Homo Crypto — A Brief History of Money

Thorsten Weigl
Aug 22, 2017 · 9 min read

This summer I read a fascinating book from the Israeli historian Yuval Noah Harari called Homo Deus. He describes the rise of Homo Sapiens as the dominant species and shares an outlook. The book was very thought provoking and made me rethink some observations I made during my life. In this post, I would like to share with you one of these newly formed conclusions.

If you are interested in technology and if you look for a book, that shows new views on developments of humankind, then I can recommend you this book. If you are curious about crypto currencies and what they mean in a much bigger context of money and innovation, then I invite you to read my post here. Enjoy …

200.000 years ago

200.000 years ago some primates in the savannah of Africa — simply said — tried to walk on two legs instead of four legs. After some trial and error and over the generations, this led to the fact, that these primates could develop slightly bigger brains through this upright walking style. With their slightly larger brains, they were able to develop a more granular way of communication and finally a more granular language. It also helped them to recognize patterns a little bit better and develop tools to find roots and fruits better.

These developments and advantages over the other primates helped this new sort of primates — the Homo Sapiens — to reproduce better and
thus their population grew faster. They lived in tribes and soon the land they used — in the savannas of Africa — was not sufficient anymore to find enough roots and fruits for all their members. So some of the members of the tribe decided to move further along the valley. This new land was not conquered yet by Homo Sapiens and — so was their assumption — should provide them more fruits and roots. So they founded a new tribe that was growing until — you can guess — the land became again too small, and some of them moved on to the next valley.

So 100.000 years ago Homo Sapiens moved from Africa to Arab, from there to Europe and Asia. And then they finally populated the land today known as Russia. 15.000 years ago they crossed the Bering Strait and filled within 4.000 years the whole American continent.

A new tool is needed

This fast spread of species over the entire planet was never seen before in the 1 Billion year history of life on planet earth. But the development — as you know — did not end there. For all of the available space on this planet was covered now, the species of the Homo Sapiens had to invent new tools. One new tool they developed was agriculture, and the other tool was cattle breeding. These tools helped the Homo Sapiens to overcome the problem of the limited supply of land.

Within the tribe they exchanged goods. They believed in a gift economy and debt. But they figured out that this way of trade is very complicated. If someone has eggs and would like to eat meat, but the one that has meat would like to have roots, a barter trade is not possible. And eggs cannot be kept for long. So some of them thought of a medium of exchange that is relatively scarce, is durable, can be relatively easy carried around and thus the first form of commodity money appeared: Shells.

But shells were breakable, and they were not identical. So there was a problem and a new invention was needed. Around 2.500 years ago a new form of money was invented: Gold coins.

Gold was perfect. It could be split into tiny parts. It stayed the same. And it was relatively easy to carry. But again there was a pain: Gold was — when used in large portions — heavy. So the ultimate form of money was invented: The Gold standard.

Marco Polo, for example, did not need to carry gold around with him, he had paper notes that showed that he possessed Gold. This made his travel much easier.

So back then Paper money was the ultimate form of money. It was a medium of exchange, it was a measure, it was a store of value and it was a standard.

Gold is good, but not perfect

46 years ago, something new happened. The U.S. government suspended the convertibility of the U.S. dollar to gold. So the aspect to use something rare like gold for a currency was canceled. The U.S. government thought and thinks of this as a feature. It makes the currency more flexible, the government and especially the Fed can support the economy better in a more flexible way.

But again, like so often in the history of Homo Sapiens there was a pain and there was a need for something else:

Fiat Money is a medium of exchange, but it was not pseudonymous and it was not instant and it is not a store of value. When a person in America wants to buy something from a person in Asia, they either can meet in person and they exchange the cash or they can send the cash via postal mail. This takes weeks and is very dangerous because parcels can get lost.

Fiat Money was a store of value, but since the U.S. government suspended the gold standard, they can lower the value of Fiat money by printing new money.

The rise of Homo Crypto

The first Homo Sapiens that became a Homo Crypto was an American computer scientist and cryptographer: David Chaum. In 1985 he wrote a paper called “Security without identification”, where he described topics such as anonymous digital cash.

It took another 24 years until his idea became a reality. On the 3rd of January 2009, Satoshi Nakamoto released the source code for a peer-to-peer Electronic Cash System.

This moment in history was like the arrival of the members of the tribe 50.000 years ago in the next valley. It was like the statement: This valley is not sufficient for our standards.

