It is true the average person in the street is pretty bamboozled by the idea of cryptocurrency.
It’s techy and new, and on the face of it, there is no comparison with the app-based online payments consumers have just grown to love over the last few years.
There is still a certain element of distrust among the general population, mainly driven by the more hysterical stories in the media, and this has been one of the major obstacles to crypto’s widespread adoption. However this distrust will fade and, for many in the business community internationally, it is already a thing of the past.
We know people hate change. Then again, they are also prone to failures of imagination. Society, bankers, professionals and politicians all frequently suffer the collective failure of assuming what we have in front of us now is as good as it gets; as if somehow, it cannot be improved. The idea that we will forever have to live with the imperfections of a system and the way people exploit it is a fallacy that we are doomed to repeat.
Until recently, crypto and Bitcoin were technologies championed by a minority and viewed with suspicion by the majority. You have to go back to the late 19th century to find a suitable comparison.
That’s when Red Flag Laws meant people had to walk 60 yards ahead of self-propelled vehicles to warn horse-drawn carriages and pedestrians they were coming. People were terrified of them but self-propelled vehicles went on to revolutionise the way we live. What did it was the internal combustion engine, something that was nowhere to be seen when the motor car’s precursors first rounded the corner.
Too good to miss?
Today’s red flag bearers are the sceptics who warn that cryptocurrencies are not built to last and are no more likely to survive than the Tulip mania that swept Holland in the 17th century. History shows us that similarly-minded people were afraid to use the first electric light bulbs, ride trains going more than 100mph and, more recently, fretted about the health risks of using mobile phones.
It is incredibly unlikely that what we have now will resemble cryptocurrencies’ final evolution no matter when global adoption occurs. If anything, that’s what is most exciting about it. It’s a matter of ‘when’ not ‘if’, and how good can it get?
Even Bitcoin’s most famous critic, JP Morgan CEO Jamie Dimon, is actually a proponent of the blockchain technology that underpins it.
Mass adoption will come, not when every individual understands the science, but when people choose to put their reservations aside because the advantages of using cryptocurrency are simply too good to miss.
Diamond in the rough
People historically have confidence in storing wealth in a currency because it is sponsored by a country’s central bank. But cryptocurrency is more like a language than a traditional fiat. It relies not on the permission of one central body, but the consent of a community. That’s apt for a currency founded in code — the language of computers.
So Bitcoin is less a diamond and more a diamond in the rough that will remain so even after over-excited speculators have taken a few haircuts. It is just a new way of avoiding having to barter that can thrive if people continue to want to use it.
Some will find the low-cost, frictionless, international transactions that cryptocurrency permits to be its most useful application. International settlement is currently a complex and costly process. For others, it will be how best to take travel money abroad or how to complete complex mergers and acquisitions across national boundaries without using costly contract lawyers.
Many businesses are wasting no time demonstrating it has a future, which creates a business reason for others to follow suit. You can already rent yachts, book flights, buy coffee and houses, and even pay for legal advice and a university education using Bitcoin.
The nuts and bolts
Someone has to go first. What all these businesses will be discovering — as they wrestle the focus away from currency speculators — is that they lack a secure way of creating a business paper trail for the blockchain that is inextricably linked to the currency’s ledger, but exists separately and privately.
In other words, without banks, who records your cash flow and revenue? For globalised business, where do you build and store KYC information and how do you know the invoice you have been sent has really come from your supplier? When that supplier complains that they have not been paid, what evidence can you produce to the contrary?
This is how CommerceBlock acts as an ‘enabler’ and why we created the industry standard ‘BIP175 protocol’, which is available open source for anyone to use. It enables firms to do business in Bitcoin without banks by ensuring the parties involved in a transaction, and no one else, can see who is being paid for what and under what contractual arrangement.
This is what the business world needs if use of crypto is going to reach the escape velocity required to enter the commercial mainstream. Evidence, if any were needed, that we are not there yet has come in the form of recent moves by two near neighbours who should be of one mind in removing barriers to trade — but aren’t.
Australia is moving to embrace and regulate Bitcoin while Vietnam has banned its use altogether. With such conflicting approaches worldwide, it’s remarkable Bitcoin is growing at the rate that it is.
Similar to Google Docs
There has been a lot of fuss about the things you can use cryptocurrency for. Most of the hype has been around use by criminals and anonymity, which is actually incredibly difficult to achieve on blockchains.
What you often find is that critics’ knowledge of distributed ledger and blockchain technology is not very sophisticated. The US dollar and British pound are also used by criminals; should we scrap them?
Put simply, blockchains are databases with multiple authors that are completely transparent. I wrote this on Google Docs which functions exactly like a blockchain. You can share it, everyone has a version of it and you can see all changes to it stretching back to its creation.
This transparency is part of its power. Anyone doing wrong can rely on anonymity only so long as they don’t ever convert cryptocurrency into assets or fiat currencies. Fiat currencies are actually far more vulnerable to abuse.
So, not all things people are afraid of are worthy of that fear and you can’t believe everything you read.
Remember that the next time you turn out the lights in your office, jump in your motor car and call a loved one to say you’ll be home early. We’ve all been here before.
Nicholas Gregory is CEO of cryptocurrency enabler CommerceBlock