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The Future of Electronic Money

The Nation State Arms Race for Cryptofiat

Preamble

Humans change their money every century or so, (see the Bitcoin Standard and the History of Money) and such change does not typically happen with a big bang, it is more of a gradual process with the new system replacing the legacy system over decades.

Electronic Money Taxonomy

Part of the purpose of this paper is to propose some taxonomy/nomenclature for the different types of electronic money that are emerging (adding I hope a bit to the taxonomy work by Chris Burniske and Jack Tatar). It is also important to understand the meaning of these words for this purpose of this paper.

Transfer Paths

The term ‘Person to Person’ (P2P) means transfer of value directly between two parties without going through a third party.

Monetary Policy

The term ‘Open Code Monetary Policy’ means a monetary policy which is embedded in open source computer code.

Permissionless System

The term ‘Permissionless’ means anyone can join or use the system without permission of going through a identification process,

Level of Privacy

The term ‘Private’ means transaction and balance are completely invisible to anyone other than those parties involved with the transactions.

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Privacy v Control

Confirming the identity of a person without compromising the privacy of that individual is one of the greatest and most important unsolved issues in the digital age.

The Nation State Arms Race for a National Blockchain and Cryptofiat

The second half of 2019 has seen the start of the race to be the first major economy to issue it’s sovereign currency in digital form and to harness the potential of blockchain technology. I refer to this as the blockchain wars.

De-Dollarisation of Global Trade

Domestic control over the money of citizens is one driver for development of Cryptofiat. Another is the opportunity to displace the USD as the World’s base currency. The theory being that by making a State’s money (for example the China CNY) more accessible and easy to transfer, it could displace the USD as the default global currency. There is a great opportunity for this to happen in the third world economies (where USD notes can be used as the default local currency) and countries engaged with the Belt and Road initiative (where China may insist trades settle in CNY Cryptofiat).

  1. each of the G20+ nations do not like Bitcoin or other Cryptocurrencies; but
  2. each of the G20+ nations would prefer Bitcoin or other Cryptocurrencies to be the default global currency over that of another States’ Cryptofiat.

Battle for the Hearts and Minds of Crypto savvy Citizens

The Millennial generation are growing up digitally native, they have a peek into the blockchain age, but Generation X will grow up crypto native and this will be due on part to government and enterprise adoption of blockchain tech over the next decade.

The Year 2070

The year 2070 is too far off…I am hedging. The development of the internet, the adoption of mobile phones and the growth of the FANG companies, all of which has happened in around two decades is an example of how fast things can change. And change is coming faster and faster. A more realistic timeline is 2040 or earlier. By then I predict the following :

  1. the G20+ countries will continue to control their monetary policy as they have done since this concept was introduced (but with much greater transparency and speed);
  2. global trade will largely be de-dollarised and the extent it is not it will be a USD Cryptofiat. The most popular currency for global trade will be one or more Cryptocurrencies (imo BTC, ETH and Hbars);
  3. any individual with a mobile phone will have access, via their phone’s crypto wallet, to all Cryptofiat, Cryptocurrencies, Cryptocash and any form of Cryptoasset; and
  4. moving from Cryptofiat to Cryptocurrency to Cryptoassets will be as seamless, immediate and cost effective.

Written by

Founder of the first cryptoasset investment firm in Australia, Blockchain Assets Pty Ltd. www.bca.fund. See more at http://ianlove.me

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