When talking cryptocurrency, it’s easy to get caught up in anecdotal conversations about people who have made, or lost, lots of money. It’s easy to end up talking about Elon Musk and meme coins as well as internet money for committing crimes. It’s easy to forget what’s right there in front of our eyes when talking crypto, which is: CURRENCY.
I recently watched an excellent series called ‘Hidden Secrets Of Money’ by Mike Maloney. In this docu-series Mike explains the core differences between (sound) money and CURRENCY, which is something totally different. CURRENCY relates to paper-based, fiat currency which is not backed by anything and requires everyone in the system to blindly trust that the currency is valuable and worth something. This is quite possibly the biggest lie and deception that we all tell ourselves and each other.
Bitcoin was the first cryptocurrency and was created to solve the problems of the financial system which requires centralized authorities (such as central banks and the Federal Reserve) to print more and more currency, thereby causing inflation, to then raise and reduce interest rates to counter the inflation they caused by printing more money. The fractional reserve banking system means all currency in circulation is created at a debt meaning the above cycles are never ending.
Since the inception of Bitcoin, various other crypto currencies have been created. The following examples are not meant to be financial advice, in fact the purpose of this article isn’t to discuss price predictions or investment opportunities, it is meant to draw attention to the real world use cases of cryptocurrency.
Whilst Bitcoin was created to be a peer-to-peer transaction system, many perhaps unforeseen consequences have arisen from the design and architecture of the Bitcoin code, such as energy usage and costs, and slow transaction times. Whilst both things are being addressed (for example with the lightning network and various energy efficient ways of mining), as time goes by there are other matters that surface, for example mining becoming unprofitable.
Despite these issues, it is apparent that Bitcoin is establishing itself as a genuine alternative to gold as a store of value.
In any monetary system, the money/currency MUST be backed by something of value such as gold or silver – otherwise we end up in a system like we are in currently (whereby currency is printed and devalued and can be manipulated and abused by governments and banks at the expense of the many and for the benefit of the few). The problem with gold is that it isn’t easily divisible, and it isn’t easily transportable which are two necessary features of sound money.
Bitcoin solves both of these problems and even outperforms gold in terms of its scarcity with its finite supply of 21m Bitcoins. People argue that Bitcoin has no value because it isn’t backed by anything. Well, gold isn’t backed by anything. Gold is valuable because of its molecular properties and scarcity, however Bitcoin is valuable because of its open source code and network. We can see with mathematical certainty that Bitcoin is finite, and we can see the movement of all Bitcoins and denominated values (satoshti’s) across all times, forever.
Let me begin by talking about XRP by saying that I have lost money numerous times by investing in XRP. Due to the ongoing court case with the SEC and considering my own failures with investing in XRP I do not advocate investing in XRP at this time.
That being said, it is important to understand the problem that XRP is trying to solve – international settlements.
The world currently settles international payments using a system called SWIFT. SWIFT had its hay day in the 1970’s and 1980’s and hasn’t really developed technologically since then. International settlements between banks still take up to three BUSINESS days to settle.
The global financial system is now digital, and currencies are no longer backed by gold in vaults… Settlement does not require the transportation of gold between nation states. It is done by updating ones and zeros on software that different financial institutions all have access to and agree on.
There is perhaps no more important application of distributed ledger technology than on the global scale between countries. Instant, secure, and verifiable transactions should be a given in the year 2022 (it could have been a reality five years ago).
As mentioned, it is easy to miss the point of cryptocurrency when your only focus is on making money. Yes, there is money to be made from investing in cryptocurrency projects, but 99% + of investments are highly risky.
It is necessary to shift focus away from Lamborghini’s towards the MONETARY SYSTEM. The current monetary system is inherently fraudulent and corrupt, and benefits only a small minority of people. By considering the potential of cryptocurrencies to negate the need for central authorities such as governments and banks, and, provide transparency over the movement of money between individuals and groups; we can see the inherent value of different currencies for solving different real world problems. In doing so, the world becomes a fairer place and the technologies that solve the biggest problems rise to the top.
I’m Jamie, 35 years old and living in Australia. I got into cryptocurrency in 2018 shortly before the $20k high and subsequent bear market, and when you could buy 1 ETH for $300 (my first investment). Since then I have dabbled in most things crypto-related: leverage trading, minting and selling NFT’s, ICO’s… I’ve been scammed (several times), attempted various trading strategies (from hodling to 100x’ing a trade) and introduced many people to crypto.