To understand the vision behind Purplecoin, we must first understand what is blockchain itself and how it was conceived, and its relation to banks.
It all starts in ancient times when kings and emperors would store their gold in a temple. As it was sacrilege to steal from a temple, it would serve as a primitive bank. The kings or emperors would write promisory notes on parchment or papyrus which could be exchanged at the temple for gold. This is how paper currency works in a nutshell. As the ancients didn't have paper, they would rely on coins for daily spending and these promisory notes for large purchases.
When paper was invented, a more scalable form of banking was invented. As it is much cheaper to produce 100 promisory notes on paper than on parchment, these could be used for smaller amounts. Banks could now serve less wealthy clients.
Paper currency became even more scalable with the printing press. Suddenly, we no longer need to have bankers write promisory notes by hand as we can print them. This is half of our system today and it has more or less stayed the same in the past centuries.
When we invented computers, we have evolved past the paper and we can now store even promisory notes in even smaller amounts by writing them as bits of information on a hard-disk. This has more or less the same magnitude of effect as paper had to parchment as papyrus.
While computers can store smaller amounts than paper notes, the information is easily lost due to various reasons such as accident, software bugs, negligence, etc. It is also very easy to counterfeit.
Our world today relies on a hybrid between the computer and the paper in order to store our promisory notes, due to the inherent problems found in computers. The banking system also has many software and regulatory measures to prevent accidents and counterfeiting. As we can see, it is a kind of transition phase between paper and computers.
Then Satoshi Nakamoto publishes Bitcoin, and writes in the source code the phrase "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". It is a reference to an article in the London Times published on the 3rd of January 2009 which describes the Chancellor of Exchequer being forced to reconsider a second bailout for banks after the credit collapse of 2008.
Satoshi never described the meaning of this and it has been left open for interpretation. Most people assume it is a direct attack against the banking system and that his vision is that Bitcoin will replace banks.
Satoshi is a very clever individual. He knew the history of banking. He was also seeing how banks are collapsing in this new digital world. He knew that banking will never disappear, as banking is an invariant of money itself. As long as money exists, in any way shape or form, banking will exist. So to suggest that it is a direct attack to banks is absolutely bonkers. My interpretation of what he meant is that blockchain is a technology which will transition banking to the next phase in its evolution: removing paper currency altogether.
He couldn't simply go to banks and present blockchain, it would have been buried under the rubble of other projects which aimed at replacing the banking system. He had to show them blockchain is capable. What does capability mean? It means that no one can alter the balances stored in the blockchain. And Bitcoin served and still serves this purpose exemplarily to this day.
The problem with the Bitcoin protocol is that it is a prototype. Satoshi was a single person, that much is obvious, as he had to keep this hidden for possibly a long-time. Loose lips sink ships. He couldn't build the real deal, not alone. But he could build something that would draw the attention of the banks, and it did.
Bitcoin can never scale to the needs of the banks. It is simply too cumbersome and doesn't process many transactions per second. Satoshi sacrificed all scalability in order to achieve safety, in order to prove that it is possible to build a tamper-proof digital ledger.
If we think of blockchain as a technology and we separate it from the assets, we can see that in its current form it only replaces the function of the paper currency, not of the digital banking system. In other words, if we had a Bitcoin that scaled, it could be used as "cash" while the banking system would store it internally in a digital system.
However, what if it could serve both needs? In other words, what if Blockchain could also be the "cash" we take out of an ATM while also serving as the backend of the digital banking system?
This is what I personally see as the epitome of the blockchain technology. No chain has ever achieved this.
Decentralisation is a technical term and refers to a piece of software that is running on many computers, owned by many different people, with many backgrounds, and very different levels of wealth, while not crashing. Bitcoin achieves this superbly.
However, there exists another form of decentralisation at which Bitcoin fails massively. That form of decentralisation is political decentralisation. In other words, complete neutrality. I do not believe this is the way Satoshi intended it to be, however, the interpretation of the message he wrote, made Bitcoin not be neutral. In other words, the Bitcoin maximalists are the reason of its eventual demise. Not technically, but as any form of means of payment in the civilised world.
No system that is against banking can ever be used in day-to-day payments. Why? Since every commercial entity on this planet prefers to keep their capital in a bank. This is regardless if they could keep it themselves. The reason is that a bank lowers risk. Any commercial entity will not tolerate the risk of keeping large amounts of capital in bearer form. It is in this regard that Bitcoin fails massively.
Blockchain is an incredible technology, but half of it is missing. In order to fulfil its promise, blockchain must:
- Retain the same safety properties as Bitcoin
- Scale
- Work with banking
Nothing has hit all of these points so far, but we believe Purplecoin can.
Let's take the third point and break it down. In order for a blockchain to work with banks it must work the same as Bitcoin while allowing:
- Users to deposit or withdraw their assets to/from a dedicated account fully controlled by a bank.
- Users must be able to do this if all regulatory checks pass.
- Banks shouldn't be able to block transfers of withdrawn assets.
- Banks should be able to block or reverse transfers of assets under their custody.
- Banks should be able to rotate the private keys of the dedicated account based on pre-agreed conditions with the client.
- The blockchain should be tied in to the fiduciary system.
- Miner fees should be paid in any currency built on top.
The asset model of Purplecoin can currently achieve all of the above.