The futurist: Establishing the Central Bank of Bitcoin
(Editor's note: This is the first of two parts.)
The year is 2024. It seemed like a piece of nostalgia to open a new bank account and get a free toaster, but this wasn’t any ordinary toaster, and it certainly wasn’t any ordinary bank. The new Internet of Things Toaster was one of the coolest gadgets of all times, and the Global Bank of Bitcoin was a charter member of Bitcoin’s new Central Bank based in Luxembourg.
Having launched as a Kickstarter project in 2022, raising millions in the process, this kitchen appliance elevated toast to the level of a new communal food with a designer flair. Old-fashioned bread could have 3D-printed toasted-inlays ranging from jams and spreads, to vitamins and dietary additives, to sweeteners and energy laces.
But what people found most magical was its ability to have animated hi-res images print-toasted onto the surface and brought to life through the use of edible electro-jellies. This next-gen food-tech had given rise to a myriad of party games, where “players told stories about the animated scenes and “toasted” the other participants by eating the face of their favorite protagonist, one bite at a time, until both the story and the food were totally consumed.
For this new crypto-bank, it was the perfect crypto-gadget to draw attention to their crypto-currency. Similar to traditional banks, accountholders could apply for home mortgages, car loans, and establish retirement accounts. But unlike today’s highly monitored, highly regulated banking world, the Central Bank of Bitcoin’s charter was to be more of an anti-central bank, serving as a pass-through shell without taking ownership of the currency, but rigorously guarding the anonymity of the accounts and transactions, as well as the integrity of the networks, at the same time, adding a systems layer to promote wider scale adoption.
Even the super-libertarian backers of cryptocurrencies had begun to realize the limitations of operating without a support structure, and in its absence a myriad of proprietary technologies, destructive thinking, and bad actors had begun rearing their ugly heads.
While the original purpose of Bitcoin was to build a counterculture currency and transaction network free from the intrusion and prying eyes of big government, its role has begun to evolve into more of a checks-and-balance system to offset abuses by the worlds existing banking system.
Here’s why creating a Central Bank for Bitcoin may be the next logical step.
Crypto Currencies Today
The first cryptocurrency, Bitcoin, was created in 2009 by a mysterious developer using the pseudo-name Satoshi Nakamoto. In 2010, the secretive Satoshi handed the reigns of Bitcoin over to Gavin Andresen, a like-minded developer who now manages the operation along with a team of five senior developers.
Less than a third of the original Satoshi code still exists. The rest has been rewritten by Gavin and his team to plug security holes, improve usability, and make it operationally more efficient. Andresen is the one who conceived of the nonprofit Bitcoin Foundation established in 2013—which is the closest thing to a central authority in the world of Bitcoin.
While we hear a lot about Bitcoin there are many other cryptocurrencies entering the startup arena.
Last week a total of 26 new crypto-currencies were added to the public lexicon with names like Nimbus, Vaultcoin, Darkfox, DeafDollars, and QuietCoin all screaming to be heard above the frothy growing pains of this newbie environment. With Bitcoin’s original source code now open to the public, the number of new cryptocurrencies that have entered the marketplace is over 1,000, averaging well over a dozen new players every week.
Even though most will make little more than a blip on the currency world’s radar screen, a full 27 crypto-coins have cap rates of over $1 million, with Bitcoin far outpacing the rest of the pack with a valuation of over $6.4 billion.
Rounding out the top 10 are Bitcoin, Ripple, Litecoin, NXT, BitShares X, Peercoin, Darkcoin, Dogecoin, NameCoin and MaidSafeCoin.
Tenuous Legal Status
Cryptocurrencies are legal in all countries except Iceland, due primarily to Iceland’s freeze on foreign exchange. In Feb 2014, a cryptocurrency called Auroracoin was launched in Iceland as an alternative to Bitcoin and the Icelandic króna, but so far is exhibiting all the telltale signs of being a complete failure.
Controversy over the misuse of cryptocurrency has also led to restrictions in certain countries. As an example, regulators in China banned the handling of Bitcoins by financial institutions during an extremely fast adoption period in early 2014. In Russia, even though cryptocurrencies are perfectly legal, it is illegal to actually purchase goods with any currency other than the Russian ruble.
On August 6, 2014, the UK announced its Treasury had been commissioned to do a study of cryptocurrencies, and what role, if any, they can and will play in the UK economy. The study will also decide on whether they should be regulated.
With the UK and others on the verge of issuing some kind of regulation, the primary tool to avoid piecemeal laws and directives will be to develop a Central Bank to serve as the interface for each nation’s watchdogs.