And, since its birth 16 years ago, it has turned finance on its head by creating a deflationary, decentralised currency that escapes from the clutches of central banks and their inflationary practices. It acts as a commodity, akin to ‘digital gold’, bought and coveted for its scarcity and for its resilience against censorship. And it acts as a decentralised payments system that persuasive advocates such as Christian Catalini at the Massachusetts Institute of Technology see as having huge ramifications for the way global finance works. Yet November’s decision to punish Bitcoin brought a blunt rebuttal from a powerful European voice: Ulrich Bindseil, head of markets at the ECB, saw only a ‘speculative’ phenomenon.
But other features were attractive: the fixed, capped 21 million supply was held up as a bulwark against monetary debasement (central banks, of course, currently have the power to ‘print’ money), while with each new transaction the network’s capabilities grew, eventually building out what we now call the crypto ecosystem, through technologies such as the smart contracts underlying Ethereum. Suddenly, central banks were criticising Bitcoin; and simultaneously they were looking to the innovations behind it, using the blockchain technology Davies alluded to in launching the ECB’s Digital Euro project, and using the same fixed-supply nature of Bitcoin to build new central-bank digital currencies, still centralised but now also semi-programmable, as though the banks are willing us to buy and sell in bitcoins because they don’t want to relinquish total centralised control.
In an age of deflationary fiat, this independence, and limited supply, make Bitcoin – especially in countries dealing with runaway inflation – an attractive alternative. The more crypto-pay services and banks are brought into the mainstream by Visa, Stripe, Mastercard et al, the more Bitcoin will intersect with the core of finance. It certainly seems poised for a long life, sharing the world with its precursor, or even outlasting it, despite the determined efforts of central banks to undermine it.
Source: Forbes
