Money and Its Ease of Use

Carlos Tapang
Published in
8 min readAug 10, 2020


Your cell phone is very easy to use and yet it’s one of the most complex man-made things in the world (probably in the universe). I’d guess that less than 1% of the world population understand more than half of how the cell phone works; and yet that does not preclude the other 99% from using it effectively.

Clearly, full knowledge is not necessary in using something. Even in nature, evolution has isolated the ability to use from the ability to understand. Anything that has to be understood in order to use has been eliminated as tools. If we imagine our hands to be the most primitive tool, then we can feel how easy it is to use without understanding exactly how it works. In humans, our ability to abstract and imagine has allowed us to build more and more complex tools that become widely used because of “ease of use”.

There are tools that gain more usefulness as more people use it (network effects). Our cell phone is one, but inside this wonderful device there are even more tools that we now use on a daily basis, only because these have gained usefulness by way of the number of our friends also using it: Facebook, Instagram, Tiktok, etc. These are all very easy to use but understanding how these work and what kind of network effects make these very popular is not easy.

Money and Its Complexity

Consider this: money is until now a coin or a piece of paper that is much, much simpler than a cell phone. In essence, until now it’s just a physical token that we humans have been exchanging among us for tens of thousands of years. Nevertheless, we are just beginning to understand the network effects at work when money circulates. Money is something in which the complexity is not in the token themselves, but rather in the network effects involved.

In order to gain money network effects, we should trust and accept a token not just from our friends, but also from any unknown person. This level of trust necessary for a medium of exchange demostrates that money network effects is different from Facebook network effects. Money requires more than a “like” in Facebook, it requires a level of trust far more than giving away your likes.

I come from the Austrian economic analysis perspective in which the fundamental understanding is that, while the value we place on a currency (particular money token) is subjective, the network effect of this value is not subjective but is arrived at as an aggregate. My belief in the current value of the USD, for example, is subjective; however, the world in the aggregate may have a different valuation of it and this aggregate valuation is one that I have to agree with if I were to make a transaction using USD. As individuals, we each have our own valuation, but in the aggregate there is only one value and this value is not subjective: it is the objective value of money.

The Austrian economic thinkers have gone one step further in their study of the network effects of money: if we can see the mechanics of its objective value, it shouldn’t take many steps for us to also see that money is also a standard economic measure of value by way of prices. Going further into this thinking, Hayek introduced the idea of prices as feedback signals that allow any society to determine how the supply of a commodity like rice may be lacking or excessive with respect to demand for rice. If the value of the currency being used in a society inflates or deflates substantially, however, the price signal can cease to work; hence, the macroeconomic importance of keeping a currency’s value fairly constant over time.

The preceding paragraphs are a rough summary and if all that makes only some sense to you, it’s as expected because my only purpose in trying to explain is to demonstrate how complex money is. Do not lose heart, however, because even if the network effects of money are too complex for you to fully grasp, it does not mean that you can’t make a lot of money. Ease of use is fully isolated from complexity and those who make a lot of money do not necessarily understand its network effects. A champion race car driver does not necessarily fully understand the mechanics of how his car works.

How to Jumpstart Your Own Currency

You don’t have to fully understand Bitcoin in order to amass wealth in it.

Let me go one step further and claim that issuing your own cryptocurrency also does not require full understanding of the network effects at work behind money. Nowadays, anybody can issue virtual tokens that can gain value. For your token to gain value, all you need is some understanding because demand versus supply works in your favor by simply limiting supply and drumming up demand. You will gain some minimum usage level (how much your token is used) by simply listing your token at some reputable crypto exchange.

Having issued your fixed-supply crypto token, you should find that it is very difficult to get attention among thousands of tokens in the market. Some friends I know have had some success tying their tokens to games.

No matter what you do, however, your token will never become a medium of exchange. In fact, the most popular cryptocurrency itself, Bitcoin, can never become a medium of exchange. How can I claim this? Just looking at the price versus time graph of Bitcoin in an exchange can show us how volatile Bitcoin is, within any time range: quarterly, monthly, weekly, daily, even hourly. Because supply is practically constant, Bitcoin price depends on practically nothing but demand, which can change in an instant. If you are a rice vendor, for example, would you accept as payment a token whose value is known right now but unknown by next hour? By tomorrow it can increase or decrease, so accepting such token as payment requires taking a risk. Would you take that risk on top of the risk you are already taking by being in business selling rice?

