Why I love the blockchain technology
In a world where 10% of the population owns 90% of the planet’s wealth and 1% owns
nearly 40% of the wealth, where 34,000 children die every single day from poverty and
preventable diseases, and where 50% of the world’s population lives on less than 2 dollars a
day, one thing is clear:
Something is very wrong.
Major cause of this inequality, diseases and all known heart wrecking incidents that happen
in the world have a common base – Money and ego of power. I personally believe that
when all humans have financial wellbeing, the planet can be a better place to mesmerize
with. Ego of power will eventually fade away as we evolve into sensible beings and stop
celebrity worshipping.
Since money forms the basis of most activities involving humans, I will try and elaborate my
understanding and perception about it.
What is money?
In general perception of the public, money is a medium used to exchange goods and
services. The more you are in need of a particular goods, higher the price you would offer to
obtain it. People tend to use the words money, currency and wealth in an interchangeable
way. In macroeconomics perspective, wealth is measured in terms of currency value owned
whilst currency per se is fiat money printed by the central banks of each government.
Do money needs to have specific properties?
To qualify as money, certain properties are to be met as follows,
• General acceptability – Masses of people should be confident to accept a particular
item as money. This may change over time. For example, tulip bulbs in the 16th
century, Spanish dollars in 17-18th century, followed by gold standard in 19th-20th
century with pound sterling as reference currency, followed by Bretton woods
conference in 1944 where US dollars was pegged to gold, followed by Richard Nixon
officially taking us off gold standard in 1971 and we are currently in petrodollar
system where the US dollar is pegged to the oil price. (Side note – I believe that
dollar being pegged to oil is the main reason for the Islam-Christianity divide that is
artificially created by the Rothschild and Rockefeller family to keep middle east in
check to retain their oil and financial interests, no single citizen would want war
forever. The minute Saudi Arabia ditches petrodollar, U.S will go there to fight for
civilians like they did for Iran (1980, 1987-1988), Libya (1981, 1986, 1989, 2011),
Lebanon (1983), Kuwait (1991), Iraq (1991-2011, 2014-), Somalia (1992-1993, 2007-),
Bosnia (1995), Saudi Arabia (1991, 1996), Afghanistan (1998, 2001-), Sudan (1998), Kosovo (1999), Yemen (2000, 2002-), Pakistan (2004-), Egypt (2011-), Tunisia (2011-) and now Syria (2012-)).
• Portability – Ease of moving from one place to another without major issues. For example, online transfer of dollars across countries.
• Indestructability – It should not be destructible and be durable for longer period. For example, precious metals are indestructible at least to a certain extent whereas dollars can be easily lost in case of house fire or earthquake in a treasury building.
• Fungibility – This means interchangeability. For example, one kilogram of gold is always equal to another kilogram of gold. And one barrel of oil is always equal to another barrel of oil.
• Divisibility – It should be divisible into smaller units. For example, dollar and its 100th divisible unit is a cent.
• Homogeneity – Money should be homogenous, identical and should be of equal quality and indistinguishable. For example, dollars, precious metals and commodities are homogenous.
• Cognisability – Money should be easily recognised. Otherwise, people may not understand what sort of asset they are dealing with. If it is not recognisable, people would be unaware of its real value and may fall into a scam.
• Stability – Money should retain its value fairly over time without significant decline.
• Malleability – Money should be malleable which means it should have the ability to be melted/changed to different forms. For example, money should be readily increased to meet the demands and reduced in times of deflation. In most cases, it may also be taken as flexibility in transaction. For example, higher volume of transactions should be processed fairly quickly in order to be used as money. Visa/MasterCard processes approximately 30 million transactions a day with zero fees for the customer.
• Control of supply – the limit or amount of money created should be in a controlled manner and be backed by some sort of work. For example, gold can be created only through mining and the mining costs of 1oz of gold is comprised of hours and hours of human labour. On the other hand, currency can be printed with minimal electricity power.
Anything printed, controlled and regulated by the central governments are called as fiat currency. Now that we understand the properties required to be qualified as money, let us try and understand how dollars are created and justify the reason for it to be not categorized as money.
