Izabella Kaminska: Crypto-currencies are mirroring pre-crash banking systems


By Izabella Kaminska
Financial Times, London
Tuesday, August 1, 2017

When bitcoin, the crypto currency, first arrived on the scene in 2009 it sold itself on a simple principle.

Unlike central bank money, the supply of which could be expanded on the whim of a non-democratically elected committee, bitcoin's supply would remain capped at 21 million coins at any cost. This would be effected by way of a decentralised protocol, making it theoretically impossible for any single authority to override or control it.

This, ultimately, was bitcoin's promise to the world: a currency manufactured and supported by the users for the users, which no single entity could manipulate, and which no third party was required to intermediate. Understandably the pledge appealed most to those who might describe themselves as hard-money enthusiasts. Their view was that uncontrolled money creation was the probable cause of most economic instability in the world and must therefore be constrained. Bitcoin offered them the perfect conduit for this vision.

More than eight years after bitcoin's arrival, most of these principles have fallen by the wayside. Bitcoin spawned a litany of copycat systems -- each with its own profiteering opportunity for early adopters. It no longer matters, for example, that the system is being engulfed by rogue and untethered private-money creation. Nor does it seem to matter that it's been a long time since bitcoin could be honestly described as a decentralised system, free of intermediaries.

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