Every day I read more about how the amazing technology which underlies Bitcoin works. For most people who have gone down this road far enough, there comes an “aha” moment when you realize this technology has the power to change, well, everything.
All technologies with the power to disrupt society on a global scale are met with incredible resistance. To quote Marc Andreessen of silicon valleys renowned VC firm Andreessen Horowitz in response to the point that Buffet sees little value in Bitcoin, “The historical track record of old white men who do not understand technology crapping on new technology is about 100%”. For context, here is a video of the Coinsummit fireside chat where he said it: https://www.youtube.com/watch?v=iir5J6Z3Z1Q (42:20)
This resistance to new technology manifests itself in debates and argument, and especially around technologies which change how humans globally interact even more so when it intersects with how we do business and when it involves money. There are many passionate debates about money in all its incarnations whether it be dollars, gold, or Bitcoin. Humans are deeply entwined with it, because it represents their labor, their sacrifice, their hopes and dreams. Money makes the difference between freedom and slavery, the difference between life and death in many cases globally for billions of people, so it is no wonder people are so passionate in their discussion of it.
Let me present some foundational information to support my posts title.
1. There are currently as many as 2.5billion un-banked people globally. This means that this huge portion of the worlds population does not have access to banking, and frankly are not likely to get it. In many cases they are simply not able to get it. If a person in Afghanistan for example (or even America) has zero credit history, no passport or drivers license, no banking or professional references, and may not even have a copy of a birth certificate (and cant get one), they are not going to be opening a bank account under the worlds current AML/KYC requirements anytime soon. If there were a way however to add 2.5billion people to the worlds economic ecosystem by granting them instant access to financial transactions and a way to store the fruit of their labor, it could create a surge of economic activity never before seen on earth.
2. People in places like Afghanistan do not go to their neighborhood super-mall and buy laptops, ipads, and desk computers. Much of the developing world does, however have ever growing access to smart/feature phones, with market penetration reaching as much as 4.55 billion consumers worldwide in 2014. (1) Developing countries are skipping the entire computer/laptop/tablet phase and moving straight into much more affordable smart/feature phones with internet access. In the Middle East and Africa, nearly ALL internet users are mobile. (2) According to IDC, global shipments for smart phones has exceeded 1 billion units in a single year, and the numbers are only rising. (3) “In a remarkably short period of time, internet and mobile technology have become a part of everyday life for some in the emerging and developing world” (4)
3. In time, all of these smart devices may be linked to the internet and the rest of the global economy via satellite networks which offer blanket coverage to every inch of planet earth. Elon Musk and Richard Branson are currently backing an initiative to create the worlds largest ever geo-stationary satellite constellation providing internet service. (5) This will only serve to magnify the penetration and accessibility of crypto-currency to the worlds un-banked billions.
4. (Update) The use of digital currencies is already a well established trend in some developing economies. By some estimates, over 50% of the GDP of Kenya is conducted in a homegrown created digital currency called M-pesa which was introduced by Kenyan Posts & Telecommunications in 2007. Today “people now make about 80 billion shillings in monthly M-pesa transactions and move more than 130 billion shillings in and out of the mobile system via 45,000 independent agents throughout the country. ” (6)
So why does all this matter?
It matters because when 2.5billion un-banked people gain access to interact economically with the rest of us, it is going to change everything about everything. Population-wise, it is the equivalent of adding another China + India to the global economy.
Perhaps even more importantly, this technology does away with the need for a centralized banking system which acts as a rent-seeking parasite on the back of humanity. It creates a means to achieve what the entire banking system does for us today, which is to provide a system for tracking transactions, debt, and other financial constructs between people, only banks wont be needed to do it anymore, because the entire world will have transparent access to that transaction record in the form of a public ledger backed by cryptography (blockchain) technology. The absolutely critical and pinnacle aspect of blockchain technology is decentralization, it will take the power out of the hands of the banks and give it back to the people, where it arguably belongs.
Imagine a world where a teenage girl in India can start a business, sell her wares or services, and then through her phone, internet, and crypto-currency technology then store the fruit of her labor. She can then buy an item on Amazon and have it shipped to her half way around the world without ever having to open a bank account. This is the future we are looking at, and it is coming faster than you think.
I am not suggesting there will be no future need for banks, nor am I suggesting that they are all of a sudden going to just fold up and disappear. They will fight, tooth and nail, kicking and screaming, every step of the way. And they will get governments involved as much as they possibly can to slow, stop, hinder, and derail its progress. But in the end, just like distributed file sharing, they will be utterly powerless to stop it. In the end we may have something like a hybrid system where banks serve the banked, and brilliant tech startups bridge the gap between the banking world and the non-banked crypto-currency world. The signs of these new companies are already there, with tens of millions in funding for these startups and backed by people who are not stupid.
I will write more about the current biggest hurdle that crypto-currencies today face versus established means of transacting such as the USD in a future post.