Posted on February 14, 2020
Mass adoption is the declared goal of many crypto enthusiasts. Several conferences have already been organized, numerous companies have been trained and thousands of fancy apps have been programmed. All in the name and effort to make people more crypto fit. The masses will jump onto blockchain and cryptocurrencies at some point, but if the masses aren’t willing, blockchain and cryptocurrencies will go to the masses instead!
In view of the obviously sluggish mass adoption of crypto, the comparison to the early-state internet is made time and time again. Who else doesn’t remember the year 1994, when the internet was only used by freaks and nerds and hardly anyone knew what this global communication network could be used for one day. Similarly, bitcoin and the crypto world are still in its infancy and will undergo the same growth process as the internet did, many believers claim.
However, many a crypto-lover is driven to the brink of despair by this game of patience. After a few years of crypto experience it is not uncommon for the following question to arise: will Bitcoin ever prevail and succeed?
Of course success is always relative. The Bitcoin network has existed flawlessly for more than 11 years with an impressive uptime of 99.98 percent. Bitcoin still behaves exactly as programmed and what is was programmed for. Approximately every ten minutes a new block is created that aggregates bitcoin transactions and keeps the bitcoin blockchain growing. Bitcoin is probably known to almost everyone on our planet today and regulators, states and supranational associations are feeling urged to grapple with it. If this is not a success from Bitcoin’s perspective, then what is?
Success today is predominantly measured in “use cases*. Applied to Bitcoin, it’s success becomes particularly evident at the edges or poles of today’s financial transactions. Its strength lies in being successful precisely where the traditional world of finance fails or comes with a mere overkill. Today, 0.01 centimes can be sent around the world in seconds using Bitcoin. Microtransactions of this kind are never profitable for traditional financial service providers. Possible interesting applications and business models in this new area are only just getting started.
On the other end of the spectrum, bitcoin also shows its strength. Just recently, a bitcoin amount worth one billion US dollars was sent in a single transaction. The transaction received its first confirmation in just a few minutes. And the cost of this money transaction was a measly $80. A similar transaction in the traditional world of finance would probably have entailed higher fees, would have been finalized only after a few weeks of complex compliance checks and could be technically more easily censored or reversed.
Bitcoin is the antithesis
Especially with larger bitcoin transactions, suspicion always arises quickly: It’s got to be illicit money. In other words, money that is used to buy drugs, circumvent capital controls or evade taxes. Often this suspicion is not wrong in fact, but the moral judgment is not quite as black and white as many believe. Bitcoin is, of course, used to finance evil doings. This is unfortunate and should be prevented effectively (with an emphasis on effectively) and in the best possible way. But one should not lose sight of the fact: Bitcoin is also a reaction against a financial system that is getting increasingly out of control today. Financial repression, negative interest rates and institutionalized debt financing – practices that, when viewed soberly, can appear just as morally questionable. It is understandable that different people are therefore led to bitcoin because of their moral compass and consider it a possible escape valve.
The moral compass that can lead one to bitcoin is still alien to many today. Will bitcoin remain forever the niche product that is highly effective for borderline cases that it is today (remember, success is relative)? Perhaps. But perhaps not. Bitcoin might indeed be destined for even greater things. However, this does not mean that bitcoin will one day become the everyday currency with which we will all pay for our daily coffee. This is an inadequate metric, even though it is now regarded as an indicator for measuring mass adoption.
In fact, something like the desire for mass adoption is based on a false understanding of the real world. When has something like a particular technology achieved mass adoption? Where exactly is the threshold that leads one to believe it has? The approach of mass adoption is far too static a concept, based on a binary view of growth, that has nothing to do with the dynamic reality.
Bitcoin grows by the day
Bitcoin is a market-emergent, organically growing phenomenon. More and more people are turning to bitcoin and having their own personal pennydrop moment. There are countless stories of people who want to pay foreign graphic designers, developers or video producers through conventional financial service providers. Only to discover that they give them a hard time. Not only does one, again and again, discover that the fiat money sent never arrived, but a fee was charged for not executing the financial transaction. Such examples drive those affected directly into the hands of bitcoin.
It is experiences like these that allow more and more people to try out the Bitcoin system. Bitcoin is used when it is actually needed, not more, not less. But trying it out often leads to bitcoin being increasingly held as a means to hold on for times when it is the only option working. An angel instead of a vicious cycle. And that is what can be called real adoption!
This article was made possible with the kind support of Bitalo, the first crypto exchange in Germany completely regulated by the BaFIN (https://bitalo.de).
