The psychology of crypto spending and where its headed
We try and articulate how people have shifted from cash based, debit based, credit based to a crypto based spending model and how that’s affecting spending habits with an open debate if this is good or bad for the economy.
Origin:
Trade originated with barter systems.
People exchanged one entity for an other.
There hasn’t been more contact with a medium of exchange than while exchanging the entities itself.
Valuation of an asset was subjective and reaching common ground was necessary if not biased without regulation and order.
People began using stones, trinkets and other ornamental pieces as objects of trade as a store of value.
This indicates the shift from value point being the entity itself to a store of value in another.
Again, value of each store of value entity was subjective.
People valued each differently.
There was no order, standard or regulation set up until now.
We, then progressed to a global economy based model.
Currency evolved much more significantly.
Currencies were issued by a central source who dictated the relative price of their issued currency.
There was order and structure for people to exchange goods and services effectively.
People began using a singular means of valuation, mainly being the national currency.
The national currency was pegged to the amount of natural resources the country held, gold, volumes of import-export, checks-balances, another national currency and then some.
People’s valuation of objects in governmental currencies continued.
Unless there were massive changes, people wouldn’t realize the change in relative value of their governmental currency on a global scale.
Trade would ensue within the country irrespective of the fluctuations happening at the governmental level.
Governments offered to protect and promise the store of value upon their currencies.
People complied.
I shall discount taxes, subsidies, price ceilings-floors, value acquisition and other factors that do not contribute to the main discussion.
In reality, there is a clear intersection of Keynesian, Capitalist and Austrian models of economics but I’ll describe their nature in another blog post.
The prosperity of a country’s economic state depended on their ability to provide value to their people and capturing a portion of generated value over and over again, essentially rotating money.
Government soon realized and made provision for groups of highly motivated people to build value and rotate them accordingly within a frame of set rules to be complied by.
Capitalism brewed.
Soon, companies began providing solutions and utilities to the masses with an intent to capture that generated value.
Governments complied.
Companies became a group of protected individuals.
Internet happens.
Companies soon needed more resources to grow faster.
Instead of directly facilitating/interacting with the companies, government built a framework and allowed individual people to interact and contribute to their growth giving rise to stock markets.
We begin to see a shift from physical payment systems to online, internet based payment systems comprising of PayPal, PayTM, AliPay and payment processing companies like VISA, MasterCard and Discover.
With the origin of Bitcoin and other Blockchain backed systems serving as instruments of trade, things shift from a centralized payment processing systems to decentralized payment processing systems fueled by incentives to people maintaining a global ledger to arrive at consensus.
Based on a first come first incentivised strategy, we notice a significant portion of people getting involved hoping to be early adopters to what appears to be a long term game.
I believe we’ve reverted back to a system with added benefits on a different scale.
This is not a zero sum game.
Cryptocurrency adoption encourages people to hold.
Developers spend to experiment and test.
Both are incentivised by different factors as are many others that go on to build their own versions of cryptocurrencies, shape their own economic games, carve their own identity and leave behind a legacy into the digital world.
Lightning channels came about to reduce the transaction fees acting as a second layer to bitcoin.
Lightning channels will revolutionize the world for payments as did bitcoin in the early days.
Bitcoin exists and will continue to exist as will many other cryptocurrencies.
Lightning will act as a medium of exchange for shared secrets to transact most if not all currency.
Lightning as a protocol holds untold potential.
As Jameson Lopp rightly said,
We’ve progressed from barter to lightning.
The shift from personal perception of traded goods in barter system to an anarchic mode of self sovereign digital holding currency over in the digital domain speaks volumes to how far we’ve come as social beings.
There is a lot more yet to come.
I believe there will come a day, where people use their own currency.
Every man for his own.
There will exist a globally traded platform where his currency is relatively priced based on the value he/she can provide. This value will also represent the time that they presumably will live or have lived in correspondence to the skillset they possess.
Lightning network can be the glue that pieces this together.
With all due respect, I view this as a revolutionary phase.
Our world is morphing to adapt to our imaginations towards a better constructed and coordinated society.
Instrument — Bitcoin — Ornament — Governmental Currency
Divisibility — Unlimited — Limited — Limited
Tangibility — Intangible — Tangible — Tangile&Intangible
Mode — Digital — Physical — Digital&Physical
Framework — Decentralized — Centralized — Centralized
Protection — Cryptography — Physicality —Federal
Volatility — Relative — Relative — Relative
Market — Internet — Limited — Citizens
Capturing Value — Division — Creation of new entity — Creation of side value
Promise — Anti Inflation — None — To hold value constant
References:
Disclaimer:
- This article is pretty old and was in my drafts.
Edits have been made after original writing. - My holdings of cryptocurrencies do influence my cognitive bias.
- I don’t know why but I feel Muneeb Ali’s tweet makes sense here.
Thank you!
BTC: 1NkSAHRsBAHPBXskz3sKtsZd7JR2oWXzVq
