Revolution is not Bitcoin but Blockchain, replacing double entry Bookkeeping and Banks.
The reason why digital fiat currency (DFC) is making capitalism obsolescent is that there is no need for loans, debts, interest or capital repayment, hence no need for banks, in the system. Money creation and spending is done by a central bank that, if the country is democratic and interested in equality, fraternity, justice and freedom, is decentralised to the smallest unit of citizen in his or her Gram Sabha (village council). This is made possible by the blockchain digital accounting technology, also known as distributed ledger technology. The economist magazine called distributed ledger technology “the trust machine”. Because the way the currency is encrypted, provided you are literate and have electricity, you can make your financial transactions happen in real time yourself, doing away with things like NEFT, SWIFT, and generally commercial and nationalised banks and non-banking payment intermediaries. Thus for example the local government can create for itself and for those of its members who are not literate and don’t have electricity, enough money in the national currency to spend on its own education, health, agricultural production and forest regeneration without having to wait for so-called “funding”. Within a few years everyone will be literate and productive and trading with each other. All the inequality of capitalism is overcome thanks to the new form of accounting in which double entry bookkeeping is replaced with distributed digital ledgers. Coin and paper note production and the transactions should also be decentralised to the village level and entered by the village accountant into the distributed ledger system. By using blockchain the central bank has much closer control over the money supply. One could even hope that it is a harbinger of peace, as nations have no need to control markets or money or territory. Everyone just does what they need to do to adapt to global warming and the sixth biodiversity extinction and revive ecology as best we can, through cooperation in communications and self-owned and issued currency. Now all we need to do is root out violent tendencies in individuals: surely these will come down if there is enough money and work and purpose in life facilitated by money for all.
It is not a question of if but when all central banks do this, David Yermack, finance professor in New York, said in his video interview on Sept 21 2017. (1) The real value of bitcoin, which all together is only worth USD 100 billion and has no linkage to the USD 76 trillion capital markets of the world, is the technology behind it. The Central Bank of China and the Reserve Bank of India have no interest in bitcoin and do not consider it legal. Once regulators get round to it these bitcoin type currencies will probably either be regulated or become obsolescent or integrated into the mainstream once the central banks have all issued their digital fiat currencies, which is expected to happen in the next 10 years. Thus bitcoin is of historical importance in bringing the technology to the mainstream but not as a currency itself. The innovation is blockchain. Corporations like Microsoft and Walmart are managing their supply chains and logistics and trades across borders in blockchain. Banks are doing their bank-to-bank transactions using it. Banks are reacting from a defensive posture, because blockchain is a technology that cuts out the middleman. Already now international remittances can be done with Ripple, bypassing SWIFT. In the concluding statement Yermack says that the biggest change will be that once the central banks issue digital currency you won’t have banks engaging in fractional reserve banking any more. The paycheck or national universal income would not be deposited into XYZ bank but it would go into an account at the central bank. Everyone would just bank with the central bank. The point of interaction with the financial system would be just through one giant blockchain managed by the central bank through the sms system on the mobile phone. He concludes that this would not necessarily be a bad thing, these banks all failed multiple times and central banks at present have had no control over private and nationalised banks and their private money creation choices. Now with blockchain or a similar distributed ledger technology all money is central bank money. Banks and brokerages are going to become unnecessary because there will be mainly peer-to-peer interaction.
Blockchain was first proposed as a new kind of database for recording intellectual property rights in 1991. Then in 2009 Satoshi Yakamoto proposed it for a currency. There are now 1100 currencies using blockchain or digital distributed ledgers of their own. In 2016 60 central banks met to discuss using the technology to add digital fiat currency to coins and paper notes as the third form of sovereign currency. Once double entry bookkeeping is obsolete and democratic transparent blockchain or distributed ledger booking keeping takes its place private and nationalised capitalist monopolies loose their monopoly over money.
It is of course an enormous pity to put it mildly that the BJP was so cruel as to experiment on the poor, illiterate and cash dependent public by withdrawing certain paper notes in 2016. Let us hope that a unity government in 2019 is caring and loving in its use of distributed ledger technology to support the citizens and residents, not punish them, and that it has a vision for coins and notes also, as part of a new socialist money system of which e-Rupees will be one revolutionary part but where cash and paper notes are used until there is 100 percent literacy and electrical connectivity in the country and also beyond.
- The innovation of blockchain, 21 September 2017: https://www.youtube.com/watch?v=kqD8T4aXBIk