Many people focus on the benefits of Bitcoin to the merchant and the customer as reasons for the ultimate success of the world’s favorite crypto currency.
Technically, it’s true, that by using Bitcoin properly, people can save money on transaction costs whether buying a sofa at Overtock.com or sending money to relatives in Mexico.
But practically, it’s not enough. Over time, a more efficient method of payment should find purchase, and succeed on its own merits, incrementally, but surely. 1% on revenue is a lot of money, particularly for intermediaries such as Amazon who play within the single digit profit percentages. Going from a 4% margin to a 3% margin is a big deal. And yet, somehow we are still uninspired.
The last 5 years has seen an explosion is payment processing innovation. From the handheld convenience of Square to the fee-less email transactions between Bank of America accounts, the world is making it easier and cheaper to send and receive money.
But the payment mechanism of Bitcoin is only half of the equation. The singular advantage that Bitcoin has over its contemporaries is that it uses a new and honest currency.
Regardless of how convenient, or fast, or fee-less, that companies can strive for, they are all at a large disadvantage: the currencies that they use are faulty.
Almost poetically, all of the world’s fiat currencies are already nearly 100% digital. There is little more than simple ledger accounting taking place as people sweat and toil to earn a higher number in their bank account, and equally so as it diminishes with each purchase of a car, or a roll of paper towels.
So as far as payment networks are concerned, Bitcoin faces stiff competition. Most of the infrastructures in place are expensive precisely because they haven’t had any competitive pressure to be inexpensive, but that tide has turned, and the consumer is benefiting from a collective race to the bottom of transaction fees.
The magic of Bitcoin won’t be truly recognized until these currencies start to misbehave. I speak specifically of the US dollar, the Euro, and the Yen. Even if prices remain constant, consumers are being robbed through inflation. Individual productivity has gone up dramatically over the past 50 years, and yet wages struggle to follow suit. Absent inflation, the prices of the common goods we all buy would have gone down: milk, petrol, electricity, copper. To the average consumer, this would have been a good thing.
Inflation hides the benefits of increased productivity and punishes the people who work every day to live, save, and provide for themselves and their families. Unfortunately, and insidiously, it steals from their wallets without taking out any bills.
Bitcoin may fail, but if it doesn’t, it won’t be because of incremental and steady progress due to its low-cost payment network. If Bitcoin succeeds, it will be amidst financial and monetary crises, providing a safe haven for those who have finally woken up and realized that the money they work for is shiny on the outside, but rotten to the core.
Like ashes in the fire, the illusion of debt-based money can disintegrate very quickly.