The Transformative Impact of Bitcoin

Whether you think bitcoin and other cryptocurrencies are a fad, a fraud, or the future of finance, they warrant our attention, says Tim Wu, Isidor and Seville Sulzbacher Professor of Law at Columbia Law School, whose teaching and writing focus on the internet, media, and antitrust.

Cryptocurrencies are a form of digital money that allows users to transact securely in anonymity without the need for an intermediary such as PayPal, a payments processor, or a bank. Though cryptocurrencies take varied forms (bitcoin among them), they all rely on decentralized networks of computers to validate and track transactions.

“I just find cryptocurrency fascinating,” Wu told approximately 75 students who gathered at a Sept. 26 forum sponsored by the Law School’s chapter of the Federalist Society to discuss with Wu and Jerry Brito, executive director of Coin Center, the attention cryptocurrencies have received from governments and some of the legal issues that arise.

In a roundup of that discussion, here are four reasons why Wu thinks cryptocurrencies could have a transformative impact:

They invite inventiveness

The future of money is up for grabs, which creates fields of opportunity, Wu explained during the forum. “It’s important there’s always a sense of a frontier somewhere,” he said. “In many ways, the technological frontier has become our frontier. There’s something really exciting about trying to reinvent what the basic tenets of money could be.”

In centuries past, Americans pushed across the continent and, later, invented technologies such as the radio. “Cryptocurrency has that feeling right now, with a lot of people trying to figure out what they can do,” Wu said. “There’s a sense of excitement and that stuff needs to be cleared out and reexamined. That’s a very healthy thing to have happen every once in a while.”

They promote competition

The decentralization that defines cryptocurrency has the potential to wrest control of money from governments, financial institutions, and other gatekeepers, explained Wu, who noted that cryptocurrency breaks through barriers to entry. “Between Wall Street and the financial sector, there are some pretty big fat monopoly rents being collected,” he said. “I find it refreshing that so many in finance are resistant.”

They invigorate capitalism

As Wu sees it, cryptocurrencies encourage experimentation that the economy depends on. “No one knows if cryptocurrency is going to work, but somebody needs to be taking a shot because capitalism isn’t naturally dynamic,” he noted. “It requires new and radical inventions sometimes to really stir the pot. There needs to be a time when you really let people experiment.”

They promote privacy

Cryptocurrencies run counter to the business model of the web, which “has become a giant manipulation machine,” said Wu, who chronicles in his book, The Attention Merchants: The Epic Scramble to Get Inside Our Heads, how technology companies, advertisers, and the media capture and resell our attention. “We need at least some technology that fights the other way.”

“If I were young and thinking about making my career, I might learn a little something about bitcoin,” Wu told the students. “Check it out and see.”

###

Posted on October 4, 2017