Billitteri, Tom

LSE Research Online

Bitcoin	may	not	last,	but	blockchain	could	be	the	realdealEconomist	Nouriel	Roubini,	aka	Dr.	Doom	since	he	predicted	the	2008	financial	crisis,	called	it	“the	mother	of	allbubbles.”	The	head	of	the	Royal	Bank	of	Scotland,	Sir	Howard	Davies,	invoked	Dante’s	Inferno	to	warn	investors	offit.	JPMorgan	Chase	CEO	Jamie	Dimon	flat-out	called	it	a	“fraud”	–	at	least	initially.The	target	of	this	opprobrium	was	bitcoin,	the	oldest	and	most	popular	of	the	more	than	1,300	so-calledcryptocurrencies	that	were	created	to	provide	a	globally	accepted	means	of	payment	that	is	anonymous,	untraceableand	outside	the	purview	of	governments	and	banks.	Given	bitcoin’s	anti-establishment	roots,	it’s	no	surprise	that	thefinancial	elite	don’t	much	like	it.	But	the	more	threatened	bankers	have	felt,	writes	SAGE	Business	Researcherfreelance	correspondent	Pat	Wechsler	in	her	new	report,	the	more	bitcoin	devotees	have	basked	in	its	success.Certainly,	2017	was	bitcoin’s	coming-out	party,	as	it	soared	from	$1,000	at	the	start	of	the	year	to	top	out	at$19,783.21	on	Dec.	17.	The	cheers	subsided	just	one	month	later,	after	it	lost	40	percent	of	its	value.	And	bitcoin’srise	has	spawned	a	bevy	of	cryptocurrency	imitators,	many	of	them	on	their	own	thrill	rides.Bitcoin’s	roller	coaster	performance	illustrates	how	volatile	and	vulnerable	to	market	manipulation	unregulated,closely	held	commodities	can	be,	Wechsler	writes.	Relatively	few	people	own	bitcoin:	40	per	cent	of	the	global	supplyis	in	the	hands	of	a	mere	1,000	investors.	On	top	of	that,	the	writer	notes,	the	promise	of	anonymity	attracts	somerather	unsavoury	characters	–	drug	and	arms	dealers,	blackmailers,	terrorists	–	who	might	not	be	the	most	ethical	oftraders.If	all	this	makes	you	nervous,	it	probably	should.	Even	the	creator	of	bitcoin	competitor	Ethereum,	Vitalik	Buterin,warned	his	Twitter	followers	in	February	about	the	uncertainties:	“Reminder:	Cryptocurrencies	are	still	a	new	andhyper-volatile	asset	class,	and	could	drop	to	near-zero	at	any	time.”So	why	are	some	rather	serious	people	taking	a	long	look	at	bitcoin	and	its	imitators?	A	large	part	of	the	fascinationis	based	on	the	so-called	blockchain	technology	that	underlies	bitcoin.	The	blockchain	is	a	public	digital	ledger	run	ona	computer	algorithm	that	monitors	and	reconciles	all	bitcoin	transactions	and	protects	the	network	from	hackers	byvirtue	of	its	transparency.	The	technology	allows	bitcoin	to	remain	free	of	government	regulators,	central	banks	andbig	financial	institutions.	“Cryptocurrencies	place	their	trust	in	code,	not	in	God,	and	certainly	not	in	the	state,”Wechsler	writes.LSE Business Review: Bitcoin may not last, but blockchain could be the real deal Page 1 of 2		Date originally posted: 2018-03-19Permalink: http://blogs.lse.ac.uk/businessreview/2018/03/19/bitcoin-may-not-last-but-blockchain-could-be-the-real-deal/Blog homepage: http://blogs.lse.ac.uk/businessreview/This	goes	a	long	way	toward	explaining	the	institutional	hostility,	according	to	Marc-David	Seidel,	a	professor	ofentrepreneurship	at	the	University	of	British	Columbia.	In	a	report	for	the	World	Economic	Forum,	Seidel	wrote	thatblockchain	“can	distribute	power	away	from	centralized	institutions	to	those	that	traditionally	have	less	power.	…Institutions	do	not	let	go	of	their	influence	easily.”At	the	same	time,	the	potential	power	of	blockchain	makes	it	highly	attractive	to	some	of	those	same	institutionalforces.	The	Bank	of	Canada	has	created	a	project,	complete	with	a	cryptic	codename	(“Jasper”),	to	examineblockchain’s	uses.	The	bank’s	governor,	Stephen	Poloz,	called	blockchain	technology	“a	true	piece	of	genius.”Robert	Shiller,	who	won	the	Nobel	Prize	for	economics	in	2013,	told	this	year’s	Davos	conference	that	he	wasimpressed	with	bitcoin’s	technology,	if	not	the	currency	itself.	Some	experts	even	view	blockchain	as	a	skeletaloutline	for	a	new	internet,	one	less	vulnerable	to	hacking.And	that	sky-high	potential	has	led	to	some	rethinking:	In	January,	even	JPMorgan’s	Dimon	expressed	regret	overhis	fraud	comment	and	said	that	while	he	still	isn’t	a	fan	of	bitcoin,	his	own	bank	was	investigating	the	uses	ofblockchain.	It	isn’t	alone,	with	industries	from	health	care	to	transportation	looking	for	ways	to	incorporate	it.That	bifurcated	view	may	foreshadow	how	things	play	out	in	the	end,	Wechsler	writes:	“Bitcoin	may	turn	out	to	be	theNetscape	of	cryptocurrency:	an	adventurous	pioneer	that	changed	the	landscape	but	then	lost	momentum	to	faster-reacting	and	innovative	competitors.	…	There	is	no	guarantee	it	will	be	around	to	witness	all	of	the	commercial	andindustrial	disruption	its	technology	is	apt	to	spawn.”Notes:This	blog	post	is	based	on	the	report	Bitcoin,	on	SAGE	Business	Researcher,	by	Pat	Wechsler.The	post	gives	the	views	of	its	authors,	not	the	position	of	LSE	Business	Review	or	the	London	School	ofEconomics.Featured	image	credit:	Blockchain,	by	geralt	,	under	a	CC0	licenceWhen	you	leave	a	comment,	you’re	agreeing	to	our	Comment	Policy.Tom	Billitteri	is	executive	editor	for	SAGE	Business	Researcher,	which	delivers	deep	dives	oncontemporary	business	issues	to	students	and	faculty	three	times	a	month.	He	has	more	than	fourdecades	of	experience	covering	business,	economics,	tax	law	and	other	issues	for	news	outlets	in	theUnited	States.		LSE Business Review: Bitcoin may not last, but blockchain could be the real deal Page 2 of 2		Date originally posted: 2018-03-19Permalink: http://blogs.lse.ac.uk/businessreview/2018/03/19/bitcoin-may-not-last-but-blockchain-could-be-the-real-deal/Blog homepage: http://blogs.lse.ac.uk/businessreview/

Bitcoin may not last, but blockchain could be the real deal

http://eprints.lse.ac.uk/88971/1/businessreview-2018-03-19-bitcoin-may-not-last-but-blockchain-could.pdf

Bitcoin may not last, but blockchain could be the real deal

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