Whether you have seen him featured on CNBC, The Keiser Report or are interested in the world of “smart contracts,” Reggie Middleton, the “Disruptor-In-Chief” of Veritaseum, is an expert you should know.
Based in the New York area, Middleton has gone from a successful real estate investor, capitalizing on the market’s economic downturn in 2008, to predicting the fall of Bear Sterns, Lehman Brothers, and others in the years to come. Reggie Middleton has always been a step ahead of the curve, so Bitcoin.com sat down with him on where the banking industry is going with blockchain technology.
As a former banker myself, I’ve seen many parallels with the Internet’s global propagation back in the 1990’s, and how the “banksters” are struggling with the Bitcoin concept, just like they did the Internet way back when. The rhetoric and blind attacks of today show history repeating itself if memory serves me correctly. How does Reggie see this financial industry-wide plan of blockchain integration playing out? Read on.
Bitcoin.com (BC): Haven’t we been through this before with banks trying to co-opt and centralize decentralized systems? Why will this be any different than ISDN or corporate Intranets from the 90’s?
Reggie Middleton (RM): Banks and many other private companies have tried to recreate the virtues of the internet via mini, private internet-like networks called intranets. These intranets were very useful and materially increased the utility of the banks, but they all paled, considerably paled in comparison to the value, utility, and ubiquity of the public internet. Click here for more on how this model works.
BC: You speak to the bankers fairly directly. What is their endgame with private blockchains, which leads to their altcoins? Disrupting the disruptor, Bitcoin? Is the goal to simply becoming more tech savvy and cost-efficient?
RM: Most in the evening industry don’t have an endgame in regards to Bitcoin technology – at least not yet. This is because they don’t fully understand its potential. They appear to be getting most of their education on the topic from a fairly narrow, undiversified set of sources. Hence, any potential misconceptions, biases or downright errors are easily reply ingrained, multiplied and propagated. If this continues for any meaningful amount of time, the re-education can be and likely will be quite painful if not lethal to the less light of foot.
“Many of the bankers I’ve spoken to eschew Bitcoin and other ‘digital currencies’ […] don’t realize that the private blockchains use altcoins, the very same concept that they are eschewing in Bitcoin and cryptocurrencies.”
For instance, you mentioned altcoins. Many of the bankers I’ve spoken to eschew Bitcoin and other “digital currencies” (failing to realize that most USD and EUR are digital currencies, what they mean is crypto-currencies) don’t realize that the private blockchains use altcoins, the very same concept that they are eschewing in Bitcoin and cryptocurrencies. Worse yet, of all the cryptocurrencies in existence to date, Bitcoin is by far the most vetted. I feel many banks and bankers hear the hype and jump on the bandwagon without doing their due diligence. Time will tell if I’m correct in this assumption.
BC: Do you feel a small-medium sized banks will adopt decentralized digital currencies as a whole? And will this calculated breaking off from the establishment herd drive the industry in a new direction of Bitcoin inclusion?
RM: I think that either a relatively small or underprivileged bank will figure out how this stuff works (“Network effect” and all) and set off a chaotic chain reaction that will tear legacy business models asunder. There’s about a 30% chance of that outcome, in my opinion. The more likely outcome is a technology-oriented concern engineers this tech to disintermediate the banks to the extent that they’ll be rendered mere money pipe utilities needed for their banking charters (say a 60% chance of this outcome). The least likely outcome is the legacy banking industry gets it right, which has never happened before during any major paradigm shift, so leave a 10% chance for this. Click here for more on this.
BC: Do you think banks will make viable blockchains at all? Who says they can model Bitcoin’s success for their private gain?
RM: Banks will make private blockchains whether they will be viable or not is not only up for debate but also highly relative. If what you mean by viable is “Will it work?” Then I’d say yes. Now, if you mean by viable is “Will it be competitive with a widely accepted public blockchain?” then the answer is almost definitely no. You see, “Network effects” prevent private blockchains from ever scaling to the prospective heights of a widely accepted public blockchain such as bitcoin. Click here for more on this.
“‘Network effects’ prevent private blockchains from ever scaling to the prospective heights of a widely accepted public blockchain such as bitcoin.”
BC: Can banks have it both ways? Deriding the bitcoin digital currency while praising its technological foundation? Is this genius, or basic hypocrisy?
RM: Attempting to laud the blockchain while deriding tokens that make them work is neither genius nor hypocrisy. In my opinion, it’s ignorance. Picture me saying, “ I love this Internet thing, but want nothing to do with Internet packets. Unfortunately, only nerds will get that one. For more on this, go here.
BC: Was Jamie Dimon right? Will the government, or some higher power, prevent Bitcoin from going viral in the mainstream, at least in Western civilization?
RM: Jamie Dimon is talking “his book.” He’s talking like a bank CEO, who is expected to say pro-bank things, and slam things that will compete with bank offerings. He’s simply doing his job. Now, please remain cognizant of the fact that this does not mean that he necessarily knows what he’s talking about, nor is he necessarily speaking the truth.
“If bitcoin is outlawed, one risks driving it underground. Governments don’t want tech that they can’t control nor stop driven out of its reach.”
The fact that the US, the world’s most powerful financial concern, has not banned bitcoin should tell you something. If bitcoin is outlawed, one risks driving it underground. Governments don’t want tech that they can’t control nor stop driven out of its reach. That is exactly what will happen if it goes underground as a peer to peer system. Think of how successful the MPAA, the record industry, and the courts have been in stemming the use of peer to peer file sharing of MP3s after their massive legal assault? Hint: over 60% of download Internet traffic is thought to be P2P torrent-style downloads.
The can easily happen to the banking industry. The path of least resistance is to regulate and then attempt to co-opt Bitcoin (think IRS and NSA) then to outlaw and attack outright.
As for his opinion on virality, methinks he may be missing the point? Viral outbreaks are never, never anticipated, wanted nor prevented by those who are subject to it! That’s not a matter of choice!
BC: Please sum up banking, blockchains, and privatization for us. Is this a net-positive for the Bitcoin community just based on the publicity alone?
RM: My summation will likely be different from what you’d expect. I believe that the entire banking community and many of the entities that are serving them are headed in the wrong direction, re Bitcoin technology. Everybody is reaching for the low hanging fruit, totally disregarding why said fruit is hanging low in the first place (hint: it’s fully ripened and is about to drop off the vine). Very wide area networks (vWANs, such as the Internet) were designed to be used by as many entities as possible (not a select group).
This is where the network effect comes into play, and how a publicly accepted Bitcoin network will force banks to play ball in its arena or face extinction. You see, Bitcoin not only enables autonomous activities, but it also rewards them. The legacy banking business model, as we know it today, is predicated on a heteronomous business model. So was the music industry before the Internet. How did that work out for them?
What do you think about organizations who are interested in the blockchain but ignore bitcoin? Let us know in the comments below!