I am writing this at a furious pace because god only knows what will happen to bitcoin pricing by the time I’m done. I could perhaps buy a small city somewhere in Wales, or my holdings will be more worthless than the remastered works of Gloria Estefan and the Miami Sound Machine.
But let’s be clear, as far as funny money goes, bitcoin is becoming pretty serious for the world — a situation that will only increase as it goes more mainstream having helped the criminal underworld. You can see how a failed economy could suddenly switch over to bitcoin, not ruled by government but by the people. Teenagers and young adults will show farmers and truck drivers how to use their mobile phone to buy and trade as part of a community powered by code.
One of the questions I’m really tired of answering is: why is bitcoin so valuable? It’s as if people have forgotten that all currency is an illusion, shared by everyone who wants to participate in that illusion; we all agree $1 is $1 and trust that of each other. Of course a major difference is that bitcoin is underpinned by an idea, whereas a fiat currency is underpinned by an economy.
But to help people to make that leap to bitcoin and comprehend its value, one needs to understand that for years our money — our ‘real-money’ (not the funny crypto money) — has been and still is largely an illusion that we all trust and play along with. Your bank account is simply numbers in cyberspace, which thanks to regulations, the bank has to keep an eye on. In short, we trust that our money is safe and actually ‘exists’.
Let’s say that the good people of the United States of America decide, “screw it, I want to put my money under the mattress” and everyone goes to physically get their dough. There will be a lot of empty spaces under mattresses because 90 percent of U.S. dollars do not physically exist. James Surowiecki (a really smart guy, writer for The New Yorker) reported in 2012 that “only about 10 percent of the U.S. money supply — about $1 trillion of the roughly $10 trillion total — exists in the form of paper cash and coins.”
Here is where cryptocurrencies gain an advantage in the trust factor. You can see that fiat shares the digital illusion of crypto, and you also know that a nation state can start producing currency whenever it wants to. However, with cryptocurrency, you can’t do that (really). Bitcoin blockchain was created in response to the ability for infinite money printing, which can wreak havoc with inflation. Come 2140, the 21 millionth bitcoin will have been mined and that will be the end of it.
What the whole conversation needs is a change in thinking. It is impossible to have a conversation about cryptocurrencies with anyone who believes that money is actually real. All money comes down to is people trusting institutions whose stability is always uncertain. A dollar is ‘backed’ by the government, but that means very different things in different countries.
For any bank account holder in Southern Europe, recent times have made you question how solid a bank is and how solid that backing is from your government. The Bank of Cyprus was forced — under the terms of a €10bn bailout of the country — to seize cash from its customers. To stay alive, billions of euros were pumped in from the central bank. How twitchy are people in Spain, Greece or Venezuela?
Regardless of fiat or crypto, it’s all funny money. The battle for stability is ongoing because of people who want to steal, game-the-system, cheat or commit fraud. At best we have to keep up appearances that money is real; I see amazing opportunities with blockchain-based communities to remove many of the negatives associated with fiat and actually establish more trust.
What if, for example, Facebook decided to have its own currency? What if all the members of Facebook could buy, invest, sell, exchange FB coin within the FB ‘world’? What if Facebook provided home loans, finance and jobs for users?
As of September 30, 2017, Facebook effectively has a nation of 2.07 billion monthly active users, serviced by 23,165 employees. Just on financial products alone, the mind boggles at the opportunity for a blockchain-based system, which everyone can see and in which no-one has ownership, to create smart contracts and effectively wipeout a lot of public and private sector institutions.
I don’t believe you need to have an organisation like Facebook to build such a community. There’s plenty of scope for many different communities, all with different purposes and goals. And here’s the crux folks, that is where the real power of blockchain and cryptocurrencies will get rubber to the road.
Imagine communities who act with purpose, fuelled by their own currency, provided with transparency and living with more trust in their currency than what you can get from just about any government. When these type of communities begin to form, you’ll see a global wave of established institutions struggling for relevance — because people will flock to where the greatest trust lies. Add to this a lack of cut through in political leadership and a whole new world can form. The running of a nation will be about public service and less about political parties.
You only have to look at China to see the priorities of politics and money. People there are too focused on getting ahead to be concerned with the political system. In the West, where we don’t have official dictatorships, political parties are already on their knees in terms of relevance. When our ‘leaders’ speak, we shut off. It’s not such a stretch to see a future of whole communities based on blockchain, utilising their own currency and exchanging with other communities. New superpowers can be formed, truly driven by the will of those people and not the few.
New age blockchain democracy anyone?