The early history of Bitcoin is often compared to the early days of the Internet. Although some say the killer applications for the peer-to-peer digital cash system have yet to arrive, many people understand the potential of this open system for online value transfer. The Internet completely revolutionized how information travels around the world, and Bitcoin could have the same impact on money, payments and many other aspects of finance.
One of the key innovations of the Internet was that it enabled permissionless publication of information. While a handful of media companies held tight control over information and news in the past, anyone with a Facebook or Twitter account can now instantly turn into a reporter on the scene of an interesting event.
Bitcoin offers a similar transition to a more decentralized version of online finance. Instead of getting permission from PayPal, Visa or MasterCard to accept online payments, anyone can instantly sell their goods and services for Bitcoin; it only takes a Bitcoin wallet to get started. Although online drug markets have existed in the past, these sorts of uncensored marketplaces become more practical in a world where Bitcoin exists. This is not to say these markets are morally right or wrong. They are simply an illustration of the permissionless nature of Bitcoin payments.
Although Bitcoin requires permission from no one on a technical level, legal barriers to entry still exist when it comes to offering financial services on top of the blockchain. Regulations tend to come into play when entrepreneurs are taking custody of their users’ bitcoins. Of course, it’s still possible to create new p2p protocols for financial services, which can be viewed as nothing more than software. An example of this concept in action is JoinMarket, which is a way for Bitcoin users to get a return on their holdings by offer liquidity to CoinJoin transactions.
Bitcoin Could Change How the Internet Works
Bitcoin also has the potential to completely change the way the Internet works. The creation of a form of true digital cash allows applications to experiment with new incentive structures and monetization models.
The most common monetization model on the Internet has evolved to the point where it’s all about tracking users’ movements and selling that data to third parties. Brave Software is a startup that hopes to fight against this trend by way of a new browser. The idea is to provide users with better privacy while browsing the web and eventually have users choose to make small Bitcoin payments to content creators rather than becoming a product for advertisers. In the meantime, the browser uses ad-blocking technology to replace pop-ups and third-party cookies with less-intrusive advertisements.
21 is another startup in the Bitcoin ecosystem that sees entirely new types of payments becoming possible thanks to the peer-to-peer digital cash system. Part of the mindset here is to view Bitcoin as a system resource rather than a currency. Having some bitcoins on devices by default may be useful in creating effective markets for sharing excess bandwidth, storage and other system resources. Bitcoin may enable a future where the specs of a particular device are less important because system resources can be automatically purchased with Bitcoin on p2p markets in the background.
A Complete Revolution in Money
One last thing to keep in mind when it comes to Bitcoin as a commodity or currency is that this is a true revolution in money. Bitcoin has specific implications when it comes to a government’s ability to have control over the economy. Whether it’s to avoid capital controls, inflation, censorship of payments, bail-ins or any other economic policy, citizens now have the ability to opt-out of the traditional system entirely via Bitcoin. Although gold has been viewed as the main hedge against specific government actions in the past, Bitcoin’s role in this regard may increase as more commerce and general economic activity moves online.
The Internet weakened centralized control over information, and Bitcoin could do the same for money.
Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.