Your Humble Correspondent: Why yes, I’m a big believer in the future of cryptocurrency.
Every skeptic I ever met: But it’s not backed by anything valuable. It’s just a Ponzi scheme.
YHC: I can see why a lot of people think that, but actually …
Skeptic: I mean, real money is backed by gold.
YHC: Not since the early 1970s, and really only back to the mid-1600s. Aside from that …
Skeptic: Don’t confuse the issue. Money is backed by gold.
Skeptic: Don’t interrupt. Gold has actual value. It’s got all kinds of metallurgical uses. Dentists use it a lot.
YHC: Yes, that’s true. But its function as a store of value is far in excess to its utilitarian use. It might as well have no use at all when you look at …
Skeptic: But there’s no practical use at all for a cryptocurrency. It’s completely useless.
YHC: Here’s a link to the Satoshi white paper. Read it. Or don’t. I’m done.
Skeptic: [Intends to read it but never does.]
How many times has this happened to you?
Look, I don’t know if those writing under the Satoshi Nakamoto pseudonym intended bitcoin to become an actual currency. My guess is they just thought that transfer payment processing could be the killer app for blockchain technology. The coins were intended as incentives to those providing proof-of-work on the network. Certainly, they’d have some inherent value, but I doubt Satoshi had any idea what it was. Otherwise, why guild the lily by suggesting that miners could also earn “transaction fees”? These fees exist in the wild, of course, but they’re rounding errors compared to the market value of the coins themselves.
Thus I conclude coins — Satoshi never uses the term “tokens” — were originally conceived as utilities. That they would be used to incentivize developers as well as miners might have been foreseen, but that so many financial speculators would be clamoring for bitcoins, then minting their own alt-coins and, eventually, shitcoins was probably not in 2009's crystal ball.
So if cryptocurrency is a scam because con artists are using it to aid in their deceit, then international reply coupons must have been a scam because Charles Ponzi would eventually find a way to subvert them. IRCs weren’t a scam, and neither is crypto.
But the same thing can happen to a coin — which Satoshi describes simply as “a chain of digital signatures” — that happened to gold: Its market value can become untethered from its practical value. And that’s pretty much where we are today.
Maybe it’s time to take a step back. Maybe it’s time to start treating blockchain like the enabling technology it is, solving real-world problems with innovative code, processes and role definitions.
And we can start by using those coins the way Satoshi intended: To reward the direct contributors. Proof-of-work is proving to be an obsolescent, long-term untenable consensus algorithm, but coins can still be used to reward those who contribute to consensus through other processes. Coin-denominated rewards could also accrue to those who maintain the network and expand the community. And of course they could also compensate those who actually pound out the code.
It’s this last point I want to focus on: Rewarding the developers. Open-source software creators have gone uncompensated since open-source has been a thing. All these money-making platforms boast “open API” so that you can bolt any function you want onto them but, if you ask what’s in it for you after spending the days and nights to write the code, you might hear nothing but crickets.
But there’s a new business model out there that could finally fix that. An example is OpenGift, a startup that has, as its core mission, to help open-source software developers monetize their efforts.
In full disclosure, Your Humble Correspondent is an advisor to OpenGift and is compensated in its internal GIFT tokens. GIFT is not currently exchanged so the market value is near nil, but I wouldn’t have joined the team or stayed on it if I didn’t believe strongly that they have considerable underlying value which will soon be released.
There are a couple things I like about this model. First, it’s not trying to reinvent money, just get it into the hands of those who worked for it. GIFT is expressed in Ether-based units, but that’s mainly for convenience. The platform isn’t even built on Ethereum. It’s on Hyperledger Fabric which, as a private blockchain, would be a ridiculous place to start minting phony currency. Hyperledger was invented by IBM and spun out by the Linux Foundation. Its intended users are legacy companies that want to do use blockchain technology to solve immediate payment, supply chain or other business problems.
OpenGift is seeking to grow its community. So if you’re an open-source developer you might want to check out OpenGift.io or the Telegram channel. Ditto if you represent an organization that needs open-source software produced for a dime on the dollar. At the moment, deal flow is more important than revenue for OpenGift, so you could probably drive a hard bargain.