The Virtues of Cryptocurrencies

in #bitcoin3 years ago

For 30 years the world has been on a relentless march towards digitisation. From the way we express ourselves, interact with each other, consume media and trade value; if it can be digitised then it will.

This is what Marc Andreessen meant when he said “Software is eating the world”.

The money that we use, the physical notes and coins, have curiously persisted in spite of banks pushing to eliminate them from the system. This is because being in physical possession of one’s money represents freedom and having no counterparty risk.

This view from my experience, however, is misguided.

I was born in Zimbabwe. In 2008 I watched as the Reserve Bank printed these 100 trillion dollar notes. That’s more dollars than there are stars in our galaxy!

3 eggs cost 100 billion dollars just prior to the currency collapsing, becoming worthless and wiping out the wealth of millions of people. My grandfather stopped drawing his pension because the cost to do so exceeded its value.

Hyperinflation is inevitable when money can be created without restraint.

The irony is that now these 100 trillion dollar notes are valuable again not as a currency but as a memento of how money destroys nations.

Cross-border Remittance

Today half a trillion US dollars are sent as remittances around the world. In some countries remittance flows are greater than major sectors of their economies.

The most expensive corridors to send money are in Africa which has many of the world’s poorest people. Over a quarter of the value that is sent to desperate families is choked off in the form of fees by the few companies that provide remittance services.
If this money could be returned to the people it would contribute greatly to reducing poverty and uplifting communities.

Bitcoin

Clearly the existing financial systems that our lives depend on have room for improvement.
In the early 2000’s with the advent of the Internet, Nobel prize winning economist Milton Friedman predicted that what was missing but would soon be developed is a reliable e-cash.

He didn’t mean a digital currency controlled by a bank but a digital form of sound money that acted like cash. Sound money, unlike existing fiat currencies, has or is linked to something of intrinsic value like gold. Cash is something you hold personally without having to trust a custodian.

In 2009, in response to the Global Financial Crisis, a group of researchers and developers created a technology that fulfilled Milton Friedman’s prediction.

It is called Bitcoin.

Bitcoin is decentralised currency that was designed to be a digital form of gold. It acts as a hedge against inflation and as a peer to peer payment network that anybody with access to the internet can use.

We are now starting to see many surprising use cases that have enormous positive social implications.

Apartheid

During Apartheid my family moved to South Africa.

The government had forcibly removed black people from the cities and sent many of them to live in territories called Homelands. Informal settlements, which were poor and lacked services, sprung up outside of towns. The legacy of which remains today.

My parents were against the segregation and social injustice and decided to move our family to a Homeland called Bophuthatswana. The town we lived in has the meaning “place of stones”. He became a school teacher and committed himself to serving the poorer communities.

I attended a small dusty school along with my siblings, who formed the majority of white kids. I learned to speak Tswana and grew a deep connection to schools like it that has remained with me my whole life.

Just outside of the town there was a landfill where rubbish was dumped. Many people lived on it and off of it, scrounging for food or useful items. My father would make giant pots of soup and transport them to the landfill in our van that had had the back seats removed. My brother and I had to sit on the lids but in spite of our best efforts the sloshing about meant that a bit was always lost. He would serve the soup in old tin cans recovered from the surroundings. While this was going on I would be hunting around with my brother and the kids we met there for interesting pieces of junk to play with.

Aid Organisations

My father went out of his way to do good but for most of us, in spite of our good intentions, it is impractical to do what he did. Aid and charity organisations act as trusted intermediaries between us and the causes we believe in.

There is, however, a “leaky bucket” problem.

Money intended for causes leaks out in the form of administration costs, inefficiencies and sometimes corruption.

Emaweni Primary School

When I discovered Bitcoin the Global Financial Crisis was in full swing and the Zimbabwe dollar had become worthless. There was perhaps no more fertile ground for the idea of a decentralised, digital, peer to peer form of sound money to take root than Southern Africa.

I wondered if there was any way that this technology could solve the leaky bucket problem and allow people to directly support those in need. Memories of my childhood led me down the path to a school called Emaweni Primary.

Emaweni is in township south of the city of Johannesburg, a legacy of Apartheid and close to where Nelson Mandela lived as a boy. Like most schools in South Africa it has a small budget every month which is never enough to cover all the running costs. Broken toilets remain unfixed so that books can be purchased. Heating and cooling is switched off to cover other necessary costs. Most often utilities are left unpaid and massive debts incurred.

This is where I saw an opportunity.

I was working in the energy industry at the time and had an idea to link a bitcoin address to a smart meter. This meant that the meter could receive a direct payment from anywhere in the world. The meter was installed at Emaweni and I wondered what to do next.

My friend, Ed Hesse who lives in Vienna, heard about the smart meter experiment. He was going to give a talk at MIT in Boston and he suggested we do a live demo.

I drove down to the school at 3am which was 7pm in Boston and the time Ed was to give his talk. I videoed into the conference and showed the delegates the meter.

The school was in total darkness since there were no credits on the meter. The parents and teachers were too excited to stay home that night. They sat quietly in the dark behind me waiting to see what was going to happen.

Ed sent a Bitcoin from his phone to the meter which was worth about $500 and about 5500 kWh worth of electricity at the time. A few seconds later the payment was detected by the meter and the lights went on.

There was an explosion of excitement and celebration simultaneously from two ends of the earth. The people at MIT and Emaweni shared this unique experience without requiring banks, remittance companies or charity organisations.

The Long Charitable Tail

There is a notion, popularised by Chris Anderson, of the Long Tail distribution. When applied to donor funding it shows how there are few causes that receive a majority of the money. There are many more down the long tail that receive little or no funding.

Bitcoin allows any cause, no matter how small, to be supported directly by anybody who wants to make a difference.
All of human history has been punctuated by periods of intense creativity and innovation. Innovation that has transformed civilisation and shaped our culture. It is an almost universal response by us to treat new things with fear, skepticism and doubt, cryptocurrencies are no different.

The internet gave us all a voice that can be heard around the world. With cryptocurrencies we can now not only be heard but also felt.

So, reach out and touch someone.

Usizo

Usizo means help in Zulu. It is also the name of a first-of-its kind social crowdfunding platform that I have created. Foreign donors can directly fund the energy of needy schools and hospitals with cryptocurrencies.

Bitcoin sent to this address will go toward the development of the Usizo platform.

Bitcoin: 1AezdT5oWfkpdjBfnM632m1zJ3VvEBwt5X

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Thanks for sharing this. What an amazing real world use case for bitcoin. Thank you explaining this in layman's terms. The 'leaky bucket' concept is brilliant.

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