Bitcoin Forum

Reading about this years Nobel laureates I stumbled upon the the theory of Creative Destruction. It is an old theory published first in 1942 by Joseph Schumpeter and explains how innovations replace older technologies, creating value on the way, and thus ensuring the survival of capitalist economies. This year the Swedish Rijksbank Prize for Economic Sciences went to Philippe Aghion and Peter Howitt who have applied the theory on the development of modern societies through technology.

I thought Bitcoin fits quite well into this very basic model, and thus I'm wondering if it was already discussed here.

Bitcoin comes as a "new type of money", i.e. as a financial innovation. Can it "creatively destroy" its predecessors? And what are its predecessors? Fiat money, or other kinds of assets?

Schumpeter's theory says basically that the essentials of creative destruction is a new combination of production factors (like capital and labor). For example, AI is an example where certain kinds of labour (e.g. writing and graphic design) can be replaced by capital (investment in computing power), leading to a "recombination" of these production factors. Graphic design studios for example have to adapt, e.g. concentrating on high quality design or offering AI-assisted low quality design, or they will probably die. Both alternatives are less labour and more capital intensive, so the whole sector will change, but in the end they will deliver more value.

How fits Bitcoin here? Many people for example think that Bitcoin could replace banks, which would be essentially such a process of "creative destruction". I don't think it will replace them entirely (risk scoring and loans are very difficult to replace, for example), but IMO it can lead to some of banking's services, like SWIFT for international transfers, certain payment services, but also (if Bitcoin stabilizes) retail and company bank accounts. Bitcoin is far less labour intensive than banks, so the process would be similar to the way AI replaces or "enhances" some creative industries in the present.

It's interesting though that Bitcoin seems to be also less capital intensive than banks: while there are investments in mining and also in development of services (who sponsor Bitcoin development too, e.g. in the case of Blockstream), banks have even higher capital requirements, think of all the office space they occupy. So Bitcoin really could boost productivity in the financial sector and be perhaps even more revolutionary than AI.

In the case of fiat money, I think it is questionable if Bitcoin can replace it. Fiat's "innovation" was to adapt money supply to real economic growth without the "limits" of an asset like gold. I can perfectly imagine a "Bitcoin standard" society, but in this case I think there would be replacements to fiat -- and if we think of a crypto-only economy, this would be a strong altcoin sector with continuously growing total money supply.

There are several details to discuss here but I don't want to get the post too long, so I leave this for the discussion. I will also try to look into the work of this year's Nobel laureates to know if their adoption of Creative Destruction can be applied to Bitcoin.

There are some common similarities that we may be able to apply and compare fiat to Bitcoin existence, but we should know that they entire pattern of introducing Bitcoin does not aligned with what we already have with fiat, but if it happens as intended, it's either we have both to exist and each individual will have to decide on which one they wanted and how they are going to make it more applicable on their demands.

Talking about the value of bitcoin, the incessant printing of fiat currency and inflation altogether, we should be able to arrived at a conclusion which permits that the more we continue with the way of using fiat, there's obvious reasons not to have a change from what has always been, but bitcoin serving an alternative will make everything balanced on an equal rights and access towards a decentralized network, whereby the Bitcoin value continue to increase over time instead of continuing mining without limit, everyone will eventually have Bitcoin even after the 21 million has been completely mined, because it will always increases in value instead of continuous mining as they do with fiat.

Bitcoin indeed can `creatively destroy’ it’s predecessor which are fiat in terms of currency use and gold, silver or stocks in terms of investments and the predecessor that will probably experience the ultimate destruction is the fiat money because many people back then before the creation of bitcoin consider fiat currencies as their primary store of value(to easily save and spend)…precisely most people especially in the rural areas that don’t have direct access to the stock market, banking system or gold and silver to store their values consider storing their values  in fiat currency because it is probably the easiest option available to them and then the currency end up losing its value due to inflation. Bitcoin on the other hand offers decentralized and borderless network that doesn’t limit anyone from using it and it being appreciative over long period of time makes it perfect for the people in the rural areas to store their values instead of  storing it  in fiat.

When bitcoin will eventually go mainstream those rurals will store their values in bitcoin, when they fully understand the system and how it works. They will only keep their spendable money in fiat

Even currently I might say bitcoin has creatively started destroying fiat money especially in the scenarios as I mentioned above.

Yeah I saw one similar topic earlier today that discusses about Benner's Theory & Bitcoin (https://bitcointalk.org/index.php?topic=5562287.msg65919169#msg65919169) which Bitcoin has come to existence as evolution to potential volatile asset following the specified theory.

Back to the discussion... Before Bitcoin came to existence in 2009, there has been speculations that there will be a currency that will be in used by everyone and it was dma skeptic how this can be possible when the traditional currencies is there and monetary is at it high regulations where every countries imposes their own policies.
But as today's has come that era with Bitcoin being usable by anyone and can send fund through it digital system across borders with a very low fees.

So it digital accessibility, use cases and potential values got it (Bitcoin) an oversight as one of those evolution and modernized monetary values

The adoption of creative destruction theory is gradually working with Bitcoin but not completely, there are some factors that you have already listed such as loans, risk and elimination of Fiat money.

In some country like mine, we already know that there won't be a total elimination of Fiat money and can not be replaced completely with Bitcoin because there are localities in my country that has big general markets where the traders are mostly older men and women and some younger uneducated ones too who are selling some of the locally most wanted food materials in those markets.  
       These sets of traders wants payment to be made to them in cash, not even via mobile bank transfer or the use of credit or debit cards on point of sales terminal but they demand for cash, they feel they are more safe with receiving cash and then going to the bank to make deposits of the cash received from payment but that's if they want to, and they are also ready to visits the bank or ATM to collect cash too if they want to. They have not passed the stage of relying on Fiat money so it will be very difficult and would take so many years to completely convert this people. I know that it's not just in my country that we have this kind of people.

Speaking about the adoption of creative destruction in using AI for text writing or graphics design, this is something that its importance is widely seen in the industry of graphics, data search and test writing, and the adoption of AI in that industry is not really a big deal for the government to approve of it.
          Meaning that it is not the same thing as Bitcoin which has to do with finance and requires so much scrutiny by the government before bringing forth a strong system that supports the motion of Bitcoin to replace banks and Fiat money. Bitcoin will become more centralized if there is Bitcoin bank where people will go and entrust their coins holding.

