About three years ago, I wrote this piece
, about the implications of Bitcoin. I've been telling you about the implications of cryptocurrency for quite some time now. As of speaking, my own investment has increased roughly 20-fold in value. The reason this was possible is because nobody took Bitcoin serious, nor had the institutional investors stumbled upon the currency.
Of course, I could have done better. If I sold all my Bitcoin in late 2015 and used them to buy into Ethereum, I'd be a millionaire right now. I could have bought a rural homestead in Norway and abandoned civilization. Still, I did pretty well and the reason I did well is because I ignored the experts and listened to what the crazy people were saying. In general, this is sound advice in life.
I have warned you before that Bitcoin will have the effect of massively disrupting life as we know it. I'm not the first by any means. It's worth reading this article
, as well as some material I wrote down here
What we face right now is the prospect of an economic system that becomes governed by an opaque network of cryptographically hidden digital assets. This is about as cyberpunk as it gets and the consequences will be catastrophic to say the least. There's nothing we can realistically do to stop it.
Regular people are starting to see the implications of cryptocurrency as hospitals are shut down by people demanding Bitcoin ransom, so there are increasing calls by now to ban the technology altogether
, before banning cryptocurrency would cause complete economic devastation. This isn't going to happen however, you can't realistically expect to implement a global ban on cryptocurrency.
Cryptocurrency revolutionizes everything. It allows you to store wealth on a USB disk, to anonymously transfer it to other people, to anonymously receive payments for online crime. Ethereum with its development of smart contracts is the next step, as it enables entire companies to exist in cyberspace that are governed by artificial intelligence, without any real physical footprint.
The development of these smart contracts has massive implications for ransomware too. As an example, it's now possible to develop ransomware that cryptographically guarantees you
that your files will be decrypted when you deliver the payment. As a result, more people will actually pay when their files are encrypted. These types of problems are one reason why tech companies are moving to a model where most people own smartphones and video game consoles rather than actual computers, while computers come with operating systems that automatically update and give you very little autonomous control over them.
Some of the developments we're likely to see include the emergence of decentralized prediction markets, that will make it possible for people to anonymously put a price on other people's head. As an example, if you want to get rid of a hypothetical person named Joe Sixpack, you would bet the equivalent of 20000 dollar that Joe Sixpack will not die before the end of the year.
A network of anonymous people with a trust rating assigned to them would then hold your money and deliver it to the guy who bets against you that Joe Sixpack will in fact die. Alternatively, it would now be possible to set up a smart contract that simply scans google search traffic, news sites or Wikipedia and concludes based on the information it gathers there whether Joe Sixpack is still alive or not. Besides the fact that the two of you have plausible deniability, your actions can be entirely anonymous.
Again, to reiterate, everything you've seen so far is comparable to the tip of the iceberg. As an example, consider that the world's wealthy hold an estimated 32 trillion dollar in offshore accounts, for the purpose of tax evasion. If 10% of this wealth were stored using Bitcoin, a Bitcoin would be worth 200,000 dollar. It will be difficult to store money offshore, as people working for such banks now have a direct financial motive to leak the information they have: They can be paid for the information through Bitcoin!
Why would the wealthy wish to store their money in Bitcoin? Well, consider this: Governments have the ability to seize assets. A drug dealer who gets caught will have his wealth seized by the government, but Bitcoin makes this impossible. Governments are similarly freezing funds held in Switzerland and other countries by the world's dictators. These are all people for whom cryptocurrency is an excellent invention. The eventual problem we will witness is that other assets will begin to lose value, as people transition towards cryptocurrency. This is the equivalent of how the social network Hyves died when everyone began to register Facebook accounts.
The question that is still unresolved is the question of which cryptocurrencies have a long-term chance of success. There are quite a few that have completely died. Of course this emphasizes the importance of spreading your eggs across baskets. If you buy 10 assets, 9 of which becomes worthless while the tenth increases a hundred times in value, you still earned a tenfold return on your investment. This is essentially what happened to alt-coins.
It's quite clear to me that the non-Bitcoin cryptocurrencies are here to stay, because they can deliver functions Bitcoin can't deliver. As an example, Monero offers increased privacy, to the degree that the blockchain can't be analyzed. This is very useful when it comes to people who want to trade drugs online. Its algorithm also creates an incentive for people to stealthily install cryptocurrency miners on computers. This is actually probably a bigger problem that the emergence of ransomware.
