Even if Currencies Fail, Money Will Evolve — Bitcoin
Since the dawn of civilisation, from barter to bitcoin, the very meaning of the word ‘currency’ has never stood still. Even in the current century, the core idea of what currency “is” continues to be malleable by group behaviour and innovation.
Fiat currencies fall (mostly inflation led — case in point, Zimbabwean Dollar and Venezuelan Bolivar) but exchange of value, trades and transactions continues to take place with alternative forms of exchange. As a result, money will very likely evolve to a new medium.
Does country-led currency driven by individual country conditions (corruption, etc.) still make sense in a global internet-led world? Governments are racing to create digital currencies, pushing fiat currency systems online, and bringing about a new wave of digital currency adoption that matches our digital lifestyle. Essentially because we live in the 21st century with a financial system which was manufactured in the 19th-century.
What is the difference between currency and money?
To most people, currency is the “cash” in your wallet. Currencies are the primary medium of exchange issued by central authorities such as governments; although they are not necessarily physical objects. They are merely signifiers of its value and can be printed at will which stimulates inflation, this is described as the Cantillon effect. Examples include GBP, EUR and USD.
Money, on the other hand, can be any commodity or an asset that is a store of value and a current medium of exchange. As a result, it is preferably finite and has intrinsic value as well as related use-cases. Examples include Bitcoin, Gold, Silver, and Land.
Money Evolves
In 1998, software developer Nick Szabo predicted the next generation of money and created a prototype currency known as “Bit Gold”.
Nick Szabo’s goal was to build a future where citizens did not rely on a central authority to govern their finances. While his invention of Bit Gold did not fully materialise, it was instrumental in inspiring Bitcoin and its cryptographic solution of trust. As faith in central government was at the lowest point in recent history, his vision appears to be fully on-trend.
A decade later, the now world-famous cypherpunk known only as Satoshi Nakamoto developed a full-fledged, trustless digital version of the gold standard: Bitcoin. Finally, the internet had a native cash system of its own — secure, fraud-resistant and most of all, decentralised.
To this day, the only real evidence we have regarding the identity of Satoshi is their use of British English.
It is worth noting that many speculate Nick Szabo is also Satoshi Nakamoto due to an email thread from 2009 between Satoshi and Hal Finney (Crypto Legend) that came to light in 2015, where Satoshi claimed his initials were NS referring to his address: 1NSwywA5Dvuyw89sfs3oLPvLiDNGf48cPD.
“I just thought of something. Eventually there’ll be some interest in brute force scanning bitcoin addresses to find one with the first few characters customised to your name, kind of like getting a phone number that spells out something. Just by chance I have my initials.”
Coincidence or not? It could also refer to the Japanese convention of using the family name first, e.g. Nakamoto Satoshi. I doubt we will ever find out.
Personally, I’d prefer the Bitcoin creator’s identity to remain anonymous as it is a benefit for the industry as well as humanity because people tend to create idols and cults. Some people will hate them, some will love them. This inevitably creates division and strife. Bitcoin is a revolutionary tech, not a religion. And I believe Satoshi had these exact principles in mind when he/she/they withdrew from the public.
There are even those who suspect the ‘Deep State’ may have created Bitcoin. If this was the case it was probably an experiment which got out of control, the sudden rush to ‘CBDC’ (Central Bank Digital Currency) by the Central Banks and the widespread promotion of a ‘Cashless Society’ would make this a plausible theory.
Centralised Digital Currencies vs. Decentralised Cryptocurrency
Over the last decade, banking institutions have witnessed the growing potential of cryptocurrencies and have always considered it a menace. Many have now resigned to investigate the new technology to ensure they can maintain their position.
The US Federal Reserve (Fed) is the latest major central bank to join numerous others who are considering the issuance of their own digital currency. Earlier this year, its European, British, and Japanese counterparts formed a group to study the benefits of the so-called central bank digital currency (CBDC).
Similar to the emerging situation in China, FinTech’s detachment from traditional banking institutions will play an important role to shape the future of finance. We’re in the 21st-century using financial systems developed in the 20th-century based on a 19th-century understanding of trade and finances.
It is time to bring things up to speed and have a digitally-led financial life.
As such, and with the current economic crisis in mind, we are about to witness a heated tug-of-war between centralised digital currencies like the inevitable Libra and central bank issued ‘Fedcoin’, and many others to come. This is inevitable and the new currency system will become part of the upcoming financial reset that we are about to witness in the coming months and years. I believe the current world crisis has sped this up and a major economical reset will be a painful experience for many who are stuck in legacy finance.
But Bitcoin has one very decisive competitive advantage over any centralised currencies.
It was not designed with a single purpose in mind, rather it was presented as a way to empower people by giving them money they assign value to themselves. I valued my first coin at $7 back in 2012 and I am very likely to pay 10x what it’s worth today in the years to come.
Why? Because Bitcoin is the optimal unit of account, store of value and a medium of exchange and its fiat monetary value is not important.
Anyone with the internet can access the Bitcoin network at any time with no restrictions — everyone has the freedom to create wallets and make cross-border transactions.
Bitcoin has provided financial freedom to many and serves its key purpose perfectly — paving the way to a world where everyone is about to have the choice between a mandatory digital currency issued by the central banks, or the more superior decentralised option that is issued by the people themselves — Bitcoin.
