While banks and fintech startups around the world continue to focus on the technology behind Bitcoin rather than that particular cryptocurrency network, Bitcoin purists, such as Bitcoin Foundation Executive Director Llew Claasen, think this sort of mindset misses the point of this new technology.
At the recent Blockchain Africa Conference 2017, Claasen explained his perspective on this topic during his presentation.
The Current Financial Services System is Not Sufficient
In the opening section of his talk, Claasen focused on the problems with the current financial system, starting with the issue of inflationary currencies that destroy savings over long periods of time. “This idea that as long as we keep saving, as long as we keep squirrelling away money, we’re going to be okay is not true,” he told the conference audience in Johannesburg, South Africa.
“Aside from those fundamental problems in the system, the financial services system doesn’t actually serve everybody,” Claasen added.
To back up his point, Claasen focused on Sub-Saharan Africa, Latin America, the Caribbean, and South Asia. In these regions, Claasen claimed only 30 to 50 percent of the population have access to bank accounts. Even worse, only roughly 10 percent have access to formal savings, while only around 5 percent have access to any kind of formal form of borrowing.
Distributed Ledger Technology is Not the Answer
In Claasen’s view, the aim to improve the current financial system through the use of some of the various technologies found in Bitcoin will not be enough.
“There’s a lot of talk about deploying technology that underlies Bitcoin and saying, ‘Well, we’ll make the system better. We’re going to use this thing here called distributed ledger technology or blockchain,’” Claasen said. “But the principle is that it’s not so much a question of: Can we make the current operators more efficient? It’s a problem that our financial system is fundamentally flawed.”
“It’s not going to be better until we start to look at the fundamentals of: Is this the way that we should be providing financial services?” added Claasen. “There’s no reason to believe we’re not just creating another gatekeeper [via distributed ledger technology].”
During another panel during the same conference, Mastering Bitcoin Author Andreas Antonopoulos noted that Bitcoin may be a better answer than digital identity systems when it comes to providing financial services to the unbanked in developing countries.
Later in his talk, Claasen brought up privacy as one specific area of traditional financial services that is unlikely to evolve and where Bitcoin may be of some help.
Another issue with the use of permissioned ledgers as opposed to open, permissionless systems like Bitcoin is patents, Claasen noted. According to Claasen, there are currently 36 blockchain-related patents being processed in the United States.
“People are trying to capture whatever value they’re able to out of this technology, which was ultimately [supposed to be] a gift for all of us,” said Claasen.
Bitcoin is About Changing the System
Instead of improving the traditional financial system, Claasen sees Bitcoin as a chance to create something completely new. “Bitcoin at its very heart is about changing the system,” he said. “It’s not about making the old system more efficient.”
To Claasen’s point, many have pointed out that Bitcoin seemed to be a direct reaction to the 2007-2008 financial crisis. Satoshi Nakamoto, who is the pseudonymous creator of the P2P digital cash system, went as far as to make note of bank bailouts in the genesis block.
“It cannot be shut down,” Claasen said. “It is not controlled by anybody.”
Claasen went on to point to the volume of bitcoin traded on LocalBitcoins, which is a platform that allows buyers and sellers to come together to trade traditional currencies for bitcoin in a less centralized manner than a traditional bitcoin exchange. Trading volume on LocalBitcoins increased 85 percent in 2016, and this sort of P2P trading activity is particular popular in Russia and Venezuela.
Claasen claimed that this sort of trading activity is a better metric of real bitcoin adoption rather than anything related to ecommerce payments.