 But already (lately), so many people are preventing their selves the stress of using banks for some foreign transactions and they are now using Bitcoin for most of their transactions. Some businesses too in some countries are accepting Bitcoin payment and in terms of asset investment, many people have shift to Bitcoin investment. That was why I first said that the adoption of creative destruction theory is gradually working for Bitcoin because we can see how people are making use of the Bitcoin for transaction and also holding it as investment instead of using other things.

Or, do Bitcoin have to completely eliminates Fiat money, eliminate banks and be adoption by everyone as an asset of investment before it will be seen that theory of creative destruction has taken place?

Reading your opinion, about creative destruction, I immediately thought about economic evolution, innovation, and creative destruction itself. Some time ago, I read a quote from Tom Peters that read, "Destruction is job number 1 (before the competition does it to you)."

I believe Bitcoin is the result of a technological phenomenon, an economic process, and a civilizational event. In a logical sequence, Bitcoin begins with a vision (visionary), triggers innovation (technology), and produces creative destruction that fuels the evolution of the global economic system.

This is the basis of my thinking:

Creative destruction is merely a mechanism, not a driving force. Its initiators describe it as a process that continuously revolutionizes the economic structure from within, destroying the old and creating the new. They also emphasize that what drives the machine is not the mechanism, but the entrepreneur-visionary who creates the disruption. So, without an agent who dares to think outside the old structure, creative destruction is merely potential, not movement.

Every process of creative destruction begins with the radical vision of someone who sees the world differently. Satoshi Nakamoto didn't just write code; he wrote an economic manifesto that rejected central monetary authority after the 2008 crisis, with a primary vision of individual financial independence and distributed trust, not his blockchain technology. Satoshi created an ideological narrative that challenged the status quo. Bitcoin was born from a visionary perspective, not from a typical market experiment, but from an ideological belief in a new system. Once the visionary initiated the disruption, a process of creative destruction took over, as radical innovation challenged the old model, markets and regulations reacted, and old institutions were forced to adapt or collapse. At this point, the visionary shifted to become the architect of a new ecosystem.

Satoshi realized his vision with concrete technological innovations: he combined cryptography (hash + signature), distributed ledger (peer-to-peer network), and game theory and mining incentives (Proof of Work). This proved a new way of combining technologies into a trust machine. With this, Bitcoin was not just an idea, but an innovative product that functioned without trust institutions. Bitcoin also marked the birth of a new paradigm: digital scarcity, something previously impossible in the digital world. At this point, Bitcoin was the result of visionary innovation, the technological manifestation of an ideological vision.

Once Bitcoin was live and widely used, it began to gradually destroy the old structures. It challenged the monopoly of money by central banks, shook up the banking model, and changed how society understood value, ownership, and trust. It encouraged countries and global institutions to create their own "centralized" versions. This was a phase that was both destructive and creative: destructive because it shook up the old monetary order. Creative because it forced the system to build new forms (DeFi, stablecoins, asset tokenization, digital IDs). Here, Bitcoin became a catalyst for creative destruction, changing not only financial technology but the global economic power structure.

After the initial disruption, came a phase of selection and adaptation. Many innovations were born from Bitcoin's inspiration (Ethereum, DeFi, Layer-2, CBDCs). Regulations and financial institutions began to adapt, some rejecting it, others integrating it. The global financial ecosystem began to move toward coevolution between centralized systems (CBDCs, banks) and decentralized systems (crypto-native finance). This is where the evolutionary phase of the digital economy begins. It is no longer a matter of "Bitcoin versus the system," but a matter of how the old system evolves with the new DNA introduced by Bitcoin.

So, Bitcoin is the result of a visionary innovation that triggered a process of creative destruction and is now a catalyst for the evolution of the global digital economy. Satoshi Nakamoto = visionary (agent of change). Bitcoin = innovation (tool of change). Creative destruction = the dynamics generated by that innovation. The evolution of the digital economy = its long-term consequences. Bitcoin is not simply the result of evolution, but rather a mutation created by a visionary innovation that ignited the process of creative destruction and forced the global economy to evolve into a new form.

I do agree with gold and silver a bit. I think they will not completely be destroyed, because they have "real" demand from different industries (jewelry, but also technology). I guess however that a lot of their "speculative" value (monetary premium) can be taken away from Bitcoin.

However I don't know if this really fits in the theory of creative destruction. Well, we have a business sector dealing with gold and silver as store of value assets (e.g. businesses that certify the authenticity of gold), and this one could be replaced by the "completely automated" Bitcoin sector. But I think this sector is very small, so it doesn't really affect the whole economy that much like a "replacement of banks services" would do.

I don't agree at all about stocks. Stocks are nothing more than owning part of a company, and so they will always exist as long as corporations exist. There is perhaps some monetary premium Bitcoin can take away but not much imo. And making stocks a bit cheaper will not provide more productivity or value to an economy.


Fiat can also contract, not only expand, if banks give away less loans. This has happened in history even if the long term trend of fiat money supply was mostly growing.

Thus if fiat loses importance or demand, it isn't necessarily the case that it loses value, as the Central Banks could simply restrict access via high interest rates. However, if this process is too fast, then indeed the system could collapse.

But as I wrote in the OP, then some kind of "expandible money" would replace fiat, because it is easier for the economy to grow if there is an asset that is stable in value but expands with economic growth (due to a lot of psychological effects, for example the "feeling good" if you earn more (either as a business or a worker), if you're interested I can delver deeper). And we have already altcoins that do that in some way.

So what could happen in theory is altcoins replacing fiat, Bitcoin replacing a part of Gold/Silver "store of value" qualities, and both replacing a part of the bank services.

Regarding possibilities for people in rural areas I answer both you and @Mrbluntzy with a similar doubt:

I agree that cash could be potentially demanded for much longer than we might think. This is not only due to older generations, but also because cash's privacy is unmatched, it is probably even better than the privacy of coins like Monero or Grin. In many developed European countries thus cash has still a huge demand, and when I visited Europe the last time, there were indeed some businesses which only accepted cash! In South America this has become very rare, people unfortunately don't care that much about privacy here.

