Last week, I was asked to speak at a debate at my old school – St. Paul’s in West London – on the subject of cryptocurrencies.
The motion was: “Cryptocurrencies are not the future of money”.
I was speaking against the motion (in other words, I was arguing that cryptocurrencies are the future of money). On my team were Linda Leaney, CFO of Globcoin (a new stablecoin), and 15-year-old pupil Hari Collins (who, most impressively, spoke without notes).
Speaking for the motion were CEO of Bullion Vault Paul Tustain, former pupil and now young trainee barrister Ben Woolgar, and 17-year-old pupil Guy Ward Jackson.
Obviously, I was right. Cryptocurrencies are the future of money. And I thought I’d share with you this week the reasons why.
Cash for the internet
First up, technology is destiny. Human beings have always been guided by technological evolution. We will, for the most part, use whatever technologies are available to us if they make our lives better. What we use as money is no different.
The first forms of money were bits of mud moulded into tokens to represent items – a cone for a sheep, a disc for a measure of barley, for example. When we found ways to simply inscribe mud with pictures instead, we abandoned the tokens in favour of more efficient hieroglyphics. The casting coins – meaning we could certify metal content and weight – saw humans evolve from shells, whale teeth, and other primitive commodity currencies.
The invention of the printing press, first in China and then in Europe, saw the rise of paper money. Digital technology and electronic banking put paid to the cheque however, and today contactless payments are doing the same to cash. The latest evolution is cryptographic technology, whereby you can send large or small amounts of wealth across the internet without the need for any middleman. Its adoption is inevitable. It is cash for the internet.
Next I spoke about the scalability of cryptographic money. The intangible economy is now much bigger than the tangible. We see this in the valuations of companies like Google, Amazon, and Facebook compared to their analogue predecessors – newspapers, old-school publishers, and traditional retailers. The reason is scalability. I can invent a fantastic car, but I’ve still got to build the factories to build it, ship the car, and so on. On the other hand, I can design a fantastic app, upload it to the app store, and it can be downloaded a billion times. Digital tech is infinitely more scalable.
The same goes for fiat currencies. They are limited by national borders. They are limited by the banking system, which still excludes about two billion people worldwide.
The internet, however, is borderless. If a borderless money can be found – money for the internet – then its potential is as scalable as the internet itself. Cryptocurrencies are that borderless money.
To participate in this borderless economy, all you need is internet access. By 2021, according to Sony Ericsson, over six billion people in a global population of seven billion will have a smartphone. A smartphone is the way by which most people will experience the internet for the first time. As soon as they are connected, they are no longer financially excluded as far as cryptocurrencies are concerned. They will be able to download a wallet and receive payment in cryptocurrencies. That will happen a long time before they ever get a bank account.
I’m not calling for the death of national currencies, by the way. But just as the digital economy has eclipsed the analogue, so will cryptocurrencies outscale national currencies. The analogue economy is very much still there, but the digital economy has outgrown it by a considerable margin. The reason is scalability.
My next point also came under the heading of scalability. It is to do with the changing nature of employment. The traditional employer-employee relationship is dying. Jobs for life are from a different age. Today we see the rise of the freelancer and the gig economy. More and more people have multiple income streams. More and more people are working from home or working flexible hours. By 2030, say Ernst and Young, half the world’s working population will be freelance. By 2035, that will be three billion people in a global workforce of six billion.
Simultaneously, we are seeing the rise of a new type of freelancer: the digital nomad. This is the most rapidly growing workforce in the world, and they almost all work in the digital economy somewhere. In the digital economy, you can work from anywhere. Travel is cheap. 5G is growing ever more commonplace.
House prices, on the other hand, are high. Taxes are high. But if you leave London, Paris, or New York, you don’t have to pay those high house prices. You can enjoy a much better lifestyle on the same earnings. More and more people, particularly in the digital economy, are upping sticks and leaving. People rooted in big cities do not realise just how many workers are nomadic. The crypto community itself is highly nomadic. Technology has made the existence of the non-dom available to ordinary workers.
These borderless people want to be paid in borderless money. They’re hired for a job in Tokyo while they’re in Bangkok on their way to Cartagena. What currency do they get paid in? Do they want to be subject to unnecessary forex charges? A borderless money is required for this new borderless workforce.
Taxing the intangible
Governments themselves have found it extremely difficult to tax the intangible economy. Where exactly is Google, Facebook, or Amazon based? Where is the value created? Where is the point of taxation? They are going to have the same problem with borderless workers. The deficit between what they spend and what they earn is increasing. Their tax collection will become both more aggressive and more efficient. They will put their own national currencies on blockchains, thereby ensuring they can totally monitor the economy. Blockchains will make for much more efficient collection of taxes. National currencies themselves will start embracing the same cryptographic technologies.
The adoption of cryptocurrencies is as inevitable as the adoption of the car. Those who say it will not happen are the same people who were defending the horse all those years ago.
I said all that and more. Yet amazingly, the debate ended close to a draw, with the other side deemed to have marginally shaded it. The audience was made up of pupils and parents. The pupils all voted in favour of cryptocurrencies. The parents (and there were two for every pupil) decided that cryptocurrencies are not the future. Forgive them, Lord, for they know not what they do!
Dominic Frisby is author of the first (and best, obviously) book on Bitcoin from a recognised publisher, Bitcoin: the Future of Money?, available from all good bookshops, and a couple of rubbish ones too. Dominic is director of Cypherpunk Holdings (CSE:HODL), a company set up to invest in privacy-related technologies. Follow Dominic – @dominicfrisby
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.