I have been following the excellent Go Full Crypto podcast, which is the creation of Halifax-based Atlantic Blockchain Company. This is part of my ongoing learning journey regarding Blockchain, Cryptocurrency, and BitCoin – related but different things.
At the 20-minute mark of the podcast’s 5th episode, the hosts ask for opinions from the audience about what we think a World Reserve Currency might be, and how might it impact us?
I have been bombarding ABC with questions and opinions about all of this stuff lately, and so rather than sending another enormous screed to their inbox, I decided to make my answer a blog post instead, so that I could pester everybody with my opinions all at once.
Disclaimer & Preemptive Backpedaling: I don’t know what I don’t know about Blockchain, Crypto, Bitcoin, Economics, Human behaviour, and all those things. Everything I write is pretty much just semi-informed opinion. What follows is just a lot of that. Your opinions are your own to form and share, just like mine…
I don’t have an opinion on the modifier “Reserve”, but when I think of a successful world currency, I would expect the following of it:
1. Accessibility & Equity
It should be accessible to the largest number of people possible, in all countries, at all ages and financial demographics; the lowest barrier to entry possible.
These barriers today are still very significant: Understanding what crypto is (or even that it exists) is a non-trivial accomplishment. Accessing and then using it for something, even more so.
My mother is 75 and does not have an easy time understanding the difference between the Internet, Google, and a Web Browser (no offence intended to her or anybody who struggles with the pace of technology in the 21st century). She would be very resistant to even learn about crypto; she has other fish to fry. This is likely true for a very large % of our aging and less-technical population.
Somebody who does not have access to the Internet cannot use crypto directly. Somebody who does not have a credit card is going to have a harder time onboarding into the crypto world. If you have no government-issued photo ID, good luck getting on an exchange. If you have no methods of electronic payment at your disposal, you need a local crypto ATM or cash-to-crypto exchange service.
I would be hesitant to send friends in some cities to meet the local crypto exchange service – sometimes this is just a person who is willing to risk government reprisals for dealing in crypto. The environments people might need to go in order to exchange crypto for local currency might be partially underground, and therefore not entirely safe to visit. This is semi-informed opinion only – I am quite sure there are far more safe places to exchange crypto than not. Still, this is a concern, and I don’t really know what I don’t know, when it comes to crypto access in other places in the world, in 2020.
Even somebody with Internet access, a bank account, Google skills, and access to expertise, still has their work cut out for them. There is a need for universal accessibility layers on top of the crypto landscape, to allow for wider understanding and adoption by a larger portion of our population. This is an incredible communications and technical challenge.
2. Stability & Predictability
I want my crypto to be at least as stable as the fiat currency model I’ve grown up accustomed to. I might be willing to sacrifice some stability in relation to my own personal CAD dollar experience, if it meant the stability of financial access for people worldwide would generally improve on the average… though I suspect a good many people would not accept anything less than a more stable alternative to their existing one.
If my crypto unit’s value fluctuated in its ability (for example) to buy bread – say, between being worth 10 and 14 bread loaves on any given day, then I could manage my timing of the purchase of bread, to maximize the value of my wealth. If, however, the crypto’s value dropped to 2 loaves on Monday, and rose to 11 the following Monday, the uncertainty would directly impact my family’s quality of life. This is a non-starter for wide adoption.
How do you design, architect, engineer, and operate a system that recognizes everybody’s Human right to provide a stable and safe environment for themselves and their family? What do you index the value of that unit to, and how?
I believe the power for one to gain wealth from currency speculation might be inversely proportional to one’s ability to count on that currency for day-to-day living, as well as planning for the future. A world currency would need to provide its users with this consistency, instead of a capacity to get rich (or poor) on some unpredictable cycle.
3. Security & Privacy
The mechanisms underlying of a world currency would naturally need to guarantee that both my wealth and my identity were not compromised by my participating in that model. I need to go to bed knowing that my wealth and identity will still be there in the morning.
4. Accountability & Traceability
Blockchain technology provides accountability and traceability, but services and practices also exist that offer to counteract this. Accountability is an enormous concern. Properly managed, it would allow this global system to reject its use as a vehicle for fraud and other criminal activities.
This summons the spectre of centralized oversight once again. It is hard to achieve the notion of a 100% “trustless system“, while also buying into government’s right to still monitor that system for suspicious activity. There is a natural conflict between the desire to have 100% anonymity and expecting law enforcement to continue to keep society safe from cyber crime, systemic fraud, and terrorism.
Accountability is also critical in order to comply with tax and international trade law. To the extent that a technology makes it easier to evade these things, there will be significant resistance to wide adoption.
5. General buy-in
The biggest challenge, which is based on all of the above others (and probably some I’ve not considered), is the mainstreaming and legitimizing of the idea and practice of using cryptocurrency itself.
This is no small task. You are asking for an aging and non-technical population to buy into a wholly new model, without the means (in all cases) to even understand the value proposition.
Understanding the value proposition of crypto (i.e. a monetary system implemented on a publicaly visible, decentralized platform, for the general good) means understanding something of how economics currently works (and breaks, and can be broken). It also means understanding something about security, and if you go deep enough, understanding some pretty hard-core math and computer whiz-bang-ery.
At a certain point, people without the time, background, or inclination to fully understand the cryptocurrency proposition will simply have to decide to trust the pack. When will this critical mass shift happen, and over what time frame?
What might this mean to me, today?
I can only speculate! And that brings me back to buying Bitcoin (in small amounts), in the hopes the experiment will prove some kind of success to my own, personal pocketbook.