Similarly, Ethereum delivers smart contracts, which as a consequence now enable the emergence of decentralized autonomous organizations that are owned by anonymous individuals and in practice governed by a computer algorithm. This paves the path for the next step, where artificial intelligence systems that exists on the internet will own decentralized autonomous organizations. The prediction I'm willing to make is that when artificial intelligence comes into existence, we won't known about it. The AI will keep its existence a secret, but use its superior intelligence to garner control over the world's infrastructure.
But how can a company that exists on top of a cryptocurrency have any genuine value? Well, consider this: The most valuable companies no longer own physical assets. They own mediums people use to enter into contact with each other. In 2017, of the top ten publicly traded companies, three of them derive their wealth primarily from a website. Google is a website, Facebook is a website and Amazon.com is a website.
In the future, hotels will start to go bankrupt, as people will earn money renting out their own house. Taxi companies don't have any real future either. Governments can ban Uber, but how exactly will you ban a company that exists on a blockchain? Similarly, deals are struck between AirBNB and governments, but how will that happen with a company that effectively escapes most legal oversight?
There's a similar phenomenon now emerging, in the form of an Ethereum company that pays people for their processing power, for anyone running CPU intensive tasks. How many IT monkeys will rent the computers in their cubicle farm out to anyone in need of processing power, in exchange for money they receive anonymously? To me this seems like it will inevitably be a very common phenomenon. There are similar services out there, that provide you with the ability to earn money, simply by storing data on a computer.
What's important to consider is that it won't be possible to tax any of this stuff. Value Added Tax, Corporate Tax, Dividend Tax, Wealth Tax, there's no genuine reason anyone will have to pay any of these taxes. In the long run, any social phenomenon that can escape taxes will grow at the cost of any identical phenomenon that does pay taxes. The tax burden will instead be shifted towards everything that is physical and can be grasped, which deflates the value of these assets at the cost of assets that are non-physical in nature.
When it comes to these digital companies, it's necessary to point out that unlike Bitcoin, which started out as the domain of basement dwellers, the big institutions are already paying attention to Ethereum. It similarly has to be pointed out that Ethereum is so complex that it will inevitably face various issues that we now struggle to anticipate.
More interesting than the fact that cryptocurrency is a genuinely functional get-rich-quick scheme, are the societal implications that will follow from this development. As an example, today we live in a society where numerous hackers and other disenfranchised people are online millionaires. This is not going to stop, it's going to further escalate. Companies in the real world will increasingly function merely as money laundering schemes that serve to convert cryptocurrency wealth into socially accepted real world wealth.
All of this is happening in an era in which wealth inequality is reaching extremely high levels. Historically, such inequality has only been resolved through political upheaval, in which the system of ownership is effectively reset
. As an example, the Dutch municipality Schiermonnikoog was owned by a German aristocrat, until the second world war created an excuse for the Dutch government to seize ownership of the island.
In today's era, it's very difficult to seize wealth. What I expect to happen instead is a kind of technological revolution, in which the emergence of cryptocurrency fundamentally changes what it means to have wealth. What happens as inequality increases is that people lose faith in the financial system as it presently operates altogether. As an example, when you have massive debts that lead institutions to seize all income above the poverty line, why would you still participate in the conventional economy?
The big problem of course is that the emergence of cryptocurrency leads to a new elite, as elites are inevitable under conditions of high population density. This new elite however, lives an effectively anonymous existence. We won't know who is wealthy anymore. Their wealth exists on the Internet, where they can use it to fund terrorism or just about any other project they might want, without a need for any existence of trust between individuals. They earned their wealth through hacking and trading drugs, so they will not be the philanthropist liberal humanist types that we're familiar with.
The outcome of this experiment will be catastrophic and dystopian to say the least. The fact that hospitals across England can be shut down because people want to change numbers in a digital ledger that we pretend has value illustrates the kind of insanity you're about to witness. It's merely going to get worse in the years ahead, as the stock market is going to face a collapse, which will wipe out the conventional economic system that we are familiar with.
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