Cryptocurrency has already established one thing – there is a viable alternative to dollars and gold as a measure of wealth. Our present economic system is flawed. Cryptocurrencies, if utilized properly, can change the way the world deals with money and wealth. But can it completely overthrow the present system and create a new economic world order? To know the answer to this we will have to understand the concept of cryptocurrencies and the premise for their creation.
Money – The weapon to control the world
Money is a measure of wealth, which translates into power. The power centers have largely remained the same throughout history, be it a monarchy, or autocracy or democracy. Power has shifted from one king to one dictator, to a few elected/selected individuals. To remain in power, they had to control the source and distribution of money. That’s why till date, only the government can print money and distribute it among citizens.
We can earn money in exchange for our time and skills or loan money in exchange for our future time. But there’s only so much of time that we can give away and hence the present day economy always runs on the philosophy of scarcity and demand. The money distribution follows a trickle down approach in a pyramid structure.
Source: Credit Suisse
Inception of Cryptocurrency – Delocalization of money
It’s abundantly clear from the image above that while printing of money is under the control of the powerful and the wealth creators, the pyramidal distribution mechanism also has ensured very less money flows to the bottom most segments of the population. The money creators have been ensuring their safety and prosperity throughout history, by accumulating chunks of money for themselves. Subsequently, the global wealth gap has increased staggeringly.
This could have possibly triggered the rise of cryptocurrencies, as a form of an alternative economic system, that theoretically, doesn’t just accumulate at the top, but also rewards anyone who is interested in mining these currencies and spending their time and resources. The main concept that made this possible was the distributed computing mechanism which has gained tremendous interest in recent times.
Distributed Computing, Blockchain & the possibilities
The foundation of our present economic system is a central power, be it government or a ruler or dictator. The alternative of this central system is a distributed system, where every single node of communication contains the power of decision making and is equally important for the system. So if one node is cut-off, the system will not fall apart, it will keep on functioning. That’s what makes distributed computing terrifying for the centralized economic systems. Because they can’t just attack the creator of the system or use a violent hack to bring down the entire system.
Source: Medium.com
When the white paper on Cryptocurrencies was first published by the anonymous Satoshi Nakamoto, there was this hope of constituting a parallel economy, where any individual with an access to a mobile phone and internet might be able to mine bitcoins and create wealth, for not just himself/herself, but for the system also. Satoshi himself invented the concept of Blockchain, an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Blockchain was the technology on top of which the first unit of Cryptocurrency, Bitcoins, were created.
The concept of Bitcoin mining seemed revolutionary at that time. The more people that joined the system, the more enriched the system would become. The hope was that it would make the mainstream economic system take note and cause a major overhaul of the wealth distribution system. But sadly, none of that seems to have taken place yet.
The phase of Disillusionment
The reality is that bitcoin mining capabilities were controlled by system resources. The creators also had accumulated enough bitcoins for themselves similar to the traditional wealth creation system. Satoshi’s Bitcoin holdings were valued at $19.4 Billion during the Dec 2017 peak, making him the 44th richest person in the world during that time.
This basically meant that the wealth distribution system was at fault again, very few could get their hands onto Bitcoins as their prices in traditional currencies had climbed. The government then duly played their part in declaring that trading in Bitcoins was illegal, cracking down on several cryptocurrency top guns. Recently different countries have joined the bandwagon to ban Cryptocurrency. Hence the value is much less now. The major concern is that the skepticism in public minds might kill the hype earlier than anticipated.
The Future and Hope for a better Alternative
What we must keep in mind is that Bitcoins are just a derivative of the concept of Cryptocurrencies. The primary concept of distributed systems and the resulting technology – Blockchain, is still a very viable and novel one. The problem in the current Bitcoin system is the distribution mechanism. Whether we would be able to tap into the distributed system concept and create a better version of the Bitcoin model, only time will tell. But for the sake of better wealth propagation and wealth balance, we can only hope that this realignment of economic system happens sooner than later.
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