Spend 5 minutes on Reddit’s /r/Bitcoin or the popular forum bitcointalk.org and you’ll likely come away with the impression that users believe the banking system is outdated, behind the times and in need of a change. The change they talk about isn’t a minor facelift; Bitcoin believers want wholesale change in how financial institutions do business. This fury lends itself to the belief that Bitcoin can shake up the status quo that believers disdain. Enthusiasts for Bitcoin and other cryptocurrencies are often believers of niche political movements like Anarcho-Capitalism and Libertarianism, and these political beliefs shape their opinions about Bitcoin. The critical problem with Bitcoin is that users are more concerned with being ideologists than technologists.
Bitcoin, and the blockchain that powers Bitcoin, have garnered serious attention. Industry leaders like Goldman Sachs, Bank of America, Forbes, Fortune and a slew of venture capitalists have contributed praise, scrutiny and investment. Somewhere in all this capitalistic enthusiasm, though, exists a disconnect between what investors and financial institutions see as valuable, and what Bitcoin believers see as valuable. Investors seem to be focusing on the blockchain, variably referred to as a distributed ledger, trustless ledger, smart contract and other derivations of the underlying protocol. The proof-of-work protocol that powers the blockchain may end up powering many forms of financial transactions, helping to lessen the burden of audit requirements, KYC/AML constraints and due diligence investigations. Start-up firms like SmartContract, Hedgy and Chain are lining up to exploit this future industry, and current giants like Visa, CitiBank and Merrill Lynch are both monitoring the situation and doing their own research.
Investment in firms specializing in blockchain technology, and not specifically Bitcoin, indicates the speculative interest of investors is focusing away from Bitcoin. This is further evidenced by the choice of investors to not simply buy Bitcoin. When investors think an asset is going to increase in value, they buy it. Witness gold, property and oil bubbles in recent times. If investors thought that Bitcoin as an asset was poised to skyrocket in value they would simply buy Bitcoins rather than investing in firms that service Bitcoin-based activities. To put it bluntly, the actions of investors suggest that faith in Bitcoin is low, but faith in smart contracts and proof-of-work-based ledgers remains high. Why, then, are users on /r/Bitcoin and Bitcointalk so aggressively dismissive of any blockchain technology that isn’t based around Bitcoin?
Here are a few actual quotes I gathered recently from /r/bitcoin regarding blockchain technology: ”There’s nothing to work out, this is marketing droids selling snake oil to suits that can’t parse how/why blockchains work,” in reply to a post about start-ups designing private blockchains. In reply to discussion about banks researching private ledgers, “But if you think you’re going to build your own blockchain and have any hope of competing with the global decentralized permissionless network of bitcoin, you’re the one who ‘doesn’t get it.’”
Consider if the designers of the printing press thought along the same narrow lines: ‘Who would want to print books about science or poetry? Printing presses should only print religious texts.’ Or if early researchers of computer networking had similar tunnel vision about their nascent technology: ‘Computers should only be networked for university and government research. Why would people want to communicate over computers? That’s what phones are for!’ Lastly, another real quote which captures the heart of how Bitcoin believers view themselves and anyone who disagrees with their beliefs: “what? Bitcoin isn’t “from the fintech sector”, it’s from the cypherpunks you ignorants.”
The vitriol with which Bitcoin believers approach blockchain innovation from financial firms not focused on Bitcoin will ultimately doom Bitcoin. The pseudo-tribalism displayed by Bitcoin users will eventually leave them as early adopters of a first-iteration technology in a world that innovates around, and adopts for use, subsequent iterations. Mentioning cypherpunks as the genesis of Bitcoin channels the deeply rooted idea that Bitcoin is made for members of the counterculture, and mainstream use infringes on their ideological copyright. It may come as some surprise then that the first adopters of PC’s, phones, and CD players are no longer using the first generation of those respective technologies. Though, perhaps, if a few users are still using their first generation products, maybe they spend significant time on /r/bitcoin decrying larger transactions and private blockchains.
It may be that Bitcoin believers are just that: possessors of irrational faith not justified by evidence. My personal conclusion is that political ideology causes Bitcoin users to predict a future that matches their own fantastical desires, something closer to Libertarian ideology, rather than a more likely future populated by banks and capitalists. This idealistic tunnel vision has the negative byproduct of discouraging discussion on blockchain innovation, and even discouraging the thought that such technology may be valuable. Instead of being early-adopters of innovative smart-contracts and proof-of-work financial instruments, users run the risk of being holders of the cryptocurrency equivalent of 8-track tapes.
Image credit – Sirius