What is money?

Opinions are like arseholes: everyone has one -- Anonymous

So this is my opinion about what money is and how it could play out in the future. Basically everyone I've heard of (which is not a long list because I'm not currently working in the financial industry) talks about money "defensively," taking for granted that money exists to keep people from starving by buying groceries, and to save it for "rainy days", for pensions, for retirement. This way of thinking skips over why money exists at all.

My concept of what money is and why it exists is basically "money = motivation".

It goes like this: "why do I not own a Lamborghini?" Obviously, Lamborghini cars exist in the world. We, the human race, have the capability to build them. So, why don't I own a Lambo?

It's because I have not motivated the Lamborghini company to build me one.

So yes, "Lambo" is a brand, a label attached to a bunch of metal, plastics, electronics, etc. and the labour to build it, and any company - let's say any group of people with the same technical capabilities - can create the same good looking performance car, down to the same (or better) details. I could create a team of capable people by going all over the world and motivating them to get together and build me a car, then go to specific types of factories all over the world and motivate them to loan me factory space and factory time to do it in, then go all over the world to whoever holds the individual raw materials and motivate them to hand them over to me. This would go on as long as it needs to so I have my Lambo, or Lambo-clone car.

How to I motivate all of them? I could barter, if I have something to barter - but after bartering my car and apartment, that's about it for the physical stuff I can barter. And that's skipping the practical issues like two people wanting my car so I'd need to decide who gets it.

Wouldn't it be nice if I had something "fungible", so I don't haul around physical stuff, something which would motivate all those participants in my Lambo-project to actually make me one? "Fungible" is the key word here, it basically means "non-specific." In other words, you don't buy an apple with an apple-coin, and milk with milk-coins, but you're buying it with something non-specific, call it dollars, euros, or whatever else.

The fact that everything we, the human race, have created actually exists proves that we, the human race, can create those things. So why the inequality?

A part the reason are the biological compulsions like the one to feel safe (hoard stuff, or the stuff-which-buys-me-stuff, i.e. money) and the one to have the highest status possible in my environment (which is a bit connected to feeling safe but a lot more connected to procreation). And those will not go away any time soon. Generally, if people have the option to feel safer and attain higher status in the relevant communities, they will take it. And the best way so far (mostly because of that fungibility) we found to both satisfy and control those compulsions, is by establishing free markets where people can participate according to their own drives.

How do we know this is true? Mostly by trial and error: all the systems where a single human being or a comittee decides what others need, have failed with much human suffering. It's not a perfect system, as those compulsions regularly overtake, for example, the ones to take care of the environment, which currently leads to global ecological problems. This trial and error continues, and I think it's fair to say that we are actively searching for better systems.

When doing small-scale transactions, like buying groceries, banks currently fulfil three main functions:

• They ensure the buyer has enough funds (direct or by credit)
• They ensure that the seller will receive the exact amount of money
• They record this transaction for liability reasons, for analysis and for external rules such as money laundering laws

Cryptocurrencies offer the interesting possibility to have the preceding three functions done in a distributed, decentralised way, and ALSO, that everyone who wishes to can, with minimal effort, create his own financial infrastructure which has all the components by which buyers and sellers can interact. Compare this to establishing an actual currency: there's a need for buildings, ATMs, secure data centres, people who maintain all of those, clerks, various levels of management, an actual economy which uses it, the army to protect this currency, etc - all working together so people can buy groceries daily (and so that other people could get embarrassingly rich by chasing their compulsions, but that's another story). In contrast to this, cryptocurrencies can be spawned in a day.

So, how do I motivate an apple manufacturing company to give me an apple?

Money is a proxy for motivation, because if I had the right motivation, I could grow an apple tree by myself. But I'm not motivated enough to wait 3-5 years so I can eat my apple, so money is often also through as a proxy for time, but that's a secondary thing, also using motivation as proxy.

If I create a cryptocurrency in a day, of what value is it to you? How do I motivate you to do something for me by using the cryptocurrency I've created?

Regular money solves this issue by creating complex entities called states and governments, and by using police and armies to enforce a set of rules which people believe motivate other people to behave themselves.

I could, maybe, barter my office-work based cryptocurrency for your apple-growing one?

I feel that the next step in evolution of the free markets will be figuring out how to use and adapt to a world where everyone can create their currency.