Why people are not ready for Bitcoin?
Bitcoin is far from mass adoption.
If we ask “why”, we will get all the same answers: scalability, fees, institutions security, usability. These are mainly technical problems that can be solved over time. But if we dig deeper, we’ll see that they are not problems at all compared to “society”.
Like any idea that intends to bring something new, bitcoin has many social and philosophical difficulties: code trust, identity, no leader, no single point of failure. The reason is that bitcoin took the decentralization idea as a basis, which may be unusual for some people, especially in finance.
In a truly decentralized world, you live by the “Law of the Jungle” — every man for himself. You shouldn’t trust or rely on someone else, you have no one to complain that someone has offended you, only you are responsible for your life and your mistakes. If you want to live in the jungle, you have to become smart, strong, agile and well-oriented in the jungle. If you want to be friends with some unknown beast, be prepared that at a moment of crisis it can take away everything you have. Are modern people able to survive in such extreme conditions?
Humanity lives in a brave centralized world which is built on trust and accusation. We trust our funds to banks, we use money which has state monopoly, we appeal to the courts or to other arbitrators when someone has hurt us. We don’t have to understand everything, because there is an infrastructure that thinks about some things for us. And we get used to it, we get used to shifting responsibility.
I am not saying that it’s good or bad. It’s just our method. And this is one of the main reasons why utopian decentralized bitcoin can remain a mythical creature. Such bitcoin cannot exist in a society with centralized thinking and a strong need for trust.
This human behavior is consistent with the spirit of the times and today’s canons. As history shows, many people accept the established rules of the game as a given. Only a few offer something improved or more progressive which gains new momentum over time. And then the cycle repeats.
Let’s look at this point in more detail.
Money is dead, long live money!
In March 1973, the Bretton Woods system virtually ceased to exist, but the end of Bretton Woods was formally ratified by the Jamaica Accords in 1976. The gold standard was abolished and we entered the era of fiat money. We used to this monetary system and many of us don’t know much about alternatives.
Modern economists mostly follow the existing economic theory either because of the lack of incentives for the new ideas development or because of central banks intolerance to dissent. Political economists usually offer minor “improvements” as problems arise. For example, quantitative easing (QE) after the financial crisis of 2007–2008 which increased countries’ debt load.
An ordinary person is increasingly absorbed in consumerism, and ease of money use is more important for him, rather than their fundamental basis. Cash, cards, Paypal and other services — all this is used depending on what is most convenient at a certain moment. Many people don’t care what money is backed by, because they can exchange them for valuable goods at any moment. As a result, illusory confidence in the current monetary system is formed.
People’s perception is so distorted that it’s difficult for us to recognize that the entire monetary system relies only on trust and belief in the future (debt). That is why it’s funny to hear “bitcoin isn’t backed by anything”. We subconsciously perceive fiat money as an unaltered given and we ourselves assign the right to manage money to the central bank. This is similar to how humans embraced monarchy and monarch’s right to govern.
When it comes to money, people have a short memory
Not so many people monitor their daily spending because we pay for something several times a day. We barely notice moderate inflation, we notice it only when prices for the goods we need “suddenly” become high. We almost forgot about Italian lira, German mark, Spanish peseta, although they existed only 18 years ago. All of them replaced by euro which is used in everyday life just 20 years, but some people already have the feeling that euro always was.
Even crisis situations rapidly become an echo of the past. The 1990s were a devaluation time — British pound, Russian ruble, Italian lira, and many other currencies were going through hard times. Turkish lira has fallen 22 years in a row by 40–80% per year not so long ago. Argentina has defaulted 4 times over the past 40 years and has all the chances to do it again. Most Eastern European countries have devalued their national currencies one and a half times after the financial crisis 2007–2008.
If we talk about conventionally recent stories, that’s enough to remember the story in India. In 2016, Indian Prime Minister Narendra Modi spontaneously declared that all 500 and 1000 rupees banknotes are no longer valid. That’s 86% of circulating Indian Rupee cash notes.
