A few days ago I ran into a friend on the street who had not seen for a long time, I invited him to have a coffee and we enjoyed a pleasant moment chatting, we caught up with what each one was doing with their lives and in a certain At the time of the conversation, he asked me what I thought was the stir that the issue of cryptocurrencies was causing on social networks.
I took a deep breath, since I know him very well and tried to explain to him what I have learned from cryptocurrencies, not only about their importance in terms of changes in financial paradigms but also in terms of the technological potential they offer to humanity and its development.
After listening to, with a mixture of annoyance and disbelief, what I believed to be a blockchain masterclass, his response could not have been more skeptical:
I think everything you say is very nice, but you cannot live from what you call blockchain, cryptocurrencies are not real money, he told me.
What is money?
My first reaction was to think that somehow I had not been able to explain myself well, that my logic had presented a failure and therefore my speech was not accepted by my friend, however, something inside me made me think that really what What happened is that my friend was not clear about some basic financial concepts, so I asked him: what is real money for you?
The real money is what we earn working, what we use to pay for services, buy food and pay for the coffee we are drinking, for example, he replied.
His answer left me quite puzzled, I replied: and if in this cafeteria, in the electric service company and in the food store they accept cryptocurrencies as a means of payment, does that make it real money? He looked at me, sighed and replied:
If everyone accepts cryptocurrencies as a means of payment, and you can deposit it in the bank, I imagine that, in that case, we could think that it is already real money, but that will never happen.
Many paradigms created around the meaning of money
The above is a fictitious story, however, the ignorance of many of my friends of how not only cryptocurrencies work, but the payment mechanisms in general, if it is totally real. For a long time the global financial systems have made us think that they are the owners of the payment mechanisms, only the paper money issued by a central bank has legal backing (granted by the government) and the rest of the citizens are subject to the monetary policies imposed by both powers (government-banks)
In the same way that many rulers think that when they are elected they obtain a kind of “special power” that allows them to decide what is good or bad for each one of us, banks for many years have thought that they are the owners of the bank. "Real money" and therefore those who have the power to decide what should be done with it. It is not up to the common citizen to establish a financial exchange mechanism, other than those imposed by both powers.
A little bit of monetary history
If we go a little further back in the history of humanity, we will realize that the origin of money does not depend on governments or banks, but on the need of human beings to have some good that would serve them to be able to carry out financial exchanges . In ancient times if someone wanted to buy a horse, for example, he would have to pay with a cow, if that had been the established price. This modality was known as barter and was used for a long time.
With the appearance of gold and other precious metals, it was these that served as a payment mechanism, which greatly facilitated commercial exchanges since it was much easier to carry a few gold nuggets in the bag than to move a whole herd of cows from one town to another to buy horses.
The increasingly numerous thefts of gold and other payment mechanisms, forced the merchants to have to use the services of a "custodian" who was in charge of safeguarding their values, in exchange they received a kind of ticket that represented the value of the goods left in custody and thus the first bills arose, as a representation of the value of the goods left in custody by someone.
War and the rise of fiat money
Once the Second World War ended, the United States and its allies in the war, imposed not only the defeated but the rest of humanity a series of conditions that intended to speed up and homogenize exchanges, in this way the Bretton agreements were born. Woods, in which a new financial system was established, all currencies had to be converted into dollars, and only the dollar could be converted into gold at a rate of 35 dollars per ounce of gold, this being the first step towards the disappearance of the standard. gold (where coins and bills represented a certain weight in another) and the birth of fiat money.
Once again the war influences world economic development, in this case that of Vietnam. The United States, in need of large amounts of dollars to finance the war effort, decides to increase the amount of money in circulation, this generated a loss in the value of said currency, which was aggravated by the decision of European banks to convert their dollar reserves into gold. , This forces President Richard Nixon to suspend the convertibility of dollars into gold, an example that would later be copied by other countries, in that way fiduciary money was born, a system based on trust or faith in the valuation of coins and bills. .
What is money for?
Money has three specific functions:
Means of exchange: this function was the one that replaced the old barter, coins and bills allow to serve as a "bridge" to carry out an exchange of other goods or services, without these having to move from one place to another.
Unit of account: we establish the value of the goods based on a certain currency, that allows us to say, for example, that a television costs $ 500, internet service 60 euros or a vehicle 5,000 yuan.
Deposit of value: money allows us to treasure it in the form of savings that allows us to create and preserve our wealth, we trust that the money that we keep can then be used without losing its value or purchasing power.
Analyzing the above, to determine if a cryptocurrency can be considered as "real money" it is enough for us to ask ourselves the following questions: can we deliver cryptocurrencies in exchange for a good or a service? well expressed in terms of a cryptocurrency? Finally, can you trust a cryptocurrency to maintain its value as a mechanism for saving and accumulating wealth?
The previous questions have already been asked by countries, financial services companies, savings funds and even many banks that now not only accept, but also promote the use of cryptocurrencies as a means of payment and exchange. Now I ask you, do you still consider that cryptocurrencies are not real money?
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