Why do Cryptocurrency and Blockchain Matter?
By: Eric Martin
Tags: Cryptocurrency, Blockchain, Bitcoin, Money, Future

This article has been updated but was published previously.

First, what is a cryptocurrency? According to Wikipedia, a cryptocurrency is an asset that “uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.” Right now there are 5,737 cryptocurrencies listed on CoinMarketCap.

A blockchain, which is just a bunch of connected chunks of information connected in order like a chain, is what makes many of those 5,737 cryptocurrencies tick. Blockchain matters largely because it enables cryptocurrency.

I’ve seen lists of a lot of different things that have evolved out of Bitcoin that will “change the world”. Things like smart contracts, blockchain, security, privacy, getting rid of the middle man, and so on. These things might change the world a little…

The only crypto-related thing, in my opinion, that will change the world a lot is the potential for one or more of those 5,737 digital assets to displace the dollar and other national currencies. If and when that happens, central banks will lose their power, the people who run many of the world’s private banks will lose much of their profit-making power, inflation as we know it today will all but disappear, and governments’ ability to spend by printing money (or by adding zeros to banks accounts, as they do now), will all but disappear.

It’s so simple, yet so huge. The power over the money supply will no longer be in the hands of the rich and powerful, but rather in the hands of an algorithm.

Do you remember that list of technologies that some people might think can change the world? Here it is: smart contracts, blockchain, security, privacy, getting rid of the middle man, and perhaps more. Look at them. Most of these things can be achieved by multiple blockchains. The value of what they provide will probably be commoditized once there are many providers, and these technologies may disrupt a few major players, but that’s all. The cryptocurrency or cryptocurrencies that disrupt the money supply will change every penny of value from every unbacked currency that right now exists in the world. That affects trillions and trillions of dollars worth of currency: some estimates put it over $1.2 quadrillion. I think cryptocurrency will also get commoditized, but not without turning upside down many trillions of dollars worth of value.

Wars have been waged, in part with the power to print money. Without the power to print money, wars should lessen.

Wages have slumped in the United States since right around 1971: this is the year we fully went off of the gold standard. By going off the gold standard, the U.S. federal government has been inflating the money supply and spending as they please without having to raise taxes nearly as much as they would have needed to if we were still on the gold standard.

Because of the growth of the money supply, the government can spend more without us noticing, or at least making it harder for us to notice. It’s harder to understand why we seem to keep having to work harder to make ends meet when the government is quietly printing dollars. For instance, how many men and women now work, when before there only needed to be one earner per household? Many of us now have twice the workers per house with perhaps barely more pay, when pay should actually be about twice as high when there are double the workers. Compare this to how things were about 50 years ago, when many households could make ends meet with just one worker who worked outside the home.

A cryptocurrency can get rid of the “money power” throughout the world. The money power includes some of the super-rich: the people who own banks. But it also includes national governments, virtually all of which have a central bank that prints money with nothing to back the money.

The money power has been artificially strong as long as it’s been printing unbacked money. So strong that it helps to cause asset bubbles that burst, wars, and unsustainable government spending.

It’s not so much that countries have horrible leaders and that’s why their governments have to default under so much debt, it’s that they unnaturally were able to acquire that debt in the first place, through one or more central banks. When people are given a power they tend to use it, unfortunately. Cryptocurrency solves the problem of central banks, and it also plunks down one huge piece of the puzzle for solving government involvement in wars and governments’ over-taxation.

Can cryptocurrency be stopped?

So far, it cannot.