But what we could imagine is a kind of Bitcoin-based cash. If the State officially issued counterfeit-proof Bitcoin "banknotes", just like Casascius coins but with much higher security, then both privacy and the "resistance to technological change by older generations or rural people" would be possible to be delivered by the Bitcoin currency.

I think you refer here to that people wouldn't want to store their coins in their own wallets, but need a custodian (e.g. to be safe when they lose their coins)?

Yes this is of course a challenge, but I think Bitcoin contracts offer still some very underexplored methods which are almost as safe as storing the coins at a bank, like vaults (addresses where you only can spend your coins to a group of "approved" addresses, so it is very difficult to steal them). This is currently quite complicated but could become easier if convenants (https://bitcointalk.org/index.php?topic=5561784.0;topicseen) were approved. So the need for a "Bitcoin bank" or a "trusted custodian" is perhaps not that big as many think.

I don't think so. My understanding is that even if Bitcoin only is able to "destroy" a few financial services improving productivity, like remittances, it would already a "creative destruction" process and the theory would be applicable to BTC. Of course, the more it can destroy, the better (if no quality like privacy is left behind ...).

The value of silver increased greatly because of the high demand for industrial use. It is a for the production of solar panels, batteries and also in the medical field. Bitcoin might not replace these precious stones because their demand might keep increasing. 

The transition from fiat to cryptocurrencies will be gradual and longer because of the nature of fiat. Access to the internet in gradually increasing in developing nations, but about 2.6 billion (https://www.weforum.org/stories/2024/01/digital-divide-internet-access-online-fwa/) people worldwide do not have internet access as of last year. I also assume that the rate of people who don't have access to phones is also high. Fiat will keep dominating in some areas because of its simplicity.     

Nice write-up, I agree so far, above all about the idea that there need to be visionary agents to change the system.

However I think your vision sounds more like 2040 than like 2025. :) We currently unfortunately do not know how far the "creative destruction" process initiated by Bitcoin can reach. We do have hints that it is changing the economy, but for now this remains speculative. For example, the remittance business would be in theory one of the most challenged by Bitcoin, because remittances are so overpriced. Well, it seems that it isn't that easy. Western Union for example has even risen their fees in the last years again after they had perhaps seen their model threatened and lowered fees in the early to mid 2010s. And I think most know that the El Salvador attempt to decrease remittance costs wasn't as successful as expected.

The only sector where Bitcoin is excelling is in the "store of value" department, but due to its high volatility it remains much more speculative than gold or silver and still isn't ready to enter a creative destruction process even in this field.

Maybe we need a new generation of visions to extend the use case spectrum of Bitcoin?

It is however also possible that the stars align alone, for example if the investment model changes from "riding the waves" to DCA and institutional investment. If the next bear market doesn't go as low as expected (<50-60% since the ATH), we could be at a tipping point actually, where Bitcoin isn't anymore seen as an ultra-risky asset only to ride the waves, but actually is developing at least into a "mildly volatile" store of value ready to challenge gold and silver. (See also this thread (https://bitcointalk.org/index.php?topic=5513345.new#new)).

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Yes, this is possible, above all in the case of silver where a bit more than half of the demand seems to come from industry (according to a quick web/AI search). So the "monetary premium" for silver, i.e. the part of the price which is driven only by investment and speculation, is lower than for gold, where industrial usage is less than 10%.

However, if there is a strong movement of funds from gold towards Bitcoin, it's possible that also silver could suffer a lot, because both could enter a longer term trend change, which could result in panic. Both silver and gold could crash to about 50% of their previous ATHs, as even in silver the monetary premium is significant (if 40-45% is investment/speculative demand).

Regarding internet access being an obstacle for Bitcoin adoption, read my previous answer to @Mrbluntzy: a similar degree of simplicity could be achieved with a "paper" or "cash" version of Bitcoin (basically paperwallets with watermarks and other security elements, just like current banknotes, and better than Casascius coins).

People have more choice than just Bitcoin, other cryptocurrencies offer lower fees and faster transactions. Even Bitcoin run in lightning network, but the way I see many people prefer to use stablecoins run in SOL, BSC, or any other less known network.

The strongest power that Bitcoin have is decentralization, unfortunately that power can't be seen easily unlike AI which can create a long text or graphic just in few seconds.

We have to wait until big centralized assets like banks, IPO companies, etc to fall and have a problem in withdrawal, then people will migrate to Bitcoin and it will destruct any centralized assets because people don't see it's safe anymore.

Bitcoin/crypto can bring a revolution to the financial markets, not the traditional banking sector(loans, mortgage, etc.). I've heard rumors about implementing blockchain technology and tokenization in the stock markets, but I don't know if there are any actual plans for such implementation. If you are connecting crypto to creative destruction, you have to ask the question "What does crypto actually destroy?" Is it fiat money? Is it traditional banking? International money transfers? I don't think that any of these are damaged or destroyed by the crypto world. Fiat money and traditional banking are still as popular as they were several years ago. Maybe the crypto industry doesn't create any "creative destruction".

From my understanding, Bitcoin is a significant innovation in financial applications, similar to how other technologies operate. Mostly, it could replace what we currently have, but the innovation here is hard to replace and might be expensive to replace.

It's similar to how CBDCs are emerging now, as this is one of the digital alternatives that complements BTC. This assumes that anyone can follow and apply it, but numerous barriers exist. We all know that this is disruptive technology. We all want to have decentralization here.

This somewhat reminds me of "The Bitcoin Standard by Saifedean Ammous"

The Schumpeter's creative destruction theory is actually inevitable when you look at the contemporary society and how AI and some other modern technologies are springing up, especially in the Banking sector. at the moment it is capital intensive for you to run a Banking successfully, operational cost alone deep it's hands into the coffers of the annual profit of the bank, that's why they are always in need for people to come and obtain loan so they could make profit. so factors like this can actually make the bank to shift grounds to accommodating bitcoin to supposedly reduce cost as they will have less workers and few Bank branches, and also with some of the factors you've enlisted like the swift international transfers and the rest can actually be done with the use of AI.