Posted on January 27, 2020
Financial transactions today are inseparably linked to identity. This has not always been the case. When humans ceased living in tribal communities and clan structures, the world became ever more shaped by loose and anonymous societies. During this societal evolution over the past two thousand years, financial transactions have been conducted in various ways using bearer instruments. Intra- but especially intercontinental trade was carried out using gold and silver. Monetary metals are nobody’s liabilities, which is why there is no central ledger recording all transactions.
With increasing digitalization the picture changed. Payment transactions within the “Open/Great society” – according to Popper and Hayek – were increasingly processed via third-party providers such as banks and other financial institutions for the purpose of efficient scaling. Then, around the 1970s, the view began to prevail that every financial transaction must be visible to the government and every participant in the payment network must be known to payment providers.
Bitcoin is different
This is not the way Bitcoin is working. Its use requires no identification whatsoever. Users can use Bitcoin however and for whatever purpose they want. Bitcoin cannot and does not want to know anything about it. All that is needed to make a Bitcoin payment is a valid digital signature. You don’t have to prove what your name is or who you are, but what you have: a digital signature with which to move a UTXO (Unspent Transaction Output). Bitcoin truly abhors identification.
So if you execute a Bitcoin transaction, you do not have to trust your transacting counterparty. You solely trust in the Bitcoin protocol and its rules, not in other people who also use Bitcoin. As long as the cryptographic and economic conditions, which Bitcoin is built on, hold, the cryptoasset can be used without interference. Without any ifs and buts and no dos and don’ts.
Accordingly, Bitcoin is a new manifestation of today’s market-based approach to bring order to the world. Markets are integral to contemporary societies – our “Open/Great society”, to quote Popper and Hayek once again. As already mentioned, this sort of market-based approach is a relatively new phenomenon. Most of the time, people lived in tribal communities and realities in which status and thus identity played a major role. Even today, imprints of such a prevalent past are still embedded in people’s intuitions and are particularly evident where basic human instincts permeate, for example in politics or in the realm of (un)social media.
Circumstances of social status are closer to us humans since status systems are actually to be interpreted as more natural due to our history and thus the human psyche. Status driven circumstances are more static and therefore more stable. For a long time, status was the most important capital instrument to excel for human beings. With the emergence of markets and their growing relevance, this spell has been increasingly broken. In essence, the great societal transformation from “tribal community” to “loose society” can be identified and marked as a development away from status to contract. With a market-based order, contractual relations instead of status conditions have become the dominant way to develop and advance human capacities.
Today, contracts are the decisive element of our economic system. Without them, there is no interaction. Bitcoin is taking this to the next level. While contracts in “capitalism” before Satoshi were still supervised and enforced by a legal system orchestrated by third parties, after 2008 a new paradigm was born: Algorithmic, self-executing protocol-based applications make worldwide interaction between people possible.
Connecting friend and foe
This very interaction is enhanced by the new world of Bitcoin. Since on a fundamental level the human element is reduced to a new minimum, the extent of human interaction is paradoxically greater due to increased social scalability.
After all, markets are the ultimate means to facilitate all kinds of business interactions among strangers. Market economy conditions often result in people cooperating with each other via market structures, who on a personal level would most likely not get along at all. Markets bring opponents of any type together because market participants only have to agree on the means and not the ends. This runs contrary to human intuition, which is shaped by clan thinking. As a consequence, repulse is a normal human reaction. In today’s times of complete transparency, third parties upholding the inner plumbing of markets are therefore increasingly being asked to exclude certain actors from interaction. Transactions are censored and bank accounts closed.
The ones falling prey to such censorship naturally oppose. Many of these people take the easy way out by blaming it on sinister government powers that conspire against their citizens. But much more plausible seems to be the observation that humans are still status-driven beings who are fundamentally opposed to identity-free, unconstraint interaction among humans (especially strangers). This would also explain, why so many people don’t see it as a problem, to have financial transactions supervised and controlled. All the more important then, that Bitcoin has entered the picture, doe not give a damn about identification and has no practical way of censoring transactions in any meaningful way.
Posted on November 5, 2019
Due to changes in the legislation, the old lamium website had to discontinue their operations. The reason is, that, as an escrow provider, lamium is handling and storing user funds in form of cryptocurrencies, which in November 2019 has become subject to various license and reporting requirements that undermine the privacy of our users. We therefore decided to operate the service from Antigua and Barbuda with a new team. Since we are not paying any bills from our own accounts, this will not cause any disadvantages for our users.
Also the new lamium will continue to provide two services:
Buy bitcoins buy paying bills
Use your bitcoins directly by uploading bills to our system.
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