Crypto, among other things, aims to allow fast, cheap and painless exchange of value–not necessarily money, but since money is a measure of value we could simply say “money”. Sending money around the world is currently still rather inefficient and expensive–try sending money to some otherwise unknown (and poor!) country like Malawi and you’ll actually have to budget for the transaction expenses! But what really gets sent when we say we are sending money? Surprisingly not money, but numbers! It is now so commonplace to receive money as mere numbers that we never quite question the fundamental meaning of this. In this article we talk about, rather summarily, what money is for and how new money can be of benefit.<\/p>\n\n\n\n
A mythical\nstory goes thus: Way, way back when people needed to exchange goods they could\nonly do so by giving away goods they owned in exchange for goods they wanted to\nhave. They would then need to find someone who needs what they wanted to let go\nof. Since they did not have flying machines and pretty paved roads back then,\nsuch exchanges may naturally have been between friends and relatives in close\nproximity. Later on it appears people realized that it is mighty hard to run\ninto someone who needs what you have at the exact time that you need what they\nhave!
\nWhile it turns out that this (barter) system is not exactly what preceded\nmoney, this story highlights an interesting aspect of goods exchange: there is\nvalue (and valueables) being exchanged. In such a system when you gave someone\ntwo bags of maize in exchange for their goat, you had an exchange using things\nthat had intrinsic value\u2014and that term\u2014intrinsic\u2014is an important one! <\/p>\n\n\n\n
But, so the\nmyth continues, a few smart folks figured that they could use tokenization! The\nidea was as follows. Suppose I want to have your 11 cows, and while I could\ngive you my dogs in exchange, you obviously don\u2019t want my dogs since\u2026who would\naccept dogs in exchange for cows anyway. So instead we\u2014started with me and you,\nbut this we<\/em> now includes our whole token-bound community\u2014agree that you\ncan give me a token that I can use to\nget something of as much value as the cows that I want from you. Two things\nemerge: first, we need to determine and agree on the value of the cows; and,\nsecond, we need proof that indeed you can use this token in the said manner. <\/p>\n\n\n\n That token\nis money. Money is used to measure the value of things\u2014and in unfortunate cases\n\u2018things\u2019 may include humans. I can give you this token called money which has\nno intrinsic value\u2014unlike the cows, you cannot eat the money if you get hungry;\nsimilarly, money won\u2019t go hunting with you like the dogs may. So, money has no\nvalue on its own. But, and a huge but this is, we as a community can give money\nvalue! We do this by simply agreeing that it has the value we desire. <\/p>\n\n\n\n You may then\nwonder what physical object is the most desirable token aka money? Initially it\nseemed necessary to have something that is scarce, perhaps hard to make or\nacquire. This use of some special objects was mostly done to fight counterfeit\ntokens. The tradition continues to this day whereby only certain organizations,\nsuch as central banks, are allowed to make<\/em> legitimate money. You and I\ncan still agree that some such piece of paper is worth some such value (e.g.\ncompany shares work somewhat like this), but this would not be called\nlegitimate money, and we may struggle to find users beyond the two of us. What\nremains true is that the form of the token does not matter. The use of gold or\nsilver or specially printed bank notes is not to say that these things are any\nmore eligible to be money than a piece of paper off my notebook. Again, the\nmajor reason is to control the flow of these tokens, and avoid counterfeiting.\nAn interesting extreme therefore has come about recently.<\/p>\n\n\n\n If money or\nthe token of exchange can be of any form, does the token then need to be\nphysical? Remember that the problem we were trying to solve by having only a\nfew lucky people have the power to create money was to create some level of\nlegitimacy or trust in the system. This idea of trust comes about especially in\ncontexts where you\u2019re dealing with strangers, who may or may not be in the mood\nof being honest. So, a stranger walks up to you to do business. She buys <\/em>your\nland and pays with a token. She hands you the token that she pulled from her\npocket and then on it writes: \u201cGive Whoever Has This Token Anything Of Value\nEquivalent To Eleven Healthy Living Cows\u201d. Perhaps to make it more legitimate\nshe could sign off with her name: \u201c#MoneyMaker\u201d. There is a good chance you\nhave been scammed. To prove this, go to the local merchant and try to get\nsomething with even one-tenth the value of 11 Healthy Living Cows. Cryptocurrencies\naim to create the required public trust independent of the government or\ntraditional central authority. Note that trust is only needed if there is room\nfor someone to act dishonestly. If it is impossible, or mighty hard to be\ndishonest, then trust is not called for. Using advanced security features and\nmaking it very hard to forge transactions, cryptocurrencies conjure up\ncommunity trust simply because no one (actually not 100% true\u2026) can make\ncounterfeit crypto. <\/p>\n\n\n\n It costs\nmoney to make money. It used to be necessary to print money and issue shiny coins\nwith which we could also play Heads or Tails. These legitimate tokens were an\nadvancement in exchange of value, but it is now a cost that is superfluous.