Preview of Introduction
The Currency Revolution is available in paperback here.
Introduction To The Currency Revolution
In digital currency markets, there tends to be a certain ideological spell that overcomes even the most rational investors and businessmen once they get past their initial fear of the idea of cash products that are not government-issued and begin to invest for real in cryptocurrencies.
As for nearly every type of ideology, the ideology of decentralized currency issuance is not only dishonest, it is also disingenuous.
As this book outlines clearly, many ICO-issued digital currencies are barely, or not even, decentralized at all, for a start. Very centralized teams composed of as little as 2 or 3 senior level executives sometimes are responsible for the issuance of many cryptocurrencies.
In many cases, too, as I discuss in this book, they are often blatantly dishonest about the circumstances surrounding their currency’s issuance, further diminishing the argument that digital currencies are in any way more decentralized than sovereign ones.
Further still, where they are decentralized, as I discuss in the chapter on exchanges, the simple reality that most popular cryptocurrency exchange platforms are nothing less than Ponzi schemes run by the same sort of 2- or 3-man teams as the phony ICOs calls into question the idea that real financial decentralization at any level in the world economy to the extent that it was proposed by Satoshi Nakomoto even exists at all.
This book is not an evangelistic gospel for Blockchain, and neither is it an attempt to persuade anyone that decentralization is in any sense preferable to centralization, or that digitalization is superior to physical trade.
What it is however is an acknowledgement that the process of decentralization as a result of the mechanism of digitization of financial markets is an inevitable evolutionary trend that is impossible to ignore.
It is not necessary to subscribe to the belief that something is preferable merely because one acknowledges that something is the case. In the same way, you do not need to think that digital payment mechanisms or decentralized financial markets are something good to believe that they are a force that is increasingly going to become influential in our lifetimes.
Despite being a proponent of digital assets, I share many of the concerns and criticisms that naysayers of the asset class often make. That’s innovation. It’s rarely a perfect arc.
This book makes some radical claims, and it is worth pursuing those claims for a moment. One of this book’s most radical claims is that the US dollar, the Euro and the Japanese Yen are not likely to survive in tact much longer.
First, I am not the only one to have made this claim, nor am I the first. Former intelligence expert and economist James Rickards makes the same claim, in a far more emphatic sense than I do here, most notably in his book The Currency Wars.
Other economists, such as Nouriel Roubini — who detests Bitcoin — have similarly dismissive viewpoints of the centrality of the role of the US dollar in our financial future.
Second, the point that I raise about the US dollar ultimately succumbing to its own base pair strength can be made equally for any of the strongest cryptocurrencies in circulation today. Bitcoin and Ethereum have at least as little z-efficiency as does the US dollar. Indeed, I say as much in this book.
In fact, the US dollar is far more powerful than Bitcoin, and will be for some time. I recently conducted a study where I monitored the 2017–2019 equity returns in the US securities markets and compared the strength they reflect in value onto the dollar to the strength that the decentralized digital asset markets reflect onto Bitcoin in the same time period.
The result was that, for the same risk that you assume holding USD and occasionally investing in and out of US equities, you would have to make 300% in returns during that period just to break even with your dollar cash position. In other words, for fund managers, a 400% rise in Bitcoin means the same exact thing today as for a 33% rise in US securities.
This last observation brings me to my next point about the digital asset space: no institutional investors are likely to enter the digital asset market any time soon. The enormous expectation that they are about to plunk down trillions of dollars will cause problems if left to go on unchecked. Thus far, only a handful of eccentric hedge fund managers — who more resemble Silicon Valley entrepreneurs than they do died-in-the-wool asset managers off Park Avenue — have participated in investing professionally in the arena, and even that at very small levels.
Capital raises for Blockchain start-ups reflect this low level of institutional participation: so far, Circle’s $110 million raise is the largest of any Blockchain unicorn in the world. That is tiny in the grander scheme of Private Equity investments.
None of these things — although superficially negative overall for Blockchain assets perhaps — is likely to stop the explosion of digital currencies as a sui-generic market force, however. In fact, it’s probably a very good thing that institutions aren’t participating in the digital asset evolution right now, as it leaves standardization as on option to the side. The longer that institutions stay away from investing in any real size in Blockchain, the longer the technology will have to make game-changing transformative effects.
That’s the message of this book: that you cannot stop the inevitable from happening. How it happens, in what contexts it happens and what the outcome may look like are the central themes of the book. To this end, I offer a little revisionist history on the early Blockchain days at the start of the narrative for good measure. I have also included real prototype demos of products my team of engineers and I have released in order to exemplify what’s going to happen as time goes on better.
Finally, I will offer a simple illustrative story to hone this point: Imagine you owned a farm in about 1300. For hundreds of years, your family had raised livestock, harvested fruits and felled trees.
It was a pretty miserable existence, and most of the time, you would trade your produce on a like-for-like basis with other suppliers or service providers who had whatever goods or skills you needed that particular winter.
