At NewsMax: “Bitcoin and the Re-democratization of Money”
Bitcoin puts the power to create money back into the people’s hands.The earliest forms of money were created by individuals. We know that early civilizations were agrarian and used the commodities they grew as mediums of economic exchange. Because transactions were between individuals, it was up to the individuals to determine what was fair as they bartered. For example, a bushel of wheat might be worth a length of linen or a portion of beer.
Eventually coins became a more popular medium of exchange. The earliest coins we know of were made out of electrum.
This naturally occurring combination of mostly gold, some silver, and a little bit of trace metals was hand hammered into molds by individuals. The coins had very specific weights for each denomination but the problem was the variations of the gold and silver content.
As the volume and value of transactions increased, verification of the value of each coin became a problem.
That problem was solved when the Lydians pioneered a method of refining electrum into pure gold. With the purity and the weight known, the exact value of the coin could be determined. But the vast majority of people could not afford to own their own refineries.
And individuals do not have the manufacturing capacity to produce the volume of coins needed for a growing and larger economy.
Government stepped into the gap. As long as you trusted in a government’s integrity, then its coins could be trusted even among two individuals who did not know each other.
The government then became the middleman in between the two parties of an economic transaction. Middlemen take a cut. The government now had a mechanism to tax economic transactions and a practical medium of exchange to tax personal income.
Lack of technological innovation has helped protect government’s monopoly on the creation of money for 2,700 years. Until now.
Bitcoin and other cryptocurrencies are the technological leap that puts the creation of money and the determination of its value back in to the hands of individuals and the private sector.
For example, Bitcoins are “mined” by the private sector not minted by a government. The free market determines the value of a bitcoin through competition not by government fiat. And verification and trust comes from Bitcoin’s public and unchangeable ledger of all transactions, not in confidence in a government’s ability to pay its debts.
Economic transactions by definition are decentralized transactions which originally used decentralized money. Money only became centralized because of the need for verification and trust. New technologies can provide verification and trust, opening up the possibility that money can be decentralized again.
Originally Posted on NewsMax.com
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