- February 15, 2022
- Posted by: MasterAdmin
- Category: Cryptocurrency
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We have the definition of money all wrong. And it’s the reason so many conversations around Cardano and Bitcoin end with “I still don’t see how any of it has value.”
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Every Wednesday, I jump on a call with COR’s Cardano stake pool operators to discuss server updates, block production on the Cardano blockchain, and how to best explain money and the value of what we do. Most of us intuitively understand that money is flawed but don’t comprehend why.
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So we produced a video explaining this problem and why staking Cardano is the best solution. But in this article, I want to further clarify Cardano’s success in the context of the history of money. \n
Why Cardano Staking Has Real Value
https://www.youtube.com/watch?v=Z7H22pMUWWU
Where The Definition of Money Went Wrong
I am not alone in my view that confusion around crypto is rooted in a poor understanding of money. The Bitcoin maximalist Robert Breedlove has a podcast called, The “What is Money?” Show. He defines money as a medium of exchange and artfully explains how Bitcoin perfectly satisfies the Austrian properties of money.
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But his definition of money is built on the wrong assumption. We didn’t invent money to replace bartering as a medium of exchange.
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Even though it is true that we all use money as a medium of exchange, we have forgotten the other vital half of the definition. And as a result, the symbolic, religious, and spiritual power of money is out of reach for regular people.
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Whether it’s a relationship to your tribe or your king, history clearly shows that the value of money is rooted in relationships. But before unveiling this power through the proper definition, I need to provide the full story.
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What Humans Used Before Money
The evidence of barter economies isn’t there. And anthropologists have long agreed that the bartering narrative promoted by economists like Carl Menger and Adam Smith is entirely false. The truth is a bit more complicated. \n
Instead of barter, people relied on various forms of gift economies. Let me explain with a present-day example.
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Splitting the Bill (Illustration) \n
https://www.youtube.com/watch?v=LsMdnCO7AOA
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You may be familiar with that awkward moment at the end of a night of bar hopping and sloppy McDoubles, when someone asks, how are we going to split the bill?
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I have two friend groups with very different approaches. The first just take turns covering the bill at each location. Everyone may not have spent the exact same at the end of the night, but there is faith that it will even out over time. This approach is a classic example of a gift economy. It only works if there is faith in the relationship. Everyone needs to be okay with sacrificing a little in faith that the others will do the same in the future. \n
The second group is old friends from high school. We live at opposite ends of the country, so there is less faith that the first approach will even out over time. So instead, we take particular account of what we owe each night we go out. And before we part ways, we make sure to settle all debts over Venmo or Cash App. \n
When we look through the history of human civilization, we see a very similar pattern. In the early stages of human progress, people relied on systems of gift-giving identical to my first group of friends. These were small tribes and villages connected through solid social bonds.
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The Earliest Prototypes of Money
The earliest prototypes or precursors to money were seashells. But they weren’t used in the way we would imagine.
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The thing with humans is that we love to mark social bonds with physical, religious, and ceremonial symbols. Wedding rings are a great example. These seashells were primarily a symbol of relationship with added benefits resembling something like money. \n
Ten thousand years ago, tribespeople in the highlands of New Guinea would give these seashells to their neighbors to symbolize their obligation to help each other. As this practice evolved, seashells became a sort of credit score, where households with lots of shells gained influence and power in the tribe. This notoriety increased demand to a point where tribes with similar values and traditions would exchange these shells for protection and supplies. However, this exchange system never became universal because it relied on the trust of small localized tribes.
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How Money Evolved From Seashells to Gold Coins
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So just like my high school friends, economies of gift-giving face the same problem when they scale into the size of city-states. It gets harder to trust people that live far away or are strangers.
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This stepping stone is critical to understanding the evolution of money. In an over-commercialized society, we forget that humans are inherently collaborative and wired to work together for our survival. But we are wired to only collaborate with people we trust and know.
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The ancient Sumerians of Uruk were one of the first known cities to institute a solution. They gave their religious leaders the authority to keep and maintain a record of debts between strangers. It worked because it took a relationship that everyone trusted to bridge trust between strangers.
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Over time, competition over limited resources changed that religious relationship from authority into a military one. And instead of shared values of human flourishing and collaboration, military leaders reinforced trust with power and the threat of violence. This, of course, took many shapes and forms, with steps toward progress and steps back.
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But one thing that emerged was a new relationship pattern between governments and the governed. Kings who used military strength to rule would choose a commodity to pay the military and send out as a gift to their subjects. The king would then ask for a portion of it back for peace and safety.
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This commodity was ultimately a symbol of the king’s sovereignty. But since it was the required payment for taxes, it was also a standard, more efficient measurement of debt. After many iterations, kings landed on gold coins as the best way to embody their sovereignty and measure value. And as kingdoms coalesced around gold as the divine symbol of sovereignty, it evolved to be a reliable medium of exchange between tribes, empires, and nation-states.
