It is natural to fear what one does not understand. That apprehension can compel one to seek knowledge, or it can produce an unwarranted aversion to the unknown. So it has gone with virtually every significant advance humankind has seen, and so it goes with blockchain and cryptocurrency.
Consider what the skeptics said about Alexander Winton, a 19th-century bicycle maker who, The Saturday Evening Post wrote, “became infatuated with the idea of a bicycle that ‘a rider wouldn’t have to push and keep pushing.’” Winton built his first car in his basement, leading to the founding of Winton Motor Carriage in 1896 and the subsequent production of automobiles “at the dizzying rate of four per year.”
“[T]he great obstacle to the development of the automobile,” Winton wrote three decades later, “was the lack of public interest.”
Thomas Edison was no skeptic. He told the New York World in 1895 that, in a “short time … the carriages and trucks of every large city will be run by motors.” Responding to Edison’s assessment that his incandescent lamp could be produced for 25 cents apiece, The Engineer wrote in January 1880, “[T]he notion that such a refined mathematical instrument can be made for [25 cents] is simply preposterous.”
Those who similarly disregarded cryptocurrency 15 years ago have been proved wrong. Crypto was no fad. However, America’s potential to play a significant role in incubating and shepherding financial innovation has been jeopardized. A cloud of regulatory uncertainty hangs over crypto’s future in the United States because many people still do not understand what it is.
To reach that understanding, one must go to the root. On Oct. 31, 2008, following the near collapse of the global economy brought on by questionable lending practices at major financial institutions, Satoshi Nakamoto, Bitcoin’s founder under a pseudonym, issued a white paper explaining the development of new “electronic cash” called Bitcoin. Computers maintain a permanent and irreversible record of transactions in this digital currency. By solving math problems, computers would generate new units of currency.
The idea was to craft an alternative to the financial system that nearly brought the world to economic ruin through the 2008-09 recession. People could download software and “mine” new Bitcoin on their own. Since then, crypto exchanges have formed through which Bitcoin may be purchased.
Computers running copies of the same program manage Bitcoin in what is known as a decentralized network. Transactions are grouped into blocks connected in an unbroken chain, hence the term “blockchain.”
Blockchain is comparable to real estate deed records. One can trace essentially every buyer and seller of every piece of property in the United States. Blockchain goes one step further. Before verifying a new buyer and seller, the network reverifies each buyer and seller since the first Bitcoin was created and transacted. Imagine how secure the deed search process would be applying that level of verification.
Bad actors have arisen in crypto, just as in every known private and public sector. The answer isn’t to malign an entire industry. It’s to provide needed regulatory certainty. The Financial Innovation Technology for the 21st Century Act, introduced by Rep. Patrick McHenry, R-N.C., would draw clear lines in the regulatory roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission .
Other lawmakers seek to raise red flags for political gain, playing on the fears of those who still don’t understand what crypto is. Greats in American history such as Edison and Winton accomplished what they did despite others’ fears, not because of them.
This country did not give in to ignorance then and must not now.
Charlie Kiser, a native of Southern West Virginia and a veteran of the cryptocurrency industry, is the founder of Matewan Digital Holdings and a graduate of West Virginia University.