Visa Goes Down — The Crypto Use Case Goes Up

Picture Cred: Btcmanager

Introduction

Unless you’ve been living under a rock, you probably heard the news that Visa transactions went down all over Europe.

What the Hell Happened?

I had the exact same reaction when I first heard the news.

Let’s take a look at some of the coverage on various publications throughout the day to get a better understanding of what happened.

From first view (Google Search) it appears that the official nominated cause of the outage was ‘network issues’.

At least on the surface.

https://www.theverge.com/2018/6/1/17418684/visa-cards-europe-not-working-network-outage

Ironically, the subtitle of the article was, “Without Visa debit cards, most people have to resort to cash.” We’ll speak more on that a little later.

Visa first acknowledged the issue on their Twitter account around 11:56 a.m. EST.

Here’s the tweet from their verified Twitter account below:

https://platform.twitter.com/widgets.js

In addition, the Bank of Ireland and HSBC (HSBC is the name of another financial institution) also tweeted about the situation since some of their customers were apparently affected by the outage.

https://platform.twitter.com/widgets.js
https://platform.twitter.com/widgets.js

(They didn’t hesitate to throw Visa under the bus! Can’t blame them though)

As you can probably guess from the Twitter handle (VisaNewsEurope), this outage primarily affected customers in the U.K. and most parts of Europe.

It’s worth noting that not all facets of the Visa card’s functionality were down today (June 1st, 2018) and not all customers in affected areas were affected.

However, the outage and the resulting inconvenience was at least severe enough to substantially impede, baffle and stress out tens of thousands of individuals.

Bloomberg was the publication that originally broke the story around 12:13 P.M. EST; GMT-4 (New York Time).

See below:

https://www.theverge.com/2018/6/1/17418684/visa-cards-europe-not-working-network-outage

The Guardian, which is a U.K. news publication, also covered the issue and conveniently provided a ‘play-by-play’ of how the situation developed:

Source: https://www.theguardian.com/world/live/2018/jun/01/visa-outage-payment-chaos-after-card-network-crashes-live-updates

Despite the fact that no money was stolen or ‘hacked’ per se, the inconvenience more than likely cost businesses an aggregate of tens of millions in potential revenue for the day due to customers being unable to pay with their Visa cards (estimate not based on hard-print stats).

In The Guardian article, the reported cause of the outage, according to Visa, was a ‘hardware failure’:

So, it appears that nothing crazy happened (or the team was able to resolve it internally without any real information getting out), and all will continue as normal from here on.

However, since we are in the world of cryptocurrency — it is almost impossible to not see the blaringly obvious use case for cryptocurrency being highlighted in this situation.


This is What Bitcoin Was Created to Solve

Let’s revisit that famous whitepaper for Bitcoin that Satoshi Nakamoto (pseudonym for the creator of Bitcoin) unleashed upon the world in 2009.

You can see in the first sentence that the goal of Bitcoin was to become a,

“Purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.”

Why?

One of the reasons is because of what we saw today with Visa.

If we rely on one central institution to manage our funds (like most of us with bank accounts or some sort of debit/credit card do), then our access to said money is contingent upon that one institution and whatever outside factors that may be impact said institution.

In this case, the institution is Visa.

You can see in the first sentence that the goal of Bitcoin was to become a, “Purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.”

Why?

One of the reasons is because of what we saw today with Visa.

If we rely on one central institution to manage our funds (like most of us with bank accounts or some sort of debit/credit card do), then our access to said money is contingent upon that one institution and whatever outside factors that may be impact said institution.

In this case, the institution is Visa.

You can see in the first sentence that the goal of Bitcoin was to become a, “Purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.”

Why?

One of the reasons is because of what we saw today with Visa.

If we rely on one central institution to manage our funds (like most of us with bank accounts or some sort of debit/credit card do), then our access to said money is contingent upon that one institution and whatever outside factors that may be impact said institution.

In this case, the institution is Visa.

Satoshi’s True Intentions

To be clear, it doesn’t appear that Satoshi held the belief that banks and/or other financial institutions were evil people that desire to steal all of our money (although many people ascribe to this theory). Rather, Satoshi didn’t possess faith that any trusted, central third-party could ever be sufficient, in itself, to guarantee the safety of one’s finances.

I believe that many have misconstrued Bitcoin’s purpose and Satoshi’s purpose to be antagonistic to the traditional finance system because of Satoshi’s emphasis on providing a ‘trustless’ system, Bitcoin’s ‘stigma’ that it still has in some circles, as well as the fact that this narrative fits some people’s agendas.

So What Did Satoshi Mean By “Trust”?

Satoshi didn’t just mean ‘trust’ in the sense of “I think that the folks at Visa are good people that would never mishandle transactions or fudge account balances or ledgers!”

