Bitcoin and Central Bank Digital Currencies – The case of utilizing the trend
T.M.E. 12.12.2021
The story of the times long-lost
Imagine you are a United States citizen and just your father and grandfather before him, can exchange the banknotes emitted by the Federal Reserve into the gold at any moment you like if you are gradually losing trust in the government or the state. The freedom you feel and have over your own money is something that most people value.
However, there comes the year 1971 when you hear the 37th president of the United States, Richard Nixon, instructs the US citizens about the new law according to which, you will not be able to convert your dollars into gold on a fixed value which was 35$ per 1oz. The banknotes you had in your wallet suddenly changed on the 15th of August 1971. The gold standard has been abandoned. The question is, how many people realized what it meant and what was going to happen next?
Introduction to cryptocurrencies
At the beginning of the article, I would like to clarify what CBDC is and how it differs from cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH). To learn about the differences, I highly advise reading the article on CBDC and the article explaining two major cryptocurrencies before reading the following sections.
Let us begin with the issue of how institutions and governments might use the popularity of cryptocurrencies to spread the knowledge and adoption of digital money into the wider public.
To begin with, we have to look at the very rise of crypto and its slow mainstream adoption. Bitcoin was created in 2008/2009* by an individual or a group of people called Satoshi Nakamoto. In the beginning, it was just an attempt to invent some digital asset that can be used instead of a dollar between two people agreeing on the terms of the transaction and the price, serving the role of a means of exchange.
* The date may vary depending on the fact which action will be taken as the inception of Bitcoin. Whether it will be the issuance of the whitepaper, the creation of the network, or other events along the road of inception.
The first-ever transaction is believed to be the purchase of two pizzas for 10 000 BTC coins back on the 22nd of May 2010. Since then, the adoption of Bitcoin experienced its ups and downs due to market bubbles leading prices to unbelievable highs, just to burst and drag the price down while creating disastrous effects to people who lost entire life savings investing in the new class of assets. The mainstream adoption rose along with the dollar price of Bitcoin; and fell accordingly.
The awareness and adoption
Nevertheless, it might not be the case for every participant in the market. While retail investors came and vanished from the market, more and more people were becoming aware that such a thing as Bitcoin existed. More and more people saw a chance to break away from the world where the banks and governments are managing our money and restricting the ways we can use them. Not to mention the fact that our savings and earnings are highly dependent on the monetary policy of a given country, and inflation, which once unleashed, cannot be stopped in a pleasant way.
The circle of the ones involved with the adoption of Bitcoin started to grow exponentially. Both investors and miners were treating the first cryptocurrency more seriously year after year. Along with the popularity of crypto assets, new cryptocurrencies emerged. The community used to refer to as Altcoins or just Alts as those are alternatives to Bitcoin itself.
Although there are thousands of altcoins nowadays, the truth is that 90% of them, if not more, are useless, and their only aim is to rob people out of their money and exit scam or are purely speculative and are created for weighty players to gain more profits. In short, most altcoins are Ponzi schemes or are created by companies who want to capitalize on the growing market and leave it as soon as the time comes.
As market cycles started to be present, more and more people gained a massive return on investment (ROI), just as numerous people lost everything or even more if played with financial leverage. Bitcoin became not only the vision of financial freedom but also a great asset to speculate on. However, I am not going to dive into the financial aspect of trading Bitcoin as it is a subject for another essay.
Nevertheless, the sheer financial and speculative aspect of Bitcoin is of great significance in the mainstream adoption that took place over the years. Where Bitcoin will be in the future, we can only speculate; that is why we will focus on the current state of the market and the current state of adoption as of the end of the year 2021.
Due to rising inflation leading to worsening the financial situation of the average citizens in various countries, people are trying to find a way to at least preserve their capital far away from the centralized form of governments and banking systems. Some people see this chance in Bitcoin being a decentralized financial asset or even a store of value similar to gold, as some individuals claim.
That is why the vision and perspective of Bitcoin have been changing over the years as people saw the opportunity not only to generate massive returns on investments but also as a way to gain even a little bit of financial freedom. However, let us not be too naïve to think that people in power will allow such a thing to happen, which is to free the people from the financial system constraints.
Central Bank Digital Currencies and the Bitcoin hype
The introduction of the CBDC that I described in the following essay will finally lead to the enslavement of the individual and the eradication of privacy and freedom that we know today for the sake of alleged security.
