Evolving Currencies

Isolated cases prove that living without money in today’s society is possible, however it is not practical. Money governs our life, we essentially buy the right to live through payments towards our living quarters, health and safety institutions and taxes toward the government that vows to keep us safe. Are there alternatives to money? Since the concept of liquidity was developed we as a society rely on cash in order to pay for certain items, being liquid is a sign of ghetto affluence. True affluence comes from: reputation, fixed assets, sphere of influence.

If we take as an example one of the largest MNCs in existence today: McDonalds. Their CEO once said: If all of our outlets were to burn down, we would have no trouble to obtain a loan from the bank to rebuild them all (not a direct quote). Mainly due to the strength of their brand, it shows its true affluence (tremendous buying power) through brand recognition en total assets. The strength of a McDonalds lies in its integrity as a selling entity, growing your own burgers, making your own buns, owning your own sauce-making factory. It has become a fully self functioning organism that sustains itself biologically. With an ever growing demand for its product (rampant obesity) its power as an ever-growing biological entity only increases.

Having established what true power in the business world today means let’s look at the buying power banks have. Banks have as a main asset: money. However if money is not true affluence then how come banks have become so large? In the previous section we have consolidated the fact that banks do not simply curate money, they displace capital and charge people for this displacement, which in turn generates revenue for the banks. More on this subject in the next section; Banks curate money, in the world today we have so many different currencies and the value of these currencies alter every day. Changing currencies can earn you money:

09.05.2014 I have 100€

Exchange rate: EUR1 = USD1.38273

I exchange :100EUR to USD on 09.05.2014 = 138.273USD

1 month later the USD has become stronger and thusly the exchange rate on 09.06.2014 is:

New Exchange rate: EUR1 = USD1.2651

I exchange USD138.273 to EUR on 09.06.2014 = EUR109.2980

This means I have made a profit of EUR9.2980.

If we do this with EUR100 it is rather a small amount of profit but relocating capital in this manner can result in serious profits, and it is often an activity the common civilian can undertake. When we look at currencies such as the USD and the EUR (United States Dollar & Euro) we are looking at relatively stable currencies. The USD is a worldwide standard for currencies that is other currencies are valuated against the dollar. Other currencies do not have much buying power, for instance the Japanese YEN, and the Chinese Renminbi are tremendous economies but their currencies are not worth very much and are quite volatile.

Is volatility negative?

A new age, and technology developments bring along many new features in today’s internet influenced world. A well as new currencies: Bitcoin being the most famous. One of the first in its class named the cryptocurrency. This is a new type of currency that gained popularity on the internet truly quickly. It is not controlled by a central bank and is therefore a decentralized currency. Bitcoins are mined; this means they essentially the same as gold. Develop or “find” them and they are yours. Bitcoins are pieces of unique code generated using large processing power of PCs (personal computers). Block chain, a ledger that registers all Bitcoin transaction is an online document stored on servers running Bitcoin software therefore Bitcoins can be spent once in a transaction and a central agency is bypassed because the online ledger automatically registers the payment. A coinbase transaction is the first transaction that validates the Bitcoin that has been mined and consists of a block of 25. This first transaction consists of transaction fees and is validated by the so-called coinbase transaction. All Bitcoins in circulation can be traced back to this initial coinbase transaction recorded in the block chain ledger. This ledger is accessible to all and everybody and is call the Block Chain Ledger, the fact that Bitcoins are extreme public is its strength and its weakness. The volatility of the currency is the reason for its popularity. Bitcoins from the start have been worth around 1000USD, however the fluctuations in its value range from 0.30-1135USD. Meaning that within 1 day of trading your capital can be doubled, tripled, quadrupled, etc or decimated.

The creation of Bitcoins is very casual, at a rate of 25 every 10 minutes Bitcoins will be created for the coming 100 years, but is capped at 21 Million. The cap is decided by the combination of different codes that can be created in the mining process. Also the amount of coins that create the block of Bitcoins halves every time a certain number of coins has been mined.