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The Definition of Money
There is no denying that people use money as a medium of exchange. But its evolutionary roots in ceremonialized social bonds reveal the source of its value and power. \n
A better definition of money then is the embodiment of a social bond used for the explicit purpose of settling debts.
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At the core of every social bond is a promise to help both parties flourish. And the fiat paper currencies across the globe are no different. At one point in time, we called them promissory notes. In the US, our currency once embodied the government’s promise to always back its value in gold. But it broke that promise. And part of the reason why we don’t understand the value of money today is that we forget that all fiat currency represents a broken promise. \n
The Corruption of Money
All currency and the social bonds they represent need trust to have value. So things go wrong when the confidence of a city, state, or nation hinges on a single king or Federal Reserve Committee. Kings can break trust by becoming neglectful greedy tyrants. And Federal Reserve committees use monetary policy to choose winners and losers in the American economy. Our video explains just how these elites manipulate the true power of money to their favor.
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History shows that when leaders break this trust, things get messy. Governments and their currencies crumble, humans build a new center of power with a new currency, and the cycle continues. But it doesn’t repeat exactly. The general trend is a move toward government innovations that further decentralize power centers. \n
Cryptocurrencies represent a paradigm shift in this evolution. We understand that we can’t trust strangers, and we can’t trust our leaders, but we can trust in our evolutionary programming to work together under the right conditions.
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From Cardano’s inception, its open-source community of developers has worked to embed those conditions into money itself. And it’s working. \n
The peer reviewed code attracts developers who are committed to its values of decentralization, scalability and governance. These developers then build the ecosystem and secure trust between stake pool operators, stake pool delegators, and endless list of dApps and their users. And since anyone can build on it, the cycle continues.
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The Cardano community’s commitment to what can really be summed up as, humanitarian values, positions it to be the currency of the people. And when you put it in the context of history, it seems as inevitable as the innovation of the internet. As its founder most famously said, the future is decentralized.
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Why Cardano Ada is the Currency of the People
Given this revised story of money, it is clear that at the core of every tribe, community, and country, there is this rudimentary understanding that we need to work together to flourish. \n
This bonding principle is called unity. It is also called love. Because to truly be unified, we need to sacrifice something. We need to stake our time, energy, passion, and attention in the betterment of our community. \n
When you take a look under Cardano’s technical hood, you see the very same pattern of love. The math is called the Ouroboros Proof of Stake Consensus Mechanism, but the design is simple. Stake pools mint every Ada token by proving that they staked their time, energy, passion, and attention to the project. \n
But instead of proving this using costly computing power, they do it by showing proof of financial stake in the ownership of Cardano Ada. Cardano’s proof of stake not only solves the problem of energy consumption and increasingly centralized cryptocurrency mining industries, but also provides a fundamental layer of demand for the Ada currency.
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When you compare the consensus mechanism to Ethereum and Bitcoin, the increased efficiency and reduced operations cost are staggering. One Ethereum transaction takes the same amount of electricity it takes to power an average American home for 1.5 weeks. For Bitcoin, it is equal to 6 weeks. But for Cardano, it is less than an hour of electricity. \n
But decentralization is essential here. Because if efficiency is accomplished by using a small centralized group of individuals, it becomes easier for them to manipulate the conditions of trust in their favor. There is plenty of other venture capital-backed proof of stake blockchains doing just that.
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Making decentralized staking a fundamental requirement of Cardano’s existence further secures the value of equal opportunity for all into the Ada token. It only makes sense then that this technology has developed a strong global community. And for the first time in history, we have witnessed a sense of shared identity take shape around a currency instead of the other way around. \n
The beauty of Cardano is that we can see the fruits of this core principle in every decision made by this tribe. In 2021, it became the most decentralized blockchain and was the most developed project on Github. \n
Every time developers face a choice to sacrifice decentralization for a competitive edge; they say “no.” And it’s because they understand that its core value proposition isn’t “number go up” for investors, it’s “freedom go up” for its tribe.
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The Future of Crypto
The crypto revolution needs competition. And it will always need competition. The evolution of money has never been straightforward. It has twisted and turned, moved forward and back, with fierce debates on its nature and power. Why do we think that crypto would be any different?
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Crypto tribalism is a big turn-off, but the competition that comes with it is essential for producing financial ecosystems that offer the most opportunity to the most number of people. The COR operators and I are committed to helping Cardano achieve that ultimate vision, but we encourage the competition. We celebrate innovation across the industry because it invites more to participate. \n
We are discovering more ways to expand opportunities through blockchain technology as an industry. For example, we are:
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Finding more decentralized and equitable ways to extend financial services like lending, investing and payment processing to people once cut out of those opportunities.
Finding ways for artists to monetize their art without the exploitative managers and distributors.
Providing fair systems of distributing property rights in both the metaverse and physical reality.
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The beauty of Cardano is that we are offering all of these applications on the most decentralized and secure blockchain. We may not be the fastest to market, but our commitment to core principles will prove that it offers the most opportunity to the largest number of people.
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Check out our Stake Pool to learn how to join this revolution and stake with us.
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