Dear Cryptocurrency Enthusiasts,
I heard the air just go out of the room. How can I dare say such a thing? I mean, why? Why challenge the Gods of Crypto? Because I listen to them when they say really dumb things and I’m a bad little sheep. I crap on their stage and bleat. It’s okay, I’m just a little sheep. Not much to worry about.
After reviewing several recent videos put out by the more vocal cryptocurrency developers and evangelists I wanted to reiterate a few things about what these pro-cryptocurrency, blockchain promoting, initial coin offering gurus and family, might be obfuscating: reality.
(There. I just let one go. Plop.)
And this goes for nearly all cryptocurrencies. Bitcoin, Litecoin, Sexcoin, Ether-bum and Frogpennies included.
What? There are no Frogpennies? You mean I was scammed? Again?
I’m no newbie (noob) to this financial vehicle. I’ve been around the bend. Lost and gained. And I’m still here. Still playing the game. Still bleating and trading — and winning — for now.
So, this is a reality check, from a fan of cryptocurrencies. (That’s me. Don’t forget that part.)
Is cryptocurrency anything other than a speculative vehicle?
I mean, look at where most of the money is going in cryptocurrency markets. Most of the investment is going into bitcoin. Currently, bitcoin’s market capitalization is nearing $100,000,000,000. Each BTC is now (almost) worth – $6000 each. It kind of wobbles there — for now. Certainly, another milestone for cryptocurrency at large.
But is bitcoin worth anything at all? Go ahead. Torture yourself about energy, electricity and nodes. What type of value, other than a service value, does any cryptocurrency have?
How’s the mental argument going? Feeling twisted up yet? Okay, I’ll let you off the hook. It’s better for your blood pressure that way.
Wait a minute… The older guys and gals take this crap in stride. It’s just the younger ones who need to chillax. We’ve — us elders — been around the apple cart a few more times.
“Oh, but times have changed!”
No. They have not. Crooks are always crooks, not matter the century. Dummies are always dummies. Blonds are… Never mind.
In the cryptocurrency world, there’s a lot of conjecture about the nature of money itself. So, I’d like to explore that a bit. Remind the wandering souls who left their gamer chairs and headed over the crypto-couchs for beer and saki. (Which are both wonderful, I’ll admit.)
Hopefully, these wandering post-gamer types (Vitalik?) will sober-up before it’s too late — for the rest of us broke investors.
So, let’s get to it.
One of my favorite definitions of money was provided by Ayn Rand. If you don’t know her, consider yourself — sorry — uneducated.
Okay, maybe that was harsh. But if you are in the Fintech world, you ought to be ashamed.
If you go to aynrandlexicon.com and look up the word “money,” you will find the seeds of what I’m about to go over, there.
The Lexicon pulls this definition from a piece that Rand did titled “Egalitarianism and Inflation,” from the book titled Philosophy: Who Needs It, page 127. (Go ahead, look it up. You can google it. I’m tired of giving out shortcuts like candy.)
So, let me compare cryptocurrency to money. I think that a lot of people are disregarding this very important definition — to their own detriment.
According to Rand, money is a tool. A tool that can be used to exercise long range control over one’s life. A tool that can be used for saving. A tool that permits delayed consumption. And, a tool that buys time for future production.
Think on that a moment. Pick up a wrench. Caress it. Did you just fondle money? Well, kind of.
Is cryptocurrency a tool? Can you fondle a crypto? Would you want to?
Certainly, crypto is a type of tool or at least an application, but it requires something a money-tool does not. Cryptocurrency requires energy. Electrical energy. It also requires a computer, software, regular updates, dedicated developers and user cooperation. These are only a few of the cryptocurrency requirements.
In other words, crypto is a “user of tools.” Catch that? It’s a multi-tool. (Oh, that’s gross.)
Can a cryptocurrency be used long range, however?
The apparent answer is that it cannot be used beyond a few years, without improvements. So, in this respect cryptocurrency cannot be used to exercise control, in a long-range manner.
Crypto is a shorty sporty. Heck, so is my wife.
Can cryptocurrency be used for saving? And by saving, I mean saving something of value (a tool — remember) that one can come back to in a week, a month, a year or longer — and pick it up, dust it off and say, “Wow, it’s still good as new.”
