Douglas Carswell

31 OCT 2015

Blockchains will be big - and make government small

Who do you trust? Politicians? Bankers? Government bureaucrats? Police chiefs? Or, none of the above?

Bitcoin – the digital currency – hit a new high this week. At first glance, it may seem surprising that so many people are willing to invest in a piece of digital code. But there is one very good reason why: they trust it.

As the Economist explains, the remarkable thing about Bitcoin is not the currency itself but the blockchain technology behind it. Blockchain is a public database of transactions which every user can view but no single user controls. One information has been entered in the blockchain, it can never be erased.

Unlike with fiat money, there is no one person or authority in charge of Bitcoin. No central bank can debase Bitcoin at will by printing more. No creative accountant can falsify the books. No government authority needs to supervise it.

Blockchains allow us to have self-organising systems, with no central control.  And no risk of central authority gaming things for its own advantage.  Bad new for politicians and parasites.  Good news for everyone else.

Bitcoin allows people who don't trust banks, the government, or even each other to trade without fear of being ripped off. No wonder the price is rising: the more people lose faith in mainstream institutions, the more sought after Bitcoin will be.

What Bitcoin highlights is how the ruling elite have systematically undermined public confidence in the economy in their efforts to promote it. Bailing out the banks and guaranteeing deposits was meant to shore up confidence; yet all it has achieved is to paper over the cracks of an overleveraged, dysfunctional banking system, and throw good money after bad.

The Political Establishment may not understand this, but people don't trust what they know is dishonest. Propping up systemic malinvestment to try to avoid a correction, and manipulating the price of capital to create the illusion of growth has only intensified the danger of a serious crisis, and made people rightly cautious to trade and invest.

Bitcoin shows the alternative: the way to build economic trust is to keep government out of it.

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