I’m a believer, I have been since the moment I first heard about Bitcoin and the concept of cryptocurrency. To me, cryptocurrency is like the internet was in the ’90s; it makes sense, it’s here to stay and it’s only a matter of time before the whole world is going to have to get used to it. But as we move into the future all the Bitcoin believers have been talking about the last couple of years our vision of tomorrow is becoming a bit clearer.
New cryptocurrencies are sprouting up every day, each with their own advantages and disadvantages, so what makes Bitcoin so great? Well nothing, Bitcoin is starting to look like old technology. Transactions are slow, energy costs of mining are high, ASIC and FPGA devices have pretty much made it impossible for your “everyman” to mine effectively, and moving into the future I’m not entirely sure Bitcoin will be around forever. Bitcoin was our prototype, a beautiful and innovative proof-of-concept, and its descendants are equally as promising. Litecoin boasts a solution to the discrepancy between FPGA miners and regular GPU/CPU miners, and Worldcoin takes it a step further mixing in mega-fast transactions. Peercoin presents an entirely new energy efficient encryption system altogether, so which one is the currency of the future?
Well the reality of cryptocurrency I’m just now starting to piece together is cryptocurrency isn’t really a currency at all. It’s not really a commodity either though. By traditional metrics, cryptocurrency has 0 potential value as a commodity and infinite value as currency except for one inconvenient fact. Cryptocurrency is a technology, and technology has little to no permanent value. Incorporating cryptocurrency on the world stage will require we change the way we think about economics, government, and currency. I foresee crypto taking on the role of a hybrid trading commodity. A pathway for consumers to bypass national restrictions and operate on a supranational level.
Imagine gold in the ‘olden days’
A universally accepted commodity, but because of this inherent liquidity gold couldn’t quite be considered a commodity economically it played more of a currency role. “Experts” will try to tell you gold can operate in this fashion because it holds some inherent value, but prior to the 20th-century technology revolution what inherent value can anyone say gold really had? Can you hunt with gold, can you fish with gold, can you farm with gold? No, gold has not utilitarian value the truth is it’s pretty and useless. In addition, gold has limited application as purely a currency, its cumbersome and easy to steal.
And so we enter the birth of fiat money, “trade notes.” As just about every cryptocurrency fan knows most fiat currencies used to be backed by gold, in the earliest days of fiat money prototypes traveling merchants used “trade notes” a piece of paper that could be taken directly to the associated banking institution and exchanged for the promised gold. Later governments decided gold backing of legal tender was no longer necessary and trade notes were abstracted into fiat money.
Currency whose only real value is its legal backing and perceived liquidity. This leads us to cryptocurrency, fiat money has now unintentionally become the 21st century’s proof of concept that all currency must have in order to have value is perceived liquidity. The legal backing of fiat money has become the same burden to currency as gold backing was to trade notes. Legal backing places an implied restriction of nationality, limiting liquidity. Cryptocurrency lifts the restrictions of nationality and allows for theoretical liquidity achievable by no currency or commodity before, it is the second logical abstraction of currency. Unfortunately, as a technology cryptocurrency is amorphous, I see a future of many cryptocurrencies each with a niche purpose. Large corporations, and banking institutions opting for more secure currencies requiring many confirmations for a transaction. Everyday markets and individuals using currencies with instant less secure transactions and a higher level of anonymity. Currencies meant for more public endeavors like political fundraising and corporate mergers with digital signature openly accessible to the public. The applications are endless, and I refuse to even debate the merits of cryptocurrency with naysayers anymore. Cryptocurrency is the future of currency, the only question which cryptocurrency will you use?