President Joe Biden’s Executive Order on Digital Assets has launched an inter – agency program to support financial innovation while protecting US consumers and interests. While many industry leaders welcome a constructive tone, some critics are hoping for action. We do not blame them.
Many cryptocurrency projects operate behind the thin veils of devolution. In public, they are sold on the premise that they are distributing power. Behind the scenes, leaders are pulling the strings. In a recent Wonderland case, a serial cheater and criminal ran a $ 1 billion treasury.
Many projects pay influencers a salary for dropping their tokens. The price of pumps. Insiders dump. Childless investors lose money. Sometimes shillers are celebrities. And sometimes these famous ones leak surprisingly little cost to their integrity.
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Hundreds of projects suffer from technical vulnerabilities. Apparently, every week hackers exploit hidden software flaws. The third largest ever took place in early February, with $ 326 million – gone. And then in late March, an additional 600 million dollars – poof.
Many cryptocurrencies are blatantly fraudulent – some, proud of the pyramid scheme. Market participants treat this as the facts of life, with frequently used terms for exit scams (“rug pulling”) and pyramid-shaped tasks (“Ponzis”).
To most people, cryptocurrencies look the same as tomatoes glued to Gang 9 – just tasteless, useless and more. Those who are skeptical see the cryptocurrency menu as a list of the most sought after proxies. Neither group is completely wrong.
Yet one item on the menu stands apart. It is probably one of the most important technological advances since the internet itself. Buy it or not, we do not care. But we three professors take care of coming up with one simple message: Bitcoin (BTC) is special. It deserves research and discussion.
Let’s talk about Bitcoin
Bitcoin is really decentralized. Tens of thousands run nodes around the world. It is easy to operate a node; you could do it in an hour with an internet-connected computer and hundreds of gigabytes of storage space. In 2017, these nodes vetoed a controversial change to Bitcoin that would have increased the network’s centralization by making it more difficult for ordinary people to operate a node. By doing so, they lost the majority of Bitcoin miners, stock exchanges and other powerful older players.
The devolution of Bitcoin makes it fair. No institution enjoys branding or governs its monetary policy. This contradicts not only centralized cryptocurrencies but also the Central Bank itself. Over the past year, three Central Bank officials have resigned in a series of, say, well-timed transactions. Bitcoin has never let any officials resign in shame – it has no such officials. The Internet automates these jobs.
The devolution of Bitcoin also makes it secure. Most money is digital and is under the thumb of third parties such as banks and payment intermediaries. But innocent Russian and Canadian citizens remind us that third parties can freeze and seize this balance, especially when they are under pressure from the state. Relying on third parties puts money at risk. Bitcoin participants can keep their own private keys and thus save and send value without a third party. Bitcoin is in a different division than other cryptocurrencies. In the digital age, the unparalleled level of decentralization of Bitcoin makes it so the a safe haven from state and corporate persecution.
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And unlike most other cryptocurrencies, Bitcoin never had a monopoly on venture capitalists or an initial currency offering to enrich insiders. Bitcoin is the most widely used digital asset. In an important sense, it has no insiders – only early adopters.
The main early adopter, Satoshi Nakamoto, won about a million Bitcoin (5% of the maximum supply). Satoshi’s holdings are fully visible and Satoshi never spent a single penny. With most other cryptocurrencies, they get richer, sometimes covertly, and even have the internet. Not so with Bitcoin.
While some projects move fast and break things, Bitcoin moves slowly but surely. Bugs are rare. Admittedly, this conservative approach has compromises. Updates are as rare as errors. And Bitcoin lacks the flexibility of other systems. But in exchange, countries and companies feel safe with Bitcoin on their balance sheets.
You may have heard of hacking and stealing Bitcoin. These instances do not include weaknesses in Bitcoin itself. Instead, they show the traps involved in unsecured key storage or relying on third-party custodians.
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Finally, Bitcoin is no cheat. It certainly can be used for fraud – such as the US dollar, or other digital assets. But the Bitcoin network offers a settlement on its native assets, just as the Federal Reserve System offers a settlement on the US dollar. People are thinking a lot about the price of Bitcoin. This is the way for the first stages of innovation. And people all over the world need it, even as Western privileged people think.
Bitcoin’s design involves compromises, to be sure. Her official ledger makes privacy difficult, though not impossible. It needs energy for its security. And its steady supply causes price fluctuations. But despite this, Bitcoin has become something remarkable: a neutral monetary system that is unmanageable for a dictator. Ideologists will be inclined to look for this perfect – but utterly ridiculous – monetary system. Wise and prudent politicians, however, will seek to use Bitcoin to improve the world.
Here’s what it means for public policy
First, we must not assume that cryptocurrencies share more in common than they actually do. Bitcoin leads them all precisely because no one leads that. The policy must start here from understanding – not about cryptocurrency, in general, but Bitcoin, in particular. As President Biden’s executive order indicates, digital assets are here to stay. The general public is not going anywhere precisely because Bitcoin itself is not going anywhere. We owe it special attention. Not just Bitcoin, but Bitcoin first.
Second, Bitcoin is reliably neutral as the Internet remains leaderless. As a result, the United States can use and support Bitcoin without “choosing winners and losers.” In fact, Bitcoin has already worked as a neutral monetary system worldwide. Nurturing the Bitcoin network, using Bitcoin as a reserve or paying with Bitcoin would be tantamount to applying gold within the monetary system – only digital, portable, shareable and easier to review and verify.
We commend President Biden for acknowledging that digital assets deserve attention. We all need hands on deck – from computer scientists, economists, philosophers, lawyers, political scientists and others – to encourage innovation and nurture what is already here.
This article was co-authored by Andrew M. Bailey, Bradley Rettler and Craig Warmke.
This article does not include investment advice or advice. Every investment and business involves risk and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are the sole author of the work and do not necessarily reflect or represent the views and opinions of the Cointelegraph.
Andrew M. Bailey, Bradley Rettler and Craig Warmke are members of the Bitcoin Policy Institute and the Resistance Money Bitcoin Research Group and teach at Yale-NUS College, the University of Wyoming and Northern Illinois University, respectively. Warmke is also a writer for Atomic.Finance.
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