Pitfalls of Digital Currency

I’ve spoken here before about the change that’s coming as a result of what’s called blockchain technology.

This is essentially a decentralised ledger that can’t be corrupted by individuals and isn’t controlled by anyone. It’s a bit hard to comprehend but it’s made possible through computer code and thousands upon thousands of individual computers recording everything that goes on.

You could have one in your house, so could your neighbour and as long as a single node remained in operation, the entire system would remain viable.

This is the technology behind Bitcoin and other cryptocurrencies you may hear about.

It’s also the technology that has enabled smart contracts which will forever change how we do business.

Imagine buying stocks without using a broker, or a house without a conveyancer. How about getting paid every day, or every hour….it’s all possible ( and so much more).

As I said it will change almost everything.

In many industries the middle man, the paper shuffler will be removed, replaced with peer to peer or manufacturer to consumer transactions.

The most incredible changes will be in the realm of finance. Already you can borrow and lend via decentralised exchanges, with no bank. You can transfer money anywhere in the world almost instantaneously.

I’ve even enabled Bitcoin payments using blockchain technology for my daily subscriber email newsletter….and it’s proving much more popular than I expected.

Now this sort of thing fills freedom lovers with hope but governments with dread. Anything they can’t totally control, they want to resist.

But even governments understand that if you can’t beat them then you’d better join them.

That’s why they are all pushing a move to digital currencies….issued and authorised by them of course.

Not only do they see it as cheaper and more efficient than a cash economy, it also offers an opportunity for even more control (and taxes).

The Deputy Governor of the Bank of England Sir Jon Cunliffe, recently said a digital currency could be programmable citing the example of “giving your children pocket money but programming the money so that it couldn’t be used for sweets.”

Am I the only one that sees a problem here?

A government that enables parents to program what digital money can be spent on is capable of setting similar limits on the rest of us.

It’d be like ration coupons of the war years. Only this time, they’d be telling you how you can spend your own money ( for your own good of course) rather than because of shortages.

Imagine such a power in the hands of the woke wowsers who seem to loathe the stuff many of us enjoy.

Of course government will promise that no such thing would ever happen but then they said your Covid check-in QR code data would never be shared ( until they did)…they also told us your health data was safe… until they sold it to data analysis agencies.

It’s even worse overseas.

The Obama administration used tax data to pursue their political enemies and we know how cancel culture works when big tech joins big government to target their declared enemies.

It’s something we should all be worried about.

And therein lies a challenge with government’s move into control of this space.

They will be able to track everything you receive and spend. They will be able to determine how you spend your money and every transaction is recorded for ever…on the blockchain ledger.

Maybe someone pays you with some ill gotten gains. Does that mean the government can take that money back from you, maybe years after the event?  It could be traced through multiple hands over many years….would they all lose out?

These are big questions and obviously governments cannot be trusted to answer them. That’s why so many people are becoming attracted to the non-government financial system, offered by Bitcoin (and other) crypto currencies.

A recent survey showed that 1 in 5 millennials, those aged between 25 and 40,  owned Bitcoin or another digital currencies. And Australia’s best performing investment funds are in the digital currency space with returns

It’s still a nascent field but it is the future.

As such, we need to understand it, embrace it while being wary of the potential pitfalls.