All innovation begins as merely an idea. Ideas are transmitted through written and verbal communication. Each recipient interprets the idea to fit their view of the world. When a recipient transfers an idea to another individual, it’s never 100% like the original — it always has a spin or a filter. This is not intentional. It is human nature.
The idea behind public blockchains was first articulated at scale by Satoshi Nakamoto in the Bitcoin whitepaper. Satoshi created the Bitcoin protocol due to a loss of faith in centralized entities to secure and maintain the purchasing power of money. The use case: you should have the ability to save and create capital in an open, permissionless, censorship-resistant manner. A digital instrument that cannot be debased by any individual or group. A digital instrument that requires no permission to access. A digital instrument that is completely transparent.
Like all ideas, this one has been transmitted across society — interpreted, amended, and in some cases corrupted. Recent events are an example of what happens when an idea is amended in an effort to improve it, yet produces the opposite of its intended outcome.
The parties involved in recent events are not decentralized public blockchains. They are simply centralized financial institutions — very similar in many ways to traditional brokerage and banking business models. Recent events are strikingly like historical financial failures: banking crises that freeze customer funds, currency crises that collapse the purchasing power of citizens. The difference is that historical financial failures occurred in a regulated environment. Recent events occurred in an unregulated one. The human behavior is the same — leverage is taken against poor collateral to make risky bets, which fail, which causes the institution to collapse and freeze customer funds.
Recent events are antithetical to the idea that inspired Satoshi Nakamoto to write the Bitcoin whitepaper.
However, these events are teachable moments. Don’t put your value in currencies controlled by human beings. Be skeptical of having to trust institutions and custodians. Both lessons are the ideas that inspired the creation of the Bitcoin protocol.
Recent events will undoubtedly have negative implications for near-term capital investment and user adoption. However, they do not change the essence of the idea — and they will not halt the developers and investors willing to dedicate their careers to innovating on the underlying architecture. There are already amendments to Satoshi’s innovation that have staying power: NFTs, stablecoins, digitally native payment rails. The world is yet to truly appreciate the value of the idea underpinning the Bitcoin protocol. Over a long enough time horizon, I believe there will be more improvements to Satoshi’s idea that create value than those that destroy it.
Satoshi’s original idea may very well be the best of all of them. Only time will tell.