This epoch-making innovation of Satoshi Nakamoto created the perfect medium of exchange: digital, programmable, instant, borderless, censorship resistant and identity-agnostic and as the supply is limited it also provided a store of value.

But do you think the tribe — that was staying behind in the old valley — supported the emigrants? No, and the same happened to Bitcoin.

In the media, Bitcoin was declared dead over a hundred times. Influential thinker declared it as very dangerous or without intrinsic value.

Sure, Bitcoin is difficult to understand. Bitcoin is as hard to understand, as the decision of a long known tribe member, that will go over the hill, where no one has ever been before, only to have more fruits than in this valley here. And Bitcoin is hard to understand because it is a combination. It is the intersection of Cryptography, Game Theory, Finance and Network Systems. Bitcoin is something revolutionary, disruptive and new. None of these fields alone are easy to grasp, let alone the intersection of them. Satoshi Nakamoto solved a problem in computer science called the Byzantine Fault tolerance, that was unsolved for a couple of decades.

More and more

David Chaum developed the idea first and then a movement — called Cypherpunks — followed. Out of this movement came Satoshi Nakamoto, he solved the game theoretical problems so that a decentralized, borderless, censorship resistant form of payment and store of value can come to fruition. And many followed Satoshi Nakamoto. They started to mine Bitcoin, to understand Bitcoin and to use Bitcoin.

First, they came at a slow pace. The first inhabitants where miner. One by one. They installed the Bitcoin client and mined a couple of Bitcoin per day. Some of them left again. Some of them stayed. This made them Homo Cryptos. Seeing what others did not see.

As a Homo Crypto you have to learn certain skills, gather special knowledge, and you will eventually fall down the rabbit hole. To be a Homo Crypto — in its early days — was way more dangerous than to live in the old and save valley. You had to resist FUD. Decide on save exchanges and fight with software bugs.

Now it looks like the new valley can not only provide more fruits than the old valley, but that Homo Crypto possess a very important advantage over Homo Sapiens.

As with every innovation — as Geoffrey Moore described brilliantly in his book Crossing the chasm — it starts with the innovators, spreads to the early adopters and hits than the early and late majority. A pattern we have seen with all innovations from the internet to social media.

There have been the innovators on the internet that coded an email on the command line in 1989. There have been the early adopters in the mid-1990s that rented web space from Pair networks, hacked together an HTML Page and offered Pet Dispensers. And there has been the early majority in the late 1990s and finally the late majority in the mid-2000s with the rise of smartphones and tablets.

As Mark Twain once said, “History may not repeat itself, but it does rhyme”. So how is it different this time? Isn’t it all said and today’s Digital Natives or Homo Internet will become Homo Crypto soon, and that is it? Let us get in the details.

Who is a Homo Crypto?

We discovered the pioneers of the Homo Cryptos like David Chaum and Satoshi Nakamoto. There are now an estimated 7 Million people in the world that own a bitcoin wallet. Are they all Homo Cryptos? No. Only if you control your keys, you own your Bitcoin. So is everyone that owns his private keys a Homo Crypto? No.

One has to truly understand the very nature of Bitcoin and the reason why Bitcoin has value.

The advantages of a Homo Crypto then, over a Homo Sapiens are manifold:

First of all, he can store his value in a deflationary and decentralized store of value. This in itself has a lot of advantages. He is not forced to keep a cash position that burns a hole in his pocket.

Second, he can foresee the implications of the Crypto revolution on the Economy and his business model.

Third, he can exchange his goods and services all around the world, free of any middlemen.

Fourth, he can distinguish between Bullshit and Blockchain. He can see the benefits of a tokenized business and where it makes no sense.

Fifth, he sees that the Internet was about Information. Crypto is about the exchange of Value, which has much larger implications.

So in my opinion, the phenomenon of Homo Cryptos cannot be compared to Digital Natives. It is much more far-reaching on an individual level and the level of the economy and society.

Conclusion

During the history of humankind, an innovation brought advantages and the most courageous were rewarded. Innovation follows patterns, and in the beginning, this can look scary and ugly to an outsider. Homo Cryptos have huge advantages, and their number will rise. The technology and innovation of Bitcoin are far bigger than the internet and not only an innovation. It will change the way we exchange value in a very profound way.

The open question for all of us remains:

How exactly will this new technology and Homo Cryptos change the Status Quo of how Companies are managed and deliver value?

How will they change how the Nation States are governed?

And how will they change how individuals transfer value?

I will closely observe these developments for you and report. Any comments, ideas, and thoughts are highly appreciated.

Thank you so much for your attention. Stay tuned!

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