 However this process will take a lot of time because there are some economies of the world that are heavily dependent on fiat especially when it comes to day-to-day transaction with business owners, I feel what bitcoin needs to get to that stage is for the creation of local laws that protects its usage just the way we have for fiat, that way Bank can easily switch into adoption, and it will easily snowball into the local economy as locals will be educated on how to make transactions using bitcoin as they will be transiting from fiat usage to bitcoin.

A new kind of asset won't replace the old ones as long as the old ones are still profitable. So I don't think there will be any replacement of assets because of Bitcoin. There may be a shift years later, but as long as those assets stay profitable, they will always be there.

As for fiat, I believe Bitcoin can replace it, but it has one obstacle, and that is a very big obstacle. Fiat is backed by the government and state. It is a currency on which the whole economy of the country is based. The government, who are usually the most powerful people in the country, won't want their source of power to be replaced, and it is because of this I believe bitcoin will never replace fiat. With fiat, the government has control; they have power. They can print as they like, and nobody even knows where a big chunk of the printed money goes. If the fiat currencies of countries were things not owned and controlled by governments, if they were things owned and controlled by private companies, Bitcoin would have had a better chance to take over.

That leads to why Bitcoin won't even be accepted as a currency by the government. The government may allow people to use the currency as they want, as long as it's a very small number of people. They won't come out and officially make it a legal tender like El Salvador did. This is because making it legal tender will push more people to use bitcoin, thereby abandoning the fiat currency of the country, and when this happens, the currency might lose value due to reduced demand. Since the government won't stop printing, and when you add that to a reduced demand, the fiat currency will take a nose dive, and the government will try to avoid that by all means.

I understand what you're referring to: the psychological and structural transition of Bitcoin from a speculative asset to a modern store of value. One of the fundamental arguments for Bitcoin's immature status is its volatility. However, from a selection tool perspective, volatility actually filters out diamond hands and eliminates weak speculators. If Bitcoin enters a widely recognized digital store-of-value status—marked by a shallower bearish correction and institutional adoption coupled with a sovereign reserve—then we face a structural shift in the global monetary architecture that has the potential to reduce USD dominance, trigger monetary policy versatility, and overhaul sanctions mechanisms, international liquidity, and energy geopolitics. Bitcoin, initially an alternative, is becoming a new baseline of value, free of charge. But all of this requires global collective confidence.

From being considered a digital toy to being recognized as a risky asset, Bitcoin is now entering a phase of value consolidation and volatility resistance, marked by its initial absorption into the global financial system (via ETFs, sovereign reserves, and corporate treasuries), while still maintaining its decentralization and anti-inflationary identity.

Could I also conclude that further creative destruction is occurring in the form of psychological destruction of investor consciousness? From FOMO to FOHO. With DCA, self-custody, and institutional adoption, it's evident that the speculative mindset has been destroyed and replaced by a visionary mindset, signifying the birth of true digital gold. As Bitcoin's volatility structurally decreases, it also means the world is starting to treat this digital energy like physical gold. Bitcoin is a future-based store of value (digital and algorithmic energy).

I imagine a world like this: some countries have 1–5% of their foreign exchange reserves in Bitcoin, and tens of millions of individuals regularly conduct DCA every month. In that scenario, Bitcoin becomes a parallel global value layer, not a total replacement for fiat, but a support that is no longer ignored. The economic power structure shifts from a single axis (USD-centric) to an alveolar one: multiple centers of value that complement and compete with each other. Political influence doesn't disappear—it simply changes form: from control over payment channels to control over energy infrastructure, custody, and interoperability.

Creative destruction presupposes that innovation occurs within a system. Bitcoin is interesting precisely because it's building a parallel system without nearly destroying the banks as much as rendering them unnecessary to people who can afford the cost of volatility

The labor/capital recombination that you are describing lacks the coordination layer. Banks don't just move money. They enforce property rights, reverse fraud, mediate disputes. Bitcoin replaces that with "code is law", which works beautifully until it doesn't and then you're just screwed, no appeals. That is a trade-off between institutional overhead and individual responsibility. There are individuals who will accept that offer. Most won't

What is really Schumpeterian about Bitcoin is that it is compelling legacy finance to innovate. Stablecoins, instant settlement rails, 24/7 markets, none of that happens without Bitcoin proving there is demand out there. The destruction is not Bitcoin killing banks. It is Bitcoin that is pushing banks to eventually compete on speed and ease rather than regulatory moats

The fiat question, however, you are correct that fixed supply does not go with elastic credit systems. However, that is the whole ideological argument of Bitcoin design. Whether rigid money supply either creates prosperity or deflation spirals is an empirical question, which we cannot answer until someone actually tries it at scale. At this point it is only competing religions

I would say that bitcoin isn't one of those. The idea of creative destruction is that you would have to innovate a new method, and get rid of the old.

For example, we used to listen to music from cassettes, and then we moved to cd's and now moved to our phones and whatever else I guess. We got rid of cassettes along the way, destructed.

So in this case, for bitcoin to be one, it has to be an innovation that we got rid of the old way, while that is not currently happening, I also do not see any way it can ever happen.

Fiat would have to be gone and we would need to use crypto in order to keep going, and that is not going to happen.

Not now, not in the future, nations needs to keep their fiat to stay strong.

 About loans for small scale there are already several loan services here in the forum that operates with Bitcoin, although this might be small scale but can be the foundation for a bigger service in the future, I don't think Bitcoin can completely replace banking because there are people that for their own reasons won't switch from the traditional banking system.

Will Bitcoin creatively destroy the banking system well I ont think so because the banking system and the financial sector is always open for flexibility to accommodate growth, I don't think the banking sector will be destroyed but rather the banking sector will keep on expanding in way to accommodate Bitcoin and crypto-currency into their system, this may be a threat to anonymity and decentralization but as Bitcoin gains popularity the banking system will be trying to adapt to the new reality.

Bitcoin which more a store of value than a payment coin, is more about safeguarding the system than its destruction.
The stable-coins being centralized won't destroy a system they are built for either.
 
instead of the Theory of Creative Destruction its more the innovator's dilema:

I don't know what you're referring to here. In most countries it is perfectly legal to pay for most goods with Bitcoin, and governments and legislatures have already regulated it, so it's not "because they don't know". So technically this "barrier" in most countries (except some dictatorships like Turkey) doesn't exist.

