Bitcoin: A Means for Global Independence
As America celebrates Independence Day, CoinDesk looks at how cryptocurrencies are building a more independent financial world for everyone.
With some research and a little technical aptitude, distributed forms of money such as bitcoin can be used as the digital equivalent of cash, offering the potential for anyone to theoretically bank themselves without relying on traditional financial institutions.
Additionally, innovative wallet technologies mean anyone can store vast amounts of value without the need to trust governments or banks. From brain wallets to paper wallets, multisig to BIP32 hierarchical deterministic technologies, the ability to store cryptocurrency value independent of a third party is becoming more sophisticated by the month.
This all adds up to a revolution in personal finance that can be attributed to smart and enterprising developers who see digital currencies as a means for independence that has never before been possible.
Independence and banking
The 4th July holiday is known for being a mid-summer soiree of fireworks, sun and socialising, but many forget that, 238 years ago, on 4th July 1776, the founders of America signed a document proclaiming independence, sovereignty over its land.
At that time, the founders faced the threat of war from a king very far away and it took over eight years in the Revolutionary War – a war against ‘rebels’ as the British called Americans during that time – before complete independence from Britain was secured.
The Americans who fought in the Revolutionary War believed that they could create a new country with equality and liberty as its keystone.
Now, another revolution is underway, with similar ideals. Distributed currency makes possible the independent safekeeping of monetary value previously strained by physical limitations. When fiat currency first became prevalent, banks were tasked with the security and accountancy of money.
Today, now that most value is relegated to the role of a database store, cryptocurrency can free those who distrust the motives of third parties, namely government and the banking industry it controls.
This is the mantra of so-called crypto-anarchists and many libertarians. But political aspects aside, at the very least, bitcoin and its variants bring a new concept to the mind of the traditional banker: competition in the form of a totally new type of money.
The Federal Reserve, with its ability to control monetary policy with the pulling of a few levers, believes it can compete as a capable adversary. It will be interesting to watch how this saga unfolds.
A new revolution
A startup environment is quickly evolving around bitcoin, for the most part, but other cryptocurrencies too. These small companies are embracing the upsides of decentralized technology and are starting to change the way people think about financial businesses.
The proof of a revolution can be found in the resistance, and that exists in the current financial situation, with many bitcoin companies still struggling to get bank accounts.
Very few US-based bitcoin enterprises, for example, are able to easily convert cash from a customer’s bank account into bitcoin, like Coinbase does.
The problems of failed bitcoin exchange Mt. Gox are likely to have exacerbated this issue in 2014. Many nascent companies wishing to start bitcoin-related enterprises even have problems getting bank accounts just for payroll purposes because their website contains the word 'bitcoin'.
Incumbent financial institutions are afraid, with big concerns about what bitcoin and its alternative counterparts might mean for their business prospects.
They are at the behest of regulators, and because there still is not clear regulation – despite some states like California making bold moves on the cryptocurrency front – there is caution towards decentralized systems that are so innovative that the old ways of doing things could disappear, if they don't adapt, at least.
A more distributed world
The United States, from its founding to the end of World War II, established itself as a global power. But the country's ability to wield financial and traditional wars appears to be waning. New, distributed disruptors have wreaked havoc on America’s traditional way of combatting enemies.
Many divisive issues such as same-sex marriage and marijuana legalization have been meted out to be contested at the state level. And the issue of terrorism is being fought with a deployment of not people, but swarms of disparate drones that can incisively target and take out nefarious and often singular actors.
The world that exists today rewards systems of distribution. Power is being held more by individuals than, perhaps, most realize.
In places where corruption is rife, uprisings such as the Arab Spring have shown that people with technology in the palm of their hands can start a revolution against government suffrage.
If George Washington had had that sort of technology in the Revolutionary War, perhaps the insurgent battles with a far-away foreign power would have been decidedly more favourable in terms of less lives lost.
The block chain is still a very new example of this idea of complete, yet public, distribution. Its technology has been in use for years now, but it has taken that long for many to fully grasp its true power.
From certification of public proof to tracking down hackers to stymieing corruption, the block chain, separate from monetary value, may have more value to change balances of power than anything before it.
Independence can bank everyone
The 4th July is a time to celebrate and ponder American independence. It is a time for reflection on how systems that don’t require third-party trust can foster a healthy dose of individual autonomy.
Reliance on technology is something that humankind deals with on a persistent and prevalent basis. It's important to remember, however, that leveraging new technology such as an imperturbable block chain can help everyone achieve a higher level of financial independence than ever before.
Consider poorer neighbourhoods all over the world that suffer from being underbanked. Or the vast majority of people in developing economies that are completely unbanked.
There’s no reason why cryptocurrency can't give everyone the ability to better control their own money – improved financial independence – without the complete reliance on a government or financial system that has sometimes clearly been a complete failure.
The unfortunate juxtaposition to bitcoin innovation is that it is happening mostly in developed countries. This is for a variety of reasons, but largely because that is where the expertise is, and investment in good ideas is common practice.
However, there is no doubt that the risk-taking and innovative ideas of digital currencies will spread money-based sovereignty to every corner of the globe.
That’s one good reason for cryptocurrency enthusiasts to think about independence on 4th July as a global prospect for financial access for everyone – something that should be a right for all individuals, no matter where they live.
Declaration of Independence image via Shutterstock
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