Why we need a better form of money

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While people around the world are busy arguing about student loan forgiveness, climate change, nuclear power, abortion rights, trans rights, the war in Ukraine, vaccine mandates, farmer protests, and about a million other things, I believe there’s one thing that’s just as important as anything else going on in the world today, but nobody is talking about it. And that’s the need for a better form of money.

Considering the fact that the prices of goods and services are soaring everywhere, that rather than living in a time of abundance, we are facing a food and energy crisis on a massive scale, I’m dumbfounded how this isn’t a part of the larger conversation. Whether you blame it on bad fiscal policy by the central banks, bad decision making by our governments, or the ongoing war in Ukraine, I believe the solution to all of these problems is fixing our money.

It’s generally accepted that there are three main objectives that money must satisfy. To facilitate the exchange of goods and services (medium of exchange), to store one’s wealth (store of value), and to communicate the price of a good or service to the rest of the market (unit of account).

The problem is the money we use today falls short in all three areas:

Medium of exchange: We live in the age of the internet, but sending money over the internet isn’t always easy, especially if we’re talking about sending small amounts of it to people in other countries. In that case it’s virtually impossible. It’s also pretty much impossible to send money over the internet without giving up our privacy, thus limiting our ability to transact with one another without revealing our identities. Not only is this true for sending money online, but with physical cash becoming increasingly obsolete, we’re soon going to find ourselves in a situation where private financial transactions simply don’t exist. Privacy is something many of us take for granted, but without it, the greatest threat to our freedom is that we will effectively lose our ability to challenge authority. Because no matter how you look at it, having to worry about going to jail for making the wrong political contribution isn’t conducive to a free society.

Store of value: With our money currently losing its value at a rate of 10% or more on an annualized basis, it’s obvious it is no longer a good store of value. Not having the ability to retain our wealth can create all kinds of problems in the world, including civil unrest and economic collapse. We have witnessed this same cycle happen over and over again throughout history. This means that what we’re experiencing today is not an anomaly, it’s part of a larger pattern, one that we’re doomed to continue repeating if we don’t find a better form of money.

Unit of account: One of the most important but overlooked aspects of money is how it helps us determine the right price of a good or service. Prices affect our behavior. Higher prices can reduce demand or encourage people to save their money for something else. It can also encourage people to use their resources in order to supply the market with those goods or services that are high in demand. Another way of putting it is that prices create a profit incentive to create more of what’s needed and less of what’s not needed. In many ways this could be what we need money for the most. But when our money is compromised, controlled and manipulated by a small group of bureaucrats, it can no longer serve this function properly. Instead of letting the overall market decide what’s best, what we end up with is a ruling class that gets to do what they think is best for everybody else. It not only distorts the economy but can lead to perverse incentives that inevitably leads to hard times.

So how are cryptocurrencies different? What can they do to fix this situation?

By improving all three aspects of money.

Medium of exchange: Cryptocurrencies can easily be sent across the internet without having to rely on any central authority. This saves us from having to pay rent-seekers exorbitant amounts in fees to use our money. Cryptocurrencies are also borderless, since they aren’t controlled by any government or central bank, meaning it doesn’t matter which country the two transacting parties are in. Not only does this make it possible for anyone to participate in the global economy, but it allows us to have a free market on a global scale, not just a local one. Crypto also makes it possible for you to send money to anyone in the world without revealing your identity. By combining privacy with censorship resistance, crypto makes it so we don’t have to be afraid of our bank, Venmo, or government flagging us for our financial activity, and our ability to challenge authority remains intact.

Store of value: A form of money that can’t just be printed out of thin air has the potential to be the most sound money ever created. This can finally enable humanity to put an end to the never ending boom and bust cycles of the past. Imagine if instead of the rise and fall of the Roman empire, the Byzantine empire, the British empire, and the US empire, what we had instead was a society that could keep going without having to deal with the same problems that brought those empires down. A civilization that continues to build and advance new technologies without end.

Unit of account: If cryptocurrencies succeed, it will make it possible for us to have prices that are measured on the same basis across the globe rather than varying from one country to the next. Prices can also react much quicker due to the improved technology, making our economy more agile. And without our money being constantly manipulated and debased, our economy can function more efficiently by having more reliable supply and demand signals. A well functioning economy will mean more value creation and a higher quality of life for all.

To summarize, I believe cryptocurrencies can have a profound impact on our world for the better by giving us a form of money that is vastly superior to the money we use today. Crypto can shift the balance of power in favor of the people since we will be taking away the power of the state to print money at will and use it to fund wars and weapons of mass destruction. Instead of just voting at the ballot box, crypto will enable us to vote with our money in a way that wasn’t possible before.

But in order for crypto to fulfill its potential it must first prove capable of serving as a real alternative to the current system. And the only way that will happen is by delivering the technology necessary to out compete the money we’ve been using for decades.

Therefore we need networks that are robust and work at scale. Networks that are more resilient than the systems in place today, not less, because if the global economy is going to run on these networks, they need to be secure and reliable.

As someone who believes in free markets, I don’t think the world will run on a single blockchain. Nor would I want it to. I understand the importance of competition. Without it, we are susceptible to growing complacent, which can eventually lead to deterioration and decay.

I want multiple blockchains that give people more options and failsafes. Different networks that serve specific needs and use cases. If you look at any capitalistic society, you will find a multitude of goods and service providers. You don’t have just one car manufacturer, or one clothing brand, or one furniture maker. What you have instead are endless choices, choices that lead to not only more freedom but more innovation.

It remains to be seen which cryptocurrency will finally solve the problems that have prevented this industry from fulfilling the mission. Bitcoin showed us what was possible, albeit on a small scale, when people used it as money on The Silk Road. But that was more of a test run than anything. A minimum viable product to demonstrate how things could work.

Over the years Bitcoin has spawned thousands of new tokens and coins that look to improve on Satoshi Nakamoto’s original creation, but sadly none have managed to fix the big scalability and usability problems preventing them from being adopted as world money. Whichever project finally solves those issues will be the one to usher in a new era for blockchains. One that isn’t focused on speculation, but on solving the most important problems of the world.