There has been a lot of talk in the last week about how if Greece had been using bitcoin, or if Grecians had kept their money in bitcoin, the recent crisis would have been avoided or largely mitigated. That should be true, but the way most people are using bitcoin today, it would NOT be true. If Greece was the first test of bitcoin, we utterly failed.
The reason is simple — how most of the world is currently using bitcoin is not as decentralized we think.
While the Bitcoin protocol is unregulated and can’t ever truly be touched by regulators or governments, the companies that continue to maintain control of their users’ funds carry just as much risk for their users as a bank or any other financial institution.
Let’s consider for a moment many of the largest wallet providers in the Bitcoin industry, the companies that are industry leaders and have the most users. If we look to companies like this to solve Greece’s problem, they WILL fall short. These companies would fail to help Greece because of the way they hold funds. Though technically not regulated like Grecian banks, because these centralized wallets actually hold users’ keys, they can be forced to comply with the government in emergency scenarios. At any time the government can intervene in their operations and seize or withhold funds like they are doing now with Grecian banks.
In Greece, all banks were compelled to comply with the government’s demands to restrict withdrawals because it declared a state of emergency. In that sense, centralized wallets are no better than a regular bank.
We believe that if Bitcoin is to be truly different and solve problems that the current financial system has created, we need to do things differently than the system we seek to change. We believe in a truly decentralized financial system, one that actually would enable people, and their wealth, to survived the crisis in Greece without a second thought.
This all comes down to one thing: control. If we want to be in control of our money at all times, through prosperity and crisis, then individuals need to have complete control of their funds without custodial influence.
When people use the Airbitz wallet, they give up none of their information and do not give up any control of their private keys. The result is that we do not withhold funds and cannot be coerced by the government to do so. If you have bitcoins with Airbitz in any country in the world and the banking system collapses, your money cannot be seized. You would not lose the ability to access it or use it.
This model is scary for companies that concern themselves entirely with profit using traditional methods. The old methods of monetizing customer information, leveraging customer funds, and directly marketing to them fall short when people take advantage of bitcoin and decentralized technology. New and creative methods of monetizing software as a service come into play and will determine the winners of this next evolution of finance and technology.
Much like centralized, pre-internet companies such as AOL, Compuserve, and Prodigy, many current *leaders* in the bitcoin space take a centralized, shortcut solution to bitcoin and mirror the custodial banking system. What eventually prevailed for communications was unbiased access to the global internet, not the walled garden of centralized services. I’m confident the same will hold true for bitcoin.
We will fail big tests in the near future if the industry as a whole does not learn the real lesson from Greece: centralized control of money is the problem. Until the bitcoin community realizes that we are recreating the same problem, bitcoin will likely be just another currency that the governments can control at will. The promise of Bitcoin is that for the first time in history, a user can hold, send, and receive their own digital money with no third party.
Bitcoin can change everything but we need to actually use it to its true potential for that to happen.