Bitcoin
& Other Cryptocurrencies Shaping Future Economy, Capitalism Morphing
Money
has shaped our modern economy. We have gone from using grain and cattle and
even salt as currency to using metal tokens (coins) and
paper.
However,
paper has the habit of sticking and it has been around ever since the Chinese
introduced it during the Tang dynasty. We have grown comfortable using paper
currency and no one can deny that it has had its usefulness.
Now
we are approaching another era in which bits are playing the same role that
paper did. Digital currencies are no longer something that will happen way into
the future, they are here.
How
will the advent of digital currencies like Bitcoin,
Monero, Ethereum and etc affect the future shape of the economy?
Is it the end of
Capitalism?
Ed
Finn wrote an article in the Guardian asking,
“Do digital currencies spell the end of Capitalism?” Finn’s article covered the
DAO issue and how Ethereum community dealt with the hack. He examines the very
nature of digital currency and ponders the questions surrounding ‘programmable money.’
In
the end, he succinctly concludes:
“If what counts, and
how we count, is measured in processor cycles instead of human exchange, it
will change the rules of the economy as surely as driverless vehicles will
change transportation. What we value is fundamentally a question of belief, and
it’s increasingly unclear what we believe in more: billfolds or bits?”
So
what will change if we move to digital currencies, surely these currencies
change the nature of money as they are not issued by a central monetary
authority or backed by the promise of the sovereign.
These
currencies are an organism of their own kind. They open the doors to people
issuing their own tokens and creating their own monetary policies. This could
radically change the financial system as individuals could potentially fund
their own enterprises with their own currencies. They also remove the vagaries
of the interest rate cycles associated with government issued money and break
the nexus between big businesses and the government.
The era of financial
empowerment
Digital
currencies have opened doors which were firmly shut. These currencies hold the
promise of distribution of wealth like
never before.
Not
only have they brought in the technology to transfer money in a blink of an eye
at minimal costs around the world, they have also brought access to ‘money’ for
people who never had it before.
As
Dominik Zynis of the WINGS Foundation says:
“Digital currencies
will allow anyone, be it person or community, to be included in the economy by
self regulated credit expansion enabling trade people who previously lacked
access to requisite mediums of exchange.”
Creating trust among
people
At
the moment people have no choice but to trust the sovereign's money. It is
after all a promissory note. Digital currencies put the trust fact squarely
among the public.
People
who choose to use a particular digital currency, do so because they recognize
it as money. Not because they were told to use it as money.
The
use of digital money or programmable money opens the doors for applications
like smart contracts. Smart contracts within digital money can revolutionize the way ‘deals’ are
done. Escrow can be inbuilt so that a transaction is only completed
when certain parameters are met.
This
removes the need for having intermediaries in financial transactions, property
transactions etc.
Capitalism is about to
morph
The
present economic system that we live in has reached its peak potential. We need
a new era of economics if we are to develop further. In an era where the
planetary resources are increasingly dwindling, we need a system that places
less emphasis on profit and more on developing human resources.
Virtual
currencies or digital currencies can usher in an era of entrepreneurship and
development. They can also transform how we do business today and remove
regulatory bottlenecks out of the system.
While
capitalism might not come to an end immediately due to ‘programmable money’, it
is certainly about to evolve into something different.
No one can deny though that we are at the crossroads.
Regards!
Librarian
Rizvi Institute of
Management
No comments:
Post a Comment