United States President Joe Biden’s executive order on digital assets has kickstarted an inter-agency mission to support financial innovation while protecting American consumers and interests. While many industry leaders welcome the creative tone, some critics expect action. We don’t blame them.
Many cryptocurrency projects operate behind a thin veil of decentralization. In public, they are sold on the basis that they distribute power. The leaders pull the strings behind the scenes. In the recent case of Wonderland, a serial scammer and felony directed a $1 billion treasure.
Many projects secretly pay influencers to mint their tokens. price pump. Insiders dump. Naive investors lose money. Sometimes, Schillers are celebrities. And, sometimes, those celebrities leak the surprisingly low cost of their honesty.
related: Sponsorship of the Year: Celebrities Adopting Crypto in 2021
Hundreds of projects have technical flaws. Seemingly every week, hackers take advantage of hidden software bugs. The third largest took place in early February, with $326 million – gone. And then at the end of March, another $600 million — poof.
Many cryptocurrencies are blatant scams – some, proudly pyramid-shaped. Market participants regard these as facts of life, with the terms frequently used for exit scams (“rug pullers”) and pyramid-shaped projects (“ponzis”).
To most, cryptocurrencies look alike, like a tomato chipped in Isle 9 – just tasteless, worthless, and more. The cynic sees the menu of cryptocurrencies as a proxy most wanted list. No group is completely wrong.
Yet one item on the menu is different. This is arguably one of the more significant technological developments since the Internet. Buy it or not, we don’t care. But we three professors care to bring a simple message: Bitcoin (BTC) is special, It deserves study and discussion.
Let’s talk about bitcoin
Bitcoin is truly decentralized. Tens of thousands of nodes run around the world. The operation of a node is easy; You can do this in under hours with an Internet-connected computer and a few hundred gigabytes of storage. In 2017, these nodes vetoed a controversial change to bitcoin that would have made the centralization of the network harder for ordinary people to run nodes. In doing so, they have outperformed most bitcoin miners, exchanges, and other powerful legacy players.
The decentralization of bitcoin makes it fair. No Foundation acquires trademarks or controls its monetary policy. This contrasts not only with more centralized cryptocurrencies, but also with the Federal Reserve. Over the past year, three Federal Reserve officials have resigned after a series of well-off trades. Bitcoin has never resigned an official in disgrace – it has no such official. The network automates these jobs.
The decentralization of bitcoin also makes it secure. Most of the money is digital and sits under the thumb of third parties such as banks and payment processors. But innocent Russians and Canadian citizens remind us that third parties can collect and confiscate those balances, especially when subject to state pressure. Dependence on third parties puts funding at risk. Bitcoin participants can keep their private keys and thus can save and send value without third parties. Bitcoin is in a different league than other cryptocurrencies. In the digital age, bitcoin’s unparalleled level of decentralization makes it A safe haven from state and corporate redundancies.
related: Meaningful shift from bitcoin extremism to bitcoin realism
And unlike most other cryptocurrencies, bitcoin never offered private token sales for venture capitalists or initial coin offerings to enrich insiders. Bitcoin is the most widely distributed digital asset. In a vital sense, it has no insiders – only early adopters.
The main early adopter, Satoshi Nakamoto, mined nearly one million bitcoins (5% of the maximum supply). Satoshi’s holdings are fully visible, and Satoshi has never spent a single penny. As with most other cryptocurrencies, the rich get richer, sometimes in hidden ways, and have more say in the network. Not so with bitcoin.
While some projects move fast and break things, bitcoin moves slowly but surely. Insects are rare. Granted, there are tradeoffs to this conservative approach. Upgrades are as rare as bugs. And bitcoin lacks the flexibility of other platforms. But in return, countries and corporations feel secure with bitcoin on their balance sheets.
You must have heard of bitcoin being hacked and stolen. These cases do not involve vulnerabilities in bitcoin itself. They instead describe the disadvantages of having insecure key storage or relying on third party custodians.
related: Satoshi may need a nickname, but can we say the same?
In the end, bitcoin is not a scam. it certainly can be Used For scams – like US dollars, or other digital assets. But the bitcoin network offers a final settlement of its native asset, just like the Federal Reserve System offers a final settlement of US dollars. People speculate wildly on the price of bitcoin. That’s the way for the early stages of innovation. And people all over the world need it, even the privileged Westerners guess.
Bitcoin’s design includes tradeoffs, to be sure. Its public ledger makes privacy difficult, though not impossible. Its protection requires energy. And its steady supply creates volatility in prices. But for all this, bitcoin has become something remarkable: a neutral monetary system that goes beyond autocratic control. Thinkers will bow as they seek that perfect – but utterly elusive – monetary system. Conversely, sensible and pragmatic policy makers will try to use bitcoin to make the world better.
Here’s What This Means for Public Policy
First, we should not assume that cryptocurrencies generally share more than they, in fact, do. bitcoin leads them all precisely because no one leads it, Policy must begin here from a place of understanding – not of cryptocurrency, in general, but of bitcoin, in particular. As President Biden’s executive order shows, digital assets are here to stay. The general class isn’t going anywhere precisely because bitcoin, itself, isn’t going anywhere. We pay special attention to this. Not just bitcoin, bitcoin first.
Second, bitcoin is reliably neutral because the network is headless. As a result, the US can use and support bitcoin “without choosing winners and losers.” In fact, bitcoin has already won out as a globally neutral monetary network. Nurturing the bitcoin network, using bitcoin as a reserve asset, or making payments on bitcoin would be similar to deploying gold within the monetary system – only digital, more portable, more divisible, and easier to audit and verify.
We applaud President Biden for giving the digital asset the attention it deserves. We’ll need everyone on deck—from computer scientists, economists, philosophers, lawyers, political scientists, and more—to fuel innovation and nurture what’s already here.
This article was co-authored Andrew M. Bailey, Bradley Ratler And Craig Warmke,
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
The views, opinions and opinions expressed here are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Andrew M. Bailey, Bradley Ratler And Craig Warmke He is a Fellow of and teaches at the Bitcoin Policy Institute and Resistance Money Bitcoin Research Collective at Yale-NUS College, the University of Wyoming and Northern Illinois University, respectively. Warmke is also the author of Atomic.Finance.