TechWeek 2019: Bitcoin – the mother of all blockchains?

Cultivating expertise

Instead of deriding Bitcoin and sweeping it under the rug, Veronika says the business community needs to develop a deeper understanding of the technologies that comprises it. 

She views the original whitepaper as a necessary component of the ‘grammar’ of blockchain that any serious expert must first study. Anyone who learns a language must both understand its grammar and go out and practice it in the real world. The current problem with blockchain advocacy is that people are desperately trying to find uses for the technology without getting the theory nailed down.

“Everybody is trying to implement something, but how many have read the Bitcoin whitepaper? It’s the mother all the systems and hardly anyone has read the grammar of it. They jump. They don’t want to put in the work or the time study those systems to get to the root.”

Room for both

Veronika is under no illusions about the disruptive potential of permissioned blockchains. She talks with great enthusiasm about a not-so-distant future where smart devices with their own wallets execute smart contracts to securely automate processes — whether that’s a fridge autonomously ordering milk when the carton is empty or an insurance company executing a claim. 

The problem, she says, is that a myopic focus on permissioned blockchains neglects the much larger disruption Bitcoin will bring long-term. And Veronika is clear-eyed about how this disruption will manifest. 

An uncensorable decentralised payment network, she argues, will eventually lead to the erosion of the “kingdom” of nation states, and she points out how it offers a way out for those whose freedoms are being readily extinguished by tech-based state surveillance in authoritarian regimes.

“My mission is in the long term. Creating a permissioned blockchain is easy, you just merge a couple of databases from different banks and then automate processes. This is streamlining existing processes. This is going to be crazy, it’s going to make all sorts of things incredibly fast and dynamic.”

“But because of globalisation, our foundational system is just not applicable anymore. What I am seeing is the crumbling of the kingdom of nation states and their financial institutions. It doesn’t matter if it is 20 years, or 60 years, I feel like that this kingdom is coming to an end.”

Looking forward

Such exuberant assertions are hard to fathom and easily dismissed as fanatical hyperbole. Veronika argues humans are simply ill-equipped to spot the harbingers of change, even if they lie under their noses.

While true that those living during the Roman empire could not foresee its demise, there are numerous reasons why Bitcoin is an undesirable alternative to the traditional means of storing and transferring value: Its value is highly volatile, it’s ill-equipped to be used at scale and is frustratingly user unfriendly. 

For Veronika, these are simply practical obstacles that can and will be overcome. 

“One of the main pillars of our society is just theoretically not needed anymore. This doesn’t mean that tomorrow we won’t have banks. People still send letters, but post offices are shrinking and shrinking and shrinking.”

It’s hard to argue with the great strides the Bitcoin community has made in the last few years to solve the digital currency’s growing pains. Even harder to deny is that the community itself is made up of an international army of talented and passionate individuals. Take user experience. Five years ago, buying Bitcoin required investing at least an afternoon studying the lexicon of wallets, addresses and exchanges. Now companies like Coinbase exist that make buying Bitcoin as easy as buying a coffee. 

Since its inception, improving scalability has been the main focus of the Bitcoin community (and rightly so if they believe their own proclamations about its growth). Frustratingly long transactions times will only exacerbate with increased adoption.

The lightning network (launched March 2018), which takes smaller transactions ‘off chain’, is the first serious attempt to meet this challenge. But as it does so at the expense of security, it is a remedy not without side-effects. Only last week, one Reddit user claimed he ‘lost’ four bitcoins on the network, though it is disputed whether the loss was caused by the network itself or the user’s own negligence. 

Veronika claims volatility is another growing pain that will only improve with time.

“If you compare the market value of Bitcoin to the global financial system, it’s a tiny part – that’s why it’s very volatile. If you listen to interviews with David Marcus, the head of Calibra, he says he would love to integrate Bitcoin into Facebook Messenger. But the problem is that Bitcoin is still very volatile. But that’s just due to its infancy. It’s a system that’s just getting started.”

The future is impossible to predict. Previous political movements, including the Occupy movement out of which Bitcoin was born, have tried and failed to destabilise the global financial order. Time and again, activists have collided with those who hold the keys to the kingdom and their robust incentives to maintain the status quo. 

But Bitcoin offers a ray of light which no amount of vested interests can extinguish. It is a tool that cannot be put back in its box and one that has rightly revitalised a grassroots movement jaded by failed attempts to stimulate serious financial reform. If society adopts Bitcoin en masse, there is nothing that governments or financial institutions can do to stop its march. It would require every country on the planet to agree to a blanket regulation. In our political climate, it’s hard to find even three world leaders that can agree on anything substantial.

Will time heal all wounds? Or is it necessary to move past Bitcoin? Catch Veronika’s talk at TechWeek Frankfurt to learn more about the crypto-nuisance that the finance sector can’t shake off.