Cryptocurrency really is going to change our world - don’t laugh

I’m sure upon reading this title you thought another soldier had fallen to the bitcoin bullet. Worry not faithful reader I haven't been caught up in the hysteria. But cryptocurrency on the other hand - I really think that’s special. That's why I'm writing this post, because I really think the progression of this idea is going to hugely transform our relationship with finance. And that’s because the internet is going to do what an emotionally reclusive adult with a bad history of relationships would never - it is going to lower those barriers baby! (Sorry.)

If only the Internet could do something for these barriers.... image from Singh , 2014. 

Who, what, when, where and how, you ask? And why the change of heart? Well, see excerpts below. Or, more specifically, see (or listen) to this “Conversations with Tyler”  podcast episode with Balaji Srinivasan; CEO of Earn.com among other ventures. This guy knows his stuff. 

(The basic podcast premise is that  renowned polymath and occasional economic professor Tyler Cowen asks him a number of questions and discussion ensues. The podcast is almost always great- I’ve linked to the transcript for ease.)

Two key things that they were talking about stuck out to me - the future of financial fees; and the future of investing.

On financial fees:

COWEN: Right now, I pay financial fees to my mutual funds, to Merrill Lynch, all over... Which of those fees will go away?...Why should we think that will go away? We’re paying for some kind of service; maybe it’s not clear what it is. What in tech is going to do that more cheaply? And what will be done more cheaply for us?

SRINIVASAN: Because you can set up a new payment rail and contract execution system in your dorm room. That’s new because it provides fundamental competition at the lowest level. Now, these new payment rails are volatile. They’ve got all kinds of issues associated with them.

But you can actually, root and branch, exit the system in a way that you couldn’t have done before, and I think that’s going to give more fundamental competition to fees. The closest analogy is, with the internet, you have a new mechanism for transmitting information which lets you route around the Postal Service and NBC and the televisions and the movies and the record companies and whatnot.

The most important thing, from my standpoint, is the level of choice you’re going to have is going to be dramatically increased because the blockchain makes it much easier to startup a competitor and raise up your own shingle as a new financial outlet.

On investing:  I think this is a 20-year thing, maybe something like a personal token, which is to say, if you have some future . . . Let’s say you’ve done well in something that shows you have some promise. Rather than, let’s say, taking out a student loan, which is one way of mortgaging your future, you might issue a personal token.

That would be something where you say, “Hey, look, I’m going to sell about 20 percent of my future earnings for token-based financing...Can you finance me and help me achieve my dreams?”

That’s something where anybody in the world can chip in. A guy from India, a guy from Japan, a guy from Kenya, Brazil can help finance that. ..it opens up financing in a way that’s never been possible before at a very small level, a very individual level.

A communication, a broadcast to millions of people is now such a low-threshold activity. If financing or the financialization of something also becomes such a low-threshold activity, it’s going to become a lot more common.

I really thought the bitcoin hysteria was nonsense until i read this. The low threshold stuff is really important - the Internet has lowered the barrier to so many things and enabled cross cultural, lingual, etc innovation. See communication, see art, see music. Imagine the impact of a true digitisation of a currency. Big things coming!

I recommend that all of you (all two of you) read it. You'll probably be the better for it. You don’t have to; but my blog is my domain so… like it or leave it. But I really think you’ll like it. Until next time!