MIT Bitcoin club
The last one 2019 MIT Bitcoin Expo, there was a debate that turned out to be more of a discussion about the usefulness of legal blockchains versus permissionless cryptocurrency networks like Bitcoin.
Similar to a similar panel at SXSW, an important distinction made during the conversation related to the usefulness of something like Bitcoin for financial activities that would normally be suppressed or censored in the traditional financial system.
This point suggests that Bitcoin does not compete with Visa or Mastercard. Instead, Bitcoin (as a payment network) should be compared to other systems used for regulatory arbitrage.
Bitcoin doesn’t compete with Visa or Mastercard
Although the early advocates of Bitcoin who worked on startups in Silicon Valley raved about the peer-to-peer digital cash system as primarily a payment innovation back in 2013, things haven’t really turned out that way.
“Visa and Mastercard have already won in many ways,” said applied cryptography consultant and former Bitcoin core Contributor Peter Todd during the recent panel at MIT Bitcoin Expo. “When you talk about things like that [Visa and Mastercard] are already competing well, Bitcoin has no hope. “
In early 2018, it seemed that many Silicon Valley startups focused on payments realized their mistake as they panned to use cases based on price speculation for various crypto assets.
Todd added that Bitcoin shines brightest in areas where regulations restrict the flow of money.
“The visa [and] Mastercards in the world have a very hard time competing there, ”added Todd.
What is Bitcoin’s Real Competition?
Regarding a more logical competitor to Bitcoin, Todd pointed to international payment companies like Western Union.
“If you look at the history of Western Union, it’s mostly a story of circumventing regulations around the world and paying billions of dollars in fines and fees and so on to make it happen,” said Todd. “Of course we don’t recognize that, because we only go to the friendly Western Union agent, but that actually happens there in the background and is a constant for you: How do we go on in these crazy countries?”
Regarding an even more scary competitor to Bitcoin, Todd pointed to an abandoned project by the Royal Canadian Mint, which makes coins and paper currencies for various countries around the world. Todd briefly outlined the plan, known as MintChip, during the panel discussion.
“I think they wanted to survive institutionally and proposed a hardware digital currency system that – long story short – would be very difficult for the Canadian government to censor once they created it. And it had very good privacy too. Well, of course the project was preserved, ”explained Todd.
Todd added that if this plan had been approved, the world would effectively have had anonymous payments over the internet that were difficult to stop.
“That would have been a very powerful thing,” said Todd. “Will a government go and decide to actually make this happen? Maybe.”
As things stand today, governments still don’t seem interested in issuing anonymous digital cash. For example, recently President of the Finance Committee of the French National Assembly, Éric Woerth shared his view that cryptocurrencies that focus on adding additional privacy measures should be banned.
It should be noted that one differentiator of Bitcoin compared to government-issued forms of anonymous digital cash would be the underlying monetary policy of the system. That way, in the unlikely scenario where a government issues a digital currency with strong privacy guarantees, Bitcoin would still be useful as a hedge against currency devaluation.