By Morf Morford
Tacoma Daily Index
I’m not crazy about the reality, but it’s still the only place to eat properly. –Groucho Marx
We have seen the dramatic, if not explosive, rise in value of cyber-currencies – and the equally dramatic collapse of them – and similar non-tangible (or non-fungible, to use a popular term) investment vehicles. .
In fact, the term “investment vehicle” used to be quite abstract, but now NFTs and their many corollaries are found in a variety of possible investment landscapes.
But many of us forget that the whole concept of money is inherently abstract – and that’s a good thing.
Or at least a necessary thing.
Before the institution of money, humans had a very basic barter system – I traded you what I have, for something you have and I want.
This system worked to some extent, but most items weren’t very portable or divisible. Or sustainable.
You couldn’t put a sheep or a basket of eggs in a safe place or take it very far, or store it for a few months, so something had to be developed – and agreed upon – that represented the value of those tangibles, usable elements.
Something at least a step away from an actual item was essential.
So here is a (very) abbreviated history of the genesis of money.
Simply put, there are three money tiers or stages.
First came intrinsic value coins (i.e. gold and silver coins).
Once upon a time there was a dollar coin, for example, that was literally made from a silver dollar.
A twenty dollar gold coin was actually made up of twenty gold dollars.
This is followed by paper invoices backed by precious metals (i.e. gold) held by the governing body.
In the United States, Fort Knox traditionally held gold reserves to “back up” all currencies in circulation.
And finally, fiat currencies – paper bills not backed by a tangible good (like gold or silver) but by a (good faith) promise from a government.
As is all too painfully obvious, economies, as they grow larger and more complicated, move away from the tangible and into the realm of the intangible.
At the same time, we went from a system that required no trust to one that relied entirely on it.
Money has changed from a thing OF value to a thing that REPRESENTS value.
Credit cards and checks were another step in this cycle of abstraction – but at least with them there was real money somewhere, in a bank account or available at some point in the future.
Credit cards and checks, in their own way, made Fort Know’s gold reserves irrelevant.
While many of us have extensive credit limits or long-term loans (as in mortgages), what does “full trust and credit” really mean behind our motto?
And then came the cyber currencies
Cyber-currencies are inherently abstract, with NO essential connection or link to anything of tangible, intrinsic value. There is value of course, but it is based on almost pure trust – no government or lasting asset in sight, or even implied.
Cybercurrencies can be based on a project in development, a creative enterprise on any scale, from a simple individual to a fledgling technology company, and it can belong to any category, from games to music or art.
Cyber-currencies are abstract, but in a sense they are a variation of the original form of commerce – barter. But instead of a cow or a freshly picked product, the money is used as leverage in an idea or a project not yet developed.
What is money?
An example of how money is abstracted would be the interest a kitten would have in a pile of money or coins.
In the feline economy, if you can’t eat it or sleep on it, what’s the value of money?
In this sense, cyber currencies are little, if any, different from cash – or even gold or silver.
A medium of exchange, almost by necessity, must be something useless in itself, something that is not eaten or used as a tool.
Its value lies in what it represents and not in what it is.
Cash and cyber-currencies are based, and retain or lose their value, on the basis of trust and an agreed value. Some are simply more officially recognized or widely accepted than others.
Money, perhaps like many things in life, only has the value we attribute to it.
To learn more about cybercurrencies, see the MIT Media Lab Cryptocurrency Online Short Course Here.
There are websites you can find to show you what to do if you want to create your own cybercurrency and invite others to invest in the potential of your personal values/vision. And if you want to track the real-time value of the top 200 cryptocurrencies, you can do so here – https://coinmarketcap.com/all/views/all/.