The industrialisation of power lead to a period of astonishing economic growth and human flourishing. It is early days, but just imagine what the industrialisation of trust could achieve.
It’s not surprising that bitcoin and many cryptocurrencies are valuable, but why are they so volatile?
At the moment, Elon Musk’s tweets seem to drive bitcoin’s volatility. Musk is what the late Joel M Stern would have labelled a “lead steer” – a person whose views and opinions are important enough to move markets.
Recently, Musk’s company, Tesla, had acquired a large stock of bitcoin and announced that it would be accepting bitcoin as payment for its vehicles. This was seen within the context of mainstream acceptance of bitcoin as a workable and viable currency. Prices went up.
Then it appeared Musk changed his mind – he indicated that bitcoin’s carbon footprint was too high for his liking and Tesla would no longer accept bitcoin as payment for its vehicles. Prices went down.
Musk has also been promoting an alternative cryptocurrency known as dogecoin. This token was literally started as a joke. Yet the joke is on everyone else – dogecoin’s market capitalisation is over $US40 billion.
Musk is almost certainly multi-tasking. He has positioned his company into the cryptoeconomy. He is probably engaging in some impact investing, as many people are concerned about bitcoin’s carbon footprint.
He is also trolling bitcoin true believers, and US regulatory authorities too.
Blockchain business models are not going away. What they need now is official recognition, and to be brought into the formal economy.
Musk is not alone in trolling the true believers. George Selgin – emeritus professor at Georgia University and now at the Cato Institute – has been engaging them too. Most of his criticisms of bitcoin maximalists are valid. It is unlikely that bitcoin will emerge as the only money being used in a global digital economy.
That is all theatre. It ignores the main game.
In the background, there are scores of start-ups – many in Australia – that are quietly working on business models that rely on industrialised trust. In the same way Uber disrupted the taxi industry, many of these start-ups will disrupt the services economy.
This will have profound implications for business. Size will no longer be a defence against competitors. In same way anyone with a nice car could become an Uber driver, anyone with a computer and internet access will be able to become an entrepreneur, a day-trader, a broker, and, in time, a bank or insurance company.
To be fair, Australian political and regulatory elites have been somewhat distracted over the past year. They have been open-minded about blockchain technology and the challenges it poses in their areas of interest. Andrew Bragg’s Senate Select committee is looking into Australia becoming a technology and financial hub. This is all good work, but time is of the essence.
Even if we are experiencing another bitcoin bear market, blockchain and blockchain business models are not going away. What they need now more than ever is official recognition, and to be brought into the formal economy. This is so they can be recognised as being legitimate businesses with need of other business services.
Ironically, the industry that will one day disrupt the banking and insurance industry is currently in need of banking and insurance services from established banking and insurance companies.
That requires legislative changes to the Australian regulatory framework. That will be hard work. In the meantime follow Elon Musk on Twitter. The fireworks are very entertaining. But remember he is actually a visionary.