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TEXAS STATE UNIVERSITY
Cryptocurrency and blockchains may be elusive concepts to some, but experts explained what they are and their worldwide implications in an easily-digestible discussion at the inaugural lecture of Ideas and Tools to Create Impact — a three-year project by Louie Dean Valencia, Texas State University Digital History associate professor, that aims to invite notable speakers whose work impacts the world and addresses digital currencies, AI, the environment and democracy. The initial event titled Bitcoin, China and Authoritarianism featured Grant McCarty, Bitcoin Policy Institute cofounder and codirector, and Yifan Liu, TXST Finance and Economics assistant professor, and was moderated by Valencia. The Bitcoin Policy Institute is a nonpartisan body of experts researching the intersection of cryptocurrency, U.S. public policy interests, technology, financial inclusion, energy and the future of money.
According to investopedia, Bitcoin is a virtual currency designed to act as money and a form of payment outside the control of any one person, group or entity. The benefit to this is that it removes the need for trusted third-party involvement, such as a mint or bank, in financial transactions.
McCarty said since Bitcoin is relatively new, 15 years old, it makes sense that it is volatile with an item being worth 60,000 Bitcoin one day and 50 the next. He added that the largest financial institutions in the world are increasingly defending Bitcoin’s worth, and it has over a trillion dollar market cap, which would make it the fifth largest currency in the world if it were recognized as one.
He made the comparison of the internet 15 years in versus 30 years in which its capabilities have vastly increased.
“Bitcoin is an asset, but also Bitcoin is a protocol. … A protocol is a shared language that computer coders agree to use. Basically, when everybody agrees to use a shared language, everybody can build stuff on top of that language,” McCarty said. “Basically what a shared protocol for the language of money on the internet, like Bitcoin, can do — without getting too technical — is we can actually change the fundamental paradigm of how the internet works and create decentralized identity where every time you go to a website — rather than signing over every piece of your data to every individual company — you can be the owner of your data.
“So if your data gets leaked, you can get compensated for it.”
Liu brought up the technology called Blockchain that powers Bitcoin. Blockchain is an encryption system in which the history cannot be changed. Once something is put onto the Blockchain, the receipts of that are visible forever. Liu said he felt the Blockchain could be used to restore confidence in the U.S. voting system because a vote cast could never be changed.
McCarty brought up other uses for the Blockchain. He pointed to the internet and the fact that links made before 2010 are very difficult to find and how photos stored on your iphone often need to be loaded due to the fact that they are currently being saved on the cloud, which is just a server.
“A server is literally just a box in some big data center. And … if that one server goes down that video will be gone forever,” McCarty said, adding that if the server where a website link or a video from a phone is being stored is destroyed, that information will be lost forever. “This is not a thing that happens in theory. This is already happening. So why is the Blockchain powerful? It’s because it codifies this, and it puts it on a database that can’t be edited or changed over time.
“Around half of all websites on the internet take place on Amazon web servers, so a single website controls essentially half the internet. And if their data centers go down, the internet goes down.”
McCarty said he would argue that Bitcoin is the most “secure computer network that we currently have today” because of its decentralization.
“Basically, when there’s hundreds of thousands of these different servers going on around the world — if one of them drops off, the network still runs,” McCarty said. “If 10 of them drops off, the network still runs. If 10,000 of them drop off, the network still runs.”
McCarty said a big misconception about Bitcoin is that it has found no product market fit or has no real use other than speculation.
“What we found through our work that’s really fascinating is, ultimately, Bitcoin has found its highest rates of adoption in countries that are facing high rates of inflation and … that are more authoritarian,” McCarty said, adding that with countries with high rates of inflation where the money is likely to go down by a large percentage, buying U.S. dollars — a stable form of currency — can be an option. “Can’t get access to US dollars? Well, maybe you look at something like Bitcoin, which is this highly liquid market that anybody around the world can buy if you have internet access or a phone. You may go, ‘Hey, Bitcoin is kind of volatile.’ But at a certain point, volatility is relative. And if you know your currency is guaranteed to go down 20%, you might be more willing to take a risk on this speculative currency that maybe it goes down but also maybe it goes up.”
Bitcoin’s popularity in authoritarian countries has to do with the government’s interference with the flow of commerce.
“What we’ve seen around the world [is that] authoritarian regimes will cut off financial rails for people who are fighting for democracy, people who are part of pro-feminist movements, people who are really doing anything that is speaking out against a current regime,” McCarty said. “[Bitcoin has] fully decentralized technology. No single person controls it. You can’t be de-banked on Bitcoin. You can be debanked by your bank if your dictator says, ‘Get this person’s bank account out of there.’ So a lot of people — human rights activists, people fighting for democracy — flock to Bitcoin because it allows them to ultimately retain their freedom of speech, their freedom of assembly in countries where that is not a given right.”
Learn more about the Bitcoin Policy Institute and its research at btcpolicy. org.
