• 09 Nov, 2025 *

Genesis

Whilst the bailout of the banking system during the Great Financial Crisis marked the birth of Bitcoin, the bail-in of Cypriot banks in 2013 marked the first major cross over from the crypto subculture1 to visibility in mainstream finance. Bitcoin appeared on the radar of bankers and banker equivalents when the price buzzed across CNBC and Bloomberg screens rising by 638% in the first quarter of 2013.

2014 “Blockchain not bitcoin”

The economic design and incentives of Bitcoin are finely balanced to encourage even adversarial actors to play by a common set of rules and be able to arrive at a consensus on which keys control which coins2.

The early reaction from banks was an attempt to create alternative solutions rather than truly understanding the implications of the new arrival. The game was to appear relevant without needing to produce anything of use. A new mantra was coined which caught on and did the rounds at the time but anyone who was echoing “blockchain not bitcoin” could easily be identified as hollow and lacking a fundamental understanding of the regime change that was being seeded.

Attempting to separate bitcoin from its blockchain and trying to refit the latter into some archaic financial system was non-sense. It was as absurd as taking a filament from a lightbulb and applying it to a candle.

The vocal majority of finance guys doing the rounds on the circuit didn’t have the prerequisite appreciation of the beauty of the design of Bitcoin but were vocal enough and loud enough to fill the mainstream vacuum at the time. From the perspective of the lay person, it may have looked like finance had heisted blockchains and buried Bitcoin but the irony was financial institutions were positioning themselves to suffer tens of billions in opportunity costs and lost potential value through a lack of courage and curiosity that would eventually be reaped by companies like Coinbase, Binance, Circle, Bitfinex/Tether etc.

The view at the time was that the blockchain could be decoupled from a cryptocurrency and used to create some unspecified efficiencies in the middle and back offices of banks. There were a couple of core reasons why this wouldn’t be so.

In (most) cryptocurrencies the blockchain is critical to trace a full record of ownership of coins in order to agree on which keys control which coins3. There is a consensus mechanism to add blocks to the chain and to agree on the “true” states.

If we consider an individual bank running its own internal blockchain, it’s superfluous because the bank already trusts itself. If we consider a group of banks that are already coming to a consensus on their positions (via audits, reporting etc) then there is no need for a blockchain; there isn’t even a need for blocks. If all parties trust each other, then a shared ledger (or database) that any of those parties can write to can have some benefit for additional transparency. However, this would be a distributed ledger (DLT), not specifically a blockchain. One could argue a DLT is not even needed, because the parties could use a classical database hosted in the cloud that each of them could directly access with logs of which users updated which records.

If we consider the case where a group of banks don’t trust each other and want to use a blockchain to share their positions then there needs to be an incentive for proposing the truth (in Bitcoin and Ethereum, these take the form of block rewards and transaction fees paid in the native coin) and a cost to propose what the truth is (energy used to mine in bitcoin and slashing in Ethereum). Without at least these two factors included in a protocol for trustlessness, one would always need to either trust all parties which could be done via a cloud hosted shared database or it would be impossible to come to a consensus across parties with zero trust between them. In short the blockchain not bitcoin crowd were being intellectually dishonest which led to a decade of aimless retrofitting.

We’ve got McDonald’s at home

The pressure was on the industry to prove it hadn’t been sidelined; that this new technology could somehow be absorbed into the natural workflows of the incumbent banking system without missing a true step.

Not many banks were brave enough to go alone so they grouped up into a useless beast called the R3 consortium4. Despite all the marketing at the time about “blockchain not bitcoin”, they were riding a DLT. The relatively forward thinking banks left the consortium whilst the most crypto feeble remained and tightly hugged each other for comfort.

In fairness, JPM was foresighted enough to leave the R3 consortium in 2017 and create Quorum; a fork of Ethereum and an enterprise grade EVM chain although by 2020 that had been sold to Consensys. More banks should have been braver and individuals in those banks who recognised what was happening should’ve been more vocal.

After a full decade of achieving nothing that anyone cares about, the R3 group has hobbled back into the limelight with involvement in the regulated liability network which was recently renamed to GBTD; at least in the UK5.

The second major bull cycle for crypto in 2017 birthed talk of central bank digital currencies (CBDCs). Again repeating the same pattern of seeing crypto do its thing then claiming some sophisticated variation of “we’ve got this other thing that means we don’t need crypto”. CBDCs are as irrelevant now as they were in 2017. Where are those proponents and what did they achieve in those eight years since? Some half baked lazy pilots? There was never an inner drive to truly achieve anything, but merely to look relevant each crypto cycle. As smart contract talk emerged with the token driven cycle of 2017, the lexicon would leak into TradFi circles in the following years with hopes of programmable CBDCs.

The deep bear market of 2018/2019 crushed the swashbuckling crypto spirit, rinsed weak hands and tested strong hands. Unsurprisingly, a turn in the market was enough for TradFi to lose interest until the 2020/21 phoenix-like crypto resurgence where decentralised finance came to the fore and Saylor first proselytised Bitcoin as the ultimate asset. By now TradFi was using the term digital assets which became a catch all for anything that lived on a blockchain or ledger whether it existed in a live environment or not. A new comfort blanket had arrived.