How is it connected to Bitcoin and other crypto-assets you might think? It depends on how we perceive the financial situation in our life and how we see the future. The following paragraphs will be my humble attempt to present the opinion concerning the case of Bitcoin. In short, how Bitcoin can be used by governments and countries to make the introduction of CBDC seen as a saviour to the ones who got lost in their lives due to financial losses on crypto markets.
It will also be a tempting chance and solution to provide equality and equity that common people vote and strive for so much. Sheer jealousy and bitterness towards the wealthy, lead common people along the way of becoming just a mere subject to the influence of the rich.
The more people believe in crypto, the greedier they become, the more money they are putting in their portfolio, just because of the fact, the market is green, and their account grows exponentially. There is no need to say that almost all of them are new to the cryptocurrencies world or are only interested in gaining money while not being willing to learn a little bit of the assets they are investing into.
The situation closely resembles the scenario that has been played in 2017/2018 as the bubble finally burst. It is almost inevitable that the outcome will be very similar. As many as 90% of people, if not more, will become exit liquidity for the major players or the ones that know what they are doing on the market. In other words, the money of the retail and new investors will flow into the wallets of professional players on the market.
When we recall how the bubble burst looked like after the bull market in 2017, we will see people losing their entire life savings or even the life savings of their whole families. Suicide prevention lifelines were installed and started to help people on the verge of mental and financial collapse.
People losing houses, jobs, everything they had because they were too greedy, too exposed to the market; because they could not say Enough and leave the market when the music is still playing as people are describing the situation on the market.
“History Doesn’t Repeat Itself, but It Often Rhymes” – Mark Twain.
The risk of centralization
We should keep that quote in mind while seeing more and more people claiming This time is different because governments are accepting Bitcoin. El Salvador induced Bitcoin as their legal tender. Prominent institutions are investing in crypto. We could buy Tesla for Bitcoin not so long ago, and there are rumours that such an option might once again be at play.
Well, Bitcoin is all about being decentralized, isn’t it?
It might not be possible to talk about the decentralization of Bitcoin if the majority of coins will be held by institutions. The institutions that will have almost an unlimited influence on the market and will freely manipulate the price, just as they are doing with, for example, the market price of gold. JP Morgan Chase has been officially convicted for manipulating the price of gold, just a quick reminder in case you forgot or did not know.
However, the situation in which we will have institutions taking over crypto-assets limiting their usage and prices will not be the most devastating scenario in this game. Why? The most important answer will be that people will not lose most of their funds due to regulations of the market and prices. That is not so bad as some people might say. It depends; because we will lose the way of gaining financial freedom that many people strived for so long.
Of course, from the technological standpoint, we can claim that either soft or hard forks will take place. The new protocol might emerge, but it will resemble playing cat and mouse with governments and institutions rather than achieving financial freedom.
The future of social division
On the other hand, we are presented with the second scenario, which might be more probable than the first one in the long term. It does not mean that the first scenario will be abandoned or disregarded. We might see a hybrid of both of those scenarios but what is important is how the crypto assets will be applied in the following example.
Let us recall the situation in which 95% (if not more) of people lost their entire life savings due to greed, laziness and negligence. After the bubble burst, society was filled with people devastated by their life suddenly crashing into pieces. They were in desperate need of help to evade the consequences of their own poor choices.
Like always, people want someone to save them from the consequences of their actions so that they can live in their dream world of no consequences once again.
That is the point when the government enters the stage as a saviour on a white horse with shiny armour and an emblem on their shield stating CBDC. However, what exactly will be the story the saviour will tell us? What will be the narrative?
I guess we all can imagine more or less accurately that the narration will revolve around saving people from the crypto world led by greedy people whose only aim is to rob others of their money.
You have been lured into the trap because the bad people played on your primal emotion of greed and feeling superior to others. Worry not, dear citizen, as we will do whatever we can to make things better and to ensure that no one will ever again fool you in such a hideous way.
Along with the feeling of reassurance and safety, people will give away their last chance of taking power over their money and finances. Yet once again, the authorities will prevail.
The idea to create a problem and then become the one who finds out or creates the solution has worked for centuries, and it still works today. That is why such a scenario is highly probable. What can we exactly see in the future?
The vision would show a society full of people devastated and in great need of help. The one who will save those people will be the government of a given country, granting it to those in need, to those who will obey. The antagonization of Bitcoin and other crypto-assets will become significantly stronger as it will be spreading through and within the enraged public who played the game without reading the rules and taking essential precautions beforehand. Bitcoin will be seen as the demolisher of the families and their life savings.
