Know about Cryptocurrencies’ Past, Present, and Future.
What is the future of money? Thousands of years ago, our ancestors used to exchange food, hunting equipment, and livestock. And now Uniswap, the world’s most popular crypto exchange, and barter protocol has generated a billion dollars in fees! The money has come full circle. Welcome to the first issue of this weekly “zero BS” column on future money and cryptocurrencies. Today we discuss the past, present, and future of money.
We spend most of our time in an endless race to earn money. But many of us don’t know what money really is.
1. The past
Our ancestors started with the barter system, something like “I’ll give you two buffalo in exchange for five shiny new, super-sharp axes.” They soon realized that the barter system had too many limitations:
- everyone didn’t want buffalo,
- buffalo were not divisible (not many people would want 0.35 buffalo)
- buffalo were not portable (imagine having to carry a buffalo on your shoulders while shopping!).
So they moved to more acceptable, divisible, homogeneous, and portable forms of money: cowrie shells, salt, gold, silver, and much more.
The Chinese invention of paper eventually led to the birth of paper money, which was initially backed by gold or other precious metals. The United States dollar was on the gold standard for many years. That means the dollar was backed by gold. This ended on June 5, 1933.
The United States government continued to convert dollars into gold at a fixed value until August 15, 1971.
Today, the entire world has switched to fiat money, a currency declared legal tender by a government but not backed by a physical product.
Take a look at an Indian banknote (anything except a 1 rupee banknote). It carries a promise signed by the Governor of the Reserve Bank of India (RBI):
“I promise to pay the bearer the sum of one hundred rupees.”
If you took this note to the RBI governor, he would (probably) give you coins or rupee notes. (Disclaimer: I haven’t tried it!)
These banknotes issued by the RBI can be used as “legal tender” in India. That means everyone must accept them for all legal payments. Remember the demonetization of some banknotes in India in 2016? Well, legally speaking, this is what happened: the “legal tender status” of the then Rs. 500 and Rs. 1,000 banknotes were withdrawn.
2. The present
The birth of computers and the Internet has brought many innovative payment systems, such as debit and credit cards, network banking, mobile wallets, UPI, etc.
The cryptocurrency revolution began with Satoshi Nakamoto’s groundbreaking whitepaper “Bitcoin: An Electronic Peer-to-Peer System” in October 2008. This brought to the world Bitcoin, the first truly peer-to-peer electronic currency. Today, there are almost 6,000 cryptocurrencies that are actively traded!
These cryptocurrencies are of many types: medium of exchange coins, stable coins, utility coins, privacy coins, meme coins, NFTs, etc.
There are also specific use case cryptos that are disrupting sectors such as e-commerce, education, data warehousing, gaming, marketing, media, supply chain, video streaming, and much more.
Do you know that there is a crypto project called Basic Attention Token (BAT) that is monetizing human attention? Yes, it is true, human attention! I will cover this in a future issue.
3. The Future of Cryptocurrency
According to me, the money must have at least 1 of the following characteristics:
You should be able to buy and sell things using it
I should be able to keep my accounts using it
I should be able to maintain and grow my savings with it.
Money is not just cash and bank deposits. It includes much more: art, cryptocurrencies, stocks, gold real estate, loyalty points, etc.
Let’s say I have a great idea for a startup. But I don’t have the money to hire a good team. I could pay them using shares in my startup. You could also give them ESOP (Employee Stock Options). If my startup is successful, my team could sell its stock at a big profit.