What is FOHO?

This can indeed happen, I think. Bitcoin would in this case not replace fiat, but become a "source of fiat stability". It would perhaps slowly grab some share away from gold and currencies like the USD used as "reserve currencies", without completely destroying them. As I understand the Theory of Creative Destruction, such a "full destruction" is also not necessary for the concept to apply: it is sufficient if a relevant pattern (in this case the "USD-centric" reserve market) is changing into another pattern.

I agree here, banks can of course even try to capitalize from Bitcoin's boom and offer custody services for those not caring about Bitcoin's trustless qualities. But it is likely that if clumsy services like SWIFT are replaced by Bitcoin, the efficiency of the banking system could increase significantly. Probably Bitcoin is still too volatile as hedging costs are too high, but I already doubt it if the volatility stays at current values (~1-2% for 30/60 days).

Exactly. I also agree with your remark about the deflation/inflation religions. Perhaps Japan with its extremely low inflation and temporary deflation while holding its development level shows that the deflation camp has some arguments. But of course still Bitcoin's deflation is extremely high, in the case of Japan we're talking about at most 1% per year.

@Webetcoins: As written above I don't think it is necessary for Bitcoin to destroy fiat for the theory to apply. It's enough if it manages, for example, to destroy SWIFT or Western Union.

IMO P2P lending services based on fiat are still much bigger, and that's of course because Bitcoin is too volatile to really make sense for "real life" lending (e.g. if you want to build a house, not speculative lending). DeFi and trading strategies like short selling are the only lending sectors that could make sense in the present. I think lending will be probably one of the last sectors which will be "destroyed" by Bitcoin, if it will ever.

Interesting take, although I don't understand what you mean by your remark about stablecoins. Stablecoins are at most a transitional technology in my opinion, not a core concept of the Bitcoin ecosystem.
Basically you would then say that coins that are used for payments (LTC? XMR?) are more disruptive, or do I misunderstand your idea? If you want you can elaborate ...

Yes, it is allowed in most countries, but not officially. The government did not announce that its legal tender. If a certain kind of paper today gets some value worth more than the dollar, and people start accepting it as a medium of payment, the government might not object, but they won't make it legal tender. The government can't make it illegal because it's a free country, and also because they're not committing any crime by using it, except in a dictatorship, like you said. As long as the person accepts it for payment, it's his business. It is regulated and free to use, but it doesn't mean it can creatively destroy its predecessors because the government won't let it. That is what I mean.

So, the government in this context is the barrier. If both fiat currencies and Bitcoin were currencies not printed, controlled and backed by the government or state, Bitcoin would become the leading currency of the world in terms of usage for transactions. So my point is, the government is what will not allow Bitcoin to "creatively destroy" fiat.

None of the coins will disrupt the system. Stablecoins being issued by a company could end their existence tomorrow. 15 leading states prohibit the stablecoins,plus the country issuing their company shell closes the office.

Litecoin and other DEX coins (mostly forks of Bitcoin) cannot be shut down.
Their danger lies in a total collapse of the system, ww3 event and no more internet, a back into caves event.
Should you wish to read the book the innovator's dilema? just reach out.

Okay, so you refer to the obligation of merchants to accept it which makes fiat unique (due to the legal tender status). In some countries like Argentina it is however now allowed to freely enter contracts where the payment has to be done in Bitcoin (or other assets). This doesn't mean it becomes legal tender but it is a step in the direction to consider it a currency and not only a payment method where the "base" of any obligation is still a fiat value.

It can only be speculated what happens if Bitcoin usage as a currency became more common and threatened the leadership of fiat. My guess is that a law would be needed to restrict payments in this case, and this could become difficult to pass through the parliament if crypto users are already a big voter group.

I think I get your point about stablecoins, but I think for the reasons you mention (they are centralized and can easily be if not shut down but weakened significantly) they aren't really a technology leading to significant creative destruction. They currently are mostly used either as a trading tool on exchanges (including "temporary hodl") or a niche fiat replacement in countries with exchange restrictions.
The "innovator's dilemma" (I read a small summary) could however applied to them to some extent, as they created a new market. However, this market isn't making big companies in the financial sector fail.

Bitcoin is also creating a new market with new customers, the "Bitcoiners", who will not be reachable that easily for the fiat world. But as of now it isn't attacking old business models either. I guess if I understand the Innovator's dilemma right, it could do so in the future.

In reality I think the innovator's dilemma can be one specific sub-category of creative destruction, or not?

It's been a while since I heard someone speak about creative destruction almost forgot the term.
Personally feel it's radical, especially with individuals growing knowledge and trying to adapt rather than become obsolete by growth in technology
So I believe what we see more now is Creative Adaptation .


While with Bitcoin relationship with Fiat, I'd go with Disruptive Innovation by Clayton
New entrant
Targeting a niche, growing and forcing the other to grow.
But I don't expect full displacement maybe partial. Bitcoin can not replace the Fiat system
Despite its flaws Fiat is needed to control the economy. There's a reason the Gold standard was stopped.
Personally I believe Bitcoin Would continue to exist as an alternative and force fiat to grow
As can be seen with their plan on CBDC.

Came across reading article regarding on this topic since I'm really curious on how this Creative Destruction would actually work.

But saw this articles Bitcoin, Creative Destruction, and the Existing Order (https://www.researchgate.net/profile/Peter-Phillips-8/publication/368714183_Bitcoin_Creative_Destruction_and_the_Existing_Order/links/63f6a4eb0cf1030a5643aa9f/Bitcoin-Creative-Destruction-and-the-Existing-Order.pdf) and also Bitcoin Magazine create an article about this way back year 2021 here The Schumpeterian Bitcoin Cycle (https://bitcoinmagazine.com/culture/the-schumpeterian-bitcoin-cycle) which explain a lot about possible things that might going to happen.

But somehow I think that it will be hard for Bitcoin to create certain situation like that. Knowing government is strictly govern their economy and other financial aspects.

I also  think that this situation is slowly happening since Paxful, Coins.ph, Strike and I think there are more platform doing it, enable their p2p direct payment which bypass those traditional banks.

