As cryptocurrencies become increasingly mainstream it’s inevitable that governments will become involved. Already we’ve seen several countries testing the idea of centralized digital currencies. The People’s Bank of China is testing a digital currency that will trade alongside the remimbi. Sweden has indicated they may go completely cashless with their ekrona project. Malta is testing a state-cryptocurrency. And most recently Dubai has become the first government to actually release a release a state sponsored digital currency into the wild with its emCash token. We can imagine it won’t be long until major governments will follow suit and we could soon see a crypto-ruble, Fedcoin, and digital-yen among others.
But just because centralized state-sponsored cryptocurrencies rise to prominence (and they will due to the pressures from governments), it doesn’t mean that the decentralized cryptocurrencies such as Bitcoin, Ethereum and other will disappear. While it’s likely that many governments will attempt to eradicate decentralized cryptos, the attempts will ultimately fail, and it’s easy to see why.
The same issues that make consensus difficult for blockchain will also plague world governments. In fact we can already see this at work globally and specifically in the European Union. Governments simply can’t come to a consensus on many issues, and digital currencies will be no different. Some governments will certainly embrace decentralized cryptocurrencies with open arms, but others will despise the very idea of decentralized currencies and will do everything they can to stamp them out.
It’s quite possible that the countries that have suffered the most in the past century due to the reserve currency status of the U.S. dollar will be the first to openly declare for decentralized cryptocurrencies over fiat. There’s a very good chance that many Asian countries, Latin American countries, and the open economies of Switzerland and Singapore will welcome decentralized digital currencies, if only to go against the current global powers that be.
If there’s no consensus among global governments regarding new centralized cryptocurrencies, then there’s no way that the current decentralized cryptocurrencies will ever go away, no matter how powerful any centralized digital currency becomes.
Right now Bitcoin and all the other decentralized crptocurrencies are at a crossroads. Bitcoin is emerging as a store of value, but decentralized cryptocurrencies all suffer from the same shortcoming. They need to develop some kind of viral killer application. The type of application that can spread rapidly in a viral fashion across the entire globe and into every persons’ life. Something that people can’t imagine living without. This type of killer app will bring the current top players into the decentralized system and will allow Bitcoin and other cryptocurrencies to defend themselves from the inevitable attack from government powers.
One possible solution is to gamify a cryptocurrency. Design a platform that gives people an incentive to use your app or collection of apps. One network already working on this is Steemit. They have created a Reddit-like social network, chat application, Youtube-like video platform and have many others created by the community. All of these incentivize users by paying them to create content. It’s growing, but isn’t the killer app needed quite yet.
Maybe it gains momentum fast enough, but know that we are running out of time. Governments are rapidly moving to maintain their power base, and if allowed to do so will crush any digital currency that competes with them. And if they are allowed to do so, we will be stuck with the same corrupt system that Bitcoin was developed to replace. Except it will be on the blockchain and will be far more dangerous than today’s central banks and fiat currencies.