What Satoshi meant is that we essentially trust that Visa will work. We trust that they will maintain the appropriate upkeep of their servers and remain at the cutting edge of cyber security in order to ensure the safety of everyone’s information and funds.

We trust that Visa will remain online and that no one will be able to successfully attack it or bring the network down. And we trust that a host of other negative outcomes will not occur as well. Perhaps we don’t explicitly see us getting a Visa card in this way, but that’s the implicit relationship.

Why Do We Trust?

A big part of the reason why we have that trust is because we’re forced to.

Before Bitcoin, there were no other viable alternatives for the digital payment of money without a trusted, 3rd party.

The only alternative that we had to a ‘trusted’ system like Visa or a traditional financial institution was actual, physical cash.

The issue with cash is that you’re limited by physical proximity when spending it.

Twenty or more years ago, before the internet, e-commerce, and globalization became a big thing, this wasn’t really an issue. Most people only did business in the towns that they lived in. So, one could conveniently choose to live life without a bank account or using any form of digital payment.

However, now, in a world of Alibaba, Amazon, payment chips, credit cards, global trade, social media and the entire world wide web at our fingertips (literally), the exclusive use of cash is no longer as feasible or even practical as it once was.

Thus, it seems that we are all forced to use Visa and Mastercard or some other trusted, 3rd-party to facilitate digital storage of our money as well as payment.

That’s Why Bitcoin is Necessary

Bitcoin wasn’t created to replace financial institutions any more so than cash was. However, it was designed as a means of allowing people to engage with the digital world of commerce (which is becoming a near necessity at this point), without having to consult a trusted, third-party.

That’s where the principle of decentralization comes into play. Rather than there being one, trusted party like Visa, every participant or ‘node’ on the network holds a copy of the blockchain, which is then used to audit the ledger to ensure that all future transactions are legitimate.

So, there’s no one central point that someone could attack that would compromise the entire network.

Satoshi Attempted to go a Step Beyond Cash

Rather than simply creating ‘digital cash’, Satoshi wanted their version to essentially be counterfeit-proof. This was an important and necessary step because most paper currency is tied to a central bank of some sort, so governments are typically responsible for identifying counterfeit currency, removing it from circulation and then apprehending offenders.

However, given Bitcoin’s structure and lack of a central, trusted party, there is no entity like a Visa or Federal Reserve Bank that can oversee the movement of transactions and ensure that everything is ‘fair’.

That’s why the mining process, transaction verification, and, most importantly perhaps, distributed ledger were all necessary to ensure that Bitcoin was not only viable as an idea, but in practice too. The transparency of the process is what removes the need for trust and what essentially allows it to be decentralized.

This Should Serve as a Potent Rebuttal to the More Renown Critics of Bitcoin

Yeah, I’m looking at you Bill!

Ideally, Satoshi’s vision was to create a form of digital payment that would be essentially immune to the issue that Visa faced.

At its most ambitious, Bitcoin should never have any downtime, ever, for any reason (and it hasn’t to my knowledge). There should never be any issue or discrepancy with accessing money (assuming one has not given custody of the Bitcoins to a 3rd-party such as an exchange) or sending it to others as well. And it should be impossible to ‘fake’ or counterfeit such transactions too.

Warren Buffett, Bill Gates, and other major financial/tech folks assert that Bitcoin has ‘no use case’ or that it’s a Ponzi scheme, I’m convinced that they have not taken such an instance such as what Visa faced today into account.


Bitcoin Provides Potential Protection Against a Financial Dystopia

It’s Becoming Increasingly Impossible to Avoid Using Digital Payments

As we become more technologically advanced as a global society, the movement away from cash payments and more toward digital payments is becoming evident. While I do not predict a cashless society for some time (there are millions of arguments on both sides of this from a wide range of experts and completely clueless people alike), in the instance that we do move toward a society where it becomes prohibitively inconvenient or perhaps downright impossible to only use cash, the use case for cryptocurrency will again increase.

Governments Can Seize Your Money At Will

It’s already well-known information that most, if not all governments have the ability to seize and freeze citizens’ funds in their bank accounts at their sole discretion (yes, there are checks & balances in many countries — but those checks and balances are also facets of the government. So, ultimately it is deliberating with itself).

While many “advanced” societies have governmental structures that assert that it will only resort to such measures if it suspects that the money is being actively used in the commission of major crimes such as drug trafficking, white collar crime, or some other serious, nefarious activity, we have all of human history to show us that governments can and often do abuse their power.

At the very least, many negligently harm their citizens in the exercise of such powers at times. So, this ‘promise’ that we have been given by our ruling bodies, congressional caucuses and legislatures should be taken with a major grain of salt.

Combine the facts above in this section with the fact that the hypothetical world I described earlier in this piece where it has become prohibitively inconvenient to use cash isn’t really that far away, this should concern people. Governments can essentially destroy or serious impede or even censor those whom it decides to freeze or seize funds from.

