We are seeing things changing rapidly. This means that many long held concepts are going out the window. Unfortunately, when it comes to what people believe, change is like moving an oil tanker from a set position. It is very slow.
There is little doubt the digital world is rapidly expanding. The formation of this realm takes things to an entirely new level. Whereas we were previously dealing with scarcity, the world we are seeing unfold is based upon abundance.
Obviously, this is a process that started to unfold a few decades ago. This sent a lot of long-held beliefs into obsolescence. We will cover a couple in this article.
Introduction of Cryptocurrency
We all know that we are mired in a world of fiat currency. This is money that is controlled by Central Banks. They have the authority to expand or contract the money supply as needed. It appears that many people feel money supplies should never expand.
Nevertheless, we see cryptocurrency changing all of this. Here we have a realm where, suddenly, anyone can create money out of thin air. This is no longer monopolized by the Central Banks of the world. Today, anyone with a laptop or smartphone can do this.
Of course, this all kicked off with Satoshi more than a decade ago. Since that time, thousands of different fungible currencies were created. Naturally, many of them went to zero, mostly due to the fact there was nothing to them from the start.
Many cryptocurrency skeptics claim there is nothing backing them. They believe the intrinsic value is zero and hence will reflect that at some point.
Here is the key point that is missed: Cryptocurrency and fiat both derive their value from the same place.
Read that again: cryptocurrency and fiat both derive their value from the same place.
What makes any of this have value is the economy that is behind a particular currency. It is that simple. The USD is used for trillions of transactions. In addition to being the currency for a $21 trillion economy, it is the reserve for the entire global market. Compare this to what is backing the Venezuelan Bolivar and we can easily see where the separation enters.
At the same time, we can look at what is taking place with Bitcoin, the volume of transactions along with the number of wallet holders. The amount of activity surrounding Bitcoin eclipses all other cryptocurrency. Hence, we can see how it has the greatest value at this point. Nothing is even close to it.
Now, contrast that with some token that has 5 users. The total number of transactions is 10. When we look at it from an economic standpoint, in USD, that equates to $15. What do you think the value of that currency is?
Again, there is no way this even compares to Bitcoin on any level. Notice how we do not have to mention circulating supply, inflation rate, or distribution. While that comes into play, the difference maker is the economic activity tied to each.
Here is where we see the ever-expansion of the digital world taking place.
Printing Cryptocurrency Into Oblivion
If we used the same logic people take with fiat, we would have to say that the industry is printing cryptocurrency into oblivion. There is no way this will have any value since the inflation rate, overall, is enormous. Tokens keep popping up everywhere.
For example, picking an arbitrary date of January 4, 2015, we see there were 501 coins listed on Coinmarketcap. Today, the site lists 6637. Not to be outdone, Coingecko has 9849.
This is just the total numbers of tokens listed. Yet, when we look at the total value on a [logarithmic chart](https://www.coingecko.com/en/global_charts), this is what we see.
For those unaccustomed to looking at logarithmic charts, note that each iteration on the left hand side is 100x the previous one. So we started the chart with a total market cap of around 8 billion and end with the present value of $2.6 trillion.
How could that be? We have an insane inflation rate and that much printing is making it worthless. Yet we see things going up.
And no it isnt because the USD fell off a cliff in comparison.
Expansion Of The World
What few consider is how the world is expanding. The reason why the old beliefs that were fostered in the 1970s (or earlier) do not hold true, is because we are in a different world.
Look at this list:
- Mobile phone plans
- Netflix/Disney+
- Laptops
- Smartphones
- Printers/scanners
- Cloud storage
- MMORPHs
- Satellite Radio
- Applications from ITunes or Play Store
This is a brief list of what is tied to the digital world. What all this has in common is none of this was available for purchase in the 1970s. Basically the total revenue amounted to zero. Now we see industries that total in the trillions.
There is something else that was not available back then: cryptocurrencies.
Now we can get specific because currency is not the only thing printed out of thin air; so are the products. Here we see fungible tokens exchanges for non-fungible.
Source
This follows up another transaction that was Tweeted out a couple days ago.
