The origin of the phenomenon:
It all began with the 2008 subprime crisis in the US. These real estate loans appeared in the 2000s in the United States and were intended for people who were not eligible for a traditional real estate loan.
But financial institutions and various investors find a particular interest in these high-yield financial securities, this is the beginning of the accumulation of mortgage loans, called securitization.
During 2006, real estate market prices collapsed while key rates rose, which inevitably led to a lack of resources on the part of creditors, many of whom were unable to honour their monthly payments. We are therefore witnessing a mass seizure of real estate.
This neo-liberal trend had already become clear recently with the removal of barriers between commercial and investment banks. Allowing them to merge and speculate on their own behalf.
This crisis is quickly spreading around the world and is affecting the global economy as a result of the globalization. Although these subprime loans were granted only to American individuals, European banks had no hesitation in investing in these high-yield investments. With the example of BNP Paribas, which announced shortly afterwards, the freezing of three funds backed by subprime contracts for €2 billion. Banks therefore restrict access to credit to restore a solvency ratio, which has an impact on the real economy. As a result, households reduce their consumption and companies have more difficulty investing.
During and after these events we observe a significant loss of trust in financial institutions by the general population
Finally. The IMF will affirm this trend in a June 2018 article entitled Monetary Policy in the Digital Age and explains that “The global financial crisis and the bailout of major financial institutions have rekindled scepticism in some quarters about central banks’ monopoly on money issuance. ( “Monetary Policy in the digital age” IMF).
This scepticism fuelled the creation of Bitcoin and other cryptographic assets, which challenged the state-backed currency paradigm and the dominant role of central banks and conventional institutions in the financial system. This crisis is only the reflection of a feeling that has been growing for several years now. Between the derisory financial lobbying, the lack of transparency of financial and government institutions, the practices of unorthodox banks for their own benefit.
The people are therefore beginning to question the abuse of power by financial institutions. It is therefore following this growing feeling that Bitcoin and blockchain were born.
Satoshi Nakamoto, the creator
Also in 2008 and in the midst of the economic crisis, an anonymous man named Satoshi Nakamoto published a document of about twenty pages on Internet explaining his project to create a virtual and decentralized currency.
He sums it up himself with these few words: “I have tried to work on a completely peer-to-peer payment system, by removing any intermediaries or “trusted third parties” “double spending” is made impossible within a peer-to-peer network with validation. There is therefore no longer a need for trusted third parties” (Satoshi Nakamoto, 2008).
Many more or less conspiratorial theories have emerged about this anonymous developer and some are willing to say that it would be Elon Musk, or the CIA, but the most likely theory would be that this assumed name brings together a whole group of developers and experts according to the complexity of the programmation of the bitcoin blockchain. The first blockchain was born.
When Satoshi Nakamoto officially opens the Bitcoin public blockchain, he mentions a newspaper title in the first block of the blockchain “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” (Satoshi Nakamoto, 2008).
This is the British daily newspaper of The Times dated 3 January and whose French title would be: “Le chancelier au bord du second plan de sauvetage pour les banques” (The New York Times, 2008). Experts express themselves on several occasions regarding this reference and affirm that it is a way to officially dating the launch of the blockchain, while clearly displaying a “revolutionary” ideology against the current financial system, and especially the banks.
First step on the market
At the beginning of this new era of the distributed economy, a famous cryptocurrency faces several obstacles in its use. Malicious users use the anonymity of Bitcoin to carry out illegal transactions, especially via the dark-net where dealers, arms dealers and illegal businesses of all kinds predominate. At that time, Bitcoin was regularly mentioned in the media as “the currency of drugs, weapons and illegal sex on the Internet” and its reputation was negatively altered in the minds of the general public.
The speed of transactions and the anonymity of the currency would have attracted the stakeholders of the underground economy and would have become a payment tool completely adapted to their “needs”.
This trend continues until 2013 and is marked by the history of Silk Road, one of the largest black markets of the time on the darknet where the majority of transactions would have been made in Bitcoins. At the end of 2013 the FBI arrested 17 people suspected of being major players in the SkillRoad network, which will lead its creator Ross William Ubricht to a lifetime sentence in jail. This event reassures the people about the anonymity of Bitcoin and shows everyone that these users are far from untouchable.
Indeed, although anonymous, one of the fundamental characteristics of Bitcoin is traceability and transparency. Each transaction is recorded in the Bitcoin blockchain in a way that is immutable and accessible to all. Of course, it is not your name that will be entered but your portfolio address, a long series of letters, hence the anonymous nature of the network. However, it is far from complicated to find the identity of a person from his portfolio address for an IT expert or any specialized legal entity.
To put an end to this reputation as “illegal currency” Marc Andreesen, founder of the first cryptocurrency web browsing network, addresses an ambiguous interview to the New York Times and quotes: “To all those who shout that Bitcoin is only used as a haven for criminal or terrorist activities, or that money can be transferred anonymously, you know nothing about it because it is a myth. Bitcoin works like email, which is easily traceable because it is in the form of a pseudonym and not anonymous. In addition, each transaction on the network is tracked and recorded in the Bitcoin blockchain, an unalterable register visible to all. Finally, Bitcoin is much easier for law enforcement to follow than cash, gold or even diamonds. It is much more discreet to buy your drugs in cash than in crypto-currencies.
Shortly afterwards, Les Echos revealed that only 3 to 6% of Bitcoin transactions were illegal in 2016, compared to nearly 40 to 50% at the beginning of the creation of the currency and until 2013.
The market is maturing and diversifying, the majority of transactions serve now speculative purposes. The 2.0 thugs have given way to white-collar workers who see Bitcoin as an ideal instrument for speculation, particularly because of its non-regulation.
Many practices prohibited on traditional and regulated markets are very present on the crypto-currency market. It is relatively easy for a person with high capital to manipulate the prices of a cryptocurrency and get the best out of it for small investors.
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Entrepreneur | ICO Advisor | Start-up Mentor & Representative at FasterCapital & Alchemyze Capital