The bitcoin revolution

The invention of the printing press in 1440 broke the Roman Catholic Church’s control on the word of God, sowing the seeds of the Renaissance.

In the early 1700s the invention of the steam engine disrupted horse-and manpower, driving the Industrial Revolution. In the past 40 years the invention of the internet has fundamentally changed the way we interact — creating digital giants such as Apple, Facebook, Amazon and Google. Yet financial infrastructure has been largely untouched. Until bitcoin.

Monetary policy is centrally determined by a group of people with debatable models who cannot hope to account for the desires of the millions who live under them. Powerful intermediaries determine who can transact on financial networks, leaving many without access to financial services. All financial transactions (including digital) clear through centralised databases, which is time-consuming, difficult and costly.

In the US, they still use cheques. SA may appear more advanced — but ask bankers about the reconciliation complexity under the hood. It’s no surprise strange transactions appear on our bank statements and fraud is commonplace.

By contrast, bitcoin’s monetary policy was determined in 2008, leaving no risk of sudden shifts in the policy trajectory. Anyone with the internet can transact on the network, providing access around the globe. And transactions clear and settle peer to peer anywhere in 10-30 minutes.

The benefit this technology affords is undeniable. Female programmers in Afghanistan who aren’t able to access bank accounts due to gender-based policies can start their own businesses thanks to bitcoin’s censorship resistance. Middle-class Venezuelans can mitigate against hyperinflation thanks to bitcoin’s store of value. African expats can send remittances to their family at home thanks to bitcoin’s borderless payments.

Bitcoin is changing society, just like the printing press and the steam engine. The printing press transformed communication, which affected religion, government and commerce. The steam engine transformed the mode of power delivery, which affected manufacturing, transportation and migration.

Similarly, bitcoin’s impact isn’t confined to one area. It’s helping individuals understand the problems with our unsound money like debt saturation, which impedes economic growth and employment. Or asset price inflation, which favours asset holders and fosters wealth inequality.

It’s making individuals appreciate the value of a deflationary savings technology where one can store value over long periods without having to choose which specific security to purchase. It’s helping individuals appreciate the value of decentralised and distributed systems where there isn’t a corruptible politician at the centre. And just like the printing press and steam engine, there are probably many more implications yet to be uncovered.

Despite this empowerment, the social, political and economic changes created by technology aren’t welcomed by all. There are many who benefited from the economic structures before the printing press and the steam engine. Similarly, there are many who will turn their noses up at bitcoin. Perhaps they’re challenged, or perhaps they’re uncomfortable with change. Take your pick of challenges — It’s going to be banned. It’s too volatile. It doesn’t have intrinsic value, It’s used by criminals. We’ve heard all these before.

Detractors have written bitcoin’s obituary numerous times before, laughing at its supporters when there’s a dip in prices. But it always comes back. And the truth is, bitcoin doesn’t care. It’s merely code on the internet. Just like the steam engine and printing press, bitcoin is a technology that’s been unleashed on the world. You cannot put this genie back in the bottle.

No matter what you, me, regulators or detractors think, bitcoin has processed transactions every 10 minutes for 12 years without a significant hack. Clearly, it has value — more than $1-trillion worth of value. Market capitalisation is a crude metric, but there are many others. Addresses are multiplying. Businesses like PayPal and Square accept bitcoin as payment. Companies like Tesla and MicroStrategy have placed bitcoin onto their balance sheets. And institutional investors like MassMutual, Guggenheim and BlackRock have allocated capital.

I’m not naive enough to think I know the future. We deal in probabilities in investments and the scales are tipped in bitcoin’s favour. Just assess our current conditions. Global debt levels are at record highs and interest rates are at record lows. Most economies were a shambles before Covid-19 and yet the only answer policymakers have got is more monetary and fiscal "stimulus" … the world is primed for a shift in the way we think about money and debt.

Bitcoin is triggering that shift. Each year the case becomes more compelling. Sooner or later, it won’t be risky to allocate to bitcoin, it’ll be risky not to allocate your time, energy and capital towards this technology.