A vision of the Internet of Value [Part 1]
The misconception about money & Understanding money as a technology
1. The misconception about money
What is money? Everyone seems to think they know what money is. Money is the dollar bill I am holding. Money is gold. Money is the number in my bank account — or Bitcoin wallet.
While these answers seem fine, I would argue that these concepts of what money is are at best partial and at worse deflect our attention away from money’s true significance. These conceptual problems arise when we think of money as a thing. This is analogous to using Newtonian physics to explain cosmology. The results would be partial and misleading, because they look at the question through the wrong filter.
The idea that money is a standard commodity originated in the hypothetical barter economy imagined by Adam Smith. He proposed a model that started with people making in-kind exchanges, and then naturally developed a commonly-shared commodity into a measure of value, such as gold and silver, historically. This understanding also underpins the foundations of economic science, which supposes that the most suitable commodity will naturally be chosen as “money” over the course of time.
If we follow this train of thought, we gravitate towards judging and comparing different forms of money based upon their commodity characteristics, which is misleading and damages our understanding of how economies work. Money should not be understood as a thing or a commodity, but as a technology to record value. In other words, money is a common technology adopted by a society to record who owns what. In this understanding, we should compare different money regimes by their technological characteristics instead, and in how they serve their societies in their designated functions.
2. Understanding money as a technology
Imagine what happens in a modern economy when you send money to a friend, likely using an online banking service or a digital wallet such as PayPal or Apple Pay. What is moving is not a “thing,” not a commodity, but rather a re-arrangement of some numbers in a database somewhere. The database, the banking service, and the number in your account are all parts of the modern form of money technology, the value of which has been agreed upon. Money technology has been evolving for thousands of years, and it is always much more than just a common commodity or currency.
a) This is the currency of the Yap Islands [1]
The round stone with the hole in the middle is used as money on the Yap Islands. Each stone holds a certain value on the island, depending on its shape and size. Since the stone is so big and heavy, it is rarely moved, but the ownership of the stone is marked and changed upon agreement of the parties involved. In some cases, even when the stone is missing, the value and ownership of the stone is maintained and recognized by the people of the island.
b) These are metrics from the Federal Reserve [2]
The above pictures show the modern definition of money, and how money as a technology works in a modern economy such as the United States. The designations M0, M1, M2, and M3 correspond to different measures of the overall money supply, different currency mediums that people have adopted and the way they interact with financial institutions. Money in bank notes and coins is designated M0; this covers only a small part of the overall money supply, and only a small percentage of the total value people are paying with and sending to each other in modern societies. Chart 2 shows the growth of different levels of the overall money supply over time, and they do not all move together. When the economy collapsed in 2008, M1 was still expanding due to the expansionary monetary policies of the Federal Reserve. The private sector was contracting, however, and consequently M3 growth contracted.
These two charts help to illustrate the need for a more accurate understanding of money as a technology to record its actual value in a society. As a foundational technology, it evolves as society evolves, and its centrality grows as the economy grows. Multiple institutions were born over the course of history to support a particular technology and create the infrastructure for that technology to function smoothly. In its technological dimensions, “money” includes all these institutions and infrastructures, as well as the currency often used as the unit of value in that money technology.
[To be continued]
References
[1] — https://en.wikipedia.org/wiki/Rai_stones
[2] — http://www.businessinsider.com/the-myth-of-the-exploding-us-money-supply-2011-3
[3] — https://medium.com/@VitalikButerin/a-proof-of-stake-design-philosophy-506585978d51
[4] — http://unenumerated.blogspot.com/2017/02/money-blockchains-and-social-scalability.html
[5] — https://news.21.co/quantifying-decentralization-e39db233c28e
[6] — https://www.youtube.com/watch?v=5ca70mCCf2M
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About the author
Mr. Long Vuong — CEO and Founder of Tomoapp, one of the very first co-founders of NEM blockchain under the name Utopian Future. He’s PhD in economics and crypto-economics researcher since 2013.
Now, he is on the race to fight back the massive data harvesting by creating the contributor’s network named Tomo Network, where your knowledge and experience sharing is value by real assets and highly recognized by a great community.
The target audience of Tomo network is focused in Asia Pacific, where leads the trend, that nearly half of the world’s social network users visit sites via their phones, according to 2016 Nielsen Report. Thus, this attribute matches the essence of Tomo App — the knowledge-sharing application via short videos on mobile phone, part of Tomo Network.
