The money of ideas

With the astronomical growth of Bitcoin — and pretty much every other crypto asset — this year, and the consequences this had for transaction costs and speeds, the currency vs store of value discussions also reached an all-time high. For anyone who cares, here are some of my thoughts around this, though keep in mind that I am not a day trader but mostly interested in the technology and its potential implications.

So what does that have to do with crypto currencies? Pretty much everything as far as I’m concerned. Like communities, currencies also were functions of locality. While modern monetary systems are really not much more than a shared belief that a specific token (a shell, a coin, a bank note, a cheque) guarantees a certain purchasing power, we were pretty much stuck with our national currencies. This is no longer the case: people call crypto currencies the money of the Internet, and for me that also means that they are the money of ad-hoc communities, of shared beliefs and ideas and as such have may have a value that is not strictly monetary.

From this perspective, store of value vs. everyday currency aren’t two irreconcilable opposites, they are merely two points on an infinite continuum that sooner or later probably will include things we can’t even imagine yet. Every idea and belief about what currency is, can or should be, will find its representation in some cryptographic asset. These assets will not compete head to head any more than fish compete with mammals on an evolutionary scale. Competition will happen within niches, and we’ll get used to seeing new crypto currencies come and go as they outlive their usefulness. After all, when was the last time you logged into your MySpace account instead of FB?

As this process continues, people will also stop valuing crypto in fiat. We all already know the exact value of every Bitcoin, it’s 100 000 000 Satoshi. Unless you’re going to exchange back to fiat currencies, that’s all that really matters. Exchange rates only come into play at gateways (like when trading to other crypto currencies or USD), just like they do for fiat currencies now. Unless you’re a forex trader, exchange rates probably have very little impact on your daily life right now, except during travels.

This is pretty much how I’ve been treating Ethereum for the past 2 years, as the native currency of this ecosystem. Whenever I find a new crypto asset I’m interested in, I’ll generally pay for it in ETH, pretty much irrespective of their current dollar value at that time. I also use it as spending money for services provided within the Ethereum ecosystem, like the ENS domain I own, without worrying too much about what USD value that represents. Computations on the distributed computer that is the EVM require gas, and ETH is what we use to pay for it.

My general optimism aside, there certainly are many problematic areas that will need to be fixed in the years to come. Blockchains and crypto currencies are no panacea and the recent gold rush has rightfully cast some doubt on the entire industry. But living in a part of the world where a bank account or insurance is not yet readily available for everyone, I sincerely believe that anything that tries to democratize and decentralize governance and money is not only needed, but inevitable. Maybe it’s all going to crash and burn, but for the time being I see a lot of very smart people working on interesting projects that could benefit the greater good, which is a welcome change from the usual Silicon Valley startups.

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