Why cryptocurrency will change transactions for good

I don’t have to go to the bank anymore, I can do it all from my phone, I don’t have to even deposit the cheques at the teller anymore. Think of the greening of that, your grandparents, my grandparents, my parents, they were driving to the bank, burning gas to get there, they were waiting in line. The teller drove themselves to the bank, they heated the bank in the winter, they cooled the bank in the summer, and they’re all sitting in the bank to do their transactions.

We’re now taking all that away and cryptocurrency, and the blockchain will be at the heart of what comes next – permissionless transactions.

The hesitation around this is reminiscent to me as I remember the late 1990s and I remember the internet boom. I remember people telling me with great skepticism that the internet wasn’t going to amount to very much. Even Bill Gates himself, who had a reverse course, said the internet was going to be a fad. It turned out that all these people were wrong.

That didn’t mean that there weren’t booms and busts, things like ‘etoys’ and ‘epets’, all these nonsensical companies that went bankrupt. But, you saw the emergence of things like Google, the emergence of things like Amazon, and ultimately saw the transition of Apple Computer and what Apple Computer ultimately became. All of that came through the internet.

Then you had the second wave with the social media companies. Once broadband expanded you had a lot more capabilities on the internet then you had prior.

So to me, the cryptocurrency market is a lot like that. Many of these tokens and coins will be extinct, there are probably three to five coins that’ll make it, but there will be permissionless transaction activity across the world where you don’t need third parties. I want you to think about this philosophically. Marc Andreessen, a lot smarter than me, he worked on the Netscape browser, and he said that the cryptocurrency market in the blockchain is way more revolutionary than what he was working on 25 years ago.

And here’s why (and I’m going to get overly philosophical with you for a second). What I want you to think about is this, everything in our lives comes from a third party as it relates to our trust. I get a passport from a third party, the American government, I get a driver’s license from my state, and so your identity is being issued from the state. If you want to transact, you have a third party verifying the transactions.

Bitcoin is decentralised, and it doesn’t have the corporate politics or the office suite.

If I want to wire you money today, if we’re at the same bank we’ll switch it over to an account, but there’s a bank doing it. Or, if you’re not at the same bank then we’ve got two banks in the game with us to make sure that the money transfers. But blockchain is going to enable us to trust each other even though we don’t know each other. We’ll be able to have this permissionless exchange.

And, I will even take it one step further, you’ll be able to have an identity that people will believe because it’s your fingerprint on the blockchain, that you, yourself will be issuing your own identity. If you stop and you think about it, and you think about it the way I just said it, you’re going to have another delayering of the economy.

If you had asked me three years ago, I would have said, “Hey, the blockchain is great but I don’t get the whole cryptocurrency thing.” And I got that wrong, I missed the first leg up. The good news is it’s very, very early. There’s only 2 percent saturation in the market.

I’m a Bitcoin investor, and I’m a Bitcoin holder. I’m not a Bitcoin evangelist. I look at this with a rational skepticism, with some level of objectivity about where it’s scaling to. What I was missed is that we’ve created an electronic ledger that meets the criteria of money. If you read Niall Ferguson’s book, the ascent of money, and he catalogues 5,000 years of the development of money in our lives, he realised that all money is a technology between us. If you think about cash, it is a piece of fabric, it’s 75 percent cotton, 25 percent line – but you’ll take this from me in exchange for goods and services.

So what do we know about money? It’s always worth less than the goods and services that we’re transacting in, but what we know about it is a trusted network, the US dollar, over the hundreds of years of its development has become a trusted network of exchange. It is a ledger, I have these in my pocket, I’m going to hand them to you and vice versa, and that and that’s what we did with cryptocurrency, that’s what we did with Bitcoin.

Blockchain is going to enable us to trust each other even though we don’t know each other, says Scaramucci.

Bitcoin as a currency? Well it is scaling now and so you wouldn’t sell your Bitcoin today, but it will mature, and when it’s fully scaled, then I think you’ll be more comfortable selling it. Let me give you a good example. If you purchased Amazon on its initial public offering on May 15, 1997, you put $1,000 into Amazon, and you’d have $21,140,000. Today, however, you would have subjected yourself to eight periods of time where Amazon lost at least 50 percent once it lost 90 percent.

Amazon.Bomb was on the cover of the Barron’s news weekly, it said that this internet retailer’s days were limited, it was over. But the guy that founded Amazon just shot himself into space after building his own rocket. This guy figured out that he was going to scale his thing and billions of people around the world were going to use it. Mark Zuckerberg figured that out with Facebook, Sergey Brin, Eric Schmidt and Larry Page, they figured it out at Google, and Bitcoin is figuring it out on its own. Bitcoin is decentralised, and it doesn’t have the corporate politics or the office suite, but it’s gotten to scale faster than anybody or anything.

If the cryptocurrency market takes hold, as I predict, we’ve got a $2.5 trillion market now … better start paying attention to it.

Anthony Scaramucci, founder and partner in Skybridge Capital.