This is a little train of thought on the nature of money. It occurred to me while in the middle of experimenting with some new online services, when I was struck with the the possibilities of what we can do if we could unbundle all those things that make up money.

What is money, and what is value? What if, we could separate out the 3 key components of money & value?:

Unit of account (quantifying value)
Medium of exchange (transferring value)
Store of value (storing value)

We often don’t even realise that these 3 distinct properties exist within money, much less what it would mean if we could separate them. If for example our currency of choice is the dollar, we may find that:

we price everything in dollars;
we transfer value through mechanisms that are rooted in dollars
(the banking system’s ACH, SWIFT etc.);
we save in dollars

But what if things weren’t necessarily like this?

Rethinking ‘Medium of Exchange’

Think about the different scenarios where we need to transfer large amounts of value right now. I find it so paradoxical that we pile large amounts of physical paper into armored trucks to move from one place to another, when in essence all that is happening is an exchange of value, expressed in this case in a physical form. This is made easier when we use more efficient channels (e.g. cheques, wire transfers etc.) but even these are still cumbersome, and can be costly both in terms of time and money.If all value is, is an expression, and its transfer is simply a communication, then why not codify that expression in the simplest, most efficient way available to us? I say this within the context of a world where right now I can click right from my taskbar to open a video chat and instantly communicate with a friend halfway across the planet.

Rethinking ‘Store of Value’

When value is created it is absolute. When it is later realised (we earn from a job, exchange some product/service, or cash out an investment etc.), we may choose to codify it into some store of value for the purpose of holding it going into the future. Whatever ‘code’ we choose may then fluctuate against other stores of value. Usually we just hold in (codify into) our local currency, and only if there is excess or a real need, we then might ‘recode’ that value by investing in some way or exchanging it for some other currency.

What if…

Given the above, think about the following. What if we treated our familiar currencies strictly as our ‘units of account’, but we unbundled the other 2 properties?

What if we could with the touch of a button bypass the currently used network of banking intermediaries entirely, and instead transfer that value using cheap, efficient & direct rails, more akin to how the internet works.
What if when we are also paid or some value is generated to us, we could seamlessly choose how to store that value at that point (be it dollars, pounds, yen, gold, sheep hides etc.)?

To make this clearer here’s an example:

What if I’m a Filipino person currently visiting Japan and I just got paid US$100 from an American client. What if I could choose to immediately store it as £64 because I actually live in London, and within the next 5 mins walk into a store and buy sushi quoted in Yen without having to do any actual currency conversions. Better yet, what if I can then sit at that sushi place, open up my messaging app, and after groupchatting for a bit about ‘Cool Runnings’ immediately send a contribution in DogeCoin to the Jamaican bobsled team who are trying to get to the Winter Olympics that year from within that same app. I also send 250 Philippine Pesos to my brother who is currently at the gas station back home and had just mentioned in the group that he’s short some pesos to fill up.

Think about what I have just done. My initial ‘unit of account’ was the US$, and it is what I was paid in. My eventual ‘store of value’ though was the GB£, and I am proposing that I was able to choose that as an option right on my phone without ever actually exchanging currencies with anyone. I am also proposing that I was able to send value straight from my phone through a messaging app to a sports team halfway across the world in the Caribbean. This particular app is able to do this by simply being connected to the internet and having access to some sort of peer-to-peer protocol that serves as my ‘medium of exchange’, bypassing any banking intermediaries.
(If I just lost you on that last point, think how Skype allows video chats by also simply being connected to the internet and using an appropriate peer-to-peer protocol, bypassing the previous Telco intermediaries.)

Paradigm shift

What that example shows is a glimpse at a different sort of world. Within the span of about 5 mins I would have just expressed value in 5 distinct denominations across both cultural and geographic distances, and in one instance in a currency that isn’t even gov’t-issued. I would have participated in a local transaction, some remittance activity & international crowdfunding, all from my mobile phone while sitting at a restaurant, and with all parties receiving their funds almost instantaneously.

Looking to the Future

What if I told you that all the building blocks of something like what I described above have already been invented and are currently available, and with a little creativity it is possible to piece together exactly what I described above using ‪‎blockchain‬ technology & services like Bitreserve (now Uphold), ShapeShift.io & Telegram Messenger. What if I also told you that this particular space is one of the fastest growing in the VC funding world and that it is set to hit US$1 billion this year in funding to companies building in this space.

What are the things that then become possible in that sort of world?

What are the new services that will be built for “the other 6 billion”?

How will Central Banks and gov’ts behave when currency becomes a choice rather than an imposition? (think capital controls in places like Venezuela & Argentina vs. willing participation as with the Bristol Pound)

“The future is already here — it’s just not evenly distributed.”

The above quote by William Gibson feels all the more real the closer you look at recent developments within spaces like FinTech & blockchain technology ones. Much progress has been made in a very short time, but we’ve only just begun to scratch at the surface of what’s possible. Developments in these spaces and other related ones will undoubtedly lead us to more questions and more creative thinking on how we view money, what makes it what it is, and what its role becomes in our future societies. I’m willing to wager that we’re in for some very interesting developments in the years/decades to come.

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Add’l: For more interesting thinking along these lines, I encourage you to check out these two talks by Andreas Antonopoulos, someone I very much respect in this space: