The news is spreading steadily: blockchain technology, created by Satoshi Nakamoto’s Bitcoin, is going to disrupt everything: financial services, insurance, government, the Internet and the world wide web… The applications appear limitless. In this upcoming revolution, Bitcoin seems to occupy a position of choice: the most mediatized embodiment of the power of the technology, unstoppable even as major governments and companies attack it via regulation or FUD. Still, Bitcoin has been chugging along for the last 8 or so years, running uninterrupted via a plethora of nodes and miners dedicating their hardware to create, via their collective effort, Bitcoin’s decentralized beating heart.
Many Bitcoin enthusiasts, including Satoshi Nakamoto, have defended the many criticisms and problems associated with Bitcoin, ranging from the 51% attacks and security vulnerabilities, electricity waste and deflation due to irrecoverable coins. But one issue seems to me more important than any other: the (extreme) bias towards early adopters’ reward. The initial return on investment from Bitcoin far exceeds what any IPO has ever offered at any point in history. Just imagine that at the beginning, when the Federal Reserve created the dollar, they gave a few billion dollars to the first people willing to accept it in exchange for something else like gold. This of course is absolutely not how it happened: the State/governments used their authority and power to “force” upon people the use of the national/official currency. There are of course many drawbacks to government backed currencies: credit bubbles from irresponsible banks, inflation, recovery of money by force… Basically, if we were to differentiate Bitcoin from the Dollar, in simple terms, one clear difference is the incentive used by the “creators” of each to encourage mass adoption: for Bitcoin, it’s greed, for Dollars its the use of force.
You’ll have those that say they are in it because they “believe in the technology”, yet the times when Bitcoin users were willing to buy stuff from their invested Bitcoins to prove it works (like the infamous 10.000 Bitcoin pizzas) seem to be gone. Most of the Bitcoin community looks like it’s comprised of “Hodlers” who are in until they can buy themselves a McMansion or a Lambo. Satoshi himself/herself/themselves have argued that there is nothing wrong with “rewarding the risk taken by early adopters” and that no one would deem it unfair that an early investor in Apple got to enjoy a return on his/her “risky” investment. Sure… but a return of over a million percent? Especially in light of what those so called “risks” were… Someone that “risked” 100$ back in 2009 would be a multimillionaire today… Maybe for a homeless person from the poorest country on Earth, investing 100$ is risky, for anyone else, it’s pocket money.
What’s especially worrying is that beyond a certain amount, money doesn’t only buy you stuff, it also buys you power and influence. The huge amount of Bitcoins horded by a few very early adopters is enough to move Bitcoin up/down in a matter of seconds if they were to cash out. More importantly, supposing Bitcoin becomes a global and recognized currency, the sheer magnitude of difference of relative wealth between late adopters and early adopters will be such that it may be even worse than today’s situation with fiat, where a handful of billionaires control most of everything, especially politics. I am really wondering if anyone is naive enough to believe that a majority of people are willing to be ruled de facto by whomever Satoshi Nakamoto turns out to be, the FBI, Roger Ver, Charlie Shrem and a handful others. Even if they turn out to be the most enlightened Rulers of all time, it’s probably not in the best interest of core values such as democracy, freedom…
If history is any indication, Bitcoin will never really make it global for a very simple reason: in the end, failure to address severe power/wealth imbalances, people will revolt. We had revolutions to overthrow a system whereby coming out from the right vagina determined whether you would rule over others, and we will have further revolutions to overthrow the right of a minority of geeks from ruling based on buying the right lottery ticket.
But it might actually never come to this. Take two neighbours with the same jobs, same house, same amount of savings in dollars. One neighbour decides to invest in Bitcoin at time t, the second neighbour only invests at time t + 6 months when Bitcoin’s price doubled. Bitcoin’s aspiration is to be a currency, not a stock or a speculative investment. No person in their right mind would support a system which, in a few months interval, reshuffles wealth completely, regardless of merit, only on the basis of a network/bandwagon effect.
Perhaps, however, there is a silver lining in all of this. I'm starting to believe that Satoshi Nakamoto may have screwed Bitcoin early adopters. He knew that there would be a limit to adoption once people realize that just because they bought a few months later than their neighbour, their purchasing power for an equivalent amount of fiat in BTC is half less. He relied on greed of early adopters because he knew it was the best way to spread the idea of blockchain and Bitcoin, but he knew that ultimately, someone somewhere would develop a coin based on the same overall principal but with a mechanism that removes or at least attenuates the early adopter bias. Bitcoin is basically a greed driven marketing campaign funded by the FOMO of early adopters, which will enable the emergence of a more ethical and balanced solution which will eventually appear but would not have made it mainstream without Bitcoin… Even if this is not how Satoshi planned it, it is very likely that this is what will happen, once Bitcoin reaches a certain level of adoption. Some projects are already under way such as Grantcoin, Duniter or Nimses. Let’s see where they lead. As John Rawls successfully argued in his theory of justice, if we placed ourselves under a “veil of ignorance”, not knowing whether we would have the qualities that would guarantee us wealth (or the right to access to basic goods/services) in a world we knew nothing about, most of us would prefer some form of socialization and redistribution of wealth.