When we have capital, we want to preserve it, for our benefit and for future generations. To do this
We can buy houses, land or stocks, but if I want to keep part of the capital in the form
Liquid money and durable, I have three very difficult problems: one, how do I know that the money is
Real and not fake. Second, how do I make sure my money stays only mine; That is, a problem
Registration of ownership of the money. Third, how do I know that my money will be worth even in the future
And will not lose its value.
To solve the first problem, the problem of forgery, countries are investing great efforts
Creating money that is difficult to fake: watermarks or silver threads in bills, coins and more
Types of inventions. Sometimes these solutions are helpful; Sometimes less.
The second problem, the problem of registration of ownership of money, more difficult. To solve it we
We deposit our money in the banks, that is, in institutions that we rely on
"In books," and see in these drawings what determines whether a sum of money belongs to me or to someone
Other. For example, if my bank account has a positive balance of 100,000,
This is my "money", and I trust the bank to make sure that it does not have a clerk (such as Etti Alon)
To write me a negative balance of one hundred thousand shekels. As a customer, I have no ability to contradict
The status of the account appearing in the books of the Bank, even though my money is not really held
At the bank. In fact, only a small percentage of the capital is held by the banks as cash, and in practice they do not
Not coins or bills, but only sketches, prints, and line commissions. The Bank holds
For us, only representation of money.
The third problem, the problem of maintaining the value of money, is the most serious and also
The most denied. As stated, not only the bank has no money but also the State Treasury. Behind
The coins and bills of the state have nothing but the promise of the Fiat: "That will be so."
Indeed, the main disadvantage of Fiat money is familiar to all of us: there is a chance that one day - out of crisis
Economic situation, a state of war or irresponsibility - the state will choose to issue many coins and bills
And therefore their value declined sharply. This is called "inflation".
The promise or stability of the state may disappear overnight. Sometimes happens
Because the state does not have coverage for the money it itself printed. In Venezuela, for example, they woke up
The citizens in one morning discovered that their currency was worthless and that the banks were closed
At the order of the government, soldiers stand. It was also in Greece. A year ago this
Happened to people in India, who wiped out some of the notes and closed the banks. Government
1 Maybe it will happen
Cyprus has nationalized a large part of the private deposits to cover its deficits.
Tomorrow the Germans, who would wake up and discover that the French had decided to leave the Eurozone and overnight
2 The value of their currency, the euro, will be erased. Even an all-out war could undermine the stability of the
State. Can none of these things happen in Israel?
Intermediate summary: We presented three issues with money - preventing forgery, registering ownership of
Currency, and stability of the body that issues the money. In January 2009 Satoshi Nakamoto stood there
false. To this day no one knows who he or she is (and invented the Bitcoin, which he solves
The three problems are amazing, by a model based on a lot of mathematics
And cryptography (the science of encryption.) Luckily, you do not have to know math or not
Cryptography to enjoy the invention or assess its implications.
