A consensus of value

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From time to time, I take the kids to the park. Spring is in the air and I expect to be at the park far more often these days, too. The days are warming up. My kids are older now and they exhibit better judgment on the "jungle gyms" with bigger brains, bigger bodies and experience, the greatest teacher.

It is curious to me to see how they respond to the same environment differently, depending on the number of kids. We go to the park and there are no kids and they get bored quickly. If there are many kids running around and having fun, they want to stay longer.

We go to the bounce house and there are few kids, and again they get bored easily. Then we go on a day when the place is crowded and they want to stay much longer. It is obvious that the playgrounds have social value for kids. It is not the playground that is of value. The value in things is determined by their use by other people.

Similarly, a toy is interesting to a kid when he or she sees some other kid is playing with it. For my kids, the elder may take interest in a toy if the younger kid is giving attention to that toy. I have often seen the elder take a toy away from the younger, yet she will show no interest in the toy if it is lying on the floor. I try to explain the dynamic to my kids in terms they can understand:

Please don't take the toy away from your sister. She will eventually get bored of it and leave it somewhere. Then you can pick it up and play with it.

We value things that other people value. Human beings have a tendency to develop a consensus when it comes to value. We see a movie if someone else has seen that movie. We want to go together to share the experience of seeing that movie. We buy a toy if we see another kid with that toy (Cabbage Patch Kids, anyone?).

We also do the same thing with money. The more people use a certain currency, the more we value it. The more people use a certain currency, the more we can agree upon its value as a medium of exchange.

In human history, we found salt and decided to trade on salt. But then we discovered there is a lot of salt on the planet. Then we found silver and gold. We traded on that. But metals are heavy. We made coins, and paper to represent value. We made dollars and traded them.

Every country now has their own currency if they can pull it off. If not, they use dollars. Money in and of itself doesn't have intrinsic value. Food has value for we need it to live. We don't need money to live. We only need it because as a society, we made a decision to use it as an exchange for food, water, and shelter and many, many other things.

The dollar and other government backed currencies had a good, long ride for a few centuries. There have been a few interlopers along the way. During the Great Depression, there was so little money in circulation that people made money from tree bark. They created "local dollars" so that they at least had something to use for exchange of labor, goods and services. Even in the 90's, there were a few communities that created "local dollars" to keep money in the community, in rebellion from the rising corporatocracy.

Along comes Bitcoin, in response to the massive corruption exposed by the rise and collapse of the housing bubble in the years leading up to and including 2008. Some people decided that Bitcoin had value as a medium of exchange or store of value. It did. It was small at first, because that consensus was among a very small group of people relative to the world and the economy of the world. Ten years later, Bitcoin has grown from a few cents per coin to more than $8000 per coin. That is all based on a consensus of value.

This consensus isn't just about people. Computers are used to build that consensus. That is, a consensus of computers determine the flow of Bitcoins through the network. And Bitcoin isn't the only one. There are now more than 1,500 cryptocurrencies all vying for enough consensus to have value as a medium of exchange.

For anything to have value, there must be enough people to agree that a thing has value at all. No single man or woman is the sole arbiter of value, though some may try to impose their own ideas, value comes from consensus.

It will be interesting to see how that consensus may change over the next few years. I don't think that the dollar will ever go away, but I also don't that the dollar will continue to be a reserve currency as it is now. In other words, other countries (I'm thinking of you, Asia), will not be so keen to hold onto dollars in order to maintain their trade balances as they are now.

More to the point, a growing consensus of people are determined to make something other than the dollar their chosen medium of exchange. Huh. Imagine that. How on earth could people just decide what their medium of exchange should be, without government doing it for them?

Well, that's what we're about to find out. Now that an entire infrastructure has grown up around these cryptocurrencies, the people have viable alternatives to the Dollar, the Pound, the Euro and the Yuan. I can't say for sure this will or will not happen. But we will know for sure that the transition is complete when we stop denominating the value of a commodity in terms of dollars.

When we look at our great commodity exchanges one day, and see that the value of a bushel of wheat is denominated in Satoshi, Steem Based Dollars, Litecoin or [insert your favorite coin here], we will know that there has been a change in consensus of value.