This is a chapter – NO MONEY – from my book Yoga for leaders. Published because of the growing interest in Bitcoin and other cryptocurrencies.
Do you remember the day, back in March 1989, when a computer scientist named Tim Berners-Lee proposed something he referred to as the World Wide Web? Of course you don’t! You and I were busy talking about things like the Exxon Valdez oil spill in Alaska and the movie Rain Man, which won the Academy Award for best picture that year. Worlds like TCP/IP, HTTP and WWW meant nothing to ordinary people like us.
Do you remember the day, back in 2008, when someone who called himself Satoshi Nakamoto proposed something referred to as Bitcoin? Again, of course not! We were all busy talking about Lehman brothers in 2008. (We still are.)
Almost a decade later, we are 100% focused on how to save the old system, instead of paying attention to what the concept of cryptocurrency and a decentralized ledger actually means. First, this is because the idea is complex and tricky to explain, which means it doesn’t fit mainstream media, which wants everything in black or white. If you believe in newspapers, Bitcoin is bad: it’s an extremely volatile currency backed by no solid value or any government, used by a few nerds who speculate and criminals who do money laundering. There have been headlines like “Bitcoin CEO Found Dead” even though the concept of a decentralized system means there is no such thing as a boss.
Second, many think of Bitcoin as digital money, and therefore all discussions are focused on exchange rates to determine value. The currency is extremely volatile since it is an extremely immature and small currency compared to any state (fiat) currency. But Bitcoin might be so much more than internet money; maybe we need to think of it as the internet of money. In that case, currency is just the first application, like e-mail was the first application of the internet.
If you think about cryptocurrency as the internet of money, maybe 2016 should be compared to 1998, eight years after Tim Berners-Lee introduced the internet. In 1998, there was no Google, Facebook or Amazon. No blogs, tweets or YouTube clips. Broadband and wifi were for few and we never imagined such a thing as a smartphone. To many of us, the value of internet was e-mail and not much more.
What does a decentralized autonomous trust network mean? What will be the killer app in the internet of money?
To most people, it’s also hard to believe cryptocurrency could overthrow any state currency. But think about money. If you remember the movie Dumb and Dumber, you might recall the scene where Jim Carrey’s character, Lloyd, emptied a suitcase full of money, but proudly announces that everything is noted on an IOU: “That is as good as money…those are I owe yous.” https://www.YouTube.com/watch?v=7GSXbgfKFWg
The comedy is actually a good analogy of our banking system. Any fiat currency is nothing but an “I owe you” (IOU) and the value depends only on trust. As long as the world trusts in the issuer, the system works, but if – for any reason – the trust weakens or disappears, that money is simply nothing but a piece of paper with some ink and bacteria.
Today many countries also replace physical money, coins and paper bills, with digital money. No need for anyone to write an “I owe you” on a piece of paper or carry suitcases full of money anymore; just check the mobile bank app and it will tell you the balance on your account (how much the bank owes you). Those are “I owe yous” … they are as good as money.” As long as you trust your bank this works, even though you know that no bank in the world can pay its debt.
When the financial crisis of 2008 occurred, we witnessed how vulnerable the world economy and the financial system are, and since there was no fundamental change at that time, unavoidably there is more to come. In this case, we don’t necessarily need new innovative technology to disrupt the old; the system is probably bad enough to kill itself.
Just like with the internet, Bitcoin and Blockchain are built on the idea of decentralization, where transactions are verified by independent nodes that also carry a copy of the ledger. Since there are millions of nodes, it is impossible to hack or tamper with the ledger; it would be like taking over all the web servers in the world simultaneously. Verification is done by cryptology. Computers compete to solve a question; this is what is called mining. This is also the foundation for inflation, since miners are incentivized with the new Bitcoin. Unlike fiat currency, no one politician can do anything to influence the currency and inflation is predictable all the way until the end, where the total amount of Bitcoins will be 21 million somewhere around the year 2140 when the total supply of Bitcoins will cease to increase.
I am not saying Bitcoin will be relevant in 2140; no one knows. The point is that with this technology we don’t need any middlemen to establish trust.
In the future, people will talk about today’s centralized banking system as a slow, costly and extremely inefficient system, and we have already talked about all of the security issues. A database can be hacked and in banking this is a huge problem, just one more reason why we shouldn’t have one database.
In the case of Bitcoin, I don’t believe we in the developed world will start the transformation. We have too much to lose. But most people on the planet don’t. Three billion people in the world don’t even have a bank account and almost five billion lack access to the international SWIFT transaction system. These people have everything to win with the internet of money. They will be able to trade from mobile phones, make micro-transactions, and cross borders at minimum fees without asking for permission. When the time comes for this revolution in global trade, the crash of 2008 will seem like a walk in the park. Bankers, as well as politicians, will probably argue for legislation to protect the Ponzi schemes of the fiat-era. To the rest of the world, they will sound just like Jim Carrey’s character, Lloyd.
It’s all “I owe yous,” there is no money.
Remember: A lifetime of experience is very misleading to guide next generation for events that occur once in a lifetime.