Why crypto is (probably) doomed...

I am no cryptocurrency expert. In fact, the mere thought of me being a bitcoin expert is enough to LOL at.

ECONOMICS

But I do know a little about economics and finance and I have always been fascinated by money. Not in the sense that I want more of it (that too) But the mere fact I guess that you can hand someone some pieces of paper and get pretty much anything you want.

This kind of money is called fiat money. It means that there is no intrinsic value to the money itself, or it is negligible. Back in the day, when people used to have silver and gold money, now that seems to make more sense, because those metals have intrinsic value.

You can actually use them for something. But still, they are also a bit fiaty, because I mean, you are probably not gonna go and melt the gold you got for your sheep or whatever and use it for a filling in your tooth.

I guess the only real non-fiat situation is where you barter. In other words, I give you three sheep for one month’s accommodation, or I give you 10 loaves of bread in exchange for 1 kg of coffee beans. Some people still do this to avoid tax I think.

Actually I think I have done it too. You can exchange services too.

Like I can say, OK, I will translate your website for you from German to English, if you give me a laser teeth whitening treatment.

ASTERIX AND OBELIX

Funny enough, I remember I think in economics class we learned about this one culture where they used these huge boulders for money.

Kind of like the one that Obelix carries in the cartoon books Asterix and Obelix, you know?

Why did they do that? I don’t know, I think maybe so it would be harder to steal money. So I guess different money systems have their advantages and disadvantages.

Some are better at solving certain challenges associated with money, whether it be liquidity, making it harder to steal, making it easier to carry, etc.

Well, for me cryptocurrency is kind of cool I guess, because it retains the positive elements of the gold standard (only a limited amount available, countries can’t just increase the amount of cryptocurrency to try and artificially stimulate the economy).

Also, at the same time, the big ones like bitcoin are becoming more and more liquid.

I see a major danger though.

SO WHAT IS THE PROBLEM?

Well, the whole idea behind monetary systems is to make money as scarce as possible. That is why they often raise interest rates) so that the government can control the money supply. So there's no way they will allow crypto to go ahead the way it is now.

Even despite all the benefits...think about how hard it is to steal.

Almost impossible unless more than half of bitcoin owners are in on it, I am led to believe. But with the new cryptocurrencies its probably impossible.

And it is easy to “carry” – you don’t need to carry anything around except your passwords!

INTERESTING HISTORICAL FACT ABOUT MONEY

Rai stones are circular disks with a hole in the middle. The stones vary widely in size: the largest are 3.6 meters (12 ft) in diameter, 0.5 meters (1.5 ft) thick and weigh 4 metric tons (8,800 lb).

The largest rai stone is located on Rumung island, near Riy village.[5] Smaller rai stones might have a diameter of 7–8 centimetres.

The extrinsic (perceived) value of a specific stone is based not only on its size and craftsmanship, but also on its history.

If many people—or no one at all—died when the specific stone was transported, or a famous sailor brought it in, the value of the rai stone increases by reason of its anecdotal heft.

Rai stones were, and still are, used in rare important social transactions, such as marriage, inheritance, political deals, sign of an alliance, ransom of the battle dead or, rarely, in exchange for food.

Many of them are placed in front of meetinghouses or along pathways. The physical location of the stone may not matter—though the ownership of a particular stone changes, the stone itself is rarely moved due to its weight and risk of damage.

OWNERS' NAMES

The names of previous owners are passed down to the new one. In one instance, a large rai being transported by canoe and outrigger was accidentally dropped and sank to the sea floor.

Although it was never seen again, everyone agreed that the rai must still be there, so it continued to be transacted as genuine currency.

What is important is that ownership of the rai is clear to everyone, not that the rai is physically transferred or even physically accessible to either party in the transfer.

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