What’s crazy is that this is reality for a lot of individuals today (See: KimDotCom; MegaUpload Founder Case).

If you talk to many folks in the United States or in Europe (where the outage occurred), many (not most) will say that the vast majority of their money is stored in their bank account or in the possession of some other third-party financial intermediary like PayPal.

So, if the government did freeze or seize their accounts for any reason, they’d be screwed.

How do I know this?

It Happened in Iceland

You might be tempted to think, “Oh, I live in __________. My country is peaceful and my government isn’t corrupt and I’m a law-abiding citizen. I don’t have to worry about my money ever being frozen or seized in any instance.”

It’s worth noting that this is what a lot of citizens in Iceland thought too before the Icelandic Bank Crisis occurred in 2008.

See the below excerpt from an article in The Guardian:

Source: https://www.theguardian.com/money/2008/nov/10/credit-crunch-savings-icesave

In other words, before the credit crunch hit Iceland, there was no reason for citizens of Iceland to believe their money was in grave jeopardy.

However, they soon found out that they couldn’t have been more wrong.

Then, this happened:

I urge all readers to closely review the last passage that I posted above here.

Essentially what happened here is that customers that had deposited money at that bank had their accounts frozen due to the bank’s negligent mishandling of their funds (over-leveraging, too many loans out at one time, etc. — we could write a book about what lead to it).

And this happened in Iceland.

This wasn’t some war-torn, under-developed nation that had been recently taken over by a violent, terrorist regime. This happened in a place with a peaceful, European nation with a well-established government.

And it screwed people and created panic throughout various parts of Europe as well.

See the video below to get a better understanding of this situation and its impact on the region:

To be clear, there are still customers that, to this day (at the time of writing), never got their money back from this fallout.

Below, is another excerpt from The Guardian article:

If the above situation plus Visa’s outage does not present, in itself, an incredibly compelling and strong argument for the use case of Bitcoin or cryptocurrency in general, I’m not sure what could.

Conclusion

This article was not written or meant to be taken as a “Why Bitcoin will take over the world!” type of piece. It wasn’t even meant to be a “Bitcoin is going to last forever!” type of piece either.

The reason why I wrote this article, was to emphasize the real-world importance of their at least being something like Bitcoin in place, if not Bitcoin itself.

No matter how you shake it up, we need money. Money is an essential facet of life. Unless you’re a subsistence farmer in the middle of nowhere (in which case, you more than likely aren’t even reading this article), you need money to live.

There’s no way around it.

Money is the cause of wars, the difference between someone living or dying at times, and the reason why many of us adults spend up to 50% of our entire lives working.

Money is security. Money is power.

So, when an idea comes around that proposes to give individuals a way to store their money in a manner where they can be sure that their funds are legitimate and that they won’t wake up one day and have their access restricted for whatever reason and that they can access it any time — we should take that proposal seriously. That’s not a Ponzi.

That’s a serious revolution in the world of Finance. And it’s a fact that many people have realized and it’s the primary reason for why Bitcoin has gotten as big as it is now.

The idea itself isn’t new. We’ve seen iterations of an electronic currency since the late 90’s when Wei Dai attempted to push bmoney. The only difference here is that Satoshi was able to bring that vision to fruition in a sustainable manner that actually solved a serious issue or at least gave folks a potential solution to it.

Now, I’m not saying that Bitcoin is perfect. It’s not. Cryptocurrency itself isn’t perfect. And there have been many times that we’ve seen it fall far short of its promise to live up to the standards set in the original Bitcoin whitepaper by Satoshi Nakamoto.

I’m not irrational or naïve enough to attempt to assert otherwise.

We’ve seen it be used for money laundering, drug dealing and other crimes that most civilized societies find intolerable. But perhaps that says more about us as humans rather than the nature of Bitcoin or cryptocurrencies.

We’ve also seen it increase the amount of globalization present on the planet, create a common bond between different societies all over the planet via one shared asset (altcoins aside), and expose us to an idea and a technological innovation that could may one day help us to solve some of mankind’s most pressing issues that we currently face.

So, yes, Bitcoin may not be the magic cure to all money-related ailments in the world.

But I be damned if it ain’t a huge step forward.

Disclaimer: This is not investment advice, I do not own any of the coin I am reviewing, nor have I ever and do not plan on doing so in the near future from the time of this article’s release. No one/entity/company/corporation paid me crypto/dollars/assets/favors or any other liquifiable asset/currency to write this article and I am neither profiting directly or indirectly from its curation. This article was not written under duress/pressure/threat/extortion or any other unfavorable condition either. I also do not possess any coins from a direct or indirect competitor of the coin I am reviewing and have no tied interest to the success/failure of this project. To reiterate, this is also not financial advice. I am not recommending any positions and any statements that happen to be made about such a position is nothing more than a reflection of opinion, not legal advice.

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