The simple answer, again, is…no. Attempting to save cryptocurrency beyond one week might be very risky. Yes, I’ve heard about bitcoin. Probably, before you.
In this respect, cryptocurrency cannot be used to delay any consumption for greater than perhaps a few days. It cannot buy time for the future.
Gold, for example, buys one “time” in a sense that one can delay using it for years. Maybe, if the governments did not control the price.
Let’s look at another aspect of money that Rand indicated was a definite requirement.
Money must be a material commodity that is imperishable.
Not a banana or pork bellies. Not energy or “trust.” Not nodes or networks. Material…and a commodity. A tough and tumble thing that just holds the fort and takes no prisoners — not even during “World of Warcraft.” (That should probably be Witchcraft.)
Now, you might ask what (exactly) is “imperishable.” And it is clear cut – it is something that cannot perish or if it does perish it would take some serious effort. Computers and networks and games — they all go “bye bye.” Time kills them.
Cryptocurrency shall perish from this earth — I mean — eventually. Maybe in a few years. Maybe after Fedcoin awakens and the apparatchiks get going. Make a few arrests. Tax people into the poor house. A bit of insurance policy suicide.
So crypto is perishable, but for now, it’s a great fruit. Sort of like one of those irradiated, dehydrated apple chips. It’ll last for a few years on your counter, but once the dog finds it, yum-yum.
If the power goes out in your area, can you spend, save, and borrow a bitcoin? If your country makes cryptocurrency illegal, will you still use it? If, a few years from now, a newer and much better cryptocurrency is invented, what will happen to your preferred cryptocurrency? It just rotted. Perished into the doggy mouth.
Rare. Money should also be rare. Something that is abundant, easy to produce, easy to copy, easy to “fork,” does not meet the definition of rare. Think copy-machine. Think clones. Think, fiat-money.
Artificially reduced numbers on a digital ledger does not meet the definition of money, but it could be a type of functional currency. Reduced numbers of cryptocurrency atomic units do meet the definition of “limited,” but digital information is not in and of itself, rare.
Unless you print this — the words you are now reading (and why you waste you time here, I’ll not ask) — are born of code. Pixels instructed to turn on and off, by a bit of computer code, fed through a electronic processor. Okay, it’s not the best code. Not a crypto-code, but you catch my drift, don’t you?
Codes are not rare. They can be secure, however.
Money must be homogeneous too. Standardized. Similar. A dollar bill looks the same and spends the same all over the U.S. and many other places. (Yes, I know dollars suck — but they spend.)
Multiple kinds of functional money, i.e. cryptocurrencies, are not standardized. Although, many cryptocurrency technologies are similar they are not, for all intents and purposes identical. There is no standard. (Maybe that’s good, actually.)
Money must be easily stored.
Generally, this might mean that money is compact, perhaps stack-able, able to be placed in one’s pocket, transportable and able to be secured.
Yes, I know gold is heavy and past presidents in the US have stolen it from the people — and that it’s really hard to steal crypto.
But you know what’s even harder to steal than crypto? My thoughts. Electronic (and chemical) codes I can relay to you via spoken or written words.
I have secret thoughts too. Try and take them. On second thought, don’t — you might get sick. I’ve seen some pretty messed up things in my life.
Is cryptocurrency easy to store? In some sense, saving information on your computer is quite easy. But is that true storage in the physical sense? And isn’t that what we’re after? The ability to place money in a safe, under your mattress or in a tin can in your backyard?
Are my thoughts money? I think I have nodes too. My neurons are decentralized in my brain for sure. Billions of nodes, just humming along.
Money should not be subject to wide fluctuations of value, according to Rand. This seems straightforward. Sort of like, “Duh!”
My thoughts fluctuate. Crypto pops up and runs to ground often. I wonder, can I trade my thoughts on an exchange?
If you place a government issued coin in your pocket, unless you live in Venezuela, it will probably maintain its value throughout the day, perhaps an entire year.
On the other hand, if you stored a bitcoin on your computer hard drive, next week it could be worth twice as much or half as much. And this goes for most other cryptocurrencies as well.
Not so for my thoughts. They are worth zilch, until I use them to develop something — say a crypto. There, I just did. Did you feel it? Wanna buy some thought-crypto?
So, fiat currencies are terrible, but they generally hold their value over longer periods of time – a stable value — when compared to cryptos. Especially my thought-cryptos.
