What role can cryptocurrencies play for society?

Everybody is talking about them: Cryptocurrencies! Whether you’re interested in technology or not, the topic of crypto will come up sooner or later. Cryptos have great potential to spark change. Therefore, we want to arm you with a new perspective on the technology. Looking at cryptos and blockchain through the lens of time!

Before we dive into the topic, we first need to do some groundwork:

What are cryptocurrencies and blockchain?

In simple terms, you can store and exchange values with cryptocurrencies. In this aspect, Bitcoin, Ethereum, etc. do not differ from conventional currencies like the Dollar or Euro. You can also exchange value with gift cards or internal currencies. Think about Amazon Vouchers, Paysafecards, or in-game-currencies.

So what makes the cryptos so special then?

The answer is the technology behind cryptocurrencies: the blockchain! As in other databases, this technology is about storing values. The crucial differences to conventional databases are decentralization and transparency. What does that mean?

  • A Blockchain has no central authority, which bends the rules of what you can store and exchange.
  • Everything that happens on the blockchain is public and can be retracted by everyone. 

Intuitively it sounds good that the power for these decisions is spread across many folks rather than centered out of an ivory tower, doesn’t it?

There is no free lunch on the blockchain

The added transparency comes with costs. A quick and quite famous example: With the shared decision-making comes personal ownership and personal responsibility. If you lose the keyphrase of your cryptocurrency wallet your crypto wealth is gone. Due to the decentralized nature, there is not something like a Bitcoin customer service agent. No one will reset your keyphrase in his Administration Interface. Sorry!

Daniel almost made the same experience. It happened already a few times that he was searching for the notebook where he stored his key pass. #Panicmodeactivated That’s what we call a bad User Experience!

So we prefer that things are in order and work easy and smooth. We don’t have sleepless nights because some central banks control the money circulation. Neither from knowing that Amazon could ban us from the marketplace. Competition seems to get the job done, forcing them to be customer-centric. So we don’t want to trade the luxury of working systems and convenience against some invisible benefit called decentralization.

Okay, so you guys are against crypto and blockchain?

Here is why we are nevertheless pro Crypto and Blockchain!

A change of perspective brought us a change in perception. We zoomed out and questioned some things from above. A core misconception is that things are in order now, and we don’t need a change! An example to illustrate this is our monetary system. Intuitively, it is almost unimaginable that we stop using the euro and the dollar, and switch to digital cryptocurrencies from some hackers. Why should this be better than a successful working system our governments created a long time ago. 

With a bit of historical context, our current monetary system isn’t old yet! It has always changed. Exactly 50 years ago, the Us-government removed the gold backing of the US Dollar. On 15 August 1971, the so cold Bretton Woods System had an end! Given that, in the context of time, our monetary system is still in an experimentation stage. In this context, it is no surprise if the current system further evolves, fails, or gets disrupted. So you can take away that things that feel super established these days are in a historic context still Startups that could fail.

Looking through the lens of time

If you start looking through this lens on the world, you’ll see more established things that don’t necessarily need to be this way: 

  • Amazon as a central marketplace that prohibits you from buying certain goods
  • Credit Card firms that prohibit doing certain types of transactions.
  • Governments and banks require fingerprints of your financial life (KYC) if you want to invest a big amount of your own money.

The list can be completed with many other and perhaps even better examples. In a recent podcast, the historian Josh Rosenthal compared the emergence of cryptocurrencies with the renaissance in the 15th and 16th centuries. It was a massive societal shift. The public questioned the medieval authorities of the church and the nobility. Back then, the argument for the social structures was to preserve order and avoid chaos. But farmers without property realized that they are equally human. They became aware that the rules that they followed can be changed.

Time brings innovations

Our lives are more orderly and equal than in the Middle Ages, but some things still can be solved better today. The mentioned restrictions and rules like Amazon or the KYC-cases are still justified with keeping the society in order. The renaissance showed that there was a different way. Why shouldn’t there be a different way today? Blockchain might be the necessary paradigm that helps to move away from authorities. 

We already can find enough aspects against authorities’ rules in our democratic and industrial society. So if we can identify them here, imagine how much more potential decentralizing technology can bring to developing countries or non-democratic countries, where many people still share the destiny of the medieval farmers.

Take away:

To understand the potential of blockchains and decentralization, you have to zoom out. If you evaluate them in the usual hands on way, you can’t see their clear purpose. The benefits of crypto don’t outweigh costs in the first climbs. You have to dig deeper! By no means we are certain that cryptocurrency will conquer the status quo! It is impossible to predict the future by just looking at the past. But it is fun and worthwhile to observe the world through the lens described and perhaps be on the right side of history.