When faced with the problem of systemic inefficiencies, one must look at the very root problem to devise a solution. When we come to understand the current economic system, we see that the currency of any financial system is its lifeblood. Our economies are animals, much the way a consumer would have animal spirits based on instincts of emotion, national economies absorb their lifeblood by way of the citizens’ which comply with their governing jurisdictions. Their issued currency, and the trust imbued within it, is the lifeblood flowing through the veins of the nation state.
When a currency loses its trust, it loses its value. When people do not trust something, it inherently loses its perceived value from that person and indirectly, the value attributed to everyone else. Therefore, when people come to mistrust a currency, the financial system which it gives life to, is in risk of collapse. When the citizens of any nation no longer have reason to trust the issuing authority the animal spirit dies. Trust is the backbone of any economy, and once it is misplaced, the current regime topples under shifting circumstances.
Many are beginning to believe digital currencies to be the rival to fiat currencies economic pundits have been predicting for years. Fiat currency is just now entering denial mode, fighting to stay above water, clawing in a desperate attempt to hold onto what it already knows it’s losing – people’s trust. When the smoke of battle clears, something far more complex, yet orderly in nature will be left standing.
Digital currencies which are built upon decades of cumulative research in cryptography and network computing, use mathematical algorithms to prove ownership and rely on a massively distributed database known as the blockchain. We call these digital currencies, which are built upon techniques for secure communication, cryptocurrencies. Although they share many economic characteristics of assets which have come before them, cryptocurrencies open up an entirely new class of financial asset.
What we are seeing with cryptocurrency is an evolutionary process of our money supply. In this evolution of money we can clearly see three distinct stages:
- Commodity based currency (precious metals as money)
- Debt based currency (governments printing money)
- Math based currency (computer networks which determine the issuance of money)
Cryptocurrencies are no fad or passing novelty, they are positioned to be the new standard in the 21st century. Bitcoin, and cryptocurrency, cannot be uninvented.
The ability to store and access financial information on a global network, without it hinging on political error or central points of failure is the dawning of a new era. When individuals have access to these resources of information, they become empowered by their capacity to conduct transactions without permission from an external authority.
When this transaction-making ability separates itself from the confines of third-party management, money velocity increasing, the network begins to act as a store of wealth, and our societies sever their dependence on debt-backed currency.
Not only does this type of trustless computing have implications for the management and movement of money, blockchain networks will dis-intermediate conventional industries which rely on third-party institutions to manage assets on behalf of their clients. Instead, we will come to work for, and invest
our energy into massive computing projects which are essentially owned by no-one. Bitcoin technology will uproot traditional ways of business which characterize third-party management of assets. Fantastic opportunities lie ahead for those able to appreciate the implications blockchain networks will bring.
We are truly privileged to have a front row seat in this transition towards a very different age of cultural, economic,
and social growth.