\nCountries like Malawi that already have a tight budget would do well to move\nquickly toward these so called trustless<\/em> systems\u2014trustless<\/em> to\nmean you don\u2019t need to trust the bank or the individual you\u2019re engaging with\nbecause the algorithms make sure nobody cheats. <\/p>\n\n\n\n Going hand in hand with cryptocurrencies is digital money. Digital money (not necessarily currency) has been around in some form already for a long time. While cryptocurrency is recent (started in earnest around 2009), digital money (money that is wholly electronic\/or just numbers backed by no physical assets) can be said to have been around for as long as decades prior to 2009. For some time already money has not really been changing hands\u2014rather it has been information changing in people\u2019s accounts. The advantage of this is that information takes up less space and is not as costly to make as are physical tokens such as coins or notes. Digital money therefore is an attractive option even for places that do not yet want to implement cryptocurrency.<\/p>\n\n\n\n What are the downsides of cryptocurrencies and perhaps digital money in general? As with all things some people will stand to win more than others. In cryptocurrencies there are individuals or corporations with computing resources that allow then to earn significantly more money and influence through facilitating transactions\u2014much the same way that banks milk you in exchange for the services they provide. There is also room for destabilizing another economy without ever setting foot there\u2014simply via the internet. This is an example of cyberwarfare, and is not necessarily just due to the advent of cryptocurrencies. Additionally, philosophers and other social researchers fear that the future may belong to a new breed of feudal lords<\/em>\u2014those who understand and manage these technologies. The creators of these tech systems are not necessarily political or religious leaders. They thus have little obligation to behave morally. The hope however is that should they create a flawed system\u2014that is, one that benefits just them\u2014the majority of people would abandon the system, rendering it truly \u201ctrustless\u201d and thus without users.<\/p>\n\n\n\n Cryptocurrencies are a nice idea some of whose aims are to make transactions more efficient, to make fraud much harder, and to avoid central currency issuing or controlling authorities misusing their power in such a way that they disrupt the economy and innocent livelihoods. Perhaps a future is coming where money, of any form, may no longer be needed. At the moment however, Bitcoin and others are taking us away from physical money AND a central issuer of such physical tokens, to enable us to transact and interact more seamlessly trustlessly. <\/p>\n\n\n\n To read more about cryptocurrencies and digital currencies:<\/p>\n\n\n\n Project Ubin<\/a> | Akoin<\/a> | China\u2019s digital currency<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Crypto, among other things, aims to allow fast, cheap and painless exchange of value–not necessarily money, but since money is a measure of value we could simply say “money”. Sending money around the world is currently still rather inefficient and expensive–try sending money to some otherwise unknown (and poor!) country like Malawi and you’ll actually […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-311","post","type-post","status-publish","format-standard","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/posts\/311","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/comments?post=311"}],"version-history":[{"count":8,"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/posts\/311\/revisions"}],"predecessor-version":[{"id":605,"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/posts\/311\/revisions\/605"}],"wp:attachment":[{"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/media?parent=311"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/categories?post=311"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/kchkna.com\/index.php\/wp-json\/wp\/v2\/tags?post=311"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nNow instead of her own token, she can give you a government token. Yes, the\ngovernment token may be prettier, but aside from that her self-created token\nand this are no different. And yet, with this government token you can go about\ntrading with others. What the gov token has is public trust. The government\ntoken has been assigned value by the community\u2014though it still lacks intrinsic\nvalue. People trust this token because they trust the system whose de facto\nhead is the government. This has little to do with whether you like the\ngovernment of the day or not: you have trust in a system where government plays\nan important role but the system is still a people-led one. <\/p>\n\n\n\n