Considering the fact that people are getting more used to the digital forms of payments and digital forms of currencies, crypto is just another step in raising awareness of the security that can be achieved along with digitalizing the financial system.
Time is passing, and more people decide to use their digital form of payments instead of cash, which becomes an artefact of the past, especially for the younger generation. That phenomenon can be used as the first step towards pushing people into the shackles of CBDC. However, the question is, how can this be adopted widely?
The governments and the banks need the appropriate narrative to persuade *ekhem manipulate* the public into accepting its new invention. And this is why they need Bitcoin. After the previously mentioned burst of the bubble on crypto-assets, people will lose everything and become heavily in debt as if losing everything was not enough. Then governments will play on the emotions of the broader public by saying that crypto, due to being the unregulated class of assets, is often used to perform some despicable actions and brings benefit only to the individuals and entities controlling the market.
Nevertheless, the public will be told that despite the attempts to regulate crypto assets, it was impossible because of the evil people behind the crypto market, the people who oppose the law and the government, and the people who want to bring chaos into the world. It is highly probable, if not certain, that the great majority of people will believe the given narrative. The public will become convinced that crypto should be illegalized, and people using it, punished in some legal way, or as it often happens, publicly ostracized. However, social ostracism only adds flavour to the war against people who still believe in their rights to privacy and freedom.
After this happens, the attempt to attack and eviscerate the cash will begin. The only question remaining will focus on the narrative that will be chosen. The arguments supportive of getting rid of the cash are not new, nor are they complex. Money laundering is the most prominent example of a narrative saying how cash can be used in a nefarious way. Along with money laundering, the public might also hear from time to time that cash significantly increases the transmission of viruses within societies and is unhygienic.
However, the argument that divides people the most is the one that spreads uncertainty and distrust among people. The narrative might claim that everyone using only cash and rejecting the digital form of payments cannot be trusted. The individuals like that must have something to hide. Otherwise, they would willingly allow the institutions to scan their financial life.
If you are not willing to expose yourself entirely to the authorities, you have something to hide; or so they will claim. The majority of citizens will follow the given perspective as it would be very persuasive and convenient in the eyes of the average citizen.
The only way of successful and secure maintenance of the financial system will be CBDC. Ready to launch at any time; or already being induced in the background without permission. Without even asking or informing the public that they are already using the CBDC system to some extent.
The idea behind the CBDC will be presented as the fully regulated and state-maintained form of digital currency, as convenient to use as crypto-assets were, as cheap and fast as previous ways of digital payments were, and as eco-friendly as possible. The only difference will be the safety of the funds that could not be established with Bitcoin and was impossible to have with the cash before. Because someone can steal your wallet, right?
With all the promises of security and equality, CBDC will enter the stage in glory and to the applause of the broader audience. Because what the public always wanted was the security of living in their comfort zones and equality of everyone; because the rich are just thieves and everyone should have an equal amount of money, most of us have heard such claims at least once in our lifetime.
The narrative focused on the rich, not being able to evade taxes and being taxed accordingly, is a story of great significance to the broader public. Since 1977 the wealth gap between the rich and the poor began to increase in the USA. Along with it, the social gap between wealthy people and average citizens began to grow at a similar pace.
Jealousy, hatred, resentment, the feeling of inferiority began to rise among the people who earned less and less money compared to the top 1%. Is there a better narrative to follow than to play on the emotions and tensions that have already been growing within the people for so many years? Overall, the majority of votes is what matters in democracy, isn’t it?
The summary
To conclude, the detrimental consequences of investing in crypto-assets without any knowledge or willingness to learn even the basics will bring the opportunity for the state and the banks to persuade people and push on the narrative of the great CBDC system. Banning Bitcoin and other unregulated assets will be only a matter of time unless the state will regulate Bitcoin and implement it to the financial system on their own terms by subjugation.
Otherwise, people who strive to be free will not only be ostracized, as they always were, but also persecuted and penalized. There will be almost no other way of purchasing goods outside the system ruled by CBDC and controlled by the institutions.
However, as long as governments will impose their laws and decisions on the broader public, there will be people fighting for freedom. The individuals, the rebels or just the people who value privacy and can take care of themselves without the helping hand of the government. The most significant difference between those people and the public is that the public will take everything for granted without thinking critically. Without asking needed and thoughtful questions. The public will get used to anything with an appropriate narrative and appropriate period of time.
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Henry Ford
The Modern Eremite 