Bitcoin is going to create with banks what he once did with e-mail with regular mail, and Amazon with retail. Naturally, everything will happen in the very center of the financial system.
The mantra “Blokchanin, but not Bitcoin” flew across Wall Street at the speed of the fire – everyone loved blockchain, even without knowing to the end what it is! Jamie Dimon, general manager of JPMorgan, hates Bitcoin, but likes Blokchein, Goldman Sachs CEO Lloyd Blankfein “made friends” with Blokchein, and while it’s warm for Bitcoin … I [author Brian Kelly] also suffered from attachment to Blokchan. Being one of the first who “accepted” Bitcoin, and having the warmest relations to the crypto currency, I still long adored the technology itself for a long time.
Perhaps, it is necessary to begin with the description of the whole way, which naturally led me to Bitcoin. For twenty years I was part of the traditional financial world of Jamie Dimon and Lloyd Blankfein. Having started my career as a trader in the stock market, after I moved to the arbitration merger department, and all the while the Internet bubble grew – happy days, for those who remember the times of the “Merger Monday” – mergers usually passed on Monday, as all the details were discussed at the weekend – Author’s note), held, betting on whether the deal would be held and who would be next. After the “bubble” burst and the long recession began, I opened a brokerage firm that serves mutual funds and other institutional investors. My clients were from the “old guard” of the financial world. We succeeded, but the work was not inspiring.
Then I started trading ADR (American Depository Receipts). This is a certificate indicating the number of shares of foreign companies traded on the NYSE and NASDAQ. The trick with this type of trade was to observe the unusual movements in the price of foreign currencies. If the price for them has changed, but there is no ARD, then the time has come to make money. This market was much more exciting than the boring trade of stable stocks of large companies. After several years of playing in the foreign exchange market, I switched to macroinvestment.
Becoming a global investor, I could play big, making big bets, given the macroeconomic trends in the world financial markets. I began to master the hidden meaning of the messages of the central banks quite skilfully. With this knowledge, you can bet on the currency markets 24 hours a day. Trafficked people like me are just intoxicating. Interaction of the policy and actions of the Central Bank, geopolitics and the financial market was the arena for games with markets. And then I came across Bitcoin.
In truth, at first I was skeptical. Even publicly stated that he has no future.
During my first time with Bitcoin I was timid and not sure. I did not want my friends from traditional financial circles to think that I was mad. However, the more I learned, the more I realized how wrong I was when I wrote off Bitcoin. It was a game player. Bitcoin was going to challenge all that I knew about finance.
I was hooked. But I still could not break myself and start talking about Bitcoin publicly.
It was easier to declare about the blockade publicly. This allowed me to be on the front line, while avoiding whispering behind my back and disapproving glances that followed any mention of the word “Bitcoin.” When I talked about the detachment, friends and colleagues listened attentively, joined in the discussion, asking questions about the wonders of the new technology. But as soon as I mentioned Bitcoin, they upset me, asking how I feel, subtly hinting at the haziness of my consciousness.
With the blockade, I felt more comfortable, but something was missing. There was some kind of emptiness in Bitchevoin without Bitcoin. I looked around and tried to rethink my first impressions, trying to understand where I had gone wrong.
And this mental journey began with the clarification of the term. There was no simple definition of Bitcoin. The wording “Bitcoin is a decentralized crypto currency” – could cause a storm of indignant reviews at worst in the case, and in the best – rolling of the eyes during a conversation. The definition needed a correction – a tight proposal, such as is made by every entrepreneur, waiting for a meeting with an investor, suitable to be mentioned in the conversation, at a casual meeting in the elevator.
Bitcoin means a lot for different people, but it’s easiest for me to think of him as a program. This software allows people to safely transfer money through the Internet without the participation of banks. Bitcoin does this by replacing the banking function with a network of computers on which the program is running, confirming and translating. The machines of the participants, known as miners, provide the function of a global ledger for accounting transactions, which is accessed every time to confirm, verify and transfer funds.
Prior to Bitcoin, the accounting process remained virtually unchanged, ever since the Medici developed the principle of double accounting in the XIV century. According to him, each bank (conveniently, all of them belonged to the Medici family) had to keep a book containing information about the debit and loans issued by the bank. A modern financial system is a network of such books kept in every banking institution.
Bitcoin “takes” the global book of accounting from the control of the banking system and places it on each computer of the Bitcoin network participant. Financial heavyweights now do not control the system. With Bitcoin, users control it.
If I said that I developed a mobile application that can use the processing power to upgrade the 600-year process of transferring “value,” you might think that I’m crazy, or could ask how to invest. Bitcoin is just such an application that undermines the archaic system of double counting – that’s why I consider it one of the most important innovations in the history of finance.
Bitcoin commits a revolution not only because of the block-technology, but also because it is a global decentralized currency. Bitcoin, as a payment tool – encourages people around the world to run software that conceptually changes the functioning of the entire financial system. Banks are supportive of the blockade because it does not prevent them from maintaining their own account books. Bitcoin also creates competition represented in the face of anyone who has a computer and an Internet connection.
Without the means of circulation, people would not have the incentive to spend money on the computer capacity required to run Bitcoin software. Blocking without Bitcoin simply duplicates the already existing financial system. Some advantages, such as increased productivity, can be used to exchange distributed accounting databases, but blocking without Bitcoin is not the most important historical innovation.
Do not get me wrong, blocking is important, but banks use it only in a way that allows them to preserve their influence in the financial system untouchable. I do not blame them for that. In fact, maintaining a central position is the goal of any bank manager. But they also have to admit that their sphere is technologically insolvent now. In the middle of the 19th century, street lights around the world were refueled with whale oil. And then John Rockefeller rationalized the process of processing crude oil. The whalers, unaware of the changes, continued to plow the ocean in search of past wealth, while Rockefeller continued to develop Standard Oil, the predecessor of Exxon, Mobil, BP and Chevron.
Bitcoin, like currency, is the impetus for all of us to become John Rockefeller. It encourages people to launch a new financial system, which is beyond the traditional. Its quantitative restriction forces people to buy new equipment and process transactions (ie, mine) in the hope of obtaining a certain number of coins. This self-sustaining system has the potential to turn a skeptical CEO into one of the lone captains of a whaler.
The means of exchange plus the block system form an independent financial system that hitherto did not exist in the world of modern finance. This bundle creates a competitor to an established financial system that has the potential to redistribute wealth, using the power of a truly free market.