Money without Boundary

Concept of countries, states of boundary is fairly new if you consider how old the human history is. With passage of time, states on the same of sovereignty, control and stability have been taking away rights of people to extent that people started protesting to take it back. While I am a law-abiding citizen & strongly encourage following the consitution, same constitution provides me the right to differ from the polices. While governments are turning out to be one big giant elephant that is unable to get anything efficiently, I am getting more and more biased towards the concept of super lean governments and open economy.

As much as I support democratic processes, they are not super-efficient & with change of governments every few years, massive shift in policy hurt the long-term stability of economy. Inflation, currency devaluation, debt/GDP ratio and other economic terms are aliens for a common person, but they do impact an average person.

I wrote about trust in previous blog on how important and critical is trust in every transaction. Trust is a super expensive commodity which is underrated in terms of dollars. Would you prefer to pay 10X more price for a car to a dealer that you trust vs the one that you don’t. While in terms of car, the cost of saving 9X money may justify the extra work required in doing the due diligence to protect yourself from being a victim of a fraud, it’s not practically possible to do it all day long for regular transactions.

This is why we gave the power of money to governments and are super happy with it until recently banking crisis, currency devaluation and inflation have started to make more press. My exposure to multiple currencies is due to my multiple residencies, it’s frustrating to see how non-serious currency inflation is taken. Unfortunately, we don’t have much options when it comes to deal with the masses, and I don’t see that changing soon. There isn’t any competition or threat to state-backed assets & utilities regardless if it’s fiat, electricity, roads or other utilities. Biggest reason is the scale at they operate, resources they’ve & little real accountability. I trust the government because they are voted in by people like me and there is a fair chance while I like the agenda, he doesn’t have the ability to execute what he claims.

While states enjoy a clear monopoly over whatever they operate in, there should be a competition like any other industry. It looks fairly awkward that how can you compete with government but there are numerous examples. Airline is the biggest one where we’ve state owned airlines as well. In Canada, I’ve used private roads controlled by private organizations & in Europe there are private railway tracks. Healthy competition leads to better product for the end customer because he has options.

Fiat is enjoying it’s dominance through a monopoly with no competition at all. Yes we do have Canadian Tire Money which is similar to any other loyalty points that you get while shopping, but the usage is limited. Companies have pooled in their points to create a wider market but in all honesty they’re still very limited. I can’t spend my airmiles to buy grocery or my gas station points to fly.

Though how difficult it looks, there is a slight possibility that this dominance may soon be challenged. Bitcoin is also referred to as MoIP. Money Over Internet Protocol. Similar to other IPs, it has the ability to transfer value over internet very efficiently. I’ve purchased items using bitcoins in-person & offline and if you think about it, a value that wasn’t created by any centralised body, let alone state was accepted. This is a massive shift in mind-set. I suspect the end user did convert it immediately into fiat because that what vendor manages his accounting but still going that far is an achievement in itself. Bitcoin had it’s tough times, but has been surviving over a decade. Fluctuations apart, you can cash in & out across the globe. We’ve put our trust in code more than human. After-all the digital transformation is happening across the globe.

While we’re super early in the shift, this can be start of a movement where we leave the currency management to a code that isn’t vulnerable to politics, economy or a small group of people that can manipulate it for their own purpose. While it looks practically impossible, but why can’t we have a global currency that is acceptable by every states. On micro level, we do have euro which is shared across multiple countries. On another scale, dollars, pounds are acceptable by many vendors across the globe. I personally never heard any one saying no to the option of accepting dollars for a purchase.

Keep aside bitcoin but imagine if there is a global currency that is governed by the code, transparent with all the information available on blockchain. We have adopted to global standards such as HTTP, SMTP, TCP/IP so why can’t we have MoIP. I’ve not found a single use case where changing something into digital didn’t improve the efficiency.

If we take a step back, we’ve gold which is defacto storage of value that’s acceptable globally and keeps a hedge any inflation. Gold was set as a standard because of it’s unique proposition and the biggest of it was scarcity since it’s limited and can be transported. Market value of gold is far from it’s intrinsic value because of the believe system. Gold has existed for centuries and centuries though currencies have came and gone. If you look at the chart below, you’ll see how currencies have been replaced.

If we shelter the identities of gold vs bitcoin and make a comparison, bitcoin is far superior to gold to be used as storage of value. Gold is a good indicator of economic strength but has is limited in terms of accessibility and storage . You can’t buy $5 worth of gold and store it safely even though that’s the income of majority of the world population. Isn’t it unfair to have an asset as storage of value which majority of the world can’t own or store. If we expand it to bitcoin, now entire world can own it and storage it without using a 3rd party. What kind of an economic impact would it have if we include everyone in a growing economical class rather than just limiting it to the top few percent. I am blessed so have diversified across multiple asset class with real estate being the safest and cryptocurrencies the riskiest, but that’s an unfair advantage that doesn’t uplift the economy of a poor person who can’t afford to invest. Why not create an asset class that’s global and accessible to everyone?

Whenever there is a friction in either acquisition, storage or transfer, usage is limited of any item. We often underestimate how big of a market it can be and that resources are scarce, or we always need a disparity in the world for the economic system to perform well. Though I am no way a socialist however I strongly believe that people should be given fair chance to compete.

Similar asset would give this chance to everyone across the globe to participate in an economic event that is easy to acquire, store and transfer. Now we’re hedging our future downside because the entire world is now operating at same frequency when it comes to economy. Asset dropped in Africa would drop the value in China or Germany. I read somewhere when it comes to money everyone has the same religion which translate that we often forget our differences when economic incentives are aligned.

Biggest reason to fight is to acquire resources which can be power, money, oil, land or ego. If we have the same asset or economic bond, there is a chance we eliminate the wars because now hurting other economy means we’re going to get hurt too. If we look at the world debt, that’s way above entire assets in the world and it’s not stopping here. We’re racking up more debt than we can afford, and it has created a very serious misbalance in budget for the countries.

Technology have provided us a growth unprecedented to anything in the past. When email was launched we thought it’ll be replace snail mail, similarly no one expected that cellphone will add a difference user class that didn’t exist before. If not more, growth has been 100X or more in both these email and cellphone example. Similar to this, if we have a similar global asset glass,I’ll induct people who couldn’t be any such economic events due to limited resources in term of time, money and intellect.

While Bitcoin is still an experiment with very little penetration across the world, it has sparkled the conversations around government free money which isn’t backed by any centralised body let alone government & is globally accepted. As much as this looks like a utopia dream, I think we’re not far from it. It’s coming and the clock is ticking, it’s just a matter of when.

Companies are now more powerful than the governments in terms of economy. If you compare balance sheet of Apple, it’s far superior than probably any country in the world.So the question arises, would you trust a government or a company. In a bigger scenario, would we be able to accept a decentralized economic system which isn’t tied to success or loss of any individual entity