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Money and markets: Facebook’s currency ensures blockchain is here to stay

Blockchain isn’t just a new technology, it is a political disrupter that takes away the state’s monopoly on money. Try as they might, governments won’t be able to legislate it away.

One thing about technology in the modern world is that you can’t uninvent it. Cryptocurrency is a genie out of the bottle and it is about to enter a new phase of expansion.

While the price has been flying up and, as I write, down, this has been because of geopolitics: Iran and the US/China trade war. Where gold would have gone through the roof in the old days, the new go-to asset for the fearful is bitcoin. Gold did manage a good rally, but the technology of blockchain is fast augmenting the ‘barbarous’ metal as ‘get out of dodge’ money. In a world full of societies like Venezuela and Iran, situations like Hong Kong’s protests, and rolling trade trolling, the current highly regulated and penned-in financial system is desperate for liquid channels like cryptocurrency.

Some people say blockchain technology is no big deal and liken it to the simple programming concept of a ‘linked list’, where information is chained together. This, in many ways, is true, but it is the addition of encryption, networks and political layers that sets up blockchain as a powerhouse of disruption.

Engineers don’t often make things with direct application to politics. There are weapons, of course, but in the main bridges, washing machines, railways and power grids, while having a massive impact on the day-to-day wellbeing of everyone, are not designed to disrupt the political status quo.

Blockchain, on the other hand, comes preloaded with political intent. The idea of decentralisation has dramatic implication. Currency decentralisation potentially inverts and certainly disrupts the power hierarchy we live under. In the current financial world of markets, resources flow up from the many to the few and the work flows down, kings ride white horses and are rich while peasants dig the soil and are poor.

Centralisation versus decentralisation is a core historical dynamic. Romans versus barbarians, kings versus parliaments, totalitarians versus anarchists, local government versus central government, it’s a long-standing tension. Monopolies controlled by the centralists are levers of power, financial and political, since the beginning of history, and money is a central one. Money is a lever, like the state monopoly in violence, and blockchains are about to take this monopoly away. This is by design; bitcoin is engineered as a currency to break this monopoly, the first billion-dollar use-case for blockchain technology.

Bitcoin’s emergence in 2017 was a cause for alarm across the world. A currency that can’t be debased or issued at will or magicked out of thin air, with many advantages over classic money, is a clear threat to the ‘droit du seigneur’ that governments are accustomed to. It might not be too great a threat to a properly run economy, but in a country with all the economic and political pestilences of a large proportion of the globe, crypto­currency is a basic threat to a kakistocracy’s stranglehold over resources.

Cryptocurrency has a whole ocean full of unknown unknowns but, like all the other weaponisable tools engineers create, once invented they will be wielded.

So welcome Facebook, a country with more users than the USA, the EU and China put together. Their currency is soon to be released and is called Libra. They’ve got buy-in from a lot of big players who they have cut in on the deal. If they get it right, there will be a trillion dollars of Facebook Libra before you can say “privacy is dead”.

It will be a stable coin, meaning it will not jump around in relative value like bitcoin as it will be lashed to a basket of global currencies. This is apparently a good thing and any analyst trying to do a SWOT analysis (strengths, weaknesses, opportunities, threats) will probably note the opportunity and threat surfaces are continental in scale.

A new currency for a population of 2.3 billion people, a financial platform that knows more about you than you do, that prints its own money... is it a social network, is it a bank, is it a financial market?

What’s not to love? Or as the memes go, ‘What Could Possibly Go Wrong?’

Just to make it yet more exciting, it is of course just the start. Google must follow, so must Amazon, so must Apple, so must Microsoft, whose ‘reward points’ system looks suspiciously like something that could develop in interesting directions.

Trillions of dollars in token currencies will spring up.

Some will say this monster will be banned by legislation but, in reality, this is not a real option. Vouchers can’t be banned. Technology, while it might be massively disruptive, or perhaps because it is disruptive, always succeeds when it is more efficient. Cryptocurrencies/tokens are more efficient. When you tally up the costs of the financial system as we know it today, they are vast. For example, there are 40,000 tonnes of dollar bills alone in circulation, to give you an idea of the scale of costs.

Blockchain and cryptocurrency upend all this, in the same way the internet upended the media. Facebook’s Libra will be just the beginning of the beginning.

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