People believing crypto is still some fringe weird technology, are surprised to learn that within just the Bitcoin network, around £1 million is exchanged every second of the day. Over the last decade or so, since bitcoin was established, over 10 trillion pounds has been exchanged over the bitcoin machine. For perspective, that’s more money than the total gold holdings on planet earth are worth today.
Historically, whilst the internet has changed a lot of things about the world (see the last blog) it hasn’t been able to pull off the exchange of value (money) between people. Of course, we have exchanged value digitally but only through a third party, a bank or institution. Now that’s changing rapidly…
The crypto adoption curve is likely to speed up dramatically now due to a thing called “network effects”. It’s simple to grasp if you think of any platform business. Let’s take Uber as an example which introduces taxi drivers to customers. Each new install of the Uber app makes the platform more valuable to taxi drivers as the customer pie increases. On the other side, each new taxi driver providing a service increases the value of the platform to the customer, as coverage and wait times decrease. That’s network effects and it’s one of the reasons why platform businesses wipe the floor with the traditional variety. Hilton may impressively build 5 new hotels and add a thousand rooms this year, but the Airbnb platform can add a thousand rooms in a week!
As an SME owner it’s hard to discern whether it’s more dangerous to have a position in crypto or whether it’s more dangerous to not have a position and watch your value get wiped off relatively. The problem is that, apparently, If the global top 1% invested just 1% of their wealth, Bitcoin would be somewhere around a million pounds per coin.
There are many crypto currencies though and what’s worse is that the coming faster and larger crypto adoption could also be its downfall….
The problem is that the bank and government have become one and the same thing. Imagine if everyone got paid in cash and the government had to facilitate the collection of all taxes manually, it wouldn’t be the same type of government. No, the government needs the banks, and the bank certainly needs the government. Just cast your mind back to when our taxes were used to prop up crap banking decisions on 2008/9.
To cut out the banker or third party is to cut out the government. If the government is out, VAT is out, income tax is out, corporation tax is out and worst of all controlling the money supply is out. Governments will still be able to tax houses, cars, issue various licenses and rate things but you are looking at a seriously smaller nation state.
Libertarians argue this is a good thing but regardless of your politics on it, the real question of whether crypto will carry on taking off, must boil down to whether governments can or will stop it.
It’s a real stretch to think that Governments won’t want to retain control of a country’s money supply. History shows that power is rarely handed over willingly. But then it’s hard to see how there is a genuine moral or legal remit to stop independent value exchange.
It will either be banned, or it will slim down governments and hold them to account in the same way that gold reserves fleeing a country used to.
“Give me control of a nation’s money supply, and I care not who makes its laws.”
Mayer Amschel Rothschild – Founder, Rothchilds