The future of Bitcoin and Harari: stories, technologies and mistrust

Bitcoin and distrust in the centralized world

Bitcoin was born during the explosion of the financial crisis of 2008 as a cry of rebellion and distrust against centralized entities, embodied in the financial system through private banks and central banks.

With a marked ideological bias in which various currents converge such as libertarians, anarcho-capitalists, cypherpunks, and adherents to the Austrian economic school, among others, bitcoin arises with the aspiration of replacing, in its opinion, inflationary and devalued fiat currencies. , whether Argentine pesos, euros, dollars, Norwegian crowns or renminbis.

one of The most repeated concepts, 12 times, in the initial white paper that gave life to bitcoin in 2008 is the word “trust.””. Satoshi Nakamoto (the pseudonym by which the inventor of Bitcoin is known) explains in that report the logic of this new asset by pointing out: ““We have proposed a system to carry out electronic transactions without depending on trust”.

Based on the multiple imperfections evidenced by the centralized financial system in terms of costs, abuses and lack of privacy, Nakamoto assured in that founding document that “it is necessary, therefore, an electronic payment system based on cryptographic proof instead of trustallowing two interested parties to carry out transactions directly between themselves, without the need for a trusted third party.”

The word trust is associated with the creation of bitcoin with different views and interpretations. For example, from a maximalist perspective, in his book “Mastering Bitcoin”, Andreas Antonopoulos, a convinced defender of the bitcoin utopia, defines the cryptoactive not as a digital currency but as something much larger and deeper. “a decentralized network of trust on which a new reality can be built – and is being built.”

Harari, the importance of trust and the construction of correctable narratives

With a thesis antagonistic to that of its defenders, Harari rejects bitcoin, defending the importance of creating trust systems like the one built around currencies issued by central banks.

The historian maintains that we “homo sapiens” have become the dominant species on planet Earth over thousands of years thanks, among other factors, to our imagination to build common stories, the ability to cooperate between a large number of humans and trust that requires that cooperation to be able to endure.

For Harari, of all the stories created by humanity for millennia, that of Money constitutes “the most universal and most efficient system of mutual trust that has ever been invented”.

Precisely for this reason criticizes that bitcoin bases its architecture on distrust before the humans who today administer the planet through centralized entities.

In his new book “Nexus” Harari also states that the advent of new technologies, such as artificial intelligence, implies a huge risk for the future of humanity to the extent that they remove the ability to decide on our destinies from human discretion. leaving it in the hands of superior intelligences capable of dominating us, in the same way that humans have subjected less intelligent species in recent millennia.

The historian emphasizes the importance of human beings constantly maintaining the ability to intervene in their creations. In his opinion hemain tool against totalitarian or anarchic deviations is to have institutions or systems that incorporate the principle of self-correction which he defines “as the mechanisms that an entity uses to correct itself.”

In that sense the rThe rigid design and governance of bitcoin supported by decentralized networks complicates its ability to quickly correct errors.a process that is easier to process in less decentralized or directly centralized entities.

Apart from the importance of trust, Harari highlights the invention of the story as one of the essential features of humanity, pointing out that man has come to dominate the planet thanks to creating stories that allowed hundreds and then millions of “homo” to connect. sapiens.”

The historian points out that, Of all types of stories, those that create intersubjective realities have been the most relevant to the development of large-scale human networks..

It is in this sense that Harari explains in his latest book the spectacular rise in the price of bitcoin during the last decade “based on the stories that people counted and believed about this crypto asset.”

He maintains, with numerous examples throughout history, that stories capable of captivating the imagination and will of millions of people are those that allow the creation of new systems.

The bitcoiner story

In that sense, bitcoin has been building since its genesis 15 years ago. a very powerful narrative from the symbolic, trying to associate his DNA with the concept of freedom.

According to that story Bitcoin is a countercultural tool capable of empowering and providing financial sovereignty citizens from all over the planet in the face of an inefficient traditional world where centralized entities, whether public or private, use the information they concentrate to control and obtain monetary benefit.

