Prerequisites for change
Tuur Demeester’s job in Adamant Research is to say something about the future. One of his challenges is to separate signals from noise in a world flooded with information. Major trends that change history are only obvious in retrospect. In his quest to find ways to say something sensible about the future, he ended up on a familiar path. Demeester has chosen to identify historical parallels to the current situation, to find arguments around cyclical shifts in the economy or society. Use history to say something about the future.
Previously, he has analyzed the similarities between Bitcoin and the petrol industry. In another report, he addresses cryptocurrency’s parallel to the search engine wars of the 1990s and what happens when people begin to share files with each other over the Internet (P2P).
This week, Demeester has looked at the Protestant Reformation, one of the greatest upheavals in history, with today’s starting point in cryptocurrency. You will find the report here.
Demeester bases his findings on four assumptions that laid the foundation for the Protestant Reformation. He then compares the different assumptions with the crypto market to match similarities. The Reformation at that time initiated a new golden age for humanity with personal growth and increasing freedom, rights, research, inventions, and art. Will cryptocurrency do the same for the next fifty years?
1. A monopoly that ensures the status quo
At that time, the Catholic Church had a monopoly on spirituality and faith. They told them what was right, and paid off as soul mates. Martin Luther challenged their power, which led to a long struggle for free thought and expression.
Since the Bretton Woods agreement in 1944, the world has been under a Dollar hegemony. It is not enough that all countries have strict rules related to their own currency. The same countries and banks are forced to adhere to the US Dollar and the rules related to its exchange. In this way, US authorities can shut down nations and individuals out of banking and commerce.
Cryptocurrency challenges this dominance, by offering value transfer between two people without an intermediary. Other features such as anonymity, speed, and cost-effectiveness will vary with different versions of cryptocurrency, but almost all of them are based on the idea of giving power back to the individual.
2. Technological catalysts for change
In the 1600s, the world experienced several transformative technological innovations. Book printing enabled writers to print thousands of identical books and newspapers, igniting an explosion in literature and written word. Double bookkeeping, the hourglass, and the compass triggered strong growth in trade and economic value creation.
Today, technology is all-encompassing in society. There is no industry or process that is not affected by the internet, software and new forms of communication. Data storage has gone from being a million-dollar investment to renting on-demand capacity for a few hundred dollars. At the same time, social media has made it cheap to scale good ideas to millions of people. It has become cheaper and easier to approach the whole world as a unified marketplace. A bitcoin is similar in Tanzania, Japan, and Finnmark.
3. A new economic class
Specialization and trade created a new economic class in the 1600s. Call it a safe middle class of merchants, lawyers, craftsmen and specialists with their own finances and freedom. This was where the foundations for new thoughts arose because the power and willingness to challenge existing structures had an economic foundation. It was at this time that insurance was invented and you could plan for many years, which in turn led to higher investments. Tearing down unfair structures was suddenly a good economic policy for the middle class.
Although there is great economic inequality in the world today, the number that defines themselves as poor has fallen like a rock. Today, it is a larger middle class than it has ever been in history, as a proportion of the total population of the earth. The children of this middle class, or what we call millennials, consume services and products in a completely different way than their parents. This new technology class does not read paper newspapers or watch linear TV, they are not afraid to set up an account on a social network or buy a digital service. In 2019, 27% of millennials in the United States responded that they preferred Bitcoin over equity if the purpose is to invest for the future.
4. The Rebels need a defensive wall
Technological innovations made it easier to hide and keep information secret. Along with faster construction techniques, entire urban communities could revolt against state power and the church before they could make a strong backlash. The most modern fort and city walls, we see the remains of today, were built in the 17th century.
Through decentralization and security measures such as encryption, 2FA, and private keys, the crypto market has effectively set up a firewall for the authorities and dominant financial players. Regulatory authorities have been slow to introduce stricter rules, and have also failed to kill the pace of innovation in the crypto market with the measures that have now been initiated. The counter-reaction came too late and it is easy for the individual to control their own values on the blockchain. It creates self-confidence for revolution.
Tuur Demeester has found four good conditions for cryptocurrency and Bitcoin to transform the world in the years to come. He bases this on the transformative Protestant Reformation. Both were fighting for a monopoly, there were clear technological catalysts, the rebels were from a new economic class and there was a strong defense against the countermeasures of the Force.