What else is important about money?
Well, if you can’t go to the market and spend it, there’s a problem. If you can’t buy a cup of coffee, a soda, or a car – anywhere you normally go – there’s a problem.
Oh, please don’t bring out that BTC ATM map. Just go to the store and let them stare at you like you are a “nerd.” (Hint: you are. But it’s okay. They meet on Wednesdays, I think. Make sure to bring your pencils.)
So, if a cryptocurrency is to become a functional money it must be in demand among those you trade with. Not only the Wednesday “Nerd” Group. Currently, cryptocurrency also fails in this respect. Let me repeat that, currently. Today.
(Note: Nerds may conquer the universe. Just look at Bill Gates. He’s got his own crypto now. “Way to go Bill, you copycat. No, I know you did not copy Apple…”)
Let’s get back on track, before Billy gets made and shuts this blog down. Really, I apologize Billy. I know you love crypto too.
Using Rand’s definitions, it seems that the only true money is gold.
“Oh not that rock thing again. You’re so retro, dude!”
Straighten up. Get a job, before your dad kicks you out.
Gold has a tangible value, but, as Rand states it, gold is “…a token of wealth actually produced.” Moreover, the transaction itself becomes much safer, much simpler, because it is like bartering.
“No, Mr. Retro. I need to get back to War of the Witchs II!”
Money is a tool. Cryptocurrency is an application that uses a tool – a computer.
Tools can be used over long periods of time. We do not know how long cryptocurrencies will last.
“You mean it’s like a new modified game?”
One can save a money-tool. If one saves a cryptocurrency application, it may be outdated within the year.
“Yep, just like my computer games. I sort of get it now.”
If you delay using your cryptocurrency, you may lose all your money – all your value.
“Right. You can’t sell used games for squat after a few months!”
The money-tool ought to be imperishable. Cryptocurrency is perishable.
“Games are dead soon after release!”
Right and a cryptocurrency is not a material commodity.
“True. I download my games now.”
Cryptocurrency is not rare, only mathematically limited.
“You got me there, grandpa.”
Cryptocurrency is not homogeneous in the sense that it is standardized among the persons with which you trade. If cryptocurrency were standardized, this might increase its demand.
“Yeah, a lot of dudes can’t stand War of Witchcraft at all! No demand. Puds.”
Cryptocurrency requires a stable value – if it is to escape the bonds of speculation.
“Hey, I made a few bucks with mining Piggycoin a few years back!”
Aside from the fact that cryptocurrencies do not meet the ‘Randian’ definition of a sound money, this does not mean that its value will not increase.
“Like I said, the Piggy was good to me. But my mom got tired of the high power bills and the gizmos making all of that noise.”
Even if governments choose to define cryptocurrencies in different ways, those jurisdictions with the least amount of regulations appear to be reaping the benefits of increased Fintech investments, for now.
“I heard that. But I’m not leaving America for some European paradise.”
Cryptocurrency is also voluntary. Fiat currency is not.
“That’s the point, right?”
Cryptocurrency is also trustworthy, in many cases. Many people trust the math, but some are concerned about the developers who write the code.
“Dude, you are confusing the hell out me. First you say they suck, now you say they don’t?”
Is fiat currency trustworthy? It depends upon the country, the economy and the leadership.
“Oh, yeah. Bummer.”
One thing is certain, however, even with two arms tied behind its back, decentralized cryptocurrency has captured the imagination of the people.
I think that any blockchain adoption by governmental entities, will only serve to solidify the people’s belief in the private use of the blockchain technologies.
I’ve also included a YouTube video of mine, highlighting some of the above issues.
“Dude, can I go back to my games now?”
P.S. I’m selling my thoughts for one BTC each. Guaranteed to be far more awesome than any cryptocurrency ever mined, minted, spat out, staked, gassed-in or farmed-out. There is a limited supply of my thoughts because one day I’ll be dead. (Shut up, I heard that.) Just leave a reply and we can work out the details. I’m not going to leave my BTC address. That’s just tacky as hell, don’t you think? Hurry, this is a limited time offer — maybe less that 30 years before it ends and my decentralized network will cease to function.
(Disclaimer: The above is the opinion of this writer. Any appearance to reality is merely a coincidence. If it bothers you, mine some ‘coin.)