Bitcoin — The Anchor.

It is not a new idea that Bitcoin could be the next ‘Anchor Currency’. The Reserve Currency mantle has, over the centuries been passed around mostly according to who had won the most recent war and who would thus become the most successful in a mercantile sense. Britain, America, Portugal, Espania, The Netherlands, have had their currencies regarded as the most powerful (desired) and held in reserve by the worlds’ Central Banks or their proxy. The reasons Bitcoin will attain this position will result mostly from the fact that Blockchain Technology, the protocol upon which Bitcoin is built, is superior to ‘token’ technology upon which current money creation system is built.

A Slippery Slope

Money creation is currently undertaken by the exchange of ‘tokens’. In the US, The ‘Government’ calls up The Fed asking it to extend credit. The Fed says Sure! A deal is struck and the Government issues a what is essentially a Promissory Note (a token) and The Fed, through the magic of Double Entry Bookkeeping, creates an amount in the account of the Government equal to the face value of the Promissory Note, upon which the Government may draw more ‘tokens’ to finance the business of Government. Not much in the way of ‘effort’ has gone into producing this miracle of modern economics (a phone call and a book entry) and the arrangement is essentially a political one.

Now, money is a very useful tool, particularly for transactions between unacquainted people. Often described as ‘Legal Tender’, it allows for certainty in trading arrangements. Money holds the unique characteristics that create the Trust between the trading parties.

The psychological dimension of money cannot be underestimated and indeed the calamity of the Euro has, to my mind, brought this dimension into sharp relief. For example, the differing attitudes to ‘work’ held by different cultures. Comparing German work ethics to those of the Greek culture has created a parlous state of affairs where the more ‘work oriented’ Germans view the ‘laid back’ Greeks as having gamed the system and now demand that the Greeks behave like Germans (or give us a few Greek islands and we’ll call it quits!) And the same goes for the Spaniards, the Italians, the Danes* who gave up their Peso, Lira and Krona upon which substantial Trust and Understanding had been built over centuries.

I will leave it to others to explore the reasons why on one day a countryman would accept one note and a day later to have to conduct business in some other unfamiliar currency with unfamiliar denominations of unfamiliar value. In the end, I imagine their conclusions may point to a hastily put together idea aimed at countering the appearance of The Internet, then a nascent apparition, dressed up as the mechanism that would unite Europe.

The stone age did not end because we ran out of stones.

The advent of the internet has not yet started. What has happened thus far is the prelude to a massive step for humankind. Blockchain Technology will come to represent the advent of the digital age. To date the internet has been the equivalent of what brochure-ware is to an interactive website. The protocols of the prelude era of the internet will largely be subsumed or replaced by Blockchain Technology.

The emergent nature of technology and human life guaranteed that the symbiotic nature of Trust and Logic would deliver the technical tools that will ultimately solve what has always been a technical problem (resource allocation) masquerading as a political one. Debate and decisions will continue to require the human touch, however ‘Business as Usual’ will be a phrase consigned to the dustbin** of history.

The primary advantages of Blockchain are Security (Immutability), Independence (Distributed and Autonomous)… While there have been thefts, exchange malfeasance and Silk Road, the protocol itself has not (to my knowledge) been hacked. It is impossible to hack! It is also the currency that Mirrors the Age in the same way that The Pound was a mirror of colonisation; The US Dollar was a mirror of ‘War’ (on anything)!

The big WHY?

That the significant investment required in Bitcoin (Blockchain): in bare metal computing power; software fabric development; education; new tools for utilising the technology is only just the first and second chapter of what a few are suggesting will become the dominant paradigm for conducting business and transacting value for the foreseeable future. This investment may give rise to different ways of imagining economic and social interactions as well as restoring a significant measure of Trust into human relations.

A similar pattern could be overlaid on the advent of Gold as the ‘Anchor Currency’ in past eras. The mining of Gold required Investment: in equipment; techniques for extraction (explosives and poisons come to mind); refining; transportation and storage, and the development of people with the skills to do all this. Sound familiar? AND great cities were built from the proceeds of selling Gold! And still, most*** of the gold mined to date is stored in vaults beneath the ground‽ All that has changed is the effort that has gone into the discovery, extraction and refining of the metal. EFFORT!

The current monetary system requires minimal effort. As suggested above with a phone call and a book entry, two people can create all the money that would ever be needed and an industry (politics) is required to determine and legislate how it will be spent!

While calamity appears on the horizon, Bitcoin may well be the instrument that will save at least a few ships.

*Errata: Denmark, while a member of the EU does not use the Euro.

** perhaps ‘re-cycle-bin’ is a more apt metaphor

*** I really mean a ‘substantial amount’

Speed the Shift!!!

Disclosure: somewhere in cyberspace there are some electrons and photons that make me think I own some Bitcoin. If you think you have some and want to share ethically…