And to whom the newly created money belongs. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
#money #economics #cryptocurrency
I am just a cabinet maker / woodworker so the terminology might be lacking and the views imperfect. Thanks for understanding!
Where Money is Created Defines it's Value
If there were no strict rules on who is allowed to create money, and if the rules were not enforced by sovereign power, money would have little lasting value. The sovereignity and trustworthness of the entity setting the rules - usually a state - are reflected in the utility of the currency. Just imagine an insignificant island at war with a bigger country; who would put any trust in its' currency? Or who wants to save money in a currency of a totally corrupt state? People would put a discount on such a currency and try to get rid of it.
How Money is Created Defines it's Charasteristics
The rules on how money is created play an important role. Who gets the newly created money? In developed countries you can bring new money into existence to the degree you are considered trustworthy or have some real-estate. By using your credit score or house as collateral, you can loan money into existence. Thus the new money created is at the disposal of people who have something to collateralize. Money can be thought of as liquidized and extended assets. This has the consequence that money is thought of as risky. You don't want to create new money if unsure. Also a state itself can loan money into existence, which has proven to be a very problematic thing. Politicians don't take personal risk, but put it on the economy.
Money can also be thought of as a share in a whole economy; 1 € is one share in the EURO-system. The charasteristics of this kind of currency is what we think of as money. Fiat-money. By the way, Fiat money is just as virtual as cryptocurrencies, only the cash representing it feels more tangible and real.
Fiat-money Has it's Costs
Creating the rules and enforcing them is not cheap business. In addition the mechanisms are decades old and money moves incredibly slowly. I don't know how much of the money in existence is currently on it's way somewhere, and not at someones immediate disposal. The cost of it is ultimately a cost on money itself and a burden on the economy.
Bitcoin Was a Funny Experiment
New bitcoins were brought into existence by mining. Mathematics enforced the rules, which was vastly more efficient than politics and bureaucracy. The people who worked the hardest got the new money. The value of the work done was in security - creating trust in the currency. So new money wasn't loaned into existence, it was laboured and sweated into existence. Labour and sweat defined it's value. Such wow.
#bitcoin #litecoin #dogecoin #pow
Proof of Stake Made it Cheap, But Struggled to Distribute the Money in a Fair Way
The entities getting the newly created money were the ones who happened to be in the right place at the right time. Creating money was cheap and enforcing rules just as cheap. Math - no bureaucracy. The limited value of such currencies wasn't because of lack of security, but because of poor methods of distribution. Way too unfair to be considered as a basis for any economy.
#nxt #peercoin #pos
Distributed Proof of Stake Made POS Even More Efficient
Transactions became even faster and cheaper, and the system was apparently more flexible in terms of optimizing parameters, but fair distribution wasn't solved.
#bitshares #dpos
Then Comes the Most Recent Attempt to Create a Better Currency, Proof of Subjective Value
Steem has the benefits of all the aforementioned. In addition it has additional mechanisms to add stability. What is probably unprecedented, is that the people getting the newly created money are the ones who create value in the form of intangible things such as information, advice, saved time and entertainment. Money doesn't represent an asset somwhere else or stake in an economy, but real value. Think of it again. This is unprecedented. New money is brought into existence and distributed to everyone creating value - defined by the consensus of everyone involved! This is immense!
#steem
What We Still Need is Proof of Producing something Physical
STEEM is evidence of subjective value - proof of producing something intangible. There is also lots of tangible things being created, which are of immense value. How could newly created money be allocated to those who create tangible things? Maybe shares in a company, which are represented and issued on a blockchain. I can think of two reasons why shares haven't been used as money before:
- For taxation purposes, goverments like to know who owns shares in which company. They are not fungible. You can't just simply give someone your shares.
- It hasn't been practically possible to issue shares electonically, because of the historical double-spend problem. Because of that, shares have not been divisible - which is a fundamental character of a currency.
However it doesn't look like technology is ripe for this. Shares can only be represented on a blockchain, but how are the rules enforced as the company is completely separated from the blockchain. Lets wait and see.
#uia
Ether Is No Currency
By the way, I don't think of Ether as currency. It wasn't designed as such. It is the fuel needed to make use of the ethereum network, and as such resembles more a commodity like oil. #ethereum
Money to me is a mutual understanding of exchange for goods and or services.
When someone creates a piece of wooden furniture it will get value by doing so. As was lumbering the wood etcetera. Now, if you'd have a baker who makes a nice piece of bread, then he' d be able to pay the woodworker with just that. But a problem would arise very fast. The weight of exchange would not be in balance. Even if the baker gave 1000 loafs of bread. They'd gone bad before they could be eaten.
