I lived in Japan for eight years in the 1990’s and during that time got to know some high-level Japanese working at large insurance and securities companies. One evening, while carousing at a local izakaya near Tokyo station, the highest ranking salaryman at the table told me: “We can’t win, the game is rigged.”
What he was getting at was that with the US dollar being the major world currency and the US controlling the world’s leading stock exchanges, he felt like a gambler at a casino where the house always wins. Charged with investing his company’s trillions of yen in billions of dollars in stock and bond investments he felt constantly at a disadvantage.
A New Financial Incentive Structure for the World
When I heard of BITCOIN, I didn’t really understand what it was or what it meant. I wasn’t surprised that the Japanese could be at the center of it because they are crafty, hard working and have been competing with the United States for decades, giving them a particularly keen insight into how the US system works.
Some YouTube videos, mostly by Andreas Antonopoulos, a serial tech entrepreneur with a background in data communications and distributed systems and currently at Blockchain.info, helped me understand the gravity of the situation.
When the profile of Satoshi Nakamoto emerged last week, my reaction was much like the journalists who tracked him down: his background and experience matched the skill set and worldview needed to change the rules of the world financial system as could only be dreamed about at that izakaya back in 1995.
Being an American and having worked in the financial services industry in the United States for 15 years, including a stint on the floor of the American Stock Exchange and later helping managing a portfolio of more than $100 million in stocks, bonds and mutual funds, I had seen the financial system from the inside.
Although I think the system is as good as any human system can be, I haven’t liked what I’ve seen of late, especially now that computer algorithms are used to time trading in milliseconds. This type of technology is beyond the average investor and tilts the market even more in favor of the richest.
The last straw for me was the 2007-2011 Global Financial Crisis which had adverse consequences for every economy and person on the planet and could be traced to extremely high risk and greedy lending and borrowing practices on the part of financial institutions and clearing houses. In addition, questionable US fiscal policy, clueless government oversight, and the eventual socializing of losses to US taxpayers, made it clear that the system could no longer be trusted by the public.
The New Paradigm: Decentralized Digital Currency
According to BITCOIN.ORG, “BITCOIN is a an open source P2P, or person to person, network through which institutions and people can send money over the internet without going through a financial institution or clearing house, in effect, cutting out the “middleman.”‘
While there are fees associated with BITCOIN transactions, they are a fraction of fees currently charged, similar to the difference between traditional mutual fund fees, which could cost 2.5% of assets versus “no-load” mutual funds that charge an average of 0.25%.
The following information is paraphrased from BITCOIN.ORG:
BITCOIN is the true first international currency because it can be used in every country, and isn’t burdened by local institutions and rules that “muck up” financial transactions. BITCOIN accounts also cannot be frozen and there are no arbitrary rules or limits on account ownership.
BITCOINs are generated over the Internet by a software called a “BITCOIN Miner.” BITCOIN miners have to solve puzzles in order to unlock the value of a BITCOIN. The difficulty of mining BITCOINS is controlled by the network so that coins are always created at a predictable and limited rate. BITCOINS are stored in a person’s digital wallet which simply looks like an online banking account.When a person makes a transaction using bit coins an electronic signature is added and the transaction is verified by a miner who earns a small fee on the transaction. The transaction is then permanently and anonymously stored in the network. BITCOIN software is open-source and anyone can review the code.
BITCOIN is changing finance the same way that the Internet changed publishing. Now every person will have access to a global market and a freer exchange of ideas and money causing new and fresh ideas to more easily gain traction and support.
Finally, BITCOIN currency exchanges now exist so that the currency can be exchanged for dollars, euros yen, etc. There is no charge to begin accepting BITCOINS and there are no chargebacks or fees and as the BITCOIN economy grows, more opportunities for sales revenue will emerge. For more on how to get started with BITCOIN, visit weusecoins.com.
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- Paypal to Accept BITCOIN in Move to Mainstream Crytocurrencies
- Satoshi Nakamoto, BITCOIN & the Depoliticization of Money
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