Something strange happened on the way to Bitcoin mania. Post-Financial Crisis bewilderment about the nature of money mixed with Satoshi worship and a sprinkle of Occupy Wall Street fervor created an atmosphere in which regular people (read: not economists) began wondering what currency is, how it works, and from where it derives its value. (Answer: A special pixie dust called trust.) Around the world, people are waking from a period of unquestioning acceptance of their respective national currency (or the euro) as the only game in town. This is a good thing.
In addition to that money you pay your taxes in, you may own some dollars, yen, pesos, or krona. But those are all currencies issued by central banks. You know: state money. Alternative or private currencies are also relatively common (airline miles, Ven, Bristol Pound) and are being born all the time (Amazon Coins, Auroracoin, Stellar). But these currencies (protocols, credit systems, or whatever you call them) were never engineered to challenge or end around coin of the realm.
Bitcoin was, or many of its advocates believe that it was, and likewise believe that it should. Yet when you listen to almost any conversation about Bitcoin, there is this sense that, although it’s fascinating, important, and maybe worth experimenting with, you would be bat-shit crazy to denominate your retirement plan in it. Even at the height of Europe’s debt crisis, or when Cypriots were seeing their money confiscated, there wasn’t an overwhelming sense that the masses were poised to quit state money altogether.
Bitcoin is a cool, possibly amazing, new form of money, but it’s not like you’re going to trade in all your dollars or euros for it. This brief caveat, which I’ve heard countless times, actually speaks volumes about the future of money. Most people may never put it in these terms, especially if they are of a more anti-government mindset, but the fact is that Bitcoin and the myriad other cryptocurrency experiments haven’t undone faith in the institution known as the state or the currency it issues to fuel commerce. When faced with the question, “Who do you trust with your life savings, the U.S of A or a bunch of internet weirdos?” most people still side with the nation (or—knock on wood—the eurozone).
And thank goodness for that! After all, too much rattling of our already tenuous faith in the state, and the whole house of cards could come down. Lest you forget, state money is the stitching used to hold together that society-organizing entity we call government.
Because of its ingenious settlement technology, Bitcoin could still go mainstream, as I suggested in this essay almost a year ago. And in many ways I hope it does. Yet that success may in turn give national currencies still another boost. How so? Competition.
As Marc Hochstein, editor of American Banker magazine recently told me, overseers of national currencies “could co-opt many of the things that make cryptocurrency seem special today”—faster settlement, enhanced privacy, counterfeit-proofing, and so forth. Combine all that with the existing edge that national currencies (plus the euro) already have in the form of history, territory, regulation, militaries, and near universal acceptability, and tomorrow’s state money will look almighty.
I should add, by the way, that Bitcoin’s recent $100 dip is interesting, but it’s not what motivated this post. Short-term ups and downs are far less provocative to those of us who are foolish enough to obsess over what all these monetary innovations will mean years from now.
On a different note, I’m starting to look into something called Yerdle. Is there an equivalent in Europe? If so, let me know. I’m in touch with one of the founders—a very impressive guy named Adam Werbach—and am going to try and post (Or is it sell? Or trade?) some stuff in the near future. What I want to know is whether Yerdle could revolutionize the vintage-stuff economy, or whether it’s just an elegant version of the longstanding practice summarized by this photo. Stay tuned for an update.
