Mankind was given a foolproof cryptographic formula to guarantee trusted transactions carried out privately on the Internet between any individuals, even among strangers.
"The Economist" magazine calls Blockchain technology "the truth machine”, and Bitcoin was his first application. Meanwhile, several entrepreneurs have been creating their own cryptocurrencies and governments begin to do the same but wanting exclusivity…
The Internet is about to change the world again: for decades it has allowed sharing information between peers, but now it is the transaction of value itself, secure and private, that can be carried out directly between peers. This new Internet functionality should be even more disruptive than the previous one, because transactions have always been more important than sharing: sharing is important, but it turns out that transacting is indispensable.
The sharing of information "peer-to-peer" (P2P) has resulted in the disintermediation of sectors such as entertainment (it started with the sharing of music), but the transaction of value P2P implies the disintermediation of sectors that are much more critical to the state. Now it is not just about sharing music, but desintermediating trust underlying transactions. Naturally, the financial sector will be the first to be affected. The socio-economic aftermath of this seismic shift will echo, and the “Open” vs. “Closed” dispute will be the biggest political challenge of the 21st century. If “openness” triumphs, we will have a free market of competitive cryptocurrencies. If not, the biggest gate to innovation will certainly be closed.
Cash has long been replaced by electronic money. We all use bank cards to move such virtual currencies. But what is happening now is much different! In fact, it is extremely dangerous to mistake blockchain based digital currencies with today’s virtual currencies which are mere electronic replicas of traditional currencies whose only advantage boils down to greater convenience in terms of storage and transaction. As is well known, the virtual format of traditional currencies has greatly streamlined the financial system, but this electronic design is nothing new. On the other hand, the new digital currencies, called “cryptocurrencies”, create a higher echelon in the “financial championship”, presenting two decisive competitive advantages: they are programmable and are surrounded by a new kind of privacy whose criteria depend only on the political will of its creators.
Traditional currencies reduce value into a single dimension, that quantifies only their trade worth (“value-of-exchange”). Furthermore, this dimension has become overly speculative. Now, for the first time, it is possible to establish the trade worth of a currency by measuring also particular kinds of his usefulness (“value-of-use”) which can be programmed beforehand. Therefore, the quotation of a cryptocurrency can represent social capital and measure the ecological value of social ecosystems.
To better understand this new reality, one must know that digital currencies integrate more resources than those that are strictly necessary in order for traditional money to work. It is advisable to think of them as “digital assets” (tokens), capable of triggering concrete actions, both in the digital and physical realms. This may seem like magic, but it is “just” technology. While traditional currencies can very rarely trigger this kind of action, (for example, a 50-cent coin can start a self-service machine), cryptocurrencies can easily put together different purposes and automate the execution of the underlying contracts ("smart-contracts").
Therefore, digital currencies can impose a discretionary access to goods and services. With them not all money is equal… It may be surprising, but the value of cryptocurrencies comes from its programming! This simple truth is what makes them as attractive as they are dangerous. For example, spending the cryptocurrency “Ether” is the only way for someone to be able to create “smart contracts” on the Ethereum network. There is no other way to create such contracts. It is crucial to understand that one day the only way for an individual to get something he needs will be by using a particular cryptocurrency… This reason alone would be enough to consider cryptocurrencies as much more than just plain financial assets. In fact, they can be turn into powerful applications of political and social control which auto-execute the rules established by their own programming code.
There are many reasons to believe that cryptocurrencies should be decentralized and liberalized. Free choice in the market is the best guarantee that people will be able to choose them freely. Especially in such a time of fear and crisis, nothing should distract us from this imperative. Free competition between cryptocurrencies can minimize risks to humankind, accelerating creativity and releasing individual initiative in the challenging years ahead. In order for innovative tokens to stimulate entrepreneurs according to the legitimate expectations of people and communities, the acceptance of cryptocurrencies must be democratically defined by the interests of each individual and not by other types of interests.
