….you could miss the major contribution of bitcoin as it presses us to reassess the way we have been doing things for years where all those little and some bigger inconveniences build into the current payment industry have to be discussed again and seen for the real merit they have. Bitcoin is showing us that the emperor is without cloths. The conceptual spin-off of Bitcoin – since we indeed can have a different approach to overcome today’s inefficiencies – will be huge.
Maybe some will get a little tired to read yet again a bitcoin related article by now but for me the bitcoin experiment is like a mirror – almost a moral reference – of how we are performing payments in all it’s fascinating diversity today.
Payment practices – e.g. like the dominant commercial, legal and technical position of banks and card processors in payment transactions – are taken for granted for so many years already. Payments and our fiat currencies are seen by many as natural phenomena, something like gravity itself. (Listen to Fleisman and Gruber about „money is not like gravity”, I like their analogy with gravity)
I see crypto-currency – with bitcoin as its most prominent example – and the bitcoin protocol as a new paradigm, a new perspective, a new technology, a treasure trove of potential developments. Chances are that bitcoin itself will not become a payment methodology with mass adoption but we can already witness the fall out of this invention (a beautiful example of human ingenuity). In that sense the die has been cast: „It will never be the same again”.
Bitcoin is a – albeit rather serious – experiment to seek a better way for value transactions (not only payments!). But what is „better”? And better to whom? These are questions which are not simple to answer. With this in mind I created the outline for the Utopia Wallet and placing payments and money in a very central spot when thinking about collaborability.
Lately I have come to the conviction that it is impossible to have a balanced view on developments in payments without a societal perspective. What is money? What are payments? What for do we have them in the first place? What happens if payments and money converge as it does now in bitcoin?
Looking at bitcoin inevitably leads to questions about the current state of affairs, and not only about payments. What the consequences will be is not really apparent which makes it even more interesting to ponder about the future of crypto currencies in conjunction with other trends in technology and our society.
This week I saw a Gardner report on bitcoin popping up on various sites: their conclusion is neatly summarized by the editor Allison Nathan auditor in “All About Bitcoin”.:
With the conclusion that bitcoin likely can’t work as a currency, but some sense that the ledger-based technology that underlies it could hold promise.
Gardner’s main criticism is the fact that bitcoin as a currency has proofed very volatile. In their view bitcoin is therefore not suitable as a proper „household” currency. I see plenty of reasons supporting this argumentation and have written about it at RPD as well. Including the volatility part.
But I do not agree to their final conclusions:
- bitcoin is a currency already and proves this everyday, it is only not (yet) suitable for all in all situations.
- „The ledger is the money is the payment” construction so principle to the bitcoin „mechanism” is in my eyes actually the part that will not be holding much promise in the end. It is too transparent, it consumes to much computer power and electricity, to just name a few real life issues.
At the same time I think that by looking at it the way Gardner does you could miss the major contribution of bitcoin as it presses us to reassess the way we have been doing things for years where all those little and some bigger inconveniences build into the current payment industry have to be discussed again and seen for the real merit they have. Bitcoin is showing us that the emperor is without cloths. The conceptual spin-off of Bitcoin – since we indeed can have a different approach to overcome today’s inefficiencies – will be huge.
While bitcoin is still in its infant phase today – regardless that it could collapse at any moment or continue to develop for many years to come – bitcoin can function as a crystal ball as to where we as humans in general and payments in particular are heading to.
I will challenge myself to become more explicit about what spin off and consequences bitcoin could have and try to answer the following questions in upcoming posts:
- Can we introduce a wallet chain based on legacy payment types?
- What will bitcoin legacy possibly mean for payments processing?
- Cherry picking the bitcoin legacy for CSM payments processing and settlement in SEPA?