He bitcoiner story beautifies a new financial world, without the vices of the traditional systeml, where all those who wish to have control of their financial life do so through accounts that are under their custody, achieving monetary sovereignty that they lack today.

It also characterizes bitcoin as a technologically invulnerable and “deflationary” asset, further decoupled from volatile traditional financial instruments.

However, it is important to note that The bitcoiner narrative, in many aspects, does not correlate with its concrete development to the present.

Some contrasts between bitcoiner narrative and reality

Although bitcoin has shown a high degree of adoption globally, The number of accounts opened worldwide through self-custodied private keys has been overwhelmingly surpassed by active escrow accounts. in the so-called centralized “exchanges”

• The idea that bitcoin would act both as a means of payment and as a refuge of value in the face of financial crises It has not been reflected in reality so far due to the high volatility of its price as well as its positive correlation with the evolution of the prices of comparable traditional financial assets.
• In relation to the promise of creating a decentralized financial system with a logic superior to the traditional one, and despite advances in DeFi platforms (decentralized finance), the crypto ecosystem in its different layers has been co-opted by centralized platforms and products replicating the same practices that it was supposed to replace and improve.
• Regarding its technological support, it is striking that those who developed an innovative technology such as blockchain, revolutionizing the global financial world in a short time, do not recognize the advancement of new technologies capable of surpassing and violating the existing one in a relatively near horizon.

The emission projection of the last Bitcoin around the year 2140 should not be interpreted as a prophecy of a bitcoin-like network immune to obsolescence or innovation, even of new digital financial products that we have not yet even imagined.. Just as an example, the advent of quantum computing represents a concrete threat to the security of bitcoin.

• For its part, the cideal concept of decentralizationembodied in thousands of nodes spread independently across the planet seems to contrast with the growing concentration of large bitcoin mining pools.

The list of differences between the idyllic universe narrated by bitcoiners and reality is long. The predictable entry into the ecosystem of malicious actors that certainly act in all areas could also be included, such as dangerous criminal gangs whose actions have been facilitated in this network thanks to the pseudo-anonymity of the platform.

Strengths of the crypto ecosystem and self-correction mechanisms

However, and despite what has been pointed out, it is important to recognize that Blockchain technology, beyond the functioning of bitcoin, has proven in recent years to be one of the most innovative and robust with a specific substrate.

Its global adoption in all types of activities is based on well-proven capabilities and qualities.

Strikingly, and despite warning in his book Nexus about the risks of centralized information systems that can lead to totalitarian regimes, Harari does not seem to consider the benefits that decentralized technology provides and more transparent like the one that comes from the Blockchain.

However, depending on the interpretation we make, the small amount of changes they have managed to make to the Bitcoin base program since its launch can be seen as both a strength and a become its Achilles heel when the protocol must respond quickly to relevant challenges whether predictable or unexpected.

As a counterexample to a greater degree of flexibility and self-correction in the crypto ecosystem, lto Ethereum networkwhich leads the incorporation of technology within this ecosystem, has managed to successfully mutate a protocol that initially consumed a lot of energy to a more environmentally efficient one and has already presented, among many other initiatives, a plan to migrate its encryption algorithms to “quantum-resistant” onesthrough zero-knowledge proof (zkp) technology.

Perspectives

Harari’s considerations regarding the fundamentals of bitcoin and its future open a complex and necessary debate about the future of this crypto asset.

Perhaps one of the reflections that his proposal leads us to is that the most enduring and virtuous stories, which have marked great advances in humanity, They are those that are based on clear, objective, realistic instructions and that have tools capable of correcting errors, adapting quickly to changing environments.

Harari, despite his concerns about the actions of these new technologies, opens a light of hope by maintaining: “…we must put aside our fantasies of infallibility and commit ourselves to the hard and rather prosaic work of build institutions with strong self-correcting mechanisms”.

Carlos Weitz- Former President of CNV and Professor of Fintech, Bigtechs, Cryptoactives and Digital Currencies. University of Buenos Aires.

Daniel Díaz – Professor of Information Technology. Rosario National University