Source
Just doing a bit of calculation, that is roughly $10 million in 11 transactions for something that was created out of thin air. We obviously can debate the perceived value of these assets yet it is clear people thought they were worth it.
The point is that while these could be scarce items for what they apply to, the reality is there is an infinite (near) number of NFTs that can be created. We are likely limited by storage and bandwidth. This means that we can purchase NFTs until we are blue in the face, and still not run out.
It is nothing new when you think about it. The Federal Reserve could print all the money it dreamed of to pay off its credit that it used to download music from ITunes. It literally could spend trillions of dollars buying music in this manner and, somehow, Apple would still have more to sell to everyone. Again, we are dealing with the limitation of bandwidth, not physical resources.
This is something the detractors of cryptocurrency do not realize. In fact, it is something advocates of it are missing. The simply reality is we are expanding our digital capabilities. That means we are dealing with near infinite world which only increases since bandwidth and computational power are ever increasing.
Therefore, we need a near infinite monetary supply to keep up. Naturally, as we evolve towards the virtual world, this is only going to compound. The age of scarcity is rapidly dwindling. When we factor in the push towards automation (leaving aside the discussion of who owns said automation), we can see how this concept is also entering the physical world.
All of this will be clear as we forge ahead, moving closer to the Metaverse. That realm is going to completely upend most of the long standing concepts that people have.
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Well price is what people are willing to pay for it as it deals with supply and demand. Though the new world of digital assets means that the printing of goods will be far easier and we won't even know how far prices will move. I think the old people are just looking at things in terms of fiat since the dollar has held on for so long and it is the world's reserve currency.
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Money cannot be infinite unless resources are infinite (and I think we are still a long way from that), otherwise the value will go towards 0 measured in its ability to be traded for goods and services. Currency and trade are only needed because resources are scarce. If resources were really infinite, you wouldn't need currency at all, you could just take what you need or want. I don't doubt that cryptocurrency as an entire market will continue to rise for some time to come. However, many of those thousand coins will go to 0 in value. Part of what makes Bitcoin valuable (relative to other goods and services) is its relative scarcity and the fact that an infinite amount is NOT created. If there is an infinite amount of something then it really can have no value relative to anything else.
It's also not quite true that crypto gets its value from the same place as fiat, at least not entirely. Fiat gets its value in part from the government's ability to tax its citizens. The government can (and typically does) force you to pay those taxes in dollars, not Bitcoin. Therefore, even if you completed every other transaction in your life with crypto, chances are you have to buy some dollars (or whatever fiat your country designates) to pay your taxes...legally speaking.
El Salvador broke that mold.
It can be if one resource is infinite. As noted, every single USD In the world could be used to purchase digital downloads of songs, tens of trillions of them, use up every USD and then start with the EURO. We could go through the entire momentary system and never run out of digital downloads as long as the bandwidth was there.
Of course, this is taking to the extreme but it shows how all money could be focused in one area to obliterate the existing supply.
Finally, the growth rate of processing power is far exceeding the printing of the global money supply. This is eradicating more of what we spend money on in the physical form. Consider how much money was spent in the early 1980s on pictures, between the film, development, and mailing. Now, we take 3 trillion pictures a year, at near zero cost per picture.
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El Salvador's money was already worthless and Bitcoin is valuable in large part because the supply is NOT infinite.
I understand what you are saying but not everything can be digitized. Most of the important things cannot be. You want clothes to wear, food to eat, a car to drive, a house to live in, a pet cat (though I suppose you could have a digital one of those if you wanted), etc. then you are not going to just download it. Obviously I am not going to trade my house for a digital song download. Hence whatever digital currency you are using to pay for a song download, you would need a whole lot more of it to pay for a house...works the same as dollars that way. The benefit of a currency vs. the barter system is that you can use it to pay for everything instead of having to trade a pig for a goat so that you can trade the goat for the wood for the fence you need...or whatever. If you can have infinite currency to download infinite songs, that's just a away of saying they have no value in terms of trade for anything else and why are you even bothering with a currency at that point?
