In crypto we trust?

Posted on June 29, 2012


Watching banks get caught out for “serious failings”, the ongoing Euro problems and continued IT problems, I’m reminded why Bitcoin is fundamentally different to existing and alternative economies – and why people need to pay attention not (just) to Bitcoin itself, but to the underlying paradigm shift.

That shift is from trusting Money as a socially-controlled mechanism, to trusting it as an mathematically-controlled one.

Sure, big banks run on electronic networks as fast and as big as the Sun, but at the end of the day, the decisions around how much cash is in the system and where it is are made by a bunch of people sitting around a table. (In the UK, at least. But the imagery holds for most places.)

Cypherpunk Inheritance

I’d argue that Bitcoin is a direct descendant of the cypherpunk movement – the politics involved in setting fiscal policy to determine the value and balance of global currency exchange has, in effect, been replaced by a very small shell script. And sitting behind that shell script is a whole bunch of very strong mathematical theory.

Ironically, the same mathematical theory that lets you communicate securely with your traditional banking institution on-line — or, at least (and more importantly), the same techno-led paradigm I mentioned in the first paragraph.

In other words, Bitcoin’s strength is that it exists in (and is made possible by) a stage of history where we trust maths (crypto) more than we trust people.

(With a caveat: not everything can or wants to be automated. Money likes to be automated now that it is “just” a “bunch of numbers”, so Bitcoin is possible. But trade between non-automated entities, such as people, makes it less “willing” to be automated, and hence cryptography becomes less useful. Relatively.)

Usability and Visibility

What does this all mean for the future of money? Who knows. For now, there are plenty of people willing/lazy enough to trust large institutions (and a legal “threat” to hold them to account). But the same people do use strong crypto, all the time. The internet is “trusted” now, at least to the same level as the institutions that run it.

For Bitcoin to gain the same level of trust (i.e. trust enough to be used) requires usability to hide it sufficiently (bringing with it all the usual, but necessary problems of convenience vs security), and visibility – enough people and sites using it for others to go along with the herd.

Because ultimately, most people don’t care about paradigm shifts at all.


Posted in: Opinion