Oftentimes in sports, the competition is so fierce that the tiniest advantage decides who's victorious.
This is why competitive swimmers shave their bodies, cyclists wear aerodynamic helmets, and jockeys max out at around 118 pounds. When you're playing in the big leagues, you can't afford to bring less than 100 % of your abilities. Playing at 95 % may very well lose you the game.
This fact about competition has me thinking about the price decline of Bitcoin over the last year.
Cryptocurrency competes with none other than fiat – the currency with all the inertia, most of the guns, and vast public indoctrination behind it. Yes, fiat's laughably inferior to Bitcoin, but it's still fierce competition to cryptocurrency for these three reasons (and more).
And many players in Bitcoin are not competing at 100 %.
The “C” Word
The Bitcoin players whose games have slipped are practicing what they call “compliance.” This 'C' word goes by a few different names. “Anti-money laundering” (AML), “know your customer” (KYC), and “combating the financing of terrorism” are among them.
Regardless of your feelings about compliance, the fact is that incorporating them requires:
That's labor, time, and money that then can't be spent on software development. Cannot be spent on marketing or educational campaigns. Can't be spent on customer acquisition.
In short, Bitcoin players who comply with these ideas are gradually sabotaging their own competitive advantage. They're like a competitive swimmer tying weights to her ankles, or a jockey wearing a backpack full of bricks.
And while talented and intelligent members of the crypto community jump through these hoops, cryptocurrency loses ground to fiat.
Burying the Best Parts
Identity-less payment is one of cryptocurrency's greater strengths and one of its primary selling points. And whaddya know, “compliance” flies directly in the face of this important selling point. Incorporation of KYC or AML ideas into Bitcoin is like imposing a 60 mile-per-hour speed limit on a Ferrari. It literally defeats the purpose, burying a clincher selling point deep into the ground.
I know – you don't want to meet the fate of Charlie Shrem. No one does.
But life is not binary in that sense. The options are not Be a KYC/AML bitch or Sit in a cage. Fortunately life is more like a quantum computer – there are more than just two possible options. Crypto entrepreneurs are adopting the following techniques to enable better competition with fiat:
- pseudonymous identity
- serverless (peer-to-peer) products
- no-knowledge customer data storage
- lack of physical officespaces
- intra-community regulation through reputation sharing
- non-documented operation
These business practices are far more suited to cryptocurrency than fiat's crushing cubicle. They preserve and enhance Bitcoin's competitive edge rather than bury it.
When in doubt, I find it most instructive to ask myself: “What Would Satoshi Do?”
What David Taught Us
The story of David and Goliath is one of history's more enduring. It tells of a small, poor boy who defeats a mighty giant in combat.
But as Malcolm Gladwell details in his book “David and Goliath: Underdogs, Misfits, & the Art of Battling Giants,” the reason David won is the true crux of the story. He won because he refused to play by Goliath's rules.
Goliath, after all, demanded hand-to-hand combat. Such rules favored his size and strength – played to his advantages. Had David complied with the assumed “rules,” he would have been killed.
But David did not comply. He competed with fiat – I mean Goliath – according to his own strengths instead. And as we know, he slayed the giant.
Bitcoin Back on Its A-Game
Cryptocurrency is an underdog. If its peddlers attempt to play by fiat's rules, they may find that they simply can't compete well enough to triumph. “Compliance” is designed to give advantage to the giant.
But should crypto peddlers reach instead for their slingshot – identity-less payments, borderless finance, near-free transfer of value, and barrier-less entry to finance's finer instruments – they just may find themselves (and the rest of humanity) the victors.
Do you agree or disagree with my hypothesis? Why? Share below.
Did you enjoy this article? You may also be interested in reading these ones:
- What the Financial Elite Say about Bitcoin
- 5 Public Figures Who Changed Their Minds about Bitcoin
- Cash Buys Charlie Hebdo Massacre, Bitcoin says Adieu aux Armes (Op-Ed)