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  • Aftab Bose

Bitcoin might have done its bit for the global economy

Does Bitcoin have a moat around it? Many analysts say no, which is perhaps why Warren Buffet is quoted in the Guardian saying that the cryptocurrency ‘will come to a bad end.’ Upon this end, however, Bitcoin might have served a crucial purpose for the global economy.


When choosing an investment avenue, Buffet – the third richest man in the world according to Forbes – recommends finding a company that has an intrinsic competitive advantage or “moat”. One that will last a long time.


Bitcoin’s inherent transparency has been among its biggest drivers of success, but might also be its downfall. Many analysts reiterate that the process to develop cryptocurrency – including Bitcoin – is open and replicable. At a point in the future when people acquire a clever way of mining Bitcoin on a large scale, inflation might hit the cryptocurrency, deflating most of its current value.


At present, the cryptocurrency is being traded at just under £6,000 according to online cryptocurrency exchange Coinbase. The current value is less than half of what it was in 2017, when the currency peaked to a record high. For many, the subsequent crash in 2018 marked the beginning of the end for the currency. But Bitcoin’s rise and anticipated fall over a decade is likely to leave a lasting impression.


Technological imprint


Perhaps the most prominent product that came out of Bitcoin was the underlying blockchain technology. Each Bitcoin transaction is clubbed by data miners with a set of other transactions to form a block. Each block is then added to the chain of previous blocks, giving rise to an open-access, decentralised, distributed ledger, where each and every Bitcoin transaction ever made can be accessed.






Blockchain was developed for Bitcoin, but its applications for reliability and transparency have been much elaborated upon. Global management consultancy Boston Consulting Group (BCG) released a detailed report earlier this year about the benefits of blockchain for the transport and logistics sector, while Accenture research from last year revealed that the Aerospace and Defence sectors had found particularly effective uses for the distributed ledgers. Advisory firm Emerton advocates blockchain use in the energy sector, while consultancy Synechron says the technology can boost banks’ ‘know your customer’ efforts.


Whether or not Bitcoin holds any intrinsic value, its underlying technology has the potential to add billions in economic gain.


Regulatory wake up call


Aside from reiterating the propensity of human beings to try and make something out of nothing, the rise of Bitcoin has exposed a number of other tendencies that regulators could perceive as red flags.


Bitcoin represents a challenge to the existing financial system in many ways. The most tangible of these is that it is a financial product that allows for anonymity and the circulation of substantial pools of tax-free money. A less tangible but more direct affront lies in the principles or ‘manifesto’ upon which Bitcoin was founded – a desire to break free from the structures that presently govern world finance.


The third challenge that Bitcoin poses to the current financial system is that it actually serves a crucial purpose, exposing considerable gaps in existing structures. Aside from the fact that it serves as a global currency capable of expediting the purchase of services and goods across borders, many have praised Bitcoin for its emancipatory value.



In an interview with Forbes, Alex Gladstein of the Human rights foundation put forth three emancipatory features of Bitcoin: Governments cannot deflate its value; governments cannot censor transactions; and anonymity, which allows anyone to make transactions without permission.


These features have the potential to facilitate criminal activity, and have done so. On the other hand, as elucidated by Gladstein in the Guardian, they also allow an Afghan woman – who is not permitted by law to open a bank account – to work for pay and make purchases of her own.


Monetary regulations in place across the globe currently negate these factors, which might explain why an alternative cryptocurrency such as Bitcoin amassed more than 7 million active users, according to data from the Bitcoin Market Journal.


Bitcoin might not be on its last legs; many continue to invest in the cryptocurrency. But if it is, the tangible value that it has added through blockchain, and the relatively less tangible critical value that it has generated have altered the global economy for good.

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