The Bitcoin network went live ten years ago today. In those very early days of Bitcoin, the nascent cryptocurrency was little more than a novelty. I don’t recall exactly when I learned of Bitcoin, but it was probably a couple years later. By that time, it was regarded as “magic Internet money,” a novelty that few understood and most dismissed as akin to a toy.
Over the next few years, the popular conception of Bitcoin shifted to the idea that it was the preferred currency of the “Dark Web,” the most wretched hive of scum and villainy lurking beneath the more savory parts of the Internet. Many people seemed to view Bitcoin as the magic Internet money of drug dealers, child pornographers, and terrorists. Bitcoin was simultaneously the Internet version of Monopoly money and the evil money used by criminals.
Over the last couple years, the popular conception of Bitcoin changed again, this time to a speculative investment akin to seventeenth-century Dutch tulip mania. The price soared and then crashed, and financial pundits congratulated themselves by proclaiming that the crash was in essence a referendum on the uselessness of Bitcoin and all the cryptocurrencies that followed in its footsteps. Bitcoin was the magic Internet money of criminals and those foolish enough to believe that solved math problems could ever have real-world value.
Bitcoin has been ignored and maligned. Its death has been pronounced hundreds of times. Yet it has still failed to fail. Whether Bitcoin will ever function as a common currency is still an open question, but like Mark Twain, the report of Bitcoin’s death was an exaggeration.
When bankers scoff at Bitcoin and other cryptocurrencies, I suspect that many are probably ignorant of the technological implications of the technology. Even after a decade, Bitcoin’s blockchain technology is still a complicated and often misunderstood technology. But I also suspect that many bankers scoff at Bitcoin because they understand that cryptocurrencies have the potential to disrupt their industry in profound ways. Permissionless programmable money could do to banks what the Internet did to newspapers.
The next ten years of cryptocurrency development may involve innovations that would seem ridiculous today. Imagine how ludicrous blogging would have sounded before the invention of the Internet. Back then, the ability to publish material and immediately make it available to nearly anyone anywhere would have been incredibly expensive, if possible at all. Radio or television would have come close but only after massive capital outlays. Today almost anyone can put up content on a website—sometimes even for free—and have that information immediately read by anyone with an Internet connection. What will Bitcoin and other cryptocurrencies do to finance?