It was assumed that this would help to overcome corruption and get people to pay taxes in a short time because only about 2% of citizens pay them. But India faced national outrage, massive queues and absolute chaos in the banks, as citizens rushed to exchange their suddenly invalid money. Street vendors couldn’t normally sell their goods, because 98% of payments are made in cash. The rich continued to evade taxes and began to buy diamonds to save their money.
The experiment was considered unsuccessful less than a year later, and 99% of the prohibited bills returned in circulation.
Despite all these examples, many people still support fiat money and stubbornly ignore the whole story of eternal depreciation and unexpected political decisions. Even today’s crisis in Venezuela will be quickly forgotten, as well as jokes about Zimbabwe’s 100-trillion-dollar note.
People almost endure no conclusions from crisis situations and continue to live by inertia, slightly transforming their reality. How big was the change in Indians’ confidence in government after this story? Negligible. Indians remain in the top countries that trust the government.
People either don’t see alternatives or don’t consider that they are worth paying attention to. And the reason is that sometimes we don’t want to make decisions and look for ways to protect ourselves in the future, it’s too difficult; it’s easier for us to trust and blame someone else in case of problems, and then live as nothing happened.
Perception of centralization
We get so absorbed in our own world that some human values look unthinkable for us. After watching the film “Human” by Jan Arthus-Bertrand, you begin to understand how different people’s perception of reality can be. Someone has no arm, leg; someone is blind, serving a life sentence; can’t walk down the street without fear, can’t choose in what to believe, can’t communicate with other people; someone lives in harsh conditions and someone in an economy where money turns into a meaningless piece of paper. All these people have different values, goals, desires and you are lucky if you are not faced with something familiar. Therefore, how can a person with a completely different perception of reality tell another what he “really” needs?
Daniel Jeffries, in his article about the most mind-blowing feature of cryptocurrency, described why the attitude towards centralized institutions and money depends on perception:
“Imagine you lived in Syria right now.
Your central infrastructure is destroyed, as is your money. You don’t want the war, but there’s nothing you can do about it. Now your house is gone, your friends and family are dead, your banks are bombed out and you’re cast out, adrift, homeless and penniless. Even worse, nobody wants you. The world has shifted from open borders to building walls everywhere. You’re not welcome anywhere, you can’t stay where you are and you’re broke.
But what if your money was still there, recorded on the blockchain, waiting for you to download and restore a deterministic wallet and give it the right passphrase to restore it?
How much easier would it be to start your life over?”
Authorities and many well-off people live in a “normal” centralized world where most things work properly, and one of the main problems is a loan rate. Governments in rich countries may see no reason to support technology that can be useful in such a situation, as they are sure that it will never happen to them. They see what is close to their perception and system: money laundering, tax evasion, terrorism financing and so on. Thus, cryptocurrency regulation for them isn’t an issue of protecting the system from possible collapse, that’s an issue of protecting the system from habitual problems.
In order for a person from the “normal” centralized world to pay attention to cryptocurrencies, they have to give him financial gain or better option to transfer money. If he thinks that they don’t give it, this technology becomes practically useless for him.
A crisis situation can change people’s perception
But not everyone lives in a “normal” centralized world. Most first-world citizens don’t grasp just how much of the world lives in countries with no secure banking infrastructure and no trust in any arbitrators, especially government. Fear and indifference prevail in such countries, not trust. In turn, fear makes a person live by the “Law of the Jungle”.
That is why cryptocurrency was supported by citizens of:
- Venezuela with its hyperinflation;
- Turkey and South Africa, which are faced with a new wave of devaluation;
- China with its tough financial control;
- India, after the story in 2016.
They had objective reasons to go beyond the wall. It’s usually minority, the rest simply accept the consequences. But still, this means that cryptocurrency can be used as an alternative.
That’s curious because the “first” European paper money was also a product of crisis situation. During the Spanish siege of Leiden in 1574, citizens of the besieged city had neither silver nor leather, which was sometimes used to replace money. So, they decided to use paper and made a temporary money substitute.
