To buy or not to buy isn’t really the question. The real question is, is bitcoin for us? Mark Hattersley argues that seeing bitcoin as an investment is ultimately short-sighted when it’s a potentially life-changing invention for some.
At the time of writing this, one bitcoin is worth more than $24,500, having recovered from a weekend ‘dip’ in price to only $18,000.
Seven years ago, the same amount was worth 10 cents. Two years ago, $400. This time last year, $930. Which brings us to today, where one virtual coin that doesn’t physically exist can buy you a brand-new car, a wedding or about 40 pairs of Yeezys.
As expected, the world has woken up to the potential of making a lot of money by buying bitcoin today and selling it for a lot more money tomorrow. The average person is now slammed every time they go online with ads and articles promising untold riches from a little bitcoin buying. They then turn on the news to see Grant Spencer, the acting governor of the Reserve Bank of New Zealand, telling TVNZ that bitcoin is a bubble.
They can’t both be right, but they can both be wrong. So here’s something we’re not really hearing: bitcoin is not necessarily for us.
What bitcoin is, however, is scarce, borderless, transparent, permissionless, incorruptible and performing better than any global currency while remaining less volatile than some others. For these reasons, it’s making bigger waves in the so-called ‘third world’ than it is in Aotearoa.
Take for instance Zimbabwe, where many of these currency characteristics are – one can imagine – life-saving.
The country that recently saw Robert Mugabe forcibly resign after 27 years at the helm is struggling with a shortage of currency, brought about by a severe lack of people wanting to trade with or bring their money to the African nation. It’s led to a run on the banks and a huge, recent uptake of bitcoin ownership in the country, according to a prominent online trading company in Africa called Golix.
In countries like this, even the much trumpeted negative sides of bitcoin aren’t too off-putting. Ask a Zimbabwean if they’re worried about the volatility of bitcoin and they’ll tell you that between the country’s independence in 1980 to 2008, Mugabe’s corruption had inflated the Zimbabwean dollar by 79,600,000,000%.
In contrast, bitcoin is considered incorruptible since the transactions are verified by a hive of computers and stored in the blockchain. While corruption is no doubt an inescapable problem throughout the world, anything incorruptible is sure to be of greater influence in Somalia, South Sudan, Syria or anywhere else that ranks poorly in the Corruption Perceptions Index. New Zealand, not incidentally, is the least corrupt country in the world along with Denmark.
In New Zealand, the idea of paying for something with a digital currency still seems a long way off. Yet developing countries are already well versed in doing so. In Kenya, a system called M-Pesa has long allowed locals to buy and sell things by transferring text and minutes from their mobile phones. Bitcoin isn’t a stretch of the imagination at all.
Digital currencies are also ideal for those who need to transfer money overseas. In places like Venezuela where some two million of the nation’s 30 million citizens have left to find better opportunities abroad, being able to send money back to family members is crucial as it is common. Bitcoin allows that to happen instantly and without intermediaries taking a cut. When there’s a severe lack of foreign currency in the country, it potentially couldn’t happen otherwise.
And when these people leave their countries, it’s safer to carry bitcoin than it is cash or precious metals, particularly in dangerous regions. All the user needs is a crypto-currency wallet, not a bank account or a rucksack. Should that wallet be compromised, it’s recoverable with a 12-word phrase.
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Should that user be fleeing their home, as a reported 11 million people have been forced to do in Syria since the war began, a digital wallet is easier to escape with than gold, heirlooms or a pillowcase full of cash. At the very least, this gives people a chance to survive after they’ve escaped with their lives.
To put this in context, seeing bitcoin as an investment seems short-sighted when it’s a potentially life-changing invention for some. Seeing it as a way to make a quick buck misses everything that’s good about crypto-currency. To buy or not to buy simply isn’t the question.
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The Spinoff’s business section is enabled by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.