In his video The Future of Cryptocurrencies, Andreas Antonopoulos, whom I’ve been following since I got into the whole bitcoin, blockchain and distributed ledger world, talks about the explosion in cryptocurrencies. Andreas is a Bitcoin evangelist and one of the most informed and eloquent speakers on the subject. In the video he admits to being initially somewhat disturbed about the explosion in alt coins or new cryptocurrencies. At the time of writing this post there are something like 1000 of these digital currencies in existence, although less when Andreas made his video. And this alt coin phenomenon somehow threatened the uniqueness of Bitcoin, as Andreas saw it.
However Andreas goes on to say that, once he started thinking about what a currency really is and what currencies mean to us as human beings, his concerns turned into a much more positive train of thought. Here’s why and also why, having thought about it myself, I thoroughly concur.
Cryptocurrencies and the human condition
In my last post on this topic De-Banking the Banked with Bitcoin and Blockchain I talked about how bitcoin and blockchain technologies had the potential to remove (disintermediate) trusted intermediaries that have proven time and time again to be less than trustworthy.
Now as I think about a world where, through the development of these technologies, almost anyone can create a real, usable cryptocurrency with features, rules and a distribution mechanism that meets their particular need or goal, I wonder is this such a bad thing? Moreover, isn’t this a very human thing to do? After all, historically currencies have been predominantly created around communities, tribes or nations. This demonstrates that currencies emerge when the social structure exists to support them and, as Andreas points out, when people need to express and exchange information about value, which is surely core to a functioning society.
Losing my marbles!
Back in England, when I was aged around ten or eleven (admittedly a long time ago!) a craze swept through our school. That craze was centered around marbles. Yes that’s right, the small glass balls that come in a multitude of sizes, colors and styles. Stay with me on this.
Firstly you had two basic sizes, big ‘uns were around an inch in diameter and little ‘uns were about half that size. Each of these basic marbles had two or three coloured streaks running through the center. Crystals were clear, coloreds were opaque and a myriad of colors and steelers were essentially shiny ball bearings. Crystals, coloreds, and steelers came in a variety of sizes and their size and rarity dictated their value – the larger and rarer, the more valuable.
The currency of marbles
Marbles, in my 10 year old world, became the currency of choice. I could swap two little uns for a big un, crystals, steelers and coloreds had greater value and each could be traded for any other type. Of course I could also convert my marbles back into fiat money by selling them for pennies or shillings (this was England remember). And I could buy more with my pocket money if I wanted to.
And it became even more than this. Kids with high value marbles could place them against the wall of the school annex building and have the rest of us roll big ‘uns or little ‘uns at the target high value crystal, colored or steeler from an ascribed distance. We would compete, based on the accuracy of our roll, for these magnificant prizes. The stakes were high, you could easily roll a dozen little ‘uns at a target crystal and miss every time, especially given the state of the surface of the schoold yard. All of these missed rolls were now the property of the kid gambling the prize marble. But if you scored a hit, you could make it big and you could significantly improve your personal brand in our marble world.
Looking back, it was a perfect trading system.
The marble craze swept the whole school for around a year. Now, admittedly, boys were almost 100% involved whereas girls less so but the proportion of girls interested in marbles was still high – an important point that I’ll return to later.
A cryptocurrency by any other name
This was, by any other name, a currency and now I think about it the currency of marbles bore a great resemblance to the cryptocurrencies we’re seeing today. All of the marbles had value ascribed by consensus – we all agreed on the hierarchical value of each type. The value wasn’t pegged to any other good or product, nor to some metal dug out of the ground and it wasn’t controlled by a central authority that could devalue it by making more marbles. The amount of marbles you owned affected your standing in the community – marble wealth was an indicator of success and gifted power to individuals, success and power that we all craved.
The marble currency had its’ own set of (unwritten) rules that were known and adhered to by the community. Anyone who didn’t play by the rules was ostracized and excluded by consensus and incidentally also risked having the crap beaten out of them! The risks of being caught cheating, and the resulting penalties, outweighed the potential benefits so we stuck to the rules.
It was a currency created by our school community, for our school community, owned by our school community and managed by consensus and it ushered in a period of great enjoyment, excitement, highs and lows.
But it provided something much more fundamental to us as kids. It was a system of communication that we all understood, it was a language. At an age where communication was never easy, it enabled and encouraged me to talk to other kids with whom I never would have otherwise communicated. I would happily go and discuss a marble swap with one of the tough guys or a kid not in my ‘inner circle’ whereas before I would most likely never speak to them. It even enabled me to talk to girls without sounding quite so awkward and naive – we had a common interest and language, it was special, it was personal and it had value to all parties.
What makes a cryptocurrency endure?
As I said, the marble craze lasted around a year I believe and then…..it disappeared. Maybe it was replaced with football (soccer) cards, conkers or other similar currencies. I know at one stage I was interested collecting cards with historic airplanes (still a passion today). But none of these were as widespread, as fascinating and as exciting (within our school) as marbles.
So now when I think about the future, a future in which we could have millions of currencies. I start to think, as Andreas did, about what gives these currencies value, what makes them viable as systems of trade and what makes them endure.
And the answer is: we do!
Not the central government that tells you that your dollar is worth a dollar (until they make it not so), not the bank that maintains control over the storage of, and access to, your money, and certainly not the credit card company that charges significant fees so that you can spend your own money without having to carry cash.
The marbles of my youth had real value because we used them: we traded them, we bought them, we sold them, we lost them and we won them. They were a medium of exchange and they had stored value. For Bitcoin and any other cryptocurrency the same thing applies: value and usefulness will grow with use. Of course some currencies will endure and others will fade away, but it doesn’t matter. This is a tidal wave that can’t be stopped, you can’t un-invent this technology and you can’t stop humans from creating and using currencies.
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