Obi Nwosu is the CEO and co-founder of Coinfloor, the UK's longest-running Bitcoin exchange. He has over 20 years’ experience building online marketplaces and bringing virtual currencies to tens of millions of people. Obi writes The Road to Bitcoin Hegemony, a weekly recap of some of the most impactful developments in Bitcoin.
Welcome to The Road to Bitcoin Hegemony, a weekly analysis of some the most interesting developments in Bitcoin and why they matter in Bitcoin's journey towards monetary dominance.
Bitcoin is no more. It has ceased to be. It’s expired and gone to meet its maker. This is an ex-cryptocurrency.
People have been predicting Bitcoin’s demise from the moment it first burst into the public consciousness, and they’ve been wrong every time. So when some people claim that its recent price fall means Bitcoin is going the way of the dinosaurs or the Norwegian Blue, it’s hard to take them too seriously. And especially not when it coincided with some truly historic news that will only strengthen demand for Bitcoin.
Last week saw a truly depressing milestone, with reports that the size of the U.S. national debt will soon exceed the value of the economy for the first time since World War II.
Blame Covid if you like, but this has been in the cards for years, the result of our longstanding tolerance for (and addiction to) national debt. The pandemic merely brought it forward a little.
Debt used to be the dirty secret that no one needed to acknowledge. It was always easy to ignore thanks to the United States’ exorbitant privilege as the printer of the world reserve currency, the monetary strategy of reducing debt through inflation, and other countries’ belief that there are no better alternatives to the U.S. and the U.S. dollar hegemony.
The view that U.S. debt represents a safe haven is starting to look like a distinctly 20th century narrative, with $230 billion already sold off over the last ten years and rumours swirling that China may sell off $270 billion more.
If other countries (especially Japan) follow suit, it really will be the death knell for the myth that the world’s biggest economy can keep racking up debt without suffering serious consequences. With the naked emperor exposed, a new standard will naturally come to the fore. Some think this will be the Chinese Yuan. Others, IMF Special Drawing Rights (which is effectively a basket of fiat currencies).
I think trust in a nation state’s ability to act in the global best interest above their own will continue to erode, and so only a decentralised currency will fit the bill. What a shame Bitcoin “died" last week. Even so, I might HODL just a bit longer.
Revolution is not just in the air; it’s in every press release announcing yet another run-of-the-mill product or service. Look a little closer and you’ll see that these companies are always promising a revolution in something: customer service, personal wellbeing, or dry cleaning.
That’s not how revolutions work. If something is truly revolutionary, it spreads ripples far beyond a single industry, country, or use case.
For an example of why Bitcoin truly deserves the r-word, take a look at this recent tweet from Wheatpond. Cryptocurrencies are making waves in cryptography and distributed systems, accelerating progress in these fields by a factor of ten.
That, in turn, has incredible significance for a technology industry that has become stale, monopolistic and ripe for a Bitcoin-inspired revolution.
The current technology stack is pretty much locked up. Other than a few side projects, almost every online interaction is dominated by a handful of companies. These once disruptive startups are now juggernauts that own the main distribution channels and have excellent economies of scale and significant war chests. Most new startups satisfy themselves dealing with markets on the fringes or aiming to be acquired by one of these tech titans.
Not only is this bad for innovation and competition; it’s terrible news for consumer rights, particularly privacy. This is the tech industry’s blindspot: they have painted themselves into a corner where their entire business models are predicated on squeezing more data out of ordinary consumers.
With nothing to fight for but leftovers, what’s an aspiring tech trillionaire to do? Well, as the Bitcoin-led boom in cryptography and distributed systems shows, the answer is to use these technologies to transform outdated, over-centralized and privacy-killing business models.
Technology alone won’t be enough, however. It will also take a major shift in consumers’ mindsets. We rail against the FAANGs’ market dominance, their monopolistic practices, and their greed for our personal data, but most of us don’t cancel our subscriptions. As Bilbo found after obtaining the One Ring, however, absolute power corrupts absolutely. These companies’ insatiable desire for their “precious" - our data - means that it’s only a matter of time before they lose the tag of benevolent dictator and are exposed as the vampires they are.
When this inevitably occurs, the money pouring into research and development today will be essential in building the privacy-preserving, distributed and self-sovereign world of tomorrow. There’s a revolution brewing ? and Bitcoin is behind it.