Sometimes you would trade a cart of apples for a horse; other times you might give a doctor a sheep when a family member fell ill.
Currency was mostly in the form of raw commodities, although you did keep copper coins under the drawer in your living room on occasion.
Mostly though, there was no need and you were likely to have these stolen anyway, so there weren’t many. Life was literally hand-to-mouth all the time, and it seemed like the future would always be that way.
Suddenly, one morning in about 1380, a town hall official announced that your area was opening up a market. You, along with all your contemporaries in other competing and different agricultural supplies industries would now bring your produce to a market stall every morning, where customers would come and purchase your produce.
Overnight, you suddenly found that your drawer of copper coins swelled and spilled out. Wool from your sheep was so regularly in demand you decided to upgrade the size of your farm and leased another acre of land.
You planted an orchard on the old plot of land so that you could sell increasing quantities of apples. The Commercial Revolution had begun and it changed the course of agricultural history.
About 300 years down the road, and the business was faring well, but life was still hard. Infant mortality was high. Scientific knowledge was low.
Things happened which made the commute to the market dangerous. Bridges collapsed without warning. Fires ravaged nearby estates. Money ran out quickly and randomly, despite the increase in regular business over the last three centuries. These things constantly posed a threat to your farm’s efficiency and your family’s ability to just plain survive.
Then suddenly, farming equipment came on the market. All of a sudden it was easier to control the harvest and the bridges you traversed on the way to market were properly fortified with amazing engineering.
The humble farm you had once built at the start of the 1300s now, by around 1800, generated about half a village worth of gainful employment.
The head of the household in this period even managed to double down on his giant land ownership status and weave his way opportunistically into Parliament. Your great-, great-, great-grandson became a Lord.
In fact, the land he owned was so huge it covered several acres. There were cooks and cleaners and an entire battery of professional service providers who slept in the East wing of the giant house he had been able to re-build for himself and his future generations at pretty remarkable cost. The Industrial Revolution had arrived.
Just as the Commercial Revolution had brought with it opportunity, followed by hazard — more diseases due to a higher population in closer quarters, the collapsing overused badly-built bridges and so forth — so the Industrial one began to ravage the farm eventually.
Electricity made heating, lighting and living in the huge mansion built in the 1700s simply impractical.
The staff the house once employed moved on to do other things — some of them opened hotels, others started up nearby restaurants and so forth. Some of their descendants became multi-millionaires and married your own progeny.
Over time, all of this industrialisation competed with the estate’s monopolistic threshold over the town.
The land became worth more than the actual business produced on it. Your descendants ultimately were forced to sell it to cover the immense costs of the estate, but still, they made a tidy profit. They invested the money in a series of businesses, some of which did quite well, until marginal cost began climbing. Here is where we reach the present day. The Currency Revolution is the third market-based revolution in the modern history of our economy, and it’s one that is about to take hold of all of our lives.
When businesses begin to issue their own currencies, which their customers use to pay them for in return for providing their own goods; when individuals use their personal digital brands to issue their own from of value which can be sold and the profits of which can be invested in starting new enterprises.
When the entire currency system becomes not just a State-controlled monetary function but a personal profit machine it will have effects more far-reaching and dramatic for society than of the last two revolutions combined.
When Bitcoin first appeared on the scene in 2009 what began was in earnest something that will convert the way we live, trade and think about economic events.
The Currency Revolution is the most important, as yet still only just emergent, market-based revolution in recent history.
The effects of the Currency Revolution will be the most radical and widespread ever in history.
Most of them don’t even know it yet, but traders, merchants, artists, scientists and whoever else are today able to manufacture and sell their own form of monetary value to finance whatever initiative they seek to get going without having to assume bank debt.
Similarly, financing without having to raise money from outside speculators and without having to seek all sorts of burdensome permissions from a company’s own state is a possibility.
The market for a currency is only limited to the size, scope and popularity of the idea that is behind it. This is huge. This is a game-changer. This is what is next.
Companies will be able to issue currencies that can purchase future products they manufacture and keep all the profits which they can redistribute back to wealthier employees.
Individuals can issue currencies that they trade throughout their educating years, further enhancing intellectual potential. R&D, innovation and science can be funded, not by mercenary investors, but by end users of the services they end up providing (giving mercenary investors another outlet for speculation that doesn’t deprive employees of any of the fruits of the labour they bear).
Welcome to The Currency Revolution.
Think about it carefully for a second: if we have managed to go from peasant farmer to passive investor on the back of the two-previous market-based revolutions, under which our form of value ascription was entirely controlled, what happens in this third revolution, where value is ours to bestow, control, issue, trade and recalculate at will?
The possibilities are, to our post-industrial newly-technologized minds, virtually limitless.
This book is part-history, part-analysis of the change agent that is right now driving this new economic revolution that is happening right under our feet. That change agent is called the Blockchain.