Do we really need today's currencies?

“Money” represents a standard. A mean of exchange. Before that our ancestors were exchanging goods and services based on need, utility and scarcity in an ad-hoc way depending on the social context. Eggs were exchanged for oranges and cheese for a sack of grain. Arguments were more often than consensus. Until one of our ancestors came up with the brilliant idea of a standard. So he used a specific weight of the most universally accepted commodity, gold or silver, added the king’s favourite image on one side ( to gain endorsement) and the “logo” of a State in the other and declared it as a standard. People realised what a good idea it was and adopted its use. The standard became a fact of life and the coins currencies. In one form or another over the last five millennia, money has woven its meme in the fabric of every human institution conceivable.

At 1972 the abandonment of the Bretton Wood system marked a new era. The era of the currency of relative value and a USD-based standard that was now open to abuse and misuse. The architects of the new system took advantage of the new financial regulations. Human institutions followed the trend. We reached the point where money has actually replaced self-actualisation in the top of the pyramid of human needs.

Today’s currencies represent a far cry from the original standard based ones. With a group of them playing the double role of a currency/pseudo-standard. Thanks to this “arrangement” anyone “authorised” can create “value” out of thin air (see Banks, Foreign Exchange Trade Centres…). The billions under the poverty line, the environmental abuse and mass migration events are only a couple of the effects of this system.

But then again, 1972 open the door to new ideas. Human ingenuity saw through the fog. Someone out there saw the glass half full.

If the value of a currency is what the “markets” believe it to be then where was the problem of creating new “markets” and local currencies or cryptocurrencies for that matter? The idea is about to become an avalanche. Try to count now the local currencies, cryptocurrencies and tokens that keep piling on a daily basis through ICOs.

What is the real difference between USD and any token? They are both fiat. The only difference is that the one is a legal tender by a government decree and runs on a Banking network while the other by the investors’ decree and runs on a Blockchain. The mistake was (is) that the crypto-markets and all of us insist to assign a relative to government-issued currencies value to them using a false standard and by doing so we distort their value in more than one ways.

From the moment you allow the comparison, issues like; misuse of cryptocurrencies, public perception of its intrinsic value, its limited supply sensitivity due to the existence of stockholders with large amounts of it in their possession that can influence its price etc. (see ) come into prominence. It makes no sense to create a new engine using parts of an old one.

In the flip side of the same “coin” the inevitable comparison uncovers the weaknesses of all existing fiat currencies relative to the digital ones for all to see and that is not easy for governments to stomach.

We witness around us the first signs of the allergic reaction to the system, the incumbent markets and the “regulators” in regards to bitcoin, Ethereum and the rest of cryptocurrencies, from this act. They suddenly realised that their post-1972 monopoly of assigning values and generating them out of thin air is over. There is a new kid in town.

Their recent arguments: Are token issuance represent “securities” or not? and are they a risky “investment”? lack substance and reveals the “regulators” state of panic in front of the inevitable change. They cannot realise that a “platform” can use their rules to issue a “currency” in the same manner as a State.

On the other hand, you see voices arguing for a middle ground approach with the more recent but unfortunately under the same distorted notional prism.

Cryptocurrencies are a different class of assets and serve a different purpose than fiat currencies. They need to be treated as such. Cryptocurrencies need a new standard to be valued against.

No government decree will ever have a higher value than a people consensus backed smart contract. It is a fact that fiat currencies CANNOT drive humanity forward anymore. Currency as standard cost humanity TOO MUCH to maintain it. It creates more problems than it solves. The only thing this practice can hold on to is our own institutionalised ideas. Has anyone calculated how much it is costing all of us to maintain this post-1972 “standard”?

Smart contracts, on the other hand, can be easily expressed on a no-cost standard, for as long as we can all agree on that. Being expressed on this cryptocurrencies will free themselves from the slavery of pseudo-standards and will be able to replace all fiat ones. Global trade based on cryptocurrencies will be so much cheaper and safer than they do not stand a chance. We have a one in 5000 (years) opportunity to create this new standard that smart contracts will be based on. It does not need to be gold or silver. We know better now. We already have the low-cost clearing systems infrastructure, that belongs to none and all of us, to process these contracts.

How can that become a reality?

It is really simple. The majority of us will need to agree upon a universal standard and value everything against it including the relative value of all existing or upcoming smart contract based tokens and cryptocurrencies and of course all existing currencies. Universal consensus will always be a more democratic approach than any government issued decree or any “market’s” assessment. We have the technology to do that. New forms of currency exchanges will need to be created to accommodate this undertaking. This maybe is an opportunity to expand their use into constantly measuring impartially humanity’s total output and to keep a record of our total assets. Central Banks will be welcomed in playing the role they seek in this new reality.

“…Central bank digital currency would bypass the financial sector and issue money to end-users directly through the balance sheet of the central bank. Similarly to cash, digital money would constitute a liability of the central bank. Instead of being the bank of banks, the central bank would become the “bank of the people” or “for the people”…” Mojmír Hampl, Vice Governor of the Czech National Bank 11 July 2017

Price volatility and the rest of the “symptoms” will disappear. The limited supply will not be an issue as the stored value in each cryptocurrency can be added to the rest from the moment we agree that each one serves a different societal need (i.e Ethereum and Filecoin or the upcoming Hellenium) in antithesis with fiat currencies that all serve a monolithic one. In other words, only the total supply of ALL cryptocurrencies plus the fiat currencies will matter and not each one of them. Scarcity will lose its meaning in relation to any currency and will be replaced by its utility.

Existing currencies will gradually die out, one after the other, when left unused and their stored values will migrate into the new cryptocurrencies to create a new global values equilibrium. The new smart contracts based cryptocurrencies and token prices, free from speculation and manipulation, will fluctuate only based on the relative value they add to humanity according to the new standard framework or they can even remain stable if we decide to do so. Do we really need inflation in this new reality?

Let us repeat what the ancient Greeks did when they created the concept of “money” as a mean to rationalise values. Let’s rationalise again. Silver-based currencies replaced all other standards in ancient times by the free will of people, the merchants that used it across the Mediterranean and Black seas, not any decree from any specific City-State. Let’s build a standard that can last until money are not needed anymore, a standard that will cost us nothing to use, that none can abuse, manipulate its value or profit from it.

I cast my vote first. I propose the Human Effort Equivalent as this universal standard for all cryptocurrencies. Let me “coin” it as H2E.