Coinbase co-founder: Writing code can solve financial problems, this is the charm of Bitcoin technology

Coinbase co-founder Fred Elzham (left) and Coinbase CEO Brian Armstrong (right)

Recently, Coinbase co-founder弗雷德•埃尔扎姆and 1776 co-founder埃文•伯菲尔德discussed the concept of “regulatory hacking” in the Bitcoin space on the 1776 podcast.

What is "cracking regulation"? To put it simply, we often use sports to understand corporate regulation: the rules are set in advance, and then the players follow the rules. But the reality is often that the rules follow business as much as business follows the rules. Sometimes it is startups that change the rules. Startups do not have the resources to change the rules through lobbying. So they achieve their goals by "cracking regulation": demonstrating the benefits of their ideas through "backdoor" experiments. If successful, regulators will be forced to follow the rules they set. (You can also click here to learn about the meaning of "cracking regulation")

1776 is a business incubator based in Washington, D.C., so it considers “cracking regulation” as its company philosophy, the basic premise of which is to find new ways to bend or circumvent rules that slow progress in certain industries. Elzam mentioned some of these industries in the podcast:

You 1776 seem to have targeted several such industries, which have not changed much so far, mainly because they tend to be more centralized or more regulated, including finance, healthcare and education. Of course, there are others besides these three leading industries, but these three industries are the most typical in my opinion.

Bitcoin’s open source, permissionless, and censorship-resistant nature makes it a potentially powerful tool for “defeating regulation” in the financial sector.

Bitcoin turns financial problems into software problems

When asked about his overall view on the importance of Bitcoin technology, Elzam said that it transforms a financial problem into a software problem. Compared to the highly regulated and slow-moving traditional financial system, building financial applications on top of Bitcoin technology only requires the ability to write code.

Elzam then talked about the positive impact on society when real-world problems are translated into software problems:

"We've all seen what happens when a problem becomes a software problem. The level of innovation and the rate of iteration will be beyond imagination. In this way, we will turn more good ideas into reality, and the ultimate benefit will be consumers, who will enjoy better services at a lower price."

In other words, competition based on an open, less regulated system can create a better environment for entrepreneurs and consumers. As Elzam said, "Software problems are truly governed by market forces, which are open, just like the Internet has experienced."

An outdated and closed financial system is disappointing

To describe the benefits of Bitcoin’s openness, Burfield first talked about the problems of the traditional financial system. He said:

"I think most people have become numb to how bad financial services are on a daily basis, it's like we keep going through these stupid things over and over again."

Burfield believes this is because traditional financial services companies have historically lacked an open system to compare with, so their problems are less prominent.

Burfield then compared Bitcoin technology to the financial system in Africa. Generally speaking, in Africa, when the two parties are in different countries, they need to pay a fee of more than 10%. In addition, the central banks of African countries have been printing money indiscriminately, which has made the financial situation in Africa very bad. Using Bitcoin settlement not only has low fees, but also allows people to enjoy more financial autonomy.

Is Coinbase the kind of business that would bend regulation?

When asked about Coinbase’s approach to “decoding regulation,” Elzam was quick to point out that the concept is difficult to apply to the financial services industry today, especially in the U.S. He explained:

"I think financial services is more difficult to crack than other industries because the reality is that financial services are heavily controlled by different political parties."

Bitcoin Technology Won’t Create a Liberal Utopia

While Burfield believes that the world needs more “hacked regulators,” he doesn’t think Bitcoin is about building some kind of libertarian utopia. He explained:

“The idea that Bitcoin technology will create a completely libertarian utopia with no regulation and complete anonymity is unrealistic.”

Elzam echoed Burfield’s sentiments. He added:

“The reality is that businesses that run on the internet are subject to laws and regulations, but we now have a more open environment, which you could say is libertarian in some ways. But the end result, I think, is not a complete libertarian utopia. It’s more about bringing us services that simply couldn’t have existed before.”

It’s important to remember the tension between early adopters of Bitcoin and those who want to make the technology more widely available — it’s easy for regulators to regulate businesses in the Bitcoin blockchain space, but it’s hard to regulate the technology.

Some aspects of Bitcoin technology do bring more free will to the real world, but this is usually about software, not startups. Companies can be shut down, but individuals are free to run open source code like JoinMarket or Dark Wallet on their own computers. Bitcoin is far from anonymous right now, but it will be interesting to see what happens as privacy-enhancing features are added to the protocol.

Original article: https://bitcoinmagazine.com/articles/coinbase-s-fred-ehrsam-bitcoin-turns-finance-into-a-software-problem-1458404239
By Avi Mizrahi
Translator: printemps
Editor: printemps
Source (translation): Babbitt Information (http://www.8btc.com/finance-a-software-problem)