating all responsibility to software developers who are now one of the top global powers on Earth as a class.
We saw this with government departments around the globe accepting Microsoft Windows as “the standard” for decades, with the late realization that this gives control (and back-door NSA espionage access) to a foreign company. Much better to use Linux that belongs to no one, is transparent and infinitely more secure and controllable. Just like Bitcoin.
For 7 years I’ve been talking about the book “Good Money” by George Selgin:
If you are interested in Bitcoin and why “private Blockchain” is junk, you should read this book. What is fascinating about this news of a sovereign mint hiring a foreign company to create a system for them is that the private money vs State money is turned on its head in the Bitcoin era.
In the 1700s, button makers switched to minting coins for private use, because the Royal Mint couldn’t supply the demand for small change. Now, government mints are turning to bespoke “Blockchain not Bitcoin Tokens” while Bitcoin becomes the sovereign money of the world.
The picture is entirely reversed; the state is minting private money to fill an (imaginary) need while Bitcoin is the money everyone uses but has trouble getting a hold of. Azteco is a service that aims to solve that problem.
Like many projects with no hope of traction because they are fundamentally flawed, this new platform has put its software up on GitHub, hoping to attract developers to work on it for free. This will not happen.
Bitcoin Devs Won’t Waste Time With Other Blockchains
First of all, the number of developers with the skill to hack cryptocurrencies in C is extremely small, and all of them are working on Bitcoin. They’re all doing so mostly without compensation, for the good of society, just like Linux kernel developers do. There is no way you are going to persuade these ethical men to stop working on Bitcoin and to devote that time to a bogus “permissioned ledger” project run by a company on behalf of a nation state.
Bitcoin devs simply aren’t going to split their limited time between projects like Corda or any anti-Bitcoin project. And of course, Corda has conceded defeat and given up on “making blockchains programmable” and other fanciful hand-waving nonsense.
“GitHub Open Source” isn’t a magic wand that will cause men to flock to your repo and software to be written for you for nothing, and no, you can’t hire developers to do this work either; there are none available.
Developers at this skill, experience and knowledge level are an extremely rare breed, and they are all working on Bitcoin, and will never contract to work on unethical software, for any amount of money.
Every year the State wastes time on vanity projects they can’t even understand, Bitcoin grows, spreads and strengthens. The number of new, fundamental features coming to Bitcoin is not matched by any other project, and how these will synergise is anyone’s guess.
(From The Elements Project, new features coming to Bitcoin https://elementsproject.org/elements/ SegWit will activate, on Litecoin first and then Bitcoin. Then everything will change.)
Every software project has a use case. The developers are eager to make their case so they can gain users. When they won’t make the case clearly, something is very wrong. There is no use case for a sovereign nation to launch its own altcoin that is inferior to Bitcoin.
Its like launching a new mobile phone network standard; no manufacturer is going to incorporate another set of protocols, chips, transceiver and antennae into its phone to accommodate you, and yet, this is exactly what these people believe they can do with Bitcoin. All rational nation State actors are now running to embrace and profit from the inevitable domination by Bitcoin and not betting against it.
We can be sure of this. No “permissioned,” “BlockChain,” alt-coin reality denying project launched by a Nation State that has outsourced development of its software to a private company in a foreign land can ever hope to outperform Bitcoin on any level.
Incredibly, the lessons of the doomed and fundamentally flawed Canadian “Mint Chip” have not been learned yet. This is a good thing, believe it or not. The longer Bitcoin’s enemies think they can reinvent the wheel and beat Bitcoin, the better it is for Bitcoin. By the time they figure all of this out, it will be too late. In fact, it already is too late.
KYC/AML is Dying
There has been some very good news on the Bitcoin perception front. Another judge, this time in of all jurisdictions, New York, has ruled that Bitcoin is not Money.
[…] a federal judge in New York has recommended that money-laundering charges be dropped in a local case, based on his determination that Bitcoin doesn’t qualify as money. Instead, U.S. Magistrate Judge Hugh B. Scott has opined that Bitcoin more closely resembles a commodity. While he noted that Bitcoin might one day become so acceptable that it could be considered as money, Scott suggested that it currently has more in common with collectibles – like trading cards and other novelty items.