Digital tokens can be programmed to manage rewards and benefits among members of an ecosystem, in order to encourage each individual to interact symbiotically, even while they pursue their own interest. It is crucial to encourage creative entrepreneurship regarding private cryptocurrencies to benefit civil society, community ecosystems and human development. The talent and shrewdness required to design and develop new cryptocurrencies must be stimulated by market incentives that can reward their practical usefulness in specific communities.
Through this new kind of incentives, it will be possible to reward the merit of those more capable of linking individual gains with collective development. Under the laws of the market, the best “utility tokens” will be programmed according to the expectations of the communities that are intended to use them. These market expectations will also take into account sustainability imperatives, because such tokens can represent the value of good and bad externalities like recycling or polluting (traditional currencies just can’t do it properly), so cryptocurrencies and other digital tokens will pave the way to institute a new kind of capitalism: a “collective action capitalism”.
In order not to make the terrible mistake of confusing “collective action” with “collectivism”, it is very important to understand that tokens with specific uses allow the creation of economic incentives that, although private, can be constituted according to a community perspective. The way to achieve such a financial chimera will be to compromise trade (and individual profit) with the collective benefit. If the premises of collective sustainable development can be "tokenized", they will also become financial incentives that can be constantly remembered by individuals!
“Cryptoeconomics” brings a new reality, which many have not yet understood. Most investors who occupy the new “crypto space”, consider that the most challenging applications of blockchain technology consist of basic tokens (e.g. Bitcoin) that function almost exclusively as a new way to store value. Such individuals are either not interested at all in community and human development (unfortunately a predatory and speculative instinct grows in society), or they simply ignore that a circular economy of cryptocurrencies can be especially useful to communities, reverting in favor of consumer citizens and entrepreneurs. In any case, "cryptoeconomics" will make it possible to align individual and collective interests.
As for state-sponsored cryptocurrencies, they will increase the granularity of monetary policies, expanding the power of the state, as well as the influence of the money issuing entities. For this very reason, cryptocurrencies, unlike virtual currencies, not only help the financial system, but also constitute a powerful political instrument. As they are targetable, through “smart contracts”, they can be programmed to exert certain effects, for example, depending on the time elapsed until their use, the economic sector in question or the interest rate. Thus, they will reach specific sectors, on any dates previously stipulated and with loan rates adapted to the market changes. All these and many other conditions will always be met with mathematical rigor.
Of course, many governments will want to launch their own national cryptocurrencies. In fact, few leaders will abdicate the unusual degree of governance provided by a monetary policy administered “à la carte”. After all, the money supply will no longer be aggregated: cryptocurrencies will allow the allocation of financial assets with “ballistic precision”, giving a new meaning to the expression “monetary policy” itself. With national cryptocurrencies, central banks will not only segment the interbank interest rate, but also set interest rates depending on the sector and the date of the transaction, market fluctuations, etc. All of these conditions will be subject to combinatorial optimization.
Considering all this, private cryptocurrencies should be allowed to show their strength in a free market. If state-sponsored centralized cryptocurrencies becomes the sole option, citizen's "private keys" will be an euphemism and our privacy, as we spend our money, will be lost to a new kind of “surveillance capitalism” or to something even worse.
We should not close the door to innovation, nor give such powerful digital arguments to collectivist or corporatist regimes. Rather, it is important to promote collective action, which should have nothing to do with collectivism. Those who knew the harsh reality lived in the past century, for example at east of the “iron curtain” (ex-USSR), should not ignore the danger that comes along with this kind of technological disruption. It is important to show the very real risks of renewing communist or fascist systems in this new digital age where surveillance and control of citizens are much more easier. Freedom is a nation’s most precious asset. If we lose freedom, we lose everything.
Also because of the current pandemic crisis, we are consuming more and more “online” services, with an increasing number of devices connected to the “electronic cloud”. This digital reality is irreversible and will make cryptocurrencies much more convenient than traditional ones. Due to their extreme divisibility, they can be incorporated into “smart contracts” that will be the way of choice to quantify and manage the countless number of transactions in the daily lives of citizens. Unfortunately, as been said, cryptocurrencies opens two very different doors, paving the way not only to a “sustainable capitalism” but also to a “surveillance capitalism”. So, we must prepare ourselves to make a choice soon enough!
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