Cryptocurrencies and blockchain assets are the newest and potentially most promising new asset class.
Investment returns in cryptocurrencies for 2017 year-to-date have by far outperformed traditional assets such as global stocks and bonds. The Lawnmower Blockchain Index, the premier gauge of performance for the blockchain asset class, is up +374% versus the world primary equity indices at +15.7% and +3.95% for bonds (Bloomberg Barclays Global Aggregate Total Return Index).
However, public opinion and investors’ minds on cryptocurrencies are divided and it often comes down to a philosophical and even emotional debate. This is also true about African policymakers and their official stance on cryptocurrency.
The cryptocurrency-based blockchain economy is an asset-based economy, while the fractional reserve banking system, based on fiat currency, is a debt-based system.
High volatility and unexplained falls, risks of hacking attacks and ransom with the subsequent sensational media headlines are reasons why many investors still shy away from cryptocurrencies and merely think of it as “magical internet money.”
In a free decentralised global market where volatility is not suppressed by trillions of central bank-created quantitative easing (QE), the market becomes more volatile as it becomes more efficient, acting faster to information changes.
The biggest fallacy many casual observers and some government officials have, is that they say they like blockchain, but they do not like cryptocurrencies like Bitcoin, Ether and Litecoin, etc. That argument is the same as people in 1994, before the introduction of the internet web browser, arguing that they do not like the public censor-free internet (it is not regulated and not “owned” by anybody, etc.), but rather have a privately controlled intra-net. A private blockchain without a trustless and distributed consensus-based cryptocurrency is nothing more than a shared database or intra-net.
Proponents of cryptocurrencies are of the firm belief that blockchain could soon give rise to a new era of the internet even more disruptive and transformative than the current one. Blockchain’s ability to generate unprecedented opportunities to create and trade value in society via cryptocurrencies will lead to a generational shift in the internet’s evolution, from an internet of information to a new generation internet of value. Any government that embraces cryptocurrencies is going to benefit so much by owning the money that is native to the internet.
Cryptocurrencies are native to how code works. The reference implementation, Bitcoin Core, is written primarily in C++. Imagine if one country cracks down on Bitcoin and cryptocurrencies protocol. That would be the same as saying no more TCP/IP. You will be driving out innovation. The countries that did adopt TCP/IP (transmission control protocol/internet protocol) are going to be so much better off.
In a similar fashion, in this case the internet of money, one can see the disruption potential of cryptocurrencies. Just like the internet took out Hollywood with Netflix, Spotify took out the music business, and Google and Facebook took out advertising and media businesses, cryptocurrencies will take out the finance industry as we know it.
