David Andolfatto, vice president of the Federal Reserve Bank of St. Louis, came out Monday with some words that should be encouraging to the Bitcoin world. He said that the open-source, transparent, decentralized management of the blockchain, the ledger that underpins all Bitcoin transactions, is a “stroke of genius.” He believes the Federal Reserve could do a lot better job in being accountable to the public.
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He derided the notion that Bitcoin or other digital currencies are the future, however, and unequivocally stated that nearly all money used in modern economies is, in fact, digital. Adolfatto did not offer a great deal of evidence to back up this statement.
Presumably, he is referring here to the fractional reserve system, where a bank can issue up 1000% of what it actually has deposited. Or perhaps he is referring to the way money is wired. In either case, it is apparent that the official would like the public to believe that there is little difference between Bitcoin and fiat currency, and further, that Bitcoin as a currency just won’t work while the blockchain could offer a number of benefits to the systems presently in place.
Specifically, a distributed ledger which all member banks of the Federal Reserve would maintain, he believes, could solve one of the key problems of centralized banking. A manipulation or perversion of the central ledger could taint the whole economy. Money that is believed to be in a certain account could have long ago moved without anyone noticing, and so on.
Adolfatto’s statements add to the growing chorus of those who believe that the real contribution to society of Bitcoin is the blockchain itself. Before it, the idea that everyone in the economy has a stake in it, let alone the notion of transparency as a rule rather than an exception in financial matters, would have been hard to present. Now, it goes without saying that something will change in the future which will make money more manageable on a macro scale. Whether Bitcoin is the next vehicle of value or not, it brings new ideas to an antiquated industry desperately in need of them.