Maybe this is the reason on why banking institutions like JP Morgan Chase also other few banks became Bitcoin friendly because maybe they know that there's a chance that this situation might going to happen in future. But since that article that topic has been tackled since 2021 I guess government and other institution already find some sort of solution that this situation will not going to happen.

Any merchandise which climbs 100% over a period of time and drops 60% a week later is like chocolate for the traders team of J.P, Morgan, Blackrock, Quant and all the others. 

Just because some things destroyed the previous one, doesn't mean all others are the same thing as well, it's different and shouldn't really be worried about it. I mean think about it, there has been so many "improvements" that because just alternatives. Even something as simple as bread, we had so many different versions of bread, but we also just have the seriousness where it's just alternatives and not what we have.

So focus on how to get a better return from bitcoin as an investment and ignore that it didn't do anything to the ones that came before. It's really not the same thing and we should be considering how this would be alternative to what we have. If we can do that then we are going to get a greater return without a much trouble.

Innovation Dilemma (ID) vs. Creative Destruction (CD)

ID explains why large corporations can collapse. CD explains how the entire global financial structure can be replaced.
ID views change as a threat to corporations. CD views change as inevitable for civilization.
ID is about innovation for survival, CD speaks of innovation to disrupt the old order.
ID speaks of managerial failure, CD speaks of systemic evolution.
ID focuses on organizational adaptation to new technologies, while Bitcoin actually eliminates the need for organizations themselves.

Exploring the emergence of Bitcoin using ID is only relevant in its disruptive spirit but weak in its structural and ideological roots. ID focuses on the microeconomics of corporations operating under market mechanisms and competition. ID attempts to unravel the hypothesis that failure is not the result of a lack of innovation, but rather the inability of large organizations to adapt to new technologies that initially appear inferior.
If countries and central banks are analogous to incumbents, then they are experiencing a geopolitical version of ID. Adopting blockchain and crypto technology risks eroding their existing monetary power, but refusing to do so risks losing economic legitimacy amidst global digital transformation.

The difference in orientation and purpose makes ID incapable of explaining the essence of Bitcoin. Bitcoin is more appropriately described by the concept of a CD.
Bitcoin is not a product of market competition, but rather a reaction to the failures of the monetary capitalist system itself. Nor is it a product of the evolution of the old system, nor is it disruptive innovation within the same market, but rather systemic destruction that demands a new economic paradigm.
What to remember:

In ID, innovation is accommodated by incumbents once they become aware of it, then becomes part of the evolving legacy system. Bitcoin, on the other hand, cannot be accommodated; no entity can take over or control Bitcoin. Banks cannot purchase or fully integrate it without losing its meaning. Regulation cannot stop it; it can only adapt to it. This means there is no dialogue between Bitcoin and the legacy system; it "negates" it (the true essence of creative destruction). The essence of what is being eliminated is the elimination of the role of the central bank as the sole creator of money. The elimination of the need for financial intermediaries. The replacement of the concept of institution-based trust with algorithm-based trust. These are not incremental innovations, but structural revolutions.



Faith of Holding On ... So this is the confidence of investors in making long-term investments and not just because of FOMO.  ;D


Discussing stablecoins through the lens of creative destruction is highly confusing. Stablecoins emerged from blockchain innovation (the result of destruction), yet they actually support the existence of the old structure of fiat currencies. Therefore, stablecoin initiators are actually trying to prolong the lifespan of old capitalism while shifting the locus of control from central banks to digital ecosystems. CD also explains that in capitalism, only entities capable of adaptive innovation can survive the cycle of destruction. Stablecoins are a form of defensive evolution, not completely destroying the old system, but absorbing its destructive functions into transitional instruments. Therefore, stablecoins are a compromise product between destruction and adaptation, between radical innovation and the need for legitimacy of the old economy. Will a more scalable, transparent, and algorithmically based digital trust programmable money emerge in this era?

In dramatic terms, Bitcoin possesses pure rebel/destructive power, true stablecoins possess conditional/adaption power, and perhaps CDBCs possess reactive power.


I think creative adoption is appropriate for CBDCs. In the context of monetary evolution, CBDCs are the result of a survival strategy, not an evolution. States use CBDCs to maintain monetary control while adapting to new digital architectures, enabling payment efficiency and tracking, while simultaneously preparing the monetary system for a possible future relinking to real assets (such as gold). Bitcoin introduced decentralization and algorithmic trust; however, due to its volatility and lack of underlying assets, it paved the way for change, even though it lacks the structural stability required by state monetary systems. In an extreme scenario where trust in fiat collapses, gold and silver would be a credible option to re-establish a real-asset-based exchange rate.

Thanks for the breakdown. I agree regarding some of the "services" Bitcoin provides, like the "ability to create and use a wallet", which had organizational work behind it in all previous iterations of electronic money (including bank accounts).

It could be argued however that the Bitcoin ecosystem is a new type of organization (DAO). At least miners are (mostly) traditional capitalist entities directly incentived by the Bitcoin protocol. So in a very simplified view we could say that miners are providing a "product" challenging banks and old-style fintechs.

Interesting take. I don't know if I would go as far to describe Bitcoin as a disruption destroying countries (or governments). There are many countries working quite well without an own central bank, or where the national central bank has no power over the monetary supply (Euro countries). I would even argue there are governments who would be eager to "throw away" the problems associated with an own currency (Argentina). For Central Banks as institutions who want to survive, it's however definitely a threat, as it is for governments needing "financing by money printing".

Here I disagree a bit, but that's only my own opinion on it, your opinion is legit and will be shared by a lot of Bitcoiners.

My take is that fiat money does have advantages to "hard money" and allows for faster economic growth, which is important above all for countries with a still low standard of living.

I see Bitcoin more as 1) a massive efficiency boost for the system, eliminating the need for several financial service providers, and 2) the first system which really allows people to really decide what to do with their own money, without interference of other entities and intermediaries and no possible censorship.

So I could view it indeed as a "superior product", catering to parts of the same market ("electronic wallets" & "digital payments"). And thus I could also imagine ID can be applied to it, if I understand it correctly.


This is true, while banks can offer custody, they can't offer a product really competing with it. They can offer services like Bitcoin loans, but the business model is very different of fiat loans because they can't "print" the Bitcoins they lend out of thin air.

