Bitcoin: Between Government and Competition

What bitcoin needs to keep thriving and what it doesn't
February 10, 2018 Updated: February 10, 2018

During communist times in some Western countries and in China’s communist regime today, atheist governments supported churches financially. This initially seems contradictory. That is only because we have a skewed understanding of what help is.

Aid from government tends to be damaging in the long run. What government funds, government can control. In those countries, the different churches became beholden to their atheist government. 

Bitcoin should not fall into that trap and so far only entities close to the government like banks have gotten involved in various blockchain ventures but have largely kept bitcoin untouched.

In the church analogy, an entity that takes its orders from something bigger than the state, and making that church suddenly beg to the state for money, knocked the church down a notch. It confused spiritual doctrine by making the church officials bow to the state.

So far in the bitcoin world, governments have not offered to fund different bitcoin ventures with money and instead only slowed down progress with regulation.

Epoch Times PhotoThe fact that government hasn’t supported bitcoin with subsidies is good news as long-term government aid causes dependency. The churches in communist countries that could formerly thrive when run by voluntary contributions from their members could later survive by getting financial help from the government. Parishioners slowly began to realize that their monetary contributions were not so important.

After all, the state was paying the pastor’s salary and for the upkeep of the building. When you privately financially support an activity, you feel more connected to it. You take it a bit more seriously. 

But government paying for a church has the net effect of weakening that church. It may feel like a favor initially, but government support is the exact opposite.

The last thing any advocate of an organization should want should be help from the government. No matter how the aid is packaged, help from the government should always be denied.

And so far the governments of the world have chosen to regulate bitcoin rather than help it along, some creating more favorable and free regulatory environments and some creating more stringent ones.

Unintended Consequences

Government assistance also comes with unintended consequences. No matter how much anyone in government intends to do good, the very mechanism of how government functions will often cause the opposite to happen.

Government is incapable of touching the decentralized bitcoin at its core but it has managed to obstruct progress by squashing competition with the New York Bitlicense for example and limited growth as a payment network through punitive tax laws.

However, aside from regulation, things will get worse if the bitcoin community voluntarily accepts help from the government. Any governmental involvement will slow innovation, reduce the contact between consumer and entrepreneur, reduce competition, and depending on how close government gets in its attempt to help bitcoin—may create more significant problems that would not be immediately apparent.

Government is generally incapable, at this stage, of harming the long-term success of the bitcoin protocol and the many functions built on top of it, especially since there is also competition among global governments to provide a more beneficial regulatory framework.

If one wants to look at it from the perspective of government or bitcoin being in the lead, then it appears the bitcoin community has the upper hand. By the very nature of bitcoin, government is currently at arm’s length, which is exactly where government should be kept.

Competition Is Good, Even for Banks

Competition is great for consumers and for innovation. Many entrepreneurs consider it to be a great thing because it pushes them to achieve their best—creating a far better version of their product than they would have any other way.

So when established companies and banks are competing in the blockchain space it should be considered good news. These projects are usually lacking in innovation. So far, we haven’t seen anything remotely commercially viable, but I’m excited to see consumers have an opportunity to flock to or avoid such products.

Experience shows, however, that many large, established companies are poor at innovating. 

They are used to a non-competitive markets created by government regulation with high barriers to entry.

Many companies have business models that show greater comfort for pushing investment toward lobbying rather than research and development. It’s laughable to imagine any technology from a company like that competing with bitcoin, let alone supplanting it.

Bitcoin offers something that a centralized entity cannot currently match. It is the door to the future of never having to rely on centralized trust. However, many industries produce products that are well-marketed, popular, and seen as total garbage by the industry insiders.

But I look forward to seeing the market decide what the financial future will look like and what role bitcoin and other cryptographic protocols play in that future.

Allan Stevo is a libertarian thinker and author of “The Bitcoin Manifesto.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

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Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.