The Cryptocurrency Tug-O-War

about 3 years ago

Kevin O'Leary, one of Bitcoin's staunchest critics over the years, suddenly reversed his position, claiming to have put 3% of his portfolio in it.

The reason: It is here to stay.

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This after fellow Shark Tank host Mark Cuban did an about face on cyptocurrency, starting to believe in the potential. Cuban, while still not a full advocate of Bitcoin, is a believer in decentralized finance and the potential it has to alter the entire economic landscape.

These are just two of the people who are changing their stance on cryptocurrency.

So while Central Bank governors blast crypto, Google is adding a crypto tab to its finance site.

And the battle continues.

What we are witnessing is very predictable. Those with the most to lose are the one's who are going to fight the hardest against what puts their empire at threat. The reality is there are many who are going to be disrupted by cryptocurrency and there is little they can do about it.

Bitcoin is serving as an appetizer. Many see the potential but do not realize the flaw. The problem with Bitcoin is that it can be controlled. We are already seeing Wall Street position itself in this manner. Since there is a know quantity that will be distributed, simply stepping up to the plate with money gets one in. This is something Wall Street has a lot of. Just wait until government's also get involved.

However, that is far from the end of the story. That flaw in Bitcoin does not exist in cryptocurrency. Here is where the establishment is overlooking the true threat. They still think in terms of a single currency for use when, in fact, we are rapidly heading to a world where tens of thousands of currencies will be used. There will be no reserve currency since we will be operating mostly in the digital realm.

Consider this point: what is the Internet to you?

Do not come up with a definition but, rather, look at your browser history. Most visit the same websites on a daily basis. Thus, the Internet to us is those 100 or so websites we visit each week.

However, there are tens of billions (maybe trillions) of websites out there. Yet to us, it is as if they do not exist. Some of them, such as porn, are rather popular. If that is not one's thing, it is completely overlooked.

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This is how networks operate. If one is involved in it, then that comes into existence. The rest of what is out there, for the individual, ceases to matter.

Since networks are going to monetized with cryptocurrency, we will see the same process applied to crypto that we do to websites. The old saying "when in Rome, do what the Romans do". In this new digital realm, whatever network one is on, that which is tied to it is what will be used.

Here we see a radically new concept that eclipses most people.

Does that mean there will not be major winners? Of course not. Just like websites, some cryptocurrencies will become a lot more popular than others. We are witnessing the formation of the "attention economy" whereby people's decision of where to spend their time is what generates the economic value.

This is the point that many who do not believe crypto has value miss. Value is derived from people (and I guess we can add computers) opting to use something. It increases when the numbers do.

The apparent chaos that exists in the blockchain/cryptocurrency world is its strength. Many look at this from the outside and see no concrete plan moving forward. It is an industry that certainly is moving in many different directions at the same time. Even within particular chains, we see this happening.

Yet, that is what increases its power. The fact that things are spreading out reduces the vulnerability. So, while everyone is watching Bitcoin, there are thousands of other projects that are arising, providing options for all users. Of course, many of these carry an economic value since they were tokenized from the start.

The decentralization is happening at a time when censorship, hacks, and other downsides of centralized systems are being shown. This is causing people to push forward, believing decentralization provides humanity with a better option.

Governments and the banking system disagree. So do the traditional social media companies. Instead of operating from the place of let's do things to improve the path forward, they want to hang onto their power position.

Thus, we can expect that nothing will be given up.

This is not a problem since disruptors need not ask permission. It is up to us to develop what is needed to take the power away. This can be in the form of new governance models or simply by generating an entirely new economic structure that grows in size over time.

What is interesting is that the wealth being generated in crypto is happening at a rate that dwarfs the traditional system. This is not surprising since startups often have a much greater growth rate. However, if the value of the listed cryptos is around $1.5 trillion with 100 million people, imagine what will take place when there are 1 billion crypto users.

Of course the inclination is to simple multiply the market cap by 10. This would likely be undercutting the true value since Metcalfe's and other "Laws" tell us that the value of networks increases exponentially in relation to their users.

Hence we find ourselves mired in a fantastic tug-o-war. The establishment is going to fight this new technology with all their might. Government needs power and control. Without it, they cannot keep following the path they established.

Cryptocurrency, in my view, is about freedom. It offers humanity control over the decisions they make. When it comes to financial affairs, it does put the power back in the hands of the people.

This is not something that sits well with those in power. They prefer the top-down structure since that is how the masses can be controlled by a few. Cryptocurrency brings a horizontal architecture to the table. This is a definite threat to the established power basis.

Expect the tug-o-war to continue for the next few years. At some point, they will see the futility in their efforts and change tactics. Until then, we will see the same course of action as the last few years.

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