In order to understand the main clashes, it is first important to understand a little bit of money history and some of its core principles below. (If your keen to read about the full history of the USD follow this link)
https://en.m.wikipedia.org/wiki/History_of_the_United_States_dollar
Point to point:
- Throughout history, money has always been ‘issued’ by one-or-more central controlling figures but certainly, this has been a very closed group. In today’s age we know these points at federal reserve banks and also Royal Mint in the case of Britain money has evolved over time. In modern time money was either a tangible asset like gold or silver or was backed, 1:1 by gold and/or silver.
- Over time the ‘gold standard’ was replaced by the fiat system, whereby, currencies around the world are not backed by any tangible asset. Rather they are held up by momentum and the citizens belief that it holds value. It the sole discretion of nations and their associated federal reserves to increase the money supply via printing additional money.
The centralized nature of the money supply has not been without its issues. Here is a quick list of when nations money supply has gone bad:
- Zimbabwe experienced hyper inflation in the 90’s as the federal reserve of Zimbabwe inflated the money supply to the point of causing runaway hyper inflation
- Many counties in the world have more recently experienced major currency crisis, perhaps the most notable was Iceland that was initially caused by deregulation in their banking system that made the country exposed to forgiven debt, and eventually flowed over into causing a financial collapse in the Iceland market
These are just a couple of examples but in no way isolated instances. In fact, we have seen over the past 300 year history of modern money that almost all currencies have defaulted and that governments have ‘changed the rules’ repeatedly about what money is, how it’s created and how the banking system can interplay with it.
So why do we still need governments and banks in the system?
Up to this point banks and governments have had to remain as the intermediaries to assist nations and the World issue and control money because the technology protocols did not exist. Think of it like mail delivery, prior to the internet and email, we simply had to send post, on paper, via the postal office. However, with the advent of technology ‘letters’ are becoming more and more redundant over time as the world continues to trust and adopt digital movement of information, communication and documents.
So this leads well into understanding a little about tokens and blockchains, such as; Bitcoin, Bitcoin Cash, Litecoin and others. How these are fundamentally a new paradigm in the financial industry.
Satoshi Nakamoto white paper of the bitcoin blockchain solved one very important problem, which is called the double spend. This is when you send cash to another person, what stops you from trying to send the same cash several times and have them all validated. Said in another way, historically we have needed the service of banks because we needed an intermediary to facilitate this specific function of ensuring a payment is made, received, confirmed and both ledgers are updated both on the senders and receivers accounts. Boiled down, what it actually has come down to is trust. Banks needed to be in place as you cannot trust other people.
Blockchains have solved this specific problem, meaning we now can have a trustless system which has 100% efficacy. No banks required.
So now we come to the initial question of the ideological debate of governments issuing ‘centralized tokens’. From the above we can draw some conclusions:
- Banks and centralization is no longer necessary due to technological advancements
- Centralizing the worlds money supply into these few ‘power hubs’ is not full proof. It has been changed and manipulated by all nations over time and in many instances has failed as well
Most of the leading blockchain technologies are:
- Entirely decentralized, owned by no-one other than its participants
- Capped as far as the issuance and ongoing new money creation and supply is concerned
- Immutable and unchangeable. There is no decision making, blockchains are code that once set in place require the developers consensus to change (which is what democracy should be all about!)
From an ideological standpoint, for those who already understand the blockchain technology, there is NO benefit to a government trying to create a ‘national token’. In fact, rather than gaining here are the things people will be loosing if they choose to buy-in and adopt a nationalized token:
control will remain with a centralized group
anyone who buys into this idea, will be agreeing blockchain technology is superior but wants to stay attached to a national system
Think of it this way - why would you use an email system that is created by the old postal service (who have no idea about how to build and run email software's - but you trust them no not loose your mail) rather than working with specialized IT companies who already have amazing software in place! The choice would be totally irrational, based upon fear of change. Furthermore, we have already have seen how this played out in the maker, and IT companies won.
Another glaring alarm is governments not allowing participation in blockchain. Recently China shut downs its exchanges and Russia is on a similar trajectory. The question that needs to be asked is ‘why would governments need to block citizens from using the decentralized technologies that exist and are working well, for their own centralized system?’
The answer is clear in that they are afraid that once people jump onboard decentralized blockchains it will be impossible to move them back to a government controlled system, blockchain driven or otherwise.