Digital, Crypto Currency & Potatoes

Digital Currency, what is it, how is it defined against all the other stores of value that we as humans seek? From the earliest beginnings, we have been trying to come up with a system of value for our labor that would reflect a consistent reference that we could understand and accept. Barter was probably the first attempt at it, but how do you come up with the trade value of five ears of corn versus five potatoes? Depending on the growing cycle, the weather, hunger, and of course, human greed, the exchange could vary. Of course, this is where gold and silver came into being. It was and still is expensive and difficult to find and seemingly always in short supply but is very durable. It seems that for humans, the rarer a thing is, the more stable it's trade value appears to be, as it can't be replicated out of existence. You can always grow more corn, but you can't print gold (yet).

I guess we are still looking for the ultimate goal of somehow storing an hour of our labor in a safe, stable and fungible format for a long period of time and then at the very least, being able to extract it with the same amount of value. Banks had been the venue used for quite a long time. But with the interest rates they pay these days, that's way below the inflation rate, who wants half an hour of value returned after storing originally an hour of labor for a number of years. Some of the other ways to beat inflation is to use investment and stock vehicles, but with reward comes risk... and but you can lose it all. Or put it into hopefully stable or growth commodities, and yes, real estate is one of them, but they can bite also.

So now back to Digital Currencies, which actually have been around for decades, debit and credit cards are all forms of it, tied back to the paper currencies of whatever country you inhabit. So now the newest form of it, Cryptocurrency is all the rage. In it's original form (Bitcoin) was promoted as private, counterfeit proof, and of a maximum limited amount produced, to stop it being inflated, as has been done by every major paper currency fiat in the world.

Unfortunately the rage caught on, and now there are over 7800 of them in existence, but the the top ten are the only ones of any consequence at the moment. Bitcoin, Ethereum XRP are a few of them. I personally love the idea of what they represent, privacy, ability to be used universally around the globe, able to be your own bank with a Digital Wallet stored on a USB drive, encrypted so that you are able to control your own money.

The first big problem is that of velocity of value, Bitcoin for instance can change in value in either direction by thousands of dollars in one day. So if you wanted to buy a car with it in the morning, by the time the dust settles, you may be in the hole a bunch or got a great deal.... Got a coin to flip?

Then there are three other issues, the cost of the transaction, which can be significantly higher than other forms of traditional online payment systems. The speed of the transaction can be from minutes to hours depending on the transaction. And then there is the issue of micro transactions. Say you want to buy a coke at a Seven Eleven. At the moment, the only way that can happen is if you use an Crypto Exchange that has ties to one of the major credit or debit card systems. But then you are back to KYC (know your customer) rules, which defeats the privacy aspect of it, plus the costs of the established card systems.

At the moment, every time you want to enter into the real world and use your Crypto for day to day purchases, the process can get pretty complicated, depending on what Crypto you are using. If the base value of your Crypto is moving up and down like a basket ball, making buying decisions can be difficult, never mind the traditional banking sphere surrounding it, that you have to poke through to finish the transaction.

Pretty much every time there is a new technology or ideology appearing, there is a concerted drive from the established structure in place that usually takes it as a threat to it's existence. At the moment, it looks like the various governments, banking and financial institutions around the world are trying to englobe it and absorb it like a jelly fish. They want what they perceive as the good stuff, Blockchain, smart contracts....

But are having a hell of a time resisting the rest of the package, especially the idea of having a maximum limit on how many currency units to be produced. So they are resisting adoption unless all of the Cryptocurrencies abide by their rules

The part that is starting to get pretty interesting is that very large global companies are now starting to buy into them, possibly as a hedge against a major global currency meltdown due to overprinting. Tesla just bought 1.5 billion dollars worth, and they are just the tip of the iceberg. Microsoft, PayPal, Expedia are taking it..

And now it looks like Amazon is getting into it..

As a couple of side bars, Gold is not taking all of this standing down, it's worked it's way into the digital age as well.

And an article from World Economic Forum, "Cryptocurrencies are democratizing the financial world. Here's how"

According to the World Bank, close to one-third of the world’s adults are “unbanked”, meaning they don’t use formal financial services. That’s nearly 2 billion people lacking access to the traditional financial system. They can’t protect their money, gain access to wealth-building tools and services, or effectively plan for their future.

The question remains, that until the big Corporations playing in the Crypto field have settled the issues that I have detailed above, Crypto E-Commerce will still be a bit flaky. But if they do figure it out, will they become their own banks? Then how does the established financial market stay competitive in the long run? I suspect that with the unprecedented inflation in the traditional currency markets squeezing from one side and Crypto from the other, I expect significant changes in the future about how we handle our potato trading...