Terence Zimwara
The world’s first privately issued currency, Bitcoin, can be
described as a success given the challenges it has survived. There is no doubt
that this success will be bettered as events in the financial services world
continue to unravel.
Bitcoin has made its point, even harsh critics like Jamie
Dimon, the CEO of JP Morgan has been forced to eat humble pie, after initially
attacking the crypto. News that JP Morgan will be launching its own crypto
vindicates Bitcoin and those behind it in a big way.
However, in spite of this apparent success and acceptance of
the ideals of a private currency, the fact that Bitcoin creators still choose
to remain unknown is something that still confuses.
It is customary, perhaps even natural, for individuals who
bring life changing innovations to seek or expect recognition for their
efforts. After all, the geniuses of this world gained global recognition for
their innovations, from Bill Gates with his Microsoft to Mark Zuckerberg and
his Facebook, Jack Ma with Alibaba to Ren Zhengfei and his Huawei,. Yet with
Bitcoin, you cannot put a face to it, Satoshi Nakamoto remains anonymous!
Unfortunately opponents of Bitcoin are seizing on this as
they up the ante against the crypto-currency. For example, South African
regulators want all issuers of crypto-currencies to register with them so as to
gain ‘permission’ to continue operating in that country.
This may well suggest that South African regulators want to
know those behind Bitcoin. Of course,
Bitcoin issuers are not going to comply with this, besides it is not possible
for any one regulator to grant permission to Bitcoin or to enforce an order
banning this crypto. The Blockchain technology behind Bitcoin makes the
innovation permissionless, it continues to grow like this because it was
created to survive like this.
South African regulators are well aware of this but they are
pressing on as the idea is winning the moral argument against anonymous crypto-currencies.
Central banks hope to turn the tables against cryptos like Bitcoin, by tying
the anticipated refusal to register down to possible ties to money laundering,
illicit transactions and terrorism financing.
Of course this terrorism or money laundering argument has
run its course but it may well be one of the major reasons why Bitcoin has not reached
its full potential. Such a tag saps confidence in that crypto-currency while
giving lagging rivals a window to play catch up rather quickly. It could well
be true that Facebook studied the Bitcoin Blockchain well and understood the
pioneering crypto’s weak points before announcing its entry.
Facebook’s Libra coin is now being touted as a crypto that
may finally achieve the elusive dream of greater adoption even as it slated for
launch in 2020. Bitcoin did all the hard work, it fought authorities for years
to accept the very idea of a privately issued currency and it is now easy for the
likes of Facebook to announce it will launch its own.
Authorities now seem to have come around the idea of
privately issued currency that is if the United States Congress demands to
Facebook are anything to go by. Apparently American congressional leaders want
Facebook to assure them that the Libra coin will not be used for nefarious
activities something they cannot do with Bitcoin. Of course, in reality politicians
have little leverage over Facebook, the congressional hearings are only a pyrrhic victory,
and nothing really changes in the end if past hearings are anything to go by.
Powerful politicians are now negotiating with an entity that
has not even launched just because they can put a face to the organization. Ideally
these powerful politicians should have been negotiating or pleading with Bitcoin!
Bitcoin will thus remain handicapped by this anonymity while lesser rivals
gain recognition and adoption by the masses.
So while Bitcoin developers and supporters may argue that
Libra does meet the minimum standards for a decentralized currency, there is a
good chance that those without banking services will embrace it just because
they know Facebook, they know Mark Zuckerberg. The social media company has the
numbers and many potential users will simply embrace Libra without asking the
hard questions like they are doing with Bitcoin or Ethereum for instance.
Bitcoin creators’ insistence on anonymity opens the doors
for opportunists as what happened in 2016 when Craig Wright attempted to present
himself as Satoshi Nakamoto. This is made possible by the fact that there is
no-one or a public relations person that can forcefully dismiss such
opportunists.
In Bitcoin’s defence however, this anonymity has been
justified given the environment that the currency has had to operate.
From its
inception, the creators recognized the potential of Bitcoin and what it could
possibly turn into, and chose anonymity over recognition. Unusually for them,
the incentives for going public were outweighed by the cons; possible legal
ramifications, personal harassment, liability etc. Some have even suggested
that the actual Satoshi Nakamoto may have passed away so the ‘coming out’ that
many expect might never happen.
Sadly the situation has changed quite significantly, there
is a good chance Bitcoin might become the next MySpace or Yahoo unless some
changes are made and that may include revealing the real identities behind this
crypto.
MySpace was one of the pioneering social media organizations;
it had tens of millions of users especially in North America and enjoyed a
leadership position. However that would change when Facebook and Twitter came
along. Facebook came with a strategy that was more appealing to a wider
audience and its users grew exponentially and the same goes for Twitter. Before
long MySpace had been deposed as the number social networking site and today no
one remembers much about them.
Similarly, Yahoo was one of the pioneering and dominant email
providers but that would change when Google came along. This new kid on block
came with its famed search algorithm, emails, videos plus many other services. The
result was a familiar, Google upstaged the likes of Yahoo and Hotmail and today
there are over a billion Gmail users! Yahoo is now the forgotten email service
provider just because it failed to regenerate itself in time.
The idealism behind Bitcoin is almost perfect but now there
is a good chance that a rival with diluted principles will enjoy a larger share
of the spoils. Bitcoin developers need to do more in order to maintain the
momentum and this could mean increasing the block size for instance or the
number of coins in circulation or even revealing the actual team behind this
innovation. Indeed the threat coming from Libra means Bitcoin creators need to
reevaluate the pros and cons of going public.
Achieving mass adoption should be the greater objective hence
making sacrifices will be necessary along the way. Bitcoin’s Blockchain has
many potential uses but the scaling and numbers issues continue to make it
difficult for such potential to be realized. It is time to regenerate the strategy
in order for the king of cryptos to continue holding that position.
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