I agree but as already written in other posts it can't threaten all functions banks & fintechs deliver, with loans and other risk management tasks being the biggest category (and the core business model of banks). For central banks, the destruction is however potentially life-threatening.

I agree about your stance on stablecoins. Excellent post, thanks for it!

I partly agree. But with "control" I would refer to the ability to attack macroeconomic liquidity problems via supply increases.

This can however, in an ideal crypto world, also be provided by altcoins and ICO-style mechanisms. The altcoin sector would however need a big jump in quality and trustworthiness to fill this role. Maybe with some kind of really trustable certification entity (independent from corruption), tokenomics standards (like my rough proposal here) (https://bitcointalk.org/index.php?topic=5504280.0), but (IMO) not necessarily more regulations.

CBDC is imo a topic almost totally disconnected to Bitcoin, it is more a competitor to "globally available" centralized wallet and payment systems, like Paypal.

I disagree with the fact that CD could replace the world's order. Even though China manages somehow to replace the US, something which could take place in 25 years. China will maintain the system. They are beating the US at their own game (Sanctions). China gives credit to countries non eligible for credit by the World Bank. The World Bank is a US lead institution who finances states mostly running out of $.

Even at WW events the system basically just restarts with many more parameters in place so war cannot restart right away again.  ,
 CD views change as inevitable for civilization, civilization is the same since we crawled from caves. We only live longer as the activities to maintain live have been replaced. We don't hunt anymore. We now hunt for values, and exchange those for food and shelter. We still vote a chief into power.

CD the media porter, still there are people using it.
Nothing is absolute, all changes have people clinging to the past.
I make a living converting webflow, Wordpress, Joomla, Drupal etc. Sites into static html5 sites.

Look, changing something and destroying something are two different things, Bitcoin is not actually destroying anything but forcing the previous thing to change. And I think this change of new things is actually necessary because in the current digital age if people use digital currency then the traditional fiat currency system will be reduced to some extent. Like you said, Bitcoin is a little different because it is actually like a new reform of bread which is changing the concept of money ownership and trust. Basically, all new innovations do not destroy things but they survive as alternatives, just like the internet did not destroy the printing press, but it was transformed digitally, just like Bitcoin is a driving force of change. It forced the old system to improve and that is where the real power of creative destruction lies. For this reason, I also think like you that our focus should be on long-term growth and acceptance, not on complete replacement.

I disagree a bit with this. While it is true that the system as a whole isn't destroyed, there are single services that can and would be destroyed by a new technology like Bitcoin.

A service is based on a concrete model of operation. Let's look at remittances for example. Today, systems like Western Union work in the following way: You establish a chain of offices in different countries. Then you let them pay and receive money (often still cash) according to the transfer necessities of your customers. The differences between deposits and withdrawals will then be sent via international transactions (and as these are expensive, you try to minimize them, by adjusting fees benefitting low-demand routes).

It is a quite expensive business, and thus the fees are almost as high as for international bank transfers (SWIFT), which are also a clumsy system where transactions are sent via multiple banks.

Crypto remittances are much faster and cheaper. There may be still people preferring Western Union for some time because they prefer to handle cash. But eventually there will not be enough demand anymore if crypto and Bitcoin become the dominant way to handle money.

You can say that in this situation "remitttances still exist!". And maybe Western Union (the company) finds another business model and can survive. But the type of service itself, the model of maintaining hundreds of offices around the world which manage cash and have to use international transactions for clearing, will then have died.

That is similar to the toilet does not work so the house will break apart.
Are you aware that there are thousands of different services, and the very 1st being established will be a government.

No. As far as I have interpreted the theory of Creative Destruction, it refers to services and business models which are "destroyed", while the underlying system (in this case, Capitalism) changes and improves, but isn't destroyed.

Bitcoin and crypto as a whole could destroy several services and business models. Still they haven't really destroyed many services, perhaps centralized "web currencies" like Linden Dollars or Liberty Reserve were "destroyed" by blockchain-based stablecoins, but these were very niche services anyway so it didn't still lead to a real improvement of the capitalist system.

Bitcoin's potential in terms of creative destruction is still unknown, I think. But a business like remittances looks in theory quite close to be "destroyed", Perhaps not in the next 5 years, but in 10-15 years. It's still not a very important CD process, but other more important models could then follow soon, like some kind of bank accounts and payment technologies.

"Fiat" as a whole is perhaps one of the services which could be destroyed, a quite big one which would affect governments but still a "service" (albeit in most countries delivered by a public institution). If this ever materializes, it would come however a bit later, and as I wrote above I expect altcoins to replace the market in part.

This is a fact, I agree. While I also think we are not even changing but just making an alternative that people prefer, it's also a strong indicator that humanity wants something that can be used as a currency but not lose value.

To understand that, we have to go back in history a bit, in history the "banknote" word came from the fact that humans used gold coins as a way of payment, we would have coins and gave those to buy things that we need, but eventually it reached to a point, specially for the rich, that they can't safely store them, it was too much. So what did they do? They gave those to the bank, for safekeeping, and instead they would get a "bank note", saying this is how much they own.

Of course you can't have one paper showing 100%, because if you just want one apple, how would you do, so you would get different amounts, that combined worth your max amount. When THAT connection broke, when your paper money didn't mean how much gold you owned, and it was just printed out of thin air for nothing, the value of it became nothing, it's just air, a promise, total worthless shitcoin.

So that is why people prefer bitcoin, it actually has a value and it increases in that value over long period of time, gets more valuable, so it's a currency AND an asset.

The Key Points of Creative Destruction
- Creative destruction is merely a mechanism; it's not the driving force that drives the machine; it's not the mechanism itself, but the visionary individual. Therefore, Creative Destruction is merely a potential, not a movement without vision.
- Visionary characters in the blockchain era see the potential of intermediary-free finance and a code-based trust economy, and the reality of this threatens the traditional financial system and monetary authorities. Bitcoin's destructive power has made central banks the new institutional visionaries, destroying the old system from within before it is destroyed by Bitcoin (read: no longer dominant) with CBDC.
- Talking about changing the world order is not that simple because we are talking about destroying the wealth-creating machine of the global elite (the 1% of the population at the top of the pyramid who control more than half of the world's wealth). But in fact, this global elite is the adaptable party most eager to adapt in order to control the direction of destruction. So, what evolves is the old system following the wave of CD.

