I recently had a discussion with a strong proponent of Bitcoin.  It was a friendly discussion, but we certainly didn’t shy away from challenging each other.  I stated some of my objections to Bitcoin and asked him to respond.

I said that buying Bitcoin is not like buying stock shares in Apple (or pick any company).  When you buy stock in Apple, you are buying a small piece of that company.  You are buying a small piece of all of its assets, and you are buying the potential of future profits if you hold onto your shares.  With Bitcoin, you aren’t buying any assets or future profits.

The interesting thing is that my friend seemed to use the same arguments in favor of Bitcoin.  He believes that Bitcoin is the next big thing (or the biggest thing now) because you don’t actually own anything.  He argues that it is fully decentralized because there are no hard assets to control.

I stated that I had read an article that we shouldn’t conflate Bitcoin (or other cryptocurrencies) with the blockchain.  He basically agrees with this except for entirely different reasons.  He sees Bitcoin as the real winner and the blockchain just serving as a function for using Bitcoin.  But he doesn’t see any future for the blockchain.  I was rather taken aback by that part.

I pointed out the possibilities.  There is already a company developing blockchain technology for ticket sales to concerts, sporting events, etc.  It would be an easy way for people to buy tickets and ensure they are not being defrauded.  I didn’t like in the company’s description that it would help prevent “scalpers” because scalping tickets just means buying and selling in the open marketplace.  But the point is that a company is using this technology for real world uses, and there are likely to be many more that follow.

My friend doesn’t agree with this.  He is liberty oriented, so he is not advocating that the government not allow this.  He just doesn’t think it will work out too well in most cases because it relies on a central authority (as opposed to Bitcoin, in his view).  In other words, in the example of blockchain use for tickets, some central authority has to issue the tickets.

While he has a valid point that it initially relies on a central authority, this doesn’t make it useless.  Everything relies on a central authority initially, as it is some person or group of people implementing the idea.  Even Bitcoin originally had a creator.  Every company on earth is a central authority to some degree.  Somebody, or some group of people, has to place the orders for the computers, tablets, and smartphones that Apple will sell.

In the case of tickets, they could initially be offered by the venue hosting the event or by the event planners.  Or they could be offered through a third party such as Ticketmaster.  You could buy the ticket using blockchain technology.  You would own that ticket just as you would own a bitcoin.  And you would hopefully be free to sell that ticket to anyone, even anonymously.

On the subject of money, I said that I envision some kind of gold-backed currency that uses blockchain technology.  There are already companies doing this sort of thing.  It would be like owning bitcoins, except that the bitcoins would be backed by actual gold.

Again, my friend’s objection is that it won’t work because it relies on a central authority.  Someone would have to store the gold, and it could easily be corrupted.  I certainly accept his objection up to a point.  There is an issue of trust.

With that said, I think he is missing the wonders of competition in a free market.  While the storing of gold for a gold-backed currency would require a central figure to store the gold, it doesn’t have to be one central figure.  There is competition.  You can go to most stores and use Visa, Mastercard, American Express, and sometimes Discover.  There is competition.

The same would likely occur with gold-backed cryptocurrencies.  The companies would compete.  They would also compete for your trust.  They would make it a point to be audited and stamped with approval by a third party.  You might see the Underwriters Laboratories (UL) sign stamped on your digital currency when you pull it up on your smartphone.

The key to all of this though is that I don’t have to know how any of it will work.  I just know that liberty works.  I know that there is competition in a free market.  I know that the costs of the technology will come down.  I know that innovative people will find ways to use blockchain technology to make our lives better and our living standards higher.

I am the opposite of my friend on this subject.  He believes strongly in Bitcoin, but does not see a future for blockchain outside of cryptocurrencies.  I do not think Bitcoin will last, and it is highly unlikely to ever serve as a common form of money.  However, I do believe there is unlimited potential in the blockchain technology and that it will be incorporated into many industries and ultimately into our daily lives.  We are just getting started.