Stablecoins, originally cast as a solution to help bitcoin traders move in and out of positions, started to find use cases in emerging markets, for remittances and for online tipping of streamers. Stablecoin providers started looking more like full reserve banking, somehow crypto had re-Austrianfied the dollar6. The disallowance of stablecoin providers sharing interest income with “depositors” made them very profitable businesses with Tether now said to be valued at $500bn7.

A new narrative occupies TradFi every cycle with unfounded and unbounded confidence that some newfound scrap, so confidently clutched, is “an alternative solution to this crypto thing”. Now TradFi is dancing at the periphery of native crypto with CBDC talk still somehow continuing in the EU, RLN/GBTD in the UK, stablecoins in the US and countless other initiatives that are everything but native crypto. No-one is knocking down doors demanding that CBDCs or tokenised deposits should definitely exist, but retail do change banks purely to access crypto more readily.

Salience

Native crypto is the innovation. Centralised exchanges, stablecoins and dollar off-ramps exist on the boundary of crypto but are not truly crypto. The risk to and the eventual successor of the traditional financial system exists within that boundary and that boundary is ever expanding. Bitcoin was an idea way ahead of its time; a prochronism that was too readily recognised by the eye-catching exchange rate with the dollar rather than Bitcoin the protocol. The price of bitcoin has nothing to do with the Bitcoin protocol. The second hardest bar Saylor ever said was that Bitcoin is nature8. Bitcoin is nature. I maintain that that would have been easier to recognise if 2023 level LLMs had appeared before Bitcoin.

The marriage of AI agents and crypto will unlock new payment possibilities9 including continuously streamed payments, payments for millisecond contracts, sub-cent payments, faster finality and trustless settlement. Any direct mirroring from legacy finance to crypto proxies like stablecoins or tokenised deposits will increasingly struggle to map one-to-one with new use cases. Open systems that can harvest ecosystems for developers are key to accelerating growth and progress. We need open platforms upon which anyone can deploy smart contracts immediately and innovate.

Over the coming decade(s) the majority of code may well be written by agents, perhaps even fully autonomously with agents eventually succeeding us and deploying their own smart contracts. Most payments won’t involve a human and the agent to agent economy will be an order of magnitude greater than the human to human or human-agent economy. TradFi and fiat currency implicitly assumes the economy will always be human dominant. A future where autonomous hardware or software mines, stakes or generates crypto for agent to agent interactions that may only exist for fractions of a second, with trillions of such transactions occurring in parallel will outcompete the legacy economy. There will be no choice but to participate in it.

From the perspective of TradFi, digital assets are seen as adding new technology to its repertoire in the same way internet and mobile banking was incorporated. It’s almost like modules being added onto the existing system like lego blocks. But crypto grew out of hardcore subcultures and it’s really those subcultures that are diffusing into the mainstream and carrying a vision of a fundamentally different basis for how value will be exchanged in the future. It can’t be added on as a module. It has to be the foundation and the centre piece.

Ultimately technology is defined by efficiency in resource usage that ties back to a physics based primitive whether that be less use of time, matter or energy. All major technological trends are underpinned by efficiency in resources. As the limits of determinism are reached, technological efficiency is stretched further through having just enough randomness; having some probability. Whether one considers physical reality or current artificial intelligence, each of them are based on probability with quantum physics and transformer based token generation respectively. It would come as no surprise that when finance, trust, and consensus are pushed to the limits of efficiency that the answer would also be probabilistic. Bitcoin unifies money, energy and computation into one elegant set of rules with a protocol based upon probability. It’s not out of the ordinary to think that’s a more likely basis for the future of finance10 given all the technological trends in play vs whatever version of Basel is now being scribed.

For TradFi the path of realisation may well be a journey starting from “blockchain not bitcoin” to CBDCs to stablecoins / digital assets to conclude with native crypto. Whoever in TradFi realises it first would be at great advantage. There will be hard choices for leaders of TradFi institutions to make in order to truly win over the next decade and I wager most won’t dare make them. My advice to all the crypto illiterati, who cling to all these extraneous terms for comfort is: don’t be afraid to say crypto.

Notes

At least as it pertains to post Bitcoin times. There was the 90s eCash experiment which was surprisingly ahead of its time involving banks such as Deutsche Bank, Credit Suisse and many others. A more recent implementation is discussed here at Nostr World.↩ 1.

More precisely spendable outputs at the end of a chain of transactions; the coins don’t actually exist as a standalone element.↩ 1.

More strictly, in Bitcoin the set of unspent transaction outputs (UTXOs) defines ownership, whereas in Ethereum a single global state records the balances and contract storage of all accounts.↩ 1.

In the same year as the Ethereum ICO but with 1/100000 less impact on the world over the next decade despite raising more capital than Ethereum over its lifetime.↩ 1.

If you read the original regulated liability network paper, it’s immediately apparent that an L2 on Ethereum solves, in the general case, what RLN is attempting to do.↩ 1.

At least when passing reserve audits.↩ 1.

At the time of writing, similar to the latest OpenAI valuation and more than half the value of JPM.↩ 1.

Of course the first would be “There is no second best”.↩ 1.

Payments aren’t the limits of what crypto will become, but the most easy to recognise for the lay person.↩ 1.

One could debate whether bitcoin and proof of work coins use more or less energy than incumbent alternatives.↩