Tuur Demeester - Bitcoin London Keynote
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Keynote address at Bitcoin London
Keynote address at Bitcoin London
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Cryptocurrency is the future of money, banking and finance
Ladies and gentlemen, we live in interesting financial times.
In 2008 it became clear that our financial system isn‟t as robust as many people thought.In response to this “credit crisis”
1
, president Obama launched a 700 billion stimulus programme. A globalfinancial meltdown was narrowly averted.
2
Turns out this stimulus programme wasn‟t nearly enough. By december of 2011, the US Federal Reserve
alone bailed out or insured banks to the tun
e of 30 trillion dollars. That‟s about a quarter million dollars for
every US household.
3
And the same is happening in Europe, here in the UK, in Japan, and in many othercountries.
And it‟s not just the banks that cause trouble, it seems.
In october of 2011, brokerage firm
MF Global
went bankrupt after a bet on Greek debt turned sour. Manyclients today still fear never seeing back their assets, because they had been used as collateral for thegreek gamble and for many other gambles like it.Actually
, there is serious evidence that the practice of using customers‟ financial assets as collateral to
trade in the markets
—
in other words: the practice of misappropriating client assets
—
is widespreadamong large brokers.
4
And what to think of the recent
LIBOR scandal
? This scandal made headlines during the summer of2012, when it became public knowledge that the benchmark interest rates for more than $400 trillionworth of financial contracts
—
including your mortgage agreement
—
have been manipulated consistentlyfor at least two decades.Not that
interest rates
, the rates
that govern borrowing and spending around the world, are “natural”
anyway. For the past 100 years, interest rates have been set (manipulated, if you will) by central banks,making money cheaper than ever before and creating by now a very cruel no-win situation for saversglobally, who are struggling to find something, anything, that will help them find protection against therising inflation.In their efforts to prevent the financial system from going under, western
governments
have pushed updebt levels well over 100% debt to GDP, which, by any historical standard, is completely unsustainable.
And so a different course is now being chosen: instead of “bail outs”, the new trend in mone
tary policy is
that of the “
bail-in
”.
5
Basically “bail in” is the Cyprus solution: instead of taking money from the tax payer,the government takes the money from the saver, to allow for a “orderly resolution” of the bank.
1
2
3
See http://www.census.gov/prod/cen2010/briefs/c2010br-14.pdf and http://www.levyinstitute.org/pubs/wp_698.pdf .
4
For more, I recommend reading the 2008 CITI bank report: “are the brokers broken?”.
5
F
or some more details on that, see the presentation I gave at the Bitcoin conference in San Jose.
So in summary: we are seeing structural insolvency in both banks and governments, amonumental debt bubble, shaky brokerage firms, manipulated interest rates, rampant money
printing around the world, and a “solution” to the problem that isn’t a solution at all.
“Nowhere to hide” is t
ruly becoming the expression of our day and age.How all of this is going to play out?
I don‟t know exactly, and I frankly don‟t care all that much, because I own bitcoins.
You see, Bitcoin is not just another fragile virtual currency, it is
a global and decentralized hard moneyledger
which has all the qualities of becoming the foundation of a new financial paradigm. And that isincredibly exciting to me: whatever financial service out there that we think should be improved, todaywith Bitcoin, it can be!
The basis is there, because “Bitcoin as a currency” possesses all the features that make for an ideal
money:
●
It is
scarce
(there will never be more than 21 million)
●
It is
secure
: it can‟t be counterfeited or multiplied at will, and it allows for
as much privacy as theuser desires.
●
It is extremely
transportable
: you send it virtually instantaneous, essentially for free, to anywherein the world.
●
Flexible
: every single bitcoin can be subdivided into millions of smaller parts, and all bitcoins areinterchangeable
●
Extremely
durable
: the bitcoins in your wallet will disappear only after every single copy of theblockchain on the planet has been erased
—
and remember, the QT client alone has beendownloaded already over 3 million times
●
And finally, unlike that of fiat currencies, the
supply of Bitcoin is steady and predictable
.All these features make Bitcoin a downright exceptional currency,which is why we will see adaptation continue to increase in a parabolic fashion.
But that‟s just the begin
ning. The properties of Bitcoin allow it to become the first layer, the ground floor ifyou will, of a new financial system all together.
Here‟s why:
First of all, the protocol is
open source
, allowing millions of brilliant programmers to build layers on top ofit to make it more useful - just like wh
at happened with internet‟s TCP/
IP protocol.Second, because it is a peer to peer network, Bitcoin truly is
accessible from anywhere in the world
: it
doesn‟t care about arbitrary boundaries, capital contr
ols, censorship or embargoes: anyone in the worldthat can reach the internet
—
directly or indirectly
—
, can pay and be paid with Bitcoin. This allows for thedevelopment of truly global financial solutions.Thirdly, the Bitcoin network is
software based
, so in theory any mobile device can become a device forBitcoin banking.
Number four, Bitcoin is a
pseudonymous network
, which means that each participant can basicallychoose his or her own identity. We are seeing pseudonymous Bitcoin companies pop up already, daringinitiatives that assist the network in clearing transactions, in exchanging property and information, and ofcourse in trading goods back and forth around the world.Why is
pseudonimity
so important? Well, that is because it removes the fear to innovate in a context ofoverregulation, and that allows the Bitcoin network to become more sophisticated and accessible at avery rapid pace
—this then, clears the way for more conventional, „official‟ businesses that make Bi
tcoinreally appealing and acceptible to the mainstream.All these characteristics together are telling us: Bitcoin and the cryptocurrencies are here to stay, andthey are the way to the future of finance.
And I‟m not the only one saying this, let alone the first one. In fact, the very title of this speech is a slight
alteration from a 1995 quote by the late Orlin Grabbe:
“Cryptology represents the future of privacy … [and] by implication [it] also represe
nts the future
of money, and the future of banking and finance.”
In light of the recent NSA spying scandal, these words have of course only become more visionary.
In case you haven‟t done
so already, I invite you to read up a little about what is happening in the Bitcoineconomy on a daily basis: this technology is attracting serious amounts of talent, knowledge, and capitalfrom around the world.Of course, it should.Because Bitcoin, as a first rate pseudonymous, open source, and globally accessible money haseverything it takes to compete in:- The $500 billion dollar remittance market- The $1000 billion dollar e-commerce market- The $7 trillion dollar gold market- The $16 trillion dollar offshore deposit market
That‟s not all though.
Bitcoin even has the qualities to develop entirely new markets, such as- bringing international banking to the 1 billion smart phone users
6
and the 5 billion users of ordinary cellphones
—most of the latter don‟t even have a bank account, let alone have
access to global markets.Bitcoin can change that.- Furthermore, Bitcoin can get the promising market of microloans and micropayments off the ground, amarket which is currently undeveloped because of the systemic financial bureaucracy that makeseverything slow and expensive.
6
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