No one writes checks or hands over paper bills in science fiction stories. To pay for the sci-fi equivalent of a latte (a synthcaf?) with physical money, credit chips / sticks or new and exotic compounds (gold pressed latinum, for instance) are exchanged. If the money is in digital form, then some apparently effortless and instant payment occurs, often with no explanation of the underlying system. These interpretations reveal that, as a culture, we assume that money will be an entirely solved problem in future.
Bitcoin certainly fits neatly into this view of the future. Although still poorly-understood, Bitcoin is widely regarded as new and advanced, and therefore regarded as an almost inevitable part of our monetary future. In a recent survey conducted by YouGov, it was revealed that one in five Britons expect that Bitcoin will be “as common as cash or card” in the future:
The Future is Always Uncertain
Such expectations appear tinged with complacency and naivety. While it’s reasonable to expect cheaper and more convenient technologies to replace obsolete ones - as cars replaced horse-drawn carriages - it’s unreasonable to discount the existence of the fiat money establishment.
Should Bitcoin truly become as commonplace as paper money or credit cards, that situation would represent a tremendous loss of control for the world’s central banks and all their allies. This group has far more power to resist competition than horse breeders and carriage manufacturers had to resist the rise of the automobile. It’s unlikely that such a group would simply consent to their own replacement. However, direct opposition to Bitcoin would likely raise too many questions in the public mind. It’s therefore more likely that some variation on Microsoft’s “embrace, extend, and extinguish” policy towards competing open source products will be attempted, or the creation of a direct competitor to Bitcoin in the form of an central bank-controlled altcoin or forkcoin.
So, while cryptocurrency may well become the money of the future, the real question is whether the crypto we use is decentralized, censorship-resistant and supply-limited, as in Bitcoin… or simply a new form of fiat, under the control of the same old banking industry. Whereas Bitcoin would represent a true revolution in the way our civilization manages value, “fiatcoin” would only perpetuate the existing problems with regular money.
Central bank cryptocurrencies entirely miss the point.
The Future of Money: Bitcoin or Fiatcoin?
Bitcoin’s future dominance is uncertain precisely because so many people are unaware of the fundamental problems with contemporary money, and how Bitcoin addresses these issues. Although the lower and middle classes are keenly aware of the problems stemming from a lack of money, few individuals consider how the underlying structure of the fiat monetary system inevitably gives rise to the world’s staggering (and increasing) wealth inequality.
While political “solutions” are often proposed to combat such inequality - usually in the form of forced wealth redistribution from one group to another - such measures generally fail to address the money system itself. Upon reflection, it would appear that any solution to wealth inequality would greatly disadvantage those who benefit most from the current system; the wealthy and powerful elite.
We must therefore view any proposed political solutions with great skepticism, given that the elites are often the ultimate source of such proposals. Notice how such proposals are usually promulgated via the institutions, corporations, media outlets, universities, and politicians owned by the elite. Meaningful monetary change is highly unlikely to come from within such a system, given that the status quo of central bank control lies at its very heart.
Furthermore, by keeping the various segments of society locked into endless conflict over countless divisive issues, including the fair and proper way to allocate wealth (equitably to each member of society as advocated by socialists or in proportion to each member’s social contributions as advocated by capitalists), the elites remain unchallenged by the only force capable of defeating them; a united society intent on reclaiming its freedom. In this way, the elites stealthily amass an ever larger share of the world’s wealth through their monopoly control over the monetary system.
Building a Bitcoin Future
There are a few plausible scenarios in which Bitcoin becomes the standard currency of the future:
1) The Widespread Failure of Fiat Currencies
All fiat currencies eventually fail, with their average lifespan being around 27 years. The international monetary system is equally prone to failure, needing an overhaul every 30 to 40 years. As global debt, measured at around $247 trillion, is well beyond any plausible possibility of repayment, an economic reset appears to imminent.
Should this “reset” take a chaotic and destructive form, as nearly occurred in the 2008 housing crisis, then it’s possible that Bitcoin will be rapidly adopted out of necessity, in the absence of any other functional monetary system (besides barter and precious metals at the local level). Some speculate that the current “trade war” environment or Chinese / European economic problems may trigger such a global financial crisis.
The possibility of Bitcoin replacing failing fiat currencies is supported by the increasing adoption of cryptocurrency in nations which are undergoing severe economic turmoil, such as Venezuela. Interestingly, Venezuelan citizens are flocking to Bitcoin even as the government imposes its own fiatcoin, the Petro.
Venezuelan peer to peer Bitcoin trading is reaching new highs.
This scenario was originally proposed by Daniel Krawisz. Under its assumptions, individuals realize the only way to prosper in an inflationary monetary environment is to invest in Bitcoin, a deflationary asset. Should sufficient individuals behave in this way, a tipping point is reached in which Bitcoin’s value continually increases relative to fiat. A total social shift soon occurs, in which people scramble to exit fiat and enter Bitcoin, until the majority of monetary value is transferred into Bitcoin and fiat loses all relevance.
Of course, the monetary authorities could be expected to defend fiat currency in this eventuality. A likely countermeasure would be the closure of all Bitcoin exchanges in a country, as occurred in China. More drastic measures, such as criminalization of private Bitcoin trading or the attempt to scrub Bitcoin traffic from local internet infrastructure, could also be expected. Such measures would certainly slow the hyperbitcoinization process, but may fail to prevent it.
Hyperbitcoinization can be imagined as a prolonged Bitcoin bubble, which grows so large that it rapidly encompasses most people in society. As each bubble cycle has led to more users and higher prices, this scenario certainly does not seem impossible. Perhaps during the next price run, Bitcoin will pass the point at which a person is not considered a fool for owning BTC - but rather a fool for not owning BTC!
3) Government-imposed Bitcoin Usage
Perhaps the least likely society is for some government to perceive a competitive advantage in “going full Bitcoin,” in other words, replacing its existing fiat currency with Bitcoin. Numerous individuals and startups, even certain companies, have dedicated themselves to cryptocurrency, so it’s not impossible that a government may choose to do so.
The relatively obscure Marshall Islands was the first country to launch its own cryptocurrency, SOV, as legal tender. The country received a stern dressing-down from the International Monetary Fund in response, signaling that this prospect inspires unease among the monetary powers-that-be.
The relevant “recommendation” from the IMF’s 2018 report on the Marshall Islands.
The elite notwithstanding, if a country were to adopt Bitcoin (rather than some localized fiatcoin) and then go on to economically out-compete its rivals, it’s likely that other countries would be forced to follow suit. The result would be a top-down version of hyperbitcoinization, with opposing nations likely forced to resort to sabotage and warfare to resist the process.
We don’t know whether Bitcoin will be the future of money… but we certainly hope so!