Federal reserve
A private organisation called as the ‘federal reserve’ was started in the year 1913 as a central authority to make and manage money. A document named ‘Modern Money Mechanics’ details how currency can be created. The ‘art’ of currency creation is called as
‘Fractional reserve banking system’. In brief, the banks don’t have the obligation to hold all of your deposits and they can lend up to 90% of their holdings to a new customer in the form of ‘loans’.
How is currency created?
In general, this is how it transcribes,
The government decides it needs money because they are over the budget. They request the federal reserve who in turn accepts to buy bonds from the government for the requested amount. The government prints on a paper and terms it as ‘Treasury bonds’ and exchange it to the papers printed by the federal reserve which they term as ‘fiat currency’. Now, in real sense, the federal reserve owns part of the country when they accumulate enough ‘treasury bonds’ whereas general public work for the currency that was printed from nothing. To make sense, China, Japan, Russia and Saudi Arabia owns around 7 Trillion dollars’ worth of US treasuries and can technically dictate U.S if need arise.
Once the exchange is complete, the government can deposit the currency into a bank account and from that time point, the currency becomes a legal tender and is to be added to the total money supply of the country. Then the banks can use the law of ‘fractional reserve lending’ and loan about 90% value of the recent deposit – again creating currency out of thin air. Since the initial deposit was borrowed from the federal reserve and the fractional reserve lending was used for new loans, it adds to the national debt.
Why does our national debt increase? Who do we owe that currency to?
Now that we had borrowed currency from the federal reserve, the government should pay back the amount, if not at least the interest rates. This is interesting because, the government would again request the federal reserve for more currency in exchange for more treasury bonds. This new currency exchanged with the federal reserve will be used to pay the interest rates for the previous currency borrowed. Now do you see how our national debts keep increasing every day and never comes down? It is because we borrowed it in the first place to create currency from the federal reserve.
How do we attain financial freedom?
The only way to attain financial freedom is by being your own bank rather than trusting a third party for transactions. But, how do we perform transactions without trusting somebody? It either has to be bot enabled, if not decentralisation of financial power, i.e., spreading the power of financial decisions which should be incorporated into a code.
Instead of central banksters deciding the fate of the country and people, decentralisation offers the responsibility to our own self in deciding our financial needs.
Blockchain technology
In 2008, an anonymous person in the name of ‘Satoshi Nakamoto’ released a whitepaper on peer to peer transactions using blockchain. I personally believe blockchain technology is a Pandora’s box and greatest invention ever yet simplest idea in the history of mankind. Basic idea is – manage the transactions on a digital ledger which is timestamped and can never even be changed but only updated. This idea is world changing and has the potential to improve wellbeing of human beings, if embraced and used in all known fields. The idea of blockchain begs for, but not limited to, fighting corruption, inequality, transparency and proper use of resources as it can be tracked with no centralised power and its ability to be not controlled by regulators unless the government becomes absolutely totalitarian. Blockchain can be applied in any sector that could be thought of.
Blockchain enabled money ticks most qualities of money closely followed by precious metals. On the other hand, dollar falls way back and yet we use it for our day to day life. Once the blockchain technology is understood by the layman, a wave of people is going to embrace it. That is the day I would love to live to see it and am guessing this would happen in the next 5-10 years or sooner. The world doesn’t just need digitalization where general joe can be tracked and taxed but transparency and timestamping along with it where any corporation can also be tracked and taxed. This is just the tip of an iceberg that can be achieved with blockchain and I would love to this the world engine running on blockchain before the end of this century.
Conclusion:
We as the citizens of this planet in the so called ‘humanised’ and ‘Civilised’ and ‘democratic’ and ‘equal’ world have an obligation to understand the underlying politics of inequality and fight against the immoral and unethical beings of the planet – most of the time it is the leaders in that specific field who doesn’t want to let their power go. If the majority comes together to share their knowledge, it could help us evolve into a decentralised being rather than a centralised being of power, ego and money.