Blockchain, back to the future.

Fernando Tozzi
Sep 1, 2018 · 5 min read

Some time ago, the economist and Nobel laureate, Paul Krugman, say that Bitcoin and Blockchain takes us back 300 years into monetary evolution. As a result, it stops all bad attributes.

A significant basis for Mr. Krugman’s argument is that the US dollar has value because men with guns say it has.


Bitcoin and Blockchain are erasing 300 years of monetary evolution?

Running with the metaphor that the fundamental change of an economic mechanism represents «evolution», I think that a more accurate statement is that Bitcoin and Blockchain do not cancel the lessons of history. Rather, it is the current step in the evolution of money. Naturally, with living species, evolution is a gradual process based on selection and natural adaptation. With Bitcoin, change is coming in the rear-view mirror at the speed of light.


The evolution of money

When a medium of exchange is portable, fungible, divisible and widely accepted, it becomes money. For at least six millennia, barter was gradually replaced by various means of exchange.

» Ossidiana » Cowrie shells » Gold

Fiat (national currency)

But what does these forms of money support? What gives it value?

The first 3 currencies above have been accepted as currency in the 5 continents. They were supported by their scarceness and their unique properties (Aristotle called this, «intrinsic value»). But all like gold can not serve as a common currency today. Although they are portable and scarce, they are not easily subdivided into the field, it is risky to carry them and difficult to trace them, they are not suitable for instant electronic regulation. But what about the money from Fiat. What do you support?

What to support national currencies?

Fiat has been supported by various things throughout history. The greatest support came from what Mr. Krugman calls «men with guns». That is, he claims that government demands give value to the dollar: At first they were tied to gold. With the promise of intrinsic value.

The truth of their value is entrusted to banks in view of the constant temptation of kings, dictators and politicians to print money based on always reasonable valuations, this has Created a castle of cards that people believe reliable., but it does not.

Bitcoin and Blockchain are changing all this

With the Blockchain, an uncrowded trust base was invented (or discovered). Inaccessible, not inflatable, not forgivable and immutable linked to the «good faith and merit» of the innovators. More important than guns, it is a government that is decoupled from its monetary policy and its supply. This is something extraordinarily positive for companies, consumers, creditors and business partners. The blockchain is giving us all the opportunity to be referees and protagonists and it is not difficult to imagine a future with thousands of applications able to make personal or collective agreements with the simplicity of a handshake of us that we are in Tokyo and the our interlocutor finds a New York.


Bitcoin is supported by something better than weapons, gold or promises. It is probably poorly stocked, remember that the system will stop at 21 million and the world GDP is worth 993 billion dollars, completely fair and built on a massive network of accountants and auditors. It is the first currency, built on the genius of mathematics and on unquestionable trust. This is completely normal because and the first time we have the widespread technology to do it.

  • (Given the competitive advantage obtained and I do not dare to hypothesize a final value if one day should be the google of the coins and get 90% of the market value)

Despite the big misunderstandings and misconceptions of the first experts, this does not interfere with the government’s ability to tax, spend or enforce tax collection, and it does not facilitate crime. Bitcoin is new, but the goal of distributing trust is not as radically new as one might think. It deals with a problem that economists and mathematicians have meditated since the times of Aristotle and the ancient Greeks …

Background:

Ever since the transition from real gold to bank notes and books, economists have wondered if value can derive from public, distributed, and stateless trust. Until 2009, the answer seemed to be that it was impossible.

9 years ago, something has changed; and the change is dramatic. It will take another decade for most people to understand and appreciate this change …


In the first paragraph, I cited Krugman’s statement that the US dollar has value because of «men with guns» (a reference to the fact that its use is legally obligatory for the payment of any debt and for government taxes). But this is not what gives value. The dollar, the Euro, a painting by MONET and a Hamburger all derive their value from supply and demand. Bitcoin is not different. The trick is to generate a viral question and a ubiquitous infrastructure necessary to achieve a solid two-sided network.

In the white paper that introduced both blockchain and Bitcoin (the first blockchain application), Satoshi taught us that a widespread and easily accessible communication network (universal Internet access amplified thanks to smartphones) can give rise to a value based on a different kind of trust. Instead of trusting a government, a bank, or testing the chemistry of a precious metal, value can come from trust in a formula that is omnipresent, redundant, and constantly monitored and controlled.


All these things have a value based on demand and available supply. But with Bitcoin, the medium of exchange, the transfer of value, is obtained with mathematics and trust distributed over a pure network on only two sides.

So, Bitcoin and blockchain :

are taking us back in time, they are bringing us back to the day when governments armed themselves to assert their currencies thanks to their dominant position. I have never been awarded a Nobel Prize, but it seems to me quite clear that Bitcoin is taking us forward because today to assert this trust there are no guns and governments but we are all of us …

Fernando Tozzi

Written by

Passionate about Blockchain and revolutionary economy. Founder : AWB Ltd Dindicash ICO (money revolution)

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