Every single dollar could be used to download music but it won't be so I don't understand how that is relevant. One could purchase grains of sand for a dollar each too but nobody is going to do that either. At the end of the day, whether we are talking about fiat or crypto, the more of it that exists, the less that 1 unit of them are worth. You can't invent value simply by printing/making more. Otherwise we could just print millions of dollars for everyone and all be infinitely prosperous. Most crypto is valuable because of the utility of their respective blockchains (and speculation of course). A few are used exclusively as currency or a store of value but too much inflation is counterproductive there. Crypto is still a relatively new invention and the demand is still growing at an astronomical rate. However, that rate of growth won't continue forever. We don't need infinite currency (it can be subdivided anyway). We need useful currency.
Sure digitization has basically made it possible for unlimited media and certain kinds of services. This just means that those things are much, much cheaper (even nearly free). But what about everything else?
Inflation makes sense now, after reading this. The tokenization of everything and the metaverse will only move all that into the digital realm.
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My parents, born in the 50s found a hard time understanding cryptocurrency. They still don't understand a lot but they find the time to read a little now and then because they understand that that's where I and my brothers earn from.
It takes a lot for people born in their time to understand how money can be made from this air but they try to be as open-minded as possible.
Life has changed a lot for them and many others like them. I'm pretty sure they never saw this coming.
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They saw a lot of change in their lives. However, the change they witnessed is nothing compared to the change you will see in your life. Plus, the kids being born today will see things that are unimaginable to us.
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No doubt. And I once thought the world was out of ideas.
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I first heard about Crypto when I was in the Secondary school in 2009 and I have been using it till date, although I don't have much crypto at hand but I know about it. But what amazes me is that my brother who is around 40 years doesn't want to hear about Crypto or invest in it. He believes it's a currency he can't touch. And he likes everything to be physical and I feel sad when he talk about it. I believe at this present age and time, everyone should be involved in Cryptocurrency.
Does he read email? How about getting information online? I guess he doesnt feel that has any value because, after all, it isnt physical.
People seem to believe it the digital has less value than the physical not realizing the URL Google.com has more value than the entire net worth of most of humanity, combined.
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I pleaded with him to join hive and invest but he keeps showing signs of being scared. I know one day, he will understand the system and how it works. Thanks Boss
There is infinite money, yet most of the people in the world lives in poverty. Many of them in deep poverty. This is because of the very unbalanced distribution of the money. This is something to think about.
There certainly is a distribution problem. The same holds true for food. We produce more than enough to feed everyone but there are still hundreds of millions of people in the world starving.
From an economic perspective, the fact that we have an exclusive system does not help the distribution of wealth. Few are able to participate via ownership of anything.
Cryptocurrency is changing that if people will embrace it.
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That is all true. I dont discount any of that. I wrote a number of article how our present system is exclusionary and only benefits a select few.
Yes we did. The difference is we had resources that were chased by said money which did not expand at a rapid pace. For most of human history innovation was not advancing much within a generation's lifespan.
No matter how much they try to sell it, the is not a field of science so the entire premise of a Nobel Prize is absurd.
And yes, 40+ years of trickle down economics shows how wrong the Jack Kemps of the world were.
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Well, we certainly get trickle down taxes. Increase the taxes on businesses and, just like any other cost, the business will seek to counteract it, often out of necessity, by reducing employment and/or raising prices. The problem is that the relationship is not a simple one and there is not a one to one immediate reaction. The idea of government managing an economy at all is what is laughable.
I wonder what kind of things will be around in 30 years that we never even dreamed would exist now.
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Read some Sci-Fi books and that will give some insight. That is where a lot of our future ideas come from (not sure the 30 years timeframe is accurate).
There will be a lot of things most of us never envisioned.
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Very good point. I am looking forward to it!
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Greetings @taskmaster4450, good perspective on your post, it is like that, nothing is static, everything changes. Blessings.
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Definately super interesting reality is becoming. It's a goo time to be alive. Infinite possibilities are upon us!! Bring it! :)
Mind blowing, needed education. Thanks.
!BBH
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. Keep up the fantastic work