The price volatility prevents Bitcoin from becoming a medium of exchange and your fixed-quantity token is subject to the same fate.

For Tokens, Ease of Use Requires Stability in Value

A necessary condition for a token to become a medium of exchange is that it has to have a fairly constant value. There are now several popular tokens with a fairly constant per-unit value and these are called stablecoins. Notice that these stablecoins are still mostly used in cryptocurrency exchanges.

To introduce a token, you can sell your Amazing tokens in an exchange. You will have to sell these within a narrow price range (say within 0.999 to 1.001 USD) and you have to be ready to buy these back within the same narrow price range. Why would people buy your Amazing tokens? They won’t be buying just to hoard it, just like they do bitcoins; they would be buying it to acquire something else, like a service you provide. To keep your tokens in circulation, you would have to encourage vendors (probably in a particular industry like cannabis vendors) to accept it as payment.

I have encountered ingenious ways to adjust the quantity of tokens to control its price. Nevertheless, I still have to find a foolproof way to adjust it automatically according to some “monetary policy”. The most popular stablecoin, USDT, is not managed automatically (humans are involved in managing it). When managers are involved, we say a stablecoin is centralized. On the other hand, DAI appears to be fully automatic and so it is considered fairly decentralized. DAI, however, is less popular than even the latest centralized crop of stablecoins: USDC, USDX, etc.

Ampleforth’s AMPL

What if, instead of simply increasing the quantity of your tokens, you divide it into smaller units if / when its value increases? This is the idea behind Ampleforth’s AMPL. This is like shares of stock of a corporation that are similarly subdivided (the exact term is “splitting” the shares), in order to decrease its per-unit value by the same multiple.

For me, this is no different from Bitcoin; in fact, bitcoiners would argue that the quantity of bitcoins does not really matter because users can simply move the decimal point to the right as Bitcoin increases in value. The AMPL concept simply makes moving the decimal point explicit, by changing what one AMPL means (rather than having other names for the split tokens, as done in both Bitcoin and Ethereum: one satoshi, for example, is 0.0000001 bitcoin).

Here’s why AMPL also cannot become a medium of exchange:

  1. The incentive to acquire it is still to hoard it, expecting an increase not in value but in quantity of AMPLs in everybody’s wallet. In other words, you would buy 100 AMPL coins only because later you’d expect it to double to 200 or even triple to 300 AMPLs. You would avoid spending it to buy something else, as much as possible; because each AMPL could be worth multiples of itself later.
  2. The increase in the quantity of AMPLs you hold cannot be decreased by those who manage AMPL because otherwise, that would be equivalent to holding 100 USD in your wallet one day and only 50 USD the next. You most probably won’t agree to that. This means that there is no way to decrease the quantity of AMPLs; which in turn means that, if it goes down in value, there’s no practical way to counteract the decrease in value. In other words, it is also volatile, but its volatility is probably less severe than Bitcoin’s.

For Tokens, Ease of Use Also Requires Value Trust Transference

I introduced the concept of value trust transference in order to explain why it is important to initially peg the value of a stablecoin to the current value standard, the USD. Value trust transference simply means the “transfer” of trust from an established currency to a new one. You provide this to users of your stablecoin by allowing them to “redeem” units of the current standard if they “burn” an equal amount of your Amazing token. Of course, any unit of Amazing token can also be used in trade before being burned. The count of tokens exchanged among users instead of redeemed from the source is a measure of how your Amazing token is used in the market: the more tokens in circulation, the better for your stablecoin business.

Value trust transference doesn’t mean just willingness on the part of the source (you) to redeem tokens — it also means making it very easy for users to exchange tokens for fiat. This is not as easy at it sounds. Number one: your market mechanism for redemption has to be legal. This means you have to comply with money laws in each of the jurisdictions where your token would be available. How will your users exchange their tokens for fiat? Will you buy these back directly?


  1. Ease of use and complexity are two separate concerns: a tool that is complex can still be easy to use;
  2. The complexity of money is not in its individual unit, it is in its network effects;
  3. Fixed-quantity tokens like Bitcoin cannot become media of exchange because accepting these tokens involve risk;
  4. There are two important characteristics that make a token currency easy to use: stability of value and value trust transference.
The Dawn of Stablecoins



Carlos Tapang

Programmer and Entrepreneur, founder and CEO of RockStable, purveyors of ROKS, the stablecoin designed for daily use, like cash.