Bitcoin Community has been advocating and working upon two elemental ideas for a secure financial future.
- Institutional Adoption
Bitcoin, the pioneer of cryptocurrencies has been working upon its network and core tech to make it dynamic enough for institutional adoption. Bitcoin Satoshi vision of a financial system where people can buy and exchange Bitcoin as an investment option.
The decentralization aspect focus on giving the power to the people to have control over their money rather than centralized institutions like bank holding a monopoly.
The two ideas are set to collide at some point in future because of the way centralized networks operate. Be it banks or governments, the institutions would not like their power trimmed down, and thus, the usage of Bitcoin might get bifurcated in order to achieve the goals. Let us see the two ideas separately and understand how it can be achieved.
For any commodity or entity to be adopted by an institution, especially financial ones, the entity must generate mass interest and a sense of security. If Bitcoin is able to make a long-lasting impression of the entity which can be trusted to store, exchange and sell, then these institutions have to find a way to facilitate it.
Now the challenge for Bitcoin to become a massively regulated form of financial barter is the decentralization aspect. The vision behind Bitcoin was to provide a way for a faster and cheaper form of exchange. However, in the current financial sector centralization play a critical part, where the custody of the entity lies in the hand of specialized institutions of the financial sector.
The specialized institutions take it upon themselves to perform all the management function with little or no involvement of the actual asset owner. The circulation of native fiat currencies is handed over to banking institutions by the governments, who take care of the management part, while the government only set targets.
However, in case of Bitcoin, the custody part becomes the problem, as the goal was always to take the power from the hand of centralized authority and give individuals the management control, through the peer-to-peer network and that is how blockchain technology works. But, the decentralization aspect always comes under scrutiny when the need for creating forks arises. Who authenticate these forks? Or why the development of the network is dependent on the few core developers.
If the community wants institutional adoption, they need to understand that it would happen in an exact way, the current financial institutions work i.e through a centralized management system and custody in the hands of the specialized financial institution.
The biggest selling point for Bitcoin was decentralization, where people can store their money away from the controlling hands of the government. If the demand for a financial system arises where people trust the technology more than the governance, then Bitcoin can surely swoop in as the savior and governments would try their best to restrict its use as seen in the case of China and Zimbabwe. For this reason, the decentralization is very important.
However, if the centralized authorities and governments hold their resistance against Bitcoin, it can only be used as a store of value just like gold, which in itself is a big achievement, however, that was not the goal. In conclusion, we can say that Bitcoin tries to tackle the old-age traditions of centralized control, head-on, but the two aspects, institutional adoption with decentralization cannot be achieved at the same time.
Since the institutional adoption asks for centralized control and decentralization is an exact opposite concept, the only way through is Bifurcation of usage, depending upon the ecosystem. If you are apart of an ecosystem where you can trust the government and centralized authorities, then Bitcoin can be used as a currency for exchange.
If you are in an ecosystem where the governance and centralized network of institutions cannot be trusted, then Bitcoin can act as a store value entity like gold.
Hopefully, in future, we arrive at a juncture where these two ideas can be implemented simultaneously and digital currencies like Bitcoin become as standard as Fiat.