Volumes have been written about bitcoin, blockchain and cybercurrencies, in particular recently given the hype and immense fluctuations in the value of bitcoin.
Last week, Bebo White held a popular keynote with observations on cybercurrency and blockchain. Bebo is Departmental Associate (Emeritus) at SLAC National Accelerator Laboratory in San Francisco and was on the team who installed the very first Web server in the US.
He certainly managed to capture my attention when he opened with these questions:
- How many of us have actually been around at the beginning of a totally new financial system?
- How many of us were dubious about the World Wide Web?
In his talk, Bebo compellingly argued how Bitcoin and other cyber currencies can pave the way for truly global and digital financial system.
Digitizing our monetary systems
There is one example of data exchange that is essential to a successful society that has so far evaded digitization – exchange of value in mutually accepted monetary systems. This does not mean convenient digital representations of money or value such as are found in online credit card transactions or stock market trades which serve only as digital proxies for genuine currency or securities.
Instead, it refers to a new financial system designed specifically for the digital age wherein value resides only in digital form especially suited for digital transactions.
The design of a robust digital currency system has long been a major software engineering challenge. Perhaps the greatest incentive for its development comes from the meteoric rise in E-commerce. Global buyers and sellers longed for a payment system that closely resembled the anonymity of cash, did not depend upon existing payment infrastructures such as credit cards or wire transfers, and was not based upon a specific national currency requiring exchange processes and fees.
In short, a new financial system designed specifically for digital storage and transactions and for the network era was the dream.
Bitcoin: realizing the dream of a digitally based financial system
The latest attempt to realize this dream comes in the form of cybercurrencies such as Bitcoin. The very mention of Bitcoin conjures up in people’s minds criminal enterprises such as Silk Road, corruption and theft in the Mt. Gox scandal, criminal money-laundering, or anarchistic attempts to circumvent national currency systems.
While such “bad press” for Bitcoin is true, they also illustrate that it represents a system that can and should be taken seriously. When the famous American bank robber Willie Sutton was asked “why do you rob banks?” his response was “because that’s where the money is.”
Perhaps examples of Bitcoin abuse are indicative of its potential to store and process real value. Bitcoin is outlawed in some countries because it represents a break in the financial control that some governments hold over their citizens. Bitcoin is empowering to a population that for various reasons may not have access to a formal financial institution – all they now need is a mobile telephone. The number of Bitcoin that will ever be in circulation is fixed thereby providing a permanent hedge against inflation – something that no national currency can honestly claim.
The technology underlying Bitcoin and other cyber currencies is robust being based upon the same asymmetric encryption schemes that protect millions of secure transactions and communications every day. The Bitcoin ledger, called the Blockchain, insures the validity of transactions and is an innovative application of crowdsourcing. None of the negative incidents attributed to Bitcoin can be traced to its algorithmic methods.
It is impossible to say whether Bitcoin will become widely accepted and will survive in the future. However, Bitcoin has been successful in starting a discussion about the viability of digital money and the role that it can play in our increasingly digital world. Like music on vinyl records and pictures on photographic film, banknotes and coins may find a deprecated or niche use in the future behind their more powerful and flexible digital form.
The enormous potential implications on society
A significant part of the keynote took a step away from the history and technical details and rather focused on the social implications.
It’s more than just payments as Bebo said.
He shared examples of how blockchain comes with empowerment and transparency which has made organizations such as the UN use it for their refugee work. A recent example is documented by SingularityHub: 5 Reasons the UN Is Jumping on the Blockchain Bandwagon
In another example, he brought up this CNBC article: Cash is useless in Venezuela thanks to hyperinflation — so people are turning to bitcoin
He did not ignore the recent press and controversy around the enormous power consumption required to mine bitcoins.
One of my personal main take aways from the talk, was how blockchain might be the true lasting disruptive legacy of the cybercurrency discussion. Bebo brought this quote on Blockchain to the discussion:
a technology that allows people who don’t know each other to trust a shared record of events
– Bank of England
Shaping the digital future step by step
Bebo has been a frequent and very highly rated speaker at J. Boye conferences in both Denmark and the US. He first became involved with the emerging WWW technology while at CERN in 1989.
You can find Bebo’s complete keynote slides here:
Deloitte has written a good paper on Six Control Principles for Financial Services Blockchain (PDF, published Oct 17)
In the global J. Boye network, you have the opportunity of experience macro-thinkers and leading industry experts like Bebo or everyday practitioners in fields spanning leadership and strategy, communication, digital workplace, collaboration and many more.
For more details, see Bebo’s slides from the J. Boye Aarhus 14 conference titled: Are You Ready for Bitcoin? (Is the World Ready for Bitcoin?)