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September 8, 2021

Thought Leaders

Hegemony is here

No one really knows when an era ends. Not at the time, anyway. The character of a new decade, century, or reign emerges slowly. It’s usually only with historical hindsight that we can pinpoint the moment when a new age began.

 

Even so, I believe that when historians look back on the origins of Bitcoin, they will identify August 2021 as the month that traditional retail finance changed forever. And the reason is not the simple fact that PayPal started rolling out Bitcoin transactions to the rest of the world, but why they have done so.

 

The reason? Rational self-interest.

 

PayPal is not an evangelist for Bitcoin. They weren’t there at the start; they waited watchfully while other visionaries invested; they’ve never made a meaningful public pronouncement on Bitcoin.

 

The reason why I believe we’re standing on the cusp of a new era is simple: because PayPal doesn’t care about Bitcoin, at least, not in the way you or I do. They don’t give a fig for financial self-sovereignty or any other benefits of the Bitcoin revolution. They have no preference for customers to transact in dollars, yen, pounds, yuan or BTC: they just want you to do it on their platform.

 

PayPal’s decision to enable customers to transact on the Bitcoin blockchain rather than keep users Bitcoin captive within their walled garden, and to make their Bitcoin service available to the whole world, is a purely business decision. It’s based on simple, rational self-interest. Research has found that Bitcoiners were three times more likely to engage with PayPal after the company trialled the new services in the US, and as these valuable new users become more educated, they naturally demand self custody.

 

Yes, the size, trust and ubiquity of PayPal’s brand makes this momentous for Bitcoin. PayPal has 400 million active users worldwide, three million of these in the UK alone. Bitcoin has never suffered from an awareness problem, but now it has exposure to a huge new potential user base. It’s one thing to seek out Bitcoin, and quite another to see it there, ready for you to buy your first few satoshis, every time you log-in to PayPal.

 

And so we pass from the era of evangelism, to the Age of Self-Interest. When Fidelity, MicroStrategy, Paul Tudor Jones or any of the early adopters bought bitcoin, they were making a bet. It was, effectively, a giant statement of belief: “This is going to be big,” they were saying, “and we’re staking our reputations on it.”

 

Companies like PayPal aren’t in the risk business. They are not visionaries. They know which way the wind is blowing and they follow the money. At the end of last year I talked about the institutions pouring into bitcoin as the critical “third follower”. PayPal represents a new wave of adopters which, crucially, don’t particularly care about Bitcoin. For them, it’s simply another mechanism to expand their market.

 

This is both incredibly exciting and ineffably sad for those of us who’ve been in it from the beginning. Why? Because it means Bitcoin is becoming boring. We early adopters will quickly become wistful for the days when our small band of believers proclaimed Bitcoin to a bemused, suspicious world. Now, everyone wants a piece of the action.

 

But we always knew this would happen. Hegemony is achieved when people and institutions stop thinking about Bitcoin as a speculative investment, and start seeing it as an essential product offering. Those who buy it, care about it. But we don’t need the legacy financial industry to be similarly passionate, or even to approve of Bitcoin’s philosophy. Bitcoin has arrived and PayPal will be the first of many just looking to follow down the path the crowd is headed.

 

Bitcoin succeeds when people don’t think about it as Bitcoin. Who – apart from politicians, central banks and fiercely nationalistic citizens – actually loves their national currency? No one. People only care about what they can do with it. For ordinary citizens, Bitcoin’s benefits are its effectiveness as a store of value, and the ability it brings to transfer wealth cheaply and quickly anywhere in the world.

 

For just over a year, I’ve been charting Bitcoin’s Road to Hegemony. Like you, perhaps, I thought this would be a long and winding path, with many setbacks and steps-back along the way. But all of a sudden, at summer’s end in this topsy-turvy Covid-wracked world, Hegemony is Here.

The follower flood

The wave of new followers isn’t limited to the financial services sector. Earlier this month, US retail behemoth Walmart followed in Amazon’s footsteps by posting a job ad for a crypto specialist to develop its “digital currency strategy and product roadmap and identify “crypto-related investment and partnerships”.

 

When Amazon did the same thing, I predicted that this would be Bitcoin’s “Windows 95 moment”, and that boardrooms around the world would be racing to understand and exploit Bitcoin. Once again, I’ve been surprised by how quickly the initial trickle of interest has turned into a flood of new followers.

 

Again, there is nothing altruistic in Walmart’s embrace of Bitcoin. Its search for crypto talent is simply another example of rational self-interest. And so we find ourselves in the ultimate virtuous circle: Fortune 500 companies are adopting Bitcoin because its utility increases; in doing so, they boost its utility still further.

 

I started 2021 full of hope for Bitcoin, expecting steady progress and some standout big wins along the way. I could never have predicted PayPal, Amazon and Walmart within weeks of each other. And it’s still only August: what other milestones will Bitcoin leave in its wake by the end of the year?

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