If you haven’t yet heard of Bitcoin, either you have little interest in financial markets or you’ve been sleeping under a rock for at least the last 5 years. Bitcoin is the first decentralised digital currency; a form of exchange that is created using open source software and backed not by central banks, but by mathematical encryption techniques that are used to regulate the creation of units and the exchange of funds. The blockchain is the term used to describe the digital ledger which records transactions made by Bitcoin or any other cryptocurrency.
Why should you be concerned with these kind of digital markets and all this cyber-terminology? Well, principally because blockchain economics and it’s infrastructure carries with it the promise of revolutionising markets and currencies altogether, by removing the possibility or likelihood of nefarious financial practices. After the crash of 2008, which is regarded by most financial analysts to have been caused, or at least influenced, by manipulatory practices of banks and financial institutions, this should come as music to your ears. Fundamentally, it is the decentralisation of these kinds of currencies, the removal of the middle man so-to-speak, that promises to have such an affect. In a currency which has no central banking system, no one in control, there is, theoretically, no one who can manipulate the market.
But does this hold true? Is a currency like Bitcoin and the infrastructure of Blockchain economics really capable of removing nefarious practices?
It depends who you ask, which, likely means that we don’t yet have a definite answer. Those who are sceptical of blockchain economics point to it’s somewhat shady history, once used as a means of exchanging illegal goods on the Silk Road – a now defunct online black market. However, this does not remove the possibility that it could eliminate high level financial skullduggery. Critics also suggest that it will remain in relative obscurity and never become big enough to significantly influence the current globalised central banking system.
However, since 2015 it has been documented that more than 100,000 vendors now accept Bitcoin (Cuthbertson 2015), and since then the figure has no doubt risen significantly. It has also been recorded that there are between 5.8 and 11.5 million ‘wallets’ in use among cryptocurrencies (Hileman & Rauchs 2017). Those of a less sceptical mindset, such as MIT economist David Johnson, have suggested that if Bitcoin becomes respected and widespread enough, the central banks will have legitimate competition and it will force them to modify their costs and malpractices, for fear that all might resort to the alternative (Carmody 2013).
Time will tell whether the promise of the Blockchain holds true. The promise is a compelling one, and as Alberto Jimenez (2014) argues in his paper, The Right to Infrastructure: A Prototype for Open Source Urbanism, we have a ‘right to infrastructure’ that is open source, absent of control, and representative of emerging new ecologies – including the digitised world that the Blockchain represents.