Authored by Max Gulker via The American Institute for Economic Research,
Bitcoin and its primary cryptocurrency competitors have been on a bumpy ride since early 2018, and the tension among investors and enthusiasts is spilling over. Bitcoin maximalists, who believe that blockchain’s very first application is the only one of value, angrily condemn those who envision a competitive process fueling cryptocurrency adoption. Others see the conflicts among miners that defined 2017 as a point where the dream died.
But somewhat counterintuitively, if blockchain and the concept of cryptocurrencies truly has world-changing potential, we should still have very little idea how to use it. Blockchain is a foundational technology, useful primarily for the applications (like Bitcoin) built to run on top of it. As the dot-com crash illustrated, the discovery process of just what apps people want can be a painful one. But history shows the road from foundational technology to world-changing applications can be much bumpier still.
In the 1440s Johannes Gutenberg developed a printing press capable of mass producing books, and though people knew it was going to be huge it took nearly a century to answer the questions of why and how. That process required not only market experimentation, but a catalyst in the form of one of history’s greatest social disruptions.
The Salvation of Printing
In his book Brand Luther, historian Andrew Pettegree gives a fascinating look at the role the Protestant Reformation, particularly its founder Martin Luther and his city of Wittenberg, played in the rise of books as we know them. These events coalesced right when they needed to, for the printing industry had just endured the bursting of a bubble.
After its initial rollout, printing presses became the must-have item for Europe’s wealthy nobility. Within decades (lightning speed by the standards of the era) there were over 200 printing presses scattered across Europe. But what then? To our modern sensibilities, virtually inseparable from books and the printed word, that question seems absurd.
One key missing piece was understanding the economics of the printed word. The wealthy owned plenty of books, but their creation for centuries had been a one-to-one transaction between collector and scribe. Neither the increasingly literate general public, nor the entrepreneurs behind the first printing presses, had any concept of buying a book, going home and reading it.
Like railroads and the internet centuries later, the bubble burst. Nobility supplying the capital lost interest and more than half of Europe’s presses shut down. And even among the survivors it was only twelve presses in major cities that did the vast majority of pre-Reformation printing.
Printing in these early years began to prosper not by disrupting the old order but by serving it. They printed books that were then ornately illustrated by hand, making the production of books as luxury items a bit more efficient. And of particular importance in these urban centers were far more mundane projects done for church and state, such as informational fliers, and quite ironically, indulgences.
A key part of Luther’s initially renegade theology was communicated with ordinary people in their own language. Pettegree shows how this catalyzed the publishing industry to take a major step toward what we know today. Luther became the first bestselling author, publishing books, pamphlets, and his translation of the Bible in German.
Until that time it was customary not to list the book’s author on the cover or front page unless it was a revered figure from antiquity. But Luther, his theological associates, and the blooming Wittenberg publishing industry perceptively understood the concept of branding. In addition to Luther’s name right up front, they developed a specific look across multiple titles that would become familiar and stand out to people in an ordinary stall.
Fast forward to today and we rightly expect change to happen faster than it did during the Renaissance. But we still need markets to teach us how to use novel technologies. Bitcoin maximalists who often tout free markets start sounding a lot like central planners when they posit that Bitcoin is and must be the only use of blockchain technology and the only money used across the globe. Given Bitcoin was the first application of blockchain technology, introduced alongside it, the maximalists do not have history on their side.
The other question Pettegree’s book leaves for technology watchers today is that of a catalyst. Many Bitcoin proponents, from the sensible to the maximalist, are libertarians who would like to see a similarly large sea change in society. But the fact is that in 2019, the vast majority of people don’t share these views, and have no problem with their government fiat money.
If, for whatever reason, public opinion shifts either gradually or seismically toward a libertarian outlook, cryptocurrencies might have a similar catalyst. But rather than Bitcoin, at least as we know it, a libertarian reformation of sorts would fuel innovation to create the private currency or currencies most useful for a future we can’t come close to predicting. Rather than protecting a preselected champion, we should all be competition and innovation maximalists.