Any business in Bitcoin, if it is run by competent men, should now destroy their “compliance” data and stop all KYC/AML work immediately. They can rely on these two judgements as pretext, and if any prosecutor or three letter agency wants to take them to court, they should accept the challenge, because they will win.
Coinbase, for example, has been asked for a database dump of all their customers who transferred Bitcoin from 2013 to 2015. They are going to fight this in court, and it may cost them millions to defend this outrageous attack.
Instead of going to court to defend handing over customer data, Coinbase should permanently destroy the data, and fight in court to prove Bitcoin is not money, and not subject to any law any more than Linden Labs “Linden Dollars” are.
Doing this, they will forever be unable to hand over data they don’t have, and will not be asked for it again. They will streamline their service, and increase their profitability. Or burn rate. Either way, the way out of their current problems is to embrace these two judgements and amplify them so that the entire industry is both protected and relieved of onerous administrative burdens simultaneously.
Stopping KYC/AML will increase on ramp speeds, increase profits, increase Bitcoin throughput and midwife “The Transformation”. You are already in a fight with the State, who are using your own data against you; data that you did not have to collect in the first place, that you volunteered to collect, expecting a pat on the head.
Doing this will also turn you from an unethical company into an ethical one. Its a no brainer.
For the Lulz
Finally, for some lulz. People love predicting the collapse of things. Its like a perverted spectator sport, where you’re betting on which gladiator is going to die first. Y2K hysteria Twitter and even the internet have been predicted to “collapse” and these predictions failed.
We all remember Clifford Stoll. No surprise then, when people pop up to predict that Bitcoin will have a “complete and total collapse” for no given reason whatsoever.
What we can see emerging is the fact that the vast majority of men have reached their intellectual limit in 2017. Most of the things are incomprehensible to them. Bitcoin is one of those most things. As time goes on, this problem is going to get much worse. Its like the familiar tale of Artificial Intelligence making new versions of itself that man has no capacity to understand.
The problem isn’t that people don’t understand new technology. This has always been true since man started forging steel, and of course, everyone is entitled to their own opinion. The problem is that these ignorant people insist on forcing other people who do understand the new tools, to conform to their mistaken ideas of how they should work with them and present it to the market.
Bitcoin has been suffering this for a few years now, but with the recent court decisions, Japanese “Legitimization” (remember when everyone kept saying “legitimacy” is what Bitcoin needs? Now its “adoption” and “scale”) and increase market penetration through great services like Local Bitcoins, it is now clear that Bitcoin will win. No matter what you want.
Finally, some good news. Samson Mow, notorious milliner, Bitcoin thinker, expert analyst, conference organizer, East West bridger, Ubisoft expander, organizer of the “Scaling Bitcoin” event and meme manipulator extraordinary, has just been hired by Blockstream.
Normally hirings of this sort would not be worth comment, but this one is given what is under discussion in this piece. Some were calling for this very useful man to be fired over his very amusing tweets and totally accurate analysis. This is not good thinking.
Because people conflated Bitcoin with money, there is an underlying assumption that the men involved in Bitcoin must emulate the behavior of stuffy, stiff, humorless bankers. Nothing could be further from the truth.
We know that Bitcoin is not money and in properly designed businesses, no one needs to be trusted; Bitcoin itself is the infallible guarantor. All the social signals that men used to use to assess trust (ties, logos, and all the trappings of banking) have been replaced with software. This leaves people behind the levers to “let it all hang out” and be totally honest, because the software is what you trust, not the men who wrote it. This is another benefit of Bitcoin, that is slowly starting to emerge.
The people stuck in the 20th Century are the same ones who never encrypted their email and think that Bitcoin is for buying Starbucks on chain. They’re the ones doing the speech policing, and calling internet culture “toxic.”
Samson Mow being hired is an explicit rejection of these wrong ideas; he is being hired because he merits the job, and nothing else. Bitcoin is not about illusions, it is about MATHEMATICAL FACTS.
[Full disclosure: The author of this piece is the founder of Azteco]
Do you agree with this assessment of Bitcoin? Share your thoughts below!
Images courtesy of elementsproject.org, Twitter, Shutterstock