Satoshi Nakamoto published his whitepaper a few months after the 2008 financial crisis, arguably the worst crisis since the Great Depression. At this point we all know who were responsible for causing the loss of 12 trillion USD in the United States alone. JP Morgan Chase, Goldman Sachs, Lehman Brothers, credit ratings agencies, CDO managers, the list goes on. Bitcoin, built upon the technology of the blockchain, was born out of necessity, at a time where the people’s confidence on governments and banks couldn’t possible be lower.
The situation in 2008 can be boiled down to this: prior to the 2008 crash, the market was flooded with cheap money. Cheap money means lower interest rate: good for borrowers, bad for investors. Restless (read: greedy) bankers wanted to capitalize on this, and they met their perfect match: restless borrowers with no income, no assets, but with a dream to own a home. More borrowers meant more cashflow more banks. More borrowers meant more demands for homes. More demands increased home prices. This subprime loan market quickly spiralled out of control. The Fed lowered interest rate even further down to 1%, the lowest in 45 years. By now you should have realized this is a house of cards ready to collapse on itself.
Let’s move our time frame forward. The situation in America now resembled a chocolate store where you can take a lick at any chocolate bar without paying first. Down payment lost its importance. But that’s not enough for the big banks. They weren’t happy with just selling the chocolates on the shelves. Say you took a lick at the chocolate earlier. You now had a chocolate debt obligation to that chocolate store. Rated the debts by labelling each of them with letters A, B or C, with A being the alpha top dog of the debt world, ie. the safest. By tat logic, C is the riskiest. Now this chocolate store cut up all those debts and repackaged them into something it called a collaterized debt obligation, or COD. It’s just a fancy name for a fraudulent practice. All the bad debts became ‘good’ and could be sold to another chocolate store. That’s exactly what happened. Your chocolate store sold your debt to another chocolate store because this chocolate business was booming like mad. That’s fucking crazy, you say? Well, that’s exactly Mark Baum said in the movie the Big Short, and he hit pretty close to the truth there.
The hypocrisy of Wall Street
The 2008 financial crisis caused the US to lose 12 trillion USD. Those responsible got a slap on the hand. Of all the “Big Four” banks, only Lehman Brothers closed down. JP Morgan Chase paid $13 billion to their victims, a meager amount compared to that staggering 12 000 billion loss. Then, in later 2017, Jamie Dimon, JP Morgan’s CEO, came forward to denounce bitcoin as a ‘fraud‘ and people who bought bitcoin are ‘stupid’.
I am sorry, what? Dimon, your firm was responsible for selling something that’s akin to dogshit wrapped in catshit, which you hide behind the fancy word CDO, to your clients in 2006, and you still can call bitcoin a fraud with a straight face? Your colleagues over at Goldman Sachs couldn’t answer when being question by the Senate for selling sub-par deals (which they knew all along) to their clients. Goldman Sachs knew that Timber Wolf deal (another CDO) was shit, and they sold it to their clients anyway, because, well… money.
Yet these financial crimes went unpunished.
This financial authoritarian oppression must end
Andreas Antonopoulos lamented the loss of freedom of money transaction in this video. He raised interesting points. First, the government has absolute control over our financial transactions. Bought a house, a car, won the lottery, made some bucks? You bet the IRS knew about it. What do governments or institutional bankers say when asked about bitcoin or crypto? Oh, you mean the digital money that’s used by money launderers, terrorists and drug dealers on the darknet? That’s how they’d answer. How interesting of them to mention the darknet. The darknet is a place where you, Average Joe, can browse in anonymity, without the fear of having your privacy compromised by your ISP and federal agencies. Second, it’s also convenient of them to forget that they, the governments, also have access to their own darknet, in the form of the CIA and NSA. What they do with the state’s budget, we don’t know.
As Andreas said, we now live in a world where every one of our transaction is visible. And everyone of theirs is private. They control us. But we can’t constrain them. What kind of democracy is this? The government, which is supposed to be subservient to its people, now has absolute authority over the fate of the financial being of its citizens.
Now, if you’ve observed your Ether transaction via etherscan.io, or any other equivalent web-based blockchain explorers, you’ll know where I’m heading to. Blockchain can revolutionize the world by giving the people the tool to constrain their own government, resulting in more transparent policy-making processes. A government incorporated, or built upon blockchain, will allow itself to be open to the public. Corruption will become a non-issue as all transactions are visible on the internet, and remain so forever.
We’ve had an open, peer-to-peer, anonymous method of money transaction for thousands of years. It’s cash. Yet somehow in the 20th century bankers and governments decide that this was dangerous. No, they said. We must control all the transactions. Whenever someone swipes a credit card, we want to know. Whenever someone sends some cash to his grandma via the internet, we want to know. But whenever we start a war, build roads, bailout banks, and manage our fiscal policy? Let’s keep that information secret, eh?
If you ask me what the biggest boon this blockchain technology can bring to the world, it’s this: it takes monopoly of money away from centralized authorities and brings it into the hands of the people. People like you and me. We finally have the option to mitigate our risks against THEIR volatile monetary policies. This is how crypto will change the world.