An illusion is usually something you can’t touch, see or taste. Something that’s only meant to trick the mind into believing it exists. It is nothing but a figment of your imagination.
Fiat on the other hand is very real. We touch, see and can even taste its existence. But this is the beauty of this illusion, and what makes it so hard for the mind to see beyond the trickery. The trick is simple too! It takes advantage of part of the human psychology that says ‘if I can see, touch, smell and taste it, then it must be real’. This objective bias towards the world serves us exceptionally well except when it comes to subjective matters.
People’s obsession with money has resulted in the study of how we interact with it. Because we believe so much in fiat money (almost religiously), we tend to want to keep it around for as long as we can. The argument that people are bad with money is a fallacy. Contrary to popular belief; people are actually good at saving money. That’s why psychologists have had to come up with ways to encourage people to spend their money by tricking the mind into thinking it’s actually saving money by spending it. They’ve even found ways to convince you that you’ve already spent your money, even though you haven’t yet. Sounds ridiculous? Not more ridiculous than treating paper as the world’s most valuable asset.
The entire global economy runs on a belief system; a belief that this paper you’re holding will be accepted by the next person or a bank. At first you couldn’t convince any one person to take paper (money) in exchange for something of actual value. So banks had to give people that confidence in paper money by exchanging it for them. And as they say “repetition is the father of learning”, it wasn’t too long before people gained trust, not for the paper money, but trust in banks. Pretty soon people started accepting paper money from others, again not because they trusted them, but because they believed they could exchange it later for gold at the bank.
In the minds of people this ‘paper money’ system was brilliant. Now not only can they easily trade with one another, their gold was also being stored safely at a bank. For the first time people could trade and in that instant safely save their wealth. Trust in banks blinded these people from the illusion which was the paper money in their hands. Credit to the banks, they made it all too convenient to carry and trade with this paper money. If you were a non-believer, then it meant living in society became a huge inconvenience to you. Gold was either too heavy to carry around all day or lacked the divisibility to trade for cheaper items. You’d often end up paying more than the asking price, forfeiting the difference. Or be forced to simply accept change in paper money.
This brings us to today’s society.
Contrary to popular belief we actually like to save, it’s just that the current system makes it difficult to do so. Since abandoning the gold standard in the 1920s-30s, fiat money has become a bad store of value. Unlike gold our money supply is now infinite, causing it to lose value over time because of price increases through inflation. Psychologists have also found ways to make it much harder to save by influencing our spending habits. Psychological attacks to spend and the decreasing value of fiat money have proven to be tough obstacles to overcome.
You may be wondering how we’re being “psychologically attacked” and the answer is simple – suggestion. According to Encyclopedia Britannica: Suggestion, in psychology, [is a] process of leading a person to respond uncritically, as in belief or action. The mode of suggestion, while usually verbal, may be visual or may involve any other sense. The suggestion may be symbolic.
Everywhere we go we are bombarded by these suggestions.
A ‘Sale’ sign suggests a bargain. Odd pricing ($29.99 or $9.97) suggests we’re saving money. Casino chips suggest play money, “not real” money. And a credit card suggests that money in it is meant to be spent. All these things are suggesting that we must spend our money.
It’s how our economy runs, and it is what fuels the progress of society. People love cash, and businesses love it! Cash makes it easier to give in to those suggestions as it is accepted everywhere and you can spend it anytime. Credit/debit cards sure do make it easier to spend, but they still aren’t accepted everywhere. The fees for transacting in credit/debit cards are a hassle for many businesses and individuals, and sometimes the system just isn’t as reliable as cash.
For a much stronger economy the answer is simple, cryptocurrencies need to be the next step of financial innovation. They have a far greater potential than credit/debit cards, their system (blockchain) can be more reliable. They could also be accessed anytime and accepted anywhere. Nearly everyone has a smartphone or at least access to one. People can exchange money as easily, but safer with cryptocurrencies via password enabled smartphones. This all makes cryptocurrencies easier to spend which the economy loves!
The only “problem” though is that government has little control over them. Many of the cryptocurrencies of today run on decentralized systems. Systems that are peer-to-peer and without a third party entity to control them. In other words, cryptocurrency has a huge potential but it won’t reach mass adoption until governments find a way to profit from them. Yes, I said it. Governments are looking for ways to efficiently track and tax cryptocurrencies before they can throw support for its mass adoption. How long ‘til they figure out taxation and tracking of cryptocurrency transactions? I say not too long.
Most likely governments will end up creating their own fiat cryptocurrencies which they will probably deem as the only legal tender. Many will be bothered by this, but Bitcoin will not be the world currency people wish it to be. I’ve had to face facts, it’s just not going to happen. It is too much of a headache for governments to try and track and tax it. The very same characteristics (untraceable, anonymous, decentralized) that make Bitcoin so great are what makes it an enemy of the state.
It’s eleven years into Bitcoin’s existence and I don’t see people taking that legal risk now. Bitcoin has done its job, and a tremendous one, by introducing to the world a more transparent and just financial system. A system that’ll correct the banking misconducts of the past. But after everything that’s happened governments don’t trust it to scale, or more importantly the public doesn’t trust it.
The way forward now seems to be in utility tokens: digital currencies that don’t seek to compete with government issued currencies. Facebook’s cryptocurrency (Libra) was foreshadowing the future for all those dealing in ‘illegal’ digital currencies. This all went bad when people started creating alternative cryptocurrencies instead of focusing on just the one (Bitcoin). Aesop’s fable ‘The Four Oxen and the Lion’ teaches us that when we quarrel and decide to split that’s when we become vulnerable to attacks. These alternative cryptocurrencies (altcoins) created a divide and as a result weakened the cryptocurrency revolution.
United we stand. Divided we fall.Aesop (The Four Oxen and the Lion)
Utility tokens are now the future for decentralized systems and applications. Unlike Bitcoin’s future this is certain (supported by government). EOS for example has been acknowledged by the Securities Exchange Commission as a utility token. This gives the project confidence in its long term operations and to not have to worry about legal moving forward. Something many blockchain projects lack and as we’ve seen countless times before, the government’s hammer could strike at any day. And users don’t #hodl in solidarity at that point, like oxen they hit the ground running to refuge. Well, come to EOS they will.
Unlike fiat money, utility tokens like EOS have a limited supply which make it possible to have a deflationary system. They are not out to compete with the illusion, they reside outside it. Utility tokens represent access to a system that is independent of the fiat world where at least the rules are transparent and apply to all. A fairer system. A safer system. And most importantly, a system you can trust.
The illusion of fiat isn’t going anywhere but at least to a certain extent we have an alternative. That to me is a sign of progress. Change doesn’t come over night and as I stated in a recent article chain-ge “requires time and patience”. Bitcoin was the first step, now EOS is the best second step forward. Pretty soon a prettier canvas of fiat cryptocurrencies will be upon us. How decent an illusion it will be compared to the current one is yet to be seen.
Thank you for reading all the way through! I know this article was provoking for some of you but I’m glad everyone pulled through. The article offers a lot to think about and you’re always welcome to comment or start a discussion with me on Twitter about it.
Until the next one, have a great one!
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