After Leiden, fiat money was tried to be introduced in Sweden and the USA, but they quickly depreciated to the value of the paper on which they were created. Because there was no trust to fiat money.
For example, in Norway in 1695 businessman Thor Mohlen from government approval has released paper money. But inhabitants of the country have not seen in them advantage and, hardly having received denominations, have suffered them revertively in bank to interchange for a hard coin.
Paper money may be an inexplicable thing for people who have used gold and silver for a long time because some fundamental basis of money was important for people. How can a piece of paper be equivalent to a silver coin? Why is this “banknote” worth 10 coins, and another 2 coins? Because it is written that way?
Сonfidence in the new money was formed gradually until it turned into unconditional acceptance.
Ubiquitous belief in a revolution is already the beginning of the revolution
Most changes in the monetary system have been accepting by authorities, and people have been adapting to these innovations. Fiat money, gold, silver coins — all this appeared in an evolutionary way and became ubiquitous by the will of authorities, not people.
Cryptocurrency idea is revolutionary (for now), because changes began in society, and the government is adapting to the innovation. Revolutionary spirit is still inherent in crypto community. A part of crypto enthusiasts are against state regulation and this looks partly justified, since the system has repeatedly failed.
It means that today’s bitcoin has only two ways to mass adoption — evolutionary or revolutionary. Or, authorities will recognize bitcoin as a new form of money, will evolve this idea and use blockchain to create a new monetary system. Or there should be some economic collapse which will finally disbelieve people in the reliability of the current monetary system, and then the authority will change.
But there is bad news for you regardless of the option. We will tame today’s bitcoin version. Just because we don’t know another way.
Imagine that fiat money completely failed.
The world is facing a new economic crisis which is more devastating than the Great Depression, the 1973 oil crisis and the financial crisis of 2007–2008. People are losing their jobs, banks and companies are closing, panic is everywhere. People are trying to understand how it happened, who is to blame and what will happen next. They become politicized, superstitious and terrified. Governments and central banks lost their credibility. In order to survive, you are trying to find alternatives to state money.
Welcome to the jungle.
But here is the question: what’s next? Would people distribute money for different needs without a centralized moderation and trusting each other? Would we constantly form flexible rules in a dynamically changed system through voting or competition? Would this happen taking into account that each person has his own experience, knowledge, and perception of justice? And this absolute democracy would not become a universal manifestation of the herd instinct in decision-making, right?
People can get used to everything and we shouldn’t exclude such an outcome, but it looks too utopian. People tend to self-organization and co-operation during times of change and crisis situations, but can a person with centralized thinking turn into a person with decentralized thinking in a short time?
It’s unlikely, just remember the story of the DAO. We still want to look for the guilty and shift the responsibility. So, we will simply create new institutions. They are not going anywhere, even in a world where social consensus is a core.
This crypto revolution will end eventually, and then we will return to conservatism no matter what the outcome of the revolution will be. Even if bitcoin and other cryptocurrencies beat fiat money, you shouldn’t expect that we will greatly change our approach. The result of the French Revolution was the First French Empire, the result of the October Revolution was the Soviet Union. The Internet was supposed to overcome centralized power but has become a central tool for surveillance.
We already distort the bitcoin idea with all these cryptocurrency exchanges and multicoin wallets, because bitcoin doesn’t need institutions. That’s we need these institutions to interact with bitcoin, as we are used to. If we continue to move in this direction, today’s bitcoin version may become something it has initially struggled.
I think that humans will accept money which is based on distrusting elements, although it may take a long time. Bitcoin idea will not be domesticated, but some bitcoin implementations will be tamed, as well as current.
Yes, today’s bitcoin version may be successful as cryptocurrency, but as distrust idea, it will most likely fail. We are not ready for bitcoin yet, perhaps robots would help us to reinvent it and the future version will become truly decentralized.
For now… we will get another hybrid of the new concept and the old centralized thinking — bitcoin which we deserve.