As Bitcoin becomes more and more popular throughout our digital world, many questions arise as of the importance of cryptocurrencies and their economic and legal aspects Moreover, the anonymous nature of cryptocurrency transactions makes them well-suited for a host of nefarious activities such as money laundering and tax evasion. So are cryptocurrencies the most serious threat of traditional monetary system?
There are possibly more myths surrounding the cryptocurrencies landscape than realities. Long story short, no, they should not be considered a threat as such. Although I believe crypto protocols will become embedded in near future payments systems, as testified by the sizeable entrepreneurial investment in bitcoin infrastructure.
Cryptocurrencies introduce a peer-to-peer approach in very much the same way that Napster did for music. However, I do not think the impact will be as critical as it has been following the 'Napsteristation' movement. Bitcoin is more than anything a platform of exchange while the underlying tokens (Bitcoin units - BTC) have no intrinsic meaning as store-of-value. It is a convention that can be dissolved as easily as it has been created, precisely because of its 'democratic' nature and the absence of authoritative representation. Bitcoin sells on anonymity and decentralisation but the economics of monetary exchange systems tells us that, in order to maintain the BTC integrity, the system will have to become increasingly centralised and, hence, less anonymous.
I'm afraid that if you think BTC (and similar blockchain protocols) offer anonymity, you are fundamentally mistaken. They are inherently decentralized; the concept of centralizing blockchain protocols is an oxymoron...
As for the original question, I guess the answer depends on what you consider to be the "world monetary system". Blockchain protocols do indeed obviate the need for some financial structures, but not all - for instance, exchanges and custodial accounts.
I am afraid there is increasing misunderstanding as to centralisation of the protocol vs. centralisation of the exchange system and, as a result, false focus: BTC sells on anonymity (i..e this does not mean it ensures it) and, in fact, it does not provide anonymity. What is often ignored is that the pertinent question is the question of nodes control. The economics of cryptocurrency networks have it that, for efficient mining to happen from now on, control will have to become centralised (not the protocol). That will have to come in exchange for security if the system is to survive. Bitcoin mining is an expensive business that cannot be justified by expected token appreciation alone.
That's like saying that sports cars sell sex and don't provide it. It's trivially true, but also irrelevant. BTC is attractive because it disintermediates payment, and that is profoundly empowering. Doesn't everyone hate their bank?
You expect BTC to fail (due to attacks like 51%), but you miss the real point: BTC isn't the only way public blockchains can work. Yes, there must be a protocol for choosing the correct ledger-history, but not the particulars of the current crypto-coin ecosystem. I can't imagine how you'd prove that centralization is somehow necessary or inevitable.
Amusing as they may be, vernacular examples do not always make a good point. The thinking you promote ignores perception and I am afraid economics is all about perception. BTC is attractive for many reasons and the perceived anonymity is one of them (think also what are the reasons you really hate your bank?)
I expect BTC in its present guise not to be sustainable; I do not expect it to fail due to the widely discussed vulnerabilities; there is fundamental difference between the two. Again, the economics and self-interest of nodes tells us that. The issue is not one to be resolved through protocol adjustments, as you possibly wish to propose, but one that should draw the attention of behavioural economists as well. Centralisation of control (I repeat, not in the protocol but in the exchange mechanism and process) and vetting will possibly become essential for survival of an otherwise expensive-to-run system.
The monetary system will go through an over haul... sooner than we think! I am currently engaged in a project related to bitcoin in my upcoming chapter "bitcoin and the world of digital currencies", more can be found in the link below:
https://www.researchgate.net/projec...and-the-World-of-Digital-Currencies
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