Cryptocurrency: Counter-Economics and Evolution Into An International Free Market

In tandem with the rise of bitcoin, ethereum, litecoin, and other alternative cryptocurrencies, many early-bird investors have made enormous gains. Whether these ‘investors’ amount to those businessmen often interested in profiting from the market’s newest trends or average-income individuals looking for a sophisticated means of growing their savings, substantial profits have been made after just under a decade of growth in the international ‘crypto-market’.

The Crypto-Gold Rush

Take the following numbers to illustrate just how much the crypto-market has grown and expanded in value and accessibility. In August 2012, bitcoin was valued at just over $10 USD a coin, meaning a simple investment of $500 USD back then then would yield a return of close to $850,000 USD today. In summary, those 50 bitcoins purchased then would have remained unchanged in number, yet the value of each coin in today's current market would amount to $15,000 - $20,000 USD. Talk about some savings account!

There are many people that are skeptics of bitcoin’s viability as a currency in the future. Due to its early stages of growth, bitcoin experiences frequent volatility, with it’s price per coin frequently fluctuating up and down. In just the past week alone, bitcoin experienced a large drop in its value, nearing almost a 50% decrease. Some even believe bitcoin’s inevitable demise will be due to many disruptive actions such as government regulation and cyber hacking. However, this particular prediction is truly misleading and ill-informed.

Cryptography, the underlying technique behind the technological safeguards and programming of cryptocurrency, is open-source and constantly evolving, working outside the realm of control by a central authority. This in effect, substantially cripples the ability of governments to control its use and proliferation as well as prevents bad actors from defrauding others through hacking. Using these tools of encryption and decentralization, cryptocurrency will far out-compete all government-controlled fiat currency systems and replace it with one that is purely democratic and impervious to the very central planning that undermines the inherent mechanisms of the free market. A true peer to peer system of exchange between buyers and sellers outside any influence of the Federal Reserve and their arbitrary fixing of interest rates.

Competing Cryptocurrencies: An ‘Arms Race’ for Cryptographic Security and Pragmatism

Widely known among the community of cryptographers and engineers, Monero (XMR), is the cryptocurrency leading the market that is virtually impossible to hack or defraud due to its unique method of cryptographic coding. Ethereum is a cryptocurrency well designed to facilitate business contracts and provide products and services using blockchain technology. This is the world of competing cryptocurrency and all of the cryptocurrencies have one thing in common; a secure, decentralized, and interlinked public ledger of all transactions. The Blockchain. In summary, blockchain technology cuts out any trusted third party which in turn heavily reduces operating cost of a company. Many companies will discover that if they were to use blockchain technology for the facilitation of their goods and services, they would excel in the market and likely outcompete rival companies in their respective industries. Some of the industries that cryptocurrencies will disrupt include insurance, voting, banking, cybersecurity, forecasting, transportation, online data storage, charity, and many others that require a trusted third party.

Another question then arises. “What has mostly contributed to bitcoin’s success as the world’s leading pioneer in cryptocurrency?” Many of the very same skeptics would answer the following question by attributing bitcoin’s success and growth to its demanding utilization by black market drug traders, sex traders, money launderers, and other highly profitable criminal enterprises. However, I say bitcoin is guilty by association. Due to bitcoins degree of anonymity within the program’s transaction process, it naturally becomes a preferred currency of those who do not want their profits, illegally earned or not, to be traced back to them. And from this logic, one can deduce that a free, decentralized, and anonymous currency such as this will surely be utilized to hold black market assets and profits; however, that is not to say that these black market transactions make the majority of those traded on the bitcoin network.

The idea that the majority of the holdings in bitcoin are sourced from black market profit is not entirely accurate. The majority of bitcoin transactions are due to ordinary sales and services, many of which are conducted by reputable businesses. Take for example how many companies have allowed bitcoin to take place as a form of payment on their sites and at their stores. According to a report by Jonas Choken of 99bitcoins.com, the following notable companies accept bitcoin as a currency. They include...

Choken, Jonas. “Who Accepts Bitcoins As Payment? List of Companies.” 99 Bitcoins, 6 Dec. 2017, 99bitcoins.com/who-accepts-bitcoins-payment-companies-stores-take-bitcoins/.

WordPress.com – An online company that allows user to create free blogs

Overstock.com – A company that sells big ticket items at lower prices due to overstocking

Subway – Eat fresh

Microsoft – Users can buy content with Bitcoin on Xbox and Windows store

Reddit – You can buy premium features there with bitcoins

Virgin Galactic – Richard Branson company that includes Virgin Mobile and Virgin Airline

Namecheap – Domain name registrar

CheapAir.com – Travel booking site for airline tickets, car rentals, hotels

Expedia.com – Online travel booking agency

Gyft – Buy giftcards using Bitcoin

Newegg.com – Online electronics retailer now uses bitpay to accept bitcoin as payment

Wikipedia – The Free Encyclopedia

Alza – Largest Czech online retailer

Bitcoin.Travel – a travel site that provides accommodation, apartments, attractions, bars, and beauty salons around the world

Zynga – Mobile gaming

Mint.com – Mint pulls all your financial accounts into one place. Set a budget, track your goals and do more

The Libertarian Party – United States political party

Grooveshark – Online music streaming service based in the United States

Lionsgate Films – The production studio behind titles such as The Hunger Games and The Day After Tomorrow

Cryptocurrency: Ushers of a Free Market Counter-Economic Insurgency

With more time and growth, the cryptocurrency industry will inevitably outcompete the companies in those industries it disrupts. The effects of this competitive disruption would result in overall reduced cost of goods and services offered within markets that accept cryptocurrency, as opposed to those that do not. These goods and services would be provided exclusively outside the existing centrally planned market. This concept of separate markets providing goods and services in direct competition with each other is known as ‘counter-economics’.

As many economists understand, the fixing of interest rates and the implementation of fractional reserve banking disrupts every aspect of the pricing mechanism between suppliers and consumers. Metaphorically speaking, artificially inflating and deflating the currency only manifests itself in the economy as some giant missed high-five between the buyers and the sellers; the suppliers and the consumers. The consumers will have to bear the supplier’s heightened costs of production and in turn many consumers will find that they cannot afford the costly products. In this state of disarray, the centrally planned market cannot as efficiently allocate resources and products to suppliers and consumers. The existence of a free market that can more efficiently allocate its goods and services at cheaper costs to suppliers and consumers will inevitably absorb and replace any preceding centrally planned market.