So i think
From a technological and engineering perspective, Bitcoin is an innovation that combines old ideas into a digital belief system.
From a political economy and financial industry perspective, Bitcoin is the result of Creative Destruction (destroying old structures and giving birth to a new monetary system).
From the framework of economic history and evolutionary theory, Bitcoin represents a stage in the evolution of the digital economy (part of capitalism's long-term adaptation to the era of decentralization).
From Philosophically and socio-ideologically, Bitcoin is a manifestation of humanity's vision of financial freedom (a product of the anti-hegemonic spirit following the global financial crisis).

It is true that CD is a natural and inevitable process of capitalism. Visionary innovation always destroys old structures and gives rise to new ones, as this is the core mechanism of modern economic progress. Change is not an option, but an existential consequence of progress. If a system does not change, it stagnates and eventually dies. The phrase that describes destruction is "it's not a bug, it's a feature." Although the goal of human economics to meet needs remains unchanged, but the tools and systems differ, we need to break down old barriers to adopt new values.

Sociologically and culturally, CD is indeed a human tendency to persevere. For example, it is difficult for someone to abandon a system that provides a sense of security (such as fiat money or banks). Thus, CD represents a transformation in the form of human activity. But it's important to remember that CDs don't just replace media, but also change the power and value structures within that medium. For example, from the banking economy to blockchain, power structures also shift/change.

So, when Bitcoin emerged, it wasn't just a new medium for money, but it replaced the mechanisms for creating and owning money. It wasn't simply a "porter medium," but rather the destruction of the monopoly on the medium of value itself. So, Bitcoin didn't just introduce a new medium, but challenged the architecture of economic power itself.

Change is never absolute on the surface, but absolute at its foundation. So, what is replaced doesn't simply disappear, but loses meaning. Studying our history reveals that something once considered valuable ultimately becomes merely an artifact in the modern world (valuable but not essential).

Regarding China's geopolitical, geoeconomic, and geostrategic approach to the US, China is not maintaining the old system;China is using it as a bridge to replace its foundation. When power shifts from the US to China, there will be new rules, norms, etique that are inevitable. China is developing numerous experimental alternative projects to the global monetary architecture, such as ECNY, BRICS Pay, and CIPs, which are not reproductions of the dollar system. This war strategy plays on the old board but rewrites the rules. For the BRI program, debt is granted based on strategic needed for China economic roadmap, not the Western version of fiscal eligibility. This is not an extension of the old system, but a new architecture. The West judges who deserves money; China creates money based on who can create value. When China imitates Western sanctions and credit systems, it is not to maintain the system, but to understand it from within before rewriting its rules. (Observe, Imitate, Modify).

Bitcoin was a result of the banks in the region where Satoshi lived. Once you live in the 3rd world you see how restrictive banks are.
A transfer to another country can easily cost $150 and takes around 4 to 8 days.  More around 2005.


Source: https://en.wikipedia.org/wiki/History_of_bitcoin

None of the society, reserve currency was even mentioned.
Bitcoin evolved inot Store of value and stopped being a P2P a long time ago,

Sorry, I haven't encountered this information before, Would you mind providing me with the source?



In terms of its components, Bitcoin is not a new innovation. However, its significance lies not in its technology but in how it combines cryptography, economics, and decentralized political ideas into a new system of trust. It represents a systemic innovation by combining existing technologies into a trust machine (the first form of a trustless governance system).

Functional evolution does not necessarily mean functional failure; major innovations change function as their systems evolve. The internet, originally a military project, evolved into a global economic platform. Email, originally a communication tool, evolved into the backbone of digital identity. So, Bitcoin's evolution is not a failure, but a natural transition to a fundamental role in a new system.

P2P functionality now lives on in the Lightning Network, Liquid, and other similar layers. Bitcoin's Layer 1 is no longer used for microtransactions because its function evolved into a global settlement layer. Bitcoin hasn't stopped being P2P; it's separating its functions. The base layer is for security and value, and the top layer is for speed and transactions.

Not being called a reserve currency doesn't mean it's not moving in that direction. Every global monetary system begins as a store of value, then becomes a medium of exchange, and finally a unit of account/reserve base. Just as gold wasn't designed as a reserve currency, it became one because of the accumulation of trust over time. I see Bitcoin going the same way: first a collectible, then a store of value, then a reserve asset.



[IMO] Bitcoin has already penetrated the core function of fiat: state control over money and capital flows. (Bitcoin is systemically destructive, not just technically efficient; it restructures financial authority.) Isn't that the pure definition of a CD?

I agree with the idea that fiat can drive growth (provided the economy is based on debt expansion). But a debt-based economic system creates boom-bust cycles and global inequality. Bitcoin rejects the inflation- and debt-based growth model, so what changes is not the speed, but the quality of growth. Bitcoin may make economic growth slower, but more sustainable and equitable.

ID talks about new products replacing incumbents in the same market. But Bitcoin isn't a new product in an old market; it eliminates the need for the market itself.

I would say you are right, bitcoin isn't a "new" idea, it's just that nobody did it this good, it finally reached a point where nobody had any control over it at all, and we all had a say in it. There were many different method of "online money" that was tried and none of them worked and none of them got any interest from people outside of that people, however when bitcoin was created, it realized quickly that we are talking about a really high quality decentralized project that would be nobody's and also everyone's.

This was the reason why it is not a new thing, but also the first time ever someone did it this great, which is why it is such a good and highly used and very much invested thing. I understand it may not be easy to accept, but that's just the way it is.

Forbes has it: https://www.forbes.com/sites/digital-assets/article/the-history-of-bitcoin-who-invented-it/



What you interpret as penetration is a simple wish to safeguard value.
A similar question has been put forward if Gold suddenly looses its value. Gold is older than any currency, so is silver.
When the silver content of the roman coins went lower so the empire crumpled.
Similarities to the dollar is there but we are in different times. No hordes of barbarians are on the front gate.

https://ancientwarhistory.com/the-silver-crisis-of-rome-how-coinage-revealed-an-empires-decline/