Bitcoin, a question of trust

“When a great genius appears in the world you may know him by this sign; that the dunces are all in confederacy against him.” — Jonathan Swift

Lately I have been reading a lot about cryptocurrencies. My motivation (transcending the technical stuff) is to find out what money should look like in the future I want for my children. I think I struck gold.

With this article I want to write down my three core reasons and a conclusion to which hold on and lead my apostolate about bitcoin.

First things first.

Money can be whatever can retain some amount of value in order to be used as medium of exchange for a good or service. It has NOT to be physical or backed by something like gold or salt. Only should be something trustable enough to be used as payment for any transaction of goods or services in the whole world.

Yes, in the whole world. So here is my first ground.

Money should be global

If markets are. Why not money? Maybe the different currencies for different regions and exchange rates have something to do. With rise of global e-commerce, we have become pretty savvy at our expense, killing intermediaries in the name of cost efficiency is the new sport. People indeed are starting to buy their leather shoes directly from the Chinese factory, buy music directly from the author wherever she is, take their servers to another countries into huge data centers for being delivered back as a services for a fee and so on. These trans-borders transactions are growing fast and have implicit exchange of currencies and of course exchange rates.

This is an important point to consider. It hurts eliminate Juan, the attentive retailer of the shop from the corner, he adds some value, so I reckon must be our moral duty to eliminate other futile intermediaries. In memory of Juan at least.

Try to figure out the millions in futile exchange rates every month and the potential growth of this amount. No value added to transaction, only changing the skin of the coin. A sterile charge which you can not escape. We accept this as mandatory. A mechanism which drains money from bottom to top of the pyramid on an ongoing basis. Pure capitalism.

Bitcoin is a global peer to peer money, with no banks or intermediaries involved in any transaction, with a very low and democratically distributed transaction fees, no frozen accounts, and a cost effective solution for micro-payments. Better isn’t it?

Go now for deeper issues.

Money supply should NOT be “biased” by central banks

Central banks feel confortable acting as drug dealers. They can “give you a relief” if you “really” need to. They support themselves in the concept of monetary policy for biasing the money supply in their territories.

Money supply (creating money out of nothing) is done by these divine banks basically printing more money. Their apostles on earth, the commercial banks, do this through the fractional-reserve system. These two mechanism are based on debt.

By supplying money, they create periods of artificial wealth, where people usually makes cheerful and a mid-term unfortunate investments sweeten by this happy hour. The next morning, hangovers are terrible, often known as crisis. Smart people crawl markets buying it all and waiting for the next happy hour, which they will sell and will hoard more artificially created money based on debt, and so on.

And money creation should NOT be based on debt

The money supplied by these banks (central and commercial) is not given but lent at interest, so it is not difficult to conclude that always there is more money debt than money that exist itself in the global balance. For me it is “debt as a weapon” (DaaW), and do not must be very difficult targeting a specific objective.

Yes, this perverted system creates poverty “by default” and maybe this is the actual function of monetary policy.

Conclusion

With the corpses still warm of Mt. Gox and Silk Road leaving the scene and big players as Silicon Valley, Wall St. or Nasdaq pulling, seems like bitcoin is having a new and more healthy reborn.

This new era makes me think that bitcoin will be exactly what people wants to it be. The underlying philosophy and technology are good enough for doing many good things with it, but as usual, there will be no lack of people that only will see the dark side and will tell you the virtual currency is insecure, dangerous, volatile, ponzi scheme, money for terrorists, dealers, extortionists etc. For me, minor risks compared with potential benefits.

As Satoshi forecasted in his protocol, the good ones are more and, at the end, we will win.