Cryptocurrency Ain’t Here Yet.

While the Bitcoin, Ethereum, et. al. world has been loud; over-amplified by the media; and impressively hyper-active, it is important to understand that these are not ‘currencies’. Cryptocurrency is a misnomer. Cryptotulips might be a better term ;-).

We do not have a digital currency that people use regularly for daily transactions.

Why? Because for day-to-day exchange of value, the vast majority of the available mechanisms (primarily fiat money) are inflationary currencies. Over time the mechanism (a dollar, a ruble, a loonie, etc.) become “worth less.” This happens for numerous reasons, but the easiest one to point at is the fact that the nations/banks that control those fiat currencies are almost always printing up more currency. Mo’ money — mo’ inflation.

This is not the case with cryptocurrencies. These misnamed creatures are deflationary creatures. That is simply because the number of coins in a currency model are capped — a priori or eventually via the mining heuristics. Once each currency hits critical mass, its value (as generally defined in fiat money) will over the long term move up — inevitable temporary market perturbations notwithstanding (unless/until people simply get bored of tulips).

Generally speaking, nobody will spend their deflationary currency. It is not logical to do so. They will hoard it. At best they’ll hold-and-leverage it on the maker side of options exchanges like BitMex.

Blockchain is the thing that matters today (provided quantum computing doesn’t destroy its security) — and most of the compelling applications of blockchain have little to nothing to do with “digital money.” There are efforts underway to create deflationary cryptocurrencies, and those efforts will evolve into the first, real, usable, digital currencies.