Is Bitcoin world-changing technology?

We believe the answer is, yes.

Admittedly, it's hard to surmise how disruptive a new technology can be when that technology is still in its infancy... Who would have predicted the modern smart-phone upon seeing the very-first mobile phones, for example? Or, who could have envisioned Facebook while browsing the early Web on his dial-up Internet connection?

However, that said, we may be able to get a handle on the potential of a new technology by assesing the areas where it has the potential to bring change.

Bitcoin, and the underlying “blockchain” technology, has the potential to disrupt a lot:

Internet-based payments
Remittance payments
Management of property title (ownership of homes, cars, etc.)
Voting systems

But we maintain that Bitcoin's most important and obvious opportunities for disruption lie in its use as a form of money...

Bitcoin tears down long-withstanding financial barriers.
Bitcoin is a form of, what we like to call, “honest money”.

Tearing down long-withstanding financial barriers

Sending money across distance has long been a cumbersome and usually expensive process; sending money across national borders is doubly so.

As one well-known Bitcoin advocate put it, for the first time in history anyone, anywhere can send money to anyone else, anywhere else, at any time of day and in any amount, for almost no cost. Bitcoin could single-handedly solve the problem of the “unbanked”.

Bitcoin makes sending money as easy as sending email. Opening a Bitcoin wallet is free and requires nothing more than a relatively modern computer or smartphone; sending bitcoins requires nothing more than Internet access.

Bitcoin as honest money

We live in a world awash with fiat money, or what you might call “political money”. There are a number of problems with this, not least of which is that people in positions of power — politicians, central bankers, and other well-connected special interests — have the ability to create money virtually on a whim.

To make matters worse, modern banking involves a practice known as “fractional-reserve banking”. This is a scheme wherein banks lend out money that their customers believe is safely deposited in checking or savings accounts, effectively creating money themselves. Ever wonder why banks always have the tallest, shiniest buildings in the city-center?

Fiat money and fractional-reserve banking may be the largest and most chronic source of poverty and income inequality. They tend to create economic distortions that lead to the boom-and-bust “business cycle” (causing recessions and depressions), and the price-inflation they create makes wealth accumulation difficult at best and impoverishing in the worst cases.

In ‘developed’ countries, like the United States and much of Europe, these negative effects may not be apparent to the majority — inflation is tolerable and most people have a decent standard of living. But ask an Argentinian how he saves money for a rainy day... The answer will surely not be the Argentine Peso!

Bitcoin is an honest form of money. Though its price is volatile today, there's no reason to believe its exchange value would not stabilize should mass Bitcoin adoption occur. Indeed, there's reason to believe it has potential as a more stable accounting unit than dollars, euros, pesos, or yen (or name your favorite national currency).

How could Bitcoin become a more stable store of value than national currencies? The reason is simple: bitcoins are created by a very well-defined algorithm, at a very stable pace, and in relatively small amount. Furthermore, there is an upper-limit on the Bitcoin money supply — there will never exist more than 21-million bitcoins, and the rate at which new bitcoins are created decreases as time goes on.

It won't happen overnight, but the potential is there.