(Part 3 of the future of money and socio/political implications of crypto-currencies)
The removal of the middle man function in an exchange based on the bitcoin protocol does not automatically lead to the disappearance of the companies (and their interests) performing these today. The middle man function will slowly but surely erode with the advent of the bitcoin protocol, the middle man of today (parties) will be the gate(way)keepers of tomorrow.
According to Duivenstein and Savalle the Bitcoin protocol is a watershed development in our societies
For the first time in history technology makes it possible to transfer property rights (such as shares, certificates, digital money, etc.) fast, transparent and very secure. Moreover, these transactions can take place without the involvement of a trusted intermediary such as a government, notary, or bank. Companies and governments are no longer needed as the “middle man” in all kinds of financial agreements.
Bitcoin enables a frictionless and transparent way of sharing ideas, media, products, services and technology between people without the interference of corporations and governments.
To me the crucial sentence is the last one. The „middle man function” indeed is not necessary in a technical sense to exchange the value between the actors when using the bitcoin protocol. For the casual reader it looks like companies performing the middle man function will not be needed any longer, but these [incumbent] companies perform multiple roles which are still valid also in a wallet-chain not needing a technical middle man function.
I have explained this shift in a posts on the development of the wallet-chain supplementing the traditional payments chain and the reversed chain induced by the apple wallet. (see: PAAS gateway to MintChip or Ripple-like transaction networks?)
Being in the middle creates dependencies for others – a publican position – and hence the power and earnings base for companies. Looking at parties as Mastercard in recent initiatives like Masterpass and its recent approach of mobile providers they are rapidly preparing and positioning themselves for a changing payments world while safeguarding their incumbent position. Even if technically the middle man function is not needed any more for a single transaction the companies performing this function in the traditional payments chain will make sure they are necessary partners behind the wallet both at the payers as well as at the payee side.
Most financial transactions are governed by rules and regulations. Governments seek a balance between all interests. Suggesting a government is superfluous in a specific market function does not mean that these governments do not want to make rules to make sure social balances are safeguarded. (see: Bitcoins’ anarchistic character will be pounded into line by real world regulations.) (NB Regulation is based on the technology – and other conditions – of today, not tomorrow’s. In the void sometimes things can develop but mostly new technology will be restrained by regulations not catering for them.)
Not all transactions, even wallet to wallet, can avoid the incumbent companies at once. Companies which will not sit still either to defend their established interests. The wallet-chain’s adoption rate will have to be humongous to make a dent in the established payment methods (and their representatives).