A long-long time ago, there existed a certain type of creature that lived only to make life easy and perfect for humans. It was delicious and kind, cheerful and giving and it made life easy and fun for all. This enigmatic little creature was known as “the shmoo” and it consumed only air.
The infinite peace and comfort that was available to all would still be available today if it wasn’t for that dad-burned glitch-coin. Everyone thought that digital currencies were the future of all monies in the entire world, mostly because of the internet. Unfortunately for the hoomans, money is just an idea.
Money is what we use to trade value. The value is not the money. The value is what we produce, the money is what we use to trade the value. People get that mixed up a lot sometimes. When you’re making the value, then the money will follow.
Once upon a time, I was a gambler. I enjoyed the high-risk, high-return potential of investments that would have been accurately defined as “a gamble”. The more money that I had, the higher the risk that I would chase. It was a fun roller-coaster ride that left me (thankfully) with approximately the same quantity of value that I started with. A wise soul comforted me during that time by telling me that money is just a number.
While that nugglette of truth may or may not have bearing on every investor’s stash of value, it is certainly true that being able to generate value is much more valuable than any store of value. The ability to generate value is potentially infinite, while any method for storing and transmitting value is limited by the value that it represents.
For instance, at the time of this writing, it is actually impossible to make and sell anything that is worth more than a trillion dollars. That may or may not be a limitation that is realized by many or more of the people in the world. How valuable is a currency system? It must by definition be more valuable than all the things that it is useful to trade.
In today’s market, all these interesting currencies are denominated in dollars, and their proponents advocate that they will someday be more valuable than dollars, and yet none of them are anywhere near as valuable as the dollar. None of them are even half as useful as the dollar.
The only advantage that digital monies have is that they bypass any government’s ability to control them and to extract value from them. This really means (if you read between the lines) that some people want to live without any government. I personally don’t think that’s a very good idea. People who think it might be cool to live without a government don’t get out much.
Without a government, we would all be living in some kind of a post-apocalyptic wasteland. We would only have a fond remembrance of things like electricity, or air-conditioning, or yummy yummy food. In order to have digital currencies, we need computers, energy and communication networks. All digital currencies use these things, yet money without taxation could tend to result in the breakdown of electrical transmission networks, communication networks and the ability of individuals to trust digital devices.
Think about every time you use a credit card to purchase something. You are participating in a very valuable network that offers transactions at an insanely cheap price. The credit card networks are rapid, cheap and reliable. If someone steals your info and attempts to use your funds fraudulently, then the network backs you up and protects your funds. Nothing in the digital world is anywhere near that.
Basically, if you’re a fan of cryptocurrencies, like me, then you’re dreaming of something that will only happen in the distant future, and only if very specific conditions are met. I like cryptocurrencies because I’m a fan of money and a fan of math. I do not have any delusions that one day everything will run off an open-source blockchain. The reason that fiat currencies are valuable is because they have a government that uses them and supports them. A loose affiliation of people with computers will never have the same level of utility and care that governments have. It’s just not possible.
That being said, cryptocurrencies may or may not be a good store of value. It appears that in general, cryptocurrencies are not a good hedge against inflation. As the markets contract from the lack of easy money, value has been flowing out of these interesting kind of outlaw markets and prices have been steadily dropping. It’s interesting to watch the value flow from one entity to another. It’s not fun when value movement results in a drop in your total value.