Why Cryptocurrencies are the natural evolution of money.
Not too long ago, Gold was recognised as a financial currency — an economic means of payment. This paved the way for the gold standard, a principle where paper value is back by the intrinsic value of an underlying asset. Banks and governments could only print notes if they possessed an underlying supply of gold to back the printed value.
In 1914, following the beginning of the First World War, the British, French and German governments abandoned the gold standard; artificial value was printed to fund the war. Otherwise, the violent dispute would have concluded upon the depletion of Gold. By way of such manipulation of money, artificial value lead to economically-implicating deficits. This was the beginning of the ‘fiat money’ era.
As fiat money isn’t backed by any tangible assets of intrinsic value, there is no limit on the value that can be artificially created, making inflation inevitable. By extension, disproportionate financial power is given to those responsible. The most compelling argument in favour of independent money is that it is a force for peace. If financial control of currency was taken out of the hands of the governments, wars would diminish in magnitude, relatively. Independent money doesn’t just limit wars, it limits everything the government does.
Inflation once referred to an increase in the money supply and credit. However, now, inflation refers to rising prices. The Consumer Price Index (CPI) of often used to measure inflation, tracking the price of commonly used products and services, namely, food, clothing, transport, energy, etc. Since 1989, the CPI has averaged just under 3% in the UK and the US. However, the amount of money circulating has increased by 11.5% per year, over the same period; the money supply has increased 67-fold in the UK and 20-fold in the US.
Imagine a tiny economy of 20 people, of whom, 10 individuals possess $1 in cash; there is $10 in the entire economy. The other 10 individual own houses, each of which, is valued at $1. Given the finite money supply, should more houses be built, the value of each will decline. Consider a member of the community, Mr Smith, who creates another $10. He purchases a house for $1, despite the value having fallen given the increased money supply. The vendor has sold the house for a price that doesn’t reflect the current value of the received funds. Mr Smith offers $1.50 for a second property, the vendor of which also sells for an undervalued price. The other vendors increase the price of each house to $1.50.
The individuals who held $1, they can no longer afford to purchase a house. In real terms, their purchasing power has halved. They have lost real value by way of the actions of other members of the community. Given the increased money supply, the real value of people owning a house is $2. The price will eventually rise to reflect this. As long as they don’t sell, they break even, in real terms. However, if they were one of the vendors who sold at $1.50, they’re no longer able to purchase the house back — they have been priced out and are now poorer.
Meanwhile, Mr. Smith has done extremely well. He was the recipient of newly created money. In addition, he was able to purchase houses before the market corrected to adjust for the increased money supply, profiting from the price rise. Value, that was evenly distributed, is now in the hands of a minority.
In the US, wages have increased by 750% since 1971; during the same time span, the money supply has increased by 2,000%. The inequality in the UK is greater; wages have increased by 1,250% whereas the money supply has increased by 6,700%. In real terms, people are becoming poorer. Many families find themselves having to work longer hours, with both partners in the workplace, having fewer children, taking on larger debts, simply to maintain their standard of living.
Wealth is being transferred from the hands of many to the hands of a few. This will continue until economic power is transferred from the hands of a few to the hands of many. Economic decentralisation necessitates economic justice. Cryptocurrencies offer just that! Value founded by the people, for the people, regulated through the free markets!
Does this lead to short-term volatility? Without a doubt. However, for those of us building and investing in the space for the long-term, these roller-coaster price charts will one day be a blip in our collective rear view mirror! On average, Bitcoin has added an extra zero to its valuation every two years. Here at Ø, we see no reason why this trend cannot continue into the foreseeable future. And that is not to forget the many other amazing projects in crypto right now! With so many of the worlds best and brightest minds devoted to the progress and proliferation of this new paradigm, a new age of economic justice is in no doubt.
The mission of Ø Crypto Union is to create a one-stop-shop entity dedicated to the use and management of cryptocurrencies. Crypto Union was created by and for crypto-owners, offering a solution tailored to the specific needs of such assets. We aim to become the world’s first decentralized bank by leveraging the infinite possibilities created by the blockchain technology. We are building a community of crypto-owners, with the aim of legally replacing the traditional financial institutions with blockchain, and allow all of our members to benefit from our ecosystem.
By creating services such as ØPay, that enable crypto enthusiasts like ourselves to use crypto without the hassle, we truly believe that we can play a significant role in driving forward the ecosystem.
Join us today and become part of the revolution!