Now they could come to a mutual understanding, to create a piece of paper, or a stick with cuts in it, or pebbles, whatever, that represents value. Maybe even more would agree, and give their fiat for this valuta of exchange. To me this is a good way to do this, until we grow up as humanity and do not need that anymore. (This will take millennia still I guess...)
So in the meanwhile a sort of mutual agreement on a representation of value for matters of exchange is needed.
Where it went pearshaped was when 'money' and the creation of it became profitable. In such a bad way that promesises of value were given out that where not backed by real value anymore. (Never mind 'gold backed', to me that only gets value by the use it has to humanity.) It got from bad to worse when these fraudes were allowed to charge interest. They did so on rubbish that was not backed by any value in the first place.
This money system, known as the banking system, is very bad for any economy, except those who control it. Even governments work together with these 'dark forces' and tax the people to keep it going. And when people are not able to fullfill this money scam than they can actually lose what is of real value to them.
So, you could conclude that I would prefer the one where there is a mutual understanding in a certain exchange value. But without interest, without creation from debt, out off thin air, this creates a forced need of supposed endless growth in an economy that is chained by this fenomena. But nothing grows for ever. And thus economical crashes come with a guarentee in the banking system. Ever growing debt, growing taxes, no free market at all, it is all controlled by who control this fraude system.
Now bitcoin was, as the story goes, a way of Nakamoto Satoshi to have revenge at the banking system. But it has a kind of the same problem of ever lasting growth build in. And creating crypto fiated money out off electricity costs, is a bit strange, but in a way it makes sence. But the weird thing is that it got Banks involved...! And Ether is even more bad, that has been heavily sponsored by big time players of that banking system economy. It just mimics the old 'shit' in a digital jacket. Less need of humans, and the bigger it gets the more centralized it becomes. Using Open Source to chain humanity in patents, contracts, it seems with Ether it got even worse. (Oh the irony in that...)
So the ideal usage for a way to exchange between humans is one that does away with the banking system. For once and for all, as far as I'm concerned. Let it be a democratic money system, that could run on a kind of blockchain, but only one that proves there is in the wallet what is claimed to be there. Not keeping track of every bleeding transaction, that is something a system of rules want, to stay in control, it comes with the banking system.
Peoples one based on a mutual understanding of value. So the baker does not need to go and carry 1000 loafs of bread to you as a woodmaker and pay for a table you made of the finest oak.
Well, that is how I see it, in short, well, a bit longer than short actually. And why does SteemIt fit more into this freedom of thought and imagination? Well because people do give value to Steem by providing a service and a product. It still is intertwined with our current system, but it has a promise in it, to show how value is been made, been given to something, decided by the people who come to a mutual understanding.
This could change something for the good of human kind.
Thanks for your thoughts, they help me understand the nature of money.
By the way, doesn't Ripple/Stellar fit your description of money quite well? I'm not sure of whether it keeps track of transactions or not, but the fact that no-one can control the creation of money. Except the ripple token, everything else is an IOU, which anyone can create. If I trust you, I could exchange my piece of furniture for an IOU from you, which you create from thin air. It would not be backed by anything but my personal trust in you. That, however, doesn't solve the problem of agreeing on any unit/measure of value.
You are welcome. One thing I like about Steem is this exchange of ideas. Like your post made me think and still does. In a good sence though. :-)
As far as I remember both Stellar and Ripple use a transaction recording blockchain. There are though purging ideas to be implemented. This might be a small step in the good direction.
And then there is the mini-blockchain approach of Cryptonight. (Not Cryptonote...) There could be a solution in the sourcecode of that.
The exchange concept that could work would be people money under democratic control. Mutual interest in an agreement what would be the lowest token of value.
It will be challenge though because the banking system has become 'normal' dogma. And still is to many.
Now the awesome thing of Open Source and the free internet is that free minds can come up with fresh ideas.
And prove Einstein right when he stated that you won't solve a challenge by doing the same over and over again. And expect a different result.
No such thing as objective value. Money is just the most marketable commodity. Other than that, good post.
Money here in the US and most other '1st world' countries quit being a commodity when we left the gold standard. You can't call something that you can make as much as you want of a commodity. Artificially scarce, but not a commodity.
Thanks, I guess I meant "tangible" more than objective. I'll fix that :-)
There are a few crypto's that you can mine by ride-sharing, then there is solarcoin, which you mine by producing solar energy. That is also interesting to think about from the perspective